| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going concern Management has determined there is substantial
doubt about our ability to continue as a going concern as a result of our lack of significant revenues and recurring losses. If we are
unable to generate significant revenue or secure additional financing, we may be required to cease or curtail our operations. Our financial
statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s operations have been financed
primarily by proceeds from the sale of shares. The Company sold an additional 10 million shares of its common stock to two subscribers
in November 2022 for an aggregate price of $880,000 USD, with the payments for the shares scheduled to be paid before October 16, 2024.
Heilongjiang Chuangyi, one of the subscribers, has paid $174,604 and agreed to pay the remaining proceeds of $617,396 on or before October
16, 2024. The Company will use these funds for working capital. On January 30, 2024, Sun Ying, the other subscriber, entered into an agreement
with the Company that cancelled their Shares Increase Contract pursuant to which Sun Ying had committed to pay $88,000 for 1,000,000 shares.
Sun Ying agreed to surrender the shares to the Company for cancellation. The marketing personnel of the Company are developing
new customers and hope to build a stable base of customers. In this manner, Management hopes to generate sufficient operating cash inflow
to support its future operations and development of the Company in addition to capital raised from sales of shares and shareholders’
support based on need. Basis of presentation The accompanying condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management,
all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying condensed
consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that
will be realized for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with Organic
Agricultural Company’s audited financial statements and accompanying notes thereto as of and for the year ended March 31, 2023 included
in Company’s current report on Form 10-K as filed with the SEC on November 17, 2023. The Company’s condensed consolidated financial
statements are expressed in U.S. Dollars and are presented in accordance with U.S. GAAP. Principles of consolidation The condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated
in consolidation. The condensed consolidated financial statements include the assets, liabilities, and net income or loss of these subsidiaries. The Company’s subsidiaries as of December
31, 2023 are listed as follows:
Name Place of Attributable
Organic Agricultural (Samoa) Co., Ltd. Samoa 100
Organic Agricultural Company Limited (Hong Kong) Hong Kong 100
Heilongjiang Tianci Liangtian Agricultural Technology Development Company Limited China 100
Heilongjiang Yuxinqi Agricultural Technology Development Company Limited China 100
Qingdao Tianci Liangtian Agricultural Technology Development Company Limited China 100 Use of estimates The preparation of condensed consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting periods. Management makes these estimates using the best information available at the time the
estimates are made; however, actual results could differ from those estimates. Significant items subject to such estimates and assumptions
include the inventory valuation allowance. This estimate is often based on complex judgments and assumptions that management believes
to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates. Cash Cash consists of cash on hand and bank deposits,
which are unrestricted as to withdrawal and use in the PRC and the USA. All highly liquid investments with original stated maturities
of three months or less are classified as cash. The Company’s cash consisted of cash on hand and cash in bank, as of December 31,
2023 and March 31, 2023. Revenue recognition The Company follows the Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 — Revenue from Contracts with Customers.
Under ASC 606, the Company recognizes revenue from the commercial sales of products and contracts by applying the following steps: (1)
identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation
is satisfied. The Company recognizes revenue when the amount
of revenue can be reliably measured, it is probable that economic benefits will flow to the entity, and specific criteria have been met
for each of the Company’s activities as described below. The Company sells paddy and selenium-enriched
paddy products, rice and other agricultural products. All revenue is recognized when it is both earned and realized. The Company’s
policy is to recognize the sale when the products and services, ownership and risk of loss have transferred to the purchasers, and collection
of the sales proceeds, if not prepaid, is reasonably assured, all of which generally occur when the customer receives the products and
services. Accordingly, revenue is recognized at the point in time when delivery is made and services are provided. Given the nature of this revenue generated by
the Company’s business and the applicable rules guiding revenue recognition, the Company’s revenue recognition practices do
not include estimates that materially affect results of operations nor does the Company have any policy for return of products. Fair value measurements The Company applies the provisions of FASB ASC
820, Fair Value Measurements Fair value is defined as the price that would
be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. In determining the fair value for the assets and liabilities required or permitted to be recorded, the Company considers the principal
or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the
asset or liability. ASC 820 establishes a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
820 establishes three levels of inputs that are to be used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving
significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets
that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices, other than those in Level
1, in markets that are not active or for similar assets and liabilities, or inputs that are observable, either directly or indirectly,
for substantially the full term of the asset or liability; Level 3: Prices or valuation techniques that require
inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Financial assets and liabilities of the Company
primarily consists of cash, accounts receivable, prepaid expenses, inventories, other receivables, accounts payable and accrued liabilities,
customer deposits, due to or from related parties, and other payables. As at December 31, 2023 and March 31, 2023, the carrying values
of these financial instruments approximated their fair values due to the short-term nature of these instruments. Functional currency and foreign currency
translation An entity’s functional currency is the currency
of the primary economic environment in which it operates. Normally that is the currency of the environment in which the entity primarily
generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators,
such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The functional currency
of the Company is the Chinese Renminbi (“RMB’), except the functional currency of Organic Agricultural HK is the Hong Kong
Dollar (“HKD”), and the functional currency of Organic Agricultural Samoa and Organic Agricultural is the United States dollar
(“US Dollars” “USD” or “$”). The reporting currency of these condensed consolidated financial statements
is in US Dollars. The financial statements of the Company, which
are prepared using the RMB and the HKD, are translated into the Company’s reporting currency, the US Dollar. Assets and liabilities
are translated using the exchange rate at each reporting period end date. Revenue and expenses are translated using average rates prevailing
during each reporting period, and shareholders’ equity is translated at historical exchange rates. Adjustments resulting from the
translation are recorded as a separate component of accumulated other comprehensive income or loss. Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.
Foreign currency exchange gains and losses resulting from these transactions are included in operations. The exchange rates used for foreign currency translation
are as follows:
For the three months ended March 31,
2023 2022 2023
(USD to RMB/ (USD to RMB/ (USD to RMB/
Assets and liabilities - period end exchange rate 7.0798/7.8085 6.8983/7.8088 6.8680/7.8498
Revenue and expenses - period average 7.2052/7.8138 7.1111/7.8227 N/A
For the nine months ended
2023 2022
(USD to RMB/ (USD to RMB/
Assets and liabilities - period end exchange rate 7.0798/7.8085 6.8983/7.8088
Revenue and expenses - period average 7.1506/7.8258 6.8557/7.8390 Income taxes The Company follows FASB ASC Topic 740, Income
Taxes ASC 740-10-30 requires income tax positions to
meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under ASC 740-10-40, previously recognized
tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting
period in which that threshold is no longer met. The application of tax laws and regulations is
subject to legal and factual interpretations, judgments and uncertainties. Tax laws and regulations themselves are subject to change as
a result of changes in fiscal policies, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual
liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially
reverse previously recorded tax liabilities or the net deferred tax asset valuation allowance. China According to the “PRC Income Tax Law”,
Tianci Liantian, Qingdao Tianci and Yuxinqi are subject to the 25% standard enterprise income tax rate in the PRC. United States The Company is subject to the U.S. corporation
tax rate of 21%. Samoa Organic Agricultural (Samoa) Co., Ltd was incorporated
in Samoa and, under the current laws of Samoa, it is not subject to income tax. Hong Kong Organic Agricultural Company Limited (Hong Kong)
was incorporated in Hong Kong and is subject to Hong Kong profits tax. Organic Agricultural Company Limited (Hong Kong) is subject to
Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable statutory
tax rate is 16.5%. Earnings (loss) per share The Company computes earnings (loss) per share
(“EPS”) in accordance with FASB ASC 260, Earnings Per Share Diluted EPS is similar to basic EPS but presents
the dilutive effect on a per share basis of contracts to issue ordinary common shares (e.g., convertible securities, options and warrants)
as if they had been converted at the beginning of the periods presented, or issuance date, if later. The computation of diluted EPS includes
the estimated impact of the exercise of contracts to purchase common stock using the treasury stock method and the potential common shares
associated with convertible debt using the if-converted method. Potential common shares that have an anti-dilutive effect (i.e., those
that increase earnings per share or decrease loss per share) are excluded from the calculation of diluted EPS. Segment information and geographic data The Company is operating in one segment in accordance
with the accounting guidance in FASB ASC Topic 280, Segment Reporting Concentration of credit and customer risks The Company maintains cash balances in two banks
in China. In China, the insurance coverage of each bank is RMB500,000 (approximately US$71,000). As of December 31, 2023, the Company
had no cash on deposit in excess of the insurance amounts. During the nine months ended December 31, 2022,
two customers, Jiufu Zhenyuan and Chuangyi Agriculture generated 60% and 13% of our revenues, respectively. During the nine months ended
December 31, 2023, one customer, Yuanzheng, generated 96% of our revenues. Recently adopted accounting standards We do not believe any recently issued but not
yet effective accounting standards, if currently adopted, would have a material effect on the condensed consolidated financial position,
statements of operations and cash flows. |
