CHINA GREEN AGRICULTURE, INC. Management report and analysis of the financial position and operating results (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the notes to those financial statements
appearing elsewhere in this report. This discussion and analysis contain
forward-looking statements that involve significant risks and uncertainties. As
a result of many factors, such as the slow-down of the macro-economic
environment in China and its impact on economic growth in general, the
competition in the fertilizer industry and the impact of such competition on
pricing, revenues and margins, the weather conditions in the areas where our
customers are based, the cost of attracting and retaining highly skilled
personnel, the prospects for future acquisitions, and the factors set forth
elsewhere in this report, our actual results may differ materially from those
anticipated in these forward-looking statements. With these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this report will in fact occur. You should not place undue reliance
on the forward-looking statements contained in this report.



The forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by U.S. federal securities laws, we undertake
no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. Further, the information about our
intentions contained in this report is a statement of our intention as of the
date of this report and is based upon, among other things, the existing
regulatory environment, industry conditions, market conditions and prices, and
our assumptions as of such date. We may change our intentions, at any time and
without notice, based upon any changes in such factors, in our assumptions
or
otherwise.



Unless the context indicates otherwise, as used in the notes to the financial
statements of the Company, the following are the references herein of all the
subsidiaries of the Company (i) Green Agriculture Holding Corporation ("Green
New Jersey"), a wholly-owned subsidiary of Green Nevada incorporated in the
State of New Jersey; (ii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd.
("Jinong"), a wholly-owned subsidiary of Green New Jersey organized under the
laws of the PRC; (iii) Xi'an Hu County Yuxing Agriculture Technology Development
Co., Ltd. ("Yuxing"), a Variable Interest Entity in the PRC ("VIE") controlled
by Jinong through contractual agreements; (iv) Shaanxi Lishijie Agrochemical
Co., Ltd. ("Lishijie"), a VIE controlled by Jinong through contractual
agreements; (v) Songyuan Jinyangguang Sannong Service Co., Ltd.
("Jinyangguang"), a VIE in the PRC controlled by Jinong through contractual
agreements; (vi) Weinan City Linwei District Wangtian Agricultural Materials
Co., Ltd. ("Wangtian"), a VIE controlled by Jinong through contractual
agreements; (vii) Anhui Fengnong Seed Co., Ltd. ("Fengnong"), a VIE controlled
by Jinong through contractual agreements; (viii) Beijing Gufeng Chemical
Products Co., Ltd., a wholly-owned subsidiary of Jinong in the PRC ("Gufeng");
and (ix) Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng's wholly-owned
subsidiary in the PRC ("Tianjuyuan"). Yuxing, Lishijie, Jinyangguang, Wangtian,
and Fengnong may also collectively be referred to as the "the VIE Companies";
Lishijie, Jinyangguang, Wangtian, and Fengnong may also collectively be referred
to as "the sales VIEs" or "the sales VIE companies".



Unless the context otherwise requires, all references to (i) "PRC" and "China"
are to the People's Republic of China; (ii) "U.S. dollar," "$" and "US$" are to
United States dollars; and (iii) "RMB", "Yuan" and Renminbi are to the currency
of the PRC or China.



Overview


We are engaged in the research, development, production and sale of various
types of fertilizers and agricultural products in the PRC through our
wholly-owned Chinese subsidiaries, Jinong and Gufeng (including Gufeng's
subsidiary Tianjuyuan), and our VIE, Yuxing. Our primary business is fertilizer
products, specifically humic-acid based compound fertilizer produced by Jinong
and compound fertilizer, blended fertilizer, organic compound fertilizer,
slow-release fertilizer, highly-concentrated water-soluble fertilizer and mixed
organic-inorganic compound fertilizer produced by Gufeng. In addition, through
Yuxing, we develop and produce various agricultural products, such as top-grade
fruits, vegetables, flowers and colored seedlings. For financial reporting
purposes, our operations are organized into three business segments: fertilizer
products (Jinong), fertilizer products (Gufeng) and agricultural products
(Yuxing).



The fertilizer business conducted by Jinong and Gufeng generated approximately
80.1% and 72.0% of our total revenues for the three months ended September 30,
2021 and 2020, respectively. The sales VIEs generated 12.2% and 22.2% of our
revenues for the three months ended September 30, 2021 and 2020, respectively.
Yuxing serves as a research and development base for our fertilizer products.



Fertilizer Products



As of September 30, 2021, we had developed and produced a total of 656 different
fertilizer products in use, of which 69 were developed and produced by Jinong,
336 by Gufeng, and 251 by the VIE Companies.



                                       25




Below is a table that shows the metric tons of fertilizer sold by Jinong and Gufeng and the revenue per ton for the periods shown:


            Three Months Ended
              September 30,            Change 2020 to 2021
            2021          2020         Amount           %
              (metric tons)
Jinong      15,224       15,871            (647 )      -4.1 %
Gufeng      38,771       44,824          (6,053 )     -13.5 %
            53,995       60,695          (6,700 )     -11.0 %




            Three Months Ended
               September 30,
            2021           2020
            (revenue per tons)
Jinong   $    997       $    930
Gufeng        378            345



For the three months ended September 30, 2021, we sold approximately 53,995 tons
of fertilizer products, as compared to 60,695 metric tons for the three months
ended September 30, 2020. For the three months ended September 30, 2021, Jinong
sold approximately 15,224 metric tons of fertilizer products, as compared to
15,871 metric tons for the three months ended September 30, 2020. For the three
months ended September 30, 2021, Gufeng sold approximately 38,771 metric tons of
fertilizer products, as compared to 44,824 metric tons for the three months
ended September 30, 2020.



Our sales of fertilizer products to customers in five provinces within China
accounted for approximately 57.7% of our fertilizer revenue for the three months
ended September 30, 2021. Specifically, the provinces and their respective
percentage contributing to our fertilizer revenues were Hebei (23.8%),
Heilongjiang (10.1%), Inner Mongolia (8.7%), Liaoning (8.6%), and Shaanxi
(6.6%).



As of September 30, 2021, we had a total of 1,803 distributors covering 22
provinces, 4 autonomous regions and 4 central government-controlled
municipalities in China. Jinong had 961 distributors in China. Jinong's sales
are not dependent on any single distributor or any group of distributors.
Jinong's top five distributors accounted for 2.8% of its fertilizer revenues for
the three months ended September 30, 2021. Gufeng had 344 distributors,
including some large state-owned enterprises. Gufeng's top five distributors
accounted for 82.3% of its revenues for the three months ended September 30,
2021.



Agricultural Products



Through Yuxing, we develop, produce and sell high-quality flowers, green
vegetables and fruits to local marketplaces and various horticulture and
planting companies. We also use certain of Yuxing's greenhouse facilities to
conduct research and development activities for our fertilizer products. The
three PRC provinces and municipalities that accounted for 91.5% of our
agricultural products revenue for the three months ended September 30, 2021 were
Shaanxi (82.2%), Shanghai (5.7%), and Sichan (3.7%).



                                       26





Recent Developments



New Products



During the three months ended September 30, 2021, Jinong launched no new
fertilizer product and added 44 new distributors. During the three months ended
September 30, 2021, Gufeng did not launch any new fertilizer product but added 3
new distributors.



Strategic Acquisitions



On June 30, 2016 and January 1, 2017, through Jinong, we entered (i) Strategic
Acquisition Agreements (the "SAA"), and (ii) Agreements for Convertible Notes
(the "ACN"), with the shareholders of the companies as identified below (the
"Targets").



June 30, 2016:



                                                                       Cash         Principal of
                                                                   Payment for        Notes for
                                                                   Acquisition       Acquisition
Company Name                        Business Scope                   (RMB[1])           (RMB)
Shaanxi Lishijie       Sales of pesticides, agricultural
Agrochemical Co.,      chemicals, chemical fertilizers,
Ltd.                   agricultural materials; Manufacture and
                       sales of mulches.                             10,000,000         3,000,000

Songyuan               Promotion and consulting services
Jinyangguang Sannong   regarding agricultural technologies;
Service Co., Ltd.      Retail sales of chemical fertilizers
                       (including compound fertilizers and
                       organic fertilizers); Wholesale and
                       retail sales of pesticides, agricultural
                       machinery and accessories; Collection of
                       agricultural information; Development of
                       saline-alkali soil; Promotion and
                       development of high-efficiency
                       agriculture and related information
                       technology solutions for agriculture,
                       agricultural and biological engineering
                       high technologies; E-commerce;
                       Cultivation of freshwater fish, poultry,
                       fruits, flowers, vegetables, and seeds;
                       Recycling and complex utilization of
                       straw and stalk; Technology transfer and
                       training; Recycling of agricultural
                       materials ; Ecological industry planning.      8,000,000        12,000,000

Shenqiu County         Cultivation of crops; Storage, sales,
Zhenbai Agriculture    preliminary processing and logistics
Co., Ltd.              distribution of agricultural by-products;
                       Promotion and application of agricultural
                       technologies; Purchase and sales of
                       agricultural materials; Electronic
                       commerce.                                      3,000,000        12,000,000

Weinan City Linwei     Promotion and application of new
District Wangtian      agricultural technologies; Professional
Agricultural           prevention of plant diseases and insect
Materials Co., Ltd.    pests; Sales of plant protection
                       products, plastic mulches, material,
                       chemical fertilizers, pesticides,
                       agricultural medicines, micronutrient
                       fertilizers, hormones, agricultural
                       machinery and medicines, and gardening
                       tools.                                         6,000,000        12,000,000

Aksu Xindeguo          Wholesale and retail sales of pesticides;
Agricultural           Sales of chemical fertilizers, packaged
Materials Co., Ltd.    seeds, agricultural mulches,
                       micronutrient fertilizers, compound
                       fertilizers, plant growth regulators,
                       agricultural machineries, and water
                       economizers; Consulting services for
                       agricultural technologies; Purchase and
                       sales of agricultural by- products.           10,000,000        12,000,000

Xinjiang Xinyulei      Sales of chemical fertilizers, packaged
Eco-agriculture        seeds, agricultural mulches,
Science and            micronutrient fertilizers, organic
Technology Co., Ltd    fertilizers, plant growth regulators,
                       agricultural machineries, and water
                       economizers; Purchase and sales of
                       agricultural by-products; Cultivation of
                       fruits and vegetables; Consulting
                       services and training for agricultural
                       technologies; Storage services; Sales of
                       articles of daily use, food and oil;
                       On-line sales of the above-mentioned
                       products.

Total                                                                37,000,000        51,000,000




(1) The exchange rate between RMB and we dollars on June 30, 2016 is

RMB1=$ 0.1508, according to the exchange rate published by the Bank of China. (2) On November 30, 2017, the Company, through its wholly owned subsidiary

Jinong, terminated the strategic acquisition agreements and the series of

contractual agreements with Zhenbai shareholders. In return, the

the shareholders of Zhenbai have agreed to remit all of the consideration for the payment in

SAA to the Company with early termination penalties. The convertible

    notes paid to Zhenbai's shareholders and the accrued interest has been
    forfeited.




                                       27




(3) Enabled June 2, 2021, the Company, through its wholly owned subsidiary Jinong,

terminated the strategic acquisition agreements and the series of

contractual agreements with the shareholders of Xindeguo, Xinyulei and

Xiangrong. In return, the shareholders of Xindeguo, Xinyulei and Xiangrong

    agreed to pay cash with amount of RMB26,280,000 (approximately $4,076,028) to
    the Company.




January 1, 2017:



                                                                     Cash         Principal of
                                                                  Payment for      Notes for
                                                                  Acquisition     Acquisition
Company Name                            Business Scope              (RMB[1])         (RMB)
Sunwu County Xiangrong           Sales of pesticides,
Agricultural Materials Co.,      agricultural chemicals,
Ltd.                             chemical fertilizers,
                                 agricultural materials;
                                 Manufacture and sales of
                                 mulches.                          4,000,000        6,000,000

                                 Wholesale and retail sales of
                                 pesticides; Sales of chemical
                                 fertilizers, packaged seeds,
                                 agricultural mulches,
                                 micronutrient fertilizers,
                                 compound fertilizers and
Anhui Fengnong Seed Co., Ltd.    plant growth regulators           4,000,000        6,000,000

Total                                                              8,000,000       12,000,000



(1) The exchange rate between RMB and we dollars on January 1, 2017 is

RMB1=$ 0.144, according to the exchange rate published by the Bank of China.

(2) On June 2, 2021, the Company, through its wholly owned subsidiary Jinong,

terminated the strategic acquisition agreements and the series of

contractual agreements with the shareholders of Xindeguo, Xinyulei and

Xiangrong. In return, the shareholders of Xindeguo, Xinyulei and Xiangrong

    agreed to pay cash with amount of RMB26,280,000 (approximately $4,076,028) to
    the Company.




                                       28





Pursuant to the SAA and the ACN, the shareholders of the Targets, while
retaining possession of the equity interests and continuing to be the legal
owners of such interests, agreed to pledge and entrust all of their equity
interests, including the proceeds thereof (but excluding any claims or
encumbrances), and the operations and management of its business to Jinong, in
exchange for an aggregate amount of RMB45,000,000 (approximately $6,979,500) to
be paid by Jinong within three days following the execution of the SAA, ACN and
the VIE Agreements, and convertible notes with an aggregate face value of RMB
63,000,000 (approximately $9,771,300) with an annual fixed compound interest
rate of 3% and term of three years.



Jinong acquired the targets using the VIE agreement based on our need to further develop our business and comply with regulatory requirements under the laws of the PRC.



As our business focuses on the production of fertilizer, all our business
activities intertwine with those in the agriculture industry in China.
Specifically, we deal with compliance, regulation, safety, inspection, and
licenses in fertilizer production, farmland use and transfer, growing and
distribution of agriculture goods, agriculture basic supplies, seeds,
pesticides, and trades of grains. It is an industry in which heavy regulations
get implemented and strictly enforced. In addition, E-commerce, which is also
under strict government regulation in the PRC, has lately become a sales and
distribution channel for agricultural products. Currently, we are developing an
online platform to connect the physical distribution network we either own
or
lease.



Compared with the regulatory environment in other jurisdictions, the regulatory
environment in the PRC is unique. For example, the "M&A Rules" purports to
require that an offshore special purpose vehicle controlled directly or
indirectly by PRC companies or individuals and formed for purposes of overseas
listing through acquisition of PRC domestic interests held by such PRC companies
or individuals obtain the approval of the China Securities Regulatory Commission
(the "CSRC") prior to the listing and trading of such special purpose vehicle's
securities on an overseas stock exchange. On September 21, 2006, the CSRC
published procedures regarding its approval of overseas listings by special
purpose vehicles.



For both e-commerce and agriculture industries, PRC regulators limit the
investment from foreign entities and set particularly rules for foreign-owned
entities to conduct business. We expect these limitations on foreign-owned
entities will continue to exist in e-commerce and agriculture industries. The
VIE arrangement, however, provides feasibility for obtaining administrative
approval process and avoiding industry restrictions that can be imposed on an
entity that is a wholly-owned subsidiary of a foreign entity. The VIE agreements
reduce uncertainty and the current limitation risk. It is our understanding that
the VIE agreements, as well as the control we obtained through VIE arrangement,
are valid and enforceable. Such legal structure does not violate the known,
published, and current PRC laws. While there are substantial uncertainties
regarding the interpretation and application of PRC Laws and future PRC laws and
regulations, and there can be no assurance that the PRC authorities will take a
view that is not contrary to or otherwise different from our belief and
understanding stated above, we believe the substantial difficulty that we
experienced previously to conduct business in agriculture as a foreign ownership
can be greatly reduced by the VIE arrangement. Further, as an integral part of
the VIE arrangement, the underlying equity pledge agreements provide legal
protection for the control we obtained. Pursuant to the equity pledge
agreements, we have completed the equity pledge processes with the Targets to
ensure the complete control of the interests in the Targets. The shareholders of
the Targets are not entitled to transfer any shares to a third party under the
exclusive option agreements. If necessary, they may transfer shares to our
company without consideration.



                                       29





While the VIE arrangement provides us with the feasibility to conduct our
business in the E-Commerce and agriculture industries, validity and
enforceability of VIE arrangement is subject to (i) any applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
affecting creditors' rights generally, (ii) possible judicial or administrative
actions or any PRC Laws affecting creditors' rights, (iii) certain equitable,
legal or statutory principles affecting the validity and enforceability of
contractual rights generally under concepts of public interest, interests of the
State, national security, reasonableness, good faith and fair dealing, and
applicable statutes of limitation; (iv) any circumstance in connection with
formulation, execution or implementation of any legal documents that would be
deemed materially mistaken, clearly unconscionable, fraudulent, coercive at the
conclusions thereof; and (v) judicial discretion with respect to the
availability of indemnifications, remedies or defenses, the calculation of
damages, the entitlement to attorney's fees and other costs, and the waiver of
immunity from jurisdiction of any court or from legal process. Validity and
enforceability of VIE arrangement is also subject to risk derived from the
discretion of any competent PRC legislative, administrative or judicial bodies
in exercising their authority in the PRC. As a result, there can no assurance
that any of such PRC Laws will not be changed, amended or replaced in the
immediate future or in the longer term with or without retrospective effect.



Results of Operations



Three Months ended September 30, 2021 Compared to the Three Months ended
September 30, 2020.



                                               2021              2020            Change $         Change %
Sales
Jinong                                     $  15,161,742     $  14,529,312           632,430            4.4 %
Gufeng                                        14,788,252        15,828,203        (1,039,951 )         -6.6 %
Yuxing                                         2,888,894         2,423,488           465,406           19.2 %
Sales VIEs                                     4,542,142         9,359,707        (4,817,565 )        -51.5 %
Net sales                                     37,381,030        42,140,710        (4,759,680 )        -11.3 %
Cost of goods sold
Jinong                                        11,092,311        10,685,464           406,847            3.8 %
Gufeng                                        12,857,262        13,977,817        (1,120,555 )         -8.0 %
Yuxing                                         2,389,467         2,042,072           347,395           17.0 %
Sales VIEs                                     3,788,945         7,561,164        (3,772,219 )        -49.9 %
Cost of goods sold                            30,127,985        34,266,517        (4,138,532 )        -12.1 %
Gross profit                                   7,253,045         7,874,193          (621,148 )         -7.9 %
Operating expenses
Selling expenses                               3,714,213         4,687,423          (973,210 )        -20.8 %
General and administrative expenses           18,474,399        31,274,517       (12,800,118 )        -40.9 %
Total operating expenses                      22,188,612        35,961,940       (13,773,328 )        -38.3 %
Income (loss) from operations                (14,935,567 )     (28,087,747
)      13,152,180          -46.8 %
Other income (expense)
Other income (expense)                            (2,908 )          (5,133 )           2,225          -43.3 %
Interest income                                   45,389            22,359            23,030          103.0 %
Interest expense                                 (72,099 )         (56,768 )         (15,331 )         27.0 %
Total other income (expense)                     (29,618 )         (39,542 )           9,924          -25.1 %
(Loss) before income taxes                   (14,965,185 )     (28,127,289 )      13,162,104          -46.8 %
Provision for income taxes                       112,023         1,569,003        (1,456,980 )        -92.9 %
Net (loss) from continuing operations      $ (15,077,208 )   $ (29,696,292 )      14,619,084          -49.2 %
Net (loss) from discontinued operations                -        (1,256,622 )       1,256,622         -100.0 %
Net (Loss)                                   (15,077,208 )     (30,952,914

) 15,875,706 -51.3%

Other comprehensive income (loss)
Foreign currency translation gain (loss)         456,574        13,467,844 
     (13,011,270 )        -96.6 %
Comprehensive (loss)                       $ (14,620,634 )   $ (17,485,070 )       2,864,436          -16.4 %




                                       30





Net Sales



Total net sales for the three months ended September 30, 2021 were $37,381,030,
a decrease of $4,759,680 or 11.3%, from $42,140,710 for the three months ended
September 30, 2020. This decrease was mainly due to the decrease for VIEs'
net
sales.


For the three months ended September 30, 2021, Jinong's net sales increased
$632,430, or 4.4%, to $15,161,742 from $14,529,312 for the three months ended
September 30, 2020. This increase was mainly due to Jinong's higher unit sales
price in the last three months. Jinong's revenue per ton was $997 for the three
months ended September 30, 2021, comparing to $930 for the same period last
year.



For the three months ended September 30, 2021, Gufeng's net sales were
$14,788,252, a decrease of $1,039,951 or 6.6%, from $15,828,203 for the three
months ended September 30, 2020. This decrease was mainly due to Gufeng's lower
sales volume in the last three months. Gufeng sold approximately 38,771 metric
tons of fertilizer products for the three months ended September 30, 2021,
decreased 6,053 tons or 13.5%, as compared to 44,824 metric tons for the three
months ended September 30, 2020.



For the three months ended September 30, 2021, Yuxing’s net sales were
$ 2,888,894, an augmentation of $ 465,406 or 19.2%, of $ 2,423,488 for the three months ended September 30, 2020. The increase is mainly due to the increase in market demand during the three months ended September 30, 2021.



For the three months ended September 30, 2021, VIEs' net sales were $4,542,142,
a decrease of $4,817,656 or 51.5%, from $9,359,707 for the three months ended
September 30, 2020. The decrease was mainly due to the decrease in market demand
during the three months ended September 30, 2021.



Cost of Goods Sold


Total cost of goods sold for the three months ended September 30, 2021 was
$30,127,985, a decrease of $4,138,532, or 12.1%, from $34,266,517 for the three
months ended September 30, 2020. The decrease was mainly due to 49.9% decrease
in VIEs' cost of goods sold.


Cost of goods sold by Jinong for the three months ended September 30, 2021 was
$11,092,311, an increase of $406,847, or 3.8%, from $10,685,464 for the three
months ended September 30, 2020. The increase in cost of goods was primarily due
to higher net sales in the fiscal year 2021.



Cost of goods sold by Gufeng for the three months ended September 30, 2021 was
$12,857,262, a decrease of $1,120,555, or 8.0%, from $13,977,817 for the three
months ended September 30, 2020. This decrease was primarily due to the 6.6%
decrease in net sale in the fiscal year 2021.



For three months ended September 30, 2021, cost of goods sold by Yuxing was
$2,389,467, an increase of $347,395, or 17.0%, from $2,042,072 for the three
months ended September 30, 2020. This increase was mainly due to Yuxing's higher
net sales in the fiscal year 2021.



For three months ended September 30, 2021, cost of goods sold by VIEs was
$3,788,945, a decrease of $3,772,219, or 49.9%, from $7,561,164 for the three
months ended September 30, 2020. This decrease was mainly due to VIEs' lower net
sales in the fiscal year 2021.



                                       31





Gross Profit


Total gross profit for the three months ended September 30, 2021 decreased by
$621,148, or 7.9%, to $7,253,045, as compared to $7,874,193 for the three months
ended September 30, 2020. Gross profit margin percentage was 19.4% and 18.7% for
the three months Ended September 30, 2021 and 2020, respectively.



Gross profit generated by Jinong increased by $225,583, or 5.9%, to $4,069,431
for the three months ended September 30, 2021 from $3,843,848 for the three
months ended September 30, 2020. Gross profit margin percentage from Jinong's
sales was approximately 26.8% and 26.5% for the three months Ended September 30,
2021 and 2020, respectively. The increase in gross profit margin percentage was
mainly due to the higher unit sales price for Jinong in the fiscal year 2021.



For the three months ended September 30, 2021, gross profit generated by Gufeng
was $1,930,990, an increase of $80,604, or 4.4%, from $1,850,386 for the three
months ended September 30, 2020. Gross profit margin percentage from Gufeng's
sales was approximately 13.1% and 11.7% for the Three months Ended September 30,
2021 and 2020, respectively.



For the three months ended September 30, 2021, gross profit generated by Yuxing
was $499,427, an increase of $118,011, or 30.9% from $381,416 for the three
months ended September 30, 2020. The gross profit margin percentage was
approximately 17.3% and 15.7% for the three months Ended September 30, 2021 and
2020, respectively. The increase in gross profit margin percentage was mainly
due to the decrease in product costs.



Gross profit generated by VIEs decreased by $1,045,346, or 58.1%, to $753,197
for the three months ended September 30, 2021 from $1,798,543 for the three
months ended September 30, 2020. Gross profit margin percentage from VIE's sales
was approximately 16.6% and 19.2% for the three months Ended September 30,
2021
and 2020, respectively.



Selling Expenses



Our selling expenses consisted primarily of salaries of sales personnel,
advertising and promotion expenses, freight-out costs and related compensation.
Selling expenses were $3,714,213, or 9.9%, of net sales for the three months
ended September 30, 2021, as compared to $4,687,423, or 11.1%, of net sales for
the three months ended September 30, 2020, a decrease of $973,210, or 20.8%. The
decrease in selling expense was caused by the decrease in marketing activities.



The selling expenses of Jinong for the three months ended September 30, 2021
were $3,329,991 or 22% of Jinong's net sales, as compared to selling expenses of
$4,256,637 or 29.3% of Jinong's net sales for the three months ended September
30, 2020.The selling expenses of Yuxing were $13,780 or 0.5% of Yuxing's net
sales for the three months ended September 30, 2021, as compared to $11,817 or
0.5% of Yuxing's net sales for the three months ended September 30, 2020. The
selling expenses of Gufeng were $85,671 or 0.6% of Gufeng's net sales for the
three months ended September 30, 2021, as compared to $67,481 or 0.4% of
Gufeng's net sales for the three months ended September 30, 2020.



General and administrative expenses



General and administrative expenses consisted primarily of related salaries,
rental expenses, business development, depreciation and travel expenses incurred
by our general and administrative departments and legal and professional
expenses including expenses incurred and accrued for certain litigation. General
and administrative expenses were $18,474,399, or 49.4% of net sales for the
three months ended September 30, 2021, as compared to $31,274,517, or 74.2% of
net sales for the three months ended September 30, 2020, a decrease of
$12,800,118, or 40.9%. The decrease in general and administrative expenses was
mainly due to lower general and administrative expenses for Gufeng. Gufeng's
general and administrative expenses were $10,936,316 for the three months ended
September 30, 2021, a decreased $21,982,823, or 66.8%, as compared to
$32,919,139 for the three months ended September 30, 2020.



                                       32




Total other income (expenses)



Total other income (expenses) consisted of income from subsidies received from
the PRC government, interest income, interest expenses and bank charges. Total
other expense for the three months ended September 30, 2021 was $29,618, as
compared to $39,542 for the three months ended September 30, 2020, a decrease in
expense of $9,924 or 25.1%. The decrease in total other expense resulted from
higher interest income.



Income Taxes



Jinong is subject to a preferred tax rate of 15% because of its business being
classified as a High-Tech project under the PRC Enterprise Income Tax Law
("EIT") that became effective on January 1, 2008. Jinong incurred income tax
expenses of 0 for the three months ended September 30, 2021, as compared to
$267,890 for the three months ended September 30, 2020, a decrease of $267,890,
or 100.0%.


Gufeng is subject to 25% tax rate, incurred no income tax expense for the three months ended September 30, 2021 and 2020.

Yuxing has no income tax for the Three months Ended September 30, 2021 and 2020
because of being exempted from paying income tax due to its products fall into
the tax exemption list set out in the EIT.



Net Income (loss)


Net (loss) for the three months ended September 30, 2021 was $(15,077,208), a
decrease in loss of $15,875,706, or 51.3%, compared to net (loss) of
$(30,952,914) for the three months ended September 30, 2020. Net (loss) as a
percentage of total net sales was approximately -40.3% and -73.5% for the three
months Ended September 30, 2021 and 2020, respectively.



Net (loss) from continuing operations for the three months ended September 30,
2021 was $(15,077,208), a decrease of loss with amount of $14,619,084, or 49.2%,
compared to net (loss) of $(29,696,292) for the three months ended September 30,
2020. The decrease was mainly due to lower General and administrative expenses.



The (net loss) from discontinued operations was 0 and $ (1,256,622) for the three months ended September 30, 2021 and 2020.

Discussion of segment profitability metrics

As of September 30, 2021, we were engaged in the following businesses: the
production and sale of fertilizers through Jinong and Gufeng, the production and
sale of high-quality agricultural products by Yuxing, and the sales of
agriculture materials by the sales VIEs. For financial reporting purpose, our
operations were organized into four main business segments based on locations
and products: Jinong (fertilizer production), Gufeng (fertilizer production) and
Yuxing (agricultural products production) and the sales VIEs. Each of the
segments has its own annual budget about development, production and sales.

                                       33





Each of the four operating segments referenced above has separate and distinct
general ledgers. The chief operating decision maker ("CODM") makes decisions
with respect to resources allocation and performance assessment upon receiving
financial information, including revenue, gross margin, operating income and net
income (loss) produced from the various general ledger systems; however, net
income (loss) by segment is the principal benchmark to measure profit or loss
adopted by the CODM.



For Jinong, the net income decreased by $5,336,960, or 351.6%, to net (loss) of
$(3,818,917) for the three months ended September 30, 2021, from net income of
$1,518,043 for the three months ended September 30, 2020. The decrease in net
income (loss) was principally due to higher general and administrative expense.



For Gufeng, the net (loss) decreased by $22,030,099, or 70.6%, to net (loss) of
$(9,163,571) for the three months ended September 30, 2021 from net (loss) of
$(31,193,670) for the three months ended September 30, 2020. The decrease was
principally due to the decrease in general and administrative expense.



For Yuxing, net profit increased $ 25,030 or 18.3%, to $ 161,939 for the three months ended September 30, 2021 of $ 136,909 for the three months ended
September 30, 2020. The increase is mainly attributable to higher sales.



For the sales VIEs, the net (loss) was $(1,731,762) for period ended September
30, 2021, decreased by $2,957,111, or 243.1%, from net income of $1,225,349 for
the three months ended September 30, 2020. The decrease was mainly due to the
increase in general and administrative expenses for the sales VIEs.



For discontinued operations, the net (loss) was 0 and $ (1,256,622) for the three months ended September 30, 2021 and 2020.

Liquidity and capital resources

Our primary sources of liquidity include cash from operations, borrowings from local commercial banks and net proceeds from our securities offerings.

From September 30, 2021, cash and cash equivalents were $ 22,022,563, an augmentation of $ 3,428,618, or 18.4%, of $ 18,593,944 from June 30, 2021.

We intend to use the net proceeds from our securities offerings, as well as
other working capital if required, to acquire new businesses, upgrade production
lines and complete Yuxing's new greenhouse facilities for agriculture products
located on 88 acres of land in Hu County, 18 kilometers southeast of Xi'an city.
We believe that we have sufficient cash on hand and positive projected cash flow
from operations to support our business growth for the next twelve months to the
extent we do not have further significant acquisitions or expansions. However,
if events or circumstances occur and we do not meet our operating plan as
expected, we may be required to seek additional capital and/or to reduce certain
discretionary spending, which could have a material adverse effect on our
ability to achieve our business objectives. Notwithstanding the foregoing, we
may seek additional financing as necessary for expansion purposes and when we
believe market conditions are most advantageous, which may include additional
debt and/or equity financings. There can be no assurance that any additional
financing will be available on acceptable terms, if at all. Any equity financing
may result in dilution to existing stockholders and any debt financing may
include restrictive covenants.



                                       34





The following table sets forth a summary of our cash flows for the periods
indicated:



                                                                    Three Months Ended
                                                                      September 30,
                                                                  2021            2020
Net cash provided by (used in) operating activities             $1,514,956   $ (1,653,512 )
Net cash provided by (used in) investing activities              1,793,168        (29,967 )
Net cash provided by financing activities                                - 

294,400

Effect of exchange rate variation on cash and cash equivalents 120,495

2,286,224

Net increase in cash and cash equivalents                        3,428,619 

897,145

Cash and cash equivalents, beginning balance                    18,593,944 

11 934 778

Cash and cash equivalents, ending balance                      $22,022,563 
 $ 12,831,923




Operating Activities



Net cash provided by operating activities was $1,514,956 for the three months
ended September 30, 2021, an increase of $3,168,468, or 191.6%, from cash used
in operating activities of $1,653,512 for the three months ended September 30,
2020. The increase was mainly due to a decrease in account receivable during the
three months ended September 30, 2021 as compared to the same period in 2020.



Investing Activities



Net cash provided by investing activities for the three months ended September
30, 2021 was $1,793,168, an increase of $1,823,135, or 6083.8%, compared to cash
used in investing activities of $29,967 for the three months ended September 30,
2020. The increase was mainly due to the sales of discontinued operations and
the Company received the fund during the three months ended September 30, 2021.



Financing Activities



Net cash provided by financing activities for the three months ended September
30, 2021 was 0, compared to $294,400 net cash provided by financing activities
for the three months ended September 30, 2020.



As of September 30, 2021, and June 30, 2021, our loans payable was as follows:



                             September 30,       June 30,
                                  2021             2021
Short term loans payable:   $    4,187,700     $ 4,179,600
Total                       $    4,187,700     $ 4,179,600




Accounts Receivable



We had accounts receivable of $99,143,737 as of September 30, 2021, as compared
to $102,783,004 as of June 30, 2021, a decrease of $3,639,267, or 3.5%. The
decrease was primarily attributable to VIEs' accounts receivable. As of
September 30, 2021, VIEs' accounts receivable was $35,506,316, a decrease of
$3,872,522, or 9.8%, compared to $39,378,838 as of June 30, 2021.



Allowance for doubtful accounts in accounts receivable as of September 30, 2021
was $28,893,232, an increase of $5,154,245, or 21.7%, from $23,738,987 as of
June 30, 2021. And the allowance for doubtful accounts as a percentage of
accounts receivable was 22.6% as of September 30, 2021 and 18.8% as of June
30,
2021.



Deferred assets



We had no deferred assets as of September 30, 2021 and June 30, 2021. During the
three months, we assisted the distributors in certain marketing efforts and
developing standard stores to expand our competitive advantage and market
shares. Based on the distributor agreements, the amount owed by the distributors
in certain marketing efforts and store development will be expensed over three
years if the distributors are actively selling our products. If a distributor
defaults, breaches, or terminates the agreement with us earlier than the
contractual terms, the unamortized portion of the amount owed by the distributor
is payable to us immediately. The deferred assets had been fully amortized
as of
September 30, 2021.



                                       35





Inventories


We had inventories of $52,463,033 as of September 30, 2021, as compared to
$64,315,903 as of June 30, 2021, a decrease of $11,852,870, or 18.4%. The
decrease was primarily attributable to Gufeng's inventory. As of September 30,
2021, Gufeng's inventory was $23,627,155, compared to $36,617,573 as of June 30,
2021, a decrease of $12,990,418, or 35.5%. The company confirmed the loss of $11
million and $13 million of inventories for the three months ended September
30,
2021 and 2020, respectively.



Advances to Suppliers



We had advances to suppliers of $23,271,394 as of September 30, 2021 as compared
to $23,884,772 as of June 30, 2021, representing a decrease of $613,378, or
2.6%. Our inventory level may fluctuate from time to time, depending how quickly
the raw material is consumed and replenished during the production process, and
how soon the finished goods are sold. The replenishment of raw material
relies on management's estimate of numerous factors, including but not limited
to, the raw materials future price, and spot price along with its volatility, as
well as the seasonal demand and future price of finished fertilizer products.
Such estimate may not be accurate, and the purchase decision of raw materials
based on the estimate can cause excessive inventories in times of slow sales and
insufficient inventories in peak times.



Accounts Payable


We had accounts payable of $13,580,483 as of September 30, 2021 as compared to
$16,868,942 as of June 30, 2021, representing a decrease of $3,288,459, or
19.5%. The decrease was primarily due to the decrease of accounts payable for
VIEs. They have accounts payable of $11,385,469 as of September 30, 2021 as
compared to $14,736,412 as of June 30, 2021, representing a decrease of
$3,350,943, or 22.7%.



Customer deposits (unearned income)

We had customer deposits of $7,841,368 as of September 30, 2021 as compared to
$6,257,215 as of June 30, 2021, representing an increase of $1,584,153, or
25.3%. The increase was mainly attributable to Jinong' $2,156,471 unearned
revenue as of September 30, 2021, compared to $1,135,988 unearned revenue as of
June 30, 2021, increased $1,020,483, or 89.8%, caused by the advance deposits
made by clients. This increase was due to seasonal fluctuation and we expect to
deliver products to our customers during the next three months at which time we
will recognize the revenue.


Off-balance sheet provisions

We do not have off-balance sheet arrangements.

Critical accounting conventions and estimates

Management's discussion and analysis of its financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with United States generally accepted accounting
principles. Our financial statements reflect the selection and application of
accounting policies which require management to make significant estimates and
judgments. See Note 2 to our consolidated financial statements, "Basis of
Presentation and Summary of Significant Accounting Policies." We believe that
the following paragraphs reflect the most critical accounting policies that
currently affect our financial condition and results of operations:



Use of estimates



The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the amount
of revenues 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 and outcomes may differ from management's
estimates and assumptions due to risks and uncertainties, including uncertainty
in the current economic environment due to the recent outbreak of COVID-19.

                                       36





Revenue recognition


Sales revenue is recognized on the date of shipment to customers when a formal agreement exists, the price is fixed or determinable, delivery is complete, we have no other material obligations and collectability is reasonably assured. Payments received before all relevant revenue recognition criteria are met are recorded as unearned revenue.



Our revenue consists of invoiced value of goods, net of a value-added tax (VAT).
No product return or sales discount allowance is made as products delivered and
accepted by customers are normally not returnable and sales discounts are
normally not granted after products are delivered.



Cash and cash equivalents



For statement of cash flows purposes, we consider all cash on hand and in banks,
certificates of deposit and other highly-liquid investments with maturities of
three months or less, when purchased, to be cash and cash equivalents.



Accounts receivable


Our policy is to maintain reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Any accounts receivable of Jinong and
Gufeng that are outstanding for more than 180 days will be accounted as
allowance for bad debts, and any accounts receivable of Yuxing that are
outstanding for more than 90 days will be accounted as allowance for bad debts.



Deferred assets


Deferred assets represent amounts the Company advanced to the distributors in
their marketing and stores development to expand our competitive advantage and
market shares. Based on the distributor agreements, the amount owed by the
distributors in certain marketing efforts and store development will be expensed
over three years if the distributors are actively selling our products. If a
distributor defaults, breaches, or terminates the agreement with us earlier than
the realization of the contractual terms, the unamortized portion of the amount
owed by the distributor is to be refunded to us immediately. The deferred assets
had been fully amortized as of September 30, 2021.



Segment reporting



FASB ASC 280 requires use of the "management approach" model for segment
reporting. The management approach model is based on the way a company's
management organizes segments within the company for making operating decisions
and assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other way
management disaggregates a company.



As of September 30, 2021, we were organized into seven main business units:
Jinong (fertilizer production), Gufeng (fertilizer production), Yuxing
(agricultural products production), Lishijie (agriculture sales), Jinyangguang
(agriculture sales), Wangtian (agriculture sales) and Fengnong (agriculture
sales). For financial reporting purpose, our operations were organized into four
main business segments based on locations and products: Jinong (fertilizer
production), Gufeng (fertilizer production) and Yuxing (agricultural products
production) and the sales VIEs. Each of the segments has its own annual budget
regarding development, production, and sales.



                                       37

© Edgar online, source Previews

About Lolita Plowman

Check Also

Chinese scientist pleads guilty to stealing trade secrets, US Department of Justice report says

A Chinese national has allegedly pleaded guilty in a US court to stealing trade secrets …