Core Points - Farmmi, Inc. announced a share consolidation at a ratio of one-for-twelve, effective March 17, 2025, to comply with Nasdaq listing requirements [1][2] - The consolidation will reduce the number of issued and outstanding ordinary shares from 15,007,123 to approximately 1,250,500 and authorized shares from 500,000,000 to 41,666,667 [4] Company Overview - Farmmi, Inc. is an agricultural products supplier, processor, and retailer specializing in edible mushrooms and other agricultural products, established in 1998 [5]

Regulatory and Compliance Risks - The company's operations are primarily conducted in mainland China, with expansions in the U.S. and Canada, and it faces significant legal and operational risks due to PRC government policies and regulations[15][16] - The company previously operated online and e-commerce sales in China through consolidated affiliated entities under contractual arrangements to comply with PRC foreign investment restrictions[17] - The company's PRC subsidiaries have obtained all necessary permits, approvals, and certificates to conduct business operations in China, but future regulatory changes could require additional compliance efforts[20] - The company is not subject to cybersecurity review by the CAC as it possesses personal information of significantly less than one million users and its data processing does not affect national security[23] - The company may be required to conduct an annual data security review and comply with reporting obligations if the Draft Regulations on Network Data Security Management are enacted[25] - The company is subject to filing procedures with the CSRC for overseas securities offerings and listings under the Trial Measures, but no prohibitive circumstances currently apply to it[27] - The company is deemed an "Existing Issuer" and must undertake filing procedures for subsequent events such as follow-on offerings, dual listings, and material changes[28] - The company must comply with confidentiality and archives administration requirements under the Confidentiality Provisions for overseas securities offerings and listings[29] - The company's ability to offer shares on Nasdaq may be significantly limited or hindered by non-compliance with PRC regulations[30] - The company is required to file with the CSRC and may need approvals from Chinese regulatory authorities for securities offerings, with uncertainties in obtaining such approvals[130][131] - The Draft Rules, if enacted, may require the company to submit filings to the CSRC within three working days following future equity securities offerings[134] - The company's Chinese subsidiaries and consolidated entities must obtain business licenses from local counterparts of the SAMR, with all licenses currently valid[137] - The company may face sanctions or delays if it fails to obtain or complete required approvals or filings for issuing securities to foreign investors[138] - The Chinese government's new guidance on capital raising outside mainland China, including VIEs, may impact the company's corporate structure and share value[139] - The company is subject to the U.S. Foreign Corrupt Practices Act (FCPA) and Chinese anti-corruption laws, with potential liabilities if employees or third parties engage in unauthorized payments or corruption[154] - The company faces additional regulatory compliance costs and uncertainties due to recent regulatory developments, which could impact future capital raise activities and share price[196] - The company has material weaknesses in internal control over financial reporting, including insufficient personnel with appropriate accounting knowledge and experience, and inadequate risk assessment[199] - The company expects to incur annual expenses between $500,000 and $1 million for compliance with public company reporting requirements[201] Financial Performance and Metrics - Revenue for the fiscal year ended September 30, 2024 was $64,131,332, a decrease from $110,364,887 in 2023 and $99,213,379 in 2022[47] - Net loss for the fiscal year ended September 30, 2024 was $4,627,772, compared to a net income of $2,543,813 in 2023 and $2,223,979 in 2022[47] - Total assets as of September 30, 2024 were $186,733,719, up from $174,800,086 in 2023 and $163,782,853 in 2022[49] - Total liabilities as of September 30, 2024 were $16,717,482, compared to $12,824,160 in 2023 and $9,098,762 in 2022[49] - Consolidated revenues for the year ended September 30, 2024 were $64,131,332, with PRC subsidiaries contributing $64,121,932 and non-PRC subsidiaries contributing $9,400[52] - Net loss for the year ended September 30, 2024 was $(4,627,772), compared to a net income of $2,543,813 in 2023 and $2,223,979 in 2022[52][53] - Gross profit for 2024 was $3,873,714, a decrease from $4,286,755 in 2023 and $5,438,086 in 2022[52][53] - Operating expenses for 2024 were $(3,078,029), higher than $(2,245,380) in 2023 and $(4,495,718) in 2022[52][53] - Total assets as of September 30, 2024 were $186,733,719, with current assets at $161,925,796 and non-current assets at $24,807,923[56] - Total liabilities as of September 30, 2024 were $16,717,482, with current liabilities at $10,060,240 and non-current liabilities at $6,657,242[56] - Total shareholders' equity (net assets) as of September 30, 2024 was $170,016,237, compared to $161,975,926 in 2023[56] - The average exchange rate for 2024 was US$1 = RMB 7.2043, compared to US$1 = RMB 7.0533 in 2023 and US$1 = RMB 6.5746 in 2022[58] - Intercompany receivables as of September 30, 2024 were $151,457,184, with intercompany payables at $962,080[56] - Current assets excluding intercompany receivables as of September 30, 2024 were $161,925,796, compared to $158,171,175 in 2023[56] - The company provided working capital loans of $151.8 million to its subsidiaries in fiscal year 2024, similar to $151.7 million in 2023 and $140.4 million in 2022[37][38][40] - As of September 30, 2024, the company had approximately $2.4 million in outstanding loans, down from $4.7 million in 2023, with potential risks of repayment and refinancing challenges[97] - The company's export sales for the year ended September 30, 2024, were distributed as follows: 8.19% to the U.S., 37.87% to Canada, 17.08% to Japan, 10.87% to Europe, and 25.47% to the Middle East, with all transactions settled in USD[107] - The company may require additional financing in the future, which could result in equity dilution or restrictive debt conditions, though no immediate need is anticipated[108] - The company's cash accounts in China are not fully insured, with only accounts holding less than RMB 0.5 million ($72,149) per bank covered by deposit insurance[112] - Significant increase in advances to suppliers and accounts receivable in fiscal year 2021, with advances mainly in anticipation of higher revenue in fiscal 2023[127] - Customers' accounts receivable to the company increased significantly in fiscal year 2021, partially due to slower-paying customers compared to fiscal year 2020[127] Tax and Dividend Policies - PRC subsidiaries are required to set aside a portion of net income each year to fund a statutory surplus reserve until it reaches 50% of registered capital, restricting dividend distributions[33] - Dividends paid to overseas shareholders may be subject to PRC withholding tax at a rate of up to 10%, potentially reduced to 5% under certain conditions[34][35] - The company has not declared or paid any cash dividends and currently intends to retain most or all available funds for business operations and expansion[40] - Dividends payable to non-PRC investors may be subject to PRC withholding tax at rates of 10% for enterprises and 20% for individuals, potentially reducing investment returns[172] - PRC tax authorities may impose up to 10% withholding tax on gains from indirect transfers of PRC resident enterprise equity if deemed abusive arrangements[173] - PRC subsidiaries must set aside at least 10% of accumulated profits annually for reserve funds until reaching 50% of registered capital, limiting distributable dividends[176] - Non-PRC resident enterprises may face up to 10% withholding tax on dividends from Chinese companies unless exempted by tax treaties[178] - PRC tax authorities may disregard intermediary holding companies in indirect transfers, subjecting non-PRC investors to PRC corporate taxes[175] - SAT Bulletin 7 reclassifies indirect transfers of PRC taxable properties as direct transfers if lacking reasonable commercial purposes, potentially increasing tax liabilities[174] - The company may be classified as a PRC "resident enterprise" for tax purposes, subjecting it to a 25% enterprise income tax on worldwide income and additional reporting obligations, which could reduce net income[167][170] - The company has not been notified by PRC tax authorities of being deemed a resident enterprise under the PRC Enterprise Income Tax Law as of the report date[171] - PRC subsidiaries' ability to pay dividends may be restricted by debt instruments or adjustments to taxable income by PRC tax authorities[177] - The company does not intend to pay dividends in the foreseeable future, retaining earnings for business operations and expansion[210] Operational and Market Risks - The company's edible fungi products are highly susceptible to risks from diseases, pests, and extreme weather events, which could significantly impact supply and quality[86][88] - The company's lack of product diversification, with a primary focus on edible fungi, makes its revenues and earnings more susceptible to industry-specific risks[75] - The company's dried mushroom wholesale business currently enjoys tax benefits, but changes in tax policies could significantly reduce or eliminate profit margins[78] - The company's suppliers may fail to comply with PRC food safety laws or quality standards, potentially harming the company's reputation and requiring costly supplier replacements[89] - The company's purchase price for dried edible fungi is based on local market prices, which are unpredictable and could reduce profit margins if prices rise unexpectedly[90] - The company faces risks from potential data breaches, which could result in significant costs, legal liabilities, and reputational damage[80] - The company's products have low visibility in China, with no guarantee of significantly increasing market recognition despite plans to participate in more industry events[92] - The company faces potential market share loss due to low technical barriers and price competition, which may require price reductions to maintain or slow market share loss[93] - The company's PRC subsidiaries have not opened Housing Provident Fund accounts for approximately 80% of employees, potentially exposing the company to financial liabilities[84] - The company exports approximately 0.6% of its agricultural products, making it vulnerable to changes in foreign trade policies and potential tariffs[85] - The company's growth strategy includes expanding export customers, increasing agricultural product varieties, and developing e-commerce platforms, which could strain management resources[116] - The company's intellectual property protection in China may be less effective due to ambiguities in laws and enforcement difficulties, potentially leading to costly litigation[119] - The company's stock price has been volatile, with shares closing between $0.1979 and $1.65 between October 1, 2023, and the report date, partly due to significant share offerings[125] - The company's Ordinary Shares have experienced significant price volatility, with prices ranging from $0.195 to $1.42 between January 1, 2024, and the report date, and last traded at $0.2622 on January 22, 2025[206] - The company received a notice from Nasdaq regarding non-compliance with the Minimum Bid Price Rule and has until April 21, 2025, to regain compliance[208] - The company's share price may be adversely affected by future sales of substantial amounts of Ordinary Shares in the public market[212] - The company's shareholders may face difficulties in protecting their interests due to the less defined nature of Cayman Islands corporate law compared to U.S. law[213] Legal and Governmental Risks - The Chinese government may intervene in or influence the company's operations, potentially impacting the value of its ordinary shares[129] - The company's PRC subsidiaries could face liquidation or bankruptcy under the PRC Enterprise Bankruptcy Law, potentially affecting the company's ability to operate and access assets[159][160] - PRC regulations on foreign exchange registration for overseas investment may limit the company's ability to inject capital into PRC subsidiaries or distribute profits, with potential penalties for non-compliance[162][164][165] - PRC M&A rules require prior notification to the Ministry of Commerce for transactions involving national security or control of domestic enterprises with famous trademarks[181] - The Holding Foreign Companies Accountable Act may prohibit trading of securities if PCAOB cannot inspect auditors for three consecutive years[189] - U.S. regulatory bodies face significant legal obstacles in conducting investigations or inspections of the company's operations in China, particularly under the revised PRC securities law effective March 1, 2020[150] - The company expects labor costs to increase due to PRC labor laws, including the Labor Contract Law and Social Insurance Law, which mandate employee benefits and social insurance contributions[152][153] - Fluctuations in the exchange rate between the Renminbi and the U.S. dollar could negatively impact the company's export sales and financial results, as the company sells products in U.S. dollars and faces limited hedging options in China[155][156][157][158] - Foreign investors face daily remittance limits of $50,000 and per-transaction limits of $10,000 under PRC foreign exchange regulations[179] PCAOB and Audit Risks - The PCAOB determined it could inspect and investigate registered public accounting firms in mainland China and Hong Kong as of December 15, 2022, vacating its previous 2021 adverse determinations[43] - The PCAOB determined it could inspect and investigate registered public accounting firms in mainland China and Hong Kong as of December 15, 2022[147] - The HFCAA timeline for trading prohibitions was accelerated to two consecutive years of non-inspection by the PCAOB, effective December 2022[148] - The company's auditor, YCM CPA INC., is subject to PCAOB inspections, but there is a risk that PCAOB may not be able to inspect or investigate the auditor completely due to regulatory changes in China, potentially affecting the assurance of financial statements[149] Corporate Structure and Governance - The company is highly dependent on its CEO, Ms. Yefang Zhang, who has over 20 years of experience in the mushroom industry, making her difficult to replace[114] - The company's key customer, Shanghai Yunmihui Supply Chain Group Co. Ltd, accounted for 55.0%, 40.5%, and 31.2% of total revenue in fiscal years 2024, 2023, and 2022, respectively[69] - The company purchases raw materials from a limited number of suppliers, with Jingning Liannong Trading Co. Ltd accounting for 23.8%, 13.5%, and 20.9% of purchases in 2024, 2023, and 2022, respectively[73]

Company Update - Farmmi Inc received an additional 180-day compliance period from NASDAQ to meet the minimum bid price requirement of at least $1 00 per share for ten consecutive business days by April 21 2025 [1] Company Overview - Farmmi Inc is an agricultural products supplier processor and retailer established in 1998 specializing in edible mushrooms like Shiitake and Mu Er as well as other agricultural products [2] - The company operates both online and offline sales channels [2] Forward-Looking Statements - The press release contains forward-looking statements regarding future growth prospects and business expectations which are subject to risks and uncertainties [3] - Potential risks include the impact of Covid-19 on customer businesses and disposable income challenges in raising capital fluctuations in earnings and foreign exchange rates and general economic conditions [3] - The company may update forward-looking statements in future filings with the Securities and Exchange Commission and reports to shareholders [3] Contact Information - For further information investors can contact Farmmi Inc's Investor Relations department via phone or email [4]

Company Overview - Farmmi Inc is an agricultural products supplier, processor, and retailer established in 1998, specializing in edible mushrooms like Shiitake and Mu Er, as well as other agricultural products [4] - The company operates both online and offline sales channels [4] Financing Activities - Farmmi entered into a securities purchase agreement with institutional investors to purchase 3,433,167 ordinary shares in a registered direct offering [1] - In a concurrent private placement, the company agreed to issue and sell Series A warrants to purchase up to 3,433,167 ordinary shares [1] - The combined effective offering price for each ordinary share and accompanying Series A warrant is $0.30 [1] - Series A warrants are immediately exercisable, expire five years from issuance, and have an initial exercise price of $0.75 per share [1] - The gross proceeds from the offering are estimated to be approximately $1.0 million before deducting placement agent fees and other offering expenses [1] - The offering is expected to close on or about August 26, 2024, subject to customary closing conditions [2] Regulatory Information - The ordinary shares are being offered pursuant to a shelf registration statement on Form F-3 (File No. 333-280348), declared effective by the SEC on June 27, 2024 [2] - The Series A warrants and ordinary shares issuable upon exercise were offered in a private placement under Section 4(a)(2) of the Securities Act of 1933 and Regulation D [2] - A prospectus supplement relating to the sales of ordinary shares will be filed with the SEC [3] Market Position - The company operates in the agricultural products sector, specifically focusing on edible mushrooms and related products [4] - Farmmi has established a presence in both online and offline retail channels, indicating a diversified sales strategy [4]

Company Expansion - Farmmi successfully opened a warehouse and distribution center in Los Angeles, California on August 12, 2024, receiving warehousing orders for 28 shipping containers on its first day of operations [1] - The company established its first warehouse and logistics center in Los Angeles in July 2024, following the acquisition of a large storage facility, and began trial operations on August 12, 2024 [2] - The successful launch of the warehouse and logistics services center in the U S marks a significant development for the company in achieving organic growth and international expansion [3] Company Background - Farmmi, Inc is an agricultural products supplier, processor, and retailer of edible mushrooms like Shiitake and Mu Er, as well as other agricultural products, established in 1998 [4] - The company sells its products both online and offline and has operated in the Chinese agricultural products industry for more than 20 years, forming a stable international customer base [3][4] Strategic Goals - Farmmi is committed to and has implemented strategies for international business expansion in recent years to further expand international cooperation and create long-term value for its shareholders [3] - The company's business in North America has entered a rapid development stage, with the American team accelerating efforts to strive for greater operating results [2]

Revenue and Net Income - Revenue for the six months ended March 31, 2024 was $36.44 million, a decrease of 39.8% compared to $60.55 million in the same period last year[8] - Net income for the six months ended March 31, 2024 was $630,492, a decrease of 60.1% compared to $1.58 million in the same period last year[8] - Net income for the six months ended March 31, 2024, was $630,492, compared to $1,579,859 for the same period in 2023[13] - Total revenue for the six months ended March 31, 2024, was $36,443,887, down from $60,547,274 for the same period in 2023[97] Cash and Cash Equivalents - Cash and cash equivalents decreased by $11.67 million (91.2%) from $12.79 million as of September 30, 2023 to $1.12 million as of March 31, 2024[4] - Cash and cash equivalents at the end of the period were $1,124,448, compared to $69,356,991 at the end of the same period in 2023[13] - Cash maintained in banks within the PRC is $1.1 million as of March 31, 2024, with deposits of less than RMB 0.5 million ($69,249) per bank covered by deposit insurance regulation[25][49] - Cash maintained in banks within the PRC was $12.8 million as of September 30, 2023, with deposits of less than RMB 0.5 million ($69,249) per bank covered by deposit insurance regulation[49] Accounts Receivable and Inventory - Accounts receivable decreased by $1.66 million (6.7%) from $24.68 million as of September 30, 2023 to $23.02 million as of March 31, 2024[4] - Inventories increased significantly by $26.39 million (676.4%) from $3.90 million as of September 30, 2023 to $30.29 million as of March 31, 2024[4] - The company's accounts receivable, net, as of March 31, 2024, were $23,016,778, compared to $24,677,445 as of September 30, 2023[65] - Inventory, net increased to $30,293,667 as of March 31, 2024, from $3,901,848 as of September 30, 2023[78] Liabilities and Equity - Total current liabilities decreased by $3.59 million (33.5%) from $10.71 million as of September 30, 2023 to $7.12 million as of March 31, 2024[5] - Total shareholders' equity increased by $2.38 million (1.5%) from $161.98 million as of September 30, 2023 to $164.35 million as of March 31, 2024[6] - Contract liabilities are $48,299 as of March 31, 2024 and $0.4 million as of September 30, 2023, included in other current liabilities[42] Earnings Per Share - Basic earnings per share decreased to $0.10 for the six months ended March 31, 2024 compared to $0.53 in the same period last year[9] - Diluted earnings per share decreased to $0.05 for the six months ended March 31, 2024 compared to $0.33 in the same period last year[9] - Net income available for ordinary shareholders is $630,492 for the six months ended March 31, 2024, with basic EPS of $0.10 and diluted EPS of $0.05[45] Cash Flow Activities - Net cash used in operating activities for the six months ended March 31, 2024, was $14,901,185, compared to $11,304,117 for the same period in 2023[13] - Net cash provided by investing activities for the six months ended March 31, 2024, was $2,946,776, compared to $36,326,277 for the same period in 2023[13] - Net cash used in financing activities for the six months ended March 31, 2024, was $16,653, compared to $1,331,253 provided for the same period in 2023[13] Subsidiaries and Divestitures - The company divested 100% interest in three subsidiaries for a total cash consideration of RMB43.1 million ($6.0 million) on January 31, 2024[17] - Farmmi USA Inc was established under the laws of the United States of America on August 24, 2023, with Farmmi Inc owning 100% equity[16] - Farmmi Canada Inc was established under the laws of Canada on July 13, 2022, with Farmmi Inc owning 100% equity[16] Product and Market Focus - Approximately 99.9% of the company's products are sold in China[21] - The company is engaged in processing and distributing dried Shiitake mushrooms and Mu Er mushrooms, and trading agricultural products[21] - Revenue from Shiitake Mushroom was $9,806,605 for the six months ended March 31, 2024[97] Advances to Suppliers and Allowances - Advances to suppliers represent prepayments made to ensure continuous high-quality supplies, with periodic reviews and allowances made for doubtful advances[27] - The company's advances to suppliers are made to secure premium quality raw materials at prices slightly higher than typical market prices for average quality raw materials[73] - The company evaluates the recoverability of advances to suppliers by monitoring suppliers' ability to deliver sufficient supplies and current crop and market conditions[75] - The company accrues for any allowance for possible loss on advances when there is doubt as to the collectability of the refund[75] - Advances to suppliers, net, as of March 31, 2024, were $100,439,974, compared to $116,343,961 as of September 30, 2023[67] Depreciation and Assets - Biological assets consist of 9.6 km² of bamboo forests, with depreciation expense of $0.1 million for the six months ended March 31, 2024 and 2023[29] - Property and equipment are depreciated on a straight-line basis over estimated useful lives, with machinery and equipment at 5-10 years, transportation equipment at 4 years, and office equipment at 3-5 years[38][39] - Depreciation expense was $5,572 for the six months ended March 31, 2024, down from $12,724 for the same period in 2023[81] Agreements and Contracts - The company signed a framework cooperation agreement with Lishui Zhelin Trading Co., Ltd., valid for four years, to ensure timely supply and delivery of edible mushroom products[68] - The company signed an agricultural product framework agreement with Zhongjin Boda (Hangzhou) Industrial Co., Ltd., for the purchase of agricultural products such as corn, cotton, and soybeans, valid for two years[69] - The company signed an agricultural product framework agreement with Ningbo Runcai Supply Chain Management Co., Ltd., for the purchase of agricultural products such as red dates and corn, valid for two years[69] - The company signed a Non-Competition Agreement with Forasen Group, restricting Forasen from engaging in competing businesses except for purchasing products from the company[106] Credit and Risk Management - The company performs ongoing credit evaluations of customers and key suppliers to reduce credit risk, with significant sales being credit sales dependent on industry economics[49] - Allowance for doubtful accounts was $2.5 million as of March 31, 2024, compared to $3,176 as of September 30, 2023[76] Exchange Rates and Expenses - The exchange rate as of March 31, 2024, was US$1 for RMB7.2203, and the average exchange rate for the six months ended March 31, 2024, was US$1 for RMB7.2064[53] - Total shipping and handling expenses for the six months ended March 31, 2024, were $40,101, compared to $37,053 for the same period in 2023[53] Related Party Transactions - Due from related parties totaled $109,755 as of March 31, 2024, compared to $110,958 as of September 30, 2023[100] - Due to related parties increased to $379,082 as of March 31, 2024, from $33,814 as of September 30, 2023, primarily due to amounts owed to Yefang Zhang and Zhejiang Tantech Bamboo Technology Co., Ltd[102] Lease and Financing Activities - The company recorded lease expenses of $50,782 for the six months ended March 31, 2024, compared to $43,910 for the same period in 2023[105] - The company entered into a note purchase agreement on July 30, 2024, issuing a $5,355,000 unsecured promissory note with a 7.0% annual interest rate and a 12-month term[108] - The note includes an original issue discount of $350,000 and $5,000 for investor fees, with prepayment options at 105% of the outstanding balance[109] - The weighted average discount rate for operating leases was 10.3% per annum as of March 31, 2024[90] - Total future minimum lease payments amounted to $685,343 as of March 31, 2024[92] Major Customers and Suppliers - Two major customers accounted for 55.9% and 12.0% of total sales for the six months ended March 31, 2024[88] - Four major suppliers accounted for 22.8%, 18.3%, 14.1%, and 11.0% of total purchases for the six months ended March 31, 2024[89] Share Issuance and Convertible Notes - The company issued 804,000 ordinary shares for the redemption of $804,000 convertible promissory notes in the six months ended March 31, 2024[84]

Company Expansion - Farmmi's subsidiary, FARMMI USA INC, has signed a sublease agreement to acquire the right to use a large distribution and storage center in the United States, marking a significant development for its US operations [1] - The leased premises, located in the Los Angeles area, California, spans a total area of 636,000 square feet, with warehouse space covering 315,000 square feet, and includes a dedicated rail line for sea-rail intermodal transportation [2] - The facility will serve as the major distribution and storage center for the Farmmi group, enabling further expansion of international cooperation and creating greater value for shareholders [2][3] Company Background - Farmmi Inc, established in 1998, is an agricultural products supplier, processor, and retailer of edible mushrooms like Shiitake and Mu Er, as well as other agricultural products [4] - The company sells its products both online and offline, with a focus on increasing its global presence in recent years [3][4]

Company Overview - Farmmi Inc is an agricultural products supplier, processor, and retailer established in 1998, specializing in edible mushrooms like Shiitake and Mu Er, as well as other agricultural products [3] - The company operates both online and offline sales channels [3] Recent Achievement - Farmmi's subsidiary, Zhejiang Farmmi Food Co Ltd, received the "An Agricultural Products Sales King" certificate from the Lishui municipal authority [1] - The award was granted after a rigorous selection process involving onsite visits, verification, and evaluation of relevant indicators [2] Business Strategy - The company is focused on accelerating sales growth by leveraging long-term customer engagements to develop new customers in target geographic markets worldwide [2] - Farmmi differentiates itself through investments in infrastructure, supply chain partnerships, and warehousing systems [2] - The company is increasing marketing efforts to aggressively target new quality customers [2] Growth Prospects - Farmmi has emerged stronger after overcoming challenges from COVID-19 and supply chain issues, with improved financial position and greater capacity for long-term growth [2] - The company plans to expand its core agricultural business and diversify into new growth vectors [2] - Farmmi aims to play a leading role in Lishui's agriculture product market by providing market-oriented professional services and promoting green development of rural industries [2]

Company Compliance Status - Farmmi Inc received a notification from Nasdaq on April 22, 2024, stating that the company is not in compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2) due to its ordinary shares closing below $1 00 per share for 32 consecutive business days [1] - The company has a 180-day compliance period until October 21, 2024, to regain compliance If the closing bid price reaches at least $1 00 per share for 10 consecutive business days during this period, Nasdaq will confirm compliance [2] - If compliance is not achieved by October 21, 2024, the company may be eligible for an additional 180-day grace period [2] Company Overview - Farmmi Inc, established in 1998, is a supplier, processor, and retailer of agricultural products, specializing in edible mushrooms such as Shiitake and Mu Er, as well as other agricultural products [3] - The company operates both online and offline sales channels [3]

Regulatory and Compliance Risks in China - Significant legal and operational risks associated with conducting operations in mainland China, including potential adverse effects from changes in PRC government regulations and US-China relations[7] - PRC government's substantial influence over business operations in China, requiring permissions and approvals for operations, data transfer, and securities issuance[8] - No current requirement for permissions from the China Securities Regulatory Commission (CSRC) or cybersecurity review by the Cyberspace Administration of China (CAC) for previous securities issuance to foreign investors[9] - Potential future changes in PRC regulations could require additional licenses, permits, or approvals, impacting the company's ability to operate or list securities[8] - PRC entities have obtained necessary business licenses and permits, but future regulatory changes could necessitate additional compliance efforts[8] - Recent PRC government actions, including the Cybersecurity Review Measures and Overseas Listing Rules, may impose significant compliance costs and affect the company's ability to accept foreign investments[7] - Uncertainty regarding the interpretation and implementation of PRC laws and regulations, which could lead to investigations, fines, or operational suspensions[8] - PRC government's intent to increase control over overseas securities offerings and foreign investments in China-based issuers[9] - Potential for PRC regulations to limit or hinder the company's ability to offer securities to investors, possibly rendering such securities worthless[7] - Compliance with PRC Food Safety Law and telecommunications regulations required for certain subsidiaries, with all necessary permissions currently in place[8] - The company may face fines between RMB 1,000,000 and RMB 10,000,000 if it fails to comply with the Trial Measures for Overseas Listing[10] - The company's PRC subsidiaries are required to set aside a portion of net income for a statutory surplus reserve until it reaches 50% of registered capital, limiting dividend distributions[10] - The company's dividends to overseas shareholders may be subject to a 10% PRC withholding tax, potentially reduced to 5% under the Double Tax Avoidance Arrangement[11] - The company's PRC subsidiaries can only use loans for purposes set forth in PRC laws and regulations, requiring SAFE filings for foreign currency loans[11] - The company has not applied for a tax resident certificate from the Hong Kong tax authority as of the report date, which is necessary to claim the 5% withholding tax rate[11] - The company faces risks related to the VIE structure, including potential regulatory changes and restrictions on dividend payments from PRC subsidiaries[22] - The company may be subject to increased regulatory oversight and intervention by the Chinese government, which could impact operations and share value[51] - The company is required to file with the CSRC for future equity securities offerings, and uncertainties in Chinese regulations could delay or hinder these processes[51] - The company's Chinese subsidiaries must obtain and maintain business licenses from local counterparts of the SAMR to operate in mainland China[52] - The company faces potential risks if its corporate structure is deemed non-compliant with Chinese regulations, which could lead to a decline in share value[52] - The company consolidates VIEs' operating results in its financial statements under U.S. GAAP, but uncertainties exist regarding PRC laws and regulations[53] - The Final Foreign Investment Law, effective January 1, 2020, does not explicitly address variable interest entities (VIEs), leaving regulatory risks unresolved[54] - Potential violations of PRC laws or regulations could lead to fines, confiscation of income, or revocation of business licenses, severely impacting operations[54] - The PRC legal system's evolving nature creates uncertainties in interpreting and enforcing laws, affecting the company's legal protections[55] - The Holding Foreign Companies Accountable Act (HFCAA) could prohibit trading of the company's securities on U.S. exchanges if its auditor is not subject to PCAOB inspections for two consecutive years[56] - The PCAOB signed a Statement of Protocol (SOP) with PRC authorities in August 2022, allowing inspections of audit firms in mainland China and Hong Kong[56] - The company's auditor, YCM CPA Inc., is headquartered in the U.S. and subject to PCAOB inspections, reducing immediate HFCAA risks[56] - PRC labor laws, including the Labor Contract Law and Social Insurance Law, may increase labor costs and compliance risks[58] - Non-compliance with PRC labor regulations could result in penalties or liabilities, adversely affecting the company's operations[58] - The company is implementing an anticorruption program to comply with the U.S. Foreign Corrupt Practices Act (FCPA) and Chinese anti-corruption laws, including clauses in contracts with foreign sales agents and distributors[59] - The PRC government has legalized the VIE structure, but uncertainties remain, including stricter national security and data security requirements for overseas listings[62] - The company's contractual arrangements with its VIE may be subject to scrutiny by PRC tax authorities, potentially leading to increased tax liabilities or penalties[64] - Conflicts of interest may arise between the company and the VIE's shareholder, who is affiliated with the company's CEO and director[65] - The company's ability to enforce contractual arrangements with its VIE is subject to uncertainties in the PRC legal system, which could limit control over its e-commerce websites[64] - The company's e-commerce business may be significantly disrupted due to restrictions on foreign investment in value-added telecommunication services in China, potentially leading to sanctions or unenforceable contractual arrangements[66] - The company must obtain and maintain various licenses and permits to operate its e-commerce websites, with non-compliance potentially resulting in penalties[67] - The implementation of the Cross-Border Electronic Commerce Code and the Electronic Commerce Law of the PRC imposes stricter legal constraints on the company's e-commerce activities, increasing potential legal risks[68] - The company's PRC subsidiary, Nongyuan Network, holds an ICP license and operates websites, but uncertainties in PRC regulations may affect the legality of foreign investments in its e-commerce business[69] - If any of the company's PRC subsidiaries undergo liquidation, third-party creditors may claim assets, adversely affecting business operations[69] - The company may face unfavorable tax consequences if classified as a PRC "resident enterprise," subject to a 25% enterprise income tax on worldwide income[70] - Dividends and gains from share sales may be subject to PRC withholding tax at rates of 10% for non-PRC enterprises or 20% for non-PRC individuals if deemed from PRC sources[71] - Enhanced scrutiny by PRC tax authorities over acquisition transactions may negatively impact the company's future acquisition strategies[72] - The company's PRC subsidiaries face restrictions on paying dividends or making other payments, potentially limiting liquidity[73] - PRC subsidiaries are required to set aside at least 10% of their accumulated profits annually until the total reaches 50% of their registered capital[74] - Dividends payable by Chinese companies to non-PRC-resident enterprises are subject to a withholding tax rate of up to 10% unless exempted or reduced by treaties[74] - Foreign investors face a daily remittance limit of $50,000 and a per-transaction limit of $10,000 when transferring funds out of China[74] - PRC subsidiaries can pay dividends in foreign currencies without prior SAFE approval, subject to compliance with procedural requirements[74] - The M&A Rules require prior notification to the Ministry of Commerce for certain acquisitions involving national economic security or famous trademarks[75] - Mergers and acquisitions by foreign investors raising national security concerns are subject to strict review by the Ministry of Commerce[75] - Future acquisitions in the PRC may be delayed or prohibited if deemed to raise national security concerns[75] - Compliance with PRC regulations on mergers and acquisitions could be time-consuming and complex[75] - The PRC government may restrict access to foreign currencies for current account transactions in the future[74] - PRC subsidiaries' ability to pay dividends may be limited by debt instruments or adjustments to taxable income by PRC tax authorities[74] - The company faces additional regulatory compliance costs and uncertainties due to recent regulatory developments, including the Holding Foreign Companies Accountable Act, which could impact future capital raising activities and share price[77] - The company is subject to the Holding Foreign Companies Accountable Act, which could prohibit trading of its securities on U.S. exchanges if its auditor is not subject to PCAOB inspections for two consecutive years[77] - The company is permitted to rely on exemptions from certain Nasdaq corporate governance standards, such as not requiring a majority of independent directors, which may reduce shareholder protection[77] - The PCAOB has determined it can inspect and investigate registered public accounting firms in mainland China and Hong Kong, but future obstruction by PRC authorities could lead to new determinations[77] - The company may face increased competition due to public disclosure requirements, as competitors gain access to otherwise confidential information[82] - The company could face investigations by regulatory authorities if it fails to comply with internal control requirements, potentially leading to a loss of investor confidence and a decline in share price[79] - The company may experience higher costs for director and officer liability insurance and face challenges in attracting qualified board members and executives due to public company requirements[81] - The company received a Nasdaq notification on October 12, 2022, for non-compliance with the $1.00 minimum bid price requirement, with an initial 180-day compliance period extended to October 9, 2023[84] - The company regained Nasdaq compliance by effecting a one-for-eight share consolidation in September 2023[85] - The company is a Cayman Islands exempted company, which may make it difficult for shareholders to protect their interests compared to U.S.-incorporated companies[86] - Shareholders of Cayman Islands exempted companies have no general rights to inspect corporate records or obtain shareholder lists[87] - The company's Board of Directors may decline to register transfers of ordinary shares under certain conditions, including unpaid shares or liens[88] - The company was incorporated in the Cayman Islands on July 28, 2015, and conducts operations in China through PRC subsidiaries[89] - The company completed its initial public offering and began trading on Nasdaq under the symbol "FAMI" in February 2018[90] - Company raised approximately $6 million in net proceeds from its initial public offering in February 2018[91] - Company completed a $7.5 million private placement in November 2018, issuing senior convertible notes and warrants[91] - Company received approximately $6.6 million in net proceeds from a public offering in March 2021, with an additional $1.0 million from over-allotment[92] - Company raised approximately $43.9 million in net proceeds from a public offering in April 2021, including over-allotment[92] - Company received approximately $74.2 million in net proceeds from a public offering in September 2021, issuing ordinary shares and pre-funded warrants[94] - Company acquired Jiangxi Xiangbo Agriculture and Forestry Development Co. Ltd. for RMB70 million (approximately $10.9 million) in September 2021[94] - Company signed an Equity Transfer Framework Agreement to purchase 124,590,064 shares of Shanghai Jiaoda Onlly Co., Ltd. for approximately RMB509 million (approximately $71.6 million) in November 2021[94] - Company issued 10,000,000 shares under the 2021 Share Incentive Plan to certain employees in February 2022[96] - Company completed a private placement in February 2022, selling 30,000,000 ordinary shares for $6,000,000[96] - Company divested FLS Mushroom for RMB24.1 million in September 2022[99] - Established a new subsidiary, Ningbo Farmmi Baitong Trading Co., Ltd., in November 2022, focusing on agricultural product production and trade[100] - Increased authorized share capital from $600,000 to $2,500,000 in March 2023, creating 76,000,000 additional ordinary shares[100] - Formed Farmmi USA INC. in April 2023 to expand sales of high-quality agricultural products in North America and Asia[100] - Issued 21,052,632 ordinary shares at $0.38 per share, raising $8,000,000 in July 2023[101] - Consolidated shares at a 1-for-8 ratio in September 2023, reducing authorized shares from 100,000,000 to 12,500,000[101] - Increased authorized share capital to $100,000,000 post-consolidation, creating 487,500,000 additional shares[101] - Sold 99.4% of products domestically in China and 0.6% internationally for the year ended September 30, 2023[103] - Closed all online platforms by January 15, 2023, due to operational costs and COVID-19 impacts[103] - Global mushroom market reached $62.99 billion in 2023, projected to grow at an 8% CAGR to $100.31 billion by 2032[107] - China's edible fungi consumption grew from 14.14 million metric tons in 2006 to 40.61 million metric tons in 2020[107] - The company processes and packages all dried edible fungi in-house, while other agricultural products are purchased and sold from external manufacturers or companies[119] - JLT and QNMI contributed 13.5% and 7.9%, 20.9% and 9.3%, and 29.7% and 14.7% of the company's edible fungi raw material supplies for the years ended September 30, 2023, 2022, and 2021, respectively[124] - The company signed a framework agreement with Ningbo Caixiang Trading Co., Ltd. in May 2021, requiring the supply of agricultural products worth no less than RMB200 million (approximately $31.2 million)[130] - The company renewed a 3-year agricultural product supply agreement with Ningbo Caixiang Trading Co., Ltd. in May 2022, with a validity of 3 years[130] - The company signed a 4-year framework cooperation agreement with Lishui Zhelin Trade Co., Ltd. on April 1, 2020[130] - The company signed a cooperation agreement with Suizhou Huayu Ecological Agriculture Co., Ltd. on August 1, 2022, to ensure timely and stable supply of goods[130] - The company made allowance for doubtful accounts of $3,176 and $3,258 for certain advances to suppliers as of September 30, 2023, and 2022, respectively[130] - The company's sales peak from December to January due to increased spending on food, including edible fungi, for New Year holidays[134] - The company applies national standards (GH/T 1013-2015) to its Shiitake products, issued by the All-China Federation of Supply and Marketing Cooperatives on March 27, 2015[135] - Domestic market accounted for 99.4% of total revenues in 2023, while international markets contributed only 0.6%[142] - Export revenues in 2023 were primarily from Japan (28.8%), Middle East (30.2%), and Canada (27.4%)[142] - Online sales accounted for 0.4% of total sales in 2023, down from 4.6% in 2022 and 13.5% in 2021[148] - Major domestic clients Yunmihui and Hongren International contributed 40.5% and 11.7% of total sales in 2023, respectively[144] - The company has established a traceability system since 2006 for its edible fungi products[139] - Quality control measures include HACCP plan, food safety manual, SSOP, GMP, and food defense plan[136] - The company holds BRC and HCCP certifications for food safety standards, valid until 2024[138] - Distribution channels primarily rely on domestic distributors, with products sold both in China and internationally[140] - The company plans to increase export sales and develop more overseas customers through export fairs and cross-border e-commerce[143] - A new e-commerce platform, Farmmi Enterprise, has been approved for agricultural product sales[146] - Farmmi Liangpin Market was closed on December 31, 2020, after being transferred to a mobile application and mini program on WeChat[149] - The company spent a total of RMB 86,955 on intellectual property and RMB 3,516,698 on software and website development, technical service, and product design over the past three fiscal years[153] - Capital expenditures for equipment renovation and development were approximately $314, $2,946, and $4,686 for the years ended September 30, 2023, 2022, and 2021, respectively[156] - The company received an export subsidy of RMB 1,000,000 in 2022[157] - Farmmi holds over 100 registered trademarks related to "Farmmi", "Farmmi Liangpin", "Forasen", and "Puyangtang" in China[154] - The company's major business development projects include internet technology development, internet product development, and processing technology and product development of edible fungi[153] - Farmmi's competitive advantages include a sophisticated quality control system, established supplier relationships, stable and experienced factory employees, and a favorable location in Lishui, China[150] - The company's competitive disadvantages include a low barrier to entry in the industry and a lack of experience in e-commerce[150] - Farmmi's key competitors in the Lishui area include Zhejiang Jingning Nature Food Co. Ltd. and Zhejiang Tianhe Food Co., Ltd.[151] - The company has been awarded various recognitions, including the "Famous Brand Products in Zhejiang" and "Healthy Products with Premium Quality in China's Longevity Village"[151] - Foreign investments in key sectors such as agriculture, energy, manufacturing, infrastructure, and technology require security review and approval before implementation[162] - Overseas listings by China-based companies must be filed with the CSRC within three business days after initial applications or offerings, with fines up to RMB 10 million for non-compliance[163] - Internet platform operators are prohibited from using data or algorithms to hijack traffic, influence user choices, or engage in unfair competition practices[164] - Fines for illegal business concentration under the amended Anti-Monopoly Law can reach up to 10% of the previous year's sales revenue[165] - Internet content service operators must obtain user consent before collecting or sharing personal information and are required to implement security measures to protect user data[166] - The Personal Information Protection Law mandates that sensitive personal information, such as biometric data, requires explicit user consent and notification of its necessity[166] - Data processors handling important data or planning overseas listings must complete annual data security assessments and file reports with regulators[166] - The Anti-Monopoly Guidelines for the Internet Platform Economy Sector specify filing procedures and penalties for monopolistic acts, including fines up to RMB 500,000[165] - The Civil Code of the PRC protects personal information and prohibits illegal collection, use, or sale of such data without consent[166] - The Measures for Information Reporting on Foreign Investment require foreign investors to submit investment details to the competent commerce department[162] - The company holds an ICP license valid until August 14, 2021, and it