BEIJING, May 1, 2024 /PRNewswire/ -- Shineco, Inc. ("Shineco" or the "Company"; NASDAQ: SISI), a provider of technologically advanced healthcare products and services, announced today that its subsidiaries Fuzhou Medashan Biotechnology Co., Ltd. and Kaifeng Yixi Biotechnology Co., Ltd. have innovatively invented a new natural active water-soluble product extracted from soybean gum. Pure physical extraction technology of natural active phospholipids - Large column chromatography polar ultrafiltration membran ...

Core Points - Shineco, Inc. has regained compliance with Nasdaq Listing Rule 5550(a)(2) after its common stock closed at a bid price of at least $1.00 per share for 15 consecutive business days from February 16, 2024, to March 8, 2024 [1] Company Overview - Shineco, Inc. focuses on providing safe, efficient, and high-quality health and medical products and services, aiming to improve the quality of life [2] - The company has developed 33 vitro diagnostic reagents and related medical devices and also produces and sells healthy and nutritious foods [2]

Core Viewpoint - Shineco, Inc. has announced a reverse stock split at a ratio of 1-for-10 to comply with Nasdaq's minimum bid price requirement of $1.00 for continued listing on The Nasdaq Capital Market [1][2]. Company Actions - The reverse stock split will take effect on February 16, 2024, with shares trading on a split-adjusted basis under the existing symbol "SISI" [1]. - Each stockholder's percentage ownership and voting power will remain largely unchanged post-split, with minor adjustments for fractional shares [2]. Operational Details - Transhare Corporation will act as the transfer and exchange agent for the reverse stock split, and registered shareholders will not need to take any action to receive their new shares [3]. - Stockholders holding shares in brokerage accounts will have their positions automatically adjusted without requiring any action [3]. Company Overview - Shineco, Inc. focuses on providing advanced healthcare products and services, aiming to improve quality of life through safe and efficient health solutions [4]. - The company has developed 33 vitro diagnostic reagents and related medical devices, in addition to producing and selling healthy foods [4].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 001-37776 SHINECO, INC. (Exact name of registrant as specified in its charter) | --- | --- | --- | |----------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 001-37776 SHINECO, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of in ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-37776 SHINECO, INC. | --- | --- | --- | --- | --- | |---------------------------------------------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Delaware 52-2175898 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Title of each Class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 per share SISI The Nasdaq Stock Market LLC FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPO ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each Class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 per share SISI The Nasdaq Stock Market LLC Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 OR ☐ TRANSITI ...

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income, comprehensive income, changes in equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets (unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) Balance Sheet Highlights | Metric | Sep 30, 2022 (Unaudited) | Jun 30, 2022 | | :---------------------------- | :----------------------- | :----------- | | Cash and cash equivalents | $24,238,173 | $15,165,231 | | Total Current Assets | $53,785,997 | $59,735,425 | | Total Assets | $57,420,167 | $63,826,017 | | Total Current Liabilities | $20,371,268 | $29,040,302 | | Total Liabilities | $21,691,301 | $30,513,129 | | Total Equity | $35,728,866 | $33,312,888 | [Condensed Consolidated Statements of Income and Comprehensive Income (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20(unaudited)) Income and Comprehensive Income Highlights (Three Months Ended September 30) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | Change (YoY) | | :------------------------------------------------ | :--------------- | :--------------- | :----------- | | Revenue | $535,698 | $629,758 | -$94,060 (-14.94%) | | Cost of Revenue | $626,575 | $1,359,303 | -$732,728 (-53.90%) | | Gross Loss | $(90,877) | $(729,545) | +$638,668 (-87.54%) | | Operating Expenses | $1,899,544 | $9,722,549 | -$7,823,005 (-80.46%) | | Loss from Operations | $(1,990,421) | $(10,452,094) | +$8,461,673 (-80.96%) | | Net Loss from Continuing Operations | $(2,442,320) | $(11,108,221) | +$8,665,901 (-78.01%) | | Net Loss from Discontinued Operations | $0 | $(3,135,237) | +$3,135,237 (-100.00%) | | Net Loss | $(2,442,320) | $(14,243,458) | +$11,801,138 (-82.85%) | | Net Loss Attributable to Shineco, Inc. | $(2,439,722) | $(14,238,332) | +$11,798,610 (-82.86%) | | Basic and Diluted Loss per Common Share | $(0.17) | $(1.71) | +$1.54 (-90.06%) | | Comprehensive Loss Attributable to Shineco, Inc. | $(4,744,406) | $(14,258,967) | +$9,514,561 (-66.73%) | [Condensed Consolidated Statements of Changes in Equity (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(unaudited)) Equity Changes (Three Months Ended September 30, 2022) | Equity Component | Balance at June 30, 2022 | Stock Issuance | Restricted Shares Issued for Management | Net Loss for the Period | Foreign Currency Translation Gain (Loss) | Balance at September 30, 2022 | | :------------------------------------ | :----------------------- | :------------- | :------------------------------------ | :---------------------- | :--------------------------------------- | :---------------------------- | | Common Stock (Shares) | 10,983,863 | 4,276,183 | 600,000 | - | - | 16,397,356 | | Common Stock (Amount) | $10,984 | $4,276 | $600 | - | - | $16,397 | | Additional Paid-in Capital | $52,998,924 | $6,754,064 | $611,400 | - | - | $60,891,487 | | Accumulated Deficit | $(18,372,023) | - | - | $(2,439,722) | - | $(20,811,745) | | Accumulated Other Comprehensive Loss | $(2,100,756) | - | - | - | $(2,304,684) | $(4,405,440) | | Total Equity | $33,312,888 | - | - | - | - | $35,728,866 | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) Cash Flow Highlights (Three Months Ended September 30) | Cash Flow Activity | 2022 (Unaudited) | 2021 (Unaudited) | | :------------------------------------------------ | :--------------- | :--------------- | | Net cash used in operating activities | $(2,109,145) | $(5,264,781) | | Net cash provided by (used in) investing activities | $11,083,120 | $(25,954,544) | | Net cash provided by financing activities | $921,047 | $20,436,888 | | Effect of exchange rate change on cash and cash equivalents | $(822,080) | $(11,884) | | Net increase (decrease) in cash and cash equivalents | $9,072,942 | $(10,794,321) | | Cash and cash equivalents - End of the period | $24,238,173 | $18,230,073 | [Notes to the Condensed Consolidated Financial Statements (unaudited)](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) Provides detailed explanations and breakdowns of the figures presented in the financial statements, covering the company's organization, significant accounting policies, financial instrument details, and specific transactions, offering crucial context for understanding the financial health and performance [NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS](index=10&type=section&id=NOTE%201%20-%20ORGANIZATION%20AND%20NATURE%20OF%20OPERATIONS) - Shineco, Inc. is a holding company incorporated in Delaware, conducting most operations through VIEs in the PRC[19](index=19&type=chunk) - The company's business segments include manufacturing and selling Bluish Dogbane products, planting and distributing green agricultural produce, and providing domestic and international logistic services[29](index=29&type=chunk) - Ankang Longevity Group, which manufactured traditional Chinese medicinal herbal products, has been reclassified as discontinued operations[29](index=29&type=chunk) [NOTE 2. GOING CONCERN UNCERTAINTIES](index=12&type=section&id=NOTE%202.%20GOING%20CONCERN%20UNCERTAINTIES) - The Company had recurring **net losses of US$2,442,320 (2022)** and **US$14,243,458 (2021)** and continuing cash outflow from operating activities, raising substantial doubt about its ability to continue as a going concern[31](index=31&type=chunk) - Management has taken measures to enhance liquidity, including a securities purchase agreement for up to **US$1,758,340 (US$1.0 million received)** and holding approximately **US$24.2 million in cash and cash equivalents** as of September 30, 2022[32](index=32&type=chunk) [NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%203%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the Company's key accounting principles, including consolidation, revenue recognition, asset valuation, and financial instrument fair value measurements [Basis of Presentation and Principles of Consolidation](index=12&type=section&id=Basis%20of%20Presentation%20and%20Principles%20of%20Consolidation) - Financial statements are prepared in conformity with US GAAP for interim financial information[34](index=34&type=chunk) - The statements consolidate the Company, its subsidiaries, and VIEs, with all intercompany accounts and transactions eliminated[35](index=35&type=chunk) [Consolidation of Variable Interest Entities](index=13&type=section&id=Consolidation%20of%20Variable%20Interest%20Entities) - The Company consolidates VIEs where it is the primary beneficiary, absorbing a majority of risks and entitled to a majority of residual returns[36](index=36&type=chunk) VIEs Financial Information (September 30, 2022 vs. June 30, 2022) | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------- | :----------- | :----------- | | Total assets | $33,936,245 | $35,935,994 | | Total liabilities | $(4,398,252) | $(5,719,289) | | Net assets | $29,537,993 | $30,216,705 | VIEs Income Information (Three Months Ended September 30) | Metric | 2022 | 2021 | | :-------------------------- | :------- | :----------- | | Net sales | $530,124 | $616,250 | | Gross loss | $(96,245) | $(601,215) | | Income (loss) from operations | $387,905 | $(7,751,663) | | Net income (loss) | $399,732 | $(7,743,264) | [Non-controlling Interests](index=14&type=section&id=Non-controlling%20Interests) - Non-controlling interests are reported in the equity section of the balance sheet and their attributable net income/loss is reported separately in the consolidated statements of loss and comprehensive loss[41](index=41&type=chunk) [Risks and Uncertainties](index=14&type=section&id=Risks%20and%20Uncertainties) - Operations in the PRC are subject to political, economic, legal, and foreign currency exchange risks[42](index=42&type=chunk) - Contractual arrangements with VIEs, controlled by the same majority shareholders, pose risks if agreements are challenged or terminated[43](index=43&type=chunk) [Use of Estimates](index=14&type=section&id=Use%20of%20Estimates) - Significant estimates include useful lives of property and equipment, intangible assets, recoverability of long-lived assets, and valuation of accounts receivable, advances to suppliers, deferred taxes, and inventory reserves[44](index=44&type=chunk) [Revenue Recognition](index=15&type=section&id=Revenue%20Recognition) - Revenue is recognized following ASC 606's five-step model, including identifying contracts, performance obligations, transaction price, allocation, and satisfaction of obligations[48](index=48&type=chunk) - The Company acts as a principal for product sales and an agent for freight services, recognizing gross or net amounts accordingly[48](index=48&type=chunk) [Cash and Cash Equivalents](index=15&type=section&id=Cash%20and%20Cash%20Equivalents) - Cash and cash equivalents consist of cash on hand and deposits with original maturities of three months or less, primarily in PRC banks[49](index=49&type=chunk) - As of September 30, 2022, and June 30, 2022, the Company had no cash equivalents[49](index=49&type=chunk) [Accounts Receivable, Net](index=16&type=section&id=Accounts%20Receivable,%20Net) Accounts Receivable, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------- | :----------- | :----------- | | Accounts receivable | $9,167,155 | $9,138,790 | | Less: allowance for doubtful accounts | $(7,205,783) | $(7,317,236) | | Accounts receivable, net | $1,961,372 | $1,821,554 | Movement of Allowance for Doubtful Accounts | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Beginning balance | $7,317,236 | $13,481,021 | | Charge to expense | $327,925 | $1,632,670 | | Foreign currency translation adjustments | $(439,378) | $(272,345) | | Ending balance | $7,205,783 | $7,317,236 | [Inventories, Net](index=16&type=section&id=Inventories,%20Net) Inventories, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------- | :----------- | :----------- | | Raw materials | $60,555 | $67,467 | | Work-in-process | $18,046,891 | $18,709,325 | | Finished goods | $1,122,368 | $1,191,275 | | Less: inventory reserve | $(1,173,594) | $(1,249,543) | | Total inventories, net | $18,056,220 | $18,718,524 | - Inventory write-offs due to natural disaster (damage and death of yew trees) amounted to **US$241,754** for the three months ended September 30, 2022, and **US$492,987** for the same period in 2021[85](index=85&type=chunk) [Advances to Suppliers, Net](index=16&type=section&id=Advances%20to%20Suppliers,%20Net) Advances to Suppliers, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------- | :----------- | :----------- | | Advances to suppliers | $11,904,432 | $13,548,178 | | Less: allowance for doubtful accounts | $(11,904,432) | $(13,544,627) | | Advance to suppliers, net | $0 | $3,551 | Movement of Allowance for Doubtful Accounts (Advances to Suppliers) | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Beginning balance | $13,544,627 | $13,320,307 | | Charge to (reversal of) expense | $(882,854) | $4,938,064 | | Foreign currency translation adjustments | $(757,341) | $(503,337) | | Ending balance | $11,904,432 | $13,544,627 | [Business Acquisitions](index=16&type=section&id=Business%20Acquisitions) - Business acquisitions are accounted for under the acquisition method, recognizing identifiable assets and liabilities at fair value[54](index=54&type=chunk) - Excess purchase price over net assets is recorded as goodwill, or a bargain purchase gain if the fair value of net assets exceeds the purchase price[54](index=54&type=chunk) [Goodwill](index=17&type=section&id=Goodwill) - Goodwill is tested for impairment at least annually by comparing the fair value of a reporting unit to its carrying amount[56](index=56&type=chunk) - Fair value is determined using discounted cash flow methodology, corroborated by a market approach[56](index=56&type=chunk) [Leases](index=17&type=section&id=Leases) - The Company adopted ASU 2016-02 "Leases" on July 1, 2019, recognizing ROU assets and lease liabilities for operating leases[57](index=57&type=chunk) - The Company elected the "package of practical expedients" and the short-term lease exemption[57](index=57&type=chunk) [Property and Equipment, Net](index=17&type=section&id=Property%20and%20Equipment,%20Net) - Property and equipment are stated at cost, less accumulated depreciation and amortization, with depreciation on a straight-line basis[58](index=58&type=chunk) Estimated Useful Lives of Property and Equipment | Asset Category | Estimated Useful Lives | | :---------------------------- | :--------------------- | | Buildings | 20-50 years | | Machinery equipment | 5-10 years | | Motor vehicles | 5-10 years | | Office equipment | 5-10 years | | Farmland leasehold improvements | 12-18 years | | Leasehold improvement | Lesser of useful life and lease term | [Long-lived Assets](index=18&type=section&id=Long-lived%20Assets) - Long-lived assets are reviewed for impairment when circumstances require, and written down to fair value if undiscounted future cash flows are insufficient to recover the carrying amount[60](index=60&type=chunk) - No impairment of long-lived assets was recognized for the three months ended September 30, 2022 and 2021[60](index=60&type=chunk) [Fair Value of Financial Instruments](index=18&type=section&id=Fair%20Value%20of%20Financial%20Instruments) - Fair value measurements are classified into Level 1, Level 2, and Level 3 based on the observability of inputs[61](index=61&type=chunk)[62](index=62&type=chunk) - The carrying value of current financial instruments approximates their fair values due to their short-term nature[62](index=62&type=chunk) [Income Taxes](index=18&type=section&id=Income%20Taxes) - Deferred tax assets and liabilities are recognized for temporary differences using enacted tax rates, with a valuation allowance established if necessary[63](index=63&type=chunk) - The Company's policy is to indefinitely reinvest undistributed earnings of non-U.S. subsidiaries, thus no deferred taxes are provided for them[64](index=64&type=chunk) - The U.S. corporate tax rate decreased from **35% to 21%** due to the "Tax Cuts and Jobs Act" (2017), impacting the Company's tax liability[67](index=67&type=chunk) [Value-Added Tax](index=19&type=section&id=Value-Added%20Tax) - Sales revenue is net of VAT, which has decreased from **17% to 13%** in the PRC since May 1, 2018[68](index=68&type=chunk) - No penalties for late or deficient VAT were assessed during the three months ended September 30, 2022 and 2021[146](index=146&type=chunk) [Foreign Currency Translation](index=19&type=section&id=Foreign%20Currency%20Translation) - Financial reporting is in USD; subsidiaries and VIEs use RMB as functional currency[69](index=69&type=chunk) - Assets and liabilities are translated at balance sheet date rates, income and cash flows at average rates, and equity at historical rates[70](index=70&type=chunk) Exchange Rates | Period | RMB to USD Exchange Rate | | :-------------------------------- | :----------------------- | | September 30, 2022 (Balance Sheet) | 0.1406 | | June 30, 2022 (Balance Sheet) | 0.1493 | | Three Months Ended Sep 30, 2022 (Average) | 0.1461 | | Three Months Ended Sep 30, 2021 (Average) | 0.1545 | [Convertible Notes Payable](index=19&type=section&id=Convertible%20Notes%20Payable) - Embedded beneficial conversion features in convertible instruments are recognized separately, with proceeds allocated to additional paid-in capital[72](index=72&type=chunk) - Issuance costs are allocated proportionally to the debt host and conversion feature, and convertible notes are carried at amortized cost[72](index=72&type=chunk) [Comprehensive Loss](index=20&type=section&id=Comprehensive%20Loss) - Comprehensive loss consists of net loss and other comprehensive income (loss), including foreign currency translation gains or losses[73](index=73&type=chunk) [Equity Investment](index=20&type=section&id=Equity%20Investment) - Investments with significant influence (**20-50% ownership**) are accounted for using the equity method[74](index=74&type=chunk) [Loss per Share](index=20&type=section&id=Loss%20per%20Share) - EPS is computed in accordance with ASC 260, presenting both basic and diluted EPS[75](index=75&type=chunk) Loss per Share Reconciliation (Three Months Ended September 30) | Metric | 2022 | 2021 | | :-------------------------------------------------------------------------------- | :------- | :----------- | | Net loss from continuing operations attributable to Shineco | $(2,439,722) | $(11,103,095) | | Net loss from discontinued operations attributable to Shineco | $0 | $(3,135,237) | | Net loss attributable to Shineco | $(2,439,722) | $(14,238,332) | | Weighted average shares outstanding - basic and diluted | 14,649,132 | 8,314,996 | | Net loss from continuing operations per share of common share Basic and diluted | $(0.17) | $(1.33) | | Net loss from discontinued operations per share of common share Basic and diluted | $0 | $(0.38) | | Net loss per share of common share Basic and diluted | $(0.17) | $(1.71) | [New Accounting Pronouncements](index=21&type=section&id=New%20Accounting%20Pronouncements) - Adopted ASU No. 2019-12 (Income Taxes) on July 1, 2021, with no material impact[78](index=78&type=chunk) - Currently evaluating ASU No. 2020-04 (Reference Rate Reform) for potential impacts on financial condition, results of operations, cash flows, and disclosures[79](index=79&type=chunk) [NOTE 4 – ACCOUNTS RECEIVABLE, NET](index=21&type=section&id=NOTE%204%20%E2%80%93%20ACCOUNTS%20RECEIVABLE,%20NET) Accounts Receivable, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------- | :----------- | :----------- | | Accounts receivable | $9,167,155 | $9,138,790 | | Less: allowance for doubtful accounts | $(7,205,783) | $(7,317,236) | | Accounts receivable, net | $1,961,372 | $1,821,554 | Movement of Allowance for Doubtful Accounts | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Beginning balance | $7,317,236 | $13,481,021 | | Charge to expense | $327,925 | $1,632,670 | | Less: cessation of subsidiaries and disposal of VIE | $0 | $(7,524,110) | | Foreign currency translation adjustments | $(439,378) | $(272,345) | | Ending balance | $7,205,783 | $7,317,236 | [NOTE 5 – INVENTORIES, NET](index=22&type=section&id=NOTE%205%20%E2%80%93%20INVENTORIES,%20NET) Inventories, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------- | :----------- | :----------- | | Raw materials | $60,555 | $67,467 | | Work-in-process | $18,046,891 | $18,709,325 | | Finished goods | $1,122,368 | $1,191,275 | | Less: inventory reserve | $(1,173,594) | $(1,249,543) | | Total inventories, net | $18,056,220 | $18,718,524 | - Inventory write-offs due to natural disaster (damage and death of yew trees from COVID-19) amounted to **US$241,754** for the three months ended September 30, 2022, and **US$492,987** for the same period in 2021[85](index=85&type=chunk) [NOTE 6 – ADVANCES TO SUPPLIERS, NET](index=22&type=section&id=NOTE%206%20%E2%80%93%20ADVANCES%20TO%20SUPPLIERS,%20NET) Advances to Suppliers, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------- | :----------- | :----------- | | Advances to suppliers | $11,904,432 | $13,548,178 | | Less: allowance for doubtful accounts | $(11,904,432) | $(13,544,627) | | Advance to suppliers, net | $0 | $3,551 | Movement of Allowance for Doubtful Accounts (Advances to Suppliers) | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Beginning balance | $13,544,627 | $13,320,307 | | Charge to (reversal of) expense | $(882,854) | $4,938,064 | | Foreign currency translation adjustments | $(757,341) | $(503,337) | | Ending balance | $11,904,432 | $13,544,627 | [NOTE 7 – OTHER CURRENT ASSETS](index=23&type=section&id=NOTE%207%20%E2%80%93%20OTHER%20CURRENT%20ASSETS) Other Current Assets, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------- | :----------- | :----------- | | Loan to third parties | $2,373,854 | $16,345,717 | | Other receivables | $2,205,091 | $3,246,293 | | Short-term deposit | $1,066,520 | $164,261 | | Prepaid expenses | $14,897 | $20,872 | | Subtotal | $5,660,362 | $19,777,143 | | Less: allowance for doubtful accounts | $2,404,614 | $2,545,565 | | Total other current assets, net | $3,255,748 | $17,231,578 | - Loans to third parties are mainly for short-term funding to business partners or employees, bearing interest or no interest, with terms of no more than one year, and are expected to be paid in full by June 2023[90](index=90&type=chunk) [NOTE 8 - PROPERTY AND EQUIPMENT, NET](index=24&type=section&id=NOTE%208%20-%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and Equipment, Net | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------------------- | :----------- | :----------- | | Buildings | $1,702,641 | $1,808,172 | | Machinery and equipment | $25,755 | $27,351 | | Motor vehicles | $130,960 | $139,077 | | Office equipment | $160,857 | $178,271 | | Leasehold improvement | $175,440 | $186,314 | | Farmland leasehold improvements | $2,956,484 | $3,139,729 | | Subtotal | $5,152,137 | $5,478,914 | | Less: accumulated depreciation and amortization | $(3,213,660) | $(3,388,640) | | Less: impairment for property and equipment | $(673,084) | $(714,802) | | Total property and equipment, net | $1,265,393 | $1,375,472 | - Depreciation and amortization expense was **US$30,966** for the three months ended September 30, 2022, compared to **US$81,473** for the same period in 2021[95](index=95&type=chunk) - Farmland leasehold improvements were fully impaired as of June 30, 2022, due to the continuous impact from the COVID-19 pandemic, making farmlands unlikely to generate enough future profit and cash flow[96](index=96&type=chunk) [NOTE 9 - DISTRIBUTION RIGHTS](index=25&type=section&id=NOTE%209%20-%20DISTRIBUTION%20RIGHTS) - Distribution rights for Daiso 100-yen shops products were acquired through Tianjin Tajite and determined to have an indefinite life[98](index=98&type=chunk) - A full impairment loss on distribution rights was recorded during the year ended June 30, 2022, due to unfavorable China Customs policy and COVID-19 impact preventing revenue generation[98](index=98&type=chunk)[119](index=119&type=chunk) [NOTE 10 - INVESTMENTS](index=25&type=section&id=NOTE%2010%20-%20INVESTMENTS) - The Company recorded a **loss of US$6,304** from its **32% equity investment** in Shanghai Gaojing Private Fund Management for the three months ended September 30, 2022, a decrease from **US$23,734** in 2021[100](index=100&type=chunk)[241](index=241&type=chunk) - No loss was recorded from the **20% equity investment** in Yushe Pharmaceutical for the three months ended September 30, 2022, as the investment was fully impaired subsequently[99](index=99&type=chunk)[240](index=240&type=chunk) - The Company has agreements to acquire **51% of XPYK** and to jointly manufacture nuclear medical imaging devices with WJM, but neither project has started as of the report date[101](index=101&type=chunk)[102](index=102&type=chunk) Total Investments | Metric | Sep 30, 2022 | Jun 30, 2022 | | :----------------------- | :----------- | :----------- | | Gaojing Private Fund | $611,142 | $617,446 | | Total investments | $611,142 | $617,446 | [NOTE 11 - LEASES](index=26&type=section&id=NOTE%2011%20-%20LEASES) Operating Lease Related Assets and Liabilities | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------------- | :----------- | :----------- | | ROU lease assets | $1,749,663 | $2,088,149 | | Operating lease liabilities – current | $586,553 | $959,909 | | Operating lease liabilities – non-current | $873,173 | $1,025,967 | | Total operating lease liabilities | $1,459,726 | $1,985,876 | - Rent expenses totaled **US$214,440** for the three months ended September 30, 2022, a decrease from **US$230,548** in 2021[113](index=113&type=chunk) - An impairment loss of **US$2,268,344** for ROU lease assets was recorded in the year ended June 30, 2022, due to the COVID-19 pandemic's impact on the profitability of leased farmlands[114](index=114&type=chunk) [NOTE 12 - ACQUISITION](index=28&type=section&id=NOTE%2012%20-%20ACQUISITION) - The Company acquired **51% of Tianjin Tajite** in 2017 for approximately **US$2.1 million**, gaining distribution rights for Daiso 100-yen shops products[116](index=116&type=chunk) - A full impairment loss on Tianjin Tajite's goodwill was recorded in June 2018 due to lower than expected revenue and profit, and an impairment loss on distribution rights was fully recorded in FY2022 due to unfavorable China Customs policy and COVID-19[118](index=118&type=chunk)[119](index=119&type=chunk) - In 2021, the Company acquired Guangyuan by transferring its rights in Ankang Longevity, aiming to enter the market of planting fast-growing bamboo willows and scenic greening trees[121](index=121&type=chunk)[122](index=122&type=chunk) Guangyuan Net Assets Acquired (July 5, 2021) | Metric | Amount | | :------------------------------------------ | :----------- | | Due from related party | $108,296 | | Inventory | $18,115,423 | | Other current assets | $224,522 | | Right of use assets | $1,127,130 | | Long-term investments and other non-current assets | $166,107 | | Other payables and other current assets | $(2,503,607) | | Operating lease liabilities | $(1,013,492) | | Total purchase price for acquisition, net of cash | $16,224,379 | [NOTE 13 - RELATED PARTY TRANSACTIONS](index=30&type=section&id=NOTE%2013%20-%20RELATED%20PARTY%20TRANSACTIONS) Due from Related Parties | Related Party | Sep 30, 2022 | Jun 30, 2022 | | :--------------------------------------------------- | :----------- | :----------- | | Zhao Min | $1,327 | $1,410 | | Shanghai Gaojing Private Fund Management | $404,902 | $429,998 | | Zhongjian Yijia Health Technology (Qingdao) Co., Ltd. | $1,431,710 | $1,719,568 | | Zhongjian (Qingdao) International Logistics Development Co., Ltd. | $4,436,545 | $4,644,011 | | Total due from related parties | $6,274,484 | $6,794,987 | - Loans to Zhongjian Yijia Health Technology (Qingdao) Co., Ltd. and Zhongjian (Qingdao) International Logistics Development Co., Ltd. bear **6.0% annual interest**, with extensions granted for repayment[128](index=128&type=chunk)[129](index=129&type=chunk) Due to Related Parties | Related Party | Sep 30, 2022 | Jun 30, 2022 | | :--------------------------- | :----------- | :----------- | | Wu Yang | $0 | $95,630 | | Wang Sai Zhou Guocong | $120,081 | $96,081 | | Lin Baolin | $1,968 | $0 | | Zhao Min | $431,238 | $562,528 | | Zhou Shunfang | $1,925,234 | $2,044,561 | | Total due to related parties | $2,480,548 | $2,798,800 | - Payables to related parties are unsecured, non-interest bearing, and due on demand, mainly from principal stockholders or their relatives[131](index=131&type=chunk) [NOTE 14 - CONVERTIBLE NOTES PAYABLE](index=31&type=section&id=NOTE%2014%20-%20CONVERTIBLE%20NOTES%20PAYABLE) - The Company issued multiple unsecured convertible promissory notes to Streeterville Capital, LLC, with a **6% annual interest rate**[134](index=134&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) - Maturity dates for some notes were extended to **June 15, 2023**, and **August 18, 2023**[134](index=134&type=chunk)[137](index=137&type=chunk) - As of September 30, 2022, **2,374,465 common shares** were issued for **$7,892,638** in principal and interest, with a remaining convertible note payable balance of **$14,283,239**[139](index=139&type=chunk) - Amortization of debt issuance costs decreased from **$458,978 (2021)** to **$154,403 (2022)** for the three months ended September 30[139](index=139&type=chunk)[242](index=242&type=chunk) [NOTE 15 - TAXES](index=32&type=section&id=NOTE%2015%20-%20TAXES) - Shineco is subject to US income tax (**21%**), while its PRC operating entities are subject to **25% tax**, with exemptions for agricultural enterprises[140](index=140&type=chunk) Deferred Tax Assets | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------- | :----------- | :----------- | | Allowance for doubtful accounts | $1,190,068 | $1,252,245 | | Inventory reserve | $292,503 | $311,439 | | Net operating loss carry-forwards | $922,505 | $979,682 | | Total | $2,405,076 | $2,543,366 | | Valuation allowance | $(2,405,076) | $(2,543,366) | | Total deferred tax assets | $0 | $0 | - PRC VAT rates decreased from **17% to 13%** between May 2018 and April 2019[145](index=145&type=chunk) Taxes Payable | Metric | Sep 30, 2022 | Jun 30, 2022 | | :---------------------------------------- | :----------- | :----------- | | Income tax payable | $978,305 | $992,780 | | Value added tax payable | $32,880 | $34,925 | | Business tax and other taxes payable | $4,810 | $3,375 | | Total tax payable | $1,015,995 | $1,031,080 | | Less: income tax payable - current portion | $(569,135) | $(584,220) | | Income tax payable - noncurrent portion | $446,860 | $446,860 | [NOTE 16 - STOCKHOLDERS' EQUITY](index=34&type=section&id=NOTE%2016%20-%20STOCKHOLDERS'%20EQUITY) - The Company completed its IPO on September 28, 2016, raising **US$7.7 million** gross proceeds[149](index=149&type=chunk) - A **1-for-9 reverse stock split** was approved in July 2020, effective August 2020, retroactively restating shares and per share data[153](index=153&type=chunk) - The Company issued **600,000 restricted shares** for management under the 2022 Equity Incentive Plan, valued at **US$612,000**, which vested immediately on July 27, 2022[157](index=157&type=chunk) - The Company entered into a securities purchase agreement on August 11, 2022, to sell up to **1,921,683 shares** for gross proceeds of up to **US$1,758,340**, with **US$1.0 million** received and the remainder expected by December 31, 2022[159](index=159&type=chunk) [NOTE 17 - CONCENTRATIONS AND RISKS](index=36&type=section&id=NOTE%2017%20-%20CONCENTRATIONS%20AND%20RISKS) - Almost **100%** of the Company's assets and revenues are located in and derived from the PRC[160](index=160&type=chunk) - Four customers accounted for approximately **80% of total sales** for the three months ended September 30, 2022[160](index=160&type=chunk) - One vendor accounted for approximately **94% of total purchases** for the three months ended September 30, 2022 and 2021[161](index=161&type=chunk) [NOTE 18 - COMMITMENTS AND CONTINGENCIES](index=36&type=section&id=NOTE%2018%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company accrued **US$829,969** for a lawsuit by Mrs. Guiqin Li in China regarding stock losses, with an appeal pending[163](index=163&type=chunk) - The Company is suing Lei Zhang and Yan Li in New York for **$9,088,125** for unpaid restricted shares, with a trial scheduled for September 18, 2023[165](index=165&type=chunk)[168](index=168&type=chunk) - As of September 30, 2022, the subscription receivable for unpaid shares from Lei Zhang and Yan Li amounted to **US$3,024,000**[168](index=168&type=chunk) [NOTE 19 - SEGMENT REPORTING](index=37&type=section&id=NOTE%2019%20-%20SEGMENT%20REPORTING) - The Company has three continuing operating segments: Luobuma products, other agricultural products (green and organic produce, yew trees, bamboo willows), and freight services[169](index=169&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - The Herbal products segment (Ankang Longevity Group) has been reclassified as discontinued operations[170](index=170&type=chunk) Segment Revenue (Three Months Ended September 30) | Segment | 2022 Revenue | 2022 % of Total | 2021 Revenue | 2021 % of Total | Variance Amount | % Change | | :---------------------- | :----------- | :-------------- | :----------- | :-------------- | :-------------- | :--------- | | Luobuma products | $5,574 | 1.04% | $13,508 | 2.14% | $(7,934) | (58.74)% | | Other agricultural products | $428,596 | 80.01% | $452,387 | 71.84% | $(23,791) | (5.26)% | | Freight services | $101,528 | 18.95% | $163,863 | 26.02% | $(62,335) | (38.04)% | | Total | $535,698 | 100.00% | $629,758 | 100.00% | $(94,060) | (14.94)% | Segment Gross Profit (Loss) (Three Months Ended September 30) | Segment | 2022 Gross Profit (Loss) | 2022 Gross Profit (Loss) % | 2021 Gross Profit (Loss) | 2021 Gross Profit (Loss) % | Variance Amount | % Change | | :---------------------- | :----------------------- | :------------------------- | :----------------------- | :------------------------- | :-------------- | :--------- | | Luobuma products | $5,368 | (5.91)% | $(128,330) | 17.59% | $133,698 | (104.18)% | | Other agricultural products | $(120,346) | 132.43% | $(615,867) | 84.42% | $495,521 | (80.46)% | | Freight services | $24,101 | (26.52)% | $14,652 | (2.01)% | $9,449 | 64.49% | | Total | $(90,877) | 100.00% | $(729,545) | 100.00% | $638,668 | (87.54)% | Total Assets by Segment | Segment | Sep 30, 2022 | Jun 30, 2022 | | :---------------------- | :----------- | :----------- | | Luobuma products | $9,388,729 | $10,982,562 | | Other agricultural products | $43,159,007 | $46,488,334 | | Freight services | $4,872,431 | $6,355,121 | | Total assets | $57,420,167 | $63,826,017 | [NOTE 20 - DISCONTINUED OPERATIONS](index=39&type=section&id=NOTE%2020%20-%20DISCONTINUED%20OPERATIONS) - The Company disposed of Ankang Longevity Group on July 5, 2021, reclassifying its operations as discontinued[178](index=178&type=chunk)[180](index=180&type=chunk) - A loss on disposal of discontinued operations of **US$3,135,237** was recorded for the three months ended September 30, 2021[180](index=180&type=chunk) [NOTE 21 - SUBSEQUENT EVENTS](index=40&type=section&id=NOTE%2021%20-%20SUBSEQUENT%20EVENTS) - On October 21, 2022, Life Science agreed to acquire **51% of Changzhou Biowin Pharmaceutical Co., Ltd.** for **US$9 million cash** and **3,260,000 common shares**[181](index=181&type=chunk) - No other subsequent events required adjustments or disclosure as of November 14, 2022[182](index=182&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS](index=41&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITIONS%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition and results of operations for the three months ended September 30, 2022, compared to 2021, covering revenue, expenses, liquidity, and capital resources, highlighting the impact of business strategy changes, COVID-19, and legal proceedings [Forward-Looking Statements](index=41&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding future products, financial projections, and market conditions, subject to known and unknown risks and uncertainties[185](index=185&type=chunk)[186](index=186&type=chunk) - The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after their making[187](index=187&type=chunk) [General Overview](index=42&type=section&id=General%20Overview) - Shineco, Inc. is a Delaware holding company operating primarily through PRC VIEs, providing health and well-being focused plant-based products[190](index=190&type=chunk) - Business segments include Luobuma products, green and organic agricultural produce (yew trees, bamboo willows), and domestic/international freight forwarding services[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) - The traditional Chinese herbal medicine segment (Ankang Longevity Group) was disposed of in July 2021 and reclassified as discontinued operations[192](index=192&type=chunk) [Financing Activities](index=43&type=section&id=Financing%20Activities) - The Company issued multiple unsecured convertible promissory notes to Streeterville Capital, LLC, with **6% annual interest**, extending some maturity dates to 2023[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - As of September 30, 2022, **$7,472,638 of notes** were fully converted into **1,946,766 common shares**, and another **$420,000** was converted into **427,699 shares**[198](index=198&type=chunk)[199](index=199&type=chunk) - The Company raised **$5.0 million** gross proceeds from a stock purchase agreement in July 2022 and is selling up to **$1.76 million** in shares from an August 2022 agreement, with **$1.0 million** received to date[201](index=201&type=chunk)[202](index=202&type=chunk) [Factors Affecting Financial Performance](index=44&type=section&id=Factors%20Affecting%20Financial%20Performance) - Increasing demand for agricultural products is expected to positively impact financial performance, with plans for new products, distribution expansion, and potential M&A[203](index=203&type=chunk) - Effective cost control is a focus, achieved by maintaining adequate material supplies at competitive prices, establishing long-term supplier alliances, and optimizing quality management and procurement[204](index=204&type=chunk) - Operations in the PRC are subject to significant political, economic, and legal risks, including changes in governmental policies and foreign currency exchange[205](index=205&type=chunk) [COVID-19 Impact](index=45&type=section&id=COVID-19%20Impact) - COVID-19 caused significant disruptions, including office closures, transportation issues, and delays in sales, order fulfillment, and payment collection[206](index=206&type=chunk)[207](index=207&type=chunk) - The resurgence of COVID-19 in Beijing in April 2022 negatively affected business, but the impact is currently considered temporary, with future extent highly uncertain[207](index=207&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies involve significant judgments and estimates, including consolidation of VIEs, useful lives of assets, and recoverability of long-lived assets[208](index=208&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) - Key estimates also include the valuation of accounts receivable, advances to suppliers, deferred taxes, and inventory reserves[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Revenue recognition follows ASC 606, with no material changes upon adoption, and fair value measurements adhere to ASC 820's hierarchy[217](index=217&type=chunk)[218](index=218&type=chunk) [Results of Operations for the Three Months Ended September 30, 2022 and 2021](index=48&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030,%202022%20and%202021) The Company experienced a significant reduction in net loss for the three months ended September 30, 2022, compared to 2021, primarily due to decreased operating expenses and the absence of discontinued operations, with revenue declining across all segments, but gross loss improving due to lower cost of revenue Results of Operations Summary (Three Months Ended September 30) | Metric | 2022 | 2021 | Variance Amount | % | | :------------------------------------------------ | :----------- | :----------- | :-------------- | :-------- | | Revenue | $535,698 | $629,758 | $(94,060) | (14.94)% | | Cost of revenue | $626,575 | $1,359,303 | $(732,728) | (53.90)% | | Gross loss | $(90,877) | $(729,545) | $638,668 | (87.54)% | | Operating expenses | $1,899,544 | $9,722,549 | $(7,823,005) | (80.46)% | | Loss from operations | $(1,990,421) | $(10,452,094) | $8,461,673 | (80.96)% | | Net loss from continuing operations | $(2,442,320) | $(11,108,221) | $8,665,901 | (78.01)% | | Net loss from discontinued operations | $0 | $(3,135,237) | $3,135,237 | (100.00)% | | Net loss | $(2,442,320) | $(14,243,458) | $11,801,138 | (82.85)% | [Revenue](index=48&type=section&id=Revenue) Revenue by Segment (Three Months Ended September 30) | Segment | 2022 Revenue | 2021 Revenue | Variance Amount | % Change | | :---------------------- | :----------- | :----------- | :-------------- | :--------- | | Luobuma products | $5,574 | $13,508 | $(7,934) | (58.74)% | | Other agricultural products | $428,596 | $452,387 | $(23,791) | (5.26)% | | Freight services | $101,528 | $163,863 | $(62,335) | (38.04)% | | Total Amount | $535,698 | $629,758 | $(94,060) | (14.94)% | - Revenue from Luobuma products decreased by **58.74%** due to no new product launches and reduced investment in e-commerce[225](index=225&type=chunk) - Revenue from other agricultural products decreased by **5.26%** due to a strategic shift from selling unmatured yew trees to cultivating matured ones for Taxol extraction[226](index=226&type=chunk) - Revenue from freight services decreased by **38.04%** due to outsourcing and recognizing revenue on a net basis as an agent[227](index=227&type=chunk) [Cost of Revenue and Related Tax](index=49&type=section&id=Cost%20of%20Revenue%20and%20Related%20Tax) Cost of Revenue by Segment (Three Months Ended September 30) | Segment | 2022 Cost of Revenue | 2021 Cost of Revenue | Variance Amount | % Change | | :--------------------------------------- | :------------------- | :------------------- | :-------------- | :--------- | | Luobuma products | $206 | $141,838 | $(141,632) | (99.85)% | | Other agricultural products | $548,942 | $1,068,254 | $(519,312) | (48.61)% | | Freight services | $77,427 | $147,956 | $(70,529) | (47.67)% | | Business and sales related tax | $0 | $1,255 | $(1,255) | (100.00)% | | Total Amount | $626,575 | $1,359,303 | $(732,728) | (53.90)% | - Cost of revenue for Luobuma products decreased by **99.85%** due to a decreased allowance for slow-moving inventories[229](index=229&type=chunk) - Cost of revenue for other agricultural products decreased by **48.61%** due to less stock written off, despite continued COVID-19 impact on yew trees[230](index=230&type=chunk) - Cost of revenue for freight services decreased by **47.67%** due to outsourcing, leading to the Company acting as an agent[230](index=230&type=chunk) [Gross Loss](index=50&type=section&id=Gross%20Loss) Gross Loss by Segment (Three Months Ended September 30) | Segment | 2022 Gross Loss | 2021 Gross Loss | Variance Amount | % Change | | :---------------------- | :-------------- | :-------------- | :-------------- | :--------- | | Luobuma products | $5,368 | $(128,330) | $133,698 | (104.18)% | | Other agricultural products | $(120,346) | $(615,867) | $495,521 | (80.46)% | | Freight services | $24,101 | $14,652 | $9,449 | 64.49% | | Total Amount | $(90,877) | $(729,545) | $638,668 | (87.54)% | - Gross loss from Luobuma product sales decreased by **104.18%** due to a decrease in allowance for slow-moving inventories[233](index=233&type=chunk) - Gross loss from other agricultural products decreased by **80.46%** due to less stock written off and fewer price discounts[234](index=234&type=chunk) - Gross income from freight services increased by **64.49%** due to improved operating efficiency from outsourcing[234](index=234&type=chunk) [Expenses](index=50&type=section&id=Expenses) Operating Expenses (Three Months Ended September 30) | Expense Category | 2022 | 2021 | Variance Amount | % Change | | :-------------------------------- | :----------- | :----------- | :-------------- | :--------- | | General and administrative expenses | $1,886,443 | $8,573,656 | $(6,687,213) | (78.00)% | | Selling expenses | $13,101 | $8,342 | $4,759 | 57.05% | | Impairment loss of distribution rights | $0 | $1,140,551 | $(1,140,551) | (100.00)% | | Total Amount | $1,899,544 | $9,722,549 | $(7,823,005) | (80.46)% | [General and Administrative Expenses](index=50&type=section&id=General%20and%20Administrative%20Expenses) - General and administrative expenses decreased by **78.00%** to **US$1,886,443**, primarily due to a significant decrease in bad debt expense[237](index=237&type=chunk) - The decrease was partially offset by increased intermediary fees for intended acquisitions and increased stock compensation expenses[237](index=237&type=chunk) [Impairment Loss of Distribution Rights](index=51&type=section&id=Impairment%20Loss%20of%20Distribution%20Rights) - No impairment loss of distribution rights was recorded for the three months ended September 30, 2022, compared to **US$1,140,551** in the same period of 2021[239](index=239&type=chunk) - The prior year's impairment was due to the inability to generate revenue from distribution rights due to unfavorable China Customs policy and COVID-19 impact[239](index=239&type=chunk) [Loss from Equity Method Investments](index=51&type=section&id=Loss%20from%20Equity%20Method%20Investments) - Loss from equity method investments decreased from **US$27,920 (2021)** to **US$6,304 (2022)**[240](index=240&type=chunk)[241](index=241&type=chunk) - The decrease is attributed to the full impairment of Yushe Pharmaceutical investment in the prior year and lower net loss from Shanghai Gaojing Private Fund Management in the current period[240](index=240&type=chunk)[241](index=241&type=chunk) [Amortization of Debt Issuance Costs](index=51&type=section&id=Amortization%20of%20Debt%20Issuance%20Costs) - Amortization of debt issuance costs decreased by **66.36%** to **US$154,403**, from **US$458,978** in the prior year[242](index=242&type=chunk) - The decrease is due to two of the four convertible note agreements being fully converted[242](index=242&type=chunk) [Interest Expenses, Net](index=51&type=section&id=Interest%20Expenses,%20Net) - Net interest expenses increased by **79.75%** to **US$305,927**, from **US$170,199** in the prior year[243](index=243&type=chunk) - The increase was primarily due to higher interest expenses on loans from third parties and convertible notes, partially offset by interest income from loans to third and related parties[243](index=243&type=chunk) [Net Loss from Continuing Operations](index=51&type=section&id=Net%20Loss%20from%20Continuing%20Operations) - Net loss from continuing operations decreased by **78.01%** to **US$2,442,320**, from **US$11,108,221** in the prior year[244](index=244&type=chunk) - The decrease was primarily due to reduced general and administrative expenses, impairment loss of distribution rights, and amortization of debt issuance costs[244](index=244&type=chunk) [Net Loss from Discontinued Operations](index=52&type=section&id=Net%20Loss%20from%20Discontinued%20Operations) - No net loss from discontinued operations was recorded for the three months ended September 30, 2022, compared to **US$3,135,237** in the same period of 2021[246](index=246&type=chunk) - This is due to the disposal of Ankang Longevity Group on July 5, 2021, and its reclassification as discontinued operations[246](index=246&type=chunk) [Net Loss](index=52&type=section&id=Net%20Loss) - Total net loss decreased by **82.85%** to **US$2,442,320**, from **US$14,243,458** in the prior year[247](index=247&type=chunk) - The decrease was primarily due to reduced net loss from continuing operations and the absence of net loss from discontinued operations[247](index=247&type=chunk) [Comprehensive Loss](index=52&type=section&id=Comprehensive%20Loss) - Comprehensive loss attributable to Shineco, Inc. decreased by **66.73%** to **US$4,744,406**, from **US$14,258,967** in the prior year[248](index=248&type=chunk) - The decrease in comprehensive loss was primarily due to the overall decrease in net loss[248](index=248&type=chunk) [Treasury Policies](index=52&type=section&id=Treasury%20Policies) - Treasury policies aim to minimize interest and currency risks through central review and monitoring[249](index=249&type=chunk) - Interest risk is managed through loan re-financing and negotiation, while currency risk is managed by monitoring foreign currency borrowings[249](index=249&type=chunk)[250](index=250&type=chunk) - As of September 30, 2022, the Company did not engage in any foreign currency borrowings or loan contracts, except for the convertible note[250](index=250&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company finances operations primarily through advances from related parties, convertible notes, and common stock sales[252](index=252&type=chunk) - Management believes current cash, future operations cash flows, and access to loans will provide sufficient liquidity for at least the next 12 months[259](index=259&type=chunk) - As of September 30, 2022, the Company had **$24,238,173** in cash and cash equivalents[7](index=7&type=chunk) [Working Capital](index=54&type=section&id=Working%20Capital) Working Capital | Metric | Sep 30, 2022 | Jun 30, 2022 | | :------------------ | :----------- | :----------- | | Current Assets | $53,785,997 | $59,735,425 | | Current Liabilities | $20,371,268 | $29,040,302 | | Working Capital | $33,414,729 | $30,695,123 | - Working capital increased by **US$2,719,606 (8.9%)** due to an increase in cash and cash equivalents and a decrease in other payables and accrued expenses[261](index=261&type=chunk) [Capital Commitments and Contingencies](index=54&type=section&id=Capital%20Commitments%20and%20Contingencies) - The Company accrued **US$829,969** for a lawsuit by Mrs. Guiqin Li in China regarding stock losses[263](index=263&type=chunk) - The Company is seeking **US$9,088,125** in damages from Lei Zhang and Yan Li for unpaid restricted shares, with a trial scheduled for September 18, 2023[265](index=265&type=chunk)[268](index=268&type=chunk) - As of September 30, 2022, the subscription receivable for unpaid shares from Lei Zhang and Yan Li amounted to **US$3,024,000**[268](index=268&type=chunk) [Off-Balance Sheet Commitments and Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Commitments%20and%20Arrangements) - The Company has no financial guarantees or other commitments to guarantee third-party payment obligations[268](index=268&type=chunk) - No derivative contracts indexed to common stock are classified as stockholders' equity or unreflected in financial statements[268](index=268&type=chunk) [Cash Flows](index=55&type=section&id=Cash%20Flows) For Q3 2022, net cash used in operating activities was $2.1 million, net cash provided by investing activities was $11.1 million (primarily from loan repayments), and net cash provided by financing activities was $0.9 million (from stock issuance, offset by related party repayments), with overall cash and cash equivalents increasing by $9.1 million Net Cash Flows (Three Months Ended September 30) | Cash Flow Activity | 2022 | 2021 | | :------------------------------------------------ | :----------- | :----------- | | Net cash used in operating activities | $(2,109,145) | $(5,264,781) | | Net cash provided by (used in) investing activities | $11,083,120 | $(25,954,544) | | Net cash provided by financing activities | $921,047 | $20,436,888 | | Effect of exchange rate changes on cash and cash equivalents | $(822,080) | $(11,884) | | Net increase (decrease) in cash and cash equivalents | $9,072,942 | $(10,794,321) | | Cash and cash equivalents, end of the period | $24,238,173 | $18,230,073 | [Operating Activities](index=56&type=section&id=Operating%20Activities) - Net cash used in operating activities was **US$2.1 million** in Q3 2022, an improvement from **US$5.3 million** in Q3 2021[271](index=271&type=chunk)[272](index=272&type=chunk) - Key factors for Q3 2022 included a net loss of **US$2.4 million**, net recovery of bad debt expenses of **US$0.6 million**, and restricted shares issued for management of **US$0.6 million**[271](index=271&type=chunk) [Investing Activities](index=56&type=section&id=Investing%20Activities) - Net cash provided by investing activities was **US$11.1 million** in Q3 2022, a significant increase from **US$26.0 million** used in Q3 2021[273](index=273&type=chunk) - The primary driver for Q3 2022 was **US$11.0 million** in repayments of loans to third parties[273](index=273&type=chunk) [Financing Activities](index=56&type=section&id=Financing%20Activities) - Net cash provided by financing activities was **US$0.9 million** in Q3 2022, a decrease from **US$20.4 million** in Q3 2021[274](index=274&type=chunk) - Q3 2022 financing activities included **US$1.0 million** from common stock issuance, partially offset by **US$0.1 million** in repayments of advances from related parties[274](index=274&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=57&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Shineco, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Shineco, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[276](index=276&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=57&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were not effective as of September 30, 2022, due to a lack of full-time U.S. GAAP personnel and insufficient segregation of duties, with remedial actions including recruiting qualified professionals, engaging external consultants, improving communication, and obtaining proper approvals for significant transactions, and no material changes in internal control over financial reporting occurred during the quarter [Evaluation of Controls and Procedures](index=57&type=section&id=Evaluation%20of%20Controls%20and%20Procedures) - Disclosure controls and procedures were not effective as of September 30, 2022, due to a lack of full-time U.S. GAAP personnel and insufficient segregation of duties[277](index=277&type=chunk) - Remedial actions include recruiting qualified professionals, engaging an outside consulting firm, improving communication, and obtaining proper approvals for significant transactions[278](index=278&type=chunk) [Changes in Internal Control over Financial Reporting](index=57&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2022[279](index=279&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=58&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in two significant legal proceedings: a lawsuit in China by Mrs. Guiqin Li for stock losses, with $829,969 accrued, and a lawsuit in New York against Lei Zhang and Yan Li for $9,088,125 in unpaid restricted shares, with a trial scheduled for September 18, 2023 - The Company is involved in a lawsuit in China by Mrs. Guiqin Li, with **US$829,969** accrued as of September 30, 2022[282](index=282&type=chunk) - The Company filed a lawsuit in New York against Lei Zhang and Yan Li, seeking **US$9,088,125** for unpaid restricted shares, with a trial scheduled for September 18, 2023[283](index=283&type=chunk)[286](index=286&type=chunk) - As of September 30, 2022, the subscription receivable for unpaid shares from Lei Zhang and Yan Li amounted to **US$3,024,000**[286](index=286&type=chunk) [ITEM 1A. RISK FACTORS](index=58&type=section&id=ITEM%201A.%20RISK%20FACTORS) As a smaller reporting company, Shineco, Inc. is not required to provide the information regarding risk factors - As a smaller reporting company, Shineco, Inc. is exempt from providing risk factor disclosures[287](index=287&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=58&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Disclosures related to unregistered sales of equity securities and use of proceeds are incorporated by reference from Note 17, "Stockholders' Equity," in Part I, Item 1 - Information on unregistered sales of equity securities and use of proceeds is incorporated by reference from Note 17, "Stockholders' Equity"[287](index=287&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=58&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reported no defaults upon senior securities - The Company reported no defaults upon senior securities[287](index=287&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company - This item is not applicable to the Company[288](index=288&type=chunk) [ITEM 5. OTHER INFORMATION](index=59&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The Company reported no other information required under this item - The Company reported no other information required under this item[288](index=288&type=chunk) [ITEM 6. EXHIBITS](index=59&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including organizational documents, incentive plans, securities purchase agreements, certifications, and XBRL-related documents - The exhibits include Certificate of Incorporation, Bylaws, Stock Incentive Plans (2016, 2022), Securities Purchase Agreements, and various certifications (CEO, CFO)[289](index=289&type=chunk) - XBRL instance, schema, calculation, definition, and label linkbase documents are also included[289](index=289&type=chunk) SIGNATURES - The report was signed on November 14, 2022, by Jennifer Zhan (CEO) and Sai (Sam) Wang (CFO)[292](index=292&type=chunk)

Part I [Business](index=5&type=section&id=Item%201.%20Business) Shineco, Inc. operates through PRC VIEs, focusing on plant-based health products, textiles, and freight services, having discontinued its herbal medicine segment - The company is a Delaware holding company conducting the majority of its operations through Variable Interest Entities (VIEs) in the PRC, a structure that carries risks of being disallowed by Chinese regulatory authorities[13](index=13&type=chunk) - The business is divided into three major segments: green/organic agricultural produce (yew trees, bamboo willows), specialized Luobuma textiles, and domestic freight forwarding services[16](index=16&type=chunk)[17](index=17&type=chunk) - The traditional Chinese herbal medicine segment, previously operated through Ankang Longevity Group, was disposed of on July 5, 2021, and is now classified as a discontinued operation. This was part of a restructuring to acquire the Guangyuan VIE[15](index=15&type=chunk) - The company utilizes a vertically integrated model for its plant-based products, leveraging modern biotechnologies for production and distributing them through various channels including retail stores, institutional sales, and e-commerce platforms like Tmall and Taobao[14](index=14&type=chunk)[57](index=57&type=chunk)[61](index=61&type=chunk) [Corporate Structure and VIE Arrangements](index=7&type=section&id=Item%201.%20Business-Corporate%20Structure) Shineco uses a complex VIE structure in China due to foreign investment restrictions, controlling VIEs contractually, which carries significant legal and enforcement risks - The company uses a VIE structure because direct foreign investment is prohibited in key business areas like the preparation of traditional Chinese medicines[23](index=23&type=chunk) - Control over the VIEs is maintained through four key types of contractual arrangements: Exclusive Business Cooperation Agreements, Equity Interest Pledge Agreements, Exclusive Option Agreements, and Powers of Attorney[26](index=26&type=chunk) - There are significant risks associated with the VIE structure, including the potential for the PRC government to disallow it and difficulties in enforcing the contractual agreements in Chinese courts, which could lead to a loss of economic benefits from the VIEs[36](index=36&type=chunk) - In fiscal year 2022, Shineco transferred **$3.72 million** to its WFOE for operational purposes, and the WFOE paid approximately **$1.56 million** in expenses on behalf of Shineco. No earnings were distributed from the PRC entities to the holding company[38](index=38&type=chunk) [Products and Strategy](index=11&type=section&id=Item%201.%20Business-Products%20and%20Strategy) The company's portfolio includes yew trees, bamboo willows, and Luobuma textiles, with R&D focused on proprietary patents and strategic alliances - The company cultivates and sells yew trees, with a long-term focus on extracting taxol, a mitotic inhibitor used in cancer chemotherapy[43](index=43&type=chunk) - Luobuma textiles are a core product, marketed for their natural Far Infrared (FIR) radiating properties, which are believed to have positive effects on human body functions. The company has developed advanced "Third Generation" FIR textiles using nanotechnology[46](index=46&type=chunk)[51](index=51&type=chunk) - The company's R&D strategy is centered on keeping products proprietary and patented, developing new byproducts from Luobuma and other plants, and building strategic alliances with universities and scientific institutions[54](index=54&type=chunk) [Market and Competition](index=15&type=section&id=Item%201.%20Business-Market%20and%20Competition) Shineco targets China's growing health market, competing with larger firms, and leverages advanced Luobuma fiber technology for competitive advantage - The primary market is China, with growth drivers identified as the expanding middle class, an aging population, and increased health awareness[62](index=62&type=chunk) - The company faces competition from larger, more established companies in both the textile and agricultural sectors. Prominent competitors include Luolai Home Textile Co. and Shenyang Xincheng Garden Engineering Co., Ltd[66](index=66&type=chunk)[67](index=67&type=chunk) - The company's competitive advantage in the textile market is its use of advanced technologies for Luobuma fiber production, distinguishing it from competitors using traditional methods[58](index=58&type=chunk) [Employees](index=17&type=section&id=Item%201.%20Business-Employees) As of June 30, 2022, Shineco employed **74 full-time employees** across various functions, and contributed approximately **$136,398** to employee social insurance Employee Distribution by Department (as of June 30, 2022) | Department | Number of Employees | | :--- | :--- | | Senior Management | **12** | | Human Resource & Administration | **15** | | Finance | **12** | | Research & Development | **6** | | Production & Procurement | **20** | | Sales & Marketing | **9** | | **Total** | **74** | - The company contributed approximately **$136,398** to employee social insurance in fiscal year 2022, in compliance with PRC law[73](index=73&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Shineco, Inc. is not required to provide the information for this item - The Company is a smaller reporting company and is not required to provide the information required by this Item[76](index=76&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[76](index=76&type=chunk) [Properties](index=19&type=section&id=Item%202.%20Properties) The company's properties are all located in China and consist of both leased facilities and properties for which it holds land use rights, with none encumbered by debt List of Properties | Property Description | Location | Term | Space (sq. meters) | | :--- | :--- | :--- | :--- | | Office (leased out) | Chaoyang District, Beijing | Company owns property right | 280 | | General Office | Chaoyang District, Beijing | Leased (July 2021 - Aug 2024) | 573.30 | | General Office | Chengyang District, Qingdao | Leased (Mar 2019 - Feb 2025) | 234.16 | | Factory | Muping District, Yantai | Land Use Right (Apr 2011 - Apr 2041) | 13,333 | | Production Facility | Pinggu District, Beijing | Land Use Right (Aug 2012 - Aug 2030) | 26,666 | | Production Facility | Chaoyang District, Beijing | Land Use Right (Aug 2012 - Jul 2024) | 73,333 | [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) The company faces a 2017 lawsuit for alleged IPO stock misguidance, accruing **$0.78 million**, and a 2021 complaint for non-payment of shares with **$9 million** counterclaims - A lawsuit by Mrs. Guiqin Li alleges misguidance on stock sales during the IPO. The company has accrued **$0.78 million** for this lawsuit as of December 31, 2021, and is appealing the initial judgment[82](index=82&type=chunk) - The company filed a complaint against Lei Zhang and Yan Li for non-payment for restricted shares. They have counterclaimed, seeking at least **$9 million** in damages for alleged breach of contract and fraud. The trial is scheduled for September 18, 2023[83](index=83&type=chunk)[84](index=84&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable as the company has no mining operations - The information required by Item 4 is not applicable as the company has no mining operations in the United States[85](index=85&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchase%20of%20Equity%20Securities) Shineco's common stock trades on NASDAQ under 'SISI', with **16.4 million shares** outstanding; the company retains earnings for growth and has issued **1.5 million shares** under its 2022 Equity Incentive Plan - The company's common stock trades on the NASDAQ Capital Market under the symbol "SISI". As of September 27, 2022, there were **16.4 million shares** outstanding[87](index=87&type=chunk) - The company does not anticipate paying cash dividends, intending to retain earnings to finance business growth. Dividend payments from PRC subsidiaries are also subject to Chinese regulations, including statutory reserve requirements and withholding taxes[89](index=89&type=chunk)[90](index=90&type=chunk) - Shareholders approved the 2022 Equity Incentive Plan on July 21, 2022, reserving **1.5 million shares** of common stock for issuance to directors, officers, employees, and consultants[96](index=96&type=chunk)[99](index=99&type=chunk) - The company conducted multiple sales of unregistered securities and convertible notes to raise capital, including issuing shares at **$3.0/share** in Jan 2021, **$3.2/share** in Apr 2021, and **$2.12/share** in June 2022, as well as issuing convertible promissory notes in June and August 2021[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [Selected Financial Data](index=23&type=section&id=Item%206.%20%5BReserved%5D) As a smaller reporting company, Shineco, Inc. is not required to provide the information for this item - The Company is a smaller reporting company and is not required to provide the information required by this Item[106](index=106&type=chunk) [Management's Discussion and Analysis of Financial Conditions and Results of Operations](index=24&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operations) In FY2022, revenue from continuing operations decreased by **27.6%** to **$2.2 million**, resulting in a net loss of **$27.1 million**, while liquidity was supported by **$17.0 million** in convertible notes and **$9.7 million** in stock issuance, despite going concern doubts [Results of Operations](index=31&type=section&id=Item%207.%20MD%26A-Results%20of%20Operations) For FY2022, total revenue from continuing operations decreased **27.6%** to **$2.19 million**, leading to a wider loss from operations of **$23.0 million** due to increased G&A expenses and a **$1.14 million** impairment loss Consolidated Results of Operations (Years Ended June 30) | Metric | 2022 ($) | 2021 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $2,186,460 | $3,021,704 | (27.6)% | | Gross Loss | ($1,610,663) | ($4,236,151) | (62.0)% | | Loss from Operations | ($23,011,213) | ($21,412,935) | 7.5% | | Net Loss from Continuing Operations | ($24,633,744) | ($21,439,445) | 14.9% | | Net Loss from Discontinued Operations | ($2,433,395) | ($10,616,988) | (77.1)% | | **Net Loss** | **($27,067,139)** | **($32,056,433)** | **(15.6)%** | Revenue Breakdown by Segment (Years Ended June 30) | Segment | 2022 Revenue ($) | 2021 Revenue ($) | Change (%) | | :--- | :--- | :--- | :--- | | Luobuma products | $43,949 | $115,590 | (62.0)% | | Other agricultural products | $1,687,884 | $2,120,484 | (20.4)% | | Freight services | $454,627 | $785,630 | (42.1)% | | **Total** | **$2,186,460** | **$3,021,704** | **(27.6)%** | - General and administrative expenses increased by **18.0%** to **$20.2 million** in FY2022, due to higher professional fees, compensation expenses, rental costs, and impairment charges on assets[162](index=162&type=chunk) - A full impairment loss of **$1.14 million** was recorded on the distribution rights of Tianjin Tajite, as the company was unable to generate revenue from this asset due to unfavorable customs policies and the impact of COVID-19[164](index=164&type=chunk) [Discontinued Operations](index=35&type=section&id=Item%207.%20MD%26A-Discontinued%20Operations) The traditional Chinese medicinal herbal products segment was disposed of on July 5, 2021, resulting in a **$2.43 million** loss on disposal in FY2022, a significant reduction from the prior year's **$10.62 million** net loss Summarized Results of Discontinued Operations (Years Ended June 30) | Metric | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Revenues | $0 | $8,085,527 | | Gross profit | $0 | $986,174 | | Net loss from discontinued operations | $0 | ($10,616,988) | | Loss from disposal | ($2,433,395) | $0 | | **Total net loss from discontinued operations** | **($2,433,395)** | **($10,616,988)** | [Liquidity and Capital Resources](index=36&type=section&id=Item%207.%20MD%26A-Liquidity%20and%20Capital%20Resources) In FY22, net cash used in operating activities improved to **$5.71 million**, while financing provided **$28.41 million** from notes and stock, supporting liquidity Working Capital (as of June 30) | | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Current Assets | $59,735,425 | $49,278,577 | | Current Liabilities | $29,040,302 | $14,795,390 | | **Working Capital** | **$30,695,123** | **$34,483,187** | Summary of Cash Flows (Years Ended June 30) | Cash Flow Activity ($) | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,712,562) | ($14,649,557) | | Net cash provided by (used in) investing activities | ($36,016,193) | $1,262,305 | | Net cash provided by financing activities | $28,412,235 | $7,235,931 | | **Net decrease in cash** | **($13,859,163)** | **($3,346,978)** | - Financing activities in FY2022 were substantial, including **$17.0 million** from issuing convertible notes and **$9.7 million** from issuing common stock[197](index=197&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Shineco, Inc. is not required to provide the information for this item - The Company is a smaller reporting company and is not required to provide the information required by this Item[199](index=199&type=chunk) [Financial Statements and Supplementary Data](index=40&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section indicates that the required financial statements are provided starting on page F-1 of the report - The financial statements required by this item are set forth beginning on page F-1[199](index=199&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=90&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[424](index=424&type=chunk) [Controls and Procedures](index=90&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2022, due to material weaknesses in accounting personnel and segregation of duties - Management concluded that disclosure controls and procedures were not effective as of the end of the fiscal year[425](index=425&type=chunk) - Identified material weaknesses include: lack of U.S. GAAP qualified personnel in the accounting department and a lack of segregation of duties for preparing and reviewing journal entries[425](index=425&type=chunk)[432](index=432&type=chunk) - Remediation plans include recruiting qualified professionals, improving communication between management and the CFO, and ensuring Board of Directors approval for significant transactions[426](index=426&type=chunk) [Other Information](index=92&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[437](index=437&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=92&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) This item is not applicable to the company - Not applicable[437](index=437&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=93&type=section&id=Item%2010.%20Directors%20%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's leadership includes CEO Jennifer Zhan, CFO Sai (Sam) Wang, and COO Xiqiao Liu, with a **seven-member** board, **four** of whom are independent, overseeing **three** standing committees Executive Officers and Directors | Name | Age | Role | Since | | :--- | :--- | :--- | :--- | | Xiqiao Liu | **42** | Chief Operating Officer and Director | 2022 | | Sai (Sam) Wang | **37** | Chief Financial Officer and Director | 2015* | | Jennifer Zhan | **34** | Chief Executive Officer and Director | 2021 | | Jin Liu | **56** | Director (Independent) | 2020 | | Aamir Ali Quraishi | **52** | Director (Independent) | 2022 | | Mike Zhao | **58** | Chair of the Board (Independent) | 2022 | | Hu Li | **48** | Director (Independent) | 2021 | - The Board of Directors has **seven members**, with **four** being independent. It maintains an Audit Committee, a Compensation Committee, and a Nominating Committee, each composed of independent directors[452](index=452&type=chunk)[453](index=453&type=chunk) [Executive Compensation](index=97&type=section&id=Item%2011.%20Executive%20Compensation) For FY2022, CEO Jennifer Zhan received **$60,000** and CFO Sai (Sam) Wang received **$96,000** in salary, with independent directors receiving an annual cash retainer of **$10,000** Summary Compensation Table (FY 2022) | Name and Principal Position | Salary ($) | Total ($) | | :--- | :--- | :--- | | Jennifer Zhan (CEO) | 60,000 | 60,000 | | Sai (Sam) Wang (CFO) | 96,000 | 96,000 | - Independent directors were paid an annual cash retainer of **$10,000** for their service during the fiscal year ended June 30, 2022[465](index=465&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=98&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of September 27, 2022, directors and executive officers collectively owned **169,294 shares** (**0.99%**), while two beneficial owners held over **5%** of the common stock - All directors and executive officers as a group beneficially own **169,294 shares**, or **0.99%** of the class, as of September 27, 2022[468](index=468&type=chunk) - There are two beneficial owners holding over **5%** of the common stock, with ownership of **6.60%** and **15.18%** respectively[468](index=468&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=99&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company engages in related party transactions with its VIEs, resulting in approximately **$6.79 million** in receivables and **$2.80 million** in payables as of June 30, 2022 - The company's VIEs are owned by members of the current management team[473](index=473&type=chunk) Related Party Balances (as of June 30, 2022) | Type | Amount ($) | | :--- | :--- | | Due from Related Parties | $6,794,987 | | Due to Related Parties | $2,798,800 | [Principal Accounting Fees and Services](index=100&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) For FY2022, the company was billed a total of **$208,900** by Assentsure PAC, including **$200,000** for audit fees and **$8,900** for audit-related fees Accountant Fees (Years Ended June 30) | Fee Type | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Audit Fees | $200,000 | $195,000 | | Audit-related Fees | $8,900 | $0 | | **Total** | **$208,900** | **$195,000** | Part IV [Exhibits and Financial Statement Schedules](index=102&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications from the CEO and CFO - The exhibit index lists key corporate documents, including the Certificate of Incorporation, Bylaws, and Equity Incentive Plans[485](index=485&type=chunk) - Numerous VIE-related agreements are filed as exhibits, detailing the contractual arrangements that allow the company to control its PRC operating entities[485](index=485&type=chunk)[487](index=487&type=chunk) - Certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act are included as exhibits[495](index=495&type=chunk) [Form 10-K Summary](index=111&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[495](index=495&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=42&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued a qualified opinion with a **going concern** uncertainty due to a **$27.07 million** net loss and **$5.71 million** cash outflow, highlighting critical audit matters in receivables and inventory reserves - The auditor's report contains a "Material Uncertainty Related to Going Concern" due to a net loss of **$27.07 million** and cash outflow from operations of **$5.71 million** for the year ended June 30, 2022[203](index=203&type=chunk) - Critical Audit Matters identified include the allowance for accounts receivable and the provision for inventory reserve, both of which involve significant management judgment[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) [Consolidated Financial Statements](index=46&type=section&id=Consolidated%20Financial%20Statements) For FY2022, total assets increased to **$63.8 million**, liabilities nearly doubled to **$30.5 million**, and total equity decreased to **$33.3 million**, with a net loss of **$27.1 million** and cash decreasing to **$15.2 million** Consolidated Balance Sheet Highlights (as of June 30) | | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Total Current Assets | $59,735,425 | $49,278,577 | | Total Assets | $63,826,017 | $61,318,599 | | Total Current Liabilities | $29,040,302 | $14,795,390 | | Total Liabilities | $30,513,129 | $15,940,393 | | Total Equity | $33,312,888 | $45,378,206 | Consolidated Statement of Loss Highlights (Years Ended June 30) | | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Revenue | $2,186,460 | $3,021,704 | | Gross Loss | ($1,610,663) | ($4,236,151) | | Net Loss from Continuing Operations | ($24,633,744) | ($21,439,445) | | Net Loss from Discontinued Operations | ($2,433,395) | ($10,616,988) | | **Net Loss** | **($27,067,139)** | **($32,056,433)** | Consolidated Cash Flow Highlights (Years Ended June 30) | Cash Flow Activity ($) | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,712,562) | ($14,649,557) | | Net cash provided by (used in) investing activities | ($36,016,193) | $1,262,305 | | Net cash provided by financing activities | $28,412,235 | $7,235,931 | | **Cash, end of the year** | **$15,165,231** | **$29,024,394** | [Notes to Consolidated Financial Statements](index=53&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the VIE structure, **going concern** doubts due to recurring losses, the **$2.43 million** loss from discontinued operations, **$20 million** in convertible notes, related party transactions, and legal contingencies - **Going Concern:** Management acknowledges that recurring net losses (**$27.1 million** in FY22, **$32.1 million** in FY21) and cash outflows from operations raise substantial doubt about the company's ability to continue as a going concern. However, they believe recent and planned stock sales will provide sufficient liquidity for the next **12 months**[251](index=251&type=chunk)[253](index=253&type=chunk) - **Discontinued Operations:** The Ankang Longevity Group was disposed of on July 5, 2021. Its assets and liabilities have been reclassified on the balance sheet, and its operating results are reported separately. The disposal resulted in a loss of **$2.43 million** in FY2022[414](index=414&type=chunk)[415](index=415&type=chunk) - **Financing:** The company issued multiple unsecured convertible promissory notes to Streeterville Capital, LLC in June, July, and August 2021, raising a total of **$20 million** in proceeds. As of June 30, 2022, the outstanding balance on these notes was **$14.4 million**[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk) - **Impairments:** In FY2022, the company recorded significant impairment losses, including **$1.14 million** on distribution rights, **$0.74 million** on property and equipment, and **$2.27 million** on Right-of-use lease assets, primarily due to the impact of COVID-19 and unfavorable business conditions[320](index=320&type=chunk)[325](index=325&type=chunk)[344](index=344&type=chunk)