Shineco(SISI) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of loss and comprehensive loss, statements of changes in equity, and statements of cash flows, along with their accompanying notes, for the periods ended March 31, 2025, and June 30, 2024 Condensed Consolidated Balance Sheets (unaudited) The company's total assets increased slightly, driven by a significant rise in current assets, particularly 'Other current assets, net' and 'Current assets held for discontinued operations'. Total liabilities also saw a substantial increase, primarily in current liabilities, leading to a decrease in total equity | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Assets: | | | | | | Total Current Assets | 34,918,780 | 20,903,961 | 14,014,819 | 67.04% | | Other current assets, net | 12,132,571 | 6,916,051 | 5,216,520 | 75.43% | | Current assets held for discontinued operations | 22,363,220 | 13,497,416 | 8,865,804 | 65.69% | | Total Assets | 85,502,545 | 84,179,379 | 1,323,166 | 1.57% | | Liabilities & Equity: | | | | | | Total Current Liabilities | 48,602,178 | 27,562,855 | 21,039,323 | 76.33% | | Convertible note payable (current) | 9,741,322 | 4,194,841 | 5,546,481 | 132.23% | | Current liabilities held for discontinued operations | 31,099,110 | 16,925,019 | 14,174,091 | 83.74% | | Total Liabilities | 59,441,910 | 47,601,684 | 11,840,226 | 24.87% | | Total Stockholders' Equity of Shineco, Inc. | 18,164,975 | 26,000,933 | (7,835,958) | -30.14% | | Non-controlling interest | 7,895,660 | 10,576,762 | (2,681,102) | -25.35% | Condensed Consolidated Statements of Loss and Comprehensive Loss (unaudited) The company experienced a significant increase in net loss for both the nine and three months ended March 31, 2025, primarily driven by a substantial loss from discontinued operations and increased operating expenses from continuing operations, despite a decrease in revenue | Metric | 9 Months Ended Mar 31, 2025 (USD) | 9 Months Ended Mar 31, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | :------- | | Revenue | 259,040 | 459,572 | (200,532) | -43.63% | | Gross Income (Loss) | 122,333 | 246,439 | (124,106) | -50.36% | | Loss from Operations | (5,089,920) | (7,463,096) | 2,373,176 | -31.80% | | Net Loss from Continuing Operations | (5,584,281) | (8,613,900) | 3,029,619 | -35.17% | | Net Income (Loss) from Discontinued Operations | (15,874,674) | 4,531,193 | (20,405,867) | -450.34% | | Net Loss | (21,458,955) | (4,082,707) | (17,376,248) | 425.61% | | Net Loss Attributable to Shineco, Inc. | (18,765,879) | (2,309,993) | (16,455,886) | 712.46% | | Basic and Diluted Loss Per Common Share | (3.10) | (11.32) | 8.22 | -72.61% | | Metric | 3 Months Ended Mar 31, 2025 (USD) | 3 Months Ended Mar 31, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | :------- | | Revenue | 40,971 | 149,346 | (108,375) | -72.57% | | Gross Income (Loss) | (14,111) | 71,153 | (85,264) | -119.83% | | Loss from Operations | (3,760,651) | (1,103,289) | (2,657,362) | 240.86% | | Net Loss from Continuing Operations | (4,082,143) | (1,523,615) | (2,558,528) | 167.92% | | Net Income (Loss) from Discontinued Operations | (12,529,001) | (2,845,113) | (9,683,888) | 340.37% | | Net Loss | (16,611,144) | (4,368,728) | (12,242,416) | 280.23% | | Net Loss Attributable to Shineco, Inc. | (15,118,697) | (3,348,746) | (11,769,951) | 351.48% | | Basic and Diluted Loss Per Common Share | (0.96) | (12.51) | 11.55 | -92.33% | Condensed Consolidated Statements of Changes in Equity (unaudited) The statements of changes in equity show a significant increase in common stock shares and additional paid-in capital, primarily due to stock issuances and convertible note redemptions. However, this was offset by a substantial increase in accumulated deficit, leading to a decrease in total equity | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Common Stock Shares Outstanding | 17,345,846 | 332,215 | 17,013,631 | 5120.96% | | Common Stock Amount | 17,346 | 332 | 17,014 | 5124.70% | | Additional Paid-in Capital | 123,281,225 | 69,476,805 | 53,804,420 | 77.44% | | Accumulated Deficit | (73,102,508) | (54,336,629) | (18,765,879) | 34.54% | | Total Stockholders' Equity of Shineco, Inc. | 18,164,975 | 26,000,933 | (7,835,958) | -30.14% | | Non-controlling interest | 7,895,660 | 10,576,762 | (2,681,102) | -25.35% | - The company underwent a 1-for-24 reverse stock split effective November 12, 2024, retrospectively restating all share and per share amounts[8] - Significant stock issuances occurred, including 15,760,590 shares for general purposes and 1,076,635 shares for convertible notes redemption during the nine months ended March 31, 2025[18] Condensed Consolidated Statements of Cash Flows (unaudited) The company experienced a net decrease in cash and cash equivalents, primarily due to significant cash outflows from operating and investing activities, partially offset by cash inflows from financing activities | Cash Flow Activity | 9 Months Ended Mar 31, 2025 (USD) | 9 Months Ended Mar 31, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | :------- | | Net cash used in operating activities | (3,120,216) | (3,062,020) | (58,196) | 1.90% | | Net cash used in investing activities | (2,984,442) | (13,939,717) | 10,955,275 | -78.59% | | Net cash provided by financing activities | 5,995,816 | 3,184,948 | 2,810,868 | 88.26% | | Net decrease in cash and cash equivalents | (107,906) | (13,601,276) | 13,493,370 | -99.21% | | Cash and cash equivalents - End of the period | 287,130 | 565,483 | (278,353) | -49.22% | - Investing activities saw a significant reduction in cash outflow, mainly due to the absence of a large disposal of VIEs (Tenet-Jove) which occurred in the prior year[25] - Financing activities provided substantially more cash, driven by proceeds from common stock issuance (US$6.8 million) and discontinued operations financing (US$0.5 million)[25] Notes to the Condensed Consolidated Financial Statements (unaudited) These notes provide detailed information on the company's organization, significant accounting policies, financial instrument details, acquisitions, related party transactions, debt, taxes, equity, and segment reporting, offering crucial context to the condensed consolidated financial statements NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS Shineco, Inc. is a Delaware holding company focused on business opportunities in the PRC. The company has undergone several acquisitions and disposals, including the acquisition of Biowin (rapid diagnostic products) and Fuzhou Meida (healthy meals), and the reclassification of Tenet-Jove Disposal Group and Wintus (Luobuma, agricultural products, freight services, other agricultural products) as discontinued operations - Shineco, Inc. is a holding company incorporated in Delaware, primarily developing business opportunities in the People's Republic of China (PRC)[27] - The company's current continuing operations include Biowin (rapid diagnostic products) and Fuzhou Meida (health-oriented chain restaurant for healthy meals)[48] - Business segments operated by Tenet-Jove and Wintus, including Luobuma products, agricultural products, freight services, and other agricultural products, have been reclassified as discontinued operations due to the Wintus and FuWang acquisitions[48] - Key acquisitions include 51% of Biowin (December 2022), 71.42% of Wintus (May 2023), and 75% of FuWang (HK) (March 2025), with the latter two leading to significant reclassifications[44][45][47] NOTE 2. GOING CONCERN The company's recurring net losses from continuing operations, negative cash flow from operating activities, and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management has taken steps to enhance liquidity through various stock offerings and debt financing, believing these measures will provide sufficient liquidity for the next 12 months - The company reported recurring net losses from continuing operations of US$5.6 million (9 months ended March 31, 2025) and US$8.6 million (9 months ended March 31, 2024)[50] - Continuing cash outflow from operating activities was US$2.6 million (9 months ended March 31, 2025) and US$2.3 million (9 months ended March 31, 2024)[50] - As of March 31, 2025, the company had an accumulated deficit of US$73.1 million and negative working capital of US$13.7 million[50] - To enhance liquidity, the company completed several stock offerings, raising gross proceeds of US$7.0 million (June 2024), US$2.0 million (July 2024), US$8.2 million (August 2024), and US$32.7 million (December 2024)[51] NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the significant accounting policies, including the basis of presentation (US GAAP), principles of consolidation (including VIEs), revenue recognition (ASC 606), and valuation methods for assets like accounts receivable, inventories, and long-lived assets. It also details policies for business acquisitions, goodwill, leases, income taxes, foreign currency translation, and new accounting pronouncements - The financial statements are prepared in conformity with US GAAP for interim financial information and include the consolidation of subsidiaries and Variable Interest Entities (VIEs) where the company is the primary beneficiary[52][53][54] - Revenue is recognized when performance obligations are satisfied, primarily from sales of rapid diagnostic products, healthy meals, and discontinued operations (Luobuma, agricultural products, logistic services)[61][64][65] - The company adopted ASC 2016-13 (CECL methodology) for credit losses on July 1, 2023, with no material impact on consolidated financial statements[70] - New accounting pronouncements, ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-01 (Stock Compensation), are effective for fiscal years beginning after December 15, 2024, or July 1, 2025, and the company is evaluating their impact[109][110][111] NOTE 4 – ACCOUNTS RECEIVABLE, NET Accounts receivable, net, increased significantly, primarily driven by an increase in accounts receivable held for discontinued operations. The allowance for credit losses also increased, reflecting ongoing assessments of collectability | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Accounts receivable, net | 1,677,907 | 1,215,114 | 462,793 | 38.09% | | Accounts receivable, net held for discontinued operations | 1,677,590 | 1,214,757 | 462,833 | 38.10% | | Allowance for credit losses (ending balance) | 1,533,494 | 1,356,873 | 176,621 | 13.02% | | Charge to allowance | 176,020 | 118,499 | 57,521 | 48.54% | NOTE 5 – INVENTORIES, NET Total inventories, net, decreased, with a notable reduction in work-in-process and finished goods. Inventories held for discontinued operations also decreased, while the inventory reserve for continuing operations was eliminated | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Raw materials | 213,444 | 290,152 | (76,708) | -26.44% | | Work-in-process | 156,562 | 338,902 | (182,340) | -53.80% | | Finished goods | 860,300 | 989,914 | (129,614) | -13.09% | | Inventory reserve | - | (30,443) | 30,443 | -100.00% | | Total inventories, net | 1,230,306 | 1,588,525 | (358,219) | -22.55% | | Inventories, net, held for discontinued operations | (1,025,836) | (1,308,556) | 282,720 | -21.61% | | Inventories, net, held for continuing operations | 204,470 | 279,969 | (75,499) | -26.97% | NOTE 6 – ADVANCES TO SUPPLIERS, NET Advances to suppliers, net, increased substantially, primarily due to a significant rise in advances to suppliers and a large charge to the allowance for doubtful accounts. The majority of these advances are held for discontinued operations | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Advances to suppliers | 24,330,480 | 10,132,190 | 14,198,290 | 140.13% | | Allowance for doubtful accounts (ending balance) | (5,249,870) | (111,483) | (5,138,387) | 4609.12% | | Advance to suppliers, net | 19,080,610 | 10,020,707 | 9,059,903 | 90.41% | | Advance to supplier, net, held for discontinued operations | (19,079,599) | (9,986,844) | (9,092,755) | 91.05% | | Charge to allowance | 5,173,172 | 102,514 | 5,070,658 | 4946.25% | NOTE 7 – OTHER CURRENT ASSETS, NET Other current assets, net, increased significantly, driven by new loans to third parties and a prepayment for business acquisition. The allowance for credit losses decreased, indicating improved collectability assessment or write-offs | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Loans to third parties | 10,227,757 | 9,445,164 | 782,593 | 8.29% | | Other receivables | 3,755,950 | 2,464,188 | 1,291,762 | 52.42% | | Prepayment for business acquisition | 2,630,000 | - | 2,630,000 | N/A | | Total other current assets, net | 12,380,789 | 7,294,454 | 5,086,335 | 69.73% | | Allowance for credit losses (ending balance) | 4,328,478 | 4,656,522 | (328,044) | -7.04% | | Charge to (reversal of) expense | (330,080) | 2,248,574 | (2,578,654) | -114.68% | - Loans to third parties are mainly for short-term funding to external business partners or employees, with various maturity dates and interest terms. The company actively manages these loans and their associated credit loss allowances[118] - A significant prepayment of US$2.63 million was made for the FuWang Acquisition, which was completed on May 12, 2025[118] NOTE 8 - PROPERTY AND EQUIPMENT, NET Property and equipment, net, decreased, primarily due to a significant reduction in assets held for continuing operations. Depreciation and amortization expenses were incurred for both continuing and discontinued operations | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Total property and equipment, net | 5,251,310 | 6,279,759 | (1,028,449) | -16.38% | | Property and equipment, net held for continuing operations | 73,008 | 1,120,318 | (1,047,310) | -93.48% | | Property and equipment, net, held for discontinued operations | (5,178,302) | (5,159,441) | (18,861) | 0.37% | | Depreciation and amortization expense (9 months, continuing operations) | 44,598 | 68,041 | (23,443) | -34.45% | | Depreciation and amortization expense (9 months, discontinued operations) | 267,334 | 290,038 | (22,704) | -7.83% | - A property was pledged as collateral for a personal loan of a former chairman, Zhang Yuying. The company transferred 100% equity interest of Chongshi to the lender as payment for the loan, with Zhang Yuying expected to pay RMB 8.0 million (US$1.1 million) to the company by June 30, 2025[124] NOTE 9 - LAND USE RIGHTS, NET Land use rights, net, decreased slightly, with all such rights held for discontinued operations. No amortization expense was charged to continuing operations | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Total land use rights, net | 601,305 | 615,607 | (14,302) | -2.32% | | Land use rights, net, held for discontinued operations | (601,305) | (615,607) | 14,302 | -2.32% | | Amortization expense (9 months, discontinued operations) | 14,523 | 14,982 | (459) | -3.06% | NOTE 10 - LEASES The company leases office space and warehouses under non-cancellable operating leases. Operating lease ROU assets and liabilities for continuing operations decreased, while discontinued operations no longer hold such assets or liabilities. The company also generates rental income from leasing out property to a third party | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | ROU lease assets (continuing operations) | 68,729 | 145,323 | (76,594) | -52.70% | | Total operating lease liabilities (continuing operations) | 312,373 | 272,787 | 39,586 | 14.51% | | ROU lease assets (discontinued operations) | - | 712 | (712) | -100.00% | | Total operating lease liabilities (discontinued operations) | - | - | 0 | 0.00% | | Total lease cost (9 months, continuing operations) | 129,008 | 56,721 | 72,287 | 127.44% | | Rental income (9 months, continuing operations) | 30,867 | 30,766 | 101 | 0.33% | - The weighted average remaining lease term for continuing operations was 0.90 years as of March 31, 2025, with a weighted average discount rate of 4.27%[133] NOTE 11 - ACQUISITIONS This note details the acquisitions of Guangyuan (2021), Biowin (2023), and Wintus (2023). Guangyuan and Wintus operations are now classified under discontinued operations, while Biowin's rapid diagnostic products contribute to continuing operations. Goodwill impairment was recognized for Wintus due to lower-than-expected performance - Acquisition of Guangyuan (July 5, 2021) provided entry into planting fast-growing bamboo willows and scenic greening trees, with its operating results included in discontinued operations[138][139][144] - Acquisition of Biowin (January 1, 2023) marked the company's entry into the Point-of-Care Testing industry, with its operations included in continuing operations. Goodwill of US$6,574,743 was recognized, with an impairment loss of US$4,555,996 recorded by June 30, 2024[145][148][149] - Acquisition of Wintus (July 31, 2023) involved cash, common stock, and the transfer of Tenet-Jove equity. Wintus's operations are classified as discontinued, and goodwill of US$21,440,360 was recognized, with impairment losses totaling US$18,219,301 by March 31, 2025[154][157][158][159] Biowin Intangible Assets (Trademarks & Patents) | Metric | March 31, 2025 (USD) | | :----------------------------------- | :------------------- | | Intangible assets | 12,683,656 | | Less: accumulated amortization | (2,853,823) | | Total intangible assets, net | 9,829,833 | | Average Useful Life | 10 years | NOTE 12 - RELATED PARTY TRANSACTIONS The company has various related party transactions, including amounts due from and to related parties, sales to a related party, loan guarantees provided by and to related parties, and lease agreements with related parties. These transactions are generally unsecured, non-interest bearing, and due on demand Due from Related Parties, Net | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Total due from related parties, net | 258,681 | 383,745 | (125,064) | -32.59% | | Due from related parties, held for continuing operations | 24,456 | 24,424 | 32 | 0.13% | | Due from related parties, held for discontinued operations | (234,225) | (359,321) | 125,096 | -34.81% | Due to Related Parties | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Total due to related parties | 2,703,404 | 2,875,384 | (171,980) | -5.98% | | Due to related parties, held for continuing operations | 254,125 | 1,160,920 | (906,795) | -78.11% | | Due to related parties, held for discontinued operations | (2,449,279) | (1,714,464) | (734,815) | 42.86% | - Sales to a related party (Chongqing Fuling District Renyi Zhilu Silk Industry Co., Ltd) from discontinued operations were US$678,142 for the nine months ended March 31, 2025, a decrease from US$797,506 in the prior year[170] - Chongqing Wintus provided a guarantee of US$688,906 for a bank loan borrowed by Chongqing Yufan, a related party, until December 28, 2025[173] NOTE 13 – LOANS The company has various short-term and long-term loans, primarily bank loans, with differing maturity dates and interest rates. Many of these loans are guaranteed by related parties or pledged properties. A significant portion of these loans are held for discontinued operations Short-term Loans (Continuing Operations) | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Short-term loans from third parties | 522,002 | 509,119 | 12,883 | 2.53% | | Short-term bank loans, held for continuing operations | 1,225,702 | 1,224,089 | 1,613 | 0.13% | | Total Short-term loans (continuing operations) | 1,747,704 | 1,733,208 | 14,496 | 0.84% | | Interest expenses (9 months, continuing operations) | 65,265 | 60,164 | 5,101 | 8.48% | | Weighted average interest rate (9 months, continuing operations) | 14.5% | 15.0% | -0.5% | -3.33% | Long-term Loans (Discontinued Operations) | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Long-term bank loans-non-current, held for discontinued operations | 1,687,821 | 1,080,159 | 607,662 | 56.26% | | Interest expenses (9 months, discontinued operations) | 432,848 | 401,673 | 31,175 | 7.76% | | Weighted average interest rate (9 months, discontinued operations) | 4.10% | 4.30% | -0.20% | -4.65% | - Several bank loans are guaranteed by individuals (e.g., former CEO, shareholders) and related entities, with some also secured by pledged patent rights or properties[181][183][186][187] NOTE 14 - CONVERTIBLE NOTES PAYABLE The company has issued several unsecured convertible promissory notes to an institutional investor, Streeterville Capital, LLC, with principal amounts totaling over US$18 million. These notes accrue interest at 6% per annum and have been subject to multiple maturity date extensions and partial conversions into common stock or cash repayments - Three main convertible promissory notes were issued to Streeterville Capital, LLC, with original principal amounts of US$3.17 million (June 2021), US$7.37 million (July 2021), and US$10.52 million (August 2021)[192][193][195] - As of March 31, 2025, US$15,258,357 of principal and interest from these notes were converted into 1,172,135 shares of common stock, and US$1,050,000 was repaid in cash[198] - The remaining notes balance was US$9,741,322 (carrying value US$9,908,256) as of March 31, 2025, recorded as current convertible note payable[198] - Amortization of debt issuance and other costs from continuing operations decreased by 21.14% to US$482,664 for the nine months ended March 31, 2025, compared to US$612,072 in the prior year[197] NOTE 15 - TAXES The company is subject to corporate income taxes in the US, Hong Kong, and PRC, with varying rates and special considerations for HNTEs and small low-profit enterprises. Deferred tax liabilities are primarily related to intangible assets, while deferred tax assets are offset by a significant valuation allowance. The company also accounts for Value-Added Tax (VAT) in the PRC - Biowin, a subsidiary, enjoys a reduced corporate income tax rate of 15% as a High and New Technology Enterprise (HNTE) through December 2025[200] - Certain Wintus subsidiaries in the PRC are subject to a reduced effective tax rate of 5% on taxable income up to RMB3 million as small low-profit enterprises[200] Income Tax Provision (Benefit) | Metric | 9 Months Ended Mar 31, 2025 (USD) | 9 Months Ended Mar 31, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | :------- | | Total income tax provision (benefit) | (838,642) | (460,039) | (378,603) | 82.29% | | Income tax benefit, held for continuing operations | (187,854) | (152,646) | (35,208) | 23.07% | | Income tax provision (benefit), held for discontinued operations | 650,788 | 307,393 | 343,395 | 111.71% | Deferred Tax Liability, Net | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Deferred tax liability, net | (8,959,583) | (9,835,306) | 875,723 | -8.90% | | Deferred tax liability, net, held for continuing operations | (1,000,597) | (1,188,718) | 188,121 | -15.82% | | Valuation allowance (total) | 4,026,576 | 1,110,668 | 2,915,908 | 262.54% | NOTE 16 - STOCKHOLDERS' EQUITY The company's stockholders' equity has been significantly impacted by multiple reverse stock splits (1-for-9 in 2020, 1-for-10 in Feb 2024, 1-for-24 in Nov 2024) and various stock issuances for financing, acquisitions, and employee incentives. Statutory reserves are maintained in accordance with PRC GAAP - The company completed a 1-for-24 reverse stock split effective November 12, 2024, retrospectively restating all share and per share data[221] - Significant stock issuances include 58,333 shares for US$7.0 million (June 2024), 77,882 shares for US$2.0 million (July 2024), 624,375 shares for US$8.2 million (August 2024), and 15,000,000 shares for US$32.7 million (December 2024)[217][218][219][222] - Statutory reserves of US$4,350,297 were maintained as of March 31, 2025, and June 30, 2024, as required by PRC GAAP[210] NOTE 17 - CONCENTRATIONS AND RISKS The company's operations are highly concentrated in the PRC, with almost all assets and 100% of revenue derived from its PRC subsidiaries and VIEs. There are significant customer and vendor concentrations for both continuing and discontinued operations, indicating reliance on a limited number of business partners - Almost 100% of the company's assets and 100% of its revenue are located in or derived from the PRC[224] - For the nine months ended March 31, 2025, two customers accounted for approximately 40% of total sales from continuing operations[225] - As of March 31, 2025, one customer accounted for approximately 100% of accounts receivable from continuing operations[229] - For the nine months ended March 31, 2025, one vendor accounted for approximately 93% of total purchases from continuing operations[231] NOTE 18 - COMMITMENTS AND CONTINGENCIES The company faces several legal contingencies, including a lawsuit regarding a US$3.4 million loan where Life Science is a defendant, and two lawsuits against its subsidiary Biowin for outstanding trade payables and a defaulted bank loan. These legal actions could result in significant financial liabilities - Life Science is a defendant in a civil complaint for an outstanding loan of RMB 25.0 million (US$3.4 million) with a 30.0% interest rate, where a business partner allegedly withheld funds[240] - Biowin faces a lawsuit from Zhejiang Shijin Packaging Co., Ltd. for RMB 121,447 (US$16,733) in outstanding trade payables plus interest and litigation fees[241] - Bank of Jiangsu commenced a lawsuit against Biowin for a defaulted loan of RMB2,946,000 (US$405,904) plus interests and penalty interests, due to Biowin's failure to make monthly interest payments[242] - A prior legal case regarding unpaid restricted shares was settled in December 2023, resulting in the waiver of US$3,024,000 in subscription receivable[238] NOTE 19 - SEGMENT REPORTING The company operates two continuing business segments: Rapid Diagnostic and Other Products (Biowin) and Healthy Meals Products (Fuzhou Meida). Discontinued operations include Luobuma products, Other Agricultural Products (Qingdao Zhihesheng, Guangyuan, Wintus), and Freight Services (Zhisheng Freight) - Continuing operations include 'Rapid diagnostic and other products' (Biowin, Jiangsu Province) and 'Healthy meals products' (Fuzhou Meida, Fuzhou City)[246] - Discontinued operations comprise 'Luobuma products' (Tenet-Jove, Beijing, Tianjin, Xinjiang), 'Other agricultural products' (Qingdao Zhihesheng, Guangyuan, Wintus, Shandong, Shanxi, Chongqing), and 'Freight services' (Zhisheng Freight)[244][245][246] Segment Revenue (9 Months Ended March 31, 2025) | Segment | Revenue (USD) | Gross Profit (USD) | Gross Profit % | | :----------------------------------- | :------------ | :----------------- | :------------- | | Rapid diagnostic and other products | 258,091 | 121,633 | 47.1% | | Healthy meals products | 949 | 700 | 73.8% | | Other agricultural products (discontinued) | 7,633,705 | 330,093 | 4.3% | | Luobuma products (discontinued) | - | - | - | | Total | 7,892,745 | 452,426 | 5.7% | Total Assets by Segment (March 31, 2025) | Segment | Total Assets (USD) | | :----------------------------------- | :------------------- | | Other agricultural products | 72,905,256 | | Rapid diagnostic and other products | 12,562,560 | | Healthy meals products | 34,729 | | Total assets, held for continuing operations | 24,565,932 | | Total assets, held for discontinued operations | (60,936,613) | NOTE 20 - DISCONTINUED OPERATIONS The Tenet-Jove Disposal Group and Wintus business segments have been reclassified as discontinued operations following the Wintus and FuWang acquisitions. This reclassification reflects a strategic shift with a major effect on the company's operations and financial results, leading to separate reporting of their assets, liabilities, and operating results - The Wintus Acquisition (May 29, 2023) and FuWang Acquisition (March 20, 2025) led to the reclassification of Tenet-Jove Disposal Group and Wintus as discontinued operations[250][251][253] Assets and Liabilities of Discontinued Operations | Metric | March 31, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :------------------- | :------------------ | :----------- | :------- | | Total current assets of discontinued operation | 22,363,220 | 13,497,416 | 8,865,804 | 65.69% | | Total assets of discontinued operation | 60,936,613 | 62,678,986 | (1,742,373) | -2.78% | | Total current liabilities of discontinued operation | 31,099,110 | 16,925,019 | 14,174,091 | 83.74% | | Total liabilities of discontinued operation | 40,745,917 | 26,651,766 | 14,094,151 | 52.88% | Operating Results of Discontinued Operations | Metric | 9 Months Ended Mar 31, 2025 (USD) | 9 Months Ended Mar 31, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | :------- | | Revenue | 7,633,705 | 4,849,026 | 2,784,679 | 57.43% | | Gross Profit | 330,093 | 356,757 | (26,664) | -7.47% | | Loss from Operations | (8,349,515) | (4,450,932) | (3,898,583) | 87.59% | | Impairment loss on goodwill | (7,950,478) | - | (7,950,478) | N/A | | Net Income (Loss) from Discontinued Operations | (15,874,674) | 4,531,193 | (20,405,867) | -450.34% | NOTE 21 - SUBSEQUENT EVENTS Subsequent to the reporting period, Shineco Life entered into a share purchase agreement to acquire 51% of InfiniClone Limited for US$19,895,600 in cash and 3,450,000 shares of common stock, with the acquisition expected to close in May 2025 - On April 22, 2025, Shineco Life agreed to acquire 51% of InfiniClone Limited for US$19,895,600 cash and 3,450,000 shares of common stock[256] - The InfiniClone acquisition is expected to be completed in May 2025[256] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's financial performance, including revenue, expenses, and net loss, for the nine and three months ended March 31, 2025 and 2024. It also discusses financing activities, factors affecting financial performance, critical accounting policies, liquidity, and capital resources, highlighting the significant impact of discontinued operations and ongoing efforts to manage liquidity - The company's net loss significantly increased for both the nine and three months ended March 31, 2025, primarily due to increased net loss from discontinued operations[318][339] - Revenue from continuing operations decreased by 43.63% for the nine months and 72.57% for the three months ended March 31, 2025, mainly due to declining orders for rapid diagnostic products and the temporary suspension of healthy meal products business[300][301][323][324] - General and administrative expenses decreased by 32.17% for the nine months ended March 31, 2025, primarily due to the forgiveness of subscription receivable and decreased acquisition-related professional fees, partially offset by increased compensation expense related to a legal case[308] - The company continues to finance operations through short-term loans, convertible notes, and common stock sales, with recent offerings raising substantial gross proceeds to support working capital and M&A activities[272][276][277][279][280] - Working capital decreased by US$7,024,504 (105.5%) as of March 31, 2025, primarily due to increased current liabilities from discontinued operations and convertible notes[359] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Shineco, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[379] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses including a lack of full-time U.S. GAAP personnel, inadequate segregation of duties, and insufficient control procedures for loan evaluations. The company is implementing measures to address these weaknesses - Disclosure controls and procedures were not effective as of March 31, 2025[381] - Material weaknesses identified include a lack of full-time U.S. GAAP personnel, insufficient segregation of duties for accounting personnel, and inadequate control procedures for pre-loan credit risk evaluation and loan approval[381] - Remedial actions include recruiting qualified professionals, improving communication, obtaining proper approval for significant transactions, and implementing stringent documentation and controls for money lending procedures[383] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings other than ordinary routine litigation, nor is it a plaintiff in any material proceeding, except as previously disclosed - No material, existing or pending legal proceedings against the company, nor is the company involved as a plaintiff in any material proceeding or pending litigation, other than ordinary routine litigation[385] Item 1A. Risk Factors As a 'smaller reporting company,' Shineco, Inc. is not required to provide the information regarding risk factors - As a 'smaller reporting company,' the company is not required to provide risk factor information[386] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of the company's equity securities during the nine months ended March 31, 2025, that were not previously disclosed - No unregistered sales of equity securities occurred during the nine months ended March 31, 2025, that were not previously disclosed[387] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[388] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[389] Item 5. Other Information No other information is reported in this section - No other information is reported[390] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, convertible promissory note amendments, equity incentive plans, distribution agreements, underwriting agreements, securities purchase agreements, director offer letters, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Second Amended and Restated Bylaws, Specimen Common Stock Share Certificate, and various amendments to Convertible Promissory Notes[391] - Equity Incentive Plans (2016, 2022, 2023, 2024, 2025) are filed as exhibits[391] - Recent agreements such as the Distribution Agreement (July 9, 2024), Underwriting Agreement (July 11, 2024), and Securities Purchase Agreements (August 22, 2024, December 24, 2024, March 20, 2025, April 22, 2025) are included[391] - Certifications of Principal Executive Officer and Principal Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) and 18 U.S.C. § 1350) are filed[391] SIGNATURES The report is duly signed on behalf of SHINECO, INC. by Jennifer Zhan, Chief Executive Officer, and Sai (Sam) Wang, Chief Financial Officer, on May 15, 2025 - The report was signed by Jennifer Zhan, Chief Executive Officer, and Sai (Sam) Wang, Chief Financial Officer, on May 15, 2025[396]