CGA(CGA) - 2021 Q4 - Annual Report

PART I Business Overview China Green Agriculture, Inc. (CGA) primarily engages in the research, development, production, and sale of fertilizers and agricultural products in the PRC, with a recent strategic shift towards blockchain applications - CGA's core business is fertilizer products, including humic acid-based compound fertilizer and other compound fertilizers, alongside agricultural products like top-grade fruits and vegetables through Yuxing[5] Revenue Contribution from Fertilizer Production | Fiscal Year Ended June 30 | Revenue from Fertilizer Production | % of Total Revenues | | :------------------------ | :--------------------------------- | :------------------ | | 2021 | $200,245,680 | 83.5% | | 2020 | $200,185,739 | 80.3% | | 2019 | $237,212,740 | 80.6% | Total Revenues and Net Income (Loss) | Fiscal Year Ended June 30 | Revenues from Continuing and Discontinued Operations | Net Income (Loss) | | :------------------------ | :--------------------------------------------------- | :---------------- | | 2021 | $239,927,726 | $(119,747,617) | | 2020 | $249,243,496 | $(134,689,311) | | 2019 | $294,320,803 | $11,590,395 | - As of June 30, 2021, the company distributed products through a network of 1,756 regional distributors across 22 provinces, 4 autonomous regions, and 4 central government-controlled municipalities in China[7] - The company has developed 690 different fertilizer products and conducts R&D through Yuxing, a VIE, for testing new fertilizers and cultivating high-quality agricultural products[7] - On August 30, 2021, shareholders approved a private placement to raise funds for expanding into blockchain applications, including cryptocurrency mining, and nominated new directors with blockchain industry experience[39] - The company operates through a Variable Interest Entity (VIE) structure in China to comply with regulatory requirements and overcome limitations on foreign investment in e-commerce and agriculture industries[30][32] - CGA's history includes reincorporation in Nevada in 2007, acquisition of Jinong in 2007, name change to China Green Agriculture, Inc. in 2008, NYSE listing in 2009, acquisition of Gufeng in 2010, and several VIE acquisitions and discontinuations between 2016 and 2021[35][36][37][38] - The Chinese fertilizer market faces a downturn with sluggish demand and downward pressure on prices, but demand for environmentally friendly green fertilizers is increasing, with an expected compound annual growth rate of 7.7% from 2016 to 2022[42][45][49] - The PRC government's promotion of the 'Green Food' industry is driving demand for organic fertilizers, and products grown with CGA's fertilizers (except Gufeng's) are certified as 'Green Food Production Material'[50][52] - CGA's growth strategy includes expanding production capacity (currently 555,000 metric tons), diversifying product offerings (690 products), capitalizing on R&D synergies, developing new highly efficient fertilizers, and expanding its sales segment through VIE acquisitions[54][56][57][58] - The company's principal products are 690 types of fertilizers (liquid, granular, powdered, compound, humic acid-based) and high-quality agricultural products (fruits, vegetables, flowers, colored seedlings), with a sales segment for various agricultural materials[59] Top 5 Best-Selling Fertilizers (FY2021) | Ranking | Product Names | Volume (Tons) | Revenues (USD) | Percent of Fertilizer Sales | | :------ | :------------------------------------------------ | :------------ | :------------- | :-------------------------- | | 1 | Organic/Inorganic Compound Fertilizer (humic acid) NPK46% | 145,818 | 55,855,930 | 27.9% | | 2 | Compound Fertilizer NPK40% | 138,465 | 47,313,266 | 23.6% | | 3 | Jinong FHF Fertilizer (humic acid) | 43,946 | 9,164,281 | 4.6% | | 4 | Jinong Letu Fertilizer (humic acid) | 3,420 | 3,545,226 | 1.8% | | 5 | Jinong Chongshifei Fertilizer (humic acid) | 2,224 | 3,198,422 | 1.6% | - Fertilizer manufacturing processes are fully automated with central control systems, ensuring quality and reducing waste, with Jinong having an annual production capacity of 55,000 metric tons and Gufeng/Tianjuyuan 500,000 metric tons[68][69] - Key raw materials for fertilizers include weathered coal (for humic acid), sodium, calcium, zinc, iron, potassium, coal, sulfuric acid, and NPK compounds, sourced from various regions in China with quality selection via spectral analysis technology[71][72] - Fertilizer sales peak from January to June, with Gufeng's sales showing significant seasonality (65.5% of annual revenue in Q3 and Q4), while agricultural product sales peak from October to March due to holiday demand[75][76] - CGA markets its fertilizer products to wholesalers and retailers across 22 provinces, 4 autonomous regions, and 4 central government-controlled municipalities in China, with 70.6% of fertilizer manufacturing revenue from five provinces, and agricultural products distributed through various channels[78][79] - Marketing efforts include professional advice, training courses, nationwide market analysis, tailored product development, television ads, mass media, joint activities with distributors, word-of-mouth, sample trials, and telephone/SMS platforms[82][83] - R&D is primarily conducted through Yuxing, utilizing 98 sunlight greenhouses and 6 intelligent greenhouses for testing new fertilizers and cultivating high-quality agricultural products, which shortens product development cycles and increases agricultural sales revenue[93][94] Yuxing R&D Center Capital Expenditure (Net of Depreciation) | Fiscal Year Ended June 30 | Amount (USD) | | :------------------------ | :----------- | | 2021 | $8,295,772 | | 2020 | $8,414,911 | | 2019 | $9,624,639 | - CGA holds several trademarks (e.g., 'Huang Cheng Gen', 'Mei Er An', 'KEBA', 'AGR GFJ', 'SPR HOP', 'T.J.Y.') and four patents for fertilizer formulations and production methods, protected for 10-20 years, with intellectual property safeguarded by confidentiality agreements and internal controls[97][98][100][101][102][103][104][105][106] - Competitive strengths include a nationwide sales network (1,756 distributors), strong R&D capabilities (short product development cycle of 3-9 months, intelligent greenhouses), well-known brands, and automated production lines with proprietary processes[107][109][112][113] - The Chinese organic fertilizer market is highly fragmented with approximately 2,000 manufacturers, mostly small-sized, and CGA competes with large national manufacturers like Stanley Fertilizer Co., Ltd., while foreign fertilizers are generally more expensive and less customized[115][116] - CGA's business operations are subject to various PRC laws and regulations, including environmental, health, and safety laws, holding 'Green Food Production Material' certification for most fertilizers, operating licenses, and numerous fertilizer registration certificates (16 formal for Jinong, 11 interim and 259 formal for Gufeng/Tianjuyuan)[118][119][120] Risk Factors The company faces significant risks from intense market competition, product development challenges, intellectual property vulnerabilities, operational disruptions, and substantial uncertainties associated with its PRC operations and VIE structure - The industry is highly fragmented and competitive, with numerous local and large national manufacturers, and increasing foreign competition, where failure to innovate or market effectively could reduce revenues[122][123][124] - Risks include the potential for proprietary fertilizer formulas to become obsolete or be unintentionally disclosed, and the inability to timely develop and market new products[127][128][125] Accounts Receivable (Net) | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $102,783,004 | | 2020 | $99,052,071 | | 2019 | $145,190,160 | - High customer concentration, especially for Gufeng where its top five distributors accounted for 79.5% of revenues in FY2021, poses a risk if major customers reduce or discontinue purchases[131] - Inadequate protection or enforcement of intellectual property rights (patents, trademarks, trade secrets) could lead to infringement, costly litigation, and loss of competitive advantage, particularly given historical difficulties in enforcing IP laws in China[131][132][133][134] - Disruptions in raw material supply (e.g., weathered coal from Tianlibao) or significant fluctuations in production costs (energy, minerals, freight) could adversely affect profitability and ability to meet demand[137][138][139][140] - The company lacks business disruption and product liability insurance, exposing it to significant losses from operational interruptions (fire, flood, earthquake) or product failures[141][142] - Failure to renew fertilizer registration certificates or obtain formal certificates for new products could halt production and sales, and not maintaining other necessary permits and licenses could lead to fines and operational limitations[145][146][147][148][149] - Environmental liabilities from manufacturing operations, including non-compliance with PRC environmental laws, could result in penalties and significant expenditures[151] - Dependence on key management (e.g., CEO Zhuoyu Li) and skilled personnel, coupled with challenges in attracting and retaining such talent in China, poses a risk to business operations and R&D initiatives[152][153][154] - Failure to maintain effective internal control over financial reporting could lead to inaccurate financial results and loss of investor confidence[155][156] - Gufeng's financial performance (net loss of $(93,878,370) in FY2021) due to lower profit margins, inefficiencies, and negative working capital, could materially adversely affect overall business if not improved[159] - Lack of proper land use rights for certain Gufeng facilities (e.g., 47,333 sq. meters in Ping Gu District) could jeopardize the right to use premises and buildings, despite ongoing application processes[160][161] - Substantially all assets and operations are in the PRC, making the company highly susceptible to economic, political, and legal developments in China, including changes in government policies, confiscatory taxation, and restrictions on currency conversion[164][165] - Vague and uncertain PRC laws and regulations, especially regarding foreign-funded enterprises, may lead to future changes, retroactive application, and substantial uncertainty in interpretation and enforcement, potentially affecting business operations[165][166] - Inflation in the PRC could negatively affect profitability if product prices do not rise sufficiently to cover increased costs of supplies and labor[167][168] - Recent regulatory developments in China, particularly regarding data security, foreign investment restrictions, and cybersecurity reviews for offshore listings (e.g., Draft Measures requiring review for companies with >1 million users' personal information), could subject the company to additional scrutiny, government interference, or restrict capital raising outside China[170][171][172][173][174][175] - Restrictions on paying dividends and making other payments from PRC subsidiaries to the parent company (due to PRC regulations on accumulated profits, statutory reserves, and foreign exchange controls) could limit the ability to pay dividends to shareholders[177][178] - The VIE structure carries substantial risks, including potential invalidation by Chinese authorities, inconsistency with foreign investment laws, disregard by tax authorities (leading to increased tax liabilities), and ineffectiveness in control compared to direct ownership, with breaches by VIE shareholders or changes in legislative practice potentially affecting operations[179][180][181][196][197][198][199][200][201][202] - Governmental control of currency conversion (RMB to foreign currencies) and fluctuations in the RMB exchange rate against the U.S. dollar can adversely affect cash flows, revenues, and the value of U.S. dollar-denominated assets[182][183][184] - PRC regulations (e.g., SAFE Circular 37) on offshore special purpose companies and employee stock options for PRC residents may subject beneficial owners and employees to personal liability, limit capital injection into PRC subsidiaries, or restrict profit distribution[185][186][188][189] - The acquisition of Jinong might be deemed a 'Round-trip Investment' without MOFCOM approval under the 2006 M&A Rules, potentially invalidating the acquisition or requiring alternative contractual arrangements that may not be as effective[190][191][192][193][194] - Contractual arrangements with Yuxing could result in adverse tax consequences if PRC tax authorities determine they were not arm's length, leading to transfer pricing adjustments and increased tax liability[195] - PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent the use of offering proceeds for capital contributions or loans to PRC subsidiaries, affecting liquidity and business expansion[205][206][207][208] - The PRC government's significant influence over China-based operations, through policy changes, enforcement of regulations, or new rules (e.g., on cryptocurrency mining), could materially increase compliance costs, change the industry landscape, or disrupt business operations[210][211] - If deemed a 'resident enterprise' by PRC tax authorities, the company could be subject to a 25% tax on global income, and non-PRC shareholders could face PRC withholding taxes on dividends and capital gains[213][214][215] - Difficulty in enforcing U.S. federal securities laws against the company or its officers/directors in the PRC due to assets and personnel being primarily located outside the U.S.[215][216] - Failure to comply with the U.S. Foreign Corrupt Practices Act could lead to penalties and adverse consequences, especially given potential fraudulent practices in the PRC[217][218] - Difficulty managing risks in the Chinese fertilizer and agricultural sectors due to natural, economic, and social factors (climate, market, technology, regulation, globalization), exacerbated by governmental intervention[219][220] - The company may not pay cash dividends in the foreseeable future, intending to retain earnings for operations and expansion[221][225] - The market price for common stock may be volatile due to various factors, including operational results, analyst estimates, market conditions, key personnel changes, exchange rate fluctuations, and litigation[221] - Need for additional financing in the future, which could result in dilution to existing shareholders or restrictive covenants from debt financing[223][224] - An SEC investor bulletin regarding reverse mergers, which the company underwent, may drive down the market price of common stock[224] - If common stock were delisted and deemed a 'penny stock,' trading could become more difficult for broker-dealers and investors[226] Unresolved Staff Comments This item is not applicable to the company - The company has no unresolved staff comments[228] Properties The company's properties in China include principal executive offices in Xi'an, production facilities for Jinong in Yangling, an R&D center for Yuxing in Hu County, and manufacturing/office/warehouse space for Gufeng and Tianjuyuan in Beijing - Principal executive offices are located at Third floor, Borough A, Block A. No. 181, South Taibai Road, Xi'an, Shaanxi Province, PRC 710065, rented for 360 square meters (3,875 square feet)[228] - Jinong owns production facilities in Yangling, Xi'an, Shaanxi province, totaling 20,298 square meters (218,487 square feet) with land use rights for 50 years from 2001, and an annual production capacity of 55,000 metric tons[229] - Yuxing holds land use rights to over 353,000 square meters (3,799,660 square feet) in Hu County, Xi'an, for 50 years from 2009, where 98 sunlight greenhouses and 6 intelligent greenhouses are part of an R&D center[230] - Gufeng and Tianjuyuan own 17,930 square meters (192,997 square feet) of manufacturing, office, and warehouse space and 47,110 square meters (507,088 square feet) of auxiliary facilities on 42,726 square meters (459,898 square feet) of land in Pinggu, Beijing, with land use rights expiring in August 2053, adding 500,000 metric tons to annual production capacity[230] - Tianjuyuan rents an additional 47,333 square meters (509,488 square feet) of land in Ping Gu District, Beijing, under a rental agreement from February 2004 to January 2054, and has since obtained the proper land use right certificate[231] Property Mortgages (as of June 30, 2021) | No. | Loan Amount (RMB) | Lending Institution | Contract Period | Interest Rate (Per Annum) | Property under Mortgage | | :-- | :---------------- | :-------------------------------------- | :-------------------------- | :------------------------ | :---------------------- | | 1 | 17 million ($2,631,600) | Postal Saving Bank of China-Pinggu Branch | May 27, 2021-May 26, 2022 | 5.66% | Tianjuyuan's land | | 2 | 10 million ($1,548,000) | Beijing Bank-Pinggu Branch | May 25, 2021-May 21, 2022 | 5.22% | Tianjuyuan's land | Legal Proceedings The company is occasionally involved in legal actions, including a pro se lawsuit filed in June 2020 alleging Securities Exchange Act violations, which was dismissed on September 30, 2021 - An individual filed a pro se lawsuit on June 5, 2020, in the Southern District of Florida federal court, alleging violations of the Securities Exchange Act, with the case transferred to the United States District Court for The Southern District Of New York on November 2, 2020[236] - On September 30, 2021, the Southern District of New York federal court dismissed all claims against the company, its executives, and independent directors without prejudice, allowing the plaintiff to appeal or amend within 30 days[236] Mine Safety Disclosures This item is not applicable to the company's operations - The company is not subject to mine safety disclosures[237] PART II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities As of October 13, 2021, China Green Agriculture, Inc. had 8,487,629 shares of common stock outstanding, listed on the NYSE under the symbol 'CGA' since December 7, 2009, with no outstanding options under its Equity Incentive Plan - As of October 13, 2021, the company had 8,487,629 shares of common stock outstanding and no preferred stock outstanding, with common stock listed and traded on the NYSE under the symbol 'CGA' since December 7, 2009[239] - As of October 13, 2021, there were approximately 369 shareholders of record[240] - The 2009 Equity Incentive Plan, approved by stockholders, allows for granting stock options, SARs, restricted stock, and other stock-based awards, with 371,511 shares available for future issuance under the plan and no outstanding options as of June 30, 2021[240][241][243] - There were no unregistered sales of equity securities or issuer purchases of equity securities during the fiscal year ended June 30, 2021[246][247] Item 6. [Reserved] This item is reserved as the company has elected to early adopt the amendment to Item 301 of Regulation S-K, no longer requiring five years of selected financial data - The company has elected to early adopt the amendment to Item 301 of Regulation S-K and is no longer required to provide five years of selected financial data[248] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of China Green Agriculture, Inc.'s financial performance and condition for the fiscal year ended June 30, 2021, compared to 2020, highlighting a slight increase in net sales, a decrease in gross profit, and a significant reduction in net loss, primarily driven by lower general and administrative expenses Overview of Business Segments China Green Agriculture, Inc. operates in the PRC through its wholly-owned subsidiaries Jinong and Gufeng (including Tianjuyuan), and its VIE, Yuxing, with business segmented into fertilizer products, agricultural products, and sales of agricultural materials - The company's operations are organized into three business segments for financial reporting: fertilizer products (Jinong), fertilizer products (Gufeng), and agricultural products (Yuxing), with Sales VIEs also contributing to revenue[254] Revenue Contribution by Segment | Segment | FY2021 % of Total Revenues | FY2020 % of Total Revenues | | :------------- | :------------------------- | :------------------------- | | Jinong/Gufeng | 71.0% | 70.9% | | Sales VIEs | 24.4% | 25.4% | - As of June 30, 2021, the company developed, produced, and sold 690 different fertilizer products: 103 by Jinong, 336 by Gufeng, and 251 by VIE companies[257] Fertilizer Sales Volume (Metric Tons) | Segment | FY2021 Sales (Metric Tons) | FY2020 Sales (Metric Tons) | Change (Metric Tons) | Change (%) | | :------ | :------------------------- | :------------------------- | :------------------- | :--------- | | Jinong | 74,382 | 71,655 | 2,727 | 3.8% | | Gufeng | 308,523 | 356,973 | (48,450) | -13.6% | | Total | 382,905 | 428,629 | (45,724) | -10.7% | Fertilizer Revenue per Ton | Segment | FY2021 Revenue per Ton ($) | FY2020 Revenue per Ton ($) | | :------ | :------------------------- | :------------------------- | | Jinong | 803 | 814 | | Gufeng | 358 | 338 | - For FY2021, 70.6% of manufactured fertilizer revenue came from five provinces: Hebei (32.6%), Heilongjiang (11.9%), Liaoning (11.2%), Inner Mongolia (11.1%), and Shaanxi (3.9%)[259] - As of June 30, 2021, the company had 1,756 distributors nationwide, with Jinong having 917 distributors (top five accounting for 3.1% of its fertilizer revenues) and Gufeng having 341 distributors (top five accounting for 79.5% of its revenues)[259] - For FY2021, 93.9% of agricultural products revenue came from Shaanxi (86.0%), Shanghai (5.5%), and Beijing (2.3%)[260] - Recent developments include shareholder approval on August 30, 2021, for a private placement to raise funds for expanding into blockchain applications and cryptocurrency mining, and the nomination of new directors with blockchain industry experience[261] - During Q4 FY2021, Jinong launched 3 new fertilizer products and eliminated 236 unqualified distributors, while Gufeng launched 2 new fertilizer products and added 7 new distributors[262] - The company discontinued strategic acquisition agreements with shareholders of Aksu Xindeguo Agricultural Materials Co., Ltd., Xinjiang Xinyulei Eco-agriculture Science and Technology Co., Ltd., and Sunwu County Xiangrong Agricultural Materials Co., Ltd. on June 2, 2021, reducing the number of VIE companies from eight to five[6][11][15][266][269] Results of Operations (Fiscal Year 2021 Compared to 2020) In fiscal year 2021, the company experienced a slight increase in total net sales, primarily driven by Yuxing's agricultural products and the sales VIEs, while Gufeng's sales declined due to COVID-19 impacts, leading to a decrease in gross profit but a substantial reduction in net loss due to lower general and administrative expenses Consolidated Statements of Operations (FY2021 vs. FY2020) | Metric | FY2021 (USD) | FY2020 (USD) | Change (USD) | Change (%) | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | :--------- | | Net Sales | $231,408,657 | $229,428,112 | $1,980,545 | 0.9% | | Cost of Goods Sold | $191,833,143 | $187,373,546 | $4,459,597 | 2.4% | | Gross Profit | $39,575,514 | $42,054,566 | $(2,479,052) | -5.9% | | Selling Expenses | $14,467,065 | $13,556,131 | $910,934 | 6.7% | | General and Administrative Expenses | $138,855,912 | $166,420,515 | $(27,564,603) | -16.6% | | Total Operating Expenses | $153,322,977 | $179,976,646 | $(26,653,669) | -14.8% | | Loss from Operations | $(113,747,463) | $(137,922,080) | $24,174,617 | -17.5% | | Total Other Income (Expense) | $283,439 | $(234,818) | $518,256 | -220.7% | | Loss from Continuing Operations before Taxes | $(113,464,024) | $(138,156,897) | $24,692,873 | -17.9% | | Provision for Income Taxes | $5,107,095 | $2,103,987 | $3,003,108 | 142.7% | | Loss from Continuing Operations | $(118,571,119) | $(140,260,884) | $21,689,765 | -15.5% | | Net Income (Loss) from Discontinued Operations | $(1,176,498) | $3,508,748 | $(4,685,246) | -133.5% | | Net Loss | $(119,747,617) | $(136,752,136) | $17,004,519 | -12.4% | | Foreign Currency Translation Gain (Loss) | $29,682,548 | $(14,442,878) | $4,125,426 | -305.5% | | Comprehensive Loss | $(90,065,069) | $(151,195,014) | $61,129,945 | -40.4% | | Basic Net (Loss) per Share | $(17.49) | $(24.33) | $6.85 | -28.1% | | Diluted Net (Loss) per Share | $(17.49) | $(24.33) | $6.85 | -28.1% | - Net sales increased by 0.9% to $231.4 million in FY2021, primarily due to higher sales from Yuxing (up 19.6%) and the sales VIEs (up 15.0%), while Jinong's sales increased by 4.2% and Gufeng's sales decreased by 7.3% due to COVID-19 impacts[277][278][279] - Cost of goods sold increased by 2.4% to $191.8 million, in line with higher net sales, with Jinong's COGS increasing by 15.5%, Yuxing's by 13.3%, and sales VIEs' by 16.2%, while Gufeng's COGS decreased by 7.9% due to lower sales volume[280][281] - Gross profit decreased by 5.9% to $39.6 million, with the gross profit margin falling from 18.0% to 17.8%, as Jinong's gross profit margin decreased from 33.8% to 26.7% due to higher product costs, while Yuxing's increased from 14.0% to 18.5% due to lower product costs and higher unit sales[282][283][284] - Selling expenses increased by 6.7% to $14.5 million, representing 6.3% of net sales (up from 5.9%)[286] - General and administrative expenses decreased significantly by 16.6% to $138.9 million, primarily due to lower bad debt expense, and as a percentage of net sales, G&A decreased from 72.5% to 60.0%[287] - Total other income (expenses) increased by 220.7% to $283,439, mainly due to an investment gain from discontinuing sales VIEs Xindeguo, Xinyulei, and Xiangrong[288] - Income tax expense increased by 142.7% to $5.1 million, with Jinong subject to a 15% tax rate as a high-tech company, VIEs to a 25% EIT rate, and Yuxing being tax-exempt[288][289] - Net loss decreased by 12.4% to $(119.7) million, primarily due to lower general and administrative expenses, with net loss from continuing operations decreasing by 15.5%, while net loss from discontinued operations increased by 133.5%[289][290] Discussion of Segment Profitability Measures The company assesses segment performance based on net income, with Jinong and Gufeng experiencing increased net losses in FY2021, while Yuxing and the sales VIEs saw significant improvements in net income - The Chief Operating Decision Maker (CODM) uses net income by segment as the principal benchmark to measure profit or loss[292] Segment Net Income (Loss) (FY2021 vs. FY2020) | Segment | FY2021 Net Income (Loss) (USD) | FY2020 Net Income (Loss) (USD) | Change (USD) | Change (%) | | :--------------------- | :----------------------------- | :----------------------------- | :------------- | :--------- | | Jinong | $(20,482,770) | $(15,422,166) | $(5,060,604) | 32.8% | | Gufeng | $(99,310,549) | $(88,682,298) | $(10,628,251) | 12.0% | | Yuxing | $639,313 | $425,957 | $213,356 | 50.1% | | Sales VIEs | $4,629,663 | $(1,355,244) | $5,984,907 | 441.6% | | Discontinued Operations | $(1,176,498) | $3,508,748 | $(4,685,246) | -133.5% | - Jinong's net loss increased by 32.8% due to higher general and administrative expenses[292] - Gufeng's net loss increased by 12.0% primarily due to decreased net sales[292] - Yuxing's net income increased by 50.1% due to higher net sales[293] - Sales VIEs' net income significantly increased by 441.6% from a loss in the prior year, mainly due to higher net sales[293] Liquidity and Capital Resources The company's liquidity sources include cash from operations, bank borrowings, and proceeds from securities offerings, with cash and cash equivalents increasing significantly in FY2021, though it continues to incur operating losses and negative operating cash flows, necessitating potential future financing - Principal sources of liquidity include cash from operations, borrowings from local commercial banks, and net proceeds from securities offerings[294] Cash and Cash Equivalents | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $18,593,944 | | 2020 | $11,838,593 | - The company believes it has sufficient cash and projected cash flow for the next twelve months, but may seek additional financing for expansion[295] Summary of Cash Flows | Cash Flow Activity | FY2021 (USD) | FY2020 (USD) | | :--------------------------------- | :---------------- | :---------------- | | Net cash used in operating activities | $(12,879,517) | $(66,196,484) | | Net cash used in investing activities | $(476,180) | $(97,483) | | Net cash provided by financing activities | $14,302,100 | $9,751,265 |\ | Effect of exchange rate change | $5,712,763 | $(3,782,324) | | Net increase (decrease) in cash | $6,659,166 | $(60,325,026) | | Cash and cash equivalents, ending balance | $18,593,944 | $11,934,778 | - Net cash used in operating activities decreased by 80.5% to $12.9 million, mainly due to lower inventories and advances to suppliers[298] - Net cash used in investing activities increased by 388.5% to $476,180, primarily due to more fixed asset purchases[299] - Net cash provided by financing activities increased by 46.7% to $14.3 million, driven by $14 million from common stock sales[300] Short-Term Loans Payable | As of June 30 | Amount (USD) | | :------------ | :----------- |\ | 2021 | $4,179,600 | | 2020 | $3,537,500 | - Accounts receivable decreased by 4.4% to $126.5 million, with allowance for doubtful accounts decreasing by 23.3% to $23.7 million, representing 18.8% of accounts receivable (down from 23.4% in FY2020)[301] - Deferred assets were fully amortized as of June 30, 2021, with no balance remaining[302] Inventories | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $64,315,903 | | 2020 | $98,408,639 | - Inventories decreased by 34.6% to $64.3 million, mainly due to a 51.3% decrease in Gufeng's inventory[305] Advances to Suppliers | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $23,884,772 | | 2020 | $65,002,723 | - Advances to suppliers decreased by 63.3% to $23.9 million[307] Accounts Payable | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $16,868,942 | | 2020 | $17,274,034 | - Accounts payable decreased by 2.3% to $16.9 million, primarily due to lower payables for VIEs[308] Unearned Revenue (Customer Deposits) | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $6,257,215 | | 2020 | $7,326,889 | - Unearned revenue decreased by 14.6% to $6.3 million, mainly due to a decrease in Gufeng's unearned revenue[309] - The company does not have any off-balance sheet arrangements[310] Critical Accounting Policies and Estimates The preparation of financial statements requires management to make significant estimates and judgments, particularly concerning revenue recognition, accounts receivable valuation, inventory valuation, property/plant/equipment depreciation, long-lived asset impairment, intangible asset amortization, goodwill impairment, fair value measurements, derivative financial instruments, stock-based compensation, income taxes, and foreign currency translation - Management's estimates and assumptions are critical for financial statements, especially regarding assets, liabilities, revenues, and expenses, with potential for actual results to differ due to risks and uncertainties like COVID-19[312][476] - Revenue is recognized at shipment when criteria are met (formal arrangement, fixed price, delivery complete, no significant obligations, collectability assured), with payments received before criteria are met recorded as unearned revenue[313][501] - Cash and cash equivalents include cash on hand, in banks, and highly-liquid investments with maturities of three months or less, with the company holding large sums in Chinese banks without insurance[314][478] - Reserves for potential credit losses on accounts receivable are maintained based on historical bad debts, customer creditworthiness, economic trends, and payment patterns, with accounts outstanding over 180 days (Jinong/Gufeng) or 90 days (Yuxing) being provisioned[315][481] - Inventory is valued at the lower of cost (weighted average) or market, with regular reviews for obsolescence, and no reserve for obsolete goods as of June 30, 2021 and 2020[305][482] - Property, plant, and equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives (e.g., buildings 10-25 years, machinery 5-15 years), with construction in progress not depreciated until placed in service[483][484][485] - Long-lived assets are tested for impairment when circumstances indicate carrying amount may not be recoverable, with no impairments recorded as of June 30, 2021 and 2020[486] - Intangible assets with definitive lives are amortized over their useful lives, while goodwill is tested for impairment annually or when circumstances change, with impairment adjustments of $5,984,611 in 2021 and $607,677 in 2020 recorded for goodwill[489][490][491] - Fair value measurements are categorized into a three-level hierarchy based on observability of inputs, with carrying values of most financial instruments approximating fair values due to short maturities[494][495][509][510] - Derivative financial instruments are initially recorded at fair value and re-valued at each reporting date, with no derivative financial instruments as of June 30, 2021[496][497] - Stock-based compensation costs are recognized based on the estimated fair value of awards over the requisite service period[503] - Income taxes are accounted for using the asset and liability method (ASC 740), requiring subjective assumptions and judgments regarding tax exposures and realization of deferred tax assets[303][304][504] - Foreign currency translation: Reporting currency is USD; functional currency of Chinese subsidiaries is RMB, with assets/liabilities translated at balance sheet date rates, income/cash flows at average rates, and translation adjustments in accumulated other comprehensive income[507] - Segment reporting uses the 'management approach' based on how management organizes segments for operating decisions and performance assessment[317][318][508] - Basic EPS is based on weighted average common shares outstanding; diluted EPS includes dilutive potential common shares[513] - The company adopted ASU 2019-12 (Simplifying Income Taxes) with no material impact and is evaluating ASU 2020-06 (Convertible Instruments)[515][516] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from currency fluctuations, interest rate changes, and credit risks, as well as broader economic risks like inflation and epidemics, with the COVID-19 pandemic significantly impacting operations and financial results - The company is exposed to foreign exchange risk as substantially all revenues and expenses are denominated in RMB, while financial reporting is in U.S. dollars, where RMB appreciation against the U.S. dollar can reduce the U.S. dollar equivalent of RMB revenues and assets[320][321] - Between July 1, 2020, and June 30, 2021, China's currency increased by a cumulative 9.5% against the U.S. dollar[321] - The company is exposed to interest rate risk from short-term bank loans, which carry fixed rates but are subject to change upon renewal (typically 3-12 months), with outstanding short-term debt of $4.2 million in FY2021 and $3.5 million in FY2020[322] - The company has not experienced significant credit risk due to long-term customer relationships and regular monitoring of receivables[324] - Inflationary factors could adversely affect operating results if product selling prices do not keep pace with increased costs of products and overhead[325] - The COVID-19 pandemic has adversely affected operations, including closures, supply chain disruptions, reduced demand, and credit losses, with the full extent of the impact remaining uncertain and dependent on future developments[326][327][328] Financial Statements and Supplementary Data This section incorporates by reference the audited consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows for the fiscal years ended June 30, 2021 and 2020, along with related notes and independent auditor reports, which are presented in the 'F' pages of the report - The report includes consolidated balance sheets as of June 30, 2021 and 2020, and statements of operations, stockholders' equity, and cash flows for the two years ended June 30, 2021, along with related notes and independent registered public accounting firm reports[329][427] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - The company has no changes in or disagreements with accountants on accounting and financial disclosure[329] Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2021, concluding they were effective, and also assessed the effectiveness of internal control over financial reporting using the COSO 2013 framework, concluding it was effective - As of June 30, 2021, the company's disclosure controls and procedures were evaluated and deemed effective by the CEO and CFO[331] - Management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure reliability of financial reporting[332] - Management assessed internal control over financial reporting as of June 30, 2021, using the COSO 2013 framework and concluded it was effective[334] - As a smaller reporting company, the company is not required to have its internal control over financial reporting audited by its auditors[335] - There were no material changes in internal control over financial reporting during the last fiscal quarter ended June 30, 2021[335] Other Information There is no other information required to be disclosed under this item - No other information is required to be disclosed under this item[336] PART III Directors, Executive Officers and Corporate Governance This section details the company's directors and executive officers, their ages, positions, and tenure, including key executive officers Zhuoyu Li (Chairman & CEO) and Yongcheng Yang (CFO), and outlines the Board's governance structure with independent directors serving on key committees and overseeing risk management Directors and Executive Officers | Name | Position with the Company | Age | Term as Director of Company | | :------------- | :------------------------------------------------------------------------------------- | :-- | :-------------------------- | | Zhuoyu Li | Chairman of the Board of Directors, Chief Executive Officer, President | 29 | 2017 - Present | | Yongcheng Yang | Chief Financial Officer | 56 | 2017 - Present | | Jian Huang | Director | 32 | 2021 - Present | | Xiaolai Li | Director | 49 | 2021 - Present | | Shiyu Zhang | Director, Compensation Committee Member, Audit Committee Member, Nominating Committee Member | 27 | April 2021 - Present | | Daqing Zhu | Director, Chairman of the Audit Committee, Compensation Committee Member, Nominating Committee Member | 56 | 2017 - Present | | Lianfu Liu | Director, Chairman of the Nominating Committee, Audit Committee Member, Compensation Committee Member | 82 | 2007 - Present | | Jinjun Lu | Director, Chairman of the Compensation Committee, Audit Committee Member, Nominating Committee Member | 48 | 2017 - Present | - There is no family relationship among any of the officers or directors[344] - The company has adopted an Amended and Restated Code of Ethics, available on its website, applicable to all employees, officers, and directors[346] - The Audit Committee, composed of independent directors (Daqing Zhu, Lianfu Liu, Jinjun Lu, Shiyu Zhang), oversees corporate accounting, financial reporting, and auditor selection, with Mr. Zhu as Chairman and a qualified Audit Committee Financial Expert, holding four meetings in FY2021[347] - The Compensation Committee, also composed of independent directors (Jinjun Lu, Lianfu Liu, Daqing Zhu, Shiyu Zhang), determines executive and employee compensation and administers stock/incentive plans, with Mr. Lu as Chairman, holding one meeting in FY2021[349] - The Nominating Committee, with independent directors (Jinjun Lu, Lianfu Liu, Daqing Zhu, Shiyu Zhang), identifies and nominates director candidates, with Mr. Liu as Chairman, holding one meeting in FY2021[350] - The Board's leadership structure combines the roles of Chairman and CEO (Zhuoyu Li) to foster communication and unified leadership, counterbalanced by a designated lead independent director (Daqing Zhu) and committees composed entirely of independent directors[351][352] - The Board actively oversees risk management, directly and through its committees, reviewing policies, practices, and major financial risk exposures[353][354] - Director candidates are evaluated based on integrity, achievements, judgment, experience, independence, and diversity of perspectives, with consideration for financial expertise and industry knowledge[356][357] Executive Compensation The company's executive compensation program aims to attract, retain, and motivate highly qualified individuals through competitive base salaries, equity-based compensation, and minimal perquisites, with no plan-based equity awards granted in FY2021 and no outstanding equity awards held by Named Executive Officers as of June 30, 2021 - The compensation objectives are to provide competitive executive compensation to attract, retain, and motivate qualified individuals, with packages consisting of base salary, incentives (short-term & long-term), and benefits, benchmarked against peer companies in the agriculture, feed, and fertilizer industries[360][361] - Base salaries are competitive and designed to attract and retain talented executives[363] - Equity-based compensation, including stock options, SARs, restricted stock, and other stock-based awards under the 2009 Equity Incentive Plan, is a key component for attracting and retaining personnel[364] - The 2012 Employee Stock Purchase Plan (ESPP), amended in 2015, reserves 3,750,000 shares for eligible non-U.S. resident employees, with purchase prices not less than fair market value[365][367] - The company does not provide company-sponsored retirement or pension benefits, nor does it have qualified or nonqualified deferred compensation plans[368][369] Summary Compensation Table (FY2021, 2020, 2019) | Name and Principal Position | Year Ended | Salary ($) | Bonus ($) | | :-------------------------- | :------------ | :--------- | :-------- | | Zhuoyu Li, CEO & Chairman | June 30, 2021 | $300,000 | $— | | | June 30, 2020 | $300,000 | $120,000 | | | June 30, 2019 | $300,000 | $120,000 | | Yongcheng Yang, CFO | June 30, 2021 | $180,000 | $— | | | June 30, 2020 | $180,000 | $63,000 | | | June 30, 2019 | $180,000 | $63,000 | - No plan-based equity awards were granted to Named Executive Officers during the year ended June 30, 2021[376][377] - As of June 30, 2021, no outstanding restricted stock or stock option awards were held by Named Executive Officers[385][386][387] - Directors receive no cash compensation but are reimbursed for out-of-pocket expenses[390] - The Compensation Committee members had no conflicts of interest or insider participation during FY2021[392] - Employment agreements for Zhuoyu Li and Yongcheng Yang include termination clauses, with Mr. Li's agreement allowing for immediate termination with one month's salary in lieu of notice, or without pay for cause, and Mr. Yang's agreement having similar terms[395][380][381] - The 2009 Equity Incentive Plan includes change-in-control provisions that mandate immediate vesting of all unvested awards[396] Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters As of October 13, 2021, the company had 8,487,629 shares of common stock outstanding, with Zhuoyu Li as the largest beneficial owner at 11.5% ownership, and the 2009 Equity Incentive Plan having 234,011 shares remaining available for future issuance - As of October 13, 2021, there were 8,487,629 shares of common stock outstanding[398] Security Ownership of Certain Beneficial Owners and Management (as of Oct 13, 2021) | Name and Address of Beneficial Owners | Amount and Nature of Beneficial Ownership | Percent of Class | | :------------------------------------ | :---------------------------------------- | :--------------- | | Zhuoyu Li | 971,891 | 11.5% | | Shaanxi Baoyu Science and Technology Investment Company | 971,000 | 11.4% | | Lianfu Liu | 10,083 | 0.1% | | All executive officers and directors as a group | 981,974 | 11.6% | - Zhuoyu Li's ownership includes 880,442 shares inherited from his father, Mr. Tao Li[401] - The 2009 Equity Incentive Plan has 234,011 shares remaining available for future issuance as of June 30, 2021, with no outstanding options[403][404][405] Certain Relationships and Related Transactions, and Director Independence The company has related party transactions, including amounts due to entities and individuals controlled by CEO Zhuoyu Li, and maintains a written Related Party Transactions Policy requiring Audit Committee approval for significant transactions, with four of its seven Board members qualifying as independent directors Amounts Due to Related Parties | As of June 30 | Amount (USD) | | :------------ | :----------- | | 2021 | $4,976,689 | | 2020 | $4,212,407 | - Gufeng borrowed $1,083,600 (2021) and $990,500 (2020) from Xi'an Techteam Science & Technology Industry (Group) Co. Ltd., a company controlled by CEO Zhuoyu Li, with these being unsecured, non-interest-bearing loans due on demand[407] - Advances from Mr. Zhuoyu Li, Chairman and CEO, were $3,861,449 (2021) and $3,192,986 (2020), unsecured and non-interest-bearing[407] - Jinong signed a two-year office rental agreement effective July 1, 2020, with Kingtone Information Technology Co., Ltd. (also chaired by Mr. Zhuoyu Li) for 612 square meters at a monthly rent of RMB24,480 (approx. $3,790)[408] - The company adopted a written Related Party Transactions Policy in November 2010, requiring Audit Committee approval for transactions exceeding $120,000 where a related party has a material interest[409][410][411][412] - Four of the seven Board members (Daqing Zhu, Jinjun Lu, Lianfu Liu, and Shiyu Zhang) qualify as independent directors under NYSE rules and SEC Rule 10A-3[414] - The Board held nine meetings in FY2021, and each incumbent director attended at least 75% of applicable meetings[415] Principal Accountant Fees and Services The company incurred $260,000 in audit fees for FY2021 and $273,000 for FY2020, with SS Accounting and Auditing Inc. engaged as the independent registered public accounting firm, and all audit services pre-approved by the Audit Committee Principal Accountant Fees | Fee Type | FY2021 (USD) | FY2020 (USD) | | :--------------- | :----------- | :----------- | | Audit Fees | $260,000 | $273,000 | | Audit-related fees | $0 | $0 | | Tax fees | $0 | $0 | | All Other Fees | $0 | $0 | | Total | $260,000 | $273,000 | - Raul Carrega, CPA was dismissed on February 6, 2020, and SS Accounting and Auditing Inc. was engaged on August 28, 2020, as the independent registered public accounting firm for FY2020 and FY2021[420][421] - All audit and non-audit services performed by the auditors must be pre-approved by the Audit Committee, which pre-approved the audit service performed by SS Accounting and Auditing Inc. for FY2021[425] PART IV Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the Form 10-K report, including the Report of Independent Registered Public Accounting Firm, consolidated financial statements, and an index of exhibits - The report includes the Report of Independent Registered Public Accounting Firm and consolidated financial statements (Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows) for the years ended June 30, 2021 and 2020, along with related notes[426][427] - Financial statement schedules have been omitted as they are either not applicable or the required information is included in the financial statements or notes[428] - An Exhibit Index is provided, listing exhibits filed or incorporated by reference, including articles of incorporation, bylaws, specimen stock certificates, various agreements (e.g., share transfer, non-competition, VIE agreements), Code of Ethics, and certifications[431][432][433][434][435][436] Item 16. Form 10-K Summary This item is not applicable to the company - The company does not provide a Form 10-K Summary[428] SIGNATURES The Form 10-K report is duly signed on behalf of China Green Agriculture, Inc. by its Chief Executive Officer, Zhuoyu Li, and other principal officers and directors, certifying its submission to the Securities and Exchange Commission - The report is signed by Zhuoyu Li (Chairman of the Board of Directors and CEO), Yongcheng Yang (Chief Financial Officer), and other directors (Shiyu Zhang, Jian Huang, Xiaolai Li, Lianfu Liu, Daqing Zhu, Jinjun Lu) on October 13, 2021[429][430] EXHIBIT INDEX This section provides a comprehensive list of exhibits filed with or incorporated by reference into the Form 10-K, including organizational documents, stock certificates, various agreements (e.g., acquisition, non-competition, VIE), the Code of Ethics, and certifications required by the Securities Exchange Act - The Exhibit Index lists various documents, including Articles of Incorporation, Bylaws, Specimen Common Stock Certificate, Form Convertible Note, Share Transfer Agreement, Supplementary Agreement, Form of Non-Competition Agreement, Form of Restricted Stock Grant Agreement, Form of Non-Qualified Stock Option Grant Agreement, Offer Letters, various VIE Agreements (Entrusted Management, Exclusive Product Supply, Shareholder's Voting Proxy, Option, Equity Pledge, Non-Compete, Strategic Acquisition Contract), Amended and Restated Code of Ethics, List of Subsidiaries, and Certifications of Principal Executive and Financial Officers[431][432][433][434][435][436] FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents the audited consolidated financial statements of China Green Agriculture, Inc. for the fiscal years ended June 30, 2021 and 2020, along with the Independent Registered Public Accounting Firm's Report, including Balance Sheets, Statements of Operations, Stockholders' Equity, Cash Flows, and detailed Notes to Consolidated Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SS Accounting & Auditing, Inc. issued an unqualified opinion on the consolidated financial statements of China Green Agriculture, Inc.