SHINECO, INC. [SISI] Filings

10-Q 1 form10-q.htm

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 March 31, 2024

☐ 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

52-2175898

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

T1, South Tower, Jiazhaoye Square

Chaoyang District,

Beijing, People’s Republic of China, 100022

(Address of principal executive offices) (Zip Code)

(+86) 10-87227366

(Registrant’s telephone number, including area code)

(Former address of principal executive offices) (Zip Code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 15, 2024, there were 6,445,963 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

		Page Number

PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets (unaudited)	1

	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited)	2

	Condensed Consolidated Statements of Changes in Equity (unaudited)	3

	Condensed Consolidated Statements of Cash Flows (unaudited)	5

	Notes to the Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67

Item 4.	Controls and Procedures	67

PART II. OTHER INFORMATION		68

Item 1.	Legal Proceedings	68

Item 1A.	Risk Factors	68

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68

Item 3.	Defaults Upon Senior Securities	68

Item 4.	Mine Safety Disclosures	68

Item 5.	Other Information	68

Item 6.	Exhibits	69

SIGNATURES		70

On February 2, 2024, the Company’s stockholders approved a 1-for-10 reverse stock split of the shares (the “Reverse Stock Split”) of the Company’s common stock, with a par value of $0.001 per share, which became effective on February 16, 2024. As a result of the Reverse Stock Split, each of the ten pre-split shares of common stock outstanding will automatically combine and convert to one issued and outstanding share of common stock without any action on the part of the stockholders. Unless otherwise indicated, all share amounts and per share amounts in this report have been presented to give effect to the 1-for-10 reverse stock split of the shares of the Company’s common stock.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHINECO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2024			June 30, 2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	565,483		$	625,966
Accounts receivable, net		4,676,210			34,586
Due from related parties		448,811			-
Inventories, net		1,446,334			324,406
Advances to suppliers, net		12,751,020			2,697
Derivative financial assets		327			-
Other current assets, net		2,560,304			2,827,042
Current assets held for discontinued operations		-			37,109,046
TOTAL CURRENT ASSETS		22,448,489			40,923,743

Property and equipment, net		6,224,380			1,213,116
Land use right, net		613,133			-
Intangible assets, net		44,250,977			12,049,473
Investment		25,962			-
Goodwill		28,015,104			6,574,743
Operating lease right-of-use assets		110,227			132,366
Non-current assets held for discontinued operations		-			2,575,698
TOTAL ASSETS	$	101,688,272		$	63,469,139

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
Short-term loans	$	13,406,523		$	1,240,431
Long-term loans - current portion		636,936			-
Accounts payable		2,744,089			191,148
Contract liabilities		6,312,218			89,490
Due to related parties		2,276,248			48,046
Other payables and accrued expenses		1,836,172			669,147
Operating lease liabilities - current		123,221			86,978
Convertible note payable		14,824,553			15,126,198
Deferred income		71,788			-
Taxes payable		1,142,687			500,869
Current liabilities held for discontinued operations		-			5,393,844
TOTAL CURRENT LIABILITIES		43,374,435			23,346,151

Income tax payable - noncurrent portion		335,145			335,145
Operating lease liabilities - non-current		16,458			44,469
Long-term loans - non-current		1,086,944			-
Deferred tax liability		10,138,018			1,416,592
Other long-term payable		33,231			68,913
Non-current liabilities held for discontinued operations		-			1,404,823
TOTAL LIABILITIES		54,984,231			26,616,093

Commitments and contingencies		-			-

EQUITY:
Common stock; par value $0.001, 150,000,000 shares authorized; 6,445,963 and 2,639,338 shares issued and outstanding at March 31, 2024 and June 30, 2023*		6,446			2,639
Additional paid-in capital		65,838,839			68,871,317
Subscription receivable		(178,332	)		(3,782,362	)
Subscribed common stock		285,714			-
Statutory reserve		4,198,107			4,198,107
Accumulated deficit		(34,045,415	)		(31,735,422	)
Accumulated other comprehensive loss		(112,630	)		(4,992,381	)
Total Stockholders’ equity of Shineco, Inc.		35,992,729			32,561,898
Non-controlling interest		10,711,312			4,291,148
TOTAL EQUITY		46,704,041			36,853,046

TOTAL LIABILITIES AND EQUITY	$	101,688,272		$	63,469,139

Retrospectively restated for effect of the Reverse Stock Split on February 16, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(UNAUDITED)

	2024			2023			2024			2023
	For the Nine Months Ended March 31,						For the Three Months Ended March 31,
	2024			2023			2024			2023

REVENUE	$	5,304,159		$	231,513		$	1,351,400		$	231,513

COST OF REVENUE
Cost of products		4,691,852			218,915			1,157,675			218,915
Business and sales related tax		9,367			1,442			2,058			1,442
Total cost of revenue		4,701,219			220,357			1,159,733			220,357

GROSS INCOME		602,940			11,156			191,667			11,156

OPERATING EXPENSES
General and administrative expenses		12,155,801			5,986,324			3,304,426			2,691,544
Selling expenses		213,632			75,342			81,437			75,342
Research and development expenses		77,811			58,384			31,895			58,384
Total operating expenses		12,447,244			6,120,050			3,417,758			2,825,270

LOSS FROM OPERATIONS		(11,844,304	)		(6,108,894	)		(3,226,091	)		(2,814,114	)

OTHER INCOME (EXPENSE)
Loss from equity method investment		-			(20,932	)		-			(14,711	)
Investment income from derivative financial assets		4,240			-			706			-
Other income, net		293,978			257,596			19,095			257,596
Amortization of debt issuance and other costs		(612,072	)		(579,664	)		(246,015	)		(223,692	)
Interest expenses, net		(1,239,835	)		(468,180	)		(418,534	)		(177,334	)
Total other expenses		(1,553,689	)		(811,180	)		(644,748	)		(158,141	)

LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES FROM CONTINUING OPERATIONS		(13,397,993	)		(6,920,074	)		(3,870,839	)		(2,972,255	)

PROVISION (BENEFIT) FOR INCOME TAXES		(460,039	)		(33,089	)		497,889			(33,089	)

NET LOSS FROM CONTINUING OPERATIONS		(12,937,954	)		(6,886,985	)		(4,368,728	)		(2,939,166	)

DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net of taxes		(49,455	)		(937,831	)		-			329,181
Income from disposal of discontinued operations		8,904,702			-			-			-
Net income (loss) from discontinued operations		8,855,247			(937,831	)		-			329,181

NET LOSS		(4,082,707	)		(7,824,816	)		(4,368,728	)		(2,609,985	)

Net income (loss) attributable to non-controlling interest		(1,772,714	)		53,312			(1,019,982	)		58,548

NET LOSS ATTRIBUTABLE TO SHINECO, INC.	$	(2,309,993	)	$	(7,878,128	)	$	(3,348,746	)	$	(2,668,533	)

COMPREHENSIVE INCOME (LOSS)
Net loss	$	(4,082,707	)	$	(7,824,816	)	$	(4,368,728	)	$	(2,609,985	)
Other comprehensive income (loss): foreign currency translation income (loss)		105,780			(996,755	)		(32,575	)		159,556
Total comprehensive loss		(3,976,927	)		(8,821,571	)		(4,401,303	)		(2,450,429	)
Less: comprehensive income (loss) attributable to non-controlling interest		(1,777,309	)		298,617			(1,033,976	)		292,330

COMPREHENSIVE LOSS ATTRIBUTABLE TO SHINECO, INC.	$	(2,199,618	)	$	(9,120,188	)	$	(3,367,327	)	$	(2,742,759	)

Weighted average number of shares basic and diluted*		4,899,762			1,765,343			6,425,618			2,052,336

Basic and diluted loss per common share	$	(0.47	)	$	(4.46	)	$	(0.52	)	$	(1.30	)

Earnings (loss) per common share
Continuing operations - Basic and Diluted		(2.28	)		(3.93	)		(0.52	)		(1.46	)
Discontinued operations - Basic and Diluted		1.81			(0.53	)		-			0.16
Net loss per common share - basic and diluted		(0.47	)		(4.46	)		(0.52	)		(1.30	)

Retrospectively restated for effect of the Reverse Stock Split on February 16, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHINECO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

																		ACCUMULATED
										ADDITIONAL								OTHER			NON-
	COMMON STOCK				SUBSCRIPTION			COMMON STOCK		PAID-IN			STATUTORY		ACCUMULATED			COMPREHENSIVE			CONTROLLING			TOTAL
	SHARES*		AMOUNT		RECEIVABLE			SUBSCRIBED		CAPITAL			RESERVE		DEFICIT			LOSS			INTEREST			EQUITY
Balance at June 30, 2022		1,098,387	$	1,098	$	(3,024,000	)	$	-	$	53,008,810		$	4,198,107	$	(18,372,023	)	$	(2,100,756	)	$	(398,348	)	$	33,312,888

Acquisition of Biowin		-		-		-			-		-			-		-			-			5,301,786			5,301,786
Stock issuance		753,618		754		(148,362	)		-		9,854,586			-		-			-			-			9,706,978
Proceeds received from investors for subscription of common stock		-		-		-			1,194,029		-			-		-			-			-			1,194,029
Issuance of common shares for convertible notes redemption		81,258		81		-			-		827,556			-		-			-			-			827,637
Common stock issued for management and employees		132,222		132		(650,000	)		-		1,666,312			-		-			-			-			1,016,444
Common stock issued for services		1,000		1		-			-		29,999			-		-			-			-			30,000
Net income (loss) from continuing operations for the period		-		-		-			-		-			-		(6,947,446	)		-			60,461			(6,886,985	)
Net loss from discontinued operation for the period		-		-		-					-			-		(930,682	)		-			(7,149	)		(937,831	)
Foreign currency translation gain (loss)		-		-		-			-		-			-		-			(1,242,060	)		245,305			(996,755	)
Balance at March 31, 2023		2,066,485	$	2,066	$	(3,822,362	)	$	1,194,029	$	65,387,263		$	4,198,107	$	(26,250,151	)	$	(3,342,816	)	$	5,202,055		$	42,568,191

Balance at June 30, 2023		2,639,338	$	2,639	$	(3,782,362	)	$	-	$	68,871,317		$	4,198,107	$	(31,735,422	)	$	(4,992,381	)	$	4,291,148		$	36,853,046

Acquisition of Wintus		1,000,000		1,000		-			-		2,299,000			-		-			(110,788	)		8,197,473			10,386,685
Disposal of Tenet-Jove		-		-		-			-		(8,904,702	)		-		-			4,880,164			-			(4,024,538	)
Stock issuance		1,200,000		1,200		-			-		1,438,800			-		-			-			-			1,440,000
Effect of rounding fractional shares into whole shares upon reverse stock split		33,061		33		-			-		(33	)		-		-			-			-			-
Proceeds received from investors for subscription of common stock		-		-		-			285,714		-			-		-			-			-			285,714
Forgiveness of subscription receivable		-		-		3,024,000			-		-			-		-			-			-			3,024,000
Issuance of common shares for convertible notes redemption		1,193,064		1,193		-			-		1,594,527			-		-			-			-			1,595,720
Common stock issued for management and employees		380,500		381		580,030			-		539,930			-		-			-			-			1,120,341
Net loss from continuing operations for the period		-		-		-			-		-			-		(11,166,035	)		-			(1,771,919	)		(12,937,954	)
Net income (loss) from discontinued operation for the period		-		-		-			-		-			-		8,856,042			-			(795	)		8,855,247
Foreign currency translation gain (loss)		-		-		-			-		-			-		-			110,375			(4,595	)		105,780
Balance at March 31, 2024		6,445,963	$	6,446	$	(178,332	)	$	285,714	$	65,838,839		$	4,198,107	$	(34,045,415	)	$	(112,630	)	$	10,711,312		$	46,704,041

Retrospectively restated for effect of the Reverse Stock Split on February 16, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2023 AND 2022

(UNAUDITED)

																		ACCUMULATED
								COMMON		ADDITIONAL								OTHER			NON-
	COMMON STOCK				SUBSCRIPTION			STOCK		PAID-IN			STATUTORY		ACCUMULATED			COMPREHENSIVE			CONTROLLING			TOTAL
	SHARES*		AMOUNT		RECEIVABLE			SUBSCRIBED		CAPITAL			RESERVE		DEFICIT			LOSS			INTEREST			EQUITY
Balance at December 31, 2022		1,965,736	$	1,966	$	(3,532,340	)	$	-	$	64,002,918		$	4,198,107	$	(23,581,618	)	$	(3,268,590	)	$	(392,061	)	$	37,428,382

Acquisition of Biowin		-		-		-			-		-			-		-			-			5,301,786			5,301,786
Stock issuance		-		-		359,978			-		-			-		-			-			-			359,978
Proceeds received from investors for subscription of common stock		-		-		-			1,194,029		-			-		-			-			-			1,194,029
Issuance of common shares for convertible notes redemption		27,527		27		-			-		299,974			-		-			-			-			300,001
Common stock issued for management and employees		72,222		72		(650,000	)		-		1,054,372			-		-			-			-			404,444
Common stock issued for services		1,000		1		-			-		29,999			-		-			-			-			30,000
Net income (loss) from continuing operations for the period		-		-		-			-		-			-		(2,999,627	)		-			60,461			(2,939,166	)
Net income (loss) from discontinued operation for the period		-		-		-					-			-		331,094			-			(1,913	)		329,181
Foreign currency translation gain (loss)		-		-		-			-		-			-		-			(74,226	)		233,782			159,556
Balance at March 31, 2023		2,066,485	$	2,066	$	(3,822,362	)	$	1,194,029	$	65,387,263		$	4,198,107	$	(26,250,151	)	$	(3,342,816	)	$	5,202,055		$	42,568,191

Balance at December 31, 2023		6,412,902	$	6,413	$	(178,332	)	$	-	$	65,838,872		$	4,198,107	$	(30,696,669	)	$	(94,049	)	$	11,745,288		$	50,819,630
Balance		6,412,902	$	6,413	$	(178,332	)	$	-	$	65,838,872		$	4,198,107	$	(30,696,669	)	$	(94,049	)	$	11,745,288		$	50,819,630

Effect of rounding fractional shares into whole shares upon reverse stock split		33,061		33		-			-		(33	)		-		-			-			-			-
Proceeds received from investors for subscription of common stock		-		-		-			285,714		-			-		-			-			-			285,714
Net loss from continuing operations for the period		-		-		-			-		-			-		(3,348,746	)		-			(1,019,982	)		(4,368,728	)
Foreign currency translation loss		-		-		-			-		-			-		-			(18,581	)		(13,994	)		(32,575	)
Foreign currency translation gain (loss)		-		-		-			-		-			-		-			(18,581	)		(13,994	)		(32,575	)
Balance at March 31, 2024		6,445,963	$	6,446	$	(178,332	)	$	285,714	$	65,838,839		$	4,198,107	$	(34,045,415	)	$	(112,630	)	$	10,711,312		$	46,704,041
Balance		6,445,963	$	6,446	$	(178,332	)	$	285,714	$	65,838,839		$	4,198,107	$	(34,045,415	)	$	(112,630	)	$	10,711,312		$	46,704,041

Retrospectively restated for effect of the Reverse Stock Split on February 16, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	2024			2023
	For the Nine Months Ended March 31,
	2024			2023

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,082,707	)	$	(7,824,816	)
Net income (loss) from discontinued operations, net of tax		8,855,247			(937,831	)
Net loss from continuing operations		(12,937,954	)		(6,886,985	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,690,258			322,113
Allowance for credit losses and doubtful accounts		1,630,494			1,929,066
Reversal of inventory reserve		(26,362	)		-
Deferred tax benefit		(465,783	)		(33,089	)
Loss from equity method investment		-			20,932
Amortization of right of use assets		57,630			83,067
Forgiveness of subscription receivable		3,024,000			-
Common stock issued for management and employees		540,311			1,016,444
Common stock issued for services		-			30,000
Amortization of debt issuance and other costs		612,072			579,664
Accrued interest expense for convertible notes		682,003			704,596
Accrued interest income from third parties		(17,949	)		(119,978	)

Changes in operating assets and liabilities:
Accounts receivable		6,810,506			154,354
Advances to suppliers		(9,918,064	)		10,081
Inventories		670,197			167,153
Other current assets		128,009			(196,447	)
Accounts payable		(4,015,534	)		(23,544	)
Contract liabilities		6,158,325			(226,782	)
Other payables and accrued expenses		493,726			143,179
Other long-term payable		(36,107	)		-
Operating lease liabilities		(27,014	)		(111,911	)
Taxes payable		47,782			(37,155	)
Net cash used in operating activities from continuing operations		(2,899,454	)		(2,475,242	)
Net cash used in operating activities from discontinued operations		(162,566	)		(378,145	)
Net cash used in operating activities		(3,062,020	)		(2,853,387	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment		(49,548	)		(18,488	)
Payment made for loans to third parties		(1,544,006	)		(2,000,000	)
Repayment from loan to third parties		50,000			10,915,129
Repayment from loan to related parties		510,117			-
Payment for derivative financial assets		(18,881	)		-
Redemption of derivative financial assets		24,714			-
Investment in unconsolidated entity		(26,039	)		-
Payment made for business acquisition					(9,000,000	)
Acquisition of subsidiaries, net of cash		1,003,678			621,979
Disposal of VIEs - Tenet-Jove, net of cash		(13,889,752	)		-
Net cash provided by (used in) investing activities from continuing operations		(13,939,717	)		518,620
Net cash provided by investing activities from discontinued operations		-			494,966
Net cash provided by (used in) investing activities		(13,939,717	)		1,013,586

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans		15,411,974			432,657
Repayment of short-term loans		(15,142,251	)		(721,095	)
Repayment of long-term loans		(325,272	)		-
Proceeds from issuance of common stock		2,020,030			1,609,978
Proceeds received from investors for subscription of common stock		276,929			1,164,815
Repayments of advances from related parties		649,541			62,393
Net cash provided by financing activities from continuing operations		2,890,951			2,548,748
Net cash provided by (used in) financing activities from discontinued operations		293,997			(127,743	)
Net cash provided by financing activities		3,184,948			2,421,005

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		215,513			(351,260	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(13,601,276	)		229,944

CASH AND CASH EQUIVALENTS - Beginning of the period		14,166,759			15,165,231

CASH AND CASH EQUIVALENTS - End of the period	$	565,483		$	15,395,175

Less: cash and cash equivalents of discontinued operations - Ended of the period		-			14,556,701

Cash and cash equivalents of continuing operations - Ended of the period	$	565,483		$	838,474

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest	$	473,008		$	17,312

SUPPLEMENTAL NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
Issuance of common shares for convertible notes redemption	$	1,595,720		$	827,637
Issuance of common shares for proceeds received in prior year	$	-		$	5,000,000
Issuance of common shares for business acquisition	$	2,300,000		$	3,097,000
Transferal of equity interest of Tenet Jove for business acquisition of Wintus	$	37,705,951		$	-
Right-of-use assets obtained in exchange for operating lease obligations	$	32,828		$	65,843
Reduction of right-of-use assets and operating lease obligations due to early termination of lease agreement	$	-		$	651,745
Repayments of loans to third parties offset by other payables	$	-		$	3,159,217

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Shineco, Inc. (“Shineco” or the “Company”) was incorporated in the State of Delaware on August 20, 1997. The Company is a holding company whose primary purpose is to develop business opportunities in the People’s Republic of China (the “PRC” or “China”).

On December 30, 2004, the Company acquired all of the issued and outstanding shares of Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove”), a PRC company, in exchange for restricted shares of the Company’s common stock, and the sole operating business of the Company became that of its subsidiary, Tenet-Jove. Tenet-Jove was incorporated on December 15, 2003 under the laws of China. Consequently, Tenet-Jove became a 100% owned subsidiary of Shineco and was officially granted the status of a wholly foreign-owned entity by Chinese authorities on July 14, 2006. This transaction was accounted for as a recapitalization. Tenet-Jove owns 90% interest of Tianjin Tenet Huatai Technological Development Co., Ltd. (“Tenet Huatai”).

On December 31, 2008, June 11, 2011, and May 24, 2012, Tenet-Jove entered into a series of contractual agreements including an Executive Business Cooperation Agreement, a Timely Reporting Agreement, an Equity Interest Pledge Agreement, and an Executive Option Agreement (collectively, the “VIE Agreements”), with each one of the following entities, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), Yantai Zhisheng International Freight Forwarding Co., Ltd. (“Zhisheng Freight”) and Qingdao Zhihesheng Agricultural Produce Services., Ltd. (“Qingdao Zhihesheng”). On February 24, 2014, Tenet-Jove entered into the same series of contractual agreements with Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. (“Zhisheng Bio-Tech”), which was incorporated in 2014. Zhisheng Bio-Tech, Zhisheng Freight and Qingdao Zhihesheng are collectively referred to herein as the “Zhisheng VIEs.”

Pursuant to the VIE Agreements, Tenet-Jove has the exclusive right to provide to the Zhisheng VIEs and Ankang Longevity Group consulting services related to their business operations and management. All the above contractual agreements obligate Tenet-Jove to absorb a majority of the risk of loss from the Zhisheng VIEs and Ankang Longevity Group’s activities and entitle Tenet-Jove to receive a majority of their residual returns. In essence, Tenet-Jove has become the primary beneficiary of the operations of the Zhisheng VIEs and Ankang Longevity Group. Therefore, the Zhisheng VIEs and Ankang Longevity Group are treated as variable interest entities (“VIEs”) under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation.” Accordingly, the accounts of these entities are consolidated with those of Tenet-Jove.

Since Shineco is effectively controlled by the majority shareholders of the Zhisheng VIEs and Ankang Longevity Group, Shineco owns 100% of Tenet-Jove. Accordingly, Shineco, Tenet-Jove, and the VIEs, the Zhisheng VIEs and Ankang Longevity Group are effectively controlled by the same majority shareholders. Therefore, Shineco, Tenet-Jove, and the VIEs of Tenet-Jove are considered under common control. The consolidation of Tenet-Jove and its VIEs into Shineco was accounted for at historical cost.

On September 30, 2017, Tenet-Jove established Xinjiang Shineco Taihe Agriculture Technology Ltd. (“Xinjiang Taihe”) with registered capital of RMB10.0 million (approximately US$1.5 million). On September 30, 2017, Tenet-Jove established Xinjiang Tianyi Runze Bioengineering Co., Ltd. (“Runze”) with registered capital of RMB10.0 million (approximately US$1.5 million). Xinjiang Taihe and Runze became wholly-owned subsidiaries of Tenet-Jove. The Company ceased the business operation of Xinjiang Taihe and Runze in September 2020 and October 2020, respectively.

On December 10, 2016, Tenet-Jove entered into a purchase agreement with Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), an online e-commerce company based in Tianjin, China, specializing in distributing Luobuma related products and branded products of Daiso 100-yen shops, pursuant to which Tenet-Jove would acquire a 51% equity interest in Tianjin Tajite for cash consideration of RMB14,000,000 (approximately US$2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May 2017, the Company amended the agreement and required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the shares in Tianjin Tajite. On May 5, 2019, two minority shareholders of Tianjin Tajite transferred their 26.4% of the equity interest to the Company. There was no consideration paid for the transfers, and after the transfers, the Company owns 77.4% equity interest of Tianjin Tajite.

On March 13, 2019, Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. (“TNB”) with registered capital of RMB10.0 million (approximately US$1.5 million). TNB became a wholly-owned subsidiary of Tenet-Jove. The operations of TNB ceased on May 15, 2023.

On July 23, 2020, Shanghai Jiaying International Trade Co., Ltd. (“Shanghai Jiaying”) was established with registered capital of RMB200 million (approximately US$29.9 million). Tenet-Jove owned an equity interest of 90% of Shanghai Jiaying, and the remaining 10% equity interests was owned by an individual shareholder. Jiaying Trade did not engage in any active business operations, and the operations of Shanghai Jiaying ceased on December 21, 2021.

On January 7, 2021, Inner Mongolia Shineco Zhonghemp Biotechnology Co., Ltd. (“SZB”) was established with registered capital of RMB50 million (approximately US$7.5 million). Tenet-Jove owned an equity interest of 55% of SZB, and the remaining 45% equity interests was owned by an individual shareholder. SZB is currently not engaging in any active business operations.

On December 7, 2021, the Company established Shineco Life Science Research Co., Ltd. (“Life Science”) as a wholly foreign-owned entity with registered capital of US$10.0 million.

On April 13, 2022, the Company established Shineco Life Science Group Hong Kong Co., Limited (“Life Science HK”) as a wholly owned entity with registered capital of US$10.0 million. On April 24, 2022, the Company entered into a Share Transfer Agreement with Life Science HK. Pursuant to the agreement, the Company transferred its 100% of the equity interest of Life Science to Life Science HK. There was no consideration paid for the transfer, and after the transfer, Life Science became a wholly-owned subsidiary of Life Science HK.

On May 16, 2023, Fuzhou Meida Health Management Co., Ltd (“Fuzhou Meida”), formerly known as Pangke Planet (Fuzhou) Health Management Co., Ltd, was established with registered capital of RMB1.0 million (approximately US$0.1 million). Life Science owned an equity interest of 51% of Fuzhou Meida, and the remaining 49% equity interests was owned by two shareholders.

On May 16, 2023, Shinkang Technology (Jiangsu) Co., Ltd (“Shinkang”) was established with registered capital of RMB10.0 million (approximately US$1.4 million). Life Science owned an equity interest of 51% of Shinkang, and the remaining 49% equity interests was owned by one shareholder. Shinkang is currently not engaging in any active business operations.

On May 23, 2023, Life Science established Beijing Shineco Chongshi Information Consulting Co., Ltd (“Chongshi”) as a wholly owned entity with registered capital of RMB0.1 million (approximately US$0.01 million). Chongshi is currently not engaging in any active business operations.

On June 8, 2021, Tenet-Jove entered into a Restructuring Agreement with various parties. Pursuant to the terms of the Restructuring Agreement, (i) the Company transferred all of its rights and interests in Ankang Longevity to the Shareholders of Yushe County Guangyuan Forest Development Co., Ltd. (“Guangyuan”) in exchange for the control of 100% of equity interests and assets in Guangyuan; (ii) Tenet-Jove entered a Termination Agreement with Ankang Longevity and the Ankang Shareholders; (iii) as a consideration to the Restructuring Agreement and based on a valuation report on the equity interests of Guangyuan issued by an independent third party, Tenet-Jove relinquished all of its rights and interests in Ankang Longevity and transferred those rights and interests to the Guangyuan Shareholders; and (iv) Guangyuan and the Guangyuan Shareholders entered into a series of variable interest entity agreements with Tenet-Jove. After signing of the Restructuring Agreement, the Company and the shareholders of Ankang and Guangyuan actively carried out the transferring of rights and interests in Ankang and Guangyuan, and the transferring was completed subsequently on July 5, 2021. Afterwards, with the completion of all other follow-ups works, on August 16, 2021, the Company, through its subsidiary Tenet-Jove, completed the previously announced acquisition pursuant to the Restructuring Agreement dated June 8, 2021.

On December 30, 2022, Life Science closed the acquisition of 51% of the issued equity interests of Changzhou Biowin Pharmaceutical Co., Ltd. (“Biowin”), a company established under the laws of China, pursuant to the previously announced stock purchase agreement, dated as of October 21, 2022, among Beijing Kanghuayuan Medicine Information Consulting Co., Ltd., a company established under the laws of China (“Seller”), Biowin, the Company and Life Science. As the consideration for the acquisition, the Company paid to Seller US$9 million in cash and the Company issued 326,000 shares of the Company’s common stock, par value US$0.001 per share to the equity holders of Biowin or any persons designated by Biowin. According to the Supplementary Agreement, dated as of December 30, 2022, by and among Life Science, the Seller and Biowin, the Seller owned 51% of the issued equity interests of Biowin before January 1, 2023, and transferred the 51% of the issued equity interests of Biowin together with its controlling rights of production and operation of Biowin to Life Science from January 1, 2023.

On May 29, 2023, Life Science HK entered into a stock purchase agreement with Dream Partner Limited, a BVI corporation (“Dream Partner”), Chongqing Wintus Group, a corporation incorporated under the laws of mainland China (“Wintus”) and certain shareholders of Dream Partner (the “Wintus Sellers”), pursuant to which Life Science HK shall acquire 71.42% equity interest in Wintus (the “Acquisition”). As the consideration for the Acquisition, the Company (a) paid the Wintus Sellers an aggregate cash consideration of US$2,000,000; (b) issued certain shareholders, as listed in the agreement, an aggregate of 1,000,000 shares of the Company’s restricted Common Stock; and (c) transferred and sold to the Wintus Sellers 100% of the Company’s equity interest in Tenet-Jove.

The Company, through its subsidiaries, currently operates three main business segments: 1) Biowin specializes in the development, production and distribution of innovative rapid diagnostic products and related medical devices for the most common diseases (“Rapid Diagnostic and Other Products”); 2) Wintus is engaged in producing, processing and distribution of agricultural products, such as silk and silk fabrics as well as trading of fresh fruit; and (3) Fuzhou Meida operates a health-oriented chain restaurant that specializes in developing healthy meals for people with slow metabolic health and those in recovery from metabolic disorders. Due to the Acquisition mentioned above, the Company’s business segments, that were operated by Tenet-Jove and its subsidiaries, Guangyuan and Zhisheng VIEs which Tenet-Jove is the primary beneficiary of (the “Tenet-Jove Disposal Group”), are classified as discontinued operations on the Company unaudited condensed consolidated financial statements. These business segments are: 1) Tenet-Jove is engaged in manufacturing and selling Bluish Dogbane and related products, also known in Chinese as “Luobuma,” including therapeutic clothing and textile products made from Luobuma; 2) Qingdao Zhihesheng and Guangyuan are engaged in planting, processing, and distributing green agricultural produce; (“Agricultural Products”); and 3) Zhisheng Freight is providing domestic and international logistic services (“Freight Services”).

NOTE 2. GOING CONCERN UNCERTAINTIES

As disclosed in the Company’s unaudited condensed consolidated financial statements, the Company had recurring net losses of US$12.9 million and US$6.9 million, and continuing cash outflow of US$2.9 million and US$2.5 million from operating activities from continuing operations for the nine months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had negative working capital of US$20.9 million. Management believes these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months. In assessing the Company’s going concern, management monitors and analyzes the Company’s cash on-hand and its ability to generate sufficient revenue sources in the future to support its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Direct offering and debt financing have been utilized to finance the working capital requirements of the Company. The continuation of the Company as a going concern through the next twelve months is dependent on the continued financial support from its stockholders.

Despite those negative financial trends, as of March 31, 2024, the Company had the following measurements which the management has taken to enhance the Company’s liquidity:

1)	On January 12, 2023, the Board of the Company approved the sales of 72,222 shares of the Company’s common stock to the Company’s employees for gross proceeds of up to US$650,000. As the date of this report, proceeds amounted to US$0.5 million has been received by the Company, and the remaining balance of the proceeds is expected to be fully collected by June 30, 2024.

2)	On March 27, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain non-US investors (the “Investors”). Under the Purchase Agreement, the Company agreed to sell to the Investors up to 285,714 shares (the “Shares”) of its common stock at a per share purchase price of US$1.0 for gross proceeds of up to US$285,714. The Company has received gross proceeds in full from the Investors as of March 31, 2024, and no share has been issued as of the date of this report.

3)	The Company financed from commercial banks and third parties. As of March 31, 2024, the Company had US$13.4 million in short-term loans outstanding and US$1.7 million in long-term loans outstanding. The management expects that the Company will be able to renew its existing bank loans upon their maturity based on past experience and its good credit history.

Management believes that the foregoing measures collectively will provide sufficient liquidity for the Company to meet its future liquidity needs 12 months from the date of this filing.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2023, which was filed on September 28, 2023.

The unaudited condensed consolidated financial statements of the Company reflect the principal activities of the Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries. The non-controlling interest represents the minority shareholders’ interest in the Company’s majority owned subsidiaries and VIEs. All intercompany accounts and transactions have been eliminated in consolidation.

Consolidation of Variable Interest Entities

VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

There are no consolidated assets of the VIEs and the VIEs’ subsidiaries that are collateral for the obligations of the VIEs and the VIEs’ subsidiaries and can only be used to settle the obligations of the VIEs and the VIEs’ subsidiaries.

As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors or beneficial interest holders of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs in normal course of business.

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs and the VIEs’ subsidiaries. However, if the VIEs and the VIEs’ subsidiaries ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIEs and the VIEs’ subsidiaries through loans to the shareholder of the VIEs and the VIEs’ subsidiaries or entrustment loans to the VIEs and the VIEs’ subsidiaries.

The total carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities and income information and the carrying amount of the VIEs and their subsidiaries’ consolidated income information held for discontinued operations were as follows:

	March 31, 2024		June 30, 2023

Current assets	$	-	$	32,532,618
Non-current assets		-		2,493,883
Total assets		-		35,026,501
Total liabilities		-		(5,952,438	)
Net assets	$	-	$	29,074,063

	2024		2023			2024		2023
	For the nine months ended March 31,					For the three months ended March 31,
	2024		2023			2024		2023
Net sales	$	-	$	1,514,166		$	-	$	984,042
Gross loss	$	-	$	(331,212	)	$	-	$	(234,967	)
Income from operations	$	60,426	$	1,311,850		$	-	$	923,945
Net income	$	60,426	$	1,347,099		$	-	$	947,367

Non-controlling Interests

U.S. GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the non-controlling interests in the net loss of these entities are reported separately in the unaudited condensed consolidated statements of loss and comprehensive loss.

Risks and Uncertainties

The operations of the Company are located in the PRC and are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these factors and believes that it is in compliance with existing laws and regulations, there is no guarantee that the Company will continue to do so in the future.

Members of the current management team own controlling interests in the Company and are also the owners of the VIEs in the PRC. The Company only has contractual arrangements with the VIEs, which obligate it to absorb the risk of loss and to receive the residual expected returns. As such, the controlling shareholders of the Company and the VIEs could cancel these agreements or permit them to expire at the end of the agreement terms, as a result of which the Company would not retain the economic benefits from the VIEs. In addition, should these agreements be challenged or litigated, they would also be subject to the laws and courts of the PRC legal system, which could make enforcing the Company’s rights difficult.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolid

SHINECO, INC. [SISI] Filings
10-Q	[2024-05-15]
10-Q	[2024-02-08]
10-Q	[2023-11-14]
10-K	[2023-09-28]
10-Q	[2023-05-12]
10-Q	[2023-02-14]
10-Q	[2022-11-14]
10-K	[2022-09-28]
10-Q	[2022-05-16]
10-Q	[2022-02-14]
10-Q	[2021-11-15]
10-K	[2021-09-30]
10-Q	[2021-05-14]
10-Q	[2021-02-19]
10-Q	[2020-11-16]
10-K	[2020-09-28]
10-Q	[2020-05-14]
10-Q	[2020-02-14]
10-Q	[2019-11-14]
10-K	[2019-09-27]
10-Q	[2019-05-15]
10-Q	[2019-02-19]
10-Q	[2018-11-14]
10-K	[2018-10-15]
10-Q	[2018-05-15]
10-Q	[2018-02-12]
10-Q	[2017-11-14]
10-K	[2017-10-13]
10-Q	[2017-05-15]
10-Q	[2017-02-15]
10-Q	[2016-11-14]
10-K	[2016-09-28]
10-Q	[2016-06-08]
S-1	[2015-03-16]