Business Combinations

9 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 15 – BUSINESS COMBINATIONS

On January 1, 2017, the Company, through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and also into a series of contractual agreements to qualify as VIEs with the shareholders of two new VIE Companies, Sunwu County Xiangrong Agricultural Materials Co., Ltd., and Anhui Fengnong Seed Co., Ltd. (“Xiangrong and Fengnong”),.

Jinong, the two new VIE Companies, Xiangrong and Fengnong and the shareholders of the two new VIE Companies, Xiangrong and Fengnong, also entered into a series of contractual agreements for the VIE Companies to qualify as VIEs (the “VIE Agreements”). The VIE Agreements are as follows:

Entrusted Management Agreements

Pursuant to the terms of certain Entrusted Management Agreements dated January 1, 2017, between Jinong and the shareholders of the two new VIE Companies (the “Entrusted Management Agreements”), the two new VIE Companies and their shareholders agreed to entrust the operations and management of its business to Jinong. According to the Entrusted Management Agreement, Jinong possesses the full and exclusive right to manage the VIE Companies’ operations, assets and personnel, has the right to control all of the VIE Companies' cash flows through an entrusted bank account, is entitled to the VIE Companies' net profits as a management fee, is obligated to pay all of the VIE Companies’ payables and loan payments, and bears all losses of the VIE Companies. The Entrusted Management Agreements will remain in effect until (i) the parties mutually agree to terminate the agreement; (ii) the dissolution of the VIE Companies; or (iii) Jinong acquires all of the assets or equity of the VIE Companies (as more fully described below under “Exclusive Option Agreements”).

Exclusive Technology Supply Agreements

Pursuant to the terms of certain Exclusive Technology Supply Agreements dated January 1, 2017, between Jinong and the VIE Companies (the “Exclusive Technology Supply Agreements”), Jinong is the exclusive technology provider to the VIE Companies. The VIE Companies agreed to pay Jinong all fees payable for technology supply prior to making any payments under the Entrusted Management Agreement. The Exclusive Technology Supply Agreements shall remain in effect until (i) the parties mutually agree to terminate the agreement; (ii) the dissolution of the VIE Companies; or (iii) Jinong acquires the VIE Companies (as more fully described below under “Exclusive Option Agreements”).

Shareholder’s Voting Proxy Agreements

Pursuant to the terms of certain Shareholder’s Voting Proxy Agreements dated January 1, 2017, among Jinong and the shareholders of the VIE Companies (the “Shareholder’s Voting Proxy Agreements”), the shareholders of the VIE Companies irrevocably appointed Jinong as their proxy to exercise on such shareholders’ behalf all of their voting rights as shareholders pursuant to PRC law and the Articles of Association of the VIE Companies, including the appointment and election of directors of the VIE Companies. Jinong agreed that it shall maintain a board of directors, the composition and appointment of which shall be approved by the Board of the Company. The Shareholder’s Voting Proxy Agreements will remain in effect until Jinong acquires all of the assets or equity of the VIE Companies.

Exclusive Option Agreements

Pursuant to the terms of certain Exclusive Option Agreements dated January 1, 2017, among Jinong, the VIE Companies, and the shareholders of the VIE Companies (the “Exclusive Option Agreements”), the shareholders of the VIE Companies granted Jinong an irrevocable and exclusive purchase option (the “Option”) to acquire the VIE Companies’ equity interests and/or remaining assets, but only to the extent that the acquisition does not violate limitations imposed by PRC law on such transactions. The Option is exercisable at any time at Jinong’s discretion so long as such exercise and subsequent acquisition of the VIE Companies does not violate PRC law. The consideration for the exercise of the Option is to be determined by the parties and memorialized in the future by definitive agreements setting forth the kind and value of such consideration. Jinong may transfer all rights and obligations under the Exclusive Option Agreements to any third parties without the approval of the shareholders of the VIE Companies so long as a written notice is provided. The Exclusive Option Agreements may be terminated by mutual agreements or by 30 days written notice by Jinong.

Equity Pledge Agreements

Pursuant to the terms of certain Equity Pledge Agreements dated January 1, 2017, among Jinong and the shareholders of the VIE Companies (the “Pledge Agreements”), the shareholders of the VIE Companies pledged all of their equity interests in the VIE Companies to Jinong, including the proceeds thereof, to guarantee all of Jinong's rights and benefits under the Entrusted Management Agreements, the Exclusive Technology Supply Agreements, the Shareholder’ Voting Proxy Agreements and the Exclusive Option Agreements. Prior to termination of the Pledge Agreements, the pledged equity interests cannot be transferred without Jinong's prior written consent. The Pledge Agreements may be terminated only upon the written agreement of the parties.

Non-Compete Agreements

Pursuant to the terms of certain Non-Compete Agreements dated January 1, 2017, among Jinong and the shareholders of the VIE Companies (the “Non-Compete Agreements”), the shareholders of the VIE Companies agreed that during the period beginning on the initial date of their services with Jinong, and ending five (5) years after termination of their services with Jinong, without Jinong’s prior written consent, they will not provide services or accept positions including but not limited to partners, directors, shareholders, managers, proxies or consultants, provided by any profit making organizations with businesses that may compete with Jinong. They will not solicit or interfere with any of the Jinong’s customers, or solicit, induce, recruit or encourage any person engaged or employed by Jinong to terminate his or her service or engagement. In the event that the shareholders of the VIE Companies breach the non-compete obligations contained therein, Jinong is entitled to all loss and damages; in the event that the damages are difficult to determine, remedies bore the shareholders of the VIE Companies shall be no less than 50% of the salaries and other expenses Jinong provided in the past.

The Company entered into these VIE Agreements as a way for the Company to have more control over the distribution of its products. The transactions are accounted for as business combinations in accordance with ASC 805. A summary of the purchase price allocations at fair value is below: 

Cash	$	1,037,297
Accounts receivable		1,001,521
Prepaid expenses and other current assets		17,716
Inventories		961,936
Machinery and equipment		215,277
Intangible assets		883,689
Goodwill		661,066
Accounts payable		(708,724	)
Customer deposits		(435,342	)
Accrued expenses and other payables		(806,697	)
Short-term loan		(160,641	)
Purchase price	$	2,667,098

A summary of the purchase consideration paid for the VIE Companies is below:

Cash	$	1,160,912
Convertible notes		1,485,800
Derivative liability		20,386
	$	2,667,098

The cash component of the purchase price for these acquisitions was paid during March 2017.