Business Combinations

3 Months Ended

Sep. 30, 2022

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 18 – BUSINESS COMBINATIONS

On June 30, 2016, 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 Shaanxi Lishijie Agrochemical Co., Ltd., Songyuan Jinyangguang Sannong Service Co., Ltd., Shenqiu County Zhenbai Agriculture Co., Ltd., Weinan City Linwei District Wangtian Agricultural Materials Co., Ltd., Aksu Xindeguo Agricultural Materials Co., Ltd., and Xinjiang Xinyulei Eco-agriculture Science and Technology Co., Ltd.

Subsequently, on January 1, 2017, Jinong entered into similar strategic acquisition agreements and a series of contractual agreements to qualify as VIEs with the shareholders of Sunwu County Xiangrong Agricultural Materials Co., Ltd., and Anhui Fengnong Seed Co., Ltd.

On November 30, 2017, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Zhenbai.

On June 2, 2021, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Xindeguo, Xinyulei and Xiangrong.

On December 1, 2021, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Lishijie.

On December 31, 2021, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Fengnong.

On March 31, 2022, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Jinyangguang and Wangtian.

The VIE Agreements are as follows:

Entrusted Management Agreements

Pursuant to the terms of certain Entrusted Management Agreements dated June 30, 2016 and January 1, 2017, between Jinong and the shareholders of the sales VIE Companies (the “Entrusted Management Agreements”), the sales 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 sales VIE Companies’ operations, assets and personnel, has the right to control all the sales VIE Companies’ cash flows through an entrusted bank account, is entitled to the sales VIE Companies’ net profits as a management fee, is obligated to pay all the sales VIE Companies’ payables and loan payments, and bears all losses of the sales 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 sales VIE Companies; or (iii) Jinong acquires all the assets or equity of the sales 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 June 30, 2016 and January 1, 2017, between Jinong and the sales VIE companies (the “Exclusive Technology Supply Agreements”), Jinong is the exclusive technology provider to the sales VIE companies. The sales 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 sales VIE companies; or (iii) Jinong acquires the sales 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 June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the sales VIE companies (the “Shareholder’s Voting Proxy Agreements”), the shareholders of the sales 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 sales VIE companies, including the appointment and election of directors of the sales 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 the assets or equity of the sales VIE companies.

Exclusive Option Agreements

Pursuant to the terms of certain Exclusive Option Agreements dated June 30, 2016 and January 1, 2017, among Jinong, the sales VIE companies, and the shareholders of the sales VIE companies (the “Exclusive Option Agreements”), the shareholders of the sales VIE companies granted Jinong an irrevocable and exclusive purchase option (the “Option”) to acquire the sales 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 sales 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 sales 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 June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the sales VIE companies (the “Pledge Agreements”), the shareholders of the sales VIE companies pledged all of their equity interests in the sales 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 June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the sales VIE companies (the “Non-Compete Agreements”), the shareholders of the sales 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. If the shareholders of the sales VIE companies breach the non-compete obligations contained therein, Jinong is entitled to all loss and damages; if the damages are difficult to determine, remedies bore the shareholders of the sales VIE companies shall be no less than 50% of the salaries and other expenses Jinong provided in the past.

The Company entered 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:

For acquisitions made on June 30, 2016:

Cash	$	708,737
Accounts receivable		6,422,850
Advances to suppliers		1,803,180
Prepaid expenses and other current assets		807,645
Inventories		7,787,043
Machinery and equipment		140,868
Intangible assets		270,900
Other assets		3,404,741
Goodwill		3,158,179
Accounts payable		(3,962,670	)
Customer deposits		(3,486,150	)
Accrued expenses and other payables		(4,653,324	)
Taxes payable		(16,912	)
Purchase price	$	12,385,087

A summary of the purchase consideration paid is below:

Cash	$	5,568,500
Convertible notes		6,671,769
Derivative liability		144,818
	$	12,385,087

The cash component of the purchase price for these acquisitions made on June 30, 2016 was paid in July and August 2016.

For acquisitions made on January 1, 2017:

Working Capital	$	941,192
Machinery and equipment		222,875
Intangible assets		1440
Goodwill		684,400
Customer Relationship		522,028
Non-compete Agreement		392,852
Purchase price	$	2,764,787

A summary of the purchase consideration paid is below:

Cash	$	1,201,888
Convertible notes		1,559,350
Derivative liability		3,549
	$	2,764,787

The cash component of the purchase price for these acquisitions made on January 1, 2017 was paid during March 2017.

On November 30, 2017, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Zhenbai. In return, the shareholders of Zhenbai agreed to tender the whole payment consideration in the SAA back to the Company with early termination penalties. The convertible notes paid to Zhenbai’s shareholders and the accrued interest has been forfeited.

For the discontinuation of Zhenbai made on November 30, 2017, the Company gave up the control of the following assets in Zhenbai:

Working Capital	$	1,179,352
Intangible assets		896,559
Customer Relationship		684,727
Non-compete Agreement		211,833
Goodwill		538,488
Total Asset	$	2,614,401

In return, the purchase consideration returned to the Company from Zhenbai’s shareholders is summarized below:

Cash	$	461,330
Interest Payable		83,039
Convertible notes		1,724,683
Derivative liability		13,353
Total Payback	$	2,282,406
Net (Loss)	$	(331,995	)

On June 10, 2021, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Xindeguo and Xinyulei. In return, the shareholders of Xindeguo and Xinyulei agreed to pay cash with amount of RMB1,850,000 (approximately $286,935) to the Company.

For the discontinuation of Xindeguo and Xinyulei made on June 10, 2021, the Company gave up the control of the following assets in Xindeguo and Xinyulei:

Working Capital	$	(1,135,366	)
Intangible Assets		28,050
Long-term equity investment		139,320
Goodwill		1,257,784
Total Asset		288,898

In return, the purchase consideration returned to the Company from Xindeguo and Xinyulei’s shareholders is summarized below:

Cash	$	286,380
Total Payback	$	286,380
Net Gain (Loss)		(2,518	)

On June 10, 2021, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Xiangrong. In return, the shareholders of Xiangrong agreed to pay cash with amount of RMB24,430,000 (approximately $3,789,093) to the Company.

For the discontinuation of Xiangrong made on June 10, 2021, the Company gave up the control of the following assets in Xiangrong:

Working Capital	$	2,930,551
Intangible assets		23,890
Goodwill		316,200
Total Asset	$	3,270,641

In return, the purchase consideration returned to the Company from Xiangrong’s shareholders is summarized below:

Cash	$	3,781,764
Total Payback	$	3,781,764
Net Gain (Loss)		511,123

On December 1, 2021, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Lishijie. In return, the shareholders of Lishijie agreed to pay cash with amount of RMB3,500,000 (approximately $550,550) to the Company before December 31, 2021.

For the discontinuation of Lishijie made on November 1, 2021, the Company gave up the control of the following assets in Lishijie:

Working Capital	$	358,715
Intangible assets		128,677
Total Asset	$	487,392

In return, the purchase consideration returned to the Company from Lishijie’s shareholders is summarized below:

Cash	$	550,550
Total Payback	$	487,392
Net Gain (Loss)		63,158

On December 31, 2021, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Fengnong. In return, the shareholders of Fengnong agreed to pay cash with amount of RMB8,750,000 (approximately $1,376,375) to the Company.

For the discontinuation of Fengnong made on December 31, 2021, the Company gave up the control of the following assets in Fengnong:

Working Capital	$	805,005
Fixed Assets		91,033
Intangible Assets		86,456
Total Asset		982,494

In return, the purchase consideration returned to the Company from Fengnong’s shareholders is summarized below:

Cash	$	1,376,375
Total Payback	$	982,494
Net Gain (Loss)		393,881

On March 31, 2022, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Jinyangguang. In return, the shareholders of Jinyangguang agreed to pay cash with amount of RMB3,200,000 (approximately $503,360) to the Company before April 30, 2022.

For the discontinuation of Jinyangguang made on March 31, 2022, the Company gave up the control of the following assets in Jinyangguang:

Working Capital	$	(621,154	)
Intangible assets	$	103,532
Total Asset	$	(517,622	)

In return, the purchase consideration returned to the Company from Jinyangguang’s shareholders is summarized below:

Cash	$	503,360
Total Payback	$	(517,622	)
Net Gain (Loss)	$	1,020,982

On March 31, 2022, the Company, through its wholly owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of Wangtian. In return, the shareholders of Wangtian agreed to pay cash with amount of RMB8,500,000 (approximately $1,337,050) to the Company.

For the discontinuation of Wangtian made on March 31, 2022, the Company gave up the control of the following assets in Wangtian:

Working Capital	$	833,252
Fixed Assets		34,394
Intangible Assets		170,514
Total Asset		1,038,160

In return, the purchase consideration returned to the Company from Wangtian’s shareholders is summarized below:

Cash	$	1,337,050
Total Payback	$	1,038,160
Net Gain (Loss)		298,890