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ACQUISITION

3 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

NOTE 11 - ACQUISITION

Acquisition of Guangyuan

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 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.

The management determined that July 5, 2021 was the acquisition date of Guangyuan. The acquisition provides a unique opportunity for the Company to enter the market of planting fast-growing bamboo willows and scenic greening trees.

The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:


Due from related party	$	108,296
Inventory		18,115,423
Other current assets		224,522
Right of use assets		1,127,130
Long-term investments and other non-current assets		166,107
Other payables and other current liabilities		(2,503,607	)
Operating lease liabilities		(1,013,492	)
Total purchase price for acquisition, net of US$112,070 of cash	$	16,224,379

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were nil for the three months ended September 30, 2024 and 2023.

The Company has included the operating results of Guangyuan in the unaudited condensed consolidated financial statements since the Acquisition Date. nil in net sales and US$12,519 in net loss of Guangyuan were included in discontinued operations in the unaudited condensed consolidated financial statements for the three months ended September 30, 2023.

Acquisition of Biowin

On October 21, 2022, the Company, through its wholly-owned subsidiary, Shineco Life, entered into a stock purchase agreement with the Seller and Biowin, pursuant to which Shineco Life would acquire 51% of the issued equity interests of Biowin from Seller. On December 30, 2022, Shineco Life closed the acquisition of 51% of the issued equity interests of Biowin. As the consideration for the acquisition, the Company paid to Seller US$9,000,000 in cash and the Company issued 13,583 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, the total consideration of the acquisition was US$12,097,000. According to the Supplementary Agreement, dated as of December 30, 2022, by and among the Shineco Life, the Seller and Biowin, the Seller transferred its controlling rights of production and operation of Biowin to Shineco Life on January 1, 2023. The management determined that January 1, 2023 was the acquisition date of Biowin. The acquisition provides a unique opportunity for the Company to step into the Point-of-Care Testing industry.

The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.

The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill which amounted to US$6,574,743. The results of operations of Biowin have been included in the unaudited condensed consolidated statements of operations from the date of acquisition.

The management performed an evaluation on the impairment of goodwill, and due to the lower-than-expected revenue and profit and unfavorable business environment, the management recorded an impairment loss on goodwill of Biowin, which amounted to US$4,555,996 during the year ended June 30, 2024.

The identifiable goodwill acquired and the carrying value consisted of the following:

SCHEDULE OF GOODWILL ACQUIRED

	September 30, 2024			June 30, 2024

Goodwill	$	6,574,743		$	6,574,743
Less: impairment for goodwill		(4,555,996	)		(4,555,996	)
Goodwill, net	$	2,018,747		$	2,018,747

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:


Accounts receivable, net	$	807,771
Inventories, net		784,336
Other current assets, net		49,979
Property and equipment, net		138,252
Intangible assets		12,683,656
Operating lease right-of-use assets		173,831
Goodwill		6,574,743
Deferred tax assets, net		346,523
Short-term bank loans		(1,594,596	)
Accounts payable		(349,989	)
Advances from customers		(407,437	)
Other current liabilities		(446,729	)
Operating lease liabilities - non-current		(45,730	)
Deferred tax liabilities		(1,937,804	)
Non-controlling interest		(5,301,785	)
Total purchase price for acquisition, net of US$621,979 of cash	$	11,475,021

The fair value of identified intangible assets, which are trademarks and patents, and its estimated useful lives as of September 30, 2024 is as follows:

SCHEDULE OF INTANGIBLE ASSETS

				Average
				Useful Life
				(in Years)

Intangible assets	$	12,683,656			10
Less: accumulated amortization		(2,219,640	)
Total intangible assets, net	$	10,464,016

The amortization expense of intangible assets was US$317,092 and US$317,091 from the continuing operations for the three months ended September 30, 2024 and 2023, respectively.

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were nil for the three months ended September 30, 2024 and 2023.

The Company has included the operating results of Biowin in continuing operations in its unaudited condensed consolidated financial statements since the Acquisition Date. US$121,865 in net sales and US$343,908 in net loss of Biowin were included in the unaudited condensed consolidated financial statements for the three months ended September 30, 2024. US$135,127 in net sales and US$296,975 in net loss of Biowin were included in the unaudited condensed consolidated financial statements for the three months ended September 30, 2023.

Acquisition of Wintus

On May 29, 2023, Shineco Life entered into a stock purchase agreement with Dream Partner, Wintus and the Wintus Sellers, pursuant to which Shineco Life shall acquire 71.42% equity interest in Wintus. 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 41,667 shares of the Company’s restricted Common Stock; and (c) transferred and sold to the Sellers 100% of the Company’s equity interest in Tenet-Jove. The management determined that July 31, 2023 was the acquisition date of Wintus.

The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.

The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill, which amounted to US$21,440,360. The results of operations of Wintus have been included in the statements of operations from the date of acquisition.

The management performed an evaluation on the impairment of goodwill, and due to the lower-than-expected revenue and profit and unfavorable business environment, our management recorded an impairment loss on the goodwill of Wintus, which amounted to US$10,268,823 during the year ended June 30, 2024.

The identifiable goodwill acquired and the carrying value consisted of the following:

SCHEDULE OF GOODWILL ACQUIRED

	September 30, 2024			June 30, 2024

Goodwill	$	21,440,360		$	21,440,360
Less: impairment for goodwill		(10,268,823	)		(10,268,823	)
Goodwill, net	$	11,171,537		$	11,171,537

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:


Accounts receivable, net	$	12,507,353
Advances to suppliers, net		3,513,448
Inventories, net		1,782,180
Derivative financial assets		6,212
Other current assets, net		1,426,163
Property and equipment, net		5,407,301
Intangible assets		36,117,041
Operating lease right-of-use assets		1,999
Goodwill		21,440,360
Short-term bank loans		(12,021,992	)
Accounts payable		(6,686,700	)
Advances from customers		(78,677	)
Tax payable		(600,742	)
Deferred income		(77,007	)
Other current liabilities		(2,277,877	)
Long-term bank loans		(2,071,093	)
Operating lease liabilities - non-current		(1,847	)
Deferred tax liabilities		(9,186,376	)
Non-controlling interest		(8,197,473	)
Total purchase price for acquisition, net of US$1,003,678 of cash	$	41,002,273
Total purchase price for acquisition	$	41,002,273

The fair value of identified intangible assets, which are trademarks and patents, and its estimated useful lives as of September 30, 2024 is as follows:

SCHEDULE OF INTANGIBLE ASSETS

				Average
				Useful Life
				(in Years)

Intangible assets	$	35,487,273		10
Less: accumulated amortization		(4,140,182	)
Total intangible assets, net	$	31,347,091

The amortization expense of intangible assets was US$887,181 and US$591,455 from the continuing operations for the three months ended September 30, 2024 and 2023, respectively.

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were nil and US$779,606 for the three months ended September 30, 2024 and 2023, respectively.

The Company has included the operating results of Wintus in continuing operations in its unaudited condensed consolidated financial statements since the Acquisition Date. US$2,051,471 in net sales and US$1,388,496 in net loss of Wintus were included in the unaudited condensed consolidated financial statements for the three months ended September 30, 2024. US$1,510,730 in net sales and US$840,708 in net loss of Wintus were included in the unaudited condensed consolidated financial statements for the three months ended September 30, 2023.