UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

 

(Mark One) 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

or

 

☐ 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: 000-54510

 

CHINA MODERN AGRICULTURAL INFORMATION, INC.

(Exact name of registrant as specified in its charter)

  

Nevada		27-2776002
(State or other jurisdiction of incorporation or organization)		(IRS Employee Identification No.)

 

No. A09, Wuzhou Sun Town

Limin Avenue, Limin Development District

Harbin, Heilongjiang, China

(Address of principal executive offices, Zip Code)

 

(86) 0451-84800733

(Registrant’s telephone number, including area code)

  

Not Applicable.

(Former name, former address and former fiscal year, if changed since last report)

 

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 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes ☒     No ☐

 

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

 

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐		Smaller reporting company	☒
(Do not check if a smaller reporting company)

 

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

 

The registrant had 53,100,000 shares of its common stock, par value $0.001 per share, outstanding as of February 25, 2016.

 

 

 

CHINA MODERN AGRICULTURAL INFORMATION, INC.

 

QUARTERLY REPORT ON FORM 10-Q/A

September 30, 2015

 

TABLE OF CONTENTS

 

		PAGE
PART 1 - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
PART II - OTHER INFORMATION
Item 6.	Exhibits	44
SIGNATURES		45

 

 

EXPLANATORY NOTE

 

China Modern Agricultural Information (the “Company”) filed its Quarterly Report on Form 10-Q for the period ended September 30, 2015 (the “Original Form 10-Q”), with the U.S. Securities and Exchange Commission (the “SEC”) on November 23, 2015. The Company is filing this Amendment No. 1 to the Original Form 10-Q (this “Form 10-Q/A”) for the purpose of revising certain disclosure in Note 1 and Note 9 to the consolidated financial statements.

 

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Form 10-Q/A also contains new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. Accordingly, this Form 10-Q/A includes the currently dated certifications as exhibits.

 

No attempt has been made in this Form 10-Q/A to modify or update the other disclosures presented in the Original Form 10-Q. This Form 10-Q/A does not reflect events occurring after the filing of the Original Form 10-Q or modify or update the disclosures in the Original Form 10-Q, except as set forth in this Form 10-Q/A, and should be read in conjunction with the Original Form 10-Q and the Company’s other filings with the SEC.

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Amendment No. 1 to the Quarterly Report on Form 10-Q/A contains “forward-looking statements”. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Amendment No. 1 to Quarterly Report on Form 10-Q/A and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Amendment No. 1 to Quarterly Report on Form 10-Q/A. All subsequent written and oral forward-looking statements concerning other matters addressed in this Amendment No. 1 to Quarterly Report on Form 10-Q/A and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Amendment No. 1 to Quarterly Report on Form 10-Q/A.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

 

CERTAIN TERMS USED IN THIS QUARTERLY REPORT ON FORM 10-Q/A

 

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to China Modern Agricultural Information, Inc. and its consolidated subsidiaries Hope Diary, China Dairy, Value Development Holding, Value Development Group and Jiasheng Consulting, its variable interest entity Zhongxian Information, Xinhua Cattle and Yulong Cattle, the subsidiaries of Zhongxian Information.

 

In addition, unless the context otherwise requires and for the purposes of this report only:

 

	●	“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
	●	“Jiasheng Consulting” refers to Jiasheng Consulting Managerial Co., Ltd., a PRC company;
	●	“Operating Company or Operating Companies” refers to Value Development Holding, Value Development Group, Jiasheng Consulting, Zhongxian Information, Xinhua Cattle, and Yulong Cattle.
	●	“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China;
	●	“Renminbi” and “RMB” refer to the legal currency of China;
	●	“SEC” refers to the United States Securities and Exchange Commission;
	●	“Securities Act” refers to the Securities Act of 1933, as amended;
	●	“Yulong Cattle” refers to Shangzhi Yulong Cattle Co., Ltd., a PRC company;
	●	“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States;
	●	“Value Development Holding” refers to Value Development Holding Limited., a British Virgin Islands company;
	●	“Value Development Group” refers to Value Development Group Limited, a Hong Kong company;
	●	“Xinhua Cattle” refers to Heilongjiang Xinhua Cattle Industry Co., Ltd., a PRC company;
	●	“Zhongxian Information” refers to Heilongjiang Zhongxian Information Co., Ltd., a PRC company;
	●	“Hope Diary” refers to Hope Diary Holdings Ltd., a British Virgin Islands company;
	●	“China Dairy” refers to China Dairy Corporation Ltd., a Hong Kong company;

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

China Modern Agricultural Information, Inc. and subsidiaries

 

CONSOLIDATED BALANCE SHEETS

september 30, 2015 (Unaudited) and june 30, 2015 (IN U.S. $)

 

 

ASSETS		September 30, 2015				June 30, 2015
		(Unaudited)
Current assets
Cash		$	40,001,283			$	54,145,781
Accounts receivable			9,227,284				7,490,501
Inventories			1,379,949				759,628
Prepaid expenses			1,053,567				898,905
Deferred registration fee			387,000				-
Interest receivable			198,300				182,422
Notes receivable, current portion			2,492,862				2,739,302
Total current assets			54,740,245				66,216,539
Property, plant and equipment, net			22,858,502				6,950,302
Other assets
Notes receivable			6,284,419				7,092,206
Prepaid leases and construction			48,778,430				54,257,040
Biological assets, net			45,678,043				38,603,586
Total other assets			100,740,892				99,952,832
TOTAL ASSETS		$	178,339,639			$	173,119,673

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 2015 (UNAUDITED) AND JUNE 30, 2015 (IN U.S. $)

 

 

LIABILITIES AND stockholders’ EQUITY		September 30, 2015				June 30, 2015
		(Unaudited)
Current liabilities
Accrued expenses and other payables		$	315,980			$	593,766
Stockholder loans			1,434,450				937,524
Total current liabilities			1,750,430				1,531,290
Deferred income taxes			42,620,287				41,806,633
Total liabilities			44,370,717				43,337,923
Commitments and contingencies
Stockholders’ equity
Common stock, $0.001 par value; 75,000,000 shares authorized; 53,100,000 shares issued and outstanding			53,100				53,100
Additional paid-in capital			43,130,851				5,851,170
Retained earnings			37,151,526				117,035,653
Statutory reserve fund			475,304				792,174
Other comprehensive income (loss)			(267,348	)			4,772,880
Sub-total			80,543,433				128,504,977
Noncontrolling interests			53,425,489				1,276,773
Total stockholders’ equity			133,968,922				129,781,750
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	178,339,639			$	173,119,673

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME

AND OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 and 2014
(UNAUDITED IN U.S. $)

 

 

		2015				2014
Revenues
Milk sales		$	15,954,007			$	13,724,991
Sales commission			5,192,856				3,043,107
Total revenues			21,146,863				16,768,098
Cost of goods sold			(8,760,384	)			(5,840,176	)
Gross profit			12,386,479				10,927,922
Operating expenses
Selling and marketing			428,024				191,388
General and administrative			38,249,414				121,734
Total operating expenses			38,677,438				313,122
Operating (loss) income			(26,290,959	)			10,614,800
Other income and expenses
Interest income on notes receivable			199,914				108,420
Loss on sale of cows			(34,818	)			-
Other non-operating income			55,508				53,230
Total other income			220,604				161,650
(Loss) income before provision for income taxes			(26,070,355	)			10,776,450
Provision for income taxes			2,464,645				2,778,055

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME

AND OTHER COMPREHENSIVE INCOME (CONTINUED)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 and 2014 (IN U.S. $)
(UNAUDITED IN U.S. $)

 

 

		2015				2014
Net (loss) income before noncontrolling interests			(28,535,000	)			7,998,395
Noncontrolling interests			(3,200,838	)			(90,466	)
Net (loss) income attributable to common stockholders			(31,735,838	)			7,907,929
Other comprehensive income
Foreign currency translation adjustment			(5,040,228	)			4,929
Total comprehensive (loss) income		$	(36,776,066	)		$	7,912,858
(Loss) earnings per common share, basic and diluted		$	(0.60	)		$	0.15
Weighted average shares outstanding, basic and diluted			53,100,000				53,100,000

 

See accompanying notes to the consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(UNAUDITED IN U.S. $)

 

 

 

		2015				2014
Cash flows from operating activities
Net (loss) income		$	(28,535,000	)		$	7,998,395
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation			898,640				660,544
Amortization for prepaid land lease			458,597				214,807
Deferred income taxes			2,464,645				2,778,055
Loss (gain) from disposal from biological assets			35,460				(470	)
Stock compensation for shareholder and consultants			37,762,400				-
Change in operating assets and liabilities
(Increase) in accounts receivable			(1,736,783	)			(188,754	)
(Increase) in inventories			(620,321	)			(371,148	)
(Increase) in prepaid expenses			(154,662	)			-
(Increase) in interest receivable			(15,878	)			(88,726	)
(Decrease) in accrued expenses and other payables			(144,786	)			(9,497	)
Net cash provided by operating activities			10,412,312				10,993,206
Cash flows from investing activities
Collection of notes receivable			685,022				474,567
Proceeds from sales of biological assets			13,142				4,869
Purchase of property, plant and equipment			(13,722,354	)			(925	)
(Increase) in biological assets			(3,529,279	)			(2,238,770	)
Purchase of biological assets			(5,822,415	)			-
Net cash (used in) investing activities			(22,375,884	)			(1,760,259	)
Cash flows from financing activities
Proceeds from stockholder loans			7,909				184,875
Repayment of stockholder loans			-				(62,210	)
Net cash provided by financing activities			7,909				122,665

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE three months ENDED September 30, 2015 AND 2014
(UNAUDITED IN U.S. $)

 

 

		2015				2014
Effect of exchange rate changes on cash			(2,188,835	)			6,948
Net (decrease) increase in cash			(14,144,498	)			9,362,590
Cash, beginning of year			54,145,781				58,032,554
Cash, end of year		$	40,001,283			$	67,395,144
Supplemental disclosure of cash flow information:
Cash paid for income taxes		$	-			$	-
Cash paid for interest		$	-			$	-
Noncash financing activities:
Payment of accrued expenses and other payables by shareholder		$	520,000			$	35,000
Construction in process transferred from prepaid		$	2,977,296			$	-

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

1.	ORGANIZATION

 

China Modern Agricultural Information, Inc. (the “Company”), formerly known as Trade Link Wholesalers, Inc. (“Trade Link”), was incorporated on December 22, 2008 under the laws of the State of Nevada. On April 4, 2011, the Board of Directors of Trade Link filed an amendment to the Certificate of Incorporation with the State of Nevada to effect the name change from Trade Link to China Modern Agricultural Information, Inc.

 

On January 28, 2011, Trade Link entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among (i) Value Development Holdings, Ltd. (“Value Development”), a British Virgin Islands company, (“BVI”) (ii) Value Development’s stockholders, (iii) Trade Link, and (iv) Trade Link’s principal stockholders. Pursuant to the terms of the Exchange Agreement, Value Development and the Value Development stockholders transferred to Trade Link all of the shares of Value Development in exchange for the issuance of 35,998,000 shares of Trade Link’s common stock as set forth in the Exchange Agreement, so that the Value Development stockholders owned 87.80% of Trade Link’s outstanding shares (the “Share Exchange”).

 

On January 28, 2011, Value Development through its wholly subsidiaries, Value Development Group Limited completed the acquisition of Harbin Jiasheng Consulting Managerial Co. Ltd. (“Jiasheng Consulting” or “WFOE”), a holding company. Jiasheng Consulting has Variable Interest Entity (“VIE”) agreements with Mr. Liu Zhengxin, the Company’s Chief HR Officer, and Mr. Wang Youliang, the Company’s Chief Executive Officer, as well as with Heilongjiang Zhongxian Information Co., Ltd. (“Zhongxian Information”). Mr. Zhengxin holds a 62% equity interest in Zhongxian Information and Mr. Youliang holds a 38% equity interest in Zhongxian Information. Pursuant to the VIE agreement signed by Mr. Zhengxin and Mr. Youliang, Jiasheng Consulting now controls and performs all management responsibilities for Zhongxian Information. The contractual arrangements are comprised of a series of agreements, including a shareholder voting rights proxy agreement, exclusive consulting and service agreement, exclusive call option agreement and equity pledge agreement, through which Jiasheng Consulting has the right to provide exclusive and complete business support and technical and consulting services to Zhongxian Information for an annual fee in the amount of Zhongxian Information’s yearly net profits after tax. Additionally, Zhongxian Information’s stockholders have pledged their rights, title and equity interests in Zhongxian Information as security for the collection of consulting and service fees provided through an Equity Pledge Agreement.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

1.	ORGANIZATION (CONTINUED)

 

In order to further reinforce Jiasheng Consulting’s rights to control and operate Zhongxian Information, the stockholders of Zhongxian Information have granted Jiasheng Consulting the exclusive right and option to acquire all of their equity interests in Zhongxian Information through an Exclusive Option Agreement.

 

The exchange agreement transaction constituted a reverse takeover transaction. Accordingly, reverse takeover accounting was adopted for the preparation of the consolidated financial statements. As a result, the consolidated financial statements are issued under the name of China Modern Agricultural Information, Inc. (the legal acquirer), but are a continuation of the consolidated financial statements of Value Development (the accounting acquirer) and the VIE its subsidiaries. Before and after the Share Exchange, Value Development, Value Development Group Limited (a wholly-owned subsidiary of Value Development), Jiasheng Consulting, and Zhongxian Information and their 99% owned subsidiary, Heilongjiang Xinhua Cattle Industry Co., Ltd. (“Xinhua Cattle”) were under common control. Therefore, the reorganization was effectively a legal recapitalization accounted for as transactions between entities under common control at the carry over basis, in a manner similar to pooling-of-interests accounting.

 

Zhongxian Information and Xinhua Cattle are engaged in the acquisition, breeding and rearing of dairy cows, and production and sale of fresh milk to manufacturing and distribution companies. Zhongxian Information was established in China in January 2005 with registered capital of 10 million Renminbi (“RMB”). In February 2006, it acquired 99% of the registered capital of Xinhua Cattle, which was established in China in December 2005 with registered capital of three million RMB. Xinhua Cattle had no significant activities and its cost approximated the fair value at the date of acquisition.

 

On November 23, 2011, Zhongxian Information acquired 100% of the equity interest of Shangzhi Yulong Co., Ltd. (“Yulong”) from Yulong’s original stockholders for consideration of 9,000,000 shares of the Company’s common stock and cash consideration of $4,396,000.

 

Yulong was a privately held company in China engaged in the acquisition, breeding and rearing of dairy cows, and production and sale of fresh milk to manufacturing and distribution companies.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

1.	ORGANIZATION (CONTINUED)

 

Our corporate structure pre-restructure is set forth below:

 

 

 

On July 16, 2015, the Company, transferred 100% of the issued and outstanding shares of Value Development Holdings, Ltd. (“Value Development”) to China Dairy Corporation Ltd. (“China Dairy,” a Hong Kong company), which is 60% owned indirectly by the Company through the Company’s wholly owned subsidiary, Hope Diary Holdings Ltd. (“Hope Diary,” a British Virgin Islands company). China Dairy was formed on January 12, 2015 and did not have any significant assets or liabilities, or business operations, and was 100% owned by Company’s PRC corporate advisor, who formed China Dairy on behalf of the Company. China Dairy was formed solely for the purchase of being a holding company in anticipation of our initial public offering in Australia. Further, the sole shareholder transferred 60% of the total outstanding shares of China Dairy to Hope Diary and 40% to various shareholders and consultants of the Company (as described below) for nominal consideration.

 

These transactions involves no consideration received or paid as Value Development and China Dairy are under common control by the Company and this transaction is a restriction to the Company’s interests in Value Development.

 

The 40% of the 10,000 shares of China Dairy were transferred from the sole shareholder of China Diary to the following entities for nominal consideration, which has direct or indirect relationship with the shareholder and consultants of the Company: 3% to Beijing Ruihua Future, 4% to Donghe Group, 3% to Integral Capital, 20% to Dingxi Shanghai Fund and 10% to Zhiyuan International. Immediately after the transfer, 65,000 bonus shares were issued at no consideration for every outstanding share held by the following entities:

			Original Shares				After bonus shares issued
	Hope Diary Holdings Ltd.			6,000				390,000,000
	Beijing Ruihua Future Investment Management Co. Ltd.			300				19,500,000
	Donghe Group Limited			400				26,000,000
	Integral Capital Group Pty Ltd.			300				19,500,000
	Dingxi (Shanghai ) Equity Investment Fund			2,000				130,000,000
	Zhiyuan International Holding Co. Limited			1,000				65,000,000
	Total			10,000				650,000,000

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

1.	ORGANIZATION (CONTINUED)

 

Value Development is the sole owner of Value Development Group Limited, which is the sole owner of Harbin Jiasheng Consulting Managerial Co. Ltd., which is the Company’s subsidiary in China, with respect to which the operating company, Heilongjiang Zhongxian Information Co. Ltd., is a variable interest entity. The effect of this transaction was to reduce the interest of the Company in its operating company by 40%. The Company use the China Diary’s offering price for IPO to approximate the fair value of the 40% stock granted to the shareholder and consultants. The Company recognized a stock compensation to the shareholder and consultants of approximately $32,098,000 and $5,664,000, respectively, during the three months ended September 30, 2015 in general and administrative expense.

 

On September 16, 2015 the Company’s 60%-owned subsidiary, Harbin Jiasheng Consulting Management Co., Ltd. ("Jiasheng Consulting"), exercised its option to purchase all of the registered equity of the Company’s operating subsidiary, Heilongjiang Zhongxian Information Co., Ltd. ("Zhongxian Information") from its stockholders Zhenxin Liu and Youliang Wang, who are also the members of the Company’s Board of Directors, for RMB10,000 (approximately $1,634).

 

Prior to the acquisition, Jiasheng Consulting controlled Zhongxian Information through a series of contractual agreements, which made Zhongxian Information a variable interest entity, the effect of which was to cause the balance sheet and operating results of Zhongxian Information to be consolidated with those of Jiasheng Consulting in the Company’s financial statements. As a result of the acquisition by Jiasheng Consulting of the registered ownership of Zhongxian Information, the balance sheet and operating results of Zhongxian Information will hereafter continue to be consolidated with those of Jiasheng Consulting as its 100% owned subsidiary.

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

1.	ORGANIZATION (CONTINUED)

 

As a result of the entry into the foregoing agreements, the Company has a corporate structure as set forth below:

 

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting and Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the financial statements of China Modern Agricultural Information, Inc. and its subsidiaries, Hope Diary, China Diary (Hope Diary’s 60% owned subsidiary), Value Development, Value Development Group Limited, Jiasheng Consulting, and, Zhongxian Information and Zhongxian Information’s 99% owned subsidiary, Xinhua Cattle and its 100% owned subsidiary, Yulong. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

The unaudited consolidated financial statements of the Company as of September 30, 2015 and for the three months ended September 30, 2015 and 2014, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC which apply to interim financial statements.

 

Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the year ended June 30, 2015, previously filed with the SEC. In the opinion of management, the interim information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three months ended September 30, 2015 are not necessarily indicative of the results to be expected for future quarters or for the year ending June 30, 2016.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Basis of Accounting and Presentation (continued)

 

Variable Interest Entity

 

Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its VIE’s. ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Zhongxian Information and its subsidiaries (collectively, the “Chinese VIE”) have no assets that are collateral for or restricted solely to settle their obligations. The creditors of the Chinese VIE and its subsidiaries do not have recourse to the Company’s general credit. Because Value Development, Value Development Group Limited and Jiasheng Consulting are established for the sole purpose of holding ownership interest and do not have any operations, the financial statement amounts and balances are principally those of the Chinese VIE and its subsidiaries.

 

Under ASC 810, an enterprise has a controlling financial interest in a VIE, and must consolidate that VIE, if the enterprise has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The Company’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de facto agents, has the unilateral ability to exercise those rights. The Chinese VIE’s actual stockholders do not hold any kick-out rights that will affect the consolidation determination.

 

On September 16, 2015 the VIE structure was terminated upon the Jiasheng Consulting exercised its option to purchase all of the registered equity of Zhongxian Information. Jiasheng Consulting became the sole owner of Zhongxin Information.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Foreign Currency Translations

 

All Company assets are located in People’s Republic of China (“PRC”). The functional currency for the majority of the Company’s operations is the Renminbi (“RMB”). The Company uses the United States dollar (“US Dollar” or “US$” or “$”) for financial reporting purposes. The consolidated financial statements of the Company have been translated into US dollars in accordance with FASB ASC 830, “Foreign Currency Matters.” All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of income and other comprehensive income amounts have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Company’s consolidated financial statements are recorded as other comprehensive income (“OCI”).

 

The exchange rates used to translate amounts in RMB and Australian dollars (the “A$”) into US dollars for preparing the consolidated financial statements are as follows:

 

September 30, 2015

June 30, 2015

September 30, 2014

RMB

A$

RMB

A$

RMB

A$

Balance sheet items, except for stockholders’ equity, as of period end

0.1569

0.7013

0.1632

0.7687

N/A

N/A

Amounts included in the statements of income, statement of changes in stockholders’ equity and statements of cash flows for the period

0.1593

0.7262

N/A

N/A

0.1623

0.9252

  

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Foreign Currency Translations (continued)

 

Foreign currency translation adjustments of $(5,040,228) and $4,929 for the three months ended September 30, 2015 and 2014, respectively, have been reported as other comprehensive income in the consolidated statements of income and other comprehensive income. Other comprehensive income of the Company consists entirely of foreign currency translation adjustments. Pursuant to ASC 740-30-25-17, “Exceptions to Comprehensive Recognition of Deferred Income Taxes,” the Company does not recognize deferred U.S. taxes related to the undistributed earnings of its foreign subsidiaries and, accordingly, recognizes no income tax expense or benefit from foreign currency translation adjustments.

 

Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US dollars at that rate or any other rate.

 

The value of the RMB against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of the RMB could materially affect the Company’s consolidated financial condition in terms of US dollar reporting.

 

Revenue Recognition

 

The Company’s primary sources of revenues are derived from (a) sale of fresh milk to Chinese manufacturing and distribution companies of dairy products and (b) commissions from local farmers on their monthly milk sales. The Company’s revenue recognition policies comply with FASB ASC 605, “Revenue Recognition.” Revenues from the sale of goods are recognized when the goods are delivered and the title is transferred, the risks and rewards of ownership have been transferred to the customer, the price is fixed and determinable and collection of the related receivable is reasonably assured.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

  

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Revenue Recognition (continued)

 

Milk sales revenue is recognized when the title has been passed to the customers, which is the date when the milk is delivered to designated locations and accepted by the customers and the previously discussed requirements are met. Fresh milk is delivered to its customers on a daily basis. The customers’ acceptance occurs upon inspection of the quality and measurement of quantity at the time of delivery. The Company does not provide the customer with the right of return. Sales commission revenue is recognized on a monthly basis based on monthly sales reports received.

 

Vulnerability Due to Operations in PRC

 

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair Value of Financial Instruments

 

FASB ASC 820, “Fair Value Measurement” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

 

	Level 1 Inputs	– Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
	Level 2 Inputs	– Inputs other than the quoted prices in active markets that are observable either directly or indirectly.
	Level 3 Inputs	– Inputs based on valuation techniques that are both unobservable and significant to the overall fair value measurements.

 

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts receivable, interest receivable, accrued expenses, and other payables, and stockholder loans, approximated their fair values due to the short maturity of these financial instruments. The carrying value of notes receivable is valued at their net realizable value which approximates the fair value. There were no changes in methods or assumptions during the periods presented.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Advertising Costs

 

Advertising costs are charged to operations when incurred. No advertising costs were incurred for the three months ended September 30, 2015 and 2014.

 

Cash and Cash Equivalents

 

The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents.

 

Accounts Receivable

 

Accounts receivable is stated at cost, net of an allowance for doubtful accounts, if required. Receivables outstanding longer than the payment terms are considered past due. The Company maintains an allowance for doubtful accounts for estimated losses when necessary resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances.

 

In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. The Company has 30 days credit term for its milk sales, and usually receives the payment in the following month. The Company considers all accounts receivable at September 30, 2015 and June 30, 2015, to be fully collectible and, therefore, did not provide an allowance for doubtful accounts. For the periods presented, the Company did not write off any accounts receivable as bad debts.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventories

 

Inventories, comprised principally of livestock feed, are valued at the lower of cost or market value. The value of inventories is determined using the weighted average cost method.

 

The Company estimates an inventory allowance for excessive or unusable inventories. Inventory amounts are reported net of such allowances, if any. There was no allowance for excessive or unusable inventories as of September 30, 2015 and June 30, 2015.

 

Prepaid Expenses

 

Prepaid expenses as of September 30, 2015 and June 30 2015 mainly represent the prepayments of approximately $1,053,600 and $898,900, respectively for prepaid cow insurances expenses and for heating expenses.

 

Prepaid Land Leases

 

Prepaid land leases represent the prepayment for grassland rental (see Note 7).

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the asset, including capitalized interest during the construction period, and any expenditures that substantially increase the assets value or extends the useful life of an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred.

 

The estimated useful lives for property, plant and equipment categories are as follows:

 

	Machinery and equipment	3 to 10 years
	Automobiles	4 to 10 years
	Building and building improvements	10 to 20 years
	Leasehold improvements	Lesser of the remaining term or useful life

 

Deferred registration fee

 

Deferred registration fee consist of legal fees, consulting fees, and accounting fees incurred through the balance sheet date that relate to the Proposed Offering in ASX and that will be charged to stockholders’ equity upon completion of the Proposed Offering or charged to expense if the Proposed Offering is not completed.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Impairment of Long-lived Assets

 

The Company utilizes FASB ASC 360, “Property, Plant and Equipment” (“ASC 360”), which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company may recognize an impairment of a long-lived asset in the event the net book value of such asset exceeds the estimated future undiscounted cash flows attributable to the asset. No impairment of long-lived assets was recognized for the three months ended September 30, 2015 and 2014.

 

Biological Assets

 

Biological assets consist of dairy cows for milking purposes and breeding.

 

Immature Biological Assets

 

Immature biological assets are recorded at cost, including acquisition costs, transportation costs, insurance expenses, and feeding costs, incurred in raising the cows. Once the cow is able to produce milk, the cost of the immature biological asset is transferred to mature biological assets using the weighted average cost method.

 

  

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Mature Biological Assets

 

Mature biological assets are recorded at their original purchase price or the weighted average immature biological asset transfer cost. Depreciation is provided over the estimated useful life of eight years using the straight-line method. The estimated residual value is 10%. Feeding and management costs incurred on mature biological assets are included as cost of goods sold. When biological assets, including male cows, are retired or otherwise disposed of in the normal course of business, the cost and accumulated depreciation will be removed from the accounts and any resulting gain or loss will be included in the results of operations for the respective period. For the the three months ended September 30, 2015, a loss of $34,818 on the sale of the adult cows is included in non-operating expenses in the accompanying consolidated statements of income and other comprehensive income. (See Note 5)

 

The Company reviews the carrying value of its biological assets for impairment at least annually or whenever events and circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected from their use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss will be recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current health status and production capacity. There were no impairment losses recorded during the three months ended September 30, 2015 and 2014.

 

Income Taxes

 

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate principally to the undistributed earnings of the Company’s subsidiary under PRC law. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. At September 30, 2015 and June 30, 2015, undistributed earnings allocated to Zhongxian Information were approximately $167,300,000 and $160,600,000, respectively.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes (Continued)

 

ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with uncertain tax positions. As of September 30, 2015 and June 30, 2015, the Company does not have a liability for any uncertain tax positions.

 

The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows:

 

United States

 

The Company is subject to United States tax at graduated rates from 15% to 35%. No provision for income tax in the United States has been made as the Company had no U.S. taxable income for the three months ended September 30, 2015 and 2014.

 

BVI

 

Value Development and Hope Diary are incorporated in the BVI and is governed by the income tax laws of the BVI. According to current BVI income tax law, the applicable income tax rate for the Company is 0%.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Hong Kong

 

Value Development Group Limited and China Dairy are incorporated in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non-Hong Kong source income.

 

PRC

 

Xinhua Cattle and Yulong are entitled to a tax exemption for the full Enterprise Income Tax in China due to a government tax preferential policy for the dairy farming industry. In January 2015, Zhongxian obtained an income tax exemption notice from tax authority to exempt the income tax on its investment income from its subsidiaries Xinhua Cattle and Yulong.

 

Net Income (Loss) Per Share

 

The Company computes net income (loss) per common share in accordance with FASB ASC 260, “Earnings Per Share” (“ASC 260”). Under the provisions of ASC 260, basic net income (loss) per common share is computed by dividing the amount available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per common share is computed by dividing the amount available to common stockholders by the weighted average number of shares of common stock outstanding plus the effect of any dilutive shares outstanding during the period. Accordingly, the number of weighted average shares outstanding as well as the amount of net income per share are presented for basic and diluted per share calculations for all periods reflected in the accompanying consolidated statements of income and other comprehensive income. There were no dilutive shares outstanding during the three months ended September 30, 2015 and 2014.

 

Statutory Reserve Fund

 

Pursuant to corporate law of the PRC, Jiasheng Consulting and the Company’s Chinese VIE and its subsidiaries are required to transfer 10% of their net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of its registered capital. The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after such use is not less than 25% of the registered capital. As of September 30, 2015 and June 30, 2015, the required statutory reserve funds have been fully funded.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

3.	Recently Issued Accounting Standards

 

In September 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-16: Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”), which eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. ASU 2015-16 is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

In May 2015, the FASB issued ASU No. 2015-09, “Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts.” This guidance requires insurance entities to disclose for annual reporting periods incurred and paid claims development information by accident year, after reinsurance, for the number of years for which claims typically remain open. Disclosures should also include quantitative information about claim frequency and a qualitative description of methodologies used for determining claim frequency information. This guidance is effective for annual reporting periods, including interim periods, beginning after December 15, 2015, and is applicable to the Company's fiscal year beginning June 1, 2016. Early and retrospective application is permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

3.

Recently Issued Accounting Standards (CONTINUED)

 

In May 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (a consensus of the FASB Emerging Issues Task Force).” This guidance removes the requirement to categorize within the fair value hierarchy investments for which fair value is measured using the net asset value per share practical expedient and removes certain related disclosure requirements. This guidance is effective for annual reporting periods, including interim periods, beginning after December 15, 2015, and is applicable to the Company's fiscal year beginning June 1, 2016. Early adoption is permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

In April 2015, the FASB issued ASU No. 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This guidance clarifies the accounting treatment for fees paid in cloud computing arrangements, including the determination of whether a cloud computing arrangement includes a software license. This guidance is effective for annual reporting periods, including interim periods, beginning after December 15, 2015, and is applicable to the Company's fiscal year beginning June 1, 2016. Early adoption is permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This Guidance requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt liability rather than an asset. This guidance is effective for annual reporting periods, including interim periods, beginning after December 15, 2015, and is applicable to the Company's fiscal year beginning June 1, 2016. Early adoption is permitted for financial statements not previously issued. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

3.

Recently Issued Accounting Standards (CONTINUED)

 

In January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2015-01 – Income Statement – Extraordinary and Unusual Items (Subtopic 225-20). This ASU addressed the simplification of income statement presentation by eliminating the concept of extraordinary items. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, with early adoption permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12). ASU 2014-12 requires that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation, as it relates to such awards. ASU 2014-12 is effective for us in our first quarter of fiscal 2017 with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative effect of applying ASU 2014-12 as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual period presented in the financial statements. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The FASB has recently extended the effective date for one year. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption is not permitted. The Company has not yet determined the potential impact of this updated authoritative guidance on its consolidated financial statements.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

4.	Property, plant and equipment

 

Property, plant and equipment are summarized as follows:

 

			September 30, 2015				June 30, 2015
			(Unaudited)
	Machinery and equipment		$	2,239,654			$	2,202,907
	Automobiles			2,052,475				2,071,656
	Building and building improvements			20,366,550				4,265,743
				24,658,679				8,540,306
	Less: accumulated depreciation			(1,800,177	)			(1,590,004	)
	Property, plant and equipment, net		$	22,858,502			$	6,950,302

 

The increase was the office buildings, cow houses, and forage storage built and refurbished on the new land, which are completed and in service before September 30, 2015. Depreciation expense charged to operations for the three months ended September 30, 2015 and 2014 were $275,705 and $72,337, respectively.

 

5.	Biological assets

 

Biological assets consist of the following:

 

			September 30, 2015				June 30, 2015
			(Unaudited)
	Immature biological assets		$	25,112,206			$	24,555,303
	Mature biological assets			24,703,141				18,271,485
				49,815,347				42,826,788
	Less: accumulated depreciation			(4,137,304	)			(4,223,202	)
	Biological assets, net		$	45,678,043			$	38,603,586

 

In July 2015, Xinhua Cattle and Yulong purchase 2,000 and 2,300 adult cow, respectively at a price RMB 8,500 (US $1,354) per cow from an outside party.

 

In August 2015, Xinhua Cattle sold 200 cows to an outside party at a total price of RMB 160,000(US $25,488) including insurance of RMB 100,000 (US $ 15,930). The cow had a net book value approximately $44,000 as of the disposal date, which include cost basis approximately $573,000 and accumulated depreciation approximately $529,000

 

Depreciation expense for the three months ended September 30, 2015 and 2014 was $622,935 and $588,207, respectively, all of which was included in cost of goods sold in the consolidated statements of income and other comprehensive income.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

6.	Notes Receivable

 

Notes receivable are related to the sales of cows (mature biological assets) to local farmers.

 

In September 2011, August 2011, and June 2011, Xinhua Cattle sold 3,787, 5,635, and 2,000 of its cows to local farmers, respectively.

 

In November and December 2014, Yulong sold 3,714 and 2,955 cows to local farmers respectively. 3,500 of the cows sold were purchased from outside parties for $4,550,000. The remaining cows sold were raised by Yulong.

 

According to the agreements signed with the local farmers in June 2011, the sales price will be collected over five years, with a minimum payment of 20% of the sales price to be paid each year. The related receivable is recorded at its present value at a discount rate of 12%, which is commensurate with interest rates for notes with similar risk. The Company also entered into agreements with these local farmers for a 30% commission of their monthly milk sales generated by the cows sold in exchange for the Company’s assistance in arranging for the sale of the milk.

 

Pursuant to the agreements signed in August 2011, September 2011, November 2014, and December 2014, the sales price will be collected in monthly installments plus interest at 7% on the outstanding balance, over the remaining useful lives of the cows, which range from one to eight years. Local farmers are required to pay a 30% of monthly milk sales generated from the cows purchased by the farmers. The 30% monthly payments are to be applied first to the monthly installment of principal for the cows sold and the balance as commission income for the Company’s assistance in arranging for the sale of the milk. The 30% monthly payments will continue over the entire remaining life of the cows sold. While the 30% rate and the amount applied to monthly installments for the purchase price of the cows remain the same, the amount of sales commission income will vary depending on total monthly milk sales and the progress of repayments towards the purchase price.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

6.	Notes Receivable (continued)

 

During the three months ended September 30, 2015 and 2014, the Company received principal and interest payments of $861,666 and $494,316, respectively. Commission income for the three months ended September 30, 2015 and 2014, was $5,192,856 and $3,043,107, respectively, under these agreements.

 

The receivable related to the sales of cows is included in notes receivable in the consolidated balance sheets as of September 30, 2015 and June 30, 2015. The related commission receivable of $3,337,434 and $3,408,759 at September 30, 2015 and June 30, 2015, respectively, is included in accounts receivable in the consolidated balance sheets.

 

Notes receivable at September 30, 2015 and June 30, 2015 consists of the following:

 

			September 30, 2015				June 30, 2015
			(Unaudited)
	Notes receivable		$	8,807,540			$	9,873,474
	Less: discount for interest			(30,259	)			(41,966	)
				8,777,281				9,831,508
	Less: current portion			(2,492,862	)			(2,739,302	)
	Non-current portion		$	6,284,419			$	7,092,206

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

6.	Notes Receivable (continued)

 

Future maturities of notes receivable as of September 30, 2015 are as follows:

 

	Year Ending September 30,
	2016		$	2,493,000
	2017			1,917,000
	2018			1,563,000
	2019			943,000
	2020			554,000
	Thereafter			1,308,000
			$	8,778,000

  

The Company considers these notes to be fully collectible and, therefore, did not provide an allowance for doubtful accounts. The Company will continue to review the notes receivable on a periodic basis and where there is doubt as to the collectability of individual balances, it will provide an allowance, if necessary.

 

7.

LeaseS

 

The Company leases an office at no cost from an unrelated third party. On September 1, 2010, the Company entered into an operating lease agreement expiring on August 31, 2015. The lease agreement does not provide for payment of rent.

 

All land in China is government owned and cannot be sold to any individual or company. The Company obtained a “land use right” to use a track of land of 250,000 square meters at no cost through December 1, 2015. On May 10, 2013, the Company, however, entered into an agreement with the municipality of Qiqihaer to obtain the “land use right” to use this land from May 1, 2013 to April 30, 2063. The Company recorded the prepayment of RMB 37,500,000 (US$6,060,000) as prepaid land lease. The prepaid lease is being amortized over the land use term of 50 years using the straight-line method. The remaining prepayment of $5,599,369 and $5,854,800 is included in prepaid land lease in the consolidated balance sheets as of September 30, 2015 and June 30, 2015, respectively. The lease provides for renewal options.

 

On October 9, 2011, the Company entered into an operating lease, from October 9, 2011 to October 8, 2021, with the municipality of Heilongjiang to lease 16,666,750 square meters of land. The lease required the Company to prepay the ten year rental of RMB 30,000,000 (US$4,686,000). The related prepayment of $2,824,200 and $3,060,000 is included in prepaid land lease in the consolidated balance sheets as of September 30, 2015 and June 30, 2015, respectively. The lease provides for renewal options.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

7.	LeaseS (CONTINUED)

 

On February 25, 2013, the Company obtained another “land use right” to use 427,572 square meters of land, from March 1, 2013 to February 28, 2063. The Company recorded the prepayment of RMB 77,040,000 (US$12,450,000) as prepaid land lease. The prepaid lease is being amortized over the land use term of 50 years using the straight-line method.  The remaining prepayment of $11,463,051 and $11,986,191 is included in prepaid land lease in the consolidated balance sheets as of September 30, 2015 and June 30, 2015, respectively. The lease provides for renewal options.

 

On May 7, 2015, the Company obtained another “land use right” to use 238,001 square meters of land, from May 7, 2015 to May 6, 2045. In addition, the Company also leased all the constructions on the land which includes cowsheds at 35,808 square meters on top of the land leased, an office building at 3,500 square meters and a flat building at 3,500 square meters. The lease period of all these constructions is the same as the land. The Company recorded the prepayment of RMB 74,847,600 (US$12,215,000) as prepaid lease. The prepaid lease is being amortized over the lease term of 30 years using the straight-line method. The remaining prepayment of $11,580,483 and $12,147,266 is included in prepaid lease in the consolidated balance sheets as of September 30, 2015 and June 30, 2015, respectively.

 

On May 14, 2015, the Company obtained another “land use right” to use 283,335 square meters of land, from May 14, 2015 to May 13, 2045. In addition, the Company also leased all the constructions on the land which includes cowsheds at 42,100 square meters, an office building at 3,000 square meters and a flat building at 3,000 square meters. The lease period of all these constructions is the same as the land. The Company recorded the prepayment of RMB 111,887,500 (US$18,260,000) as prepaid lease. The prepaid lease is being amortized over the lease term of 30 years using the straight-line method. The remaining prepayment of $17,311,327 and $18,158,595 is included in prepaid lease in the consolidated balance sheets as of September 30, 2015 and June 30, 2015, respectively.

 

Rent expense charged to operations for the three months ended September 30, 2015 and 2014 was $458,597 and $214,807, respectively.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

8.	EMPLOYMENT AGREEMENTS

 

The Company had Employment Agreements with its executive officers which expired in 2015. The Agreements were later renewed to June 30, 2016. For the three months ended September 30, 2015 and 2014, compensation under these agreements was $19,541 and $8,521, respectively.

 

At September 30, 2015, the future commitment under these agreements is approximately $62,000.

 

9.	Related party transactions

 

In March 2015, Zhongxian informration and the Executive Chairman of the Company entered into a loan agreement pursuant to which Executive Chairman provides a loan facility to Zhongxian informration, which are non-interest bearing and due on demand. The maximum amount of the loan is RMB 50,000,000 (US $7,845,000). Any borrowings in excess of this amount may be negotiated between the parties. The loans outstanding were $939,450 and $937,524 as of September 30, 2015 and June 30, 2015, respectively.

 

In July 2015, 34% of China Dairy’s outstanding shares were granted to certain shareholders of the Company and 6% were granted to consultants, who provide services during the initial public offering process of China Diary in Australia.(See Note 1)

 

10.	Income taxes

 

The provision for income taxes consisted of the following for the three months ended September 30:

 

			2015				2014
			(Unaudited)				(Unaudited)
	Current		$	-			$	-
	Deferred			2,464,645				2,778,055
			$	2,464,645			$	2,778,055

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

10.	Income taxes (continued)

 

The following table reconciles the effective income tax rates with the statutory rates for the three months ended September 30:

 

			2015				2014
			(Unaudited)				(Unaudited)
	Statutory rate			25.00	%			25.00	%
	Allowance			0.03	%			0.11	%
	Other			(34.49	%)			0.66	%
	Effective income tax rate			(9.45	%)			25.78	%

 

The stock compensation of approximately $37,762,400 would be deductible only to the U.S. parent company and accordingly there is no deferred tax benefit to be recognized.

 

Deferred tax assets and liabilities are recognized for expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effects for the year in which the differences are expected to reverse.

 

The tax laws of China permit the carry forward of net operating losses for a period of five years. Undistributed earnings from Xinhua Cattle and Yulong are not taxable until such earnings are actually distributed to Jiasheng Consulting. A deferred tax liability was provided for the tax to be paid when these earnings are distributed. On September 16, 2015 due to the termination of VIE structure (Note 1), Jiasheng Consulting would not be taxable on the future undistributed earnings from Xinhua Cattle and Yulong under the Enterprise Income Tax Law that Chinese resident enterprise is an exemption of dividend income received from another Chinese resident enterprise.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

10.	Income taxes (CONTINUED)

 

Deferred tax assets (liabilities) are comprised of the following:

 

			September 30, 2015				June 30, 2015
			(Unaudited)
	Net operating loss carryforwards		$	467,112			$	458,947
	Bargain purchase gain			(1,430,399	)			(1,430,399	)
	Undistributed earnings of subsidiaries under PRC law upon VIE structure terminated			(41,189,888	)			(40,376,234	)
				(42,153,175	)			(41,347,686	)
	Less valuation allowance			(467,112	)			(458,947	)
	Net deferred tax (liabilities)		$	(42,620,287	)		$	(41,806,633	)

 

At September 30 2015 and June 30 2015, Zhongxian Information had unused operating loss carry-forwards of approximately $1,868,000 and $1,836,000, respectively, expiring in various years through 2020. The Company has established a valuation allowance of approximately $467,000 and $460,000 against the deferred tax asset related to the net operating loss carry forward at September 30, 2015 and June 30, 2015, due to the uncertainty of realizing the benefit.

 

The Company’s tax filings are subject to examination by the tax authorities. The tax years from 2009 to 2014 remain open to examination by tax authorities in the PRC. The Company’s U.S. tax returns are subject to examination by the tax authorities for tax years 2012 and 2014. The year ended June 30, 2013 was examined by the Internal Revenue Service and resulted in no adjustment.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

11.	CONCENTRATION OF CREDIT RISK

 

Substantially all of the Company’s bank accounts are located in The People’s Republic of China and are not covered by protection similar to that provided by the FDIC on funds held in United States banks.

 

Five customers accounted for approximately 100% of milk sales for the three months ended September 30, 2015 and 2014. The same five and four customers also accounted for approximately 64% and 48% of accounts receivable at September 30, 2015 and June 30, 2015, respectively.

 

Seventy six farmers and thirty nine farmers accounted for the notes receivable at September 30, 2015 and June 30, 2015, respectively.

 

12.	Parent company only condensed financial information

 

The following is the condensed financial information of China Modern Agricultural Information, Inc. only, the US parent, balance sheets as of September 30, 2015 and June 30, 2015, statements of income for the three months ended September 30, 2015 and 2014, and statements of cash flows for the three months ended September 30, 2015 and 2014:

 

Condensed Balance Sheets

 

	ASSETS		September 30, 2015				June 30, 2015
			(Unaudited)
	Investment in subsidiaries		$	81,750,231			$	129,259,501
	TOTAL ASSETS		$	81,750,231			$	129,259,501

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

12.	Parent company only condensed financial information (CONTINUED)

 

Condensed Balance Sheets (continued)

 

	LIABILITIES AND stockholders’ EQUITY		September 30, 2015				June 30, 2015
			(Unaudited)
	Stockholder loans		$	939,450			$	937,524
	Stockholders’ equity
	Common stock, $0.001 par value; 75,000,000 shares authorized; 53,100,000 shares issued and outstanding			53,100				53,100
	Additional paid-in capital			5,851,170				5,851,170
	Retained earnings			74,906,511				117,827,827
	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	81,750,231			$	123,723,097

 

Condensed Statements of Income (Unaudited)

 

			For the three months ended September 30,
			2015				2014
	Revenues
	Share of earnings from investment in subsidiaries		$	(5,588,842	)		$	7,907,929
	Operating expenses
	General and administrative			37,324,680				27,000
	Net loss (income)		$	(31,735,838	)		$	7,880,929

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

12.	Parent company only condensed financial information (CONTINUED)

 

Condensed Statements of Cash Flows (Unaudited)

 

			For the three months ended September 30,
			2015				2014
	Cash flows from operating activities
	Net (loss) income		$	(31,735,838	)		$	7,880,929
	Adjustments to reconcile net income to net cash provided by (used in) operating activities
	Increase in accrue expense			45,000				27,000
	Share of earnings from investment in subsidiaries and VIE			31,690,838				(7,907,929	)
	Net cash provided by (used in) operating activities			-				-
	Net change in cash			-				-
	Cash, beginning of period			-				-
	Cash, end of period		$	-			$	-

 

Basis of Presentation

 

The Company records its investment in its subsidiaries under the equity method of accounting. Such investments are presented as “Investment in subsidiaries” on the condensed balance sheets and the subsidiaries and VIE profits upon September 16, 2015 (the date of VIE structure dissolved - Note 1)) are presented as “Share of earnings from investment in subsidiaries” in the condensed statements of income.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

12.	Parent company only condensed financial information (CONTINUED)

 

Basis of Presentation (continued)

 

Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. The parent only financial information has been derived from the Company’s consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements.

 

There were no cash transactions in the US parent company during the three months ended September 30, 2015 and 2014.

 

Restricted Net Assets

 

Under PRC laws and regulations, the Company’s PRC subsidiaries are restricted in their ability to transfer certain of their net assets to the Company in the form of dividend payments, loans or advances. The restricted net assets of the Company’s PRC subsidiaries and amounted to $ 81,750,231 and $ 123,723,097 as of September 30, 2015 and June 30, 2015, respectively.

 

The Company’s operations and revenues are conducted and generated in the PRC, and all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars.

 

 

China Modern Agricultural Information, Inc. and subsidiaries

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ended SEPTEMBER 30, 2015 AND 2014 (IN U.S. $)
(UNAUDITED)

 

12.	Parent company only condensed financial information CONTINUED)

 

Restricted Net Assets (continued)

 

Schedule I of Article 5-04 of Regulation S-X requires the condensed financial information of the parent company to be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the Company’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by its subsidiaries in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company only financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiaries exceed 25% of the consolidated net assets of the Company.

 

13.	Subsequent event

 

In October 2015, the China Diary entered into an agreement with an advisory firm to which the advisory firm was appointed as the exclusive lead manager in respect of the offering in Australian. Under the agreement, the advisory firm is entitled to the following fees:

 

(a) a monthly advisory fee of A$15,000 (US $11,445) for each month up to a maximum of A$75,000 (US $57,225);

 

(b) a placement fee of 4% (plus GST) on the amount of capital raised under the Offer;

 

(c) a management fee of 7.5% (plus GST) on the amount of capital raised under the Offer;

 

(d) a success fee of 2% (plus GST) on the amount of capital raised under the Offer to be satisfied by the issue of shares in China Dairy at the Offer Price to the advisory firm; and

 

(e) a break fee of A$5,000 (US $3,815) per month from April 2015 if China Dairy terminates the services of the advisory firm or terminates the Offer.

 

China Diary is currently seeking admission to the Official List of the ASX. The Prospectus was lodged with ASIC on October 30, 2015, which contains an offer of up to 100,000,000 CDIs to raise up to A$20,000,000 (US $14,524,000). The minimum subscription under the Offer is 75,000,000 CDIs to raise A$15,000,000 (US $10,893,000) at A$0.20 (US $ 0.15) per CDI.

 

 

PART II - OTHER INFORMATION

  

Item 6. Exhibits.

 

(a) Exhibits

 

Exhibit Number		Description
31.1		Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+		Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+		Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

 

+ In accordance with the SEC Release 33-8238, deemed being furnished and not filed.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	CHINA MODERN AGRICULTURAL INFORMATION, INC.
Dated: February 25, 2016	By:	/s/ Youliang Wang
		Youliang Wang
		Chief Executive Officer (Principal Executive Officer)

 

Dated: February 25, 2015	By:	/s/ Yanyan Liu
		Yanyan Liu
		Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer)

 

 

 

 

 

45