Investments

6 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS

NOTE 7 - INVESTMENTS

Ankang Longevity Group entered into two equity investment agreements with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”), a Chinese state-owned pharmaceutical enterprise to invest a total of RMB 6.8 million (approximately US$ 1.0 million) for a 49% equity interest in a pharmacy retail company called Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and a 49% equity interest in a pharmaceutical wholesale distribution company named Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). These two equity investments were formed as new business entities to collaborate with Shaanxi Pharmaceutical Group to expand sales to regional hospitals and clinics and to establish the presence of retail pharmacies under the Brand name “Sunsimiao”. The investments are accounted for using the equity method because Ankang Longevity Group has significant influence, but no control of these two entities. Ankang Longevity Group recorded income of US$ 140,582 and US$ 288,877 for the six months ended December 31, 2019 and 2018, respectively and recorded income of US$ 70,683 and US$ 145,742 for the three months ended December 31, 2019 and 2018, respectively, from the investments, which was included in “Income from equity method investments” in the unaudited condensed consolidated statements of income and comprehensive income (see Note 11).

Ankang Longevity Group entered into a supplemental agreement with Shaanxi Pharmaceutical Group. According to the supplemental agreement, new 49% equity investment companies established by Shaanxi Pharmaceutical Group and Ankang Longevity Group are required to exclusively purchase certain raw materials and drug products from Shaanxi Pharmaceutical Group. In return, Shaanxi Pharmaceutical Group has agreed to compensate Ankang Longevity Group with a purchase rebate of 7% of the total purchases made from Shaanxi Pharmaceutical Group. For the six months ended December 31, 2019 and 2018, a total of US$ Nil and US$ 517,626 was recognized by Ankang Longevity Group from this supplemental agreement in addition to its 49% share of the income from the equity investment companies, respectively. For the three months ended December 31, 2019, total income of US$ Nil was recognized by Ankang Longevity Group from this supplemental agreement, compared to US$ 225,187 in the same period in 2018.

On October 21, 2013, the Company, through its controlled subsidiaries, Zhisheng Freight and Zhisheng Agricultural, entered into an agreement with an unrelated third party, Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd. (“Zhen’Ai Network”), and invested RMB 14.5 million (approximately US$ 2.2 million) into Tiancang Systematic Warehousing project (“Tiancang Project”) operated by Zhen’Ai Network. The Tiancang Project is an online platform established to provide comprehensive warehousing and logistic solutions to companies involved in E-commerce. The Company is entitled to 29% of Tiancang Project’s after-tax net income annually, less 30% statutory reserve and a 10 % employee welfare fund contribution. When the amount of the accumulated statutory reserve reaches 30% of the total investment for the Tiancang Project, no additional appropriation to the statutory reserve is required. For the six and three months ended December 31, 2019 and 2018, the Company did not record investment income from this investment.

On November 21, 2016, the Company (the “Investor”) entered into an agreement with Original Lab Inc., a California corporation (the “Investee”), and made a payment of US$ 200,000 in exchange for the right to acquire certain shares of the Investee’s common and preferred stock. The Company considered it’s unlikely to obtain any investment income in the near future, and decided the make a fully impairment on this investment during the year ended June 30, 2019. 

The Company’s investments in unconsolidated entities consist of the following:

	December 31, 2019		June 30, 2019
Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy)	$	3,774,388	$	3,717,277
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd.		840,853		822,058
Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd.		2,080,942		2,111,609
Total	$	6,696,183	$	6,650,944

Summarized financial information of unconsolidated entities is as follows:

	December 31, 2019		June 30, 2019
Current assets	$	38,714,700	$	35,675,858
Noncurrent assets		220,420		241,580
Current liabilities		29,531,039		26,668,485

	For the six months ended December 31,
	2019		2018
Net sales	$	16,283,932	$	16,306,851
Gross profit		1,674,366		2,020,501
Income from operations		287,432		665,455
Net income		286,902		589,545