20-F

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report……………

For the transition period from _____to______

Commission file number 001-38397

FARMMI, INC.

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

Fl 1, Building No. 1, 888 Tianning Street, Liandu District

Lishui, Zhejiang Province

People’s Republic of China 323000

(Address of principal executive offices)

Lingge Wu, Chief Financial Officer

+86-0578-82612876

wlg@farmmi.com

Fl 1, Building No. 1, 888 Tianning Street, Liandu District

Lishui, Zhejiang Province

People’s Republic of China 323000

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, $0.20 par value per share	FAMI	NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act: None 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 6,094,078 Ordinary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ☐ Yes   ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes   ☒ No

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 of 1934 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 every Interactive Data File required to be submitted 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 such files). ☒ Yes   ☐ No

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

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒
		Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☒ International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17  ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). ☐ Yes   ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes    ☐ No

Table of Contents
Part I
Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	38
Item 4A.	Unresolved Staff Comments	87
Item 5.	Operating and Financial Review and Prospects	87
Item 6.	Directors, Senior Management and Employees	106
Item 7.	Major Shareholders and Related Party Transactions	116
Item 8.	Financial Information	120
Item 9.	The Offer and Listing	121
Item 10.	Additional Information	122
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	131
Item 12.	Description of Securities Other than Equity Securities	132
Part II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	133
Item 14.	Material Modifications to the Rights of Securities Holders and Use of Proceeds	133
Item 15.	Controls and Procedures	133
Item 15.	Controls and Procedures	134
Item 16.	[Reserved]	134
Item 16A.	Audit Committee Financial Expert	134
Item 16B.	Code of Ethics	135
Item 16C.	Principal Accountant Fees and Services	135
Item 16D.	Exemptions from the Listing Standards for Audit Committees	135
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	135
Item 16F.	Change in Registrant’s Certifying Accountant	136
Item 16G.	Corporate Governance	136
Item 16H.	Mine Safety Disclosure	136
Item 16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	136
Item 16J.	Insider Trading Policy	136
Item 16K	Cybersecurity	136
Part III.
Item 17.	Financial Statements	137
Item 18.	Financial Statements	137
Item 19.	Exhibits	138

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this annual report with respect to the Company’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of the Company. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. The Company cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, including but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission (the “SEC”). Therefore, investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements.

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

ii

Part I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable for annual reports on Form 20-F.

Item 2. Offer Statistics and Expected Timetable

Not applicable for annual reports on Form 20-F.

Item 3. Key Information

Our Corporate Structure and the Operations of Our PRC Subsidiaries and Consolidated Entities

Farmmi, Inc. (the “Farmmi,” “we,” “our” or “us”) is not a PRC operating company but a holding company incorporated in the Cayman Islands (“Cayman”). As a holding company, we own equity interests, directly or indirectly, in our operating subsidiaries. The vast majority of the business operations are conducted by our subsidiaries based in mainland China, or PRC, the U.S. and Canada. In addition, we have also operated limited products sales through online and e-commerce channels. PRC laws and regulations restrict and impose conditions on foreign investment in internet based, value-added telecommunication services, mobile application services and certain other businesses. Accordingly, we have operated our online and e-commerce sales in China mainly through our consolidated affiliated entities and rely on contractual arrangements among our PRC subsidiaries, consolidated affiliated entities and their nominee shareholder to control the business operations. Those affiliated entities are consolidated for accounting purposes, but are not entities in which our Cayman holding company, or our investors, own equity. Such structure and the contractual arrangements are designed to enable Farmmi to have power to direct significant activities of those entities and to receive economic benefits from these entities where PRC law prohibits, restricts or imposes conditions on diret foreign investment in such entities.

Our consolidated affiliated entities have been treated as Variable Interest Entities under the Statement of Financial Accounting Standards Board Accounting Standards Codification 810 Consolidation and we are regarded as the primary beneficiary of our consolidated affiliated entities, or VIEs. Accordingly, we treat our VIEs as our consolidated entities under U.S. GAAP and we consolidate the financial results of our VIEs in our consolidated financial statements in accordance with U.S. GAAP.

Our subsidiaries, our VIEs and the shareholder of VIEs have entered into a series of contractual agreements. These contractual arrangements enable us to: (a) receive the economic benefits that could potentially be significant to our consolidated affiliated entities in consideration for the services provided by our subsidiaries; (b) exercise effective control over our consolidated affiliated entities; and (c) hold an exclusive option to purchase all or part of the equity interests in our VIEs when and to the extent permitted by PRC law. The contractual arrangements among our subsidiaries, our VIEs and their shareholder generally include shareholder voting rights proxy agreements, exclusive equity purchase option agreements, technologies, management and consulting services agreements, and equity interest pledge agreements. As a result of the contractual arrangements, we have effective control over and are considered the primary beneficiary of these affiliated companies, and we have consolidated the financial results of these companies in our consolidated financial statements. For more details of these contractual arrangements, see “Item 4. Information on the Company-B. Business Overview;” and “Item 4. Information on the Company-C. Organizational Structure.”

The contractual arrangements may not be as effective as direct ownership in providing us with control over our consolidated affiliated entities and we may incur substantial costs to enforce the terms of the arrangements. Uncertainties in the PRC legal system may limit our ability, as a Cayman holding company, to enforce these contractual arrangements. Our corporate structure is subject to risks associated with our contractual arrangements with our VIEs. Investors may never directly hold equity interests in our VIEs. If the PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. See “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in China.”

1

The following diagram illustrates our Company’s organizational structure as of the date of this annual report:

There are significant legal and operational risks associated with conducting a substantial portion of our operations in mainland China, including those changes in the legal, political, and economic policies of the PRC government, the relations between China and the United States, or PRC or U.S. regulations may materially and adversely affect our business, financial condition, results of operations, and the market price of our ordinary shares. Any such changes could significantly limit or completely hinder our ability to offer or continue to offer our shares to investors and could cause the value of our shares to significantly decline or become worthless. Recent statements made and regulatory actions undertaken by the PRC government, including the recent enactment of China’s Data Security Law, as well as our obligations to comply with China’s new Cybersecurity Review Measures (which became effective on February 15, 2022), regulations and guidelines relating to the multi-level protection scheme, Personal Information Protection Law, or PIPL, the Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises and related guidelines (collectively, the “Trial Measures” or “Overseas Listing Rules”), and any other future laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept foreign investments or continue to be listed on a U.S. or foreign stock exchange.

Permissions Required from the PRC Authorities for Our Operations

We conduct our business in China through our subsidiaries and VIEs, or PRC entities. We are required to obtain certain permissions from the PRC authorities to operate, issue securities to foreign investors, and transfer certain data. The PRC government has exercised, and may continue to exercise, substantial influence or control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be undermined if our PRC subsidiaries are not able to obtain or maintain approvals to operate in China. The central or local governments could impose new, stricter regulations or interpretations of existing regulations that could require additional expenditures, and efforts on our part to ensure our compliance with such regulations or interpretations. To operate our general business activities currently conducted in mainland China, each of our PRC entities is required to obtain a business license from the local counterpart of the State Administration for Market Regulation, or SAMR. Each of our PRC entities has obtained a valid business license from the local SAMR, and no application for any such license has been denied. Our PRC entities are also required to obtain certain licenses and permits. Among our PRC entities, Farmmi Food and Farmmi Biotech are required to obtain food business licenses pursuant to the PRC Food Safety Law. Prior to April 2021, Nongyuan Network was required to made, and had made, a record filing with the competent telecommunications authority as a non-operational Internet Content (ICP) Provider and has received the ICP License. As of the date of this report, as advised by our PRC legal counsel, Zhengbiao Law Firm, we and our PRC entities have received all requisite permits, approvals and certificates from the PRC government authorities to conduct our business operations in China. To our knowledge, no permission or approval has been denied or revoked. However, given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by government authorities, we cannot be certain that relevant policies in this regard will not change in the future, which may require us or our subsidiaries or VIEs to obtain additional licenses, permits, filings or approvals for conducting our business in the PRC. If we or our subsidiaries or VIEs do not receive or maintain required permissions or approvals, or inadvertently conclude that such permissions or approvals are not required, we may be subject to governmental investigations or enforcement actions, fines, penalties, suspension of operations, or be prohibited from engaging in relevant business or conducting securities offering, and these risks could result in a material adverse change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

In connection with our previous issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we and our PRC subsidiaries, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC authority. However, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.

2

On July 10, 2021, the CAC published a revised draft revision to the Cybersecurity Review Measures for public comment, or the Revised Cybersecurity Measures. Under these measures, an operator having more than one million users shall be subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate the risk of critical information infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments after going public overseas. The procurement of network products and services, data processing activities and overseas listing should also be subject to cybersecurity review if they concern or potentially pose risks to national security. According to the effective Cybersecurity Review Measures, online platform/website operators of certain industries may be identified as critical information infrastructure operators by the CAC, once they meet standard as stated in the National Cybersecurity Inspection Operation Guide, and such operators may be subject to cybersecurity review. On December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and other government agencies jointly issued the final version of the Revised Measures for Cybersecurity Review, or the Measures, which took effect on February 15, 2022 and replaced the previously issued Revised Cybersecurity Review Measures. Under the Measures, an “online platform operator” in possession of personal data of more than one million users must apply for a cybersecurity review if it intends to list its securities on a foreign stock exchange. The operators of critical information infrastructure and the online platform operators (collectively, the “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, and any online platform operator who controls more than one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country. Pursuant to the Measures, we believe we are not subject to the cybersecurity review by the CAC, given that (i) we possess personal information of a relatively small number of users in our business operations as of the date of this report, significantly less than one million users; and (ii) data processed in our business does not have a bearing on national security and thus shall not be classified as core or important data by the PRC authorities. We don’t believe that we are an Operator within the meaning of the Measures, nor do we control more than one million users’ personal information, and as such, we should not be required to apply for a cybersecurity review under the Revised Measures. Further, an expert interpretation of the Measures published at the CAC’s website on February 17, 2022 indicated no application review is required for operators that have been listed abroad before the implementation of the Revised Cybersecurity Measures. However, the Measures were just recently released and there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and implementation. Whether the data processing activities carried out by traditional enterprises (such as food, medicine, manufacturing, and merchandise sales enterprises) are subject to such review and the scope of the review remain to be further clarified by the regulatory authorities in the subsequent implementation process.

The PRC government recently initiated a series of regulatory actions and statements to regulate business operations in China, including adopting new measures to extend the scope of cybersecurity reviews, cracking down on illegal activities in the securities market, and expanding the efforts in anti-monopoly enforcement. The PRC government is increasingly focused on data security. In July 2021, the CAC opened cybersecurity probes into several U.S.-listed technology companies focusing on anti-monopoly regulation, and how companies collect, store, process and transfer data. On November 14, 2021, the CAC published the Draft Regulations on Network Data Security Management for public comments, which among other things, stipulates that a data processor listed overseas must conduct an annual data security review by itself or by engaging a data security service provider and submit the annual data security review report for a given year to the municipal cybersecurity department before January 31 of the following year. If the Draft Regulations on Network Data Security Management are enacted in the current form, we, as an overseas listed company, would be required to carry out an annual data security review and comply with the relevant reporting obligations. As of the date of this report, the draft regulations have been released for public comment only and have not been formally adopted. The final provisions and the timeline for its adoption are subject to changes and uncertainties. We have been closely monitoring the regulatory development in China, particularly regarding the requirements of approvals, annual data security review or other procedures that may be imposed on us. If any approval, review or other procedure is in fact required, we cannot assure our investors that we will be able to obtain such approval or complete such review or other procedure timely or at all. For any approval that we may be able to obtain, it could nevertheless be revoked and the terms of its issuance may impose restrictions on our operations and/or securities offerings. The PRC regulatory requirements with respect to cybersecurity and data security are constantly evolving and can be subject to varying interpretations and significant changes, resulting in uncertainties about the scope of our responsibilities in that regard. Failure to comply with these cybersecurity and data privacy requirements in a timely manner, or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension or disruption of our operations.

On February 17, 2023, China Securities Regulatory Commission (the “CSRC”) issued the Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises and five supporting guidelines (collectively, the “Trial Measures” or “Overseas Listing Rules”), which took effect on March 31, 2023. Under the Trial Measures, a company established in mainland China seeking securities offering and listing, by both direct or indirect means, in an overseas market is required to undertake filing procedures with the CSRC for its overseas offering and listing activities. The Trial Measures also set forth a list of circumstance under which overseas offering and listing by domestic companies established in mainland China is prohibit, including: (i) where such securities offering and listing is explicitly prohibited by the PRC laws; (ii) where the intended securities offering and listing may endanger national security as reviewed and determined by competent PRC authorities under the State Council in accordance with PRC laws; (iii) where the domestic company established in mainland China, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three (3) years; (iv) where the domestic company established in mainland China seeking securities offering and listing is suspected of committing crimes or major violations of laws and regulations, and is under investigation according to law, and no conclusion has yet been made thereof; and (v) where there are material ownership disputes over equity held by the controlling shareholder of the company established in mainland China or by other shareholders that are controlled by the controlling shareholder and/or actual controller. In accordance with the Trial Measures, the listing and trading of our ordinary shares on Nasdaq is deemed as an indirect overseas offering and listing by domestic companies established in mainland China, and thus, we are subject to the relevant filing procedures as required. Further, we believe, as of the date of this report, none of the circumstances prohibiting the overseas offering and listing by domestic companies established in mainland China as listed above applies to us, and we can offer and continue to offer our ordinary shares on Nasdaq.

In accordance with the Notice on the Arrangement for the Filing of Overseas Offering and Listing by Domestic Companies issued by the CSRC, we are deemed as an “Existing Issuer” because we had been listed overseas before March 31, 2023. Under such Notice, we are not required to undertake the initial filing procedure immediately. However, we shall carry out filing procedures as required in a timely manner for the subsequent events, including any further follow-up offerings on Nasdaq, dual and/or secondary offering and listing on different overseas markets, and occurrence of material events including change of control, investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities, change of listing status or transfer of listing segment, and voluntary or mandatory delisting. Among other things, if an overseas listed issuer intends to effect any follow-on offering in an overseas stock market, it should, through its major operating entity incorporated in the PRC, submit filing materials to the CSRC within three working days after the completion of the offering. The required filing materials shall include, but not be limited to, (1) filing report and relevant commitment letter and (2) domestic legal opinions.  We may be subject to additional compliance requirements in the future, and we cannot assure you that we will be able to get the above-mentioned clearance of filing procedures on a timely basis, or at all. If we or our PRC Subsidiaries in the future fail to undertake filing procedures as stipulated in the Trial Measures, or offer and list securities in an overseas market in violation of the Trial Measures, the CSRC may order rectification, issue warnings to us and/or our PRC Subsidiaries, and impose a fine of between RMB 1,000,000 and RMB 10,000,000. The CSRC may also inform its regulatory counterparts in the overseas jurisdictions, such as the SEC, via cross-border securities regulatory cooperation mechanisms.

Further, on February 24, 2023, the CSRC, together with Ministry of Finance, National Administration of State Secrets Protection, and National Archives Administration of China, released the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Confidentiality Provisions”), which went into effect on March 31, 2023 with the Trial Measures. Under the Confidentiality Provisions, domestic companies established in mainland China seeking overseas offering and listing, by both direct and indirect means, are required to institute a sound confidentiality and archives system. If such domestic companies established in mainland China intend to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, they shall obtain approval from competent authorities and complete the relevant filing procedure with the competent secrecy administrative department prior to their disclosure or provision of such documents and materials. Further, if they provide or publicly disclose documents and materials which may adversely affect national security or public interests, they shall strictly follow the corresponding procedures in accordance with relevant laws and regulations. Any failure or perceived failure by us or our subsidiaries to comply with the above confidentiality and archives administration requirements under the Confidentiality Provisions and other relevant PRC laws and regulations may cause relevant entities to be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. As of the date of this report, we believe that we and our subsidiaries have not provided or publicly disclosed any documents or materials involving state secrets or work secrets of PRC government agencies or any of which may adversely affect national security or public interests, to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals. We intend to comply with the Confidentiality Provisions and other relevant PRC laws and regulations in our future offerings.

However, any failure of us or our PRC Subsidiaries to fully comply with the Trial Measures and/or the Confidentiality Provisions, may significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares on Nasdaq, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless.

For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in China.”

3

Cash Flows through Our Organization

Farmmi is a holding company with no operations of its own. We conduct our operations principally in China through our subsidiaries. As a result, we may rely upon dividends paid to us by our subsidiaries in the PRC to pay dividends and to finance any debt we may incur. As of the date of this report, none of our subsidiaries has issued any dividends or distributions to us and we have not made any dividends or distributions to our shareholders. Our subsidiaries in the PRC generate and retain cash generated from operating activities and re-invest it in our business.

Current PRC regulations permit our subsidiary in mainland China to pay dividends to the Company only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Under our current corporate structure, we rely on dividend payments or other distributions from our subsidiaries to fund any cash and financing requirements we may have, including the funds necessary to pay dividends and other cash distributions to our shareholders or to service any debt we may incur. If any subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us. In addition, under PRC laws and regulations, each of our Chinese subsidiaries is required to set aside a portion of their net income each year to fund a statutory surplus reserve until such reserve reaches 50% of its registered capital. This reserve is not distributable as dividends. As a result, our PRC subsidiaries are restricted in their ability to transfer a portion of its net assets to us in the form of dividends, loans or advances. Further, the PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. If we are unable to receive funds from our subsidiaries, we may be unable to pay cash dividends on our ordinary shares.

Cash dividends, if any, on our ordinary shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%. A 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises. Any gain realized on the transfer of ordinary shares by such investors is also subject to PRC tax at a current rate of 10% which in the case of dividends will be withheld at source if such gain is regarded as income derived from sources within the PRC.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC resident enterprise. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong resident enterprise must be the beneficial owner of the relevant dividends; and (b) the Hong Kong resident enterprise must directly hold no less than 25% share ownership in a PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot be certain that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kong subsidiaries. As of the date of this report, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Our Hong Kong subsidiaries intend to apply for the tax resident certificate when our subsidiaries in mainland China plan to declare and pay dividends to their Hong Kong parent companies.

As an offshore holding company, we will be permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund-raising activities to our subsidiaries in China only through loans or capital contributions, subject to the satisfaction of the applicable government registration and approval requirements. Before providing loans to our PRC subsidiaries, we will be required to make filings about details of the loans with the State Administration of Foreign Exchange of the PRC (the “SAFE”) in accordance with relevant PRC laws and regulations. Our PRC subsidiaries that receive the loans are only allowed to use the loans for the purposes set forth in these laws and regulations. Under regulations of the SAFE, Renminbi is not convertible into foreign currencies for capital account items, such as loans, repatriation of investments and investments outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made.

Under PRC law, we may provide funding to our PRC subsidiaries only through capital contributions or loans, and prior to the dismantling of our PRC consolidated affiliated entities only through loans to our former consolidated affiliated entities, subject to satisfaction of applicable government registration and approval requirements.

For the year ended September 30, 2023, we provided working capital loans of $151.7 million in aggregate to our subsidiaries.

4

For the fiscal years ended September 30, 2022, we provided working capital loans of $140.4 million in aggregate to our wholly owned subsidiaries.

For the fiscal years ended September 30, 2021, we provided working capital loans of $132.9 million in aggregate to our wholly owned subsidiaries.

We have not declared or paid any cash dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

As of the date of this report, we do not anticipate any difficulties on our ability to transfer cash between subsidiaries. We have not installed any cash management policies that dictate the amount of such funds and how such funds are transferred.

The Holding Foreign Companies Accountable Act

Our ordinary shares may be prohibited from trading on a national exchange or “over-the-counter” markets under the HFCAA if the PCAOB is unable to inspect our auditors for two consecutive years. Pursuant to the HFCAA enacted in December 2020 and related legislation, if the SEC determines that a company has filed an audit report issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for two consecutive years, the SEC is required to prohibit such company’s securities from being traded on a national securities exchange or in the over the counter trading market in the U.S.

Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. On August 26, 2022, the PCAOB signed a Statement of Protocol (SOP) Agreement with the CSRC and the MOF of the PRC regarding cooperation in the oversight of PCAOB-registered public accounting firms in the PRC and Hong Kong to establish a method for the PCAOB to conduct inspections of PCAOB-registered public accounting firms in the PRC and Hong Kong, as contemplated by the Sarbanes-Oxley Act. Under the agreement, (a) the PCAOB has sole discretion to select the firms, audit engagements and potential violations it inspects and investigates without consultation with, or input from, PRC authorities; (b) procedures are in place for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed; (c) the PCAOB has direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates; and (d) the PCAOB shall have the unfettered ability to transfer information to the SEC in accordance with the Sarbanes-Oxley Act, and the SEC can use the information for all regulatory purposes, including administrative or civil enforcement actions. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and vacated its previous 2021 adverse determinations. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination.

Our current auditor is based in the U.S. and has been inspected by the PCAOB on a regular basis. Our auditor is not among the PCAOB-registered public accounting firms headquartered in the PRC or Hong Kong that are subject to PCAOB’s determination. Notwithstanding the foregoing, in the future, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, or if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations to the PCAOB for inspection or investigation, our investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected or investigated by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national exchange or “over-the-counter” markets, may be prohibited under the HFCAA.

A. Selected Financial Data

In the table below, we provide you with historical selected financial data for our company. The selected consolidated statements of operations data for the fiscal years ended September 30, 2023, 2022 and 2021 and the selected consolidated balance sheets data as of September 30, 2023 and 2022 have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. The selected consolidated balance sheets data as of September 30, 2021, 2020 and 2019 have been derived from our audited consolidated balance sheets as of September 30, 2021 and 2020, which are not included in this annual report. The selected consolidated statements of operations data for the years ended September 30, 2020 and 2019 have been derived from our audited consolidated financial statements for the year ended September 30, 2020, which are not included in this annual report. Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with US GAAP.

(All amounts in U.S. dollars)

Statements of operations data:

	For the Years Ended September 30,
	2023			2022			2021			2020			2019
Revenues	$	110,364,887		$	99,213,379		$	39,289,951		$	28,363,963		$	28,643,293
Gross Profit		4,286,755			5,438,086			5,109,281			4,651,422			5,079,202
Operating expenses		(2,245,380	)		(4,495,718	)		(2,256,405	)		(2,384,339	)		(2,058,855	)
Income from operations		2,041,375			942,368			2,852,876			2,267,083			3,020,347
Provision for income taxes		(313,493	)		118,367			(25,571	)		(16,753	)		(29,813	)
Net income from continuing operations		2,543,813			2,223,979			2,407,790			1,077,302			(218,279	)
Net income (loss) from discontinued operations, net of tax		-			-			(51,352	)		(263,847	)		(92,725	)
Net income (loss)	$	2,543,813		$	2,223,979		$	2,356,438		$	813,455		($311,004)
Earnings (loss) per share, basic
Continuing operations		0.70			0.77			4.68			13.26			(3.58	)
Discontinued operations		-			-			(0.10	)		(3.25	)		(1.52	)
Earnings (loss) per share, diluted
Continuing operations		0.30			0.77			4.61			13.26			(3.58	)
Discontinued operations		-			-			(0.10	)		(3.25	)		(1.52	)
Weighted average ordinary share outstanding, basic		3,628,923			2,905,984			514,212			81,224			60,919
Weighted average ordinary share outstanding, diluted		8,452,875			2,905,984			522,276			81,224			60,919

____ 

1.  On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. The weighted average ordinary shares had been retrospectively adjusted from 2019 to reflect the consolidation of ordinary shares. 

5

Balance sheets data

	2023		2022		2021		2020		2019
Current assets	$	158,171,175	$	153,254,380	$	155,305,536	$	37,022,171	$	29,705,028
Total assets	$	174,800,086	$	163,782,853	$	165,686,901	$	38,191,746	$	30,482,631
Current liabilities	$	10,712,982	$	8,289,321	$	4,146,426	$	8,367,387	$	8,145,080
Total liabilities	$	12,824,160	$	9,098,762	$	4,894,483	$	9,036,589	$	8,145,080
Total shareholders' equity (net assets)	$	161,975,926	$	154,684,091	$	160,792,418	$	29,155,157	$	21,498,503

Selected Consolidated Financial Schedule

The tables below disaggregated the Consolidated Statements of Operations and Comprehensive Income (Loss) of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the fiscal years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	74,224,063		$	16,034,543		$	20,106,281			-		$	110,364,887
Cost of revenues		(70,021,350	)		(16,023,779	)		(20,033,003	)		-			(106,078,132	)
Gross profit		4,202,713			10,764			73,278			-			4,286,755
Operating expenses		(1,028,294	)		(71,676	)		(231,462	)		(913,948	)		(2,245,380	)
Income (loss) from operations		3,174,419			(60,912	)		(158,184	)		(913,948	)		2,041,375
Other income (expenses)		1,514,162			(68,416	)		634,225			(1,264,040	)		815,931
Income (loss) before income taxes		4,688,581			(129,328	)		476,041			(2,177,988	)		2,857,306
Provision for income taxes		(270,874	)		(8,556	)		(34,063	)		-			(313,493	)
Net income (loss)	$	4,417,707		($137,884)			$	441,978		($2,177,988)			$	2,543,813

	For the year ended September 30, 2022
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	64,795,082		$	9,111,073		$	25,307,224			-		$	99,213,379
Cost of revenues		(60,272,018	)		(9,053,547	)		(24,449,728	)		-			(93,775,293	)
Gross profit		4,523,064			57,526			857,496			-			5,438,086
Operating expenses		(782,009	)		(50,344	)		(701,516	)		(2,961,849	)		(4,495,718	)
Income (loss) from operations		3,741,055			7,182			155,980			(2,961,849	)		942,368
Other income (expenses)		560,497			20,510			213,771			368,466			1,163,244
Income (loss) before income taxes		4,301,552			27,692			369,751			(2,593,383	)		2,105,612
Provision for income taxes		114,801			9,182			(5,616	)		-			118,367
Net income (loss)	$	4,416,353		$	36,874		$	364,135		($2,593,383)			$	2,223,979

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary			VIE and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Revenues from continuing operations	$	33,068,045		$	762,771		$	5,459,135		$	-		$	39,289,951
Cost of revenues from continuing operations		(28,847,801	)		(742,933	)		(4,589,936	)		-			(34,180,670	)
Gross profit from continuing operations		4,220,244			19,838			869,199			-			5,109,281
Operating expenses		588,892			(8,940	)		(804,851	)		(2,031,506	)		(2,256,405	)
Income (loss) from operations		4,809,136			10,898			64,348			(2,031,506	)		2,852,876
Other expenses		(391,819	)		(19,990	)		(2,033	)		(5,673	)		(419,515	)
Income (loss) before income taxes		4,417,317			(9,092	)		62,315			(2,037,179	)		2,433,361
Provision for income taxes		(8,085	)		-			(17,486	)		-			(25,571	)
Net income (loss) from continuing operations	$	4,409,232		$	(9,092	)	$	44,829		$	(2,037,179	)	$	2,407,790

6

The tables below disaggregated the Consolidated Balance Sheets of the Company into loss FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated as of the fiscal years ended September 30, 2023 and 2022.

	As of September 30, 2023
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	144,664,527	$	131,992,092	$	7,086,579	$	151,681,406		-
Current assets excluding intercompany receivables		138,871,675		353,985		18,841,671		103,844	$	158,171,175
Current assets	$	283,536,202	$	132,346,077	$	25,928,250	$	151,785,250	$	158,171,175
Investment in subsidiaries		-	$	37,712,692		-		-		-
Non-current assets excluding investment in subsidiaries	$	16,627,615		-	$	1,296		-	$	16,628,911
Non-current assets	$	16,627,615	$	37,712,692	$	1,296		-	$	16,628,911
Total assets	$	300,163,817	$	170,058,769	$	25,929,546	$	151,785,250	$	174,800,086
Intercompany payables	$	290,760,077	$	124,634,218	$	19,812,080	$	218,229		-
Current liabilities excluding intercompany payables		634,111		756,017		3,530,735		5,792,119	$	10,712,982
Current liabilities	$	291,394,188	$	125,390,235	$	23,342,815	$	6,010,348	$	10,712,982
Non-current liabilities	$	533,315	$	106,737		1,471,126		-	$	2,111,178
Total liabilities	$	291,927,503	$	125,496,972	$	24,813,941	$	6,010,348	$	12,824,160
Total shareholders' equity (net assets)	$	8,236,314	$	44,561,797	$	1,115,605	$	145,774,902	$	161,975,926

	As of September 30, 2022
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	163,676,919	$	114,994,912		-	$	140,445,311		-
Current assets excluding intercompany receivables	$	91,926,232	$	33,986	$	57,133,125	$	4,161,037	$	153,254,380
Current assets	$	255,603,151	$	115,028,898	$	57,133,125	$	144,606,348	$	153,254,380
Investment in subsidiaries		-	$	40,424,517		-		-		-
Non-current assets excluding investment in subsidiaries	$	10,500,217	$	8,484	$	19,772		-	$	10,528,473
Non-current assets	$	10,500,217	$	40,433,001	$	19,772		-	$	10,528,473
Total assets	$	266,103,368	$	155,461,899	$	57,152,897	$	144,606,348	$	163,782,853
Intercompany payables	$	255,440,223	$	109,255,668	$	54,420,549	$	702		-
Current liabilities excluding intercompany payables	$	590,393	$	226,814	$	1,789,357	$	5,682,757	$	8,289,321
Current liabilities	$	256,030,616	$	109,482,482	$	56,209,906	$	5,683,459	$	8,289,321
Non-current liabilities	$	657,734	$	151,707		-		-	$	809,441
Total liabilities	$	256,688,350	$	109,634,189	$	56,209,906	$	5,683,459	$	9,098,762
Total shareholders' equity (net assets)	$	9,415,018	$	45,827,710	$	942,991	$	138,922,889	$	154,684,091

7

Exchange Rate Information

Our financial information is presented in U.S. dollars. Our functional currency is Renminbi (“RMB”), the currency of the PRC. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China at the dates of the transactions. Exchange gains and losses resulting from transactions denominated in a currency other than the RMB are included in statements of operations as foreign currency transaction gains or losses. Our financial statements have been translated into U.S. dollars in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 52, “Foreign Currency Translation”, which was subsequently codified within ASC 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in shareholders’ equity. The relevant exchange rates are listed below:

	For the years ended September 30,
	2023		2022		2021
Period ended exchange rate US$1=RMB		7.2960		7.1124		6.4433
Period average exchange rate US$1=RMB		7.0533		6.5746		6.4935

B. Capitalization and Indebtedness

Not applicable by 20-F as an annual report.

C. Reasons for the Offer and Use of Proceeds

Not applicable by 20-F as an annual report.

D. Risk Factors

Before you decide to purchase our Ordinary Shares, you should understand the high degree of risk involved. You should consider carefully the following risks and other information in this report, including our consolidated financial statements and related notes. If any of the following risks actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our Ordinary Shares could decline, perhaps significantly.

8

Summary of Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to:

Risks Relating to Doing Business in China

· The PRC government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ordinary shares.

· If the Chinese government determines that our corporate structure does not comply with Chinese regulations, or if Chinese regulations change or are interpreted differently in the future, the value of our ordinary shares may decline in value or become worthless.

· Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us and our shareholders.

· We are required to submit filings with the CSRC in connection with securities issuance and may be subject to approval, filing or other procedures with other Chinese regulatory authorities under PRC law; we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures.

· Trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or investigate completely our auditors for two consecutive years.

· We face many uncertainties with the VIE structure we use in our operations.

· Our contractual arrangements with our VIE may not be as effective in providing operational control as direct ownership.

· Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

· We may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.

Risks Related to Our Business and Industry

· The loss of any of our key customers could reduce our revenues and our profitability.

· We buy our supplies from a relatively limited number of suppliers.

· We face risks related to health epidemics that could impact our sales and operating results.

· Our industry and business are subject to extensive regulations by the Chinese government.

· Any failure by our subsidiaries to comply with PRC food safety laws may require us to incur significant costs.

· Edible fungi cultivated by our suppliers and other agricultural products we sell are subject to risks related to diseases, pests, extreme weather events or climate risks.

Risks Related to Ownership of Our Ordinary Shares

· We are a Cayman Islands exempted company with limited liability. The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

· As a “foreign private issuer,” we are exempt from certain U.S. federal securities law provisions applicable to U.S. domestic issuers and are also permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, and such exemptions may afford less protection to shareholders.

· Our shares may be delisted if we are unable to comply with Nasdaq continued listing requirements.

· The market price of our ordinary shares has been, and may continue to be, highly volatile, and such volatility could cause the market price of our Ordinary Shares to decrease and could cause you to lose some or all of your investment in our Ordinary Shares.

Risks Related to Our Business and Industry

We face risks related to health epidemics that could impact our sales and operating results.

Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including COVID-19. Although the impact of COVID-19 was temporary on our business and operations in 2021 due to some shutdowns in China, any outbreak of contagious diseases in the future, and other adverse public health developments, particularly in China, could have a material and adverse effect on our business operations. These could include disruptions or restrictions on our ability to our operations, as well as temporary closures of our facilities and ports or the facilities of our customers and third-party service providers. Any disruption or delay of our customers or third-party service providers would likely impact our operating results and the ability of the Company to continue as a going concern. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of China and many other countries, resulting in an economic downturn that could affect demand for our products and significantly impact our operating results.

The COVID-19 has had a significant impact on our operations for the year ended September 30, 2020 and had temporarily impact on our operations for the years ended September 30, 2021 and 2022.

Our ability to manufacture and/or sell our products may be impaired by damage or disruption to our manufacturing, warehousing or distribution capabilities, or to the capabilities of our suppliers, logistics service providers or distributors as a result of the impact from COVID-19. This damage or disruption could result from events or factors that are impossible to predict or are beyond our control, such as raw material scarcity, pandemics, government shutdowns, disruptions in logistics, supplier capacity constraints, adverse weather conditions, natural disasters, fire, terrorism or other events. In December 2019, COVID-19 emerged. Because of the shelter-in-place orders and travel restrictions mandated by the Chinese government, the production and sales activities of the Company stopped during the end of January and February 2020, which adversely impacted the Company’s production and sales during that period. Although the production and sales resumed at the end of March 2020, the COVID-19 outbreak has had a significant adverse impact on our business and operations during the fiscal year ended September 30, 2020. Though our business and operation were only temporarily affected by COVID-19, the Company’s operations may be affected by the ongoing outbreak of COVID-19. The continued uncertainties associated with COVID-19 may cause the Company’s revenue and cash flows to underperform in the next 12 months. A resurgence could negatively affect the sales, the collection of the payments from account receivables and the utilization of advances to suppliers. The extent of the future impact of COVID-19 is still highly uncertain and cannot be predicted as of the date of this report. If COVID-19 further impacts its production and sales, the Company’s financial condition, results of operations, and cash flows could continue to be adversely affected.

The loss of any of our key customers could reduce our revenues and our profitability.

Our key customers in fiscal year 2023 were principally Shanghai Yunmihui Supply Chain Group Co. Ltd (“Yunmihui”) and Shanghai Hongren International Trade Co., Ltd (“Hongren”). They are unrelated parties. For the fiscal years ended September 30, 2023, 2022 and 2021, sales to Yunmihui accounted for approximately 40.5%, 31.2% and 0% of our total revenue, respectively, and sales to Hongren accounted for approximately 11.7%, 0% and 0%, respectively. While we've lost certain major customers in the last two years, we haven't experienced a decrease in revenue as a result of the development of new customers. If we cannot maintain long-term relationships with these major customers, the loss of our sales to them could have an adverse effect on our business, financial condition and results of operations. There can be no assurance that we will maintain or improve the relationships with these customers, or that we will be able to continue to supply these customers at current levels or at all. Any failure to pay by these customers could have a material negative effect on our company’s business. In addition, having a relatively small number of customers may cause our quarterly results to be inconsistent, depending upon when these customers pay for outstanding invoices.

9

We buy our supplies from a relatively limited number of suppliers.

During the years ended September 30, 2023, 2022 and 2021, we had the following suppliers that accounted for 15% or more of our purchases.

	For the years ended September 30,
Supplier Name	2023			2022			2021
Ningbo Caixiang Trading Co., Ltd.		8.2	%		23.0	%		5.7	%
Jingning Liannong Trading Co., Ltd.		13.5	%		20.9	%		36.9	%
Lishui Zhelin Trading Co., Ltd.		9.5	%		6.0	%		20.2	%
Qingyuan Nongbang Mushroom Industry Co., Ltd.		7.9	%		9.3	%		18.2	%
Zhongjin Boda (Hangzhou) Industrial Co., Ltd.		-			-			16.2	%

Because we purchase a material amount of our raw materials from these suppliers, the loss of any such suppliers could result in increased expenses for our company and result in adverse impact on our business, financial condition and results of operations.

Our failure to comply with PRC food safety laws may require us to incur significant costs.

Manufacturers in the Chinese food industry are subject to compliance with PRC food safety laws and regulations. These food safety laws require all enterprises engaged in the production of edible fungi and various vegetables and fruits to obtain a food production license for each of their production facilities. Such laws also require manufacturers to comply with regulations with respect to food, food additives, packaging, and food production sites, facilities and equipment. Meanwhile, a separate food distribution license is required for engaging in the sale of food. Failure to comply with PRC food safety laws may result in fines, suspension of operations, loss of licenses and, in more extreme cases, criminal proceedings against an enterprise and its management. The Chinese government may also change the existing laws or regulations or impose additional or stricter laws or regulations, compliance with which may cause us to incur significant capital expenditures, which we may be unable to pass on to our customers through higher prices for our products.

We lack product and business diversification. Accordingly, our future revenues and earnings are more susceptible to fluctuations than a more diversified company.

Our primary business activities have historically focused on edible fungi products. Because our focus is limited in this way, any risk affecting the edible fungi industry or consumers’ desire for edible fungi products could disproportionately affect our business. Our lack of product and business diversification could inhibit the opportunities for growth of our business, revenues and profits. Although we began to expand into the bulk agricultural commodity trading industry in June 2021, we still lack product and business diversification.

Governmental support to the agriculture industry and/or our business may decrease or disappear.

Currently the Chinese government is supporting agriculture with tax exemption, especially e-commerce in agriculture. In addition, our local government has been supporting our company by providing subsidies from time to time. These beneficial policies may change, so the support we receive from the government may decrease or disappear, which may impact our development.

10

Beneficial tax incentives may disappear.

We operate our business through our Chinese subsidiaries and variable interest entity (“VIE”). Currently the agriculture industry is highly supported by the Chinese government. For example, to further strengthen and standardize the support of comprehensive agricultural development to the characteristic industries with agricultural advantages, the Chinese National Office of Comprehensive Agricultural Development has decided to carry out the compilation of The Plan for Comprehensive Agricultural Development to Support the Agricultural Advantage and Characteristic Industries (2019-2021) (the “New Plan”). Edible fungi are emphasized and classified as a “dominant and characteristic industry,” which may become the objects of policy-support issue in the future. However, the New Plan has not yet been formally approved and the final result remains to be further observed.

As an agricultural production enterprise, we are enjoying certain tax benefits, including a tax waiver for our dried mushroom wholesale business. If the tax policies change in a way that some or all of the tax benefits we presently receive are cancelled, we may need to pay much higher taxes which will reduce or eliminate our profit margin.

We are subject to extensive regulations by the Chinese government.

The food industry is subject to extensive regulations by Chinese government agencies. Among other things, these regulations govern the manufacturing, importation, processing, packaging, storage, exportation, distribution and labeling of our products. New or amended statutes and regulations, increased production at our existing facilities, and our expansion into new operations and jurisdictions may require us to obtain new licenses and permits and could require us to change our methods of operations at costs that could be substantial.

While we are not aware of any data breach in the past, cyber-attacks, computer viruses or any future failure to adequately maintain security and prevent unauthorized access to electronic and other confidential information could result in a data breach which could materially adversely affect our reputation, financial condition and operating results.

As part of business operations, we collect, process, store and transmit our employees, business partners and other third party data. Our customers, business partners and employees expect we adequately safeguard and protect their sensitive personal and business information. We may experience cyber-attacks and other security incidents of varying degrees from time to time, and we may incur significant costs in protecting against or remediating such incidents. In addition, we are subject to a variety of laws and regulations in the PRC and other countries relating to cybersecurity and data protection. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with customers and cooperation partners could be severely damaged. Affected third parties or government authorities could initiate legal or regulatory actions against us in connection with any actual or perceived security breaches or improper access to or disclosure of data, which could cause us to incur significant expense and liability, and our business and operations could be materially and adversely affected.

Failure to make adequate contributions to Housing Provident Fund for certain employees of our PRC subsidiaries could subject us to labor disputes or complaint and adversely affect our financial condition.

Pursuant to the Regulations on Management of Housing Provident Fund (“HPF”), promulgated by the State Council on April 3, 1999 and amended on March 24, 2002, PRC enterprises must register with relevant HPF management center, open special HPF accounts at a designated bank and make timely HPF contributions for their employees. In accordance with the Regulations on Management of Housing Provident Fund and the Rules for Administrative Enforcement of Housing Provident Fund in Zhejiang Province, an enterprise that fails to register with HPF management center or open accounts for its employees shall be ordered to do so within the prescribed time; if a PRC company fails to comply within the prescribed time, it could be fined between RMB10,000 and RMB50,000.

Furthermore, if such enterprise fails to pay in full or in part its HPF contributions, such enterprise will be ordered by the HPF enforcement authorities to make such contributions, and may be compelled by the people’s court that has jurisdiction over the matter to make such contributions. Pursuant to the relevant HPF laws and regulations, HPF contributions are only required for employees with urban housing registration. For employees with rural housing registration, contributions are voluntary and are not required. In addition, there are discrepancies in the interpretation and enforcement of such regulations at the national and local level. Local and national enforcement practices at times vary significantly.

Our PRC subsidiaries have not opened HPF accounts for approximately 80% of their employees (most of them are with rural housing registration), and their contribution to HPF did not cover these employees. Regarding those employees with urban housing registration but not covered by our PRC subsidiaries’ contribution to HPF, our PRC subsidiaries may potentially be ordered by HPF enforcement authorities to make full contribution, and face litigation by employees in relation to their failure to make full contribution. As of the date of this report, our PRC subsidiaries have not received any demand or order from the competent authorities with respect their HPF contribution. To the extent the PRC subsidiaries are required to make such payment, our financial condition will likely be adversely affected.

Changes in trade policies may make our products more expensive to end purchasers in other countries or regions.

We currently receive incentives and support from our local government. Further, China has policy support for the agricultural sector. Because we export approximately 0.6% of our agricultural products for sale outside China, we are subject to the risk that foreign governments will view such support, either now or in the future, as unfair trade practices. If this were to happen, our products could be subjected to tariffs or other taxes that cause such products to be more expensive and thus less attractive to potential purchasers.

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The edible fungi cultivated by our suppliers is subject to risks related to diseases, pests, abnormal temperature change and extreme weather events.

Edible fungi are exposed to diseases and pests. Pests and diseases during the cultivation process may significantly decrease the quantity of the qualified edible fungi provided to us, which may force us to breach our contracts with our clients by not being able to supply enough products to them timely, and further impact our revenues.

Temperature can have a significant impact on the growth and the quality of edible fungi. Mushrooms can only grow under certain temperature. If the temperature is too low, the edible fungi may grow slowly or even not grow at all. If the temperature is too high, the edible fungi may grow too fast and have a worse texture.

Global warming is increasing the frequency and severity of extreme weather events around the world. Although our suppliers are using more and more carefully managed environments for cultivation, extreme weather events may still impact our cultivation process. As a result, the supply of our raw materials may be affected. For example, because of the warm winter in 2016, the quantity of edible fungi cultivated in Lishui, Zhejiang Province increased, but the quality decreased and the price decreased accordingly.

Our supplier farms may fail to comply with the legal requirements and our quality standards and negatively affect the quality of our raw materials.

Our supplier farms are responsible for complying with the legal requirements. It is possible that they fail to comply with any PRC law relating to food safety during their production process. If the governmental agency determines they are not eligible to continue the operation, we will need to find alternative supplier farms to meet our demands. The supplier farms may also fail to comply with our quality standards. As a result, our raw materials provided by these family farms will be negatively affected. If we are unable to inspect and rule out any affected fungi and we sell them to our clients, our reputation will be harmed. Our clients may cease purchasing products from us. Even if we are able to inspect the affected fungi, we will need to spend extra time to find alternative suppliers to supplement our raw materials.

The purchase price of dried edible fungi is based on local market price which we cannot control and predict.

When we purchase dried edible fungi from our suppliers, we usually reach a price slightly higher than the local market price on that day or during that period because we seek to purchase top quality dried mushrooms, which command premium prices. If the local market price is unusually higher on that day or during that period, and if we have to purchase certain amount of edible fungi to fulfill our clients’ orders, we will spend more on the costs than expected. Because we receive the orders from our clients first when the sale price is set, and then purchase dried edible fungi accordingly, a higher purchase price will reduce our profit margin.

Increases in edible fungi costs may negatively affect our operating results.

The price of edible fungi may be inelastic when we wish to purchase supplies. While we have attempted to mitigate this risk by taking advantage of decreases in other expenses (due to better transportation infrastructure reducing the cost of bringing materials to our company and from our company to our customers) and improving efficiency, we cannot guarantee that we will be able to control our material expenses. In addition, as we are competing based upon low price, we will risk losing customers by increasing our selling prices. To the extent our expenses increase beyond the price we can charge our customers, our operating results could be harmed.

Our products are not nationally well known.

Our product visibility in general is not high in China. Although we plan to participate in more industry events to improve recognition and drive revenues, we have no guarantee that we will be able to materially increase the market recognition of all our edible fungi products. To the extent we are unable to increase our product visibility, we may face challenges in increasing revenues or increasing the profit margin for such products.

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Our products have relatively low technical requirements; therefore, barriers to entry are minimal.

Processing edible fungi does not require complicated technology. Our competitors can create similar products at a relatively low cost because there are minimal barriers of entry. To the extent our customers discriminate based on price, we may find that we lose market share to new producers. Moreover, we may be required to reduce our price in order to maintain or slow loss of market share for such products.

Our prior e-commerce strategy has not produced expected results and our continued investment in online sales may not succeed as well.

We have devoted significant resources to our decision to develop and expand our e-commerce business. We have built and developed our online store Farmmi Jicai targeting centralized procurement and our retail online store Farmmi Liangpin Market in China. We closed our Farmmi Liangpin Market on December 31, 2020 and closed Farmmi Jicai in January 2023 because the revenues generated did not justify the costs and expenses incurred in the operations of those online stores. Nevertheless we expect to continue to operate online sales through Nongyuan Network, especially for product sales to foreign markets. We have no guarantee that we will be successful in operating online sales channels in the future. If we do not manage it effectively, our business prospects could be further impaired.

Our directors’ and executive officers’ other business activities may pose conflicts of time commitment and conflicts of interest.

Our directors and executive officers have other business interests outside the company that could potentially give rise to conflicts of time commitment. For example, our Chief Executive Officer and Chairwoman, Yefang Zhang, and her husband and one of our directors, Zhengyu Wang, collectively own all of Forasen Group. Zhengyu Wang is also the Chairman of the Board of Directors of Tantech Holdings Ltd (“Tantech”), another Nasdaq listed company, and Yefang Zhang is its director.

Ms. Zhang has historically devoted approximately 85% of her time to matters concerning Farmmi, approximately 5% of her time to matters for Tantech, and approximately 10% of her time to matters concerning Forasen Group. Mr. Wang has historically devoted approximately 15% of his time to matters concerning Farmmi, approximately 15% of his time to matters for Tantech, and approximately 70% of his time to matters concerning Forasen Group. As Ms. Zhang and Mr. Wang devote considerable time and effort to Tantech and Forasen Group, these sort of business activities could both distract them from focusing on Farmmi and pose a conflict of time commitment.

Our company and Forasen Group signed a Non-Competition Agreement which provides that Forasen Group should not engage in any business that our company engages in, except purchasing products from us. In addition, Mr. Wang and Ms. Zhang signed a Non-Competition Agreement with our company and Tantech which provides that Mr. Wang and Ms. Zhang shall not vote in favor or otherwise cause Tantech to engage in the business that we conduct. Although because of these non-competition agreements, we do not believe that there are business activities of Mr. Wang and Ms. Zhang that will compete directly with our business operations, it is possible that the enforceability of these agreements is challenged and a conflict of interest occurs.

Outstanding bank loans may reduce our available funds.

We had approximately $4.7 million in outstanding bank loans as of September 30, 2023. While we believe we have adequate capital to repay those bank loans, there can be no guarantee that we will be able to pay all amounts when due or to refinance the amounts on terms that are acceptable to us or at all. If we are unable to make our payments when due or to refinance such amounts, we could be subject to penalty and our business could be negatively affected.

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While we do not believe they will impact our liquidity, the terms of the debt agreements impose significant operating and financial restrictions on us. These restrictions could also have a negative impact on our business, financial condition and results of operations by significantly limiting or prohibiting us from engaging in certain transactions, including but not limited to: incurring or guaranteeing additional indebtedness; transferring or selling assets currently held by us; and transferring ownership interests in certain of our subsidiaries. The failure to comply with any of these covenants could cause a default under our other debt agreements. Any of these defaults, if not waived, could result in the acceleration of all of our debt, in which case the debt would become immediately due and payable. If this occurs, we may not be able to repay our debt or borrow sufficient funds to refinance it on favorable terms, if any.

We may be unable to refinance our short-term loans.

We expect to be able to refinance our short-term loans based on past experience and our good credit history. We do not believe failure to refinance from certain banks will have significant negative impact on our normal business operations. For the years ended September 30, 2023 and 2021, our operating cash flow was negative. While for the year ended September 30, 2022, our operating cash flow was positive. Our related parties including our major shareholders and affiliate companies, are willing to provide us financial support. However, it is possible for us to have negative cash flow again in the future, and for our related parties to be unable to provide us financial support as needed. As a result, the failure to refinance our short-term loans could potentially affect our capital expenditure and expansion of business.

We have in the past guaranteed third parties’ debt; if we guarantee third parties’ debt in the future, a failure by such parties to repay their debts may be enforced against our company.

As a condition of obtaining bank financing, smaller companies in China sometimes enter into reciprocal debt guaranties with third parties, pursuant to which the bank agrees to provide loans to one or more unrelated entities if such entities agree to guarantee the loans made to the other entities.

Over the years, our subsidiaries were the guarantors of third parties’ debts and were also beneficiaries of third parties’ guaranties.

We are not currently guaranteeing any third-party debts or intend to enter into any third-party guarantees. We have also adopted a policy that restricts third party guarantees. In addition, no banks currently require such guarantee arrangements from us. However, it is possible that we may, in the future, require bank loans to support our business or expand our operations and be unable to obtain unguaranteed loans. If this were to occur in the future, future lenders might demand unrelated third-party guarantees. If we were to enter into any other guarantees for third party debts and they failed to pay, our cash position could be adversely affected and we might be unable to be made whole by our counter-guarantor.

If we guarantee related parties’ debt in the future, we may be liable if they fail to pay the underlying debt.

In the past, we facilitated the operations of our related party Forasen Group by agreeing to guarantee its obligations.

For example, on December 20, 2013, Forasen Group signed a guarantee agreement with Bank of China to guarantee the loan and credit of up to RMB 15,000,000 on a loan from the Bank of China to Zhejiang Feiyan Down Products Co., Ltd. (“Feiyan”). Relying on this guarantee, Feiyan was able to borrow RMB 15,000,000 from the Bank of China.

Feiyan subsequently defaulted on its debt and Forasen Group entrusted Zhejiang FLS Mushroom Co., Ltd. (“FLS Mushroom”) to repay the money on Forasen Group’s behalf. Accordingly, FLS Mushroom signed a credit transfer agreement with Bank of China by which it promised to honor the guarantee in Forasen Group’s place.

In five installments paid in 2015, 2016 and 2017, Forasen Group fully repaid all outstanding amounts, and FLS Mushroom has no remaining liability for its guarantee.

If we enter into related party guarantees in the future and we are unable to cause a related party to honor such obligations, we could find that our company bears primary responsibility for such obligations.

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When China’s currency appreciates, our products may become more expensive to export to countries or regions outside mainland China.

While 2023 and 2022, we saw the Renminbi’s depreciation against the U.S. dollar, 2021 saw the Renminbi’s appreciation against the U.S. dollar. We are subject to exchange rate risk between U.S. dollar and Renminbi because we sell our products in U.S. dollar from time to time, and our export distributors settle in U.S. dollar and these distributors may also be affected by U.S. dollar exchange rate. Among our export sales for the year ended September 30, 2023, approximately 3.17% were sold to U.S., approximately 27.41% were sold to Canada, approximately 28.83% were sold to Japan, approximately 10.42% were sold to Europe, and approximately 30.17% were sold to the Middle East. Settlement currency is USD for export transactions no matter what the destination country is.

We may require additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing when needed.

While we conducted a private placement in November 2018 and we have outstanding bank loans, we may need to obtain additional debt or equity financing to fund future capital expenditures. While we do not anticipate seeking additional financing in the immediate future, any additional equity may result in dilution to the holders of our outstanding shares of capital stock. Additional debt financing may include conditions that would restrict our freedom to operate our business, such as conditions that:

· limit our ability to pay dividends or require us to seek consent for the payment of dividends;

· increase our vulnerability to general adverse economic and industry conditions;

· require us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and

· limit our flexibility in planning for, or reacting to, changes in our business and our industry.

We cannot guarantee that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

Our bank accounts are not fully insured or protected against loss.

We maintain our cash with various banks located in mainland China. Cash maintained in banks within the People’s Republic of China of less than RMB0.5 million (equivalent to $70,289) per bank are covered by "Deposit Insurance Regulation" promulgated by the State Council of the People’s Republic of China. Our cash accounts are not insured or otherwise protected. Should any bank or trust company holding our cash deposits become insolvent, or if we are otherwise unable to withdraw funds, we would lose the cash on deposit with that particular bank or escrow agent.

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We are substantially dependent upon our senior management.

We are highly dependent on our senior management to manage our business and operations. In particular, we rely substantially on our Chief Executive Officer and Chairwoman, Ms. Yefang Zhang to manage our operations. Ms. Zhang has been involved in the mushroom industry for more than twenty years. Ms. Zhang cofounded Lishui Jingning Huali Co., Ltd. in 1994 with her husband Mr. Zhengyu Wang to engage in the mushroom business. Due to her experience in the industry and long relationships with our customer base, Ms. Zhang would be difficult to replace.

While we provide the legally required personal insurance for the benefit of our employees, we do not maintain key person life insurance on any of our senior management, including Ms. Zhang. The loss of any one of them would have a material adverse effect on our business and operations. Competition for senior management and our other key personnel is intense, and the pool of suitable candidates is limited. We may be unable to quickly locate a suitable replacement for any senior management that we lose. In addition, if any member of our senior management joins a competitor or forms a competing company, they may compete with us for customers, business partners and other key professionals and staff members of our company. Although some of our senior management of Forest Food and Hangzhou Nongyuan Network Technology Co., Ltd. (“Nongyuan Network”) have signed confidentiality agreements in connection with their employment with us, we cannot assure you that we will be able to successfully enforce these provisions in the event of a dispute between us and any member of our senior management.

Failure to manage our growth could strain our management, operational and other resources, which could materially and adversely affect our business and prospects.

Our growth strategy includes developing export customers of our existing products of edible fungi, increasing varieties of agricultural products and expanding our e-commerce platforms. Pursuing these strategies has resulted in, and will continue to result in substantial demands on management resources. In particular, the management of our growth will require, among other things:

· stringent cost controls and sufficient liquidity;

· strengthening of financial and management controls;

· increased marketing, sales and support activities; and

· hiring and training of new personnel.

If we are not able to manage our growth successfully, our business and prospects would be materially and adversely affected.

An insufficient amount of insurance could expose us to significant costs and business disruption.

While we have purchased insurance to cover certain assets and property of our business, the amounts and scope of coverage could leave our business inadequately protected from loss. For example, not all of our subsidiaries have coverage of business interruption insurance. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected.

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

We rely on a combination of trademark, domain name laws and non-disclosure agreements and other methods to protect our intellectual property rights.

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Implementation of PRC intellectual property-related laws have historically been lacking, primarily because of ambiguities in the PRC laws and enforcement difficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.

We may be exposed to trademark infringement and other claims by third parties which, if successful, could disrupt our business and have a material adverse effect on our financial condition and results of operations.

If we sell our branded products internationally, and as litigation becomes more common in China, we face a higher risk of being the subject of claims for trademark infringement, invalidity or indemnification relating to other parties’ proprietary rights. The defense of trademark suits, including of trademark infringement suits, and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our management personnel. Furthermore, an adverse determination in any such litigation or proceedings to which we may become a party could cause us to:

· pay damage awards;

· seek licenses from third parties;

· pay ongoing royalties;

· redesign our branded products; or

· be restricted by injunctions,

each of which could effectively prevent us from pursuing some or all of our business and result in our customers or potential customers deferring or limiting their purchase or use of our products. This could have a material adverse effect on our financial condition and results of operations.

Stock price volatility may expose investors to significant investment risk.

In three public offerings on March 22, 2021, April 28, 2021, and September 13, 2021, we offered an aggregate of more than 500 million shares. The significant increase in the number of outstanding shares that resulted from such offerings, together with successively decreasing offering prices per share, has resulted in material volatility in our stock price. In September 2022, we entered into a securities purchase agreement with an investor, pursuant to which we issued to the investor a convertible promissory note. Our obligations under the agreements may be satisfied in cash and/or ordinary shares. In the event that our repayments are made in shares in lieu of cash, we could expect a substantial increase in the number of the outstanding shares, which could cause additional volatility in our stock price. Between January 1, 2023 and the date of this report, our shares have closed between a low of $0.2263 and a high of $1.3 per share. If we engage in future capital raises at dilutive prices, or if investors believe that we will do so, our stock price could continue to be volatile.

Our investments in other businesses may not be successful.

On November 5, 2021, we purchased 124,590,064 shares of Shanghai Jiaoda Onlly Co., Ltd. (“Jiaoda Onlly”), a Shanghai Stock Exchange listed company under the ticker 600530.SH, from shareholders of Jiaoda Onlly. Jiaoda Onlly operates elderly care institutions and engages in the research and development, production and sale of health food. We, through one of our subsidiaries, Zhejiang Yitang Medical Service Co., Ltd. (“Yitang”), purchased a total of 16% of the shares of Jiaoda Onlly from China Capital Investment (Group) Co., Ltd. (CCIG) and its affiliates for approximately RMB 509 million (approximately US$71.6 million). In January 2022, we determined that the investment in Jiaoda Onlly no longer aligned with our business objectives and transferred our obligations and rights under the Equity Transfer Framework Agreement to two unrelated parties. Although we did not suffer a financial loss in this transaction, we could incur a loss in future investments.

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An increase in prepaid expenses and accounts receivable may have a material adverse effect on our financial condition and the results of operations.

We have significantly increased our advances to suppliers and accounts receivable in fiscal year 2021. Although we increased such advances to suppliers mainly in anticipation of higher revenue to be generated in fiscal 2023, we cannot guarantee that such customer demand will be forthcoming, that such commodity prices will justify the amount of such increase, that the suppliers will continue to operate in business, that we would be able to recover any prepayments in the event suppliers are unable to deliver according to our agreements or that the market prices for our products will allow us to sell such products profitably even with increased demand. Similarly, our customers had significantly increased accounts receivable to us during fiscal year 2021. While this increase was partially related to an increase in revenues, some of the increase was also due to slower-paying customers than in fiscal year 2020. Although we recovered some of the accounts receivable following completion of the fiscal year, we cannot guarantee that we will be successful in recovering accounts receivable in a timely fashion in the future. In the event our customers fail to pay our business for products or suppliers fail to return advances in the event they are unable to meet our requirements, our financial operation would be materially adversely affected.

Risks Related to Doing Business in China

The PRC government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ordinary shares.

The Chinese government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The Chinese government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industries that could require us to seek permission from Chinese authorities to continue to operate our business, which may adversely affect our business, financial condition and results of operations. Furthermore, recent statements made by the Chinese government have indicated an intent to increase the government’s oversight and control over offerings of companies with significant operations in mainland China that are to be conducted in foreign markets, as well as foreign investment in China-based issuers like us. Any such action, if taken by the Chinese government, could significantly limit or completely hinder our ability to offer or continue to offer ordinary shares to our investors and could cause the value of our ordinary shares to significantly decline or become worthless.

We are required to file with the CSRC and may be subject to the approval of, filing or other procedures with  other Chinese regulatory authorities in connection with securities offerings under PRC law, and we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures.

The Chinese government has exercised, and may continue to exercise, substantial influence or control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in mainland China could be undermined if our Chinese subsidiaries and consolidated entities are not able to obtain or maintain approvals to operate in mainland China. The central or local governments could impose new, stricter regulations or interpretations of existing regulations that could require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

As of the date of this Annual Report, we are required to submit filings to the CSRC in connection with the future issuance of our equity securities to foreign investors. As there are uncertainties with respect to the Chinese legal system and changes in laws, regulations and policies, including how those laws, regulations and policies will be interpreted or implemented, there can be no assurance that we will not be subject to additional requirements, approvals, or permissions in the future. We are required to obtain certain approvals from Chinese authorities in order to operate our Chinese subsidiaries.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, appear to require that offshore special purpose vehicles, controlled by Chinese companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of Chinese domestic companies or assets in exchange for the shares of the offshore special purpose vehicles, obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange.

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Further, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law, pursuant to which Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures have been or are expected to be adopted in addition to the Cyber Security Law and Data Security Law.

Additionally, the Draft Rules, if declared into effect, will implement a new regulatory framework requiring China-based companies such as us to submit filings to CSRC in connection with the issuance of equity securities to foreign investors. The instructions on the Draft Rules released by the CSRC suggest that companies already listed on overseas exchanges will be exempt, such that prior offerings will not need to be filed with the CSRC. However, if the Draft Rules are declared into effect, we may be required to submit filings to the CSRC in connection with any future offerings, including follow-on offerings, secondary offerings or other shelf offerings, within three working days following the completion of any such offering(s).

As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure investors that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities, and we may become subject to more stringent requirements with respect to matters including data privacy and cross-border investigation and enforcement of legal claims.

If our Chinese subsidiaries or consolidated entities do not receive or maintain approvals or inadvertently conclude that approvals needed for their business are not required or if there are changes in applicable laws (including regulations) or interpretations of laws and our Chinese subsidiaries or consolidated entities are required but unable to obtain approvals in the future, then such changes or need for approvals (if not obtained) could adversely affect the operations of our Chinese subsidiaries or consolidated entities, including limiting or prohibiting the ability of our Chinese subsidiaries or consolidated entities to operate, and the value of our shares could significantly decline or become worthless.

To operate our general business activities currently conducted in mainland China, each of our Chinese subsidiaries and consolidated entities is required to obtain a business license from the local counterpart of the State Administration for Market Regulation, or SAMR. Each of our Chinese subsidiaries and consolidated entities has obtained a valid business license from the local counterpart of the SAMR, and no application for any such license has been denied.

As of the date of this Annual Report, we have not received any inquiry, notice, warning or sanction regarding obtaining approval, completing filing or other procedures in connection with issuing securities to foreign investors from the CSRC or any other Chinese regulatory authorities that have jurisdiction over our operations. Based on the above and our understanding of the Chinese laws and regulations currently in effect, we were not required to submit an application to the CSRC or any other Chinese regulatory authorities for issuing securities to foreign investors. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities, and we cannot assure you that the relevant Chinese regulatory authorities, including the CSRC, would reach the same conclusion as us. If it is determined in the future that the approval of, filing or other procedure with the CSRC or any other regulatory authority is required for issuing our securities to foreign investors, it is uncertain whether we will be able and how long it will take for us to obtain the approval or complete the filing or other procedure, despite our best efforts. If we, for any reason, are unable to obtain or complete, or experience significant delays in obtaining or completing, the requisite relevant approval(s), filing or other procedure(s), we may face sanctions by the CSRC or other Chinese regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our ability to pay dividends outside of mainland China, limit our operations in mainland China, delay or restrict the repatriation of the proceeds from our public offerings into mainland China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our shares. In addition, if the CSRC or other regulatory authorities later promulgate new rules requiring that we obtain their approvals or complete filing or other procedures for any future public offerings, we may be unable to obtain a waiver of such requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an requirement could have a material adverse effect on the trading price of our shares, including potentially making those shares worthless.

If the Chinese government determines that our corporate structure does not comply with Chinese regulations, or if Chinese regulations change or are interpreted differently in the future, the value of our ordinary shares may decline in value or become worthless.

In July 2021, the Chinese government provided new guidance on Chinese companies raising capital outside of mainland China, including through arrangements called variable interest entities, or VIEs. We are not in an industry that is subject to foreign ownership limitations in mainland China. While most of our business operations are conducted by our PRC subsidiaries, our product sales via online and e-commerce channels, which account for a smaller portion of our business, are engaged by our VIEs through a series of contractual arrangements entered into between our subsidiaries and VIEs and the shareholder of the VIEs. As a result of these contractual arrangements, we exert control over VIEs and their subsidiaries and consolidate the VIEs’ operating results in our financial statements under U.S. GAAP. We believe our current ownership structure and the contractual arrangements among our subsidiaries, VIEs and the shareholder of the VIEs are not in violation of existing PRC laws, rules and regulations; and those contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with our opinion.

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It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entities structures will be adopted or if adopted, what they would provide. In particular, in January 2015, the Ministry of Commerce, or MOFCOM, published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, variable interest entities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. In December 2018, the Standing Committee of the National People’s Congress published a discussion draft of a new proposed Foreign Investment Law, aiming to replace the major existing laws governing foreign direct investment in China. On January 29, 2019, the discussion draft with slight revisions, or the New Draft Foreign Investment Law, was submitted for review. Pursuant to the New Draft Foreign Investment Law, foreign investments shall be subject to the negative list management system. However, the New Draft Foreign Investment Law does not mention “actual control” as regulated in the previous draft and the position to be taken with respect to the existing or future companies with the “variable interest entities” structure. On March 15, 2019, the Foreign Investment Law of the People’s Republic of China, or the Final Foreign Investment Law, with slight revision, was finally issued and became effective on January 1, 2020.

Although variable interest entities structures are not included in the Final Foreign Investment Law, it is uncertain whether any interpretation and implementation of the Final Foreign Investment Law or new PRC laws, rules or regulations relating to variable interest entities structures will be adopted or if adopted, what they would provide. If the ownership structure, contractual arrangements and business of our PRC subsidiary or its consolidated VIEs are found to be in violation of any existing or future PRC laws or regulations, or our PRC subsidiary fails to obtain or maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating its income or the income of its PRC subsidiary or consolidated variable interest entities, revoking the business licenses or operating licenses of its PRC subsidiary or consolidated variable interest entities, discontinuing or placing restrictions or onerous conditions on its operations, requiring our PRC operations to undergo a costly and disruptive restructuring and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our financial service business operations and severely damage its reputation, which would in turn materially and adversely affect its business, financial condition and results of operations. If any of these occurrences results in its inability to direct the activities of its consolidated variable interest entities, and/or its failure to receive economic benefits from its consolidated variable interest entities, we may not be able to consolidate our VIEs’ results into our consolidated financial statements in accordance with U.S. GAAP.

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China. Our PRC subsidiaries are subject to various PRC laws and regulations generally applicable to companies in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

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Trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or investigate completed our auditors for two consecutive years.

In recent years, U.S. regulatory authorities have continued to express their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. As part of a continued regulatory focus in the United States on access to audit and other information, the Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The HFCAA also requires that, to the extent that the PCAOB has been unable to inspect an issuer’s auditor for three consecutive years since 2021, the SEC shall prohibit its securities registered in the United States from being traded on any national securities exchange or over-the-counter markets in the United States.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. The interim final rule applies to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. Consistent with the HFCAA, the interim final rule requires the submission of documentation to the SEC establishing that such a registrant is not owned or controlled by a government entity in that foreign jurisdiction and also requires disclosure in a foreign issuer’s annual report regarding the audit arrangements of, and government influence on, such registrants. On May 13, 2021, the PCAOB issued proposed PCAOB Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act for public comment. The proposed rule provides a framework for making determinations as to whether PCAOB is unable to inspect an audit firm in a foreign jurisdiction, including the timing, factors, bases, publication and revocation or modification of such determinations, and such determinations will be made on a jurisdiction-wide basis in a consistent manner applicable to all firms headquartered in the jurisdiction. In November 2021, the SEC approved PCAOB Rule 6100. On December 2, 2021, the SEC adopted amendments to final rules implementing the disclosure and submission requirements of the HFCAA.

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

On December 16, 2021, the PCAOB announced the PCAOB Holding Foreign Companies Accountable Act determinations (the “PCAOB determinations”) relating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in the PRC or Hong Kong.

On August 26, 2022, the PCAOB signed a SOP with the CSRC and the MOF of the PRC regarding cooperation in the oversight of PCAOB-registered public accounting firms in the PRC and Hong Kong which establishes a method for the PCAOB to conduct inspections of PCAOB-registered public accounting firms in the PRC and Hong Kong, as contemplated by the Sarbanes-Oxley Act. Under the agreement, (a) the PCAOB has sole discretion to select the firms, audit engagements and potential violations it inspects and investigates without consultation with, or input from, PRC authorities; (b) procedures are in place for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed; (c) the PCAOB has direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates; and (d) the PCAOB shall have the unfettered ability to transfer information to the SEC in accordance with the Sarbanes-Oxley Act, and the SEC can use the information for all regulatory purposes, including administrative or civil enforcement actions. The PCAOB was required to reassess its determinations as to whether it is able to carry out inspections and investigations completely and without obstruction by the end of 2022. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and vacated its previous determinations. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination.

Congress passed fiscal year 2023 Omnibus spending legislation in December 2022, which contained provisions to accelerate the HFCAA timeline for implementation of trading prohibitions from three years to two years. As a result, the SEC is required to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections or complete investigations for two consecutive years.

Our current auditor, YCM CPA Inc., an independent registered public accounting firm that is headquartered in the United States, is a firm registered with the U.S. Public Company Accounting Oversight Board (the “PCAOB”), and is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. YCM CPA Inc. has been subject to PCAOB inspections, and is not among the PCAOB-registered public accounting firms headquartered in the PRC or Hong Kong that are subject to PCAOB’s determination. Notwithstanding the foregoing, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, or if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the Determination so that we are subject to the HFCAA, as the same may be amended, you may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected or investigated by the PCAOB, or a lack of PCAOB inspections or investigations of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate.

U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.

The SEC, the U.S. Department of Justice and other U.S. authorities may also have difficulties in bringing and enforcing actions against us or our directors or executive officers in the PRC. The SEC has stated that there are significant legal and other obstacles to obtaining information needed for investigations or litigation in China. China has recently adopted a revised securities law that became effective on March 1, 2020, Article 177 of which provides, among other things, that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without governmental approval in China, no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators, which could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted outside of China.

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The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.

The PRC Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. According to the PRC Social Insurance Law, which became effective on July 1, 2011, and the Administrative Regulations on the Housing Funds, Companies operating in China are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees.

As a result of these laws and regulations designed to enhance labor protection, we expect our labor costs will continue to increase. In addition, as the interpretation and implementation of these laws and regulations are still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.

We are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We are also subject to Chinese anti-corruption laws, which strictly prohibit the payment of bribes to government officials. We have operations, agreements with third parties, and make sales in China, which may experience corruption. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants or distributors of our company, because these parties are not always subject to our control. We are in process of implementing an anticorruption program, which prohibits the offering or giving of anything of value to foreign officials, directly or indirectly, for the purpose of obtaining or retaining business. The anticorruption program also requires that clauses mandating compliance with our policy be included in all contracts with foreign sales agents, sales consultants and distributors and that they certify their compliance with our policy annually. It further requires that all hospitality involving promotion of sales to foreign governments and government-owned or controlled entities be in accordance with specified guidelines. In the meantime, we believe to date we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption law. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption law may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

We are subject to exchange rate risk between U.S. dollar and Renminbi because we sell our products in U.S. dollar from time to time, and our export distributors settle in U.S. dollar and these distributors may also be affected by U.S. dollar exchange rate. If China’s currency appreciates, our products may become more expensive to export to other countries and our sales may be negatively affected by the appreciation.

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Significant revaluation of the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive upon cash exercises, if any, of the warrants to purchase the Ordinary Shares offered hereby into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

PRC government has legalized the VIE structure for the first time, but VIE structure still faces many uncertainties.

The PRC government regulates telecommunications-related businesses through strict business licensing requirements and other government regulations. These laws and regulations also include limitations on foreign ownership of PRC companies that engage in telecommunications-related businesses.

Because we are a Cayman Islands company, we are classified as a foreign enterprise under PRC laws and regulations, and most of our PRC subsidiaries, (Farmmi (Hangzhou) Enterprise Management Co., Ltd. (“Farmmi Enterprise”), Lishui Farmmi Technology Co., Ltd. (“Farmmi Technology”), Farmmi Agricultural), are foreign-invested enterprises, or FIEs. To comply with PRC laws and regulations, we conduct our e-commerce websites (Farmmi Jicai and Farmmi Liangpin Market which we recently closed) in China through contractual arrangements with our VIE and its shareholder. These contractual arrangements provide us with effective control over our VIE and enable us to receive substantially all of the economic benefits of our VIE in consideration for the services provided by our foreign-owned PRC subsidiaries, and have an exclusive option to purchase all of the equity interest in our VIE when permissible under PRC laws. For a description of our VIE structure and these contractual arrangements, see “Item 4. Information on the Company - C. Organizational Structure - Hangzhou Nongyuan Network Technology Co., Ltd. (‘Nongyuan Network’).”

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Based on the advice of our PRC legal counsel, Zhejiang Zhengbiao Law Firm, the corporate structure of our VIE in China are in compliance with all existing PRC laws and regulations. According to the administrative provisions of the State Council on overseas securities issuance and listing of domestic enterprises (Draft for comments) (hereinafter referred to as the Administrative Provisions) and the administrative measures for the filing of overseas securities issuance and listing of domestic enterprises (Draft for comments) (hereinafter referred to as the Filing Measures) issued by the CSRC on December 24, 2021, The VIE framework has been officially recognized, but these two laws in draft are soliciting public opinions. At present, they have not been officially promulgated or come into force, and many filing requirements have been put forward for VIE. If VIE structure enterprises satisfy the premise of complying with domestic laws and regulations, and meet the compliance requirements, these VIE structure enterprises can go for overseas listing after filing with the appropriate government agencies, but the legislators have not yet provided a detailed explanation of the word "compliance requirements". According to relevant legislative explanations and interpretations, the new regulations are not retroactive in principle, but additional offerings after overseas listing still need to be subject to regulatory measures such as filings. In addition, the new regulations require stricter national security and data security in the process of overseas listing. For example, "personal information of more than 100,000 people or sensitive personal information of more than 10,000 people" is subject to supervision of Chinese government. Chinese government's legislation or legal supervision on VIE structure has just begun, the new regulations are only the "first step", and other supporting rules will inevitably follow up in the future. Also, the two new regulations would be revised to some extent after the comments period, so overseas listed companies with VIE structure still faces many legal uncertainties. We need to wait for the more detailed rules and guideline on the VIE structure. According to PRC lawyers, since the Chinese government is a government under the rule of law. Before laws are promulgated, there will be a process of soliciting comments or publicizing them in advance. It is unlikely that there will be a sudden change in legislative act without prior notice. Our PRC legal counsel has further advised that if the PRC government authority finds that our corporate structure, the contractual arrangements or the reorganization to establish our current corporate structure do not comply with any applicable PRC laws, rules or regulations, the contractual arrangements will become invalid or unenforceable, and we could be subject to severe penalties including being prohibited from continuing operations

If we or any of our current or future VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities, including the Ministry of Industry and Information Technology, or MIIT, which regulates internet information services companies, SAIC, which regulates advertising companies, and the CSRC would have broad discretion in dealing with such violations, including levying fines, confiscating our income or the income of Farmmi Agricultural and the VIE, revoking the business licenses or operating licenses of Farmmi Agricultural and the VIE, shutting down our servers or blocking our websites, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting our rights to use the proceeds upon cash exercises, if any, of the warrants to purchase the Ordinary Shares offered hereby to finance our business and operations in China, or taking other enforcement actions that could be harmful to our business.

Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business and results of operations. In addition, if the imposition of any of these penalties causes us to lose the rights to direct the activities of the VIE or our right to receive their economic benefits, we would no longer be able to consolidate the VIE. Our VIE was engaged in the operation of our own e-commerce websites, which were established in August 2016. Our VIE had revenue of $20.1 million, $25.3 million and $5.5 million for the years ended September 30, 2023, 2022 and 2021, respectively.

Our contractual arrangements with our VIE may not be as effective in providing operational control as direct ownership.

We have relied and expect to continue to rely on contractual arrangements with Nongyuan Network and its shareholder to operate our e-commerce websites. For a description of our VIE structure and these contractual arrangements, see “Item 4. Information on the Company - C. Organizational Structure - Hangzhou Nongyuan Network Technology Co., Ltd. (‘Nongyuan Network’).” These contractual arrangements may not be as effective in providing us with control over the VIE as direct ownership. If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on the performance of the contractual obligations by our VIE and its shareholder to exercise control over our VIE. Therefore, our contractual arrangements with our VIE may not be as effective in ensuring our control over our e-commerce websites in China as direct ownership would be.

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Our VIE may conduct actions which cause our loss.

Xinyang Wang, a daughter of Mr. Zhengyu Wang, one of the directors of our Company and Ms. Yefang Zhang, our Chairwoman and Chief Executive Officer, is the sole shareholder of our VIE. The Exclusive Call Option Agreement between Farmmi Agricultural, Xinyang Wang and our VIE Nongyuan Network provides that Nongyuan Network may not conduct key actions without the prior written consent of Farmmi Agricultural, such as amending its articles of association. See “Item 4. Information on the Company - C. Organizational Structure - Hangzhou Nongyuan Network Technology Co., Ltd. (‘Nongyuan Network’).” However, the list of these key actions may not be comprehensive enough to protect us. For example, the key actions requiring Farmmi Agricultural prior written consent exclude entering into material contracts in the ordinary course of business. It is possible that contracts entered by Nongyuan Network in the ordinary course of business, such as procurement agreements with exceptionally high amount, may be detrimental to its business. As we are obligated to absorb all of our VIE’s loss from its activities, entry in these agreements by our VIE may cause our loss.

The shareholder of our VIE may breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with her and our VIE. Any failure by our VIE or its shareholder to perform her obligations under our contractual arrangements with her would have a material adverse effect on our business and financial condition.

Xinyang Wang is the sole shareholder of our VIE. She may breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with her and our VIE. If our VIE or its shareholder fails to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend resources to enforce our rights under the contracts. We may have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. For example, if the shareholder of Nongyuan Network were to refuse to transfer her equity interests in Nongyuan Network to us or our designee when we exercise the call option pursuant to these contractual arrangements, if she transferred the equity interests to other persons against our interests, or if she were otherwise to act in bad faith toward us, then we may have to take legal actions to compel her to perform his contractual obligations.

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would incur additional expenses and delay. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our VIE, and our ability to conduct our e-commerce websites may be negatively affected.

Contractual arrangements our subsidiary has entered into with our VIE may be subject to scrutiny by the PRC tax authorities and a finding that we or our VIE owes additional taxes could substantially reduce our consolidated net income and the value of your investment.

Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among Farmmi Agricultural, our VIE and the shareholder of our VIE do not represent arm’s-length prices and consequently adjust Farmmi Agricultural’s or our VIE’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our VIE, which could in turn increase their tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on Farmmi Agricultural or our VIE for any unpaid taxes. Our consolidated net income may be materially and adversely affected if Farmmi Agricultural or our VIE’s tax liabilities increase or if they are subject to late payment fees or other penalties.

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The shareholders and director of our VIE may have potential conflicts of interest with us, which may materially and adversely affect our e-commerce websites.

Xinyang Wang, a daughter of our CEO and Chairwoman Yefang Zhang and Zhengyu Wang, one of our directors, is the shareholder and executive director (legal representative) of our VIE Nongyuan Network. As Xinyang Wang is affiliated with both parties of the contractual arrangements, conflicts of interest may arise for Xinyang Wang. For example, it is in Farmmi Agricultural’s interest to collect as much service fees as possible from Nongyuan Network. However, as the shareholder and executive director (legal representative) of Nongyuan Network, Xinyang Wang may have personal benefits to limit the service fees paid by Nongyuan Network to Farmmi Agricultural. We cannot assure you that when conflicts of interest arise, this equity holder will act in the best interests of our company or that such conflicts will be resolved in our favor. We currently rely on Xinyang Wang to comply with the laws of China, which protect contracts. We also rely on the laws of Cayman Islands, which provide that directors owe a duty of care and a duty of loyalty to our company. However, the legal frameworks of China and the Cayman Islands do not provide guidance on resolving conflicts in the event of a conflict with another corporate governance regime. If we cannot resolve any conflict of interest or dispute between us and the shareholder of our VIE, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related business and companies.

The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involves significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. Issues, risks and uncertainties relating to PRC governmental regulation of the internet industry include, but are not limited to, the following.

We only have control over our websites through contractual arrangements due to the restriction of foreign investment in businesses providing value-added telecommunication services in China, including internet information provision services. This may significantly disrupt our e-commerce business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us.

The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information Office, the MIIT, and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry.

We are required to obtain and maintain various licenses and permits and fulfill registration and filing requirements in order to conduct and operate our e-commerce websites. If these new laws and regulations are promulgated, additional licenses may be required for our operations. If our operations do not comply with these new regulations at the time they become effective, or if we fail to obtain any licenses required under these new laws and regulations, we could be subject to penalties.

The Code for Cross-Border Electronic Commerce Commodity Operations and Services (T/CCPITCSC 009-2017) (hereinafter referred to as “Cross-Border Electronic Commerce Code”) and the Code for Mobile Electronic Commerce Commodity Operations and Services (T/CCPITCSC 009-2017) were formally implemented on March 1, 2018. In addition, the Electronic Commerce Law of the PRC was formally passed on August 31, 2018 and came into effect on January 1, 2019. These laws and regulations define and regulate e-commerce operations, e-commerce operators, e-commerce platform operators, e-commerce contracts, disputes and responsibilities, so as to regulate e-commerce activities. They are legally binding on our company’s electronic commerce platform Nongyuan Network and our online stores. As a result, our electronic commerce activities are subject to stricter legal constraints which cause potential legal risks.

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The Circular on Strengthening the Administration of Foreign Investment in an Operation of Value-added Telecommunications Business, issued by the MIIT in July 2006, prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunications business operating licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunications business in China. According to this circular, either the holder of a value-added telecommunication services operation permit or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunication services. The circular also requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain such facilities in the regions covered by its license. If an Internet Content Provider license (“ICP license”) holder fails to comply with the requirements and also fails to remediate such non-compliance within a specified period of time, the MIIT or its local counterparts have the discretion to take administrative measures against such license holder, including revoking its ICP license. As of April 19, 2021, ICP is not required to be renewed according to the announcement from Zhejiang Communications Administration. Currently, Nongyuan Network, our PRC consolidated VIE, holds an ICP license and operates our websites (farmmi88.com; Farmmi.com; Farmmi.com.cn). Nongyuan Network owns the relevant domain names and has the necessary personnel to operate such websites.

The interpretation and application of existing PRC law, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our e-commerce business. We cannot assure you that we have obtained all the permits or licenses required for conducting our e-commerce business in China or will be able to maintain our existing licenses or obtain new ones.

Our business may be materially and adversely affected if any of our PRC subsidiaries declares bankruptcy or becomes subject to a dissolution or liquidation proceeding.

The Enterprise Bankruptcy Law of the PRC, or the Bankruptcy Law, came into effect on June 1, 2007. The Bankruptcy Law provides that an enterprise will be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise’s assets are, or are demonstrably, insufficient to clear such debts.

Our PRC subsidiaries hold certain assets that are important to our business operations. If any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

According to the SAFE’s Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch. It is not clear whether “registration” is a mere formality or involves the kind of substantive review process undertaken by SAFE and its relevant branches in the past.

PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into these subsidiaries, limit these PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

On July 4, 2014, the State Administration of Foreign Exchange, or SAFE, promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles (generally known as SAFE Circular 75) promulgated by SAFE on October 21, 2005. On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

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These circulars require PRC residents to register with qualified banks in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, which is referred to in SAFE Circular 37 as a “special purpose vehicle.” These circulars further require amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in a special purpose vehicle fails to complete the required SAFE registration, the PRC subsidiary of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

While Ms. Yefang Zhang, a citizen of Saint Lucia, is not required to register with qualified bank according to the various SAFE registration requirements, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we may not always be able to compel them to comply with all relevant foreign exchange regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by all relevant foreign exchange regulations. The failure or inability of such individuals to comply with the registration procedures set forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities or our PRC subsidiaries’ ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, our company, or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.

Under the PRC Enterprise Income Tax Law, or the EIT Law, that became effective in January 2008, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation, or the SAT, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters.

Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.

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If the PRC tax authorities determine that the actual management organ of Farmmi, Inc. (“FAMI”) is within the territory of China, FAMI may be deemed to be a PRC resident enterprise for PRC enterprise income tax purposes and a number of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.

Up to the date of this report, FAMI has not been notified or informed by the PRC tax authorities that it has been deemed to be a resident enterprise for the purpose of the EIT Law.

Finally, dividends payable by us to our investors and gains on the sale of our shares may become subject to PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our shares.

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the SAT on December 10, 2009, where a foreign investor transfers the equity interests of a resident enterprise indirectly via disposition of the equity interests of an overseas holding company, or an “indirect transfer,” and such overseas holding company is located in a tax jurisdiction that (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report the indirect transfer to the competent tax authority. The PRC tax authority will examine the true nature of the indirect transfer, and if the tax authority considers that the foreign investor has adopted an “abusive arrangement” in order to avoid PRC tax, it may disregard the existence of the overseas holding company and re-characterize the indirect transfer and as a result, gains derived from such indirect transfer may be subject to PRC withholding tax at a rate of up to 10%.

On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or SAT Bulletin 7, to supersede existing provisions in relation to the “indirect transfer” as set forth in Circular 698, while the other provisions of Circular 698 remain in force. Pursuant to SAT Bulletin 7, where a non-resident enterprise indirectly transfers properties such as equity in PRC resident enterprises without any justifiable business purposes and aiming to avoid the payment of enterprise income tax, such indirect transfer must be reclassified as a direct transfer of equity in PRC resident enterprise. To assess whether an indirect transfer of PRC taxable properties has reasonable commercial purposes, all arrangements related to the indirect transfer must be considered comprehensively and factors set forth in SAT Bulletin 7 must be comprehensively analyzed in light of the actual circumstances. SAT Bulletin 7 also provides that, where a non-PRC resident enterprise transfers its equity interests in a resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

There is little practical experience regarding the application of SAT Bulletin 7 because it was issued in February 2015. During the effective period of SAT Circular 698, some intermediary holding companies were actually looked through by the PRC tax authorities, and consequently the non-PRC resident investors were deemed to have transferred the PRC subsidiary and PRC corporate taxes were assessed accordingly. It is possible that we or our non-PRC resident investors may become at risk of being taxed under SAT Bulletin 7 and may be required to expend valuable resources to comply with SAT Bulletin 7 or to establish that we or our non-PRC resident investors should not be taxed under SAT Bulletin 7, which may have an adverse effect on our financial condition and results of operations or such non-PRC resident investors’ investment in us.

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Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, Our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. Furthermore, if our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our PRC subsidiaries’ ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiary to distribute dividends to us or on the ability of our PRC consolidated VIE to make payments to us may restrict our ability to satisfy our liquidity requirements.

In addition, the EIT Law, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our company in the Cayman Islands may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate shareholders of our corporate shareholders who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. For foreign investors, after reporting and being reviewed and approved by the appropriate government authorities, the foreign investors can transfer money through banks and other payment institutions, but the daily limit is $50,000 and the amount of each remittance cannot exceed $10,000. In addition, we can also distribute and transfer profits or dividends through our overseas third-party institutions in accordance with the law. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our company in the Cayman Islands may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate shareholders of our corporate shareholders who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. For foreign investors, after reporting and being reviewed and approved by the appropriate government authorities, the foreign investors can transfer money through banks and other payment institutions, but the daily limit is $50,000 and the amount of each remittance cannot exceed $10,000. In addition, we can also distribute and transfer profits or dividends through our overseas third-party institutions in accordance with the law. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

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The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the “M&A Rules,” adopted by six PRC regulatory agencies in 2006 and amended in 2009, and recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the Ministry of Commerce when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the Prior Notification Rules, issued by the State Council in August 2008 is triggered. In addition, the security review rules issued by the Ministry of Commerce that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. It is clear that our business would not be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the Ministry of Commerce or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.

Risks Related to Ownership of Our Ordinary Shares

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We are a Cayman Islands exempted company with limited liability. The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our First Amended and Restated Memorandum and Articles of Association and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors (the “Board of Directors”) may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, the board of directors of a solvent Cayman Islands exempted company is required to consider the company’s interests, and the interests of its shareholders as a whole, which may differ from the interests of one or more of its individual shareholders. See “Item 16.G. Corporate Governance.”

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we are subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly reports or proxy statements. We are not required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers are not required to report equity holdings under Section 16 of the Exchange Act and are not subject to the insider short-swing profit disclosure and recovery regime.

As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we are still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

Newly enacted Holding Foreign Companies Accountable Act, recent regulatory actions taken by the SEC and the Public Company Accounting Oversight Board, and proposed rule changes submitted by Nasdaq calling for additional and more stringent criteria to be applied to China-based public companies could add uncertainties to our capital raising activities and compliance costs.

Public companies with operations based in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.

On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, the SEC Chairman and PCAOB Chairman, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets generally.

On May 18, 2020, NASDAQ filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”, (ii) prohibit Restrictive Market companies from directly listing on NASDAQ Capital Market, and only permit them to list on NASDAQ Global Select or NASDAQ Global Market in connection with a direct listing, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives passed the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.

On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

On December 16, 2021, PCAOB announced the PCAOB Holding Foreign Companies Accountable Act determinations (the “PCAOB determinations”) relating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in the PRC or Hong Kong.

On August 26, 2022, the PCAOB signed a SOP with the CSRC and the MOF of the PRC regarding cooperation in the oversight of PCAOB-registered public accounting firms in the PRC and Hong Kong. The SOP seeks to establish a method for the PCAOB to conduct inspections of PCAOB-registered public accounting firms in the PRC and Hong Kong. Under the agreement, (a) the PCAOB has sole discretion to select the firms, audit engagements and potential violations it inspects and investigates without consultation with, or input from, PRC authorities; (b) procedures are in place for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed; (c) the PCAOB has direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates; and (d) the PCAOB shall have the unfettered ability to transfer information to the SEC in accordance with the Sarbanes-Oxley Act, and the SEC can use the information for all regulatory purposes, including administrative or civil enforcement actions. The PCAOB is required to reassess its determinations as to whether it is able to carry out inspections and investigations completely and without obstruction by the end of 2022.

On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination.

In December 2022, Congress passed fiscal year 2023 Omnibus spending legislation, which contained provisions to accelerate the HFCAA timeline for implementation of trading prohibitions from three years to two years. As a result of the legislation, the SEC is required to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections or complete investigations for two consecutive years.

The recent regulatory developments have resulted in additional regulatory compliance costs and uncertainties to our future capital raise activities, business and our share price. In addition, any additional actions, proceedings or rules resulting from these efforts could create new uncertainties for our shareholders, and the market price of our shares could be adversely affected,

As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. If we opt to rely on such exemptions in the future, such decision might afford less protection to holders of our Ordinary Shares.

Section 5605(b)(1) of the Nasdaq Listing Rules requires listed companies to have, among other things, a majority of its board members to be independent, and Section 5605(d) and 5605(e) require listed companies to have independent director oversight of executive compensation and nomination of directors. As a foreign private issuer, however, we are permitted to follow home country practice in lieu of the above requirements.

The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors or the implementation of a nominating and corporate governance committee. Since a majority of our Board of Directors would not consist of independent directors if we relied on the foreign private issuer exemption, fewer board members would be exercising independent judgment and the level of board oversight on the management of our company might decrease as a result. In addition, we could opt to follow Cayman Islands law instead of the Nasdaq requirements that mandate that we obtain shareholder approval for certain dilutive events, such as an issuance that will result in a change of control, certain transactions other than a public offering involving issuances of 20% or greater interests in the company and certain acquisitions of the shares or assets of another company.

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If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Ordinary Shares may decline.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. In addition, we are required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. Currently we have not established and maintained effective disclosure controls and procedures. In addition, there are material weaknesses in our internal control over financial reporting. Among other things, we did not have sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP. Specifically, our control did not operate effectively to ensure the appropriate and timely analysis of and accounting for unusual and non-routine transactions and certain financial statement accounts. We also have not established sufficient risk assessment in accordance with the requirement of COSO 2013 Framework. In addition, we have not established an internal control department and had a lack of adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned. As a result, our internal control over financial reporting was not effective as of September 30, 2023. We are in the process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation, which process is time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Ordinary Shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

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The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. We must engage U.S. securities law counsel and U.S. auditors, and we have annual payments for listing on a stock exchange. In addition, the Sarbanes-Oxley Act and rules and regulations implemented by the SEC and The Nasdaq Capital Market require significantly heightened corporate governance practices for public companies. The Exchange Act requires, among other things, that we file annual and current reports with respect to our business and operating results. In addition, as long as we are listed on The Nasdaq Capital Market, we are also required to file semi-annual financial statements. While it is impossible to determine the amounts of such expenses in advance, we expect that we will incur expenses of between $500,000 and $1 million per year. We do not expect to incur materially greater costs as a result of becoming a public company than those incurred by similarly sized foreign private issuers.

If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action, investors may lose confidence in us and the market price of our Ordinary Shares could decline.

As a result of disclosure of information in this report and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.

We also expect that being a public company and these rules and regulations makes it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.

As a publicly listed company, we are required to file periodic reports with the SEC upon the occurrence of matters that are material to our company and shareholders. In some cases, we need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company. Similarly, as a U.S.-listed public company, we are governed by U.S. laws that our non-publicly traded competitors are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations.

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The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance.

Since our Ordinary Shares became listed on The Nasdaq Capital Market in February 2018, the trading price of our Ordinary Shares has fluctuated substantially. Between January 1, 2023 and the date of this report, our shares have closed between a low of $0.2263 and a high of $1.3 per share, and the last reported trading price on January 26, 2024 was $1.18 per Ordinary Share. The trading prices of our Ordinary Shares may be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other listed companies based in China. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of other Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our Ordinary Shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

· actual or anticipated fluctuations in our revenue and other operating results;

· the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

· actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

· announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

· price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

· lawsuits threatened or filed against us; and

· other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

Our shares may be delisted if we are unable to comply with Nasdaq continued listing requirements.

As a Nasdaq listed company, we are required to comply with Nasdaq continued listing requirements. On October 12, 2022, we received a notification letter (the “Notice”) from The Nasdaq Stock Market LLC. (“NASDAQ”) advising the Company that for 30 consecutive business days preceding the date of the Notice, the bid price of our ordinary shares had closed below the $1.00 per share minimum required for continued listing on The NASDAQ Capital Market pursuant to the Minimum Bid Price Rule. We were provided 180 calendar days, or until April 10, 2023, to regain compliance with the $1.00 per share minimum required for continued listing on The NASDAQ Capital Market pursuant to NASDAQ Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Rule”). NASDAQ granted us an additional 180 calendar days, or until October 9, 2023, to regain compliance with the Minimum Bid Price Rule.

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To regain compliance, the bid price of the Company’s ordinary shares must close at or above $1.00 per share for a minimum of ten consecutive business days at any time during the 180-day compliance period. The Company cured the deficiency by effecting a one-for-eight share consolidation in September 2023. It is possible that we will fail to comply with the continued listing requirement of Nasdaq Marketplace Rule 5550(a)(2) again or any other listing requirements. If so, and Nasdaq may delist our shares if we cannot regain compliance timely.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.

Shares eligible for future sale may adversely affect the market price of our Ordinary Shares, as the future sale of a substantial amount of outstanding Ordinary Shares in the public marketplace could reduce the price of our Ordinary Shares.

The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our Ordinary Shares. For example, in July 2023, certain of our shareholders purchased approximately 2.6 million in aggregate of our ordinary shares in private transactions exempt from registration under the Securities Act. These shares are “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act and permitted by relevant agreements.

Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.

Our corporate affairs are governed by our Third Amended and Restated Memorandum and Articles of Association, by the Companies Law (as revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are not as clearly defined as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the United States, due to the comparatively less formal nature of Cayman Islands law in this area.

While Cayman Islands law allows a dissenting shareholder to express the shareholder’s view that a court sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder’s shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a merger or consolidation of a company. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation or to require that the acquirer gives you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation to apply to the Grand Court for a determination of the fair value of the dissenter’s shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.

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Shareholders of Cayman Islands exempted companies (such as us) have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our First Amended and Restated Memorandum and Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. Subject to limited exceptions, under Cayman Islands’ law, a minority shareholder may not bring a derivative action against the board of directors. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical interests may bring representative proceedings, which are similar.

United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.

Further, it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts outside the United States, including in the Cayman Islands. Courts of the Cayman Islands may not, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, provided it is not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands’ judgment in respect of the same matters, and was not obtained in a manner which is contrary to the public policy of the Cayman Islands. In addition, a Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.

Our Board of Directors may decline to register transfers of Ordinary Shares in certain circumstances.

Our Board of Directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our Board of Directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as Nasdaq may determine to be payable, or such lesser sum as our Board of Directors may from time to time require, is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our Board of Directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

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Item 4. Information on the Company

A. History and Development of the Company

Farmmi, Inc. (“FAMI”), is a Cayman Islands holding company incorporated on July 28, 2015. We conduct our operations in China principally through our foreign-owned PRC subsidiaries. FAMI’s registered office is at the office of Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite # 5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman, KY1-1104, Cayman Islands. Its registered office’s telephone number is +1.345.745.5100. Farmmi, Inc.’s agent in the U.S. is Shangzhi Zhang, with the address of 33202 Havers Drive, Cary, NC 27518.

FLS Mushroom, a major operating entity of our Company prior to its divestiture in September 2022, previously was under mushroom business sectors of Forasen Group, which is controlled by Ms. Yefang Zhang and Mr. Zhengyu Wang. Forasen Group (initially named as Lishui Forasen Green Industry Group) was established in April 2003. Forasen Group’s primary business areas used to include rubber trading, mushroom sales, biomass power generation, and marketing.

Mr. Wang and Ms. Zhang decided to spin off various business sectors from Forasen Group and to develop them separately. Since 2010, they began to spin off bamboo-based charcoal businesses by establishing several offshore and domestic companies and re-organizing related operating entities in China. In 2011, they established Tantech Holdings Ltd. which completed an IPO and listing on the Nasdaq Capital Market in March 2015. Since 2015, Ms. Zhang and Mr. Wang started to spin off the edible fungi business from Forasen Group by establishing several offshore companies and re-organizing related operating entities in China. In July 2015, FMI was established. After a series of transactions, Forest Food is indirectly controlled by FMI and no longer has any common relationship with Forasen Group. FMI also controls some other companies which develop our e-commerce business of edible fungi products and other agricultural products. In February 2018, FMI completed its initial public offering and its Ordinary Shares commenced trading on Nasdaq under the symbol “FAMI.”

Historical Timeline

· November 1994: our Chairwoman and CEO Ms. Yefang Zhang and her husband Mr. Zhengyu Wang founded Lishui Jingning Huali Co., Ltd. in China to start edible fungi business by selling dried edible fungi.

· May 2003: Forest Food was established in China.

· December 2006: We passed ISO 22000 certification.

· December 2008: We passed QS certification.

· August 2010: We passed BRC certification.

· March 2011: FLS Mushroom was established in China.

· July 2015: Farmmi, Inc. was incorporated in the Cayman Islands.

· August 2015: Farmmi International was incorporated in Hong Kong.

· December 2015: Nongyuan Network was established in China.

· December 2015: Suyuan Agriculture was established in China.

· May 2016: Farmmi Enterprise was established in China.

· July 2016: Farmmi Technology was established in China.

· December 2016: Farmmi Liangpin Market (www.farmmi.com/www.farmmi88.com) began operating.

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· February 2018: FAMI completed its initial public offering and its Ordinary Shares commenced trading on Nasdaq under the symbol “FAMI.” We raised approximately $6 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us.

· May 2018: Farmmi Food started operation in China.

· August 2018: Farmmi Liangpin Market (www.farmmi.com/www.farmmi88.com) was restructured as two online stores: Farmmi Jicai (www.farmmi88.com) targeting centralized procurement and Farmmi Liangpin Market (www.farmmi.com) targeting direct retail for consumption. Liangpin Market and Farmmi Jicai were closed in 2020 and 2023, respectively.

· November 2018: FAMI completed a $7.5 million private placement (the “Private Placement”) with an institutional investor. The securities sold by the Company in the Private Placement consisted of (a) senior convertible notes with an aggregate principal amount of $7,500,000 (the “Notes”) which are initially convertible into an aggregate of 1,198,084 of the Company’s Ordinary Shares at the rate of $6.26 per share and (b) warrants to purchase an aggregate of 800,000 Ordinary Shares at an exercise price of $6.53 per share (the “Investor Warrants”). We also issued warrants to purchase an aggregate of 119,808 Ordinary Shares for an exercise price of $7.183 per share to the placement agent (the “Placement Agent Warrants,” and together with the Investor Warrants, the “Warrants”).

· December 2018: in connection with the Private Placement, FAMI filed a registration statement with the SEC on Form F-1 (Registration No. 333-228677), which was amended by Pre-Effective Amendment No. 1 to Form F-1 filed with the SEC on February 4, 2019 (as amended, the “F-1 Registration Statement”). The F-1 Registration Statement was declared effective by the SEC on February 12, 2019.

· March 2019: Lishui Farmmi E-Commerce Co., Ltd. (“Farmmi E-Commerce”) was established under the laws of the PRC. Nongyuan Network and Suyuan Agriculture owns 98% and 2% of interests in Farmmi E-Commerce, respectively.

· November 2019: in connection with the Private Placement, FAMI filed a post-effective registration statement with SEC Amendment No. 1 to the F-1 Registration Statement on Form F-3 (the “Post-Effective Amendment No. 1”). The Post-Effective Amendment No. 1 was declared effective by the SEC on December 3, 2019.

· December 2019: Xinyang Wang, as the new shareholder of Nongyuan Network, signed a series of VIE agreements (the “Xinyang Wang VIE Agreements”) with Nongyuan Network and Suyuan Agriculture.

· May 2020: to clarify the legal effect of the Original VIE Agreements (as defined below) and to sustain the effective control over Nongyuan Network by the Company, Nongyuan Network and Suyuan Agriculture signed a series of documents with the effective date of December 10, 2019.

· September 2020: at the 2020 annual shareholder meeting of the Company, the shareholders approved an ordinary resolution that the authorized share capital of the Company be increased from 20,000,000 ordinary shares of $0.001 par value each to 200,000,000 ordinary shares of $0.001 par value each.

· December 2020: we closed Farmmi Liangpin Market, including the mobile application and the WeChat mini program.

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· On March 22, 2021, Farmmi entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter, in a firm commitment public offering (the “Offering”), 6,469,467 ordinary shares (the “Shares”) of the Company, par value $0.001 per share, for a public offering price of $1.15 per share. The Company received approximately $6.6 million in net proceeds from the Offering after deducting the underwriting discount and estimated offering expenses payable by the Company. The Company also granted the Underwriter an option for a period of 25 days to purchase an additional 970,419 ordinary shares at a price of $1.15 per ordinary share solely to cover over-allotments. On April 9, 2021 the over-allotment was exercised and the net proceeds the Company received is approximately $1.0 million. Pursuant to the terms of the Underwriting Agreement, the Shares were offered pursuant to a registration statement on Form F-3 (File No. 333-254036) which was filed with the Securities Exchange Commission on March 9, 2021 and was declared effective on March 16, 2021. A final prospectus relating to and describing the terms of the offering has been filed with the Securities and Exchange Commission on March 23, 2021.

· In April 2021, FAMI incorporated Farmmi (Hangzhou) Ecology Agriculture Development Co., Ltd. (“Farmmi Ecology”) in China through its wholly-owned subsidiary Farmmi International Limited.

· April 7, 2021, Farmmi incorporated Zhejiang Farmmi Biotechnology Co., Ltd. (“Farmmi Biotechnology”), through its former wholly-owned subsidiary Hangzhou Suyuan Agriculture Technology Co., Ltd.

· On April 28, 2021, Farmmi entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter, in a firm commitment public offering (the “Offering”), 140,000,000 ordinary shares of the Company, par value $0.001 per share, at a public offering price of $0.30 per share. Under the terms of the Underwriting Agreement, the Company granted the Underwriter a 45-day option to purchase up to an additional 21,000,000 ordinary shares solely to cover over-allotments, if any. The over-allotment option was exercised in full at a price of $0.30 per share on April 30, 2021. The Company received approximately $43.9 million in net proceeds from the Offering (including the net proceeds from the exercise of the over-allotment option in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Offering was conducted pursuant to the Company’s registration statement on Form F-1 (File No. 333-255387) declared effective by the Securities and Exchange Commission on April 28, 2021, an abbreviated registration statement on Form F-1 pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”) (File No. 333-255590) effective upon filing on April 28, 2021, and a prospectus dated April 28, 2021, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

· In May 2021, Farmmi Ecology incorporated Zhejiang Farmmi Agricultural Supply Chain Co., Ltd. (“Farmmi Supply Chain”) in China.

· In July 2021, at the 2021 annual shareholder meeting of the Company, the shareholders approved an ordinary resolution that the authorized share capital of the Company be increased from 20,000,000 ordinary shares of $0.001 par value each to 600,000,000 ordinary shares of $0.001 par value each.

· In July 22, 2021, shareholders approved the 2021 Share Incentive Plan (the “2021 Plan”) and authorized the Company to reserve a total of 40,000,000 unissued ordinary shares (the “Shares”) for issuance under the 2021 Plan.

· On August 26, 2021, Suyuan Agriculture has changed its name to Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd., and its capital was increased to RMB50 million.

· Zhejiang Yitang Medical Service Co., Ltd. was incorporated on September 7, 2021. Upon formation, Nongyuan Network and Farmmi Ecology owned 95% and 5% of the equity interests in Yitang Medical Service, respectively. On April 20, 2023, Nongyuan Network transferred the 95% equity it held in Yitang Medical Service to Farmmi Medical Health. After the transfer, Yitang Medical Service becomes one of our wholly owned subsidiaries.

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· On September 13, 2021, Farmmi entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter, in a firm commitment public offering (the “Offering”), 93,111,717 ordinary shares (the “Shares”) of the Company, par value $0.001 per share, for a public offering price of $0.22 per share, and 275,150,000 pre-funded warrants (the “Pre-funded Warrants”) to purchase 275,150,000 shares (the “Warrant Shares”), for a public offering price of $0.2199 per Pre-funded Warrant to those purchasers whose purchase of ordinary shares in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding ordinary shares immediately following the consummation of this Offering. The Pre-funded Warrants have an exercise price of $0.0001 per share. The Pre-funded Warrants were issued in registered form under a warrant agent agreement (the “Warrant Agent Agreement”) between the Company and TranShare Corporation as the warrant agent. The Company received approximately $74.2 million in net proceeds from the Offering after deducting the underwriting discount and estimated offering expenses payable by the Company. Each warrant is exercisable for one ordinary share of the Company. During the year ended September 30, 2021, 275,150,000 warrants were exercised for 275,114,477 ordinary shares of the Company for a total proceed of $19,050. Any securities offered and sold in the Offering (including the Warrant Shares) will be issued pursuant to the Company’s shelf registration statement on Form F-3 (File No.: 333-254036) filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2021 and declared effective on March 16, 2021 (the “Registration Statement”), as supplemented by the preliminary prospectus supplement dated September 13, 2021 relating to the Offering and filed with the SEC on September 13, 2021 and a final prospectus supplement dated September 13, 2021.

· Zhejiang Yiting Medical Technology Co., Ltd. was incorporated on September 17, 2021.

· We incorporated Farmmi (Hangzhou) Health Development Co., Ltd. on September 17, 2021.

· We incorporated Zhejiang Farmmi Medical Health Technology Co., Ltd. on September 18, 2021.

· We incorporated Zhejiang Farmmi Holdings Group Co., Ltd. on September 18, 2021.

· On September 27, 2021, we acquired Jiangxi Xiangbo Agriculture and Forestry Development Co. Ltd. (“Jiangxi Xiangbo), from a third party, Ganzhou Tengguang Agriculture and Forestry Development Co., Ltd., for a total price of RMB70 million (approximately $10.9 million). The acquisition transaction was completed on October 27, 2021. Together with Jiangxi Xianbo, its 100% controlled subsidiary Yudu County Yada Forestry Co., LTD became a part of us.

· On September 27, 2021, we signed as a sale and purchase agreement to acquire 100% interest in an entity, Guoning Zhonghao (Ningbo) Trade Co., Ltd.., from a third party, Ningbo Guoning Zhonghao Technology Co., Ltd., for a total price of RMB5,000 (approximately $776). The acquisition transaction was completed on December 1, 2021.

· On September 27, 2021, Farmmi Agricultural and Hangzhou Dawo Software Co., Ltd., the only shareholders of Zhejiang Forest Food Co., Ltd. (“Zhejiang Forest Food”), entered into a Share Transfer Agreement to transfer all of their equity in Zhejiang Forest to Lishui Zhongjun Technology Co., Ltd., an unrelated party, for a total price of RMB18,200,000 (approximately $2.82 million). The divestment was completed on October 1, 2021. We received the whole proceed of disposal on November 5, 2021. After this transfer, Zhejiang Forest has been divested from the Company.

· On November 5, 2021, we signed an Equity Transfer Framework Agreement to purchase 124,590,064 shares of Shanghai Jiaoda Onlly Co., Ltd. (“Jiaoda Onlly”), a Shanghai Stock Exchange listed company under the ticker 600530.SH, from former shareholders of Jiaoda Onlly for approximately RMB 509 million (approximately US$71.6 million).

· Lishui Yilong Enterprise Management Co., Ltd., a subsidiary of Nongyuan Network, was incorporated on January 10, 2022. It was deregistered in April 2023.

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· Lishui Yifeng Medical Health Technology Co., Ltd., a subsidiary of Nongyuan Network, was incorporated on January 10, 2022. It was deregistered in April 2023.

· Lishui Yifeng Yilong Medical Technology Development Partnership (Limited Partnership) was formed on January 19, 2022. It was owned 80% by Yilong Enterprise and 20% by Yifeng Medical Health, respectively. This partnership was deregistered in April 2023.

· Lishui Yitang Shangke Medical and Health Technology Partnership (Limited Partnership) was formed on January 19, 2022. It was owned 80% by Yilong Enterprise and 20% by Yifeng Medical Health, respectively. This partnership was deregistered in April 2023.

· On January 27, 2022, Yitang entered into an agreement to assign its obligations and rights under the Equity Transfer Framework Agreement with respect to Jiaoda Onlly to Shanghai Shijie Decoration Design Engineering Co., Ltd. and Shanghai Yunjian Industrial Development Co., Ltd., two unrelated parties.

· On February 15, 2022, we issued 10,000,000 Shares under the 2021 Plan to certain employees.

· On February 15, 2022, we cancelled the reserved but unissued 30,000,000 Shares under the 2021 Plan and released the reservation of such Shares.

· On February 25, 2022, we entered into a securities purchase agreement with certain investors in a private placement transaction, pursuant to which Farmmi agreed to sell to the investors an aggregate of 30,000,000 ordinary shares at USD$0.20 per share for USD$6,000,000. On February 28, 2022, Farmmi closed the Transaction. There were 597,780,383 ordinary shares outstanding after the issuance of the shares purchased.

· We incorporated Zhejiang Farmmi Ecological Agricultural Technology Co., Ltd. on May 27, 2022.

· On May 31, 2022, Farmmi effected a share consolidation of its authorized shares including issued and unissued ordinary shares at the ratio of one-for-twenty-five. As a result of the share consolidation, the Company’s 600,000,000 authorized shares of a single class, par value of US$0.001 each, were consolidated into 24,000,000 shares, par value of US$0.025 each.

· We formed a wholly-owned subsidiary in Canada, Farmmi Canada Inc. on July 13, 2022. Farmmi Canada is engaged in the production and sales of agricultural products, such as mushroom, as well as agricultural trade business in Canada and other international markets.

· We incorporated Zhejiang Suyuan Agricultural Technology Co., Ltd on July 25, 2022,

· On September 26, 2022, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, pursuant to which the Company issued to Streeterville, in an unregistered private transaction, an unsecured promissory note on September 26, 2022 in the original principal amount of $6,440,000.00 (the “Note”), convertible into ordinary shares, $0.025 par value, of the Company (the “Ordinary Shares”), for $6,000,000.00 in gross proceeds. On November 13, 2023, Farmmi and Streeterville entered an Amendment to the Convertible Promissory Note, which, among other things, extended the term of the Note from twelve months to twenty four months from the Purchase Price Date, or until September 28, 2024.

· On September 30, 2022, Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd., the then-shareholder of FLS Mushroom, entered into a Share Transfer Agreement and Supplementary Agreement to transfer all of the equity in FLS Mushroom to Zhejiang Jingcai Industrial Co., Ltd, an unrelated party, for RMB24.1 million. The divestiture of FLS Mushroom was completed following the closing of the transaction.

· In November 2022, Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd formed a new subsidiary, Ningbo Farmmi Baitong Trading Co., Ltd. (“Farmmi Ningbo”). Farmmi Ningbo is engaged in the production and sales of agricultural products, such as mushroom, as well as agricultural trade business.

· In March 2023, at the annual meeting of the Company, the shareholders approved an ordinary resolution that the authorised share capital of the Company be increased from (i) US$600,000, divided into 24,000,000 ordinary shares of US$0.025 par value each, to (ii) US$2,500,000, divided into 100,000,000 ordinary shares of US$0.025 par value each, by the creation of additional 76,000,000 ordinary shares of US$0.025 par value each.

· In April 2023, we established a new subsidiary, FARMMI USA INC. in Newark, California (“Farmmi USA”). The Company plans to use Farmmi USA as a platform to sell its high-quality agricultural products to the North America market and to sell high-quality food products from North America to Asia.

· On July 12, 2023, we entered into a securities purchase agreement with certain non-U.S. purchasers in reliance on Regulation S, pursuant to which we issued and sold an aggregate of 21,052,632 ordinary shares, par value $0.025 per share of the Company, at a price of $0.38 per share for aggregate gross proceeds of US$8,000,000.00.

· On September 21, 2023, at an extraordinary general meeting of shareholders (EGM), the Company’s shareholders approved a proposal to effect a share consolidation of the Company’s authorized shares including issued and unissued ordinary shares at the ratio of one-for-eight (the “Share Consolidation”). As a result of the Share Consolidation, the Company’s 100,000,000 authorized shares of a single class each with a par value of US$0.025, including all issued shares and unissued shares, were consolidated into 12,500,000 shares each with a par value of US$0.20.

· On September 21, 2023, at an extraordinary general meeting of shareholders, the Company’s shareholders approved an ordinary resolution that, immediately following the Share Consolidation, the authorised share capital of the Company be increased from (i) US$2,500,000 divided into 12,500,000 ordinary shares of US$0.20 nominal or par value each, to (ii) US$100,000,000 divided into 500,000,000 ordinary shares of US$0.20 nominal or par value each, by the creation of an additional 487,500,000 ordinary shares of US$0.20 nominal or par value each

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B. Business Overview

General

We are a supplier of agricultural products. Our business has historically been focused on the processing and/or sales of a variety of mushrooms, edible fungi and other agricultural products. In the recent years, in response to the market demand, our product sales have more evenly divided among Shiitake mushrooms, Mu Er mushrooms, and bulk agricultural commodity trading such as cotton and corn bulk trading.

Our founders Ms. Yefang Zhang and Mr. Zhengyu Wang started their edible fungi business in November 1994 by establishing Lishui Jingning Huali Co., Ltd. They established our first Farmmi/Forasen entity, Forest Food, in May 2003. We established Farmmi Food, a new subsidiary under Farmmi Agricultural, in December 2017 and it started the operation in May 2018. Forest Food and Farmmi Food focus on export sales and domestic sales of small packages of our edible fungi, while FLS Mushroom, which was founded in March 2011, focused on the Chinese domestic market for big packages. Our business office is located in Binjiang district of Hangzhou city in Zhejiang. We have two processing factories in Lishui. Our raw materials are directly or indirectly provided by family farms from various counties of Lishui in Zhejiang along with other provinces in China.

We are headquartered in the edible fungi rich southwest of Zhejiang Province, in the city of Lishui. Zhejiang province, located in southeastern coastal China, is China’s eighth largest province in population in 2021according to the seventh census in China, with 65.4 million residents. As the first province in China without any counties in the poverty-county list of the central government, Zhejiang has become one of the wealthiest and most developed provinces in China. Its province-wide GDP of approximately RMB 7.35 trillion in 2021 placed it as the fourth highest in China in aggregate amount and fifth per capita.

Lishui is a prefecture-level city located in southwest Zhejiang province. Approximately 2.5 million residents live in the city, and city-wide GDP is approximately RMB 178 billion in 2021. Lishui’s primary industries include food processing, wood and bamboo production, ore smelting, textile, clothes making, construction materials, pharmaceuticals and electronic machinery. Lishui has cultivated edible fungi for almost 1,000 years. It is one of the major production areas of edible fungi in the southeastern China. Lishui produces approximately 0.6 million tons of edible fungi every year, contributing to 50% volume of Zhejiang Province. Lishui also has rich species of edible fungi, among which there are over 30 species of commercially cultivated mushroom.

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We sell most of our products to domestic distributors in China, which then sell in China and internationally. For the year ended September 30, 2023, we sold approximately 99.4% of our products in China and 0.6% outside mainland China, including in the U.S., Japan, Canada, and other countries or regions. Prior to January 15, 2023, we also had sold our products online through our own e-commerce platforms, Farmmi Jicai (www.farmmi88.com) and Farmmi Liangpin Market (mobile application and mini program on WeChat; closed on December 31, 2020).  All of our online platforms were closed as of January 15, 2023 because of the costs and expenses associated with their operations. We tested a few offline stores in Hangzhou, Zhejiang but closed them by March 2020 due to the impact of the COVID-19 outbreak.

Our typical agreements with the distributors which sell the products in China, such as Yunmihui, provide that payment is due upon receipt of a value-added tax invoice, and the customer should make the payment by bank’s acceptance bill or wire transfer. Delivery is set at our factory, and the customer is responsible for the cost of transportation. Products are deemed to be accepted upon receipt unless the customer rejects the delivery. Our cooperation with other distributors which sell products in China is similar, except the delivery is set at the distributor’s warehouse. For new clients, we may require full payment before we deliver the products to them.

We supply mushroom products indirectly to foreign customers such as supermarkets through Chinese distributors. Our typical agreements with these Chinese distributors provide that payment is due upon receipt of a value-added tax invoice and a copy of bill of lading, and the Chinese distributor should make the payment by wire transfer. Our products are required to meet the exportation requirements. Delivery is set at a warehouse designated by the Chinese distributor, and we are responsible for the cost of transportation from our warehouse to the warehouse designated by the Chinese distributor. Products are deemed to be accepted upon receipt unless the foreign customers raise objections.

Product quality is always our main focus. We have established a food quality traceability system to trace and correct any possible quality issues in any step. We have also established a sound quality management system, and have obtained the BRC international food certification issued by Intertek Certification Ltd to certify we meet the BRC Global Standard for Food Safety, and Food Safety Management System Certificate issued by China Quality Certification Centre to certify we meet the GB/T 27341-2009/GB 14881-2013 standard.

As of the date of this report, we hold over 100 registered trademarks related to “Farmmi”, “Farmmi Liangpin”, “Forasen” and “Puyangtang” in different applicable trademark categories in China.

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Our Industry

Edible Fungi (Edible Mushroom)

Edible fungi, or edible mushroom, is our major product category. Edible fungi are edible fruit bodies of several species of macrofungi. Edible fungi have high nutritional value. It generally has a high protein content, usually around 30 to 45% by dry weight. Almost all edible fungi contain eight kinds of amino acids essential to human nutrition. Protein contained in 1 kg of dried mushrooms is equivalent to protein in 2 kg of lean meat, 3 kg of eggs or 12 kg of milk. Edible fungi also contain a variety of vitamins and trace elements, polysaccharides, and other physiologically active substances, to promote human metabolism and enhance physical fitness. Besides the nutritional value, edible fungi also have medicinal values including wound-healing, immunity-enhancement, and tumor-retarding effects.

Mushroom Dish Models Presented at Qingyuan Mushroom Museum, Lishui City, Zhejiang Province, China

According to Expert Market Research, the global mushroom market reached USD 62.99 billion in 2023. The market is expected to grow at a CAGR of 8%, in the forecast period of 2024-2032, to reach a value of USD 100.31 billion by 2032.

Edible fungi were traditionally harvested wild and were difficult to domesticate and cultivate. Cultivation of edible mushroom species has grown rapidly in recent decades. Most mushrooms have been cultivated on various species of hardwood trees. The procedure was to cut down the natural logs in the fall (after leaf fall) and inoculate them with Shiitake spawn within 15 to 30 days after felling. One breakthrough for this cultivation was the utilization of synthetic logs instead of natural logs. Composed of sawdust and supplemented with millet and wheat bran, synthetic logs may produce three to four times as many mushrooms as natural logs in one-tenth of the time. Environmentally controlled houses allow for the manipulations of temperature, humidity, light, and the moisture content of the logs to produce the highest possible yields. The major advantages of producing mushroom on synthetic logs rather than natural ones are the consistent market supply through year-round production, increased yields, and decreased time required to complete a crop cycle. Most of the mushrooms we purchase are grown in this manner.

Most of the edible fungi produced by China is for domestic consumption. In 2020 ,  the export portion of edible fungi was only 1.61% of the annual production in China. Edible fungi, especially Shitake mushroom and Mu Er have become important food source for the Chinese. In 2021, the total export amount of dried edible fungi in China was the largest among all the edible fungi, totaling $1.29 billion, accounting for 45% of the total export edible fungi amount.

In general, the consumption volume of edible fungi in China is growing. From 2006 to 2020, the edible fungi consumed by China market increased from 14,140,000 metric tons (approximately 31 billion pounds) to 40,614,231 metric tons (approximately 89 billion pounds).

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Figure 2006-2020 China Edible Fungus Market Consumption Volume and Growth Rate

Source: China Edible Fungus Association

The Belt and Road Initiative implemented by the Chinese government is expected to bring more opportunities to Chinese edible fungi industry. The Belt and Road Initiative is an initiative of jointly building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. Accelerating the building of the Belt and Road can help promote the economic prosperity of the countries along the Belt and Road and regional economic cooperation, strengthen exchanges and mutual learning between different civilizations, and promote world peace and development. It is a great undertaking that will benefit people around the world.

China Edible Fungi Association issued The Cooperation Proposal of Edible Fungi Industry along “The Belt and Road” Countries in April 2016. Countries along “the Belt and Road” all have a long tradition of consuming edible fungi. However, their planting technology has lagged behind and mainly focuses on Shuangbao mushroom and wild mushroom. With the Belt and Road Initiative, the edible fungi industry can be promoted, through strengthening communication, building new cooperation trend among the Belt and Road countries, and achieving the common development and prosperity.

E-commerce for Agricultural Products

E-commerce is the trading or facilitation of trading in products or services using computer networks, such as the Internet. There are different kinds of e-commerce business models: web portal model, online content provider, online retailer, online distributor, online market maker, online community provider and cloud application service provider. Our online sales operations make profits by selling products made by the manufacturers on line.

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Our e-commerce focuses on agricultural products. E-commerce of agricultural products is supported by Chinese policy. For example, on January 8, 2016, in the press conference of Guidance Opinion about Fusion Development of the Primary Industry, the Secondary Industry and the Service Industry by General Office of the State Council of the People’s Republic of China, National Development and Reform Commission of China said China will develop modern “Internet+” agriculture and e-commerce for agricultural products.

Our Products

Currently we have the following major brands:

Our subsidiary Farmmi Food is certified and authorized to use the brand of Lishui Shangeng. Lishui Shangeng is a regional public brand signifying high-quality agricultural products in Lishui and other cities in Zhejiang. To receive the certification, the products must demonstrate a proper ecological agricultural environment and meet the strict requirements of "Three Products and One Indication" (pollution-free agricultural products, green food, organic agricultural products and geographical indications of agricultural products) through third-party evaluation and certification.

Lishui Shangeng

For the fiscal year ended September 30, 2023, we mainly process and/or trading four categories of agricultural products: Shiitake mushrooms, Mu Er mushrooms, cotton, corn, other edible fungi, and other agricultural products.

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Shiitake

The Shiitake (Xiang Gu in Chinese and Lentinula edodes in Latin) is a variety of mushroom that originated from Eastern Asia. Shiitake have many uses in the cuisines of East Asia. In Chinese cuisine, they are often sautéed in vegetarian dishes such as Buddha’s Delight. In Japan, they are served in miso soup, used as the basis for a kind of vegetarian soup called dashi, and as an ingredient in many steamed and simmered dishes. As a potent immune-boosting mushroom, it has antitumor and antiviral properties, and can potentially lower blood pressure and cholesterol if consumed regularly.

Divided by the growing season, there are four kinds of Shiitake: spring mushroom, summer mushroom, fall mushroom and winter mushroom. We focus on winter mushroom which has the best quality and taste. Depending on the species, our Shiitake products include different varieties such as floral mushroom and Jinqian (“money”) mushroom. Depending on the shape, our Shiitake products include fungi in whole, Shiitake slices and Mu Er strings.

Mu Er

Mu Er (auricularia auricula-judae in Latin or also known as jelly fungi), is sometimes known as wood ear mushrooms, cloud ear, Judas ear or tree ear. It is a variety of mushroom that is dark brown to black and native to Asia and some Pacific islands with humid climates. It is usually sold in dried form, and needs to be soaked in water before use. It has little real flavor of its own and has slippery but slightly springy and crunchy texture. It is commonly found in “Hot and Sour Soup”, and also widely used in stir-fried dishes. Mu Er has potential medicinal properties. For example, it is believed that it can help with health issues by benefiting the lungs, stomach and liver if consumed regularly.

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Depending on the growing area, our Mu Er products include varieties from Zhejiang Mu Er and Northeastern Mu Er. Depending on the shape, our Mu Er products include Mu Er in whole and Mu Er strings. According to some clients’ requirements, we also provide washed Mu Er which is cleaner than normal Mu Er products after we soak dried Mu Er in water to make it flat, and remove the hidden impurities.

Other edible fungi

Based on the clients’ needs and the supply, we also process and sell other edible fungi from time to time, such as bamboo fungi (Zhu Sun in Chinese), agrocybe aegerila (Cha Shu Gu in Chinese), pleurotus eryngii (Xin Bao Gu in Chinese), grifola frondosa (Hui Shu Hua in Chinese), coprinus comatus (Ji Tui Gu in Chinese) and hericium erinaceus (Hou Tou Gu in Chinese).

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Other agricultural products

Historically, we only sold green tea products in this category on our online store farmmi88.com/farmmi.com, and have stopped selling them in and since the six months ended March 31, 2018. In August 2018, we restructured farmmi88.com/farmmi.com to two different online stores: Farmmi Jicai (farmmi88.com) and Farmmi Liangpin Market (previously farmmi.com; later switched to mobile application and mini program on WeChat). Before we closed Farmmi Liangpin Market on December 31, 2020, we had over 400 kinds of products in Farmmi Liangpin Market. The online platform has helped diversify our product categories and expand our product sales. In June 2021, we started our bulk agricultural commodity trading business through Zhejiang Farmmi Agricultural Supply Chain Co., Ltd. and Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd.

We process and package all of the dried edible fungi on our own, and purchase and sell all the other agricultural products from other manufacturers or companies. Before we closed Farmmi Lianpin Market, there were three ways to sell other agricultural products. First, we may provide our packing materials or requirements to the manufacturers to package. After packaging, these manufacturers may deliver the products to us, or may deliver the products to our clients on behalf of us. No sales have been made through this method. Second, we sold other companies’ products on our Farmmi Liangpin Market. For example, we sold crabs provided by Panjin Zhongtong Food Ltd. Co. (“Zhongtong”). Zhongtong is a company based in Panjin, Liaoning Province. When there was an order of the crabs at our Farmmi Liangpin Market, we informed Zhongtong which would deliver the crab product directly to the client. We made our profits from the difference between the selling price and the purchase price offered by these manufacturers. The third is our bulk agricultural commodity trading business, we use our well-developed channels to purchase certain agricultural commodities from upstream third-party suppliers and then sell them directly to third-party customers. Our bulk product trading volumes are typically adjusted depending on the seasonality of agricultural products and market demand. Corn and cotton have accounted for a large percentage of our bulk commodity trading operations. We expect to make product and volume adjustments as needed in our agricultural commodity trading operations in response to customer demand and market condition. After the closing of Farmmi Liangpin Market, online sales through Liangpin Market are no longer available.

Raw Materials and Suppliers

As a supplier of edible fungi products, our raw materials primarily include Shiitake mushrooms, Mu Er, and other bulk dried edible fungi. We typically enter into a standard form of agreements with our suppliers, including major suppliers and family farms, which set forth the terms and conditions of the transactions, subject to specific quantity and price terms to be set forth in subsequent purchase orders. The purchase agreements provide that we and the suppliers are independent parties. These companies and family farms supply dried edible fungi materials to us based on our purchase orders. We then further process the edible fungi.

JLT and QNMI are two supplier companies, both near Lishui City where our processing facilities are located. They are co-operatives representing family farms which grow and roughly process edible fungi. JLT and QNMI themselves do not have any facility and do not process any fungi. JLT and QNMI are established by the local family farms as wholesale agents. Such arrangements allow these family farms to better share resources such as procurement information and enjoy the advantage of scale.

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The family farms supplying raw materials to us, through JLT/QNMI or directly, are responsible for growing, harvesting, dehydrating, roughly sorting and selecting edible fungi. They dehydrate the fungi until the desired moisture content is reached so fungi can be stored for a long time. They then sort the dried fungi roughly so that most of the fungi supplied to us fall within the size range required by us. The family farms also select the dried fungi to get rid of obvious impurities such as dirt.

Most of our family farm suppliers conduct their initial and rough sorting manually. Some family farms may use machines to conduct advanced sorting so the percentage of the dried fungi within the size range required by us is higher. We pay higher purchase prices to these family farms because they can save us certain time on initial sorting. In addition, while most of our raw materials are fungi in whole, if our clients need Shiitake slice products, we will purchase dried Shiitake slices to process at our own facilities. If our clients need Mu Er string products, we will use our own equipment to cut the dried whole Mu Er into strings.

After we receive the raw materials, we are responsible for further sorting to get the fungi in specific size range and further selecting to get rid of more impurities. For Shiitake, we also further dehydrate it to ensure the uniform level of dryness of our products. For Mu Er, we conduct additional procedures such as burning hair to increase the quality of the fungi products. We then package and sell the dried edible fungi products. For more details about our procession, please see “Our Processing Workflow of Shiitake” and “Our Processing Workflow of Mu Er” later in this section.

According to the purchase agreements, the suppliers accept the guidance of both the local governmental agencies and the technical organization regarding mushroom industry, and produce mushrooms in compliance of the standardized specifications. The suppliers record the whole production process in accordance with the traceability requirements. The products provided by the suppliers should comply with the relevant quality standards and our requirements for the species and the specifications. During the term of the purchase agreements, we are entitled to examine the farms, conduct sampling inspections of the products, and require the suppliers to correct any problems at any time.

Most of our edible fungi sales are made through customers’ pre-orders. After we receive a customer order, our procurement personnel communicate with the suppliers we have selected and place the purchases of the dried fungi at suppliers’ sites. The raw materials are shipped to our factory which then processes them. Most of the time these suppliers can provide enough raw materials for us to fill our clients’ orders. We also keep stock of raw materials from time to time before we receive orders to meet new clients’ demand. For large orders, if our contracting suppliers are not able to provide enough raw materials, we may purchase additional raw materials from local farmer markets.

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Previously, we purchased all raw materials directly from various family farms. In March 2016, some of the family farms we cooperated with established JLT and QNMI as co-operatives to represent local family farms. On April 1, 2016, we entered into a three-year framework purchase agreement with each of JLT and QNMI. The framework purchase agreements were renewed for another three years in April 2022 upon expiration. Since April 2016, we switched to JLT and QNMI for the majority of our purchases from individual family farms. Therefore, since the year ended September 30, 2016, JLT and QNMI, have been our major suppliers related edible fungi. For the years ended September 30, 2023, 2022 and 2021, JLT and QNMI contributed13.5% and 7.9%, 20.9% and 9.3%, and 29.7% and 14.7% of our edible fungi raw material supplies, respectively. The allocation of our total purchases vary from time to time between these two major suppliers depend upon the specific needs of our clients at certain point of time. JLT is located in Jingning County and QNMI is located in Qingyuan County. These two counties, are famous for growing different kinds of edible fungi due to their unique geographic characteristics. As such, we order different types of mushrooms from these two companies. For instance, when we need flower Shiitake, we order it from JLT since Jingning County is famous for growing flower Shiitake. When we need Dengwai Shiitake, we order it from QNMI since Qingyuan County is famous for growing Dengwai Shiitake. Therefore, their respective supplies to us vary from time to time. As the quantity of different kinds of edible fungi ordered by our clients vary, the quantitative allocation of supplies among JLT, QNMI and other family farms changes.

In addition, we cooperate with a number of family farms which may provide dried edible fungi directly to us. We have a few employees who provide technology support to the family farms. These family farms are located in Zhejiang Province, Henan Province, Hubei Province, Jiangxi Province, Fujian Province and Jilin Province.

Shiitake

Among the family farms that we cooperate with, 5 are located in Qingyuan County, Lishui, Zhejiang Province. One of our major suppliers, QNMI, is located in Qingyuan County. We have also set up a branch in Qingyuan to have a closer access to the raw materials. Qingyuan is the birth place of artificial cultivation of Shiitake dating back to about 1,000 years ago. The county of Qingyuan is located in a warm monsoon climate which is considered ideal for the cultivation of Shiitake. The county was officially named by Chinese Government as “The Town of Lentinula Mushroom in China” in 1994. Qingyuan Shiitake is a China national recognized “protected geographical indication product”. A geographical indication product is a product named by the geographical location because of its premium quality and unique production location. The value of the public brand “Qingyuan Lentinula Mushroom” was estimated as RMB4.926 billion (approximately $0.77 billion) in 2022. The brand was the No. 1 public brand in edible fungi category in China for eight years in a row.

In accordance with our clients’ needs, we also purchase Shiitake from other areas in China because different areas cultivate different kinds and sizes of Shiitake.

Mu Er

We mainly purchase and process our Mu Er from Longquan County, Lishui, Zhejiang Province. Longquan has over 1,800 years of history of cultivation of Mu Er. Longquan was awarded as “The Hometown of Mu Er in China” by China Edible Fungi Association in 2010. Longquan Mu Er usually grows from October to May.

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In accordance with our clients’ needs, we also purchase and process Mu Er from Northeastern China. Mu Er from Northeastern China is famous for its premium quality. Northeastern Mu Er usually grows from July to November.

Examination of Family Farms

We use the following checklist to examine the family farms before we sign the purchase agreements with them:

1.	Basic condition:
	a.	location
	b.	equipment on site
	c.	marks on site

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2.	Cultivation management:
	a.	How many varieties are cultivated and how big production volume is (at least 10 acres or 100,000 artificial logs)
	b.	How good equipment are, including ventilating equipment and watering equipment
	c.	How well management standards are enforced

3.	Cultivation environment:
	a.	Contamination situation of the farm and the neighboring environment
	b.	Water source
	c.	If cultivation dent is provided

4.	Harvest condition:
	a.	Space and sanitary conditions
	b.	Whether or not harvested fungi are processed briefly before storage

5.	Storage condition:
	a.	Whether or not there are enough storage room and/or freezer can be facilitated

6.	Cultivation record:
	a.	How well farms keep track of the cultivation process

Our supplier farms are responsible for complying with legal requirements and our quality standards. First of all, they need to produce edible fungi in compliance of PRC law about food safety. Our purchase agreements with family farms also provide that the family farms shall accept the guidance of local governmental agencies of the industry and the technical organization, and shall produce the products in compliance of the standardized specifications. Second, the family farms should record the whole production process according to the traceability requirements. The products provided by the family farms should comply with the relevant quality standards and our requirements for the species and the specifications. We have the right to exam the farms, conduct the sampling inspection, and require the suppliers to correct the problems.

In order to enter into the trading of agricultural products in bulk, the Company signed a framework agreement on agricultural products purchase and sales cooperation with Ningbo Caixiang Trading Co., Ltd. on May 25, 2021. Ningbo Caixiang Trading Co., Ltd. is located in Ningbo City, a port city, and is the gathering and distributing place of agriculture products in bulks in the Yangtze River Delta region, with rich resources of agricultural products. The contract with Ningbo Caixiang Trading Co., Ltd. expired in May 2022, and the two parties renewed the agricultural product supply agreement in May 2022, with a validity of 3 years. The agreement agreed that Ningbo Caixiang should provide the Company with agricultural products of no less than RMB200 million yuan (including but not limited to cotton, corn, etc.) and pay part of the payment in advance to lock up the goods.

On April 1, 2020, the Company signed a framework cooperation agreement with Lishui Zhelin Trade Co., Ltd. (“Zhelin Trade”), which is valid for 4 years. Zhelin Trade is located in the agricultural product distribution center in Liandu District - Southwest Zhejiang Agricultural Trade City, which has convenient logistics and timely agricultural product information. Therefore, the cooperation agreement stipulates that Zhelin Trade will process and deliver edible mushroom products on behalf of Zhelin Trade, and the Company is required to make advance payment to ensure the timeliness of goods supply and delivery.

Due to the increase of edible fungus business and preventing untimely supply of goods arising from natural disasters, the Company signed a cooperation agreement with Suizhou Huayu Ecological Agriculture Co., Ltd. on August 1, 2022. Suizhou Huayu is located in Suizhou City, Hubei Province. Suizhou City is the main production area of edible fungi in central China. The cultivation of edible fungi in this area is mainly family farms and cooperatives. Advance payment is required to ensure supply, The timely and stable supply of goods and the quality of goods can be guaranteed by paying the suppliers in advance.

Many competitors of the Company and other large buyers go there to source their supplies. Family farms and co-operatives traditionally request advance payments to secure supplies. By making advance payments to these suppliers, the Company is also able to lock in a more favorable price for premium quality than would be available in the open market. Allowance for doubtful accounts of $3,176 and $3,258 was made for certain advances to suppliers as of September 30, 2023 and 2022.

The Framework Agreements only provide general guidelines. Actual prices are negotiated and agreed upon in individual purchase orders, and are typically set at market prices based on the quality grade and quantities determined and agreed with the suppliers. Prices may vary based on market demand and crop condition etc. The Company can generally secure the premium quality raw material supplies at prices slightly higher than the typical market prices for average quality raw materials. The quality of supplies must meet standardized specifications of both the mushroom industry and standards set by the Company.

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Dried Edible Fungi Production Process

The process of producing dried edible fungi products consists of the following steps, which we and/or our suppliers perform, as indicated:

1. Family Farms Plant and Harvest Edible Fungi

Family farms plant edible fungi based on our standards and harvest them.

2. Family Farms Process Edible Fungi Roughly

Family farms then dehydrate the edible fungi until the desired moisture content is reached. They then sort the dried fungi roughly to have most of the fungi fall within the size range required by us. The family farms also select the dried fungi to get rid of obvious impurities such as dirt. Some family farms may use machines to conduct advanced sorting to provide higher percentage of dried edible fungi within the size ranges required by us. In addition, if our clients need Shiitake slice products, we will purchase dried Shiitake slices and process them. If our clients need Mu Er string products, we will use our own equipment to cut the dried whole Mu Er into strings.

3. Our Company Further Processes the Dried Edible Fungi

After the dehydration process is completed, our supplier farms supply the dried edible fungi to us directly or through supplier companies (currently only JLT and QNMI) for processing. After we receive the raw materials, we are responsible for further sorting to get the fungi in specific size range and further selecting to get rid of more impurities. For Shiitake, we also further dehydrate it to ensure the uniform level of dryness of our products. For Mu Er, we conduct additional procedure such as burning hair to get the products with higher quality. We then package, sell and market the dried edible fungi products.

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Our Processing Workflow of Shiitake

We develop and manufacture our Shiitake products using the following workflow:

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Our Processing Workflow of Mu Er

We develop and manufacture our Mu Er products using the following workflow:

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Seasonality

Prior to the divestiture transaction in September 2022, most of the sales of FLS Mushroom were made to China Forest. Sales increased from July to September because the client places significantly more orders with FLS Mushroom during this period. From December to January, there was usually a peak because people spend more on food including edible fungi to prepare for Chinese New Year celebrations. From February to March, the sales of FLS Mushroom typically decreased because of the conclusion of Chinese New Year holiday.

Farmmi Food focuses on producing and selling small packages of dried edible fungi. The sales peak is from December to January, as customers spend more on food including edible fungi to prepare for the New Year holidays.

Our Quality Control

Quality control is an important aspect of our work and ensuring quality at every stage of the process has been a key driver in maintaining and developing brand value for the Company.

Quality Standards

We apply the following national standards to our following products:

Product Category	Standard	Issuance Agency	Issuance Date
Shiitake	GH/T 1013-2015	All-China Federation of Supply and Marketing Cooperatives	March 27, 2015
Mu Er	GB/T 6192-2008	General Administration of Quality Supervision,	August 7, 2008
		Inspection and Quarantine of the People’s
		Republic of China and Standardization
		Administration of the People’s Republic of
		China
Other edible fungi	GB 7096-2014	National Health and Family Planning	December 24, 2014
		Commission of the People’s Republic of China
Corn	GB 1353-2018	State Administration for Market Regulation and	July 13,2018
		National Standardization Administration of the
		People’s Republic of China
Cotton	GB1103.1-2012	Standardization Administration of The People's Republic of China	November 21, 2012
	GB1103.2-2012	Standardization Administration of The People's Republic of China	November 21, 2012

Before we purchase dried edible fungi from companies and family farms, our experienced procurement managers examine the physical characters of the samples. After the initial examination, they bring back the samples to our own laboratory and third-party inspection agents perform sophistic examinations.

Quality Control System

We are enforcing HACCP (the hazard analysis critical control point) plan for dried Shiitake and dried Mu Er. In addition, we are enforcing food safety manual, SSOP (sanitation standard operating procedure), GMP (good manufacturing practices), food defense plan, and a series of procedure documents.

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In addition, we utilize a food source tracking system. This system helps us obtain detailed information of every step in the process that our raw materials/products are delivered from the farms to the clients. Our staff performs on-site quality certification at every step.

Quality Certificates

Issuing Authority	Certificate	Recipient	Standard	Applicable to	Valid Period
				Processing of dried
				cultivated edible
				fungi products by
			BRC Global	sorting, drying and
Intertek	BRC Certificate of	Farmmi	Standard for Food	packing in plastic
Certification Ltd	Registration	Biotechnology	Safety	bags	2023.9.19 to 2024.10.2
			GB/T 27341-	Processing of Dried
China Quality	HCCP system	Farmmi	2009/GB 14881-	Mushroom and
Certification Centre	Certificate	Biotechnology	2013	Dried Black Fungus	2021.9.30 to 2024.9.29

Quality Control Over Family Farms

We apply quality control and examine all family farms before we sign purchase agreements with them. The purchase agreements also provide quality requirements to the family farms. See “Item 4. Information on the Company - B. Business Overview - Raw Materials and Suppliers - Examination of Family Farms.”

Quality Control in Processing Factory

We have a selecting workshop and a packing workshop. The packing workshop is further divided into an internal packing area and a box packing area to avoid possible contamination.

The workers in the workshops are required to wear uniforms, masks, over sleeves, inner caps and outer hats.

The picking process of the edible fungi repeats twice to three times. For each time, the workers need to examine the whole fungi, identify and dispose of foreign matters such as leaves, fibers, hair and so on.

For Mu Er, we use additional process of burning mushroom filaments to refine the quality. After the workers finish the check and examination of the Mu Er on the conveyor belt, when it is falling to the oscillating screen, a fire device in front projects fire so the impurities which are hard to remove by hand such as mushroom filaments can be burned. In accordance with some clients’ requirements, we also soak dried Mu Er in water to make it flat, and remove the hidden impurities.

Quality Control Group

We have a quality control group. At different stage, we have different employees in the quality control group to conduct quality control.

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Traceability System

We have established and used a traceability system since 2006 for our products of edible fungi.

First, we use mark cards to designate the vendors which provided the materials. The vendors include the raw materials suppliers such as third-party family farms, JLT and QNMI which represent local family farms, and the suppliers which provide supplementary materials such as package boxes, package bags, plastic trays, air bubble films, and desiccants.

The mark cards state the name of the materials, production lot number or production date, quantity, production location, warehouse receipt date and so on. With the mark cards, we are able to trace the materials to the specific vendors.

Second, we classify the status of the products as “to be inspected,” “qualified,” and “disqualified.” For each status, we use different marks and put the products at designated areas.

Third, each of the following departments keep track of the records of the products, client names, quantity, weight and lot numbers: sales department, production department, packaging department, procurement department, and quality inspection department. With the records, we are able to trace the products to the specific clients. If any client submits claims for any product quality issues, the quality control department will check the problematic procedure, and trace the production records according to the product name, lot number, packing slip and so on to find the responsible department and personnel.

Distribution Channels

We distribute our products mainly through distributors. We sell most of our products to domestic distributors in China, which then sell in China and internationally.

Most of our products are sold in mainland China. The chart below is a breakdown of total revenues by geographic market for the years ended September 2023, 2022 and 2021, respectively.

	For the years ended September 30,
	2023			2022			2021
International Markets		0.6	%		1.8	%		3.0	%
Domestic Markets		99.4	%		98.2	%		97.0	%
Total		100.0	%		100.0	%		100.0	%

International Markets and Customers

The majority of our export items are dried Shiitake and dried Mu Er. They are sold to international markets through a related party, Forasen Group (until March 2018), and unaffiliated trading companies in China. Currently we export dried edible fungi including dried Shiitake and dried Mu Er. In the fiscal year 2023, approximately 86.4% of our export revenues are from Japan, Middle East and Canada (including approximately 28.8% from Japan, approximately 30.2% from middle east, and approximately 27.4% from Canada). The remaining approximately 13.6% of our export revenues are from other countries.

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The following is a list of selected international customers, their respective nations, the distributors and the brands.

Country/Area	Customer	Brand
Japan	Maruhan Co., Ltd	OEM
Korea	H-MART Group	OEM
United States	Rhee Bros., Inc.	OEM
Canada	Loblaws Supermarkets	OEM
Europe (England and the Netherlands)	Processing manufacturers, supermarkets and restaurants	OEM
Middle East	Processing manufacturers, supermarkets and restaurants	OEM

A few examples of our OEM products are below:

Through domestic trading companies, we have supplied our products to Rhee Bros. Inc. for twenty years to support them in their sales of edible fungi products, primarily to Asian supermarkets in the United States.

Through domestic trading companies, we have supplied products to Loblaws supermarkets for nineteen years. By obtaining a BRC certification, which certifies we meet the leading food safety standard associated with UK retailing, we established systems to ensure we can provide edible fungi products that satisfy these high standards.

Our cooperation with Maruhan began fifteen years ago. Maruhan’s wholesale offerings to supermarkets in Japan carry strict product quality and safety requirements, and we are pleased to continually satisfy their expectations.

Since the beginning of 2018, we have signed multiple sales contracts with Qingdao Gabsan Trading Co., Ltd., a Chinese trading company affiliated with H-MART Group, a supermarket chain which operates Korean supermarkets in the U.S., Canada, Europe and India.

We plan to continue increasing our export sales and develop more export customers. We intend to further investing our resources in promoting overseas market, including attending more export fairs and developing cross-border e-commerce.

Domestic Markets and Customers

Products from six categories of our products are mostly sold in China. Our domestic sales used to depend heavily on our major clients, Yunmihui and Hongren International. Yunmihui and Hongren International contributed to 40.5% and 11.7% of our total sales for the years ended September 30, 2023, respectively. Yunmihui and Senjiayamei contributed to 31.2% and 15.6% of our total sales for the years ended September 30, 2022, respectively. China Forest contributed to 63.8% of our total sales for the years ended September 30, 2021.

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Our typical agreements with the distributors which sell the products in China, such as Yunmihui, provide that payment is due upon receipt of a value-added tax invoice, and the customer should make the payment by bank’s acceptance bill or wire transfer. Our products are required to meet national requirements for agricultural products for the products involved. Delivery is set at our factory, and the customer is responsible for the cost of transportation. Products are deemed to be accepted upon receipt unless the customer rejects the delivery. The price and quantity of products are agreed upon at the time an individual sales contract is signed. Our cooperation with other distributors which sell products in China is similar.

We also sell our mushroom products to restaurants and cafeterias. In addition, we provide our mushroom products to local specialty stores from time to time, such as Lishui Department Store and Zhejiang Liujianyuan Local Specialty Store. Since August 2019, we began testing a few brick-and-mortar stores using our Farmmi Baba brand in Hangzhou. In August 2019, we have also launched the Farmmi Baba Yipinlv Organic Farm Project with a third party. The farm covers more than 18 acres and is located in Tongxiang City of Zhejiang Province. The farm focuses on enabling domestic and foreign consumers to better experience and enjoy high quality agricultural products. In addition to consumption, the farm will serve as a base for the popular immersive entertainment experience called "Agritainment" or farm-based tourism.

We also have online sales in China. In the fiscal years 2023, 2022 and 2021 online sales accounted for about 0.4%, 4.6% and 13.51% of our total sales, respectively. For details of our online distribution channels, see “Item 4. Information on the Company - B. Business Overview - E-Commerce of Agricultural Products.”

Agricultural Product Sales Through E-Commerce Channels

E-commerce has big business potential in China. From June 2019 to December 2020, Chinese users of internet shopping increased 31.61%, from 639,000,000 to 841,000,000. From 2016 to 2021, Chinese e-commerce industry market scale increased 53.6%, from RMB 27.54 trillion to RMB 42.3 trillion. Beginning in July 2014, we opened online stores on well-known third-party e-commerce sites like taobao.com, Tmall.com and JD.com to capitalize on this trend and meet customers who might not have otherwise found our products.

In March 2016, we began to develop our own e-commerce site, Farmmi Liangpin Market (www.farmmi.com/www.farmmi88.com). It sold our edible fungi products and tea products of a third-party manufacturer to Chinese customers. Most of the customers were the centralized procurement personnel who bought bulk edible fungi products on behalf of restaurants and cafeterias.

In August 2018, we restructured Farmmi Liangpin Market (www.farmmi.com/www.farmmi88.com) to two online stores: Farmmi Jicai (www.farmmi88.com) and Farmmi Liangpin Market (www.farmmi.com). Farmmi Jicai (www.farmmi88.com) sold our edible fungi products under Forasen brand and Farmmi Liangpin brand. Farmmi Liangpin Market (initially www.farmmi88.com; later switched to mobile application and mini program on WeChat) sold our edible fungi products under Farmmi Liangpin brand and Puyangtang brand, as well as other agricultural products we purchased from third party manufacturers. In connection to the reconstruction, we closed our stores at JD.com and Tmall.com in March 2018 and June 2018, respectively. We also closed our Taobao store in 2019.

In May 2019, we tested Farmmi Baba, a new e-commerce platform operated as a mini program on WeChat, to provide bulk orders of vegetables. Due to inactive business, we terminated its operation.

We closed our Farmmi Liangpin Market on December 31, 2020 and closed Farmmi Jicai on January 15, 2023 because the revenues generated from the two online stores did not justify the costs and expenses.

We operate our e-commerce websites through Nongyuan Network. Nongyuan Network previously obtained its ICP license for www.farmmi.com and www.farmmi88.com as required by the then-existing government regulations. The ICP license is a permit issued by the Chinese Ministry of Industry and Information Technology to permit China-based websites to operate in China. The ICP license is no longer required for our e-commerce sales operations after April 2022. 

Our e-commerce websites are indirectly managed by Farmmi Enterprise. We plan to use Farmmi Enterprise as our overall E-commerce platform. Our business development project of an e-commerce platform of agricultural products through Farmmi Enterprise has been approved by Hangzhou High-tech Industrial Development Zone.

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Our online sales have been generated by (1) the centralized procurement personnel who buy bulk edible fungi products on behalf of restaurants and cafeterias and (2) direct retail to individual consumers. Most of our offline sales are wholesale and a small percentage is the sales to the centralized procurement personnel who buy bulk edible fungi products on behalf of restaurants and cafeterias. We also established a few offline retail stores in Hangzhou, Zhejiang but closed them by March 2020. The percentages of our online sales and our offline sales were as below:

	For the years ended September 30,
	2023			2022			2021
Online Sales		0.4	%		4.6	%		13.5	%
Offline Sales		99.6	%		95.4	%		86.5	%

1. Farmmi Jicai (www.farmmi88.com; closed on January 15, 2023)

We launched Farmmi Liangpin Market (farmmi88.com/farmmi.com), the predecessor of Farmmi Jicai, in March 2016, and it started generating sales in December 2016. After the restructuring in August 2018, Farmmi Jicai served members of the old Farmmi Liangpin Market. It has had over 40,000 registered members, among whom over 7,500 members have ordered products. A majority of the members of this online store was our long-time clients, including restaurants and cafeterias. The rest members were individual consumers.

Previously we set it as a platform to sell our edible fungi products and other agricultural products manufactured by third parties. The tea products were the only products we actually sold under the other agricultural products category. From the six months ended March 31, 2018, because the tea supplier raised the unit price of its tea products, we stopped selling them. Before we closed Jicai Market in January 2023, the only products sold on Jicai Market were edible fungi products.

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2. Farmmi Liangpin Market (initially www.farmmi88.com; transferred to mobile application and mini program on WeChat; closed on December 31, 2020)

We began to operate this new Farmmi Liangpin Market since August 2018 when we reconstructed Farmmi Liangpin Market (www.farmmi.com/www.farmmi88.com) to two online stores: Farmmi Jicai (www.farmmi88.com) and Farmmi Liangpin Market (www.farmmi.com). We identified Farmmi Liangpin Market as a platform of pesticide-free, organic and green agricultural products before we closed it.

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Methods of Competition and Competitive Position

Competitive Advantages

1. Sophisticated quality control system. Product quality is always our major focus. We enforce a series of quality standards for our edible fungi products, adopt sound quality control system and have been awarded various quality certificates. In addition, our workers must follow specific quality control procedures in the factories. In addition, our traceability system allows us to trace and correct any quality issues. See “Item 4. Information on the Company - B. Business Overview - Our Quality Control”.

To ensure the highest quality, we have implemented systems designed to subject us to stringent oversight of our production practices and quality control systems:

2006: ISO22000 food safety management system certification.

2010: BRC British Retail Consortium certification for food safety.

2010: Implementation of Health Standards Operational Procedures.

2012: Implementation of dry mushrooms and dry black fungi hazard analysis and critical control points (“HACCP”) plan.

2012: Implementation of food safety manual and food protection plan to reduce or eliminate food safety hazards, to prevent harm to public health, and to ensure the health of consumers.

2. Established supplier relationships. We have strong relationships with our significant suppliers to ensure access to relatively high-quality dried edible fungi. We have built long time and stable relationship with the family farms that we cooperate with. Our employees provide technology support to the family farms in need. Our procurement price is usually higher than the market price. Some of the family farms have cooperated with us for more than 10 years. They provide steady supply of raw materials to us.

3. Stable and experienced factory employees. Our founders started to conduct edible fungi business twenty years ago, and they have attracted many loyal employees. Among our current less than 80 factory workers, there are over 20 employees who have followed Ms. Zhang and Mr. Wang for over 10 years. They are great assets to us by being loyal to the company and possessing rich experience in the factory.

4. Favorable location. Lishui is an important mushroom resource base, giving our company access to an abundance of high quality, affordable raw materials. We purchase many of our Shiitake from Qingyuan of Lishui, a certified place of origin of Shiitake and most of our Mu Er from Longquan of Lishui, the town of Mu Er in China.

Competitive Disadvantages

1. Low barrier to entry. We believe the barrier to entry in our industry is relatively low. Although we believe we distinguish our company from competitors on the basis of quality, to the extent our customer base focuses heavily on price, many of our competitors can provide products at relatively low prices, affecting our profit margins as we seek to compete with them.

2. Lack of experience in E-commerce. We have devoted resources to our decision to build, develop and reconstruct our online stores. We have closed Farmmi Liangpin Market due to unsuccessful operation. Farmmi Jicai is the only online store we have right now. It is not well known by consumers yet, and we do not have rich experience in e-commerce operation. As a result, we have no guarantee that we will be successful in Farmmi Jicai. If we do not manage it effectively, our business prospects could be impaired.

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Competitive Position

Mushroom cultivation in the Lishui area of China has a history going back 1,800 years, and the region is famous throughout China for producing some of the finest quality, best flavored mushrooms available. Our region is known as the “Hometown of Mushrooms in China” and the “Hometown of Mu Er in China.” Since 2005, our region has also held China’s Qingyuan Mushroom Festival, and Lishui has established a mushroom museum to introduce the long history of mushroom planting and mushroom eating in China. Therefore, it is not surprising that some of our biggest competitors are also in the Lishui area.

One of our key competitors is Zhejiang Jingning Nature Food Co. Ltd. (“Jingning”), also in Lishui. Founded in 1987, Jingning has a facility in Lishui that covers approximately 18,000 square meters and fixed assets worth more than RMB 1 billion. Jingning’s products have been awarded for quality and technology, and its brand has been recognized as a “Famous Brand of Lishui”.

Another competitor is Zhejiang Tianhe Food Co., Ltd. (“Tianhe”), which is also based in Lishui. Founded in 1979, Tianhe operates four facilities in Zhejiang for processing and packaging fresh and dried products, as well as a retail site in Shanghai. Tianhe offers a variety of specialty products, including in particular, fresh mushroom products. Tianhe’s operations include 9 acres of land, 16,000 square meters of production facilities and 4,000 square meters of refrigeration facilities.

Awards and Recognition

2010

Famous Trademark in Zhejiang Province (Forest)

2010 - 2011

Model Enterprise of Food Safety in Liandu Area, Lishui City, Zhejiang Province

2012

Zhejiang Exportation and Importation Enterprise of Quality and Integrity

2012 - 2013

Model Enterprise of Food Safety in Liandu Area, Lishui City, Zhejiang Province

2013

Famous Brand Products in Zhejiang (Forest Shiitake and Mu Er)

2016

2016 Famous Brand Products in Zhejiang (Forasen)

2016 Famous Brand Products in Lishui

2017

Healthy Products with Premium Quality in China’s Longevity Village (authorized to use “Longevity” mark for three years)

Listed Brand selected by China Edible Fungi Business Website and Edible Fungi Market

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2019

Yangtze River Delta Famous Food Honor

Top Ten Excellent Enterprise by Zhejiang Edible Fungi Association

2020

China Mushroom Industry Development Boom Observation Unit by China Edible Fungi Association

Eco-premium agricultural products by Lishui government (Black Fungus and dried mushrooms).

2021

The first batch of assured consumer company in Liandu District

Key agricultural leading enterprises in Liandu District, Lishui City

Zhejiang Farmmi Biotechnology Co., Ltd. and Zhejiang Farmmi Food Co., Ltd. Subsidiaries awarded title of Sunshine Factory

2022

Joined the National Restaurant Association.

The tenth batch of city-level key agricultural leading enterprises of Lishui, Zhejiang Province

Business Development Efforts

Our business development efforts focus on developing e-commerce platforms, web-based products and applications of new technologies.

We believe technological innovations will help our Company achieve its long-term strategic objectives.

Our business development employees provide technology support to the family farms in need, improve the technology used in our production, and help with the maintenance of our online stores. Over the past three fiscal years, we spent, in aggregate, RMB86,955 for intellectual property and RMB3,516,698 on software and website development, technical service and product design.

In July 2019, we appointed Eitan Neubauer as a senior technology consultant. Mr. Neubauer serves as the CEO of the Israel-based Neubauer Agro-Business & Projects Company. He previously held the position of Counselor of Agriculture, Science and International Cooperation of the Israeli Embassy in China, and has considerable experience in trade management and agricultural technology.

Our major business development projects include the following:

1. internet technology development;

2. internet product development; and

3. processing technology and product development of edible fungi.

Intellectual Property

We rely on trademarks and service marks to protect our intellectual property and branding. As of the date of this report, we hold over 100 registered trademarks about or related to “Farmmi”, “Farmmi Liangpin”, “Forasen” and “Puyangtang” in different applicable trademark categories in China. We also own three domain names: farmmi.com, farmmi.com.cn and farmmi88.com. These websites are not part of this report.

Marketing Channels

We mainly market our products by attending trade fairs, such as The China Import and Export Fair, Anuga (originally short for Allgemeine Nahrungs- und Genussmittel-Ausstellung, a leading international food fair) and FOODEX JAPAN.

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Capital Expenditures and Divestitures

We had capital expenditures of approximately $314, $2,946 and $4,686 for the years ended September 30, 2023, 2022 and 2021, respectively for equipment renovation and development.

We do not have any principal capital expenditures since the beginning of the last three fiscal years to the date of this report or any principal capital expenditures in progress. On September 27, 2021, Farmmi Agricultural and Hangzhou Dawo Software Co., Ltd., the only shareholders of Zhejiang Forest Food Co., Ltd. (“Zhejiang Forest Food”), entered into a Share Transfer Agreement to transfer all of their equity in Zhejiang Forest to Lishui Zhongjun Technology Co., Ltd., an unrelated party, for a total price of RMB18,200,000 (approximately $2.82 million). The divestment was completed on October 1, 2021.  After this transfer, Zhejiang Forest has been divested from the Company. On September 30, 2022, Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd., the only shareholder of FLS Mushroom, entered into a Share Transfer Agreement and Supplementary Agreement (“Share Transfer Agreement”) to transfer all of the equity in FLS Mushroom to Zhejiang Jingcai Industrial Co., Ltd, an unrelated party, for a total price of RMB24,100,000. After this transfer, FLS Mushroom has been divested from the Company.

Governmental Support

Our local government has been supporting our development in different ways, including providing subsidies. The following chart is a summary of selected projects.

				Subsidy Amount
Year		Governmental Agency	Project	(RMB)
	2021	Liandu District, Lishui City	Tourist destination commodity subsidy	41,000
			Job stabilization subsidy	20,000
			Subsidies for replacing training with work	19,000
			Employment subsidies for newly graduated college students	768
			Job stabilization subsidy	6,353
			Exhibition subsidy	5,000
	2022	Liandu District, Lishui City	Other taxes subsidy	2,404
			Chinese New Year job subsidy	1,500
			Export subsidy	1,000,000
			Agricultural subsidy	10,000
			Exhibition subsidy	7,700
			Food safety subsidy	20,000
			Job training subsidy	8,500
			Product international certification award	10,000
	2023	Xiaoshan District, Hangzhou City	Fund raised in capital market	10,151,164

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Community Involvement

Since our founding, we have been highly committed to community involvement, both through charitable endeavors and industry development. We believe the best approach to corporate social responsibility is through embedding elements of social responsibility in our business model. Our achievements and initiatives in the area of corporate social responsibility include the following:

Charitable Endeavors

We support and promote a number of charitable and socially responsible initiatives and programs in ways that we believe are in alignment with our core values and our mission. For example, on November 20, 2015, Forest Food donated RMB 100,000 to help the people affected by the landslides in Lidong Village, Yaxi Town, Lishui City.

Industry Development

By attending local and national industry associations, we take the responsibility of helping develop our industry. Below list shows some of our involvement with industry associations:

Association	Position	Activities
China Edible Fungi Industry Association	Member Entity	Attend various industry meetings such as the Sixth
		Member Representative General Meeting on October
		28, 2015; share and communicate industry information,
		such as the M&A opportunities and operation of edible
		fungi industry.
Zhejiang Province Edible Fungi Industry	Vice Chair Entity	Attend meetings such as Zhejiang Edible Fungi Meeting
Association		and Zhejiang Edible Fungi Production and Sale
		Flourishing Meeting.
Zhejiang Province Lishui City Food Industry	Chair Entity	Organize events such as Lishui Food Industry Seminar
Association		and Lishui Food Fair.
Zhejiang Province Modern Agricultural Association	Member Entity	Attend meetings such as Industry Leader Meeting
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REGULATIONS

We are subject to a variety of PRC and foreign laws, rules and regulations across a number of aspects of our business. This section summarizes the principal PRC laws, rules and regulations relevant to our business and operations. Areas in which we are subject to laws, rules and regulations outside of the PRC include intellectual property, competition, taxation, anti-money laundering and anti-corruption.

Regulation on Foreign Investments

Investment activities in the PRC by foreign investors are principally governed by the Industry Guidelines of Encouraged Foreign Investment, or the Industry Guidelines, effective on January 27, 2021, and the Special Administrative Measures for Entrance of Foreign Investment (Negative List), or the Negative List, most recently amended on December 27, 2021 and effective on January 1, 2022, and together with the PRC Foreign Investment Law, which took effect on January 1, 2020, and its respective implementation rules and ancillary regulations. The Industry Guidelines and the Negative List lay out the basic framework for foreign investments in China, classifying businesses into three categories with regard to foreign investments: “encouraged”, “restricted” and “prohibited”. Industries not listed in the Industry Guidelines or the Negative List are generally deemed as falling into a fourth category “permitted” unless specifically restricted by other PRC laws. The Negative List specifies that Investment in Internet news service, Internet publishing service, Internet audio-visual program service, cyber culture operation (except for music) and Internet information dissemination service (except for contents opened up in China’s WTO commitments) shall be prohibited.

According to the PRC Foreign Investment Law, foreign investments shall enjoy pre-entry national treatment, except for those foreign-invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list.” While foreign investors shall refrain from investing in any of the foreign “prohibited” industries, foreign-invested entities operating in foreign “restricted” industries shall require market entry clearance and other approvals from relevant PRC governmental authorities. Furthermore, the PRC Foreign Investment Law provides that foreign-invested enterprises that have been established before the implementation of PRC Foreign Investment Law according to the then existing laws regulating foreign investments may maintain their structure and corporate governance within five years after the implementation of the PRC Foreign Investment Law.

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On December 19, 2020, MOFCOM and NDRC released the Measures for the Security Review of Foreign Investments, which took effect on January 18, 2021. For foreign investments within the following scope, foreign investors or the relevant parties in China (hereinafter referred to collectively as the “parties concerned”) shall take the initiative to declare to the office of the working mechanism prior to implementation of the investments:…(II) investments in important agricultural products, important energy and resources, important equipment manufacturing, important infrastructure, important transport services, important cultural products and services, important information technology and Internet products and services, important financial services, key technologies and other important fields relating to national security, and obtaining the actual controlling stake in the investee enterprise. Prior to a decision made by the office of the working mechanism, the parties concerned shall not make the investment. The parties concerned shall not make the investment unless the office of the working mechanism decides that security review is not required. Where the declared foreign investment affects national security, a decision on prohibiting the investment shall be made. Foreign-invested entities of the group have businesses that conduct Internet services, but not related to national security within the scope of the regulations above.

On December 26, 2019, the State Council promulgated the Regulations for Implementing the PRC Foreign Investment Law, which took effect on January 1, 2020. The implementation regulations further clarified that the State encourages and promotes foreign investments, protects the lawful rights and interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and advances a higher-level opening.

On December 30, 2019, MOFCOM and SAMR jointly promulgated the Measures for Information Reporting on Foreign Investment, which became effective on January 1, 2020. Pursuant to the Measures for Information Reporting on Foreign Investment, where a foreign investor carries out investment activities in China directly or indirectly, the foreign investor or the foreign-invested enterprise shall submit the investment information to the competent commerce department.

Regulations Related to M&A and Overseas Listings

On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce, the State-owned Assets Supervision and Administration Commission, the SAT, the SAIC, the China Securities Regulatory Commission, or CSRC, and the SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended on June 22, 2009. The M&A Rules, among other things, require that (i) PRC entities or individuals obtain MOFCOM approval before they establish or control a special purpose vehicle, or SPV, overseas, provided that they intend to use the SPV to acquire their equity interests in a PRC company at the consideration of newly issued share of the SPV, or Share Swap, and list their equity interests in the PRC company overseas by listing the SPV in an overseas market; (ii) the SPV obtains MOFCOM’s approval before it acquires the equity interests held by the PRC entities or PRC individual in the PRC company by Share Swap; and (iii) the SPV obtains CSRC approval before it lists overseas.

On February 17, 2023, the CSRC issued the Trial Measures and five application guidelines, or the Overseas Listing Rules, which became effective on March 31, 2023. According to the Overseas Listing Rules, among other things, after making initial applications with overseas stock markets for offerings or listings, all China-based companies shall file with the CSRC within three business days. Subsequent securities offerings of an issuer in the same overseas market where it has previously offered and listed securities shall be filed with the CSRC within three business days after the offering is completed. Subsequent securities offerings and listings of an issuer in other overseas markets than where it has offered and listed shall be filed with the CSRC within three business days after the applications are made. In addition, overseas offerings and listings are prohibited for such China-based companies when any of the following applies: (a) where such securities offering and listing is explicitly prohibited by provisions in PRC laws, administrative regulations and relevant state rules; (b) where the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (c) where the domestic company intending to make the securities offering and listing, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (d) where the domestic company intending to make the securities offering and listing is suspected of committing crimes or major violations of laws and regulations, and is under investigation according to law, and no conclusion has yet been made thereof; (e) where there are material ownership disputes over equity held by the domestic company’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. The Overseas Listing Rules further stipulate that a fine between RMB 1 million and RMB 10 million may be imposed if a company fails to fulfill the filing requirements with the CSRC or conducts an overseas offering or listing in violation of the Overseas Listing Rules. According to the Notice on the Filing Management Arrangements for Overseas Offerings and Listings by Domestic Companies published by the CSRC on February 17, 2023, existing listed companies are not required to make any filings until they conduct a new offering or financing transaction in the future. A company is regarded as an existing listed company if it (a) has already completed overseas listing or offering, or (b) has already obtained the approval for the offering or listing from overseas securities regulatory authorities or stock exchanges but has not completed such offering or listing before the effective date of the Overseas Listing Rules and also completes the offering or listing before September 30, 2023. On the effective date of the Overseas Listing Rules, PRC companies that have already submitted offering and listing applications but have not yet obtained the approvals from overseas securities regulators or exchanges shall make filings with the CSRC at a reasonable time before the completion of the offerings or listings. For those that have already obtained CSRC’s approvals for overseas listings or offerings may continue their process without additional filings but shall make the filing pursuant to the Overseas Listing Rules if they cannot complete the offering or listing before the expiration of the original approval from CSRC.

Regulations on Anti-Monopoly and Competition

On September 11, 2020, the Anti-Monopoly Commission of the State Council issued Anti-Monopoly Compliance Guideline for Business Operators, which requires business operators to establish anti-monopoly compliance management systems under the PRC Anti-Monopoly Law to manage anti-monopoly compliance risks.

On August 17, 2021, the State Administration for Market Regulation, or the SAMR, issued a discussion draft of Provisions on the Prohibition of Unfair Competition on the Internet, under which business operators should not use data or algorithms to hijack traffic or influence users’ choices, or use technical means to illegally capture or use other business operators’ data. Furthermore, business operators are not allowed to (i) fabricate or spread misleading information to damage the reputation of competitors, or (ii) employ marketing practices such as fake reviews or use coupons or “red envelopes” to entice positive ratings.

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On February 7, 2021, the Anti-Monopoly Commission of the State Council published Anti-Monopoly Guidelines for the Internet Platform Economy Sector that specified circumstances where an activity of an internet platform will be identified as monopolistic act as well as concentration filing procedures for business operators. According to the PRC Anti-Monopoly Law, if a business operator carries out a concentration in violation of the law, the relevant authority shall order the business operator to terminate the concentration, dispose of the shares or assets or transfer the business within a specified time limit, or take other measures to restore the pre-concentration status, and impose a fine of up to RMB500,000.

On June 24, 2022, the Standing Committee of the National People’s Congress adopted the amended Anti-Monopoly Law, which increases the fines for illegal concentration of business operators to no more than ten percent of its last year’s sales revenue if the concentration of business operator has or may have an effect of excluding or limiting competitions, or a fine of up to RMB5 million if the concentration of business operator does not have an effect of excluding or limiting competition. The amended Anti-Monopoly Law also empowers the relevant authority to investigate a transaction where there is any evidence that the concentration has or may have the effect of eliminating or restricting competitions, even if such concentration does not reach the filing threshold.

Regulations Relating to Cybersecurity and Privacy Protection

The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these rights. In recent years, PRC government authorities have enacted legislation on the Internet use to protect personal information from any unauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services which was promulgated by MIIT on December 29, 2011, an Internet content service operator may not collect any user personal information or provide any such information to third parties without the consent of a user, unless otherwise stipulated by laws and administrative regulations. An Internet content service operator must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An Internet content service operator is also required to properly keep the user personal information, and in case of any leak or likely leak of the user personal information, the Internet content service operator must take immediate remedial measures and, in severe circumstances, to make an immediate report to the telecommunication regulatory authority.

In addition, the Decision on Strengthening Network Information Protection, which was promulgated by the Standing Committee of NPC on December 28, 2012, provides that electronic information that is able to identify personal identities of citizens or is concerned with personal privacy of citizens is protected by law and shall not be unlawfully obtained or provided. Internet content service operators collecting or using personal electronic information of citizens shall specify purposes, manners and scopes of information collection and use, obtain the consent of citizens concerned, and strictly keep confidential personal information collected. Internet content service operators are prohibited from disclosing, tampering with, damaging, selling or illegally providing others with personal information collected. Technical and other measures are required to be taken by Internet content service operators to prevent personal information collected from unauthorized disclosure, damage or being lost. Internet content service operators are subject to legal liability, including warnings, fines, confiscation of illegal gains, revocation of licenses or filings, closing of websites concerned, public security administration punishment, criminal liabilities, or civil liabilities, if they violate relevant provisions on Internet privacy.

In April 10, 2019, the Ministry of Public Security promulgated the Guidelines for Internet Personal Information Security Protection, which establishes the management mechanism, security technical measures and business workflows for personal information security protection. On August 22, 2019, the CAC promulgated the Provisions on the Cyber Protection of Children’s Personal Information which requires, among others, that network operators who collect, store, use, transfer and disclose personal information of children under the age of 14 shall establish special rules and user agreements for the protection of children’s personal information, inform the children’s guardians in a noticeable and clear manner, and shall obtain the consent of the children’s guardians.

On November 28, 2019, the CAC, MIIT, the Ministry of Public Security and SAMR jointly promulgated the Measures for the Determination of the Collection and Use of Personal Information by Apps in Violation of Laws and Regulations, which provides guidance for the regulatory authorities to identify the illegal collection and use of personal information through mobile apps, and for the app operators to conduct self-examination and self-correction and social supervision by citizens.

On May 28, 2020, the NPC approved the Civil Code of the PRC or the Civil Code, which came into effect on January 1, 2021. Pursuant to the Civil Code, the personal information of a natural person shall be protected by the law. Any organization or individual that needs to obtain personal information of others shall obtain such information legally and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others. Furthermore, information processors shall not divulge or tamper with personal information collected or stored by them; without the consent of a natural person, information processors shall not illegally provide personal information of such person to others, except for information that has been processed so that specific persons cannot be identified and that cannot be restored. In addition, an information processor shall take technical measures and other necessary measures to ensure the security of the personal information that is collected and stored and to prevent the information from being divulged, tampered with or lost; where personal information has been or may be divulged, tampered with or lost, the information processor shall take remedial measures in a timely manner, inform the natural person concerned in accordance with the provisions and report the case to the relevant competent department.

On August 20, 2021, the SCNPC adopted the Personal Information Security Law, which took effect on November 1, 2021. The Personal Information Protection Law includes the basic rules for personal information processing, the rules for cross-border provision of personal information, the rights of individuals in personal information processing activities, the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and use of personal information. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.

On November 14, 2021, the CAC published the Regulations of Internet Data Security Management (Draft for Comments), which further regulate the internet data processing activities and emphasize the supervision and management of network data security, and further stipulate the obligations of internet platform operators, such as to establish a system for disclosure of platform rules, privacy policies and algorithmic strategies related to data. Specifically, the draft regulations require data processors to, among others, (i) adopt immediate remediation measures when finding that network products and services they use or provide have security defects and vulnerabilities, or threaten national security or endanger public interest, and (ii) follow a series of detailed requirements with respect to processing of personal information, management of important data and proposed overseas transfer of data. In addition, the draft regulations require data processors handling important data or the data processors to be listed overseas to complete an annual data security assessment and file a data security assessment report to applicable regulators. Such annual assessment, as required by the draft regulations, would encompass areas including, but not limited to, the status of important data processing, data security risks identified and the measures adopted, the effectiveness of data protection measures, the implementation of national data security laws and regulations, data security incidents that occurred and their handling, and a security assessment with respect to sharing and provision of important data overseas. As of the date of this prospectus, the draft regulations have been released for public comment only and have not been formally adopted. The final provisions and the timeline for its adoption are subject to changes and uncertainties.

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Regulation Relating to Value-added Telecommunications Services

Licenses for Value-Added Telecommunications Services

On September 25, 2000, the State Council issued the Regulations on Telecommunications of China, or the Telecommunications Regulations, to regulate telecommunications activities in China. The Telecommunications Regulations divide the telecommunications services into two categories, namely “infrastructure telecommunications services” and “value-added telecommunications services.” Pursuant to the Telecommunications Regulations, operators of value-added telecommunications services must first obtain a Value-added Telecommunications Business Operating License, or VAT License, from the Ministry of Industry and Information Technology, or MIIT, or its provincial level counterparts. On March 1, 2009, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses, which set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses.

According to the Catalog of Classification of Telecommunications Businesses effective from April 1, 2003, internet information services, also called internet content services, or ICP services, are deemed as a type of value-added telecommunications services. On December 28, 2015, the MIIT published a revised Catalog of Classification of Telecommunication Business, or the 2016 MIIT Catalog, which took effect on March 1, 2016. According to the 2016 MIIT Catalog, internet information services, which include information release and delivery services, information search and query services, information community platform services, information real-times interactive services, and information protection and processing services, continues to be classified as a category of value-added telecommunication services. The Administrative Measures on Internet Information Services, or ICP Measures, also promulgated by the PRC State Council on September 25, 2000, set forth more specific rules on the provision of ICP services. According to ICP Measures, any company that engages in the provision of commercial ICP services shall obtain a sub-category VAT License for Internet Information Services, or ICP license, from the relevant government authorities before providing any commercial internet content services within the PRC, and when the ICP services involve areas of news, publication, education, medical treatment, health, pharmaceuticals and medical equipment, and if required by law or relevant regulations, specific approval from the respective regulatory authorities must be obtained prior to applying for the ICP License from the MIIT or its provincial level counterpart. Pursuant to the above-mentioned regulations, “commercial ICP services” generally refers to provision of specific information content, online advertising, web page construction and other online application services through internet for profit making purpose. Operating websites is classified as commercial ICP services. We currently, through Nongyuan Network, our PRC VIE, hold an ICP license that is valid until August 14, 2021. And according to the announcement from Zhejiang Communication Administration, the IPC license does not need to be renewed anymore.

Foreign Investment in Value-Added Telecommunication Services

The Regulations on Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which took effect on January 1, 2002 and amended on September 10, 2008, are the key regulations that regulate foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that the foreign investor of a telecommunications enterprise is prohibited from holding more than 50% of the equity interest in a foreign-invested enterprise that provides value-added telecommunications services. In addition, for a foreign investor to acquire any equity interest in a business providing value-added telecommunications services in China, it must demonstrate a positive track record and experience in providing such services.

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On July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Services, or the MIIT Circular 2006, which requires that (i) foreign investors can only operate a telecommunications business in China through establishing a telecommunications enterprise with a valid telecommunications business operation license; (ii) domestic license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, or providing any resource, sites or facilities to foreign investors to facilitate the unlicensed operation of telecommunications business in China; (iii) value-added telecommunications services providers or their shareholders must directly own the domain names and registered trademarks they use in their daily operations; (iv) each value-added telecommunications services provider must have the necessary facilities for its approved business operations and maintain such facilities in the geographic regions covered by its license; and (v) all value-added telecommunications services providers should improve network and information security, enact relevant information safety administration regulations and set up emergency plans to ensure network and information safety. The provincial communications administration bureaus, as local authorities in charge of regulating telecommunications services, (i) are required to ensure that existing qualified value-added telecommunications service providers will conduct a self-assessment of their compliance with the MIIT Circular 2006 and submit status reports to the MIIT before November 1, 2006; and (ii) may revoke the value-added telecommunications business operation licenses of those that fail to comply with the above requirements or fail to rectify such non-compliance within specified time limits. Due to the lack of any additional interpretation from the regulatory authorities, it remains unclear what impact MIIT Circular 2006 will have on us or the other PRC internet companies with similar corporate and contractual structures. After the MOFCOM and NDRC amended the Catalog in March 2015, MIIT also issued the Circular on Removing the Restrictions on Shareholding Ratio Held by Foreign Investors in Online Data Processing and Transaction Processing (Operating E-commerce) Business on June 19, 2015, which amended the relevant provision in FITE Regulations by allowing foreign investors to own more than 50% of the equity interest in an operator of e-commerce business. However, foreign investors continue to be prohibited from holding more than 50% of the equity interest in a provider of other category of value-added telecommunications services except for e-commerce.

The vast majority of our business is processing and/or selling agricultural products, as well as selling our products on third-party e-commerce websites. Based on the advice of our PRC legal counsel, Zhejiang Zhengbiao Law Firm, PRC laws and regulations allow foreign-owned entities to conduct such business directly, rather than through contractual VIE agreements. To comply with the above-mentioned foreign ownership restrictions, we operate our e-commerce websites in China through Nongyuan Network, which is owned by Ms. Xinyang Wang, a PRC citizen, and is controlled by Farmmi Agricultural, our PRC subsidiary, through a series of contractual arrangements. Nongyuan Network is the holder of the domain names, trademarks and facilities necessary for daily operations of our e-commerce websites in compliance with the MIIT Circular 2006. Based on our PRC legal counsel’s understanding of the current PRC law, rules and regulations, our corporate structure complies with all existing PRC laws and regulations. However, we were further advised by our PRC legal counsel that there are substantial uncertainties with respect to the interpretation and application of existing or future PRC laws and regulations and thus there is no assurance that Chinese governmental authorities would take a view consistent with the opinions of our PRC legal counsel.

The Draft PRC Foreign Investment Law

On January 19, 2015, MOFCOM published a discussion draft of the proposed Foreign Investment Law for public review and comments. The draft Foreign Investment Law purports to change the existing “case-by-case” approval regime to a “filing or approval” procedure for foreign investments in China. The MOFCOM, together with other relevant authorities, will determine a catalogue for special administrative measures, or the “negative list,” which will consist of a list of industry categories where foreign investments are strictly prohibited and a list of industry categories where foreign investments are subject to certain restrictions. Foreign investments in business sectors outside of the “negative list” will only be subject to filing procedures, in contrast to the existing prior approval requirements, whereas foreign investments in the restricted industries must apply for approval from the foreign investment administration authority.

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The draft Foreign Investment Law for the first time defines “foreign investor,” “foreign investment,” “Chinese investor” and “actual control.” A foreign investor is not only determined based on the place of its incorporation, but also on the conditions of the “actual control.” The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors, such as via contracts or trust, will be treated as Foreign-invested enterprises, or FIEs, whereas foreign investment in China in the foreign investment restricted industries by a foreign investor may nonetheless apply for being, when approving market entry clearance by the foreign investment administration authority, treated as a PRC domestic investment if the foreign investor is determined by the foreign investment administration authority as being “controlled” by PRC entities and/or citizens. In this connection, “actual control” is broadly defined in the draft Foreign Investment Law to cover the following summarized categories: (i) holding 50% of more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to materially influence the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. According to the draft Foreign Investment Law, VIEs would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties.

The draft Foreign Investment Law emphasizes the security review requirements, whereby all foreign investments concerning national security must be reviewed and approved in accordance with the security review procedure. In addition, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. In addition to the investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

It is still uncertain when the draft would be signed into law and whether the final version would have any substantial changes from this draft. When the Foreign Investment Law becomes effective, the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations, will be abolished.

Recently, the Chinese government has also been actively guiding the foreign investment to promote domestic economic development and industrial upgrading. To this end, the State Council issued the Circular on Several Measures for Actively and Effectively Utilizing Foreign Investment to Promote High-quality Economic Development (Circular 19, 2018), which guides foreign investment to invest more in modern agriculture and ecological construction, among other industries. The key areas, such as optimizing tax policy, supporting innovation and encouraging mergers and acquisitions, are potentially good for the related industries in which our Company is involved, but the specific measures need to be refined and clarified, and the sustainability of the policy remains uncertain.

Regulations Related to Intellectual Property Rights

The State Council and the National Copyright Administration, or the NCAC, have promulgated various rules and regulations relating to the protection of software in China. Under these rules and regulations, software owners, licensees and transferees may register their rights in software with the NCAC or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are encouraged to go through the registration process to enjoy the better protections afforded to registered software rights.

On March 1, 2009, the MIIT promulgated the Administrative Measures on Software Products, or the Software Measures, which replaced the original Administrative Measures on Software Measures promulgated by MIIT in October 2000, to regulate software products and promote the development of the software industry in China. Pursuant to the Software Measures, software products which are developed in China and registered with the local provincial government authorities in charge of the information industry and filed with MIIT may enjoy the relevant encouragement policies. Software developers or producers may sell or license their registered software products independently or through agents. Upon registration, the software products will be granted registration certificates. Each registration certificate is valid for five years and may be renewed upon expiration.

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The PRC Trademark Law, adopted in 1982 and revised in 1993, 2001 and 2013 respectively, with its implementation rules adopted in 2002 and revised in 2014, protects registered trademarks. The PRC Trademark Office of the State Administration for Industry and Commerce, or the SAIC, handles trademark registrations and grants a protection term of ten years to registered trademarks.

The MIIT amended its Administrative Measures on China Internet Domain Names in 2004. According to these measures, the MIIT is in charge of the overall administration of domain names in China. The registration of domain names in PRC is on a “first-apply-first-registration” basis. A domain name applicant will become the domain name holder upon the completion of the application procedure.

Regulations Related to Employment

On June 29, 2007, the Standing Committee of the National People’s Congress, or SCNPC, adopted the Labor Contract Law, or LCL, which became effective as of January 1, 2008 and was revised in 2012. The LCL requires employers to enter into written contracts with their employees, restricts the use of temporary workers and aims to give employees long-term job security.

Pursuant to the LCL, employment contracts lawfully concluded prior to the implementation of the LCL and continuing as of the date of its implementation will continue to be performed. Where an employment relationship was established prior to the implementation of the LCL but no written employment contract was concluded, a contract must be concluded within one month after the LCL’s implementation.

According to the Social Insurance Law promulgated by SCNPC and effective from July 1, 2011, the Regulation of Insurance for Work-Related Injury, the Provisional Measures on Insurance for Maternity of Employees, Regulation of Unemployment Insurance, the Decision of the State Council on Setting Up Basic Medical Insurance System for Staff Members and Workers in Cities and Towns, the Interim Regulation on the Collection and Payment of Social Insurance Premiums and the Interim Provisions on Registration of Social Insurance, an employer is required to contribute the social insurance for its employees in the PRC, including the basic pension insurance, basic medical insurance, unemployment insurance, maternity insurance and injury insurance.

In July 2018, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the Reform Plan for the Taxation and Administration System of State Taxes and Local Taxes (hereinafter referred to as the Reform Plan). The Reform Plan clearly stipulates that from January 1, 2019, all social insurance premiums, such as basic old-age insurance premium, basic medical insurance premium, unemployment insurance premium, industrial injury insurance premium and maternity insurance premium, will be levied by the tax authorities. The Reform Plan makes the collection of social insurance fees more transparent and standardized, and reduces a certain degree of flexibility that enterprises can enjoy before. For enterprises that have not paid all the related fees before, the Reform Plan will increase the financial burden of enterprises, which may even face administrative penalties and illegal risks. The details of how to levy social insurance fees need to be clarified.

Under the Regulations on the Administration of Housing Funds, promulgated by the State Council on April 3, 1999 and as amended on March 24, 2002, an employer is required to make contributions to a housing fund for its employees.

Regulations Related to Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, as amended in August 2008. Under this regulation, the Renminbi is freely convertible for current account items, including the trade and service-related foreign exchange transactions and other current exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made.

Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange promulgated on June 20, 1996 by the People’s Bank of China, foreign-invested enterprises in China may purchase or remit foreign currency for settlement of current account transactions without the approval of the SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities.

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In addition, the Notice of the General Affairs Department of SAFE on The Relevant Operation Issues Concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or Circular 142, which was promulgated on August 29, 2008 by SAFE, regulates the conversion by foreign-invested enterprises of foreign currency into Renminbi by restricting how the converted Renminbi may be used. Circular 142 requires that Renminbi converted from the foreign currency-denominated capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the relevant government authority and may not be used to make equity investments in PRC, unless specifically provided otherwise. The SAFE further strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-denominated capital of a foreign-invested enterprise. The use of such Renminbi may not be changed without approval from the SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Any violation of Circular 142 may result in severe penalties, including substantial fines.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

In July 2014, SAFE decided to further reform the foreign exchange administration system in order to satisfy and facilitate the business and capital operations of foreign invested enterprises, and issued the Circular on the Relevant Issues Concerning the Launch of Reforming Trial of the Administration Model of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises in Certain Areas, or Circular 36, on August 4, 2014. This circular suspends the application of Circular 142 in certain areas and allows a foreign-invested enterprise registered in such areas to use the Renminbi capital converted from foreign currency registered capital for equity investments within the PRC.

On March 30, 2015, SAFE released the Notice on the Reform of the Management Method for the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or Circular 19, which has made certain adjustments to some regulatory requirements on the settlement of foreign exchange capital of foreign-invested enterprises, lifted some foreign exchange restrictions under Circular 142, and annulled Circular 142 and Circular 36. However, Circular 19 continues to, prohibit foreign-invested enterprises from, among other things, using Renminbi fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises.

On June 19, 2016, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, which took effect on the same day. Compared to Circular 19, Circular 16 not only provides that, in addition to foreign exchange capital, foreign debt funds and proceeds remitted from foreign listings should also be subject to the discretional foreign exchange settlement, but also lifted the restriction, that foreign exchange capital under the capital accounts and the corresponding Renminbi capital obtained from foreign exchange settlement should not be used for repaying the inter-enterprise borrowings (including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party.

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Circular 37

On July 4, 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or Circular 37, which replaced the former circular commonly known as Circular 75 promulgated by SAFE on October 21, 2005. Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle.” Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

On February 13, 2015, SAFE released the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment, or Circular 13, which has amended Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

Dividend Distribution

The principal regulations governing distribution of dividends of foreign holding companies include the Foreign Investment Enterprise Law, issued in 1986 and amended in 2000, and the Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in 2001 and 2014 respectively. Under these regulations, foreign investment enterprises in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign investment enterprises in the PRC are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Regulations Related to Taxation

Enterprise Income Tax

Prior to January 1, 2008, entities established in the PRC were generally subject to a 30% national and 3% local enterprise income tax rate. Various preferential tax treatments promulgated by PRC tax authorities were available to foreign-invested enterprises.

In March 2007, the National People’s Congress enacted the Enterprise Income Tax Law, and in December 2007, the State Council promulgated the Implementing Rules of the Enterprise Income Tax Law, or the Implementing Rules, both of which became effective on January 1, 2008. The Enterprise Income Tax Law (i) reduces the top rate of enterprise income tax from 33% to a uniform 25% rate applicable to both foreign-invested enterprises and domestic enterprises and eliminates many of the preferential tax policies afforded to foreign investors, (ii) permits companies to continue to enjoy their existing tax incentives, subject to certain transitional phase-out rules and (iii) introduces new tax incentives, subject to various qualification criteria.

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The Enterprise Income Tax Law also provides that enterprises organized under the laws of jurisdictions outside China with their “de facto management bodies” located within China may be considered PRC resident enterprises and therefore be subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The Implementing Rules further define the term “de facto management body” as the management body that exercises substantial and overall management and control over the production and operations, personnel, accounts and properties of an enterprise. If an enterprise organized under the laws of jurisdiction outside China is considered a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, it would be subject to the PRC enterprise income tax at the rate of 25% on its worldwide income. Second, a 10% withholding tax would be imposed on dividends it pays to its non-PRC enterprise shareholders and with respect to gains derived by its non-PRC enterprise shareholders from transfer of its shares.

Prior to January 1, 2008, dividends derived by foreign enterprises from business operations in China were exempted from PRC enterprise income tax. However, such exemption was revoked by the Enterprise Income Tax Law and dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding arrangement.

Pursuant to the Notice of the State Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates, which was issued on January 29, 2008 and supplemented and revised on February 29, 2008, and the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, which became effective on December 8, 2006 and applies to income derived in any year of assessment commencing on or after April 1, 2007 in Hong Kong and in any year commencing on or after January 1, 2007 in the PRC, such withholding tax rate may be lowered to 5% if a Hong Kong enterprise is deemed the beneficial owner of any dividend paid by a PRC subsidiary by PRC tax authorities and holds at least 25% of the equity interest in that particular PRC subsidiary at all times within the 12-month period immediately before distribution of the dividends. Furthermore, the State Administration of Taxation promulgated the Notice on the Interpretation and Recognition of Beneficial Owners in Tax Treaties in October 2009, which stipulates that non-resident enterprises that cannot provide valid supporting documents as “beneficial owners” may not be approved to enjoy tax treaty benefits. Specifically, it expressly excludes an agent or a “conduit company” from being considered as a “beneficial owner” and a “beneficial owner” analysis shall be conducted on a case-by-case basis following the “substance-over-the-form” principle.

Value-Added Tax and Business Tax

Pursuant to applicable PRC tax regulations, any entity or individual conducting business in the service industry is generally required to pay a business tax at the rate of 5% on the revenues generated from providing such services. However, if the services provided are related to technology development and transfer, such business tax may be exempted subject to approval by the relevant tax authorities. Whereas, pursuant to the Provisional Regulations on Value-Added Tax of the PRC and its implementation regulations, unless otherwise specified by relevant laws and regulations, any entity or individual engaged in the sales of goods, provision of processing, repairs and replacement services and importation of goods into China is generally required to pay a value-added tax, or VAT, for revenues generated from sales of products, while qualified input VAT paid on taxable purchase can be offset against such output VAT.

In November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax. In March 2016, the Ministry of Finance and the State Administration of Taxation further promulgated the Notice on Fully Promoting the Pilot Plan for Replacing Business Tax by Value-Added Tax, which became effective on May 1, 2016. Pursuant to the pilot plan and relevant notices, VAT is generally imposed in the modern service industries, including the VATS, on a nationwide basis. VAT of a rate of 6% applies to revenue derived from the provision of some modern services. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the modern services provided.

In April 2018, the Ministry of Finance and the State Administration of Taxation jointly issued the Notice on Adjusting the Tax Rate of Value-added Tax (Circular 32 of Finance and Taxation, 2018). The Notice clearly stipulates that, from May 1, 2018, for all taxpayers who have engaged in taxable sales of VAT or imported goods, where the original 17% and 11% tax rates were applied, the tax rates shall be adjusted to 16% and 10%, respectively. This can lighten the operation burden of enterprises to a certain extent.

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C. Organizational Structure

Our current corporate structure is as follows:

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Farmmi, Inc. (“FAMI”)

FAMI is the listing company. It was incorporated on July 28, 2015 under the Companies Law (as revised) of the Cayman Islands as an exempted company limited by shares. The authorized share of the Company is 24,000,000 ordinary shares of $0.025 par value per share, in such class or classes as the company’s Board of Directors may designate from time to time. FAMI has full power and authority to carry out any business not prohibited by Cayman Islands law; provided, however, that the company may not operate the business of a bank, trust company, insurance business or company manager unless it obtains the proper licensure in the Cayman Islands for such businesses. As of the date of this report, FAMI has 23,906,985 ordinary shares issued and outstanding.

Farmmi International Limited (“Farmmi International”)

Farmmi International is currently a holding company, and it may participate in offshore acquisition and trading of agricultural products in the future. Farmmi International was incorporated on August 20, 2015 in Hong Kong under the Companies Ordinance (Chapter 622) as a private company limited by shares. As a private company limited by shares, Farmmi International may not sell its shares publicly and may not have more than 50 members. The share capital of the Company is HK $10,000, consisting of 10,000 Ordinary Shares, HK $1.00 par value per share. As of the date of this filing, Farmmi International has issued and outstanding 10,000 Ordinary Shares, all of which are held by Farmmi, Inc.

Farmmi (Hangzhou) Enterprise Management Co., Ltd. (“Farmmi Enterprise”)

Farmmi Enterprise is a company to manage Farmmi’s fund and e-commerce business. It was incorporated on May 23, 2016 under the laws of the PRC with registered capital of $30 million. The operating period on the business license is from May 23, 2016 to May 22, 2036, when the business license can be renewed. Its business scope covers technology development, technology service: internet technology, computer software; enterprise management consultation, economic information consultation (except commodities agency), excluding matters forbidden and restricted by China. Farmmi International is its sole shareholder. Farmmi Enterprise is considered a wholly foreign owned enterprise (“WFOE”) in China by virtue of Farmmi International’s 100% ownership.

 Farmmi Technology (Lishui) Co., Ltd. (“Farmmi Technology”)

Farmmi Technology is a company to manage Farmmi’s business of edible fungi. It was incorporated on July 6, 2016 under the laws of the PRC by Farmmi International with registered capital of $30 million. The operating period on the business license is from July 6, 2016 to July 3, 2036, when the business license can be renewed. Its business scope covers trading of agricultural products (except grain and cotton); technology development; technology service: agricultural technology, agricultural products, excluding matters forbidden and restricted by China. Farmmi International is its sole shareholder. Farmmi Technology is considered a wholly foreign owned enterprise (“WFOE”) in China by virtue of Farmmi International’s 100% ownership.

Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd. (“Farmmi Agricultural”)

Farmmi Agricultural is a holding company which we plan to use as the platform to acquire Chinese companies in the same or similar industry. It was established by Mr. Zhengyu Wang on December 8, 2015 under the laws of the PRC with initial registered capital of RMB 5 million, under the name as Hangzhou Suyuan Agriculture Technology Co., Ltd. (“Suyuan Agriculture”). The operating period on the business license has no ending date. The business scope of Suyuan Agriculture covers technology development, technology service, technology consulting and transfer of achievements: agricultural technology. On June 27, 2016, Mr. Zhengyu Wang transferred 50% stock rights of Suyuan Agriculture to Farmmi Enterprise. On August 9, 2016, Mr. Zhengyu Wang transferred remaining 50% stock rights of Suyuan Agriculture to Farmmi Technology. Currently each of Farmmi Enterprise and Farmmi Technology holds 50% of Suyuan Agriculture. On May 12, 2021, its capital was increased to RMB 50 million. On August 26, 2021 Suyuan Agriculture has changed its name to Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd.,. On September 17, 2021 its capital was increased to RMB 150 million. On December 30, 2021, Farmmi Enterprise and Farmmi Technology transferred all their equities to Zhejiang Farmmi Holding Group Co. LTD.

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Hangzhou Nongyuan Network Technology Co., Ltd. (“Nongyuan Network”)

Nongyuan Network is our major company for e-commerce business. It was established on December 8, 2015 under the laws of the PRC with initial registered capital of RMB 5 million. The operating period on the business license has no ending date. Forasen Group was the sole shareholder of Nongyuan Network. In June 2016, Forasen Group transferred all of its interests in Nongyuan Network to

Mr. Zhengyu Wang. The business scope of Nongyuan Network covers technology development, technology service, technology consultancy and transfer of achievements: network technology, computer soft/hardware and electronic products; online sales: unprocessed edible agricultural products (other than food and medicines), pre-packaged food and bulk food.

Ms. Xinyang Wang, the daughter of our CEO and Chairwoman Ms. Yefang Zhang, Farmmi Agricultural and Nongyuan Network signed a series of VIE agreements (the “Xinyang Wang VIE Agreements”). Foreign investment in Internet companies is currently subject to some restrictions under PRC laws and regulations. Although the ICP certification required by the company's original E-commerce Business was a restricted business, which has now been opened, the Special Administrative Measures for foreign investment access (Negative List) (2021) has just come into force, and there are still many possible uncertainties. So as a Cayman Islands holding company, we now have the qualify to conduct these businesses under PRC regulations, but still to face some possible uncertainties. In addition, foreign investment in the online service industry requires the foreign investor to possess certain qualifications, which we do not have, and one of our PRC subsidiaries, Farmmi Agricultural, is considered a foreign invested enterprise by virtue of its ownership by Farmmi Enterprise and Farmmi Technology, both of which are WFOEs. As a result, Farmmi Agricultural is restricted from holding the licenses that are essential to the operation of our e-commerce websites. See “Item 4. Information on the Company - B. Business Overview - Regulations”. As a result, Farmmi Agricultural has entered into a series of contractual arrangements with Nongyuan Network and we exercise effective control over the operations of Nongyuan Network. We conduct our e-commerce websites in China through Nongyuan Network, which we treated as our consolidated affiliated entity in China. The Xinyang Wang VIE Agreements were entered into in December 2019 to replace the agreements signed by Zhengyu Wang, the previous owner of Nongyuan Network, Farmmi Agricultural and Nongyuan Network (the “Original VIE Agreements”). These contractual arrangements enable us to exercise effective control over Nongyuan Network and receive all of the economic benefits from it.

The following diagram illustrates the flow of economic benefits from Nongyuan Network to Farmmi Agricultural stipulated under the VIE agreements:

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Exclusive Management Consulting and Technology Service Agreement. Farmmi Agricultural and Nongyuan Network entered into an exclusive management consulting and technology service agreement, under which Nongyuan Network agrees to engage Farmmi Agricultural as its exclusive provider of management consulting, technical support, intellectual property license and relevant services, including all services within Nongyuan Network’s business scope and decided by Farmmi Agricultural from time to time as necessary. Farmmi Agricultural is obligated to absorb all of the loss from Nongyuan Network’s activities and is entitled to receive all of its residual returns. Nongyuan Network shall pay to Farmmi Agricultural service fees within three months after each fiscal year end. The service fees should be 100% of the after-tax profit after the deficit of the prior fiscal year is covered and the statutory common reserve is extracted. According to Chinese law, when a company distributes its after-tax profits for a given year, it shall allocate 10% of profits to its statutory common reserve until the aggregate amount of such reserve exceeds 50% of its registered capital. With Farmmi Agricultural’s prior written consent, the percentage of the service fee may be adjusted based on Nongyuan Network’s operation performance. Farmmi Agricultural exclusively owns any intellectual property arising from the performance of the exclusive management consulting and technology service agreement. The exclusive management consulting and technology service agreement is effective for twenty years unless earlier terminated as set forth in the agreement or other written agreements entered into by the parties thereto. The exclusive management consulting and technology service agreement shall be extended automatically by the expiry thereof, until Farmmi Agricultural’s business term or Nongyuan Network’s business term expires, unless otherwise notified by Farmmi Agricultural in writing. During the term of the exclusive management consulting and technology service agreement, Nongyuan Network may not terminate the agreements except in the case of Farmmi Agricultural’s gross negligence or fraud, or this agreement or laws provide otherwise. Farmmi Agricultural may terminate this agreement by 30 day written notice to Nongyuan Network at any time.

Proxy Agreement. Farmmi Agricultural, Xinyang Wang and Nongyuan Network entered into a proxy agreement. Xinyang Wang as the sole shareholder of Nongyuan Network irrevocably authorizes Farmmi Agricultural to exercise her rights as an equity holder of Nongyuan Network, including the right to attend shareholders meetings, to exercise voting rights and to transfer all or a part of her equity interests therein pursuant to the exclusive call option agreement. During the term of the proxy agreement, Nongyuan Network may not terminate the agreements except when this agreement or applicable PRC laws provide otherwise.

Power of Attorney. Pursuant to the Proxy Agreement, Xinyang Wang, as the sole shareholder of Nongyuan Network, entered into an irrevocable power of attorney appointing Farmmi Agricultural as the attorney-in-fact to act on her behalf on all matters pertaining to Nongyuan Network and to exercise all of her rights as the sole shareholder of Nongyuan Network, including the right to attend shareholders meetings, to exercise voting rights and to transfer all or a part of his equity interests therein pursuant to the exclusive call option agreement. The power of attorney with Xinyang Wang expires when the proxy agreement terminates, Farmmi Agricultural appoints another person pursuant to the proxy agreement, or Xinyang Wang, as appointee of Farmmi Agricultural, dies or loses her civil capacity.

As a result of the Proxy Agreement and Power of Attorney, we, through Farmmi Agricultural, are able to exercise management control over the activities that most significantly impact the operation results of Nongyuan Network.

Exclusive Call Option Agreement. Farmmi Agricultural, Xinyang Wang and Nongyuan Network entered into an exclusive call option agreement, pursuant to which Farmmi Agricultural has an exclusive option to purchase, or to designate other persons to purchase, to the extent permitted by applicable PRC laws, rules and regulations, all of the equity interest and assets in Nongyuan Network from its sole shareholder, Xinyang Wang.

Without the prior written consent of Farmmi Agricultural, Nongyuan Network may not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of its assets or beneficial interests, create or allow any encumbrance on its assets or other beneficial interests, provide any loans for any third parties, enter into any material contract with a value of more than RMB300,000 (approximately $45,617) (except those contracts entered into in the ordinary course of business), merge with or acquire any other persons or make any investments, or distribute dividends to the shareholders. For potential risks, see “Item 3 - Key Information - Risk Factors - Risks Related to Doing Business in China - Our VIE may conduct actions which cause our loss.” Xinyang Wang agrees that, without the prior written consent of Farmmi Agricultural, she will not dispose of his equity interests in Nongyuan Network or create or allow any encumbrance on his equity interests. We have been advised by our PRC legal counsel, Zhejiang Zhengbiao Law Firm, that the exclusive purchase option granted to Farmmi Agricultural under the exclusive call option agreement comports with PRC laws.

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The purchase price for the equity interest is to be the minimum price permitted by applicable PRC laws, rules and regulations, or the amount that Xinyang Wang actually pays to Nongyuan Network regarding the equity, whichever is higher. The purchase price for the assets is to be the minimum price permitted by applicable PRC laws, rules and regulations, or the net book value of the assets, whichever is higher. The exclusive call option agreement expires when all the equity interest or all the assets are transferred pursuant to the agreement.

Equity Pledge Agreement. Farmmi Agricultural, Xinyang Wang and Nongyuan Network entered into an equity pledge agreement, under which Xinyang Wang pledged all of her equity interests in Nongyuan Network to Farmmi Agricultural as collateral to secure performance of all of his obligations under the exclusive consulting and service agreement, the exclusive call option agreement and the proxy agreement. If any event of default as provided for therein occurs, Nongyuan Network, as the pledgee, will be entitled to dispose of the pledged equity interests according to applicable PRC laws. Xinyang Wang agrees that, during the term of the equity pledge agreements, she will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests, and she also agrees that Farmmi Agricultural’s rights relating to the equity pledge should not be prejudiced by the legal actions of the shareholder, his successors or designates. During the term of the equity pledge, Farmmi Agricultural has the right to receive all of the dividends and profits distributed on the pledged equity. On December 1, 2019, Farmmi Agricultural, Xinyang Wang and Nongyuan Network have completed the registration of the equity pledge with the relevant office of SAIC in accordance with the PRC Property Rights Law.

Through the current contractual arrangements, we established a contractual relationship with Xinyang Wang, the sole shareholder and executive director (legal representative) of our VIE Nongyuan Network. Pursuant to these agreements, Xinyang Wang irrevocably authorized Farmmi Agricultural to exercise voting rights and all other rights as the shareholder and pledged all of her equity interests in our VIE to Farmmi Agricultural as collateral to secure performance of all of her obligations under these agreements. We have relied and expect to continue to rely on contractual arrangements with Xinyang Wang to operate our e-commerce websites. However, Xinyang Wang may have potential conflicts of interest with us and may breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with her and our VIE. Any failure by our VIE or Xinyang Wang to perform her obligations under our contractual arrangements with her would have a material adverse effect on our business and financial condition. See “Item 3 - Key Information - Risk Factors - Risks Related to Doing Business in China - The shareholders and director of our VIE may have potential conflicts of interest with us, which may materially and adversely affect our e-commerce websites.”

We have been advised by our PRC legal counsel, Zhejiang Zhengbiao Law Firm, that the ownership structure and the contractual arrangements among Farmmi Agricultural, Xinyang Wang and Nongyuan Network, will not result in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations. Actually, the law on Foreign Investment of PRC (2020) and its implementing regulations have now been officially promulgated and come into force, according to which the Chinese government actively promotes foreign investment, protects the legitimate rights and interests and standardizes the management of foreign investment. However, we are still requiring to be strictly compliance with Chinese laws in many aspects, such as national interests, public interests and data security, etc. These laws and regulations include both existing laws or regulations and those to be introduced in the process of implementing the Policy of "High-level Opening-up " in the near future. As the enterprise operating in China, we must strictly implement the restricted scope of the Negative List (2021), and shall not invest in the areas prohibited from foreign investment, and for the restricted areas we must meet the conditions stipulated by law. For foreign investment, access to areas beyond the Negative List, PRC promise to insist the principle of consistency between domestic and foreign capital. In addition to fully abiding by Chinese laws, the Chinese government has also established a Foreign Investment Security Review system to strictly review foreign investment that affects or may affect national security. In addition, according to the administrative provisions of the State Council on overseas securities issuance and listing of domestic enterprises (Draft for comments) (hereinafter referred to as the Administrative Provisions) and the administrative measures for the filing of overseas securities issuance and listing of domestic enterprises (Draft for comments) (hereinafter referred to as the Filing Measures) issued by the CSRC on December 24, 2021, The VIE framework has been officially recognized, but these two laws in draft are soliciting public opinions. At present, they have not been officially promulgated or come into force, and many filing requirements have been put forward for VIE. What's more, Our PRC legal counsel has further advised that if the PRC government authority finds that our corporate structure, the contractual arrangements or the reorganization to establish our current corporate structure do not comply with any applicable PRC laws, rules or regulations, the contractual arrangements will become invalid or unenforceable, and we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3 - Key Information - Risk Factors - Risks Related to Doing Business in China - Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”

Zhejiang Farmmi Food Co., Ltd. (“Farmmi Food”)

Farmmi Food primarily engages in the business of packed dried edible fungi for domestic sales to distributors. It was established on December 26, 2017 under the laws of the PRC with initial registered capital of RMB5 million. The operating period on Farmmi Food’s business license is from December 26, 2017 and there is no expiration date. The business scope of Farmmi Food covers processing and production of agricultural by-products (excludes cotton, tobacco and silkworm cocoon) and mushroom; wholesale and retail of edible agricultural products (excludes vegetables, fresh meat, aquatic product and soy products except soy milk) and mushroom; as well as engagement in import and export business of commodities and technologies that the state allows.

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Initially Farmmi Food was wholly owned by Farmmi Technology. In May 2018, Farmmi Food received its food production permit and began its operation. Before then, its business was conducted by Forest Food.

Lishui Farmmi E-Commerce Co., Ltd. (“Farmmi E-Commerce”)

We set up Farmmi E-Commerce with the plan to use it to operate online stores in the future. As an E-commerce company in Lishui, it enjoys beneficial tax policies. It was established on March 22, 2019 under the laws of the PRC with initial registered capital of RMB 5 million. The operating period on Farmmi E-Commerce’s business license is from March 22, 2019 and there is no expiration date. The business scope of Farmmi E-Commerce covers technology development, technology service, technology consultancy and transfer of achievements: network technology, computer soft/hardware and electronic products; online sales; retail or wholesale of edible agricultural products (other than food and medicines), pre-packaged food and bulk food.

Prior to a corporate reorganization in January 2024, Farmmi Agricultural and Nongyuan Network  owned 86.58% and 13.42%, respectively, of Farmmi E-Commerce’s equity. Following the reorganization, Farmmi E-Commerce is a wholly owned subsidiary of Farmmi Eco Agri-Tech.

Zhejiang Farmmi Biotechnology Co., Ltd. (“Farmmi Biotech”)

We incorporated Farmmi Biotech on April 7, 2021, with initial registered capital of RMB 20 million.

Farmmi (Hangzhou) Ecology Agriculture Development Co., Ltd. (“Farmmi Ecology”)

On April 25, 2021, we incorporate Farmmi Ecology, with initial registered capital of US $30 million.

Zhejiang Farmmi Agricultural Supply Chain Co., Ltd. (“Farmmi Supply Chain”)

We incorporated Farmmi Supply Chain on May 11, 2021, with initial registered capital of RMB 100 million.

Zhejiang Yitang Medical Service Co., Ltd. （“Yitang Medical”）

We incorporated Yitang Medical on September 7, 2021, with initial registered capital of RMB 100 million.

Zhejiang Yiting Medical Technology Co., Ltd. (“Yiting Medical”)

We incorporated Yiting Medical on September 17, 2021, with initial registered capital of RMB 10 million.

Farmmi (Hangzhou) Health Development Co., Ltd. (“Farmmi Hangzhou Health Development”)

We incorporated Farmmi Hangzhou Health Development on September 17, 2021, with initial registered capital of US $300 million.

Zhejiang Farmmi Healthcare Technology Co., Ltd. (“Zhejiang Farmmi Healthcare”)

We incorporated Farmmi Medical Healthcare on September 18, 2021, with initial registered capital of RMB 500 million.

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Zhejiang Farmmi Holding Group Co. LTD (“Farmmi Holding”)

We incorporated Farmmi Holding on September 18, 2021, with initial registered capital of RMB 300 million.

Jiangxi Xiangbo Agriculture and Forestry Development Co., Ltd. (“Jiangxi Xiangbo”)

On September 27, 2021, we acquired Jiangxi Xiangbo from Ganzhou Tengguang Agriculture and Forestry Development Co., Ltd. for a total price of RMB 70 million. Together with Jiangxi Xiangbo, its 100% percent subsidiary Yudu County Yada Forestry Co., LTD became the subsidiary of FAMI.

Guoning Zhonghao (Ningbo) Trade Co., Ltd. (“Guoning Zhonghao”)

On September 27, 2021, we acquired Guoning Zhonghao from Ningbo Guoning Zhonghao Technology Co., Ltd. and Jianxin Huang for a total price of RMB 5,000.

Zhejiang Farmmi Ecological Agricultural Technology Co., Ltd.

We incorporated Zhejiang Farmmi Ecological Agricultural Technology Co., Ltd. (“Farmmi Eco Agri” or “Farmmi Eco Agri-Tech”) on May 27, 2022, with initial registered capital of RMB100 million.

Farmmi Canada Inc.

On July 13, 2022, we formed a wholly-owned subsidiary in Canada, Farmmi Canada Inc. (“Farmmi Canada”). Farmmi Canada engages in the production and sales of agricultural products, such as mushroom, as well as agricultural trade business in Canada and other international markets.

Zhejiang Suyuan Agricultural Technology Co., Ltd

We incorporated Zhejiang Suyuan Agricultural Technology Co., Ltd on July 25, 2022, with initial registered capital of US$100 million.

Ningbo Farmmi Baitong Trading Co., Ltd. 

We incorporated Ningbo Farmmi Baitong Trading Co., Ltd. on  November 17, 2022, with initial registered capital of RMB20 million.

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Farmmi USA Inc.

On April 30, 2023, we incorporated a wholly-owned subsidiary in the United States of America, Farmmi USA Inc. (“Farmmi USA”). Farmmi USA engages in trading in USA.

D. Property and Equipment

We do not own any real property. We rent our factories in Lishui from our related parties, Zhejiang Tantech Bamboo Technology Co., Ltd., for processing dried edible fungi and a floor in an office building in Hangzhou from third parties. The following is a list of our main properties we rent:

					Productive
		Land/Building	Space		Capacity		Extent of		Products
Lessee	Property	Use Term	(m2)		(ton)		Utilization		Processed
									Shiitake,
	# 5 Building, 888								Mu Er,
	Tianning Street, Liandu								other
Zhejiang Farmmi	District, Lishui City,								edible
Biotechnology Co., Ltd.	Zhejiang Province	July 14, 2021 - July 13, 2031	1,914	(1)	1,818.3		95	%	fungi
	1st floor of #1, Basement								Shiitake,
	of Building 1, 888								Mu Er,
	Tianning Street,								other
	Lishui City,	August 1, 2020 - July 31,							edible
Farmmi Food	Zhejiang Province	2031	936.84	(2)	890		95	%	fungi
	floor 1 of Building
	4, Basement of Building
	4, 888 Tianning Street,
	Lishui City, Zhejiang	August 1, 2020 - July 31,
Farmmi Food	Province	2031	242.97		230	(3)	95	%	N/A

(1) It includes storage area of 854 m², factory of 757 m², office area of 163.8 m² and other area of 139.2 m².

(2) The first floor includes storage area of 599.24 m², factory of 256.00 m², office area of 28.80 m²and other area of 52.80 m². Floor 1 is mainly used as storage area.

(3) Building 4 is mainly used as storage area.

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Fixed assets at our properties consist of office equipment, buildings, structures, ancillary facilities, and equipment for processing and packaging our products.

None of our property is affected by any environmental issues that may affect our use of the property. At present, we do not have any material plans to construct, expand or improve our facilities.

Our Plants and Warehouse

In 2020, we moved our facilities from No. 307, Tianning Industrial Area to No. 5 building at 888 Tianning Street, where we already had a plant at No. 1 building. The move helped us conduct all the production at one location and increase our efficiency.

We have a warehouse at No. 1 building, 888 Tianning Street and 95% of the warehouse is being used.

Our Equipment

We have 6 production lines and various machines for filtering and packing mushrooms. Below is a list of our selected advanced equipment:

Equipment	Function
Mu Er cleaning production line	Clean Mu Er
Metal detector	Detect metal objects in production line
Vegetable dehydration machine	Dehydrate vegetables
Mushroom filter	Filter mushroom into different sizes
Moisture determination meter	Determine moisture content
Muffle furnace	Detect element content

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors.”

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Business Overview

We currently produce and/or sell the following categories of agricultural products: Shiitake mushrooms, Mu Er, cotton, corn, forestry and other products. We do not grow fungi, but purchase dried edible fungi from third party suppliers, mainly from family farms, and two co-operatives representing family farms, Jingning Liannong Trading Co. Ltd. (“JLT”) and Qingyuan Nongbang Mushroom Industry Co., Ltd. (“QNMI”), with whom we have worked with for many years. JLT and QNMI are two companies in Lishui area where our facilities are located. They are co-operatives representing family farms which plant and provide edible fungi. JLT and QNMI themselves do not have any facility and do not process any fungi. They are established to share resources such as procurement information and to enjoy the advantage of economy of scale. After we select and filter the dried edible fungi for specific size and better quality, we may further dehydrate them again, as deemed necessary, to ensure the uniform level of dryness of our products. We then package the fungi products for sale. The only products we process and package are edible fungi, which are processed and packaged at our own processing facilities. For other agricultural products, such as rice and edible oil, we purchase them from third-party suppliers, and sell these products at our online store Farmmi Jicai. Mainly through distributors, we offer gourmet dried mushrooms to domestic and overseas retail supermarkets, produce distributors and foodservice distributors and operators. We have become an enterprise with advanced processing equipment and business management experience, and we pride ourselves on consistently producing quality mushrooms and serving our customers with a high level of commitment.

During the fiscal year ended September 30, 2023, 99.4% of our products were sold in China to domestic distributors and the remaining 0.6% were sold outside mainland China, including the U.S., Japan, Canada and other countries or regions, through distributors. We tested a few offline stores in Hangzhou, Zhejiang but closed them by March 2020 due to the impact of the COVID-19 outbreak. In addition, in order to enhance our e-commerce marketing presence, we developed our own e-commerce websites Farmmi Jicai (www.farmmi88.com) and Farmmi Liangpin Market (mobile application and mini program on WeChat; closed on December 31, 2020).

Our total revenues for the year ended September 30, 2023 increased by $11.2 million or 11.2%, compared to the same period in 2022. We expect our sales of edible fungi products will grow in the coming years, as the consumption of fungi products in China has been rising significantly, and edible fungi has become one of the most important parts of planting industry. Meanwhile, although China has the most production of edible fungi, consumption of edible fungi per capita is significantly lower than other countries such as USA and Japan. Therefore, there is great potential for the sales of edible fungi in the Chinese market as well as the international markets. We believe our sales will continue to grow in the future with our increased brand awareness, which will grow along with the demand for edible fungi products.

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Growth Strategy

Increasing our market share – the premium quality of our products has been long recognized by our customers. Consumers’ increasing awareness of healthy dietary may lead to increased demand of our products. Our development plan mainly focuses on developing high-quality agricultural products market. Through our expansion to international market and enhancing stable relationship with suppliers, we expect to expand our product lines and improve our brand awareness and customer loyalty, to meet the demands of market and customers, and improve our sales performance.

Expansion of our sources of supply, productivity and sales network – to meet the increasing demand, we emphasize cooperation with major suppliers as well as small family farms to ensure the quantity and quality of raw materials. While expanding supply resource, we also plan to increase our processing capability and upgrade production facilities to increase productivity. We have been actively participating in international trade exhibitions held in China and other countries, to expand our international sales network. We also intend to invest more in our online stores, continue to train our employees, upgrade information technology and supply chain system, with the goal of making an integrated sales network with an international approach.

Securing high quality raw materials with competitive price – to meet the increasing demand for our products, we have been increasing our cooperation with major suppliers, with whom we have been working together for many years, to secure the quality and quantity of our raw materials. We also have dedicated teams that constantly visit and communicate with the family farm suppliers, to monitor the quality and quantity of raw materials. By working closely with our suppliers throughout the planting seasons, we have been providing such suppliers technical support to secure the stable supply of our raw materials. With our deep understanding of the edible fungi market, we have been able to purchase raw materials of premium quality at favorable prices. Edible fungi can be stored for a long time after simple processing, therefore we have been purchasing edible fungi when we expect their purchase price to increase, and store them to fulfill future sales orders. This strategy has been proven effective and will continue to be used by us as a cost control method.

Factors Affecting Our Results of Operations

Government Policy May Impact our Business and Operating Results

We have not seen any impact of unfavorable government policy upon our business in recent years. However, our business and operating results will be affected by China’s overall economic growth and government policies. Unfavorable changes in government policies could affect the demand for our products and could materially and adversely affect our results of operations. Our edible fungi products are currently eligible for certain favorable government tax incentive and other incentives, any future changes in the government’s policy upon edible fungi industry may have a negative effect on our operations.

Price Inelasticity of Raw Materials May Reduce Our Profit

As a processor of edible fungi, we rely on a continuous and stable supply of edible fungi raw materials to ensure our operation and expansion. The price of edible fungi may be inelastic when we wish to purchase supplies, resulting in an increase in raw material prices and thus reduce our profit. In addition, although we compete primarily in the high-end market which puts more emphasize on the flavor, texture and quality of our products, we risk losing customers by increasing our selling prices.

Competition in Edible Fungi Industry

Although we have a lot of competitive advantages, such as premium product quality, stable and experienced factory employees, favorable production locations within proximity of significant mushroom planting bases and strong relationships with our significant suppliers, we face a series of challenges.

Our products face competition from a number of companies operating in the vicinity. One of our largest competitors has high sales volume, which enables this competitor to purchase and sell edible fungi at a relatively lower price. Another major competitor has much larger plants and warehouses than we have and its main product is Mu Er mushrooms with different sorts and qualities. Competition from these two major competitors may prevent us from increasing our revenue.

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On the other hand, although we believe we distinguish our Company from competitors on the basis of product quality, the edible fungi industry is fragmented and subject to relatively low barriers of entry. Many of our competitors can provide products at relatively lower prices to increase their supplies which may affect our profit margins as we seek to compete with them.

At last, we have devoted significant resources to build and develop our online stores, Farmmi Jicai and Farmmi Liangpin Market. We have recently closed our Farmmi Liangpin Market because the revenue did not reach the expected level. We have no guarantee that we will be successful in operating Farmmi Jicai. If we do not manage it effectively, our business prospects could be impaired.

Economy and Politics

Our ability to be successful in China depends in part on our awareness of trends in politics that may affect our company, including, for example, government initiatives that would either encourage or discourage programs and companies that produce healthy foods or efforts to increase export of agricultural products. In addition, we must be aware of political situations in destination countries of our products, particularly if such countries take action to stifle importation of food products from abroad.

Trend Information

We have noted the existence of the following trends since October 2021, all of which are likely to affect our business to the extent they continue in the future:

China’s edible fungi industry is growing, both in absolute terms and in market share.

Through its development of enoki mushroom industrialization technology in the 1960s, Japan became the world leader in mushroom farming. As other countries’ fungi farming technology improved, China began to supplant Japan and now became the largest worldwide edible mushroom producer. China’s growth has outpaced worldwide production growth rates. While China’s growth rates in the past much higher than world growth rates, it appears to be moving from rapid expansion to a more mature industry.

As the table below illustrates, our sales volume of Shiitake mushroom for the year ended September 30, 2023 was approximately 1,633 tons, representing an increase of 102 tons as compared with 1,531 tons sales volume in fiscal 2022. The increase in sales of Shiitake mushroom was primarily due to our efforts in sales and developing the new customers. Meanwhile, our sales volume of Mu Er for the year ended September 30, 2023 was approximately 1,302 tons, representing a decrease of 91 tons, as compared with 1,393 tons sales volume in fiscal 2022. The sales volume of Mu Er decreased due to market demand declined which reduced orders by customers. As China’s mushroom industry is moving from rapid expansion to a more mature stage, we expect the effect of industry growth on promoting our sales volume will decrease.

	Shiitake		Mu Er
Period	(tons)		(tons)
Oct/22		108		91
Nov/22		110		87
Dec22		128		104
Jan/23		106		103
Feb/23		123		106
Mar/23		154		103
Apr/23		129		102
May/23		170		89
Jun/23		191		102
Jul/23		102		167
Aug/23		204		102
Sep/23		107		147
Total sales volume for fiscal 2023		1,633		1,302
Average unit selling price per ton for fiscal 2023	$	10,677	$	10,387

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our consolidated financial statements included elsewhere in this report.

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Use of Estimates

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts and advances to suppliers, the valuation of inventories, the useful lives of property and equipment, the valuation of derivative liabilities of the notes, the recoverability of long-lived assets, valuation of warrants and the valuation of deferred tax assets.

Revenue Recognition

We recognized revenue following Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“ASC Topic 606”). In accordance with ASC 606, to determine revenue recognition for contracts with customers, we perform the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

We recognize revenue when we transfer our goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in such exchange. All of our contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as a price per ton. We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. In accordance with ASC 606, when we act as a principal, that we obtain control of the specified goods before they are transferred to the customers, the revenues should be recognized in the gross amount of consideration to which it expects to be entitled in exchange for the specified goods transferred.

Refer to Note 14 – Segment reporting for details of revenue segregation of our Consolidated Financial Statements.

Accounts Receivable

Accounts receivable are presented net of allowance for doubtful accounts. We maintain allowance for doubtful accounts for estimated losses. We review our accounts receivable on a periodic basis and make general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, we consider various factors, including the age of the balance, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2023 and 2022, allowance for doubtful accounts was $14,719 and $7,249, respectively.

Inventory, net

We value our inventory at the lower of cost, determined on a weighted average basis, or net realizable value. We review our inventory periodically to determine if any reserves are necessary for potential obsolescence or if the carrying value exceeds net realizable value. We recorded inventory reserve of $8,809 and $49,652 as of September 30, 2023 and 2022, respectively.

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Recent accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, we plan to adopt this guidance effective October 1, 2023. We are currently evaluating the impact of its pending adoption of ASU 2016-13 on our consolidated financial statements but do not expect this guidance will have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplify the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for smaller reporting companies, as defined by the SEC. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures.

We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

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Results of Operations for the Years Ended September 30, 2023 and 2022

	For the Years Ended September 30,						Variance
	2023			2022			Amount			%
Revenue	$	110,364,887		$	99,213,379		$	11,151,508			11.2	%
Cost of revenues		(106,078,132	)		(93,775,293	)		12,302,839			13.1	%
Gross profit		4,286,755			5,438,086			(1,151,331	)	(21.2%)
Allowance for doubtful debts		32,007			(57,173	)		(89,180	)	(156.0%)
Selling and distribution expenses		(145,292	)		(305,367	)		(160,075	)	(52.4%)
General and administrative expenses		(2,132,095	)		(4,133,178	)		(2,001,083	)	(48.4%)
Income from operations		2,041,375			942,368			1,099,007			116.6	%
Change in fair value of derivative liability		873,767			419,649			454,118			108.2	%
Interest income		743,858			516,869			226,989			43.9	%
Interest expense		(650,813	)		(134,144	)		516,669			385.2	%
Amortization of debt issuance costs		(1,691,609	)		(48,160	)		1,643,449			3,412.5	%
Government grant		1,439,208			-			1,439,208			100.0	%
Other income, net		101,520			409,030			(307,510	)	(75.2%)
Income before income taxes		2,857,306			2,105,612			751,694			35.7	%
Provision for income taxes		(313,493	)		118,367			431,860			364.8	%
Net income	$	2,543,813		$	2,223,979		$	319,834			14.4	%

Our revenue is generated from the following major product categories: Shiitake, Mu Er, bulk trading and other products. Since June 2021, the Company’s operations were expanded into bulk agricultural commodity trading, such as cotton and corn bulk trading, The Company obtains control over these commodities as a principal from its suppliers before selling these commodities to its customers.

The following table sets forth the breakdown of our revenues for the years ended September 30, 2023 and 2022, respectively:

	For the years ended September 30,										Variance
	2023		%			2022		%			Amount			%
Tapioca	$	39,977,734		36.2	%		-		-		$	39,977,734			100.0	%
Corn		27,430,969		24.9	%		10,778,197		10.9	%		16,652,772			154.5	%
Shiitake		19,655,465		17.8	%		19,859,533		20.0	%		(204,068	)	(1.0)		%
Mu Er		16,301,157		14.8	%		19,123,152		19.3	%		(2,821,995	)	(14.8)		%
Cotton		5,547,927		5.0	%		47,950,345		48.3	%		(42,402,418	)	(88.4)		%
Cornstarch		1,338,782		1.2	%		-		-			1,338,782			100.0	%
Other edible fungi		112,853		0.1	%		1,502,152		1.5	%		(1,389,299	)	(92.5)		%
Total	$	110,364,887		100.0	%	$	99,213,379		100.0	%	$	11,151,508			11.2	%

Total revenues for the year ended September 30, 2023 increased by $11.2 million, or 11.2%, to $110.4 million from $99.2 million for the year ended September 30, 2022.

The trading of agriculture products (i.e. tapioca, corn, cotton and cornstarch) was mainly based on market opportunity of matching suppliers and customers. Hence, the sales volume may fluctuate according to market demand and supply and there is no pattern of such agriculture product trading.

Revenue from sales of tapioca increased by $40.0 million, or 100%, to $40.0 million for the year ended September 30, 2023 from nil for the same period of last year. The increase was mainly attributable to trading of tapioca for the year ended September 30, 2023, while no such trading for the same period of last year.

Revenue from sales of corn increased by $16.7 million, or 154.5%, to $27.4 million for the year ended September 30, 2023 from $10.8 million for the same period of last year. The increase was mainly attributable to the increase in trading volume for the year ended September 30, 2023 as compared to the same period of last year.

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Revenue from sales of Shiitake decreased by $0.2 million, or 1.0%, to $19.7 million for the year ended September 30, 2023 from $19.9 million for the same period of last year, mainly due to the decrease in average unit sales price of our Shiitake products. The average unit sales price of Shiitake decreased from $12,971 per ton for the year ended September 30, 2022 to $12,024 per ton for the year ended September 30, 2023, which resulted in a decrease of $1.5 million in revenue from sales of Shiitake. The decrease in average unit sales price of Shiitake is in line the decrease in the price of raw materials due to higher harvest in 2023. The decrease was partially offset by an increase in sales volume from 1,531 tons for the year ended September 30, 2022 to 1,635 tons for the year ended September 30, 2023, which resulted in an increase of $1.3 million in revenue from sales of Shiitake. The increase in sales volume of Shiitake was mainly attributable to the recovery of market demand for our Shiitake products.

Revenue from sales of Mu Er decreased by $2.8 million, or 14.8%, to $16.3 million for the year ended September 30, 2023 from $19.1 million for the year ended September 30, 2022, mainly due to the decreased sales volume and decreased average unit sales price. Sales volume of Mu Er decreased to 1,303 tons for the year ended September 30, 2023 from 1,393 tons for the year ended September 30, 2022, which resulted in a decrease of $1.2 million in revenue from sales of Mu Er. The decrease in sales volume of Mu Er was caused by reduced customers’ orders which resulted by the decrease in market demand for Mu Er. Also, the average unit sales price of Mu Er decreased from $13,733 per ton for the year ended September 30, 2022 to $12,508 per ton for the year ended September 30, 2023, which resulted in a decrease of $1.6 million in revenue from sales of Mu Er. The decrease in average unit sales price of Mu Er was in line with the decrease in the price of raw materials due to lower harvest in 2023.

Revenue from sales of cotton decreased by $42.4 million, or 88.4%, to $5.5 million for the year ended September 30, 2023 from $48.0 million for the same period of last year. The decrease was mainly attributable to less profitable trading opportunity of cotton in fiscal 2023 as compared to fiscal 2022.

Revenue from sales of cornstarch increased by $1.4 million, or 100%, to $1.4 million for the year ended September 30, 2023 from nil for the same period of last year. The increase was mainly attributable to trading of cornstarch for the year ended September 30, 2023, while no such trading for the same period of last year.

Revenue from sales of other edible fungi decreased by $1.4 million, or 92.5%, to $0.1 million for the year ended September 30, 2023 from $1.5 million for the same period of last year, mainly due to the decreased sales volume arising from reduced market demand of other edible fungi which resulted in a decrease of customer orders.

Cost of revenue

The following table sets forth the breakdown of the Company’s cost of revenue for the years ended September 30, 2023 and 2022, respectively:

	For the years ended September 30,										Variance
	2023		%			2022		%			Amount			%
Tapioca	$	39,903,506		37.6	%		-		-		$	39,903,506			100.0	%
Corn		27,429,966		25.9	%		10,669,201		11.4	%		16,760,765			157.1	%
Shiitake		17,538,319		16.5	%		17,325,773		18.5	%		212,546			1.2	%
Mu Er		14,236,143		13.4	%		16,689,136		17.8	%		(2,452,992	)		(14.7	)%
Cotton		5,547,811		5.2	%		47,715,009		50.9	%		(42,167,198	)		(88.4	)%
Cornstarch		1,335,921		1.3	%		-		-			1,335,921			100.0	%
Other edible fungi		86,466		0.1	%		1,376,174		1.4	%		(1,289,709	)		(93.7	)%
Total	$	106,078,132		100.0	%	$	93,775,293		100.0	%	$	12,302,839			13.1	%

Cost of revenues increased by $12.3 million, or 13.1%, to $106.1 million for the year ended September 30, 2023 from $93.8 million for the same period of last year. As illustrated in the table above, the increase was mainly attributed by the cost of revenue associated with trading of tapioca and corn, the increase was partially offset by the decrease in cost of revenue associated with trading of cotton and the decrease in sales volume of Mu Er.

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Gross Profit

The following table sets forth the breakdown of gross profit for the years ended September 30, 2023 and 2022, respectively:

	For the years ended September 30,										Variance
	2023		%			2022		%			Amount			%
Tapioca	$	74,228		1.7	%		-		-		$	74,228			100.0	%
Corn		1,003		0.02	%		108,996		2.0	%		(107,993	)		(99.1	)%
Shiitake		2,117,146		49.4	%		2,533,760		46.6	%		(416,614	)		(16.4	)%
Mu Er		2,065,014		48.2	%		2,434,016		44.8	%		(369,002	)		(15.2	)%
Cotton		116		0.0	%		235,336		4.3	%		(235,220	)		(100	)%
Corn starch		2,861		0.1	%		-		-			2,861			100.0	%
Other edible fungi		26,387		0.6	%		125,978		2.3	%		(99,591	)		(79.1	)%
Total	$	4,286,755		100.0	%	$	5,438,086		100.0	%	($1,151,331		)		(21.2	)%

Overall gross profit decreased by $1.2 million, or 21.2%, to $4.3 million for the year ended September 30, 2023 from $5.4 million for the same period of fiscal 2022. The decreased gross profit was caused by product mix for the year ended September 30, 2023, as compared to the prior period.

Selling and distribution expenses

Selling and distribution expenses decreased by $0.2 million, or 52.4%, to $0.1 million for the year ended September 30, 2023 from $0.3 million for the year ended September 30, 2022. The decrease was primarily due to a decrease in shipping expenses by $0.2 million when comparing with the same period of last year. The trading of agricultural products, such as tapioca, corn, cotton and cornstarch, did not incur shipping expenses as the transactions of agricultural products were completed by the transfer of rights of those agricultural products to the buyers. Also, the decrease in shipping expenses was due to a new customer willing to absorb shipping expenses incurred during a rush Chinese New Year order. Additionally, certain shipping agents provided discount on shipping charges.

General and administrative expenses

General and administrative expenses decreased by $2.0 million, or 48.4%, to $2.1 million for the year ended September 30, 2023 from $4.1 million for the same period of last year. The decrease was primarily attributable to the share-based compensation expenses of $2.0 million arising from restricted shares granted to certain employees for the year ended September 30, 2022, while no such share-based compensation expenses for the year ended September 30, 2023.

Change in fair value of derivative liability 

On September 26, 2022, the Company completed a $6.42 million convertible promissory note with an institutional investor (the “Investor”). Pursuant to the Securities Purchase Agreement, dated as of September 26, 2022, the Company issued and sold to the Investor a convertible promissory note of $6.42 million due on September 25, 2023, convertible into ordinary shares, $0.025 par value per share, at a discount of $0.42 million. Upon issuance, this convertible promissory note converts at the 80% of the market price. The Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $3.87 million and a debt discount of $3.87 million upon issuance of this convertible promissory note. As of September 30, 2023, the fair value of this derivative liability was nil, the change in fair value of derivative liability of $0.9 million and $0.4 million was recorded in other income for the years ended September 30, 2023 and 2022, respectively.

Interest income

Interest income increased by $0.2 million, or 43.9%, to $0.7 million for the year ended September 30, 2023 from $0.5 million for the same period of last year. The increase was mainly attributed to 6.5% per annum interest earned on a deposit of RMB50 million ($7.0 million) from a third party. On November 5, 2021, one of our subsidiaries signed an Equity Transfer Framework Agreement to invest 15.97% interest in an entity, Shanghai Jiaoda Onlly Co., Ltd., from four third parties for a total consideration of RMB509.6 million (approximately $71.6 million). On November 5, 2021, the Company paid a deposit of RMB50 million ($7.0 million) as a prepayment for the acquisition. However, the Company decided to withdraw from the investment due to the adjustment of its business strategy and a third party is willing to undertake the above-mentioned investment. Upon consummation of the investment by that third party, the above-mentioned deposit will be returned to the Company from the seller and the Company charged that third party with an interest of 6.5% per annum on that deposit counting from the payment date.

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Interest expense

Interest expense increased by $0.5 million, 385.2%, to $0.6 million for the year ended September 30, 2023 from $0.1 million for the same period of last year. The increase in interest expense was primarily attributable to the higher average loan balances for the year ended September 30, 2023 as compared to the same period of last year.

Amortization of debt issuance costs

Amortization of debt issuance costs increased by $1.6 million, or 3,412.5%, to $1.7 million for the year ended September 30, 2023 from $0.05 million for the same period of last year. On September 26, 2022, the Company completed a $6.42 million convertible promissory note with an institutional investor (the “Investor”). Pursuant to the Securities Purchase Agreement, dated as of September 26, 2022, the Company issued and sold to the Investor a convertible promissory note of $6.42 million due on September 25, 2023, convertible into ordinary shares, $0.025 par value per share, at a discount of $0.42 million. Upon issuance, this convertible promissory note converts at the 80% of the market price. The Company accounted for this conversion feature as a derivative liability. The debt discount was amortized over the term of the convertible promissory note and, for the year ended September 30, 2023, the Company recorded amortization of debt issuance cost of $1.7 million and $48,150 in other expenses for the year ended September 30, 2023 and 2022, respectively.

Government grant

Government grant increased by $1.4 million, or 100%, to $1.4 million for the year ended September 30, 2023 from nil for the same period of last year. Government grant was received from district government in respect of fund raised from capital market for the year ended September 30, 2023.

Provision for income taxes

For the years ended September 30, 2023 and 2022, our income tax expense was $0.3 million and income tax benefits of $0.1 million, respectively. The income tax expenses for the year ended September 30, 2023 were as a result of certain PRC subsidiaries that have taxable income from operations. In fiscal 2022, the income tax benefits were mainly attributable to deferred tax assets which mainly arising from unutilized tax losses carried forward from certain subsidiaries which can be utilized against future taxable income.

Net income

As a result of the factors described above, our net income was $2.5 million for the year ended September 30, 2023, from net income of $2.2 million for the same period of last year.

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Results of Operations for the Years Ended September 30, 2022 and 2021

Overview

The following table summarizes our results of operations for the years ended September 30, 2022 and 2021:

	Year Ended September 30,
	2022			2021			Amount			%
Revenue from continuing operations	$	99,213,379		$	39,289,951			59,923,428			152.5	%
Cost of revenues from continuing operations		(93,775,293	)		(34,180,670	)		59,594,623			174.4	%
Gross profit from continuing operations		5,438,086			5,109,281			328,805			6.4	%
Allowance for doubtful debts		(57,173	)		875,094			932,267			106.5	%
Selling and distribution expenses		(305,367	)		(292,709	)		12,658			4.3	%
General and administrative expenses		(4,133,178			(2,838,790	)		1,294,388			45.6	%
Income from operations		942,368	)		2,852,876			(1,910,508	)		(67.0	)%
Change in fair value of derivative liability		419,649			-			419,649			100.0	%
Interest income		516,869			33,576			483,293			1439.4	%
Interest expense		(134,144	)		(73,866	)		60,278			81.6	%
Amortization of debt issuance costs		(48,160	)		-			48,160			100.0	%
Other income (expense) net		409,030			(379,225	)		(788,255	)		(207.9	)%
Income before income taxes		2,105,612			2,433,361			(327,749	)		(13.5	)%
Provision for income taxes		118,367			(25,571	)		(143,938	)		(562.9	)%
Net income from continuing operations		2,223,979			2,407,790			(183,811	)		(7.6	)%
Discontinued operations
Net loss from discontinued operations, net of tax		-			(51,352	)		(51,352	)		(100.0	)%
Net income	$	2,223,979		$	2,356,438			(132,459	)		(5.6	)%

Revenue

Our revenue is generated from the following major product categories: Shiitake, Mu Er, cotton, corn and other products. Since June 2021, the Company’s operations were expanded into bulk agricultural commodity trading, such as cotton and corn bulk trading, The Company obtains control over these commodities as a principal from its suppliers before selling these commodities to its customers.

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The following table sets forth the breakdown of our revenues from continuing operations for the years ended September 30, 2022 and 2021, respectively:

Revenue

	Year Ended September 30,										Variance
	2022		%			2021		%			Amount			%
Shiitake	$	19,859,533		20.0	%	$	20,494,362		55.5	%	$	(634,829	)		(3.1	)%
Mu Er		19,123,152		19.3	%		16,524,723		42.5	%		2,598,429			15.7	%
Cotton		47,950,345		48.3	%		-		-			47,950,345			100.0	%
Corn 1		10,778,197		10.9	%		1,796,006		4.6	%		8,982,191			500.1	%
Other products		1,502,152		1.5	%		474,860		1.2	%		1,027,291.73			216.3	%
Total	$	99,213,379		100.0	%	$	39,289,951		100.0	%	$	59,923,428			152.5	%

_____________ 

1. For the year ended September 30, 2021, other products of $2,270,866 contained $1,796,006 of revenue generated from sales of corn, which was reclassified into $1,796,006 as corn and $474,860 as other products for comparatives.

Total revenues from continuing operations for the year ended September 30, 2022 increased by $59.9 million, or 152.5%, to $99.2 million from $39.3 million for the year ended September 30, 2021.

Revenue from sales of Shiitake decreased by $0.6 million, or 3.1%, to $19.9 million for the year ended September 30, 2022 from $20.5 million for the year ended September 30, 2021, mainly due to the decrease in average unit sales price of our Shiitake products. The average unit sales price of Shiitake decreased from $13,529 per ton for the year ended September 30, 2021 to $12,971 per ton for the year ended September 30, 2022, which resulted in a decrease of $0.8 million in revenue from sales of Shiitake. The decrease in average unit sales price of Shiitake is in line the decrease in the price of raw materials due to higher harvest in 2022. The decrease was partially offset by an increase in sales volume from 1,515 tons for the year ended September 30, 2021 to 1,531 tons for the year ended September 30, 2022, which resulted in an increase of $0.2 million in revenue from sales of Shiitake. The increase in sales volume of Shiitake was mainly attributable to the recovery of market demand for our Shiitake products since the containment of major COVID-19 outbreak in PRC in April 2020 as well as an increase in one new customer which contributed $0.2 million in revenue from sales of Shiitake.

Revenue from sales of Mu Er increased by $2.6 million, or 15.7%, to $19.1 million for the year ended September 30, 2022 from $16.5 million for the year ended September 30, 2021, mainly due to the increased sales volume and increased average unit sales price. Sales volume of Mu Er increased to 1,393 tons for the year ended September 30, 2022 from 1,205 tons for the year ended September 30, 2021, which resulted in an increase of $2.6 million in revenue from sales of Mu Er. The increase in sales volume of Mu Er was caused by the increase in market demand for Mu Er as a result of the recovery of market since the containment of major COVID-19 outbreak in PRC in April 2020 as well as an increase in one new customer which contributed $2.6 million in revenue from sales of Mu Er. Also, the average unit sales price of Mu Er increased from $13,709 per ton for the year ended September 30, 2021 to $13,733 per ton for the year ended September 30, 2021, which resulted in an increase of $31,308 in revenue from sales of Mu Er. The increase in average unit sales price of Mu Er was in line with the increase in the price of raw materials due to lower harvest in 2022 and, since July 2021, we purchased packaged Mu Er instead of raw materials from our suppliers, the cost of purchasing packaged Mu Er tends to be higher than raw materials.

Revenue from sales of cotton increased by $48.0 million, or 100%, to $48.0 million for the year ended September 30, 2022 from nil for the same period of last year, mainly due to engagement of agricultural product trading business for the year ended September 30, 2022. Sales volume of cotton amounted to 16,960 tons and the average unit sales price for cotton was $2,827 per ton.

Revenue from sales of corns increased by $9.0 million, or 500.1%, to $10.8 million for the year ended September 30, 2022 from $1.8 million for the same period of last year, mainly due to engagement of agricultural product trading business for the year ended September 30, 2022. The increase was mainly attributed to the increase in sales volume and average unit sales price. Sales volume of corn increased from 5,572 tons for the year ended September 30, 2021 to 29,525 tons for the year ended September 30, 2022, which resulted in an increase of $8.2 million in revenue from sales of corn. The increase in sales volume was mainly attributed to full year impact in fiscal 2022 as compared with one-month sales of corn in fiscal 2021. The increase in revenue was also caused by an increase in average unit sales price for corn from $322 per ton in fiscal 2021 to $365 per ton in fiscal 2022, which resulted in an increase of $0.8 million in revenue from sales of corn. The increase in average unit sales price of corn was in line with the increase in the price of sourcing corn from suppliers.

Revenue from sales of other products increased by $1.0 million, or 216.3%, to $1.5 million for the year ended September 30, 2022 from $0.5 million for the year ended September 30, 2021. The increase was mainly attributed to the sales of art collection from a recently acquired subsidiary, such sales was once-off in fiscal 2022.

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Cost of revenue

	Year Ended September 30,										Variance
	2022		%			2021		%			Amount			%
Shiitake	$	17,325,773		18.5	%	$	17,639,983		51.6	%	$	(314,210	)		(1.8	)%
Mu Er		16,689,136		17.8	%		14,406,483		42.2	%		2,282,653			15.8	%
Cotton		47,715,009		50.9	%		-		-			47,715,009			100.0	%
Corn 2		10,669,201		11.4	%		1,745,347		5.1	%		8,923,854			511.3	%
Other products		1,376,174		1.5	%		388,857		1.1	%		987,317			253.9	%
Total	$	93,775,293		100.0	%	$	34,180,670		100.0	%	$	59,594,623			174.4	%

___________ 

2. For the year ended September 30, 2021, other products of $2,134,204 contained $1,745,347 cost of revenue arising from sales of corn, which was reclassified into $1,745,347 as corn and $388,857 as other products for comparatives.

Cost of revenues of Shiitake decreased by $0.3 million, or 1.8%, to $17.3 million for the year ended September 30, 2022 from $17.6 million for the year ended September 30, 2021. The decrease was mainly attributed to the decrease in average unit cost of Shiitake from $11,645 per ton for the year ended September 30, 2021 to $11,316 per ton for the year ended September 30, 2022, which resulted in a decrease of $0.5 million in cost of revenue of Shiitake. The decrease in average unit cost of Shiitake was mainly due to higher harvest in 2022. The decrease was partially offset by an increase in sales volume from 1,515 tons for the year ended September 30, 2021 to 1,531 tons for the year ended September 30, 2022, which resulted in an increase of $0.2 million in cost of revenue of Shiitake. The increase in sales volume of Shiitake was mainly attributable to the recovery of market demand for our Shiitake products since the containment of major COVID-19 outbreak in PRC in April 2020 as well as an increase in one new customer which contributed $0.2 million in cost of revenues of Shiitake.

Cost of revenue of Mu Er increased by $2.3 million, or 15.8%, to $16.7 million for the year ended September 30, 2022 from $14.4 million for the year ended September 30, 2021. The increase was primarily attributable to the increase in sales volume from 1,205 tons for the year ended September 30, 2021 to 1,393 tons for the year ended September 30, 2022, which resulted in an increase of $2.2 million in cost of revenue of Mu Er. The increase in sales volume of Mu Er was caused by the increase in market demand for Mu Er as a result of the recovery of market since the containment of major COVID-19 outbreak in PRC in April 2020 as well as an increase in one new customer which contributed $2.2 million in cost of revenue of Mu Er. Also, the increase in average unit cost of Mu Er from $11,951 per ton for the year ended September 30, 2021 to $11,985 per ton for the year ended September 30, 2022, which resulted in an increase of $0.1 in cost of revenue of Mu Er. The increase in average unit cost of Mu Er is in line the increase in the price of raw materials due to lower harvest in 2022 and, since July 2021, we purchased packaged Mu Er instead of raw materials from our suppliers, the cost of purchasing packaged Mu Er tends to be higher than raw materials.

Cost of revenue of cotton increased by $47.7 million, or 100%, to $47.7 million for the year ended September 30, 2022 from nil for the same period of last year, mainly due to engagement of agricultural product trading business for the year ended September 30, 2022. Sales volume of cotton amounted to 16,960 tons and the average unit cost for cotton was $2,813 per ton.

Cost of revenue of corn increased by $8.9 million, or 511.3%, to $10.7 million for the year ended September 30, 2022 from $1.7 million for the same period of last year, mainly due to engagement of agricultural product trading business for the year ended September 30, 2022. The increase was mainly attributed to the increase in sales volume and average unit cost for corn. Sales volume of corn increased from 5,572 tons for the year ended September 30, 2021 to 29,525 tons for the year ended September 30, 2022, which resulted in $8.1 million increase in cost of revenue of corn. The increase in sales volume was mainly attributed to full year impact in fiscal 2022 as compared with one-month sales of corn in fiscal 2021. Also, the average unit cost for corn increased from $313 per ton for the year ended September 30, 2021 to $361 per ton for the year ended September 30, 2022, which resulted in an increase of $0.8 million in cost of revenue. The increase in average unit cost is as a result of changes in market price.

Cost of revenue of other products increased by $1.0 million, or 253.9%, to $1.4 million for the year ended September 30, 2022 from $0.4 million for the year ended September 30, 2021. The increase was mainly attributed to the cost related to sales of art collection from a recently acquired subsidiary, such cost was once-off in fiscal 2022.

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Gross profit

The following table sets forth the breakdown of the Company’s gross profit from continuing operations for the years ended September 30, 2022 and 2021, respectively:

	Year Ended September 30,										Variance
	2022		%			2021		%			Amount			%
Shiitake	$	2,533,760		46.6	%	$	2,854,379		55.9	%	$	(320,619	)		(11.2	)%
Mu Er		2,434,016		44.8	%		2,118,240		41.5	%		315,776			14.9	%
Cotton		235,336		4.3	%		-		-			235,336			100.0	%
Corn		108,996		2.0	%		50,659		1.0	%		58,337			115.2	%
Other products		125,978		2.3	%		86,003		1.6	%		39,975			46.5	%
Total	$	5,438,086		100.0	%	$	5,109,281		100.0	%	$	328,805			6.4	%

Overall gross profit from continuing operations increased by $0.3 million, or 6.4%, to $5.4 million for the year ended September 30, 2022 from $5.1 million for the same period of last year. Gross profit from sales of Shiitake decreased by $0.3 million, or 11.2%, to $2.5 million for the year ended September 30, 2022 from $2.8 million for the year ended September 30, 2021. Gross profit from sales of Mu Er increased by $0.3 million, or 14.9%, to $2.4 million for the year ended September 30, 2022 from $2.1 million for the year ended September 30, 2021. Gross profit from sales of cotton increased by $0.2 million, or 100%, to $0.2 million for the year ended September 30, 2022 from nil for the same period of last year. Gross profit from sales of corn increased by $0.06 million, or 115.2%, to $0.11 million for the year ended September 30, 2022 from $0.05 million for the same period of last year. Gross profit from sales of other products increased by $0.04 million, or 46.5%, to $0.13 million for the year ended September 30, 2022 from $0.09 million for the year ended September 30, 2021. The increased overall gross profit was caused by increased sales for the year ended September 30, 2022, as compared to the prior period.

Overall gross margin from continuing operations decreased by 7.5 percentage point to 5.5% for the year ended September 30, 2022 from 13% for the year ended September 30, 2021. Overall average unit margin decreased from $615 for the year ended September 30, 2021 to $112 for the year ended September 30, 2022. The decrease in overall gross margin was mainly attributable to gross margin of cotton was 0.5% and gross margin of corn was 1.0% and gross margin of Shiitake and Mu Er was 0.7% for a new customer which caused the decrease in overall gross margin.

Allowance for doubtful accounts

Allowance for doubtful debts increased by $0.93 million, or 106.5%, to an allowance of $0.05 million for the year ended September 30, 2022 from an allowance reversal of $0.88 million for the year ended September 30, 2021, primarily due to certain inventory aged over one and a half year and 100% allowance was made on such inventory.

Selling and distribution expenses

Selling and distribution expenses increased by $12,658, or 4.3%, to $0.3 million for the year ended September 30, 2022 from $0.3 million for the year ended September 30, 2021. The increase of selling and distribution expenses was caused by an increase of $12,974 in advertising expenses to promote products for the year ended September 30, 2022, as compared to the year ended September 30, 2021.

General and administrative expenses

General and administrative expenses increased by $1.3 million, or 45.6%, to $4.1 million for the year ended September 30, 2022 from $2.8 million for the year ended September 30, 2021. The increase was primarily attributable to (i) increase of share-based compensation expenses of $0.7 million; (ii) an increase of shareholders meeting expenses of $0.4 million; and the amortization of biological assets of $0.2 million.

Change in fair value of derivative liability 

On September 26, 2022, the Company completed a $6.42 million convertible promissory note with an institutional investor (the “Investor”). Pursuant to the Securities Purchase Agreement, dated as of September 26, 2022, the Company issued and sold to the Investor a convertible promissory note of $6.42 million due on September 25, 2023, convertible into ordinary shares, $0.025 par value per share, at a discount of $0.42 million. Upon issuance, this convertible promissory note converts at the 80% of the market price. The Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $3.87 million and a debt discount of $3.87 million upon issuance of this convertible promissory note. As of September 30, 2022, the fair value of this derivative liability was $3.45 million, the change in fair value of derivative liability of $0.42 million was recorded in other income.

Interest income

Interest income increased by $0.5 million, or 1,439.4%, to $0.5 million for the year ended September 30, 2022 from $33,576 for the same period of last year. The increase was mainly attributed to 6.5% per annum interest earned on a deposit of RMB50 million ($7.0 million) from a third party. On November 5, 2021, one of our subsidiaries signed an Equity Transfer Framework Agreement to invest 15.97% interest in an entity, Shanghai Jiaoda Onlly Co., Ltd., from four third parties for a total consideration of RMB509.6 million (approximately $71.6 million). On November 5, 2021, we paid a deposit of RMB50 million ($7.0 million) as a prepayment for the acquisition. However, we decided to withdraw from the investment due to the adjustment of its business strategy and a third party is willing to undertake the above-mentioned investment. Upon consummation of the investment by that third party, the above-mentioned deposit will be returned to us from the seller and we charge that third party with an interest of 6.5% per annum on that deposit counting from the payment date.

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Interest expense

Interest expense was $133,453 for the year ended September 30, 2022, as compared to $73,866 for the year ended September 30, 2021. The increase in interest expense was primarily attributable to higher average loan balances during the year ended September 30, 2022 as compared to same period last year.

Amortization of debt issuance costs

Amortization of debt issuance costs was $48,160 for the year ended September 30, 2022, as compared to nil for the year ended September 30, 2021. On September 26, 2022, the Company completed a $6.42 million convertible promissory note with an institutional investor (the “Investor”). Pursuant to the Securities Purchase Agreement, dated as of September 26, 2022, the Company issued and sold to the Investor a convertible promissory note of $6.42 million due on September 25, 2023, convertible into ordinary shares, $0.025 par value per share, at a discount of $0.42 million. Upon issuance, this convertible promissory note converts at the 80% of the market price. The Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $3.87 million and a debt discount of $3.87 million upon issuance of this convertible promissory note. As of September 30, 2022, the fair value of this derivative liability was $3.45 million, the change in fair value of derivative liability of $0.42 million was recorded in other income. The debt discount was amortized over the term of the convertible promissory note and, as of September 30, 2022 the Company recorded amortization of debt issuance cost of $48,160 in other expenses.

Other income (expense) net

Other income was $0.4 million for the year ended September 30, 2022, as compared to other expenses of $0.38 million for the year ended September 30, 2021. Other income for the year ended September 30, 2022 was primarily related to exchange gain of $0.4 million. Other expenses for the year ended September 30, 2021 was primarily related to exchange loss of $0.37 million.

Provision for income taxes

For the year ended September 30, 2022, our income tax benefits from continuing operations were $118,367, as compared to income tax expense of $25,571 for the year ended September 30, 2021. In fiscal 2022, the income tax benefits were mainly attributable to deferred tax assets which mainly arising from unutilized tax losses carried forward from certain subsidiaries which can be utilized against future taxable income. In fiscal 2021, the low-income tax expense was primarily due to an income tax incentive the Company received from the tax authority of Lishui City. Our subsidiaries, FLS Mushroom and Farmmi Food has received an income tax exemption since January 2019 from the local tax authority of Lishui City, for engaging in the agricultural industry. Management expects that the Company will continue to enjoy the tax break going forward.

A total net income of $2.8 million and $4.0 million was exempt from income tax for the years ended September 30, 2022 and 2021, respectively. The aggregate amount of our tax savings was approximately $0.7 million and $1.0 million for the years ended September 30, 2022 and 2021, respectively. From October 1, 2022 to December 31, 2022, we expect to enjoy the tax exemption for 95% of our taxable income. The summary is below:

	Exempted Net Income	Tax holiday
October 1, 2020 - September 30, 2021	RMB 26.1 million (approximately $4.0 million)	RMB6.5 million (approximately $1.0 million)
October 1, 2021 - September 30, 2022	RMB18.2 million (approximately $2.8 million)	RMB4.5 million (approximately $0.7 million)
October 1, 2022 - December 31, 2022	95% of Taxable Income

Net income from continuing operations

As a result of the factors described above, our net income was $2.2 million for the year ended September 30, 2022, a decrease of $0.1 million from net income of $2.4 million for the same period of fiscal year 2021.

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Liquidity and Capital Resources

We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of their after-tax profits based on PRC rules and regulations to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends.

Further, although instruments governing the current debts incurred by our PRC subsidiaries do not have restrictions on their abilities to pay dividends or make other payments to us, the lender may impose such restriction in the future. As a result, our ability to distribute dividends largely depends on earnings from our PRC subsidiaries and their ability to pay dividends out of earnings. Management believes that our current cash, cash flows provided by operating activities, and access to loans will be sufficient to meet our working capital needs for at least the next 12 months. We intend to continue to carefully execute our growth plans and manage market risk.

As of September 30, 2023, we had cash of $12.8 million. As of September 30, 2023, advances to suppliers amounted to $116.3 million and is expected to be fully utilized by September 2024. We made these advances based on the sales orders we received and expect to receive in the future months. As of September 30, 2023, we had accounts receivable of $24.7 million and we expect to collect the remaining balance by March 2024. Our current liabilities amounted to $11.7 million at September 30, 2023, in comparison to $8.3 million at September 30, 2022. This increase of current liabilities was mainly attributable to the increase in loans.

Indebtedness. As of September 30, 2023, we have long-term loans - current portion of $0.7 million, long-term loans - non-current portion of $1.7 million, short-term loans of $2.4 million and convertible promissory notes of $5.8 million. Beside these debts, we did not have any debts, finance leases or purchase commitments, guarantees or other material contingent liabilities.

Off-Balance Sheet Arrangements. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that we provide financing, liquidity, market risk or credit support to or engages in hedging or research and development services with us.

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Capital Resources. The primary drivers and material factors impacting our liquidity and capital resources include our ability to generate sufficient cash flows from our operations and renew commercial bank loans, as well as proceeds from equity and debt financing, to ensure our future growth and expansion plans. As of September 30, 2023, we had total assets of $174.8 million, which includes advances to suppliers of $116.3 million, accounts receivable of $24.7 million and cash of $12.8 million, working capital of $147.4 million and total equity of $162.0 million. Our advances to suppliers were mainly in anticipation of higher revenue to be generated in fiscal 2024, these advances to suppliers were to secure sufficient supply from our suppliers so as to meet our anticipated sales.

Working Capital. Total working capital as of September 30, 2023 amounted to $147.5 million, compared to $144.9 million as of September 30, 2022.

Capital Needs. Our capital needs include our daily working capital needs and capital needs to finance the expansion of our business. Our management believes that income generated from our current operations can satisfy our daily working capital needs over the next 12 months. We may also raise additional capital through public offerings or private placements to finance our business development and to consummate any merger or acquisition, if necessary.

Cash flows

The following table sets forth summary of our cash flows from continuing operations for the years ended September 30, 2023, 2022 and 2021.

	For the Years Ended September 30,
	2023			2022			2021
Net cash (used in) provided by operating activities	($75,754,162)			$	20,635,488		($53,231,108)
Net cash provided by (used in) investing activities		35,896,193			(41,991,079	)		(12,127,728	)
Net cash provided by financing activities		11,017,942			11,634,868			122,665,288
Effect of exchange rate changes on cash		462,261			(8,363,680	)		(153,454	)
Net (decrease) increase in cash		(28,377,766	)		(18,084,403	)		57,152,998
Cash, beginning of year		41,167,501			59,251,904			2,098,906
Cash, end of year	$	12,789,735		$	41,167,501		$	59,251,904

Operating activities

Net cash used in operating activities was $75.8 million for the year ended September 30, 2023, which mainly consisted of an increase of $71.3 million in advances to suppliers for purchasing mushrooms, corn, cotton, red dates and soybean in anticipation of sales orders and an increase of $9.0 million in accounts receivable due to sales, as mainly offset by net income of $2.5 million and collection of notes receivables of $3.6 million.

Net cash provided by operating activities from continuing operations was $20.6 million for the year ended September 30, 2022, which mainly consisted of (i) a decrease of $12.8 million in advances to suppliers for purchasing mushrooms in anticipation of the sales orders (the decrease of our advances to suppliers were to improve our cash flow from operations and to reduce our credit risk with advances to suppliers), (ii) a decrease of $6.5 million in accounts receivable due to collections, and (iii) net income of $2.2 million.

Net cash used in operating activities from continuing operations was $53.2 million for the year ended September 30, 2021, which mainly consisted of (i) an increase of $41.0 million in advances to suppliers for purchasing mushrooms in anticipation of the sales orders (the increase of our advances to suppliers were mainly in anticipation of higher revenue to be generated in fiscal 2022, these advances to suppliers were to secure sufficient supply from our suppliers so as to meet our anticipated sales), and (ii) an increase of $13.2 million in accounts receivable due to increase in sales.

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Investing activities

Net cash provided by investing activities was $35.9 million for the year ended September 30, 2023, which mainly consisted of collection of $35.4 million fixed term deposit and $7.5 million from withdrawn acquisition, as offset by $7.1 million used in long-term investment.

Net cash used in investing activities from continuing operations was $42.0 million for the year ended September 30, 2022, which mainly consisted of (i) placement of $35.3 million fixed term deposit with a bank for one year, and (ii) prepayment of RMB50 million ($7.0 million) to invest 15.97% interest in an entity, Shanghai Jiaoda Onlly Co., Ltd., on November 5, 2021, this acquisition was subsequently withdrawn and a third party is willing to undertake this acquisition.

Net cash used in investing activities from continuing operations was $12.1 million for the year ended September 30, 2021, which mainly consisted of (i) prepayment of $9.2 million for the acquisition of a subsidiary and this acquisition was completed on October 27, 2021, (ii) placement of $2.8 million fixed term deposit with a bank for one year.

Financing activities

Net cash provided by financing activities was $11.0 million for the year ended September 30, 2023, which mainly consisted of net proceeds of $7.9 million from issuance of ordinary shares and borrowing of $4.8 million loans, as mainly offset by repayment of $1.7 million loans.

Net cash provided by financing activities from continuing operations amounted to $11.6 million for the year ended September 30, 2022, which mainly consisted of (i) net proceeds of $6.0 million from stock issuance, and (ii) net proceeds of $6.0 million from convertible promissory note issuance.

Net cash provided by financing activities from continuing operations amounted to $122.7 million for the year ended September 30, 2021, which mainly consisted of net proceeds of $126.0 million from stock issuance, as mainly offset by full repayment bank acceptance notes of $3.4 million in June 2021.

Tabular Disclosure of Contractual Obligations

We have certain potential commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments.

The following table presents the company’s material contractual obligations as of September 30, 2023:

			Less than		1-2		3-5		More than
Contractual obligations	Total		1 year		years		years		5 years
Short-term loans	$	2,412,281	$	2,412,281		-		-		-
Long-term loans		2,328,845		676,284		1,652,561		-		-
Operating lease obligations		747,307		119,232		98,975		286,384		242,716
Total	$	5,488,433	$	3,207,797	$	1,751,536	$	286,384	$	242,716

____

(1) As of September 30, 2023, the Company had outstanding loans of $4.7 million (see Note 8 of the notes to consolidated financial statements for details).

(2) As of September 30, 2023, the Company had operating lease commitment of $0.7 million (see Note 13 of the notes to consolidated financial statements for details).

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

The following table provides information regarding our executive officers and directors as of the date of this report:

Name	Age	Position(s)
Yefang Zhang	57	Chief Executive Officer and Chairwoman of Board of Directors
Zhengyu Wang	55	Director
Lingge Wu	30	Chief Financial Officer
Dehong Zhang	54	Chief Operating Officer
Qingyi Fu	39	Director (Independent)
Hongdao Qian	61	Director (Independent)
Hui Ruan	56	Director (Independent)

The business address of all such senior management and directors is Fl 1, Building No. 1, 888 Tianning Street, Liandu District, Lishui City, Zhejiang Province, People’s Republic of China 323000.

Yefang Zhang. Ms. Zhang has been our Chairwoman and CEO since July 2015. Ms. Zhang has been the sole shareholder and the director of FarmNet Limited since its incorporation in July 2015. Ms. Zhang has been the general manager of Farmmi International since August 2015. Ms. Zhang was the sole director of EN Energy Group Inc. (‘CNEY”) from November 23, 2018 to August 26, 2019, she held 100% shares of CNEY though Global Clean Energy Limited in which she is the sole director either, Ms. Zhang was the executive director of FLS Mushroom from March 2011 to September 2016. Since 2013, Ms. Zhang has been a director of Tantech Holdings Ltd. (“Tantech”), a NASDAQ Capital Market listed company, Tanbsok Group Ltd. and USCNHK Group Limited. Ms. Zhang was also a director of Zhengjiang Tantech Bamboo Technology Co., Ltd. from January 2011 to May 2016. Ms. Zhang has been a director of Daxing’anling Hualin Investment Management Ltd. From 1994 to 1997, she served as Vice General Manager of Lishui Jingning Huali Co., Ltd. which has been dissolved. From 1991 to 1994, she was a teacher at Wenzhou Wencheng Huangtan Middle School. She earned her degree of junior college in Geography from Wenzhou Normal College in July 1991. Ms. Zhang has extensive knowledge and experience in company management and food industry. We have appointed Ms. Zhang to be a director due to her strong understanding of our industry and business. Ms. Zhang is the wife of our director, Mr. Zhengyu Wang.

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Zhengyu Wang. Mr. Wang has been our director since February 2017. Mr. Wang is a seasoned veteran in business, Mr. Wang has been the executive director of almost all of FAMI’s Chinese subsidiaries (Farmmi Enterprise, Farmmi Technology, Farmmi Agricultural, Nongyuan Network, and Farmmi Food) since their incorporation, except FLS Mushroom where he has served as the executive director since September 2016. He was also the manager or the general manager of Farmmi Enterprise, Farmmi Technology Farmmi Agricultural, Nongyuan Network since their incorporation until July 2017. Mr. Wang also manages the business operations of Forasen Group which he owns with his wife and our director and CEO, Ms. Yefang Zhang. Mr. Wang has been the Chairman and CEO of Forasen Group since September 2006, and the executive director and the general manager of Forasen Holding Group Ltd. Co. since September 2013. Mr. Wang has also been the Chairman and CEO of Tantech since July 2014 and recently resigned from the CEO position. He has been the executive director and/or general manager of various subsidiary companies under Tantech and charcoal business-related companies (Zhejiang Tantech Bamboo Technology Co., Ltd., Zhejiang Tantech Bamboo Charcoal Co., Ltd., Zhejiang Tantech Energy Technology Co., Ltd., Hangzhou Tanbo Technology Co., Ltd., Shanghai Jiamu Investment Management Co., Ltd., Hangzhou Jixi Investment Management Co., Ltd., Hangzhou Wangbo Investment Management Co., Ltd.). Mr. Wang was one of the directors of CNEY from August 26, 2019 to June 22, 2020. Mr. Wang has also been the Chairman of Daxing’anling Hualin Investment Management Ltd. Co. since November 2011 and Daxing’anling Forasen Energy Technology Ltd. Co. since March 2009, Hangzhou Nanlin Energy Technology Ltd. Co.’s general manager since March 2012 and executive director from March 2012 to September 2016, the executive director of Zhejiang Tesiyang New Energy Complete Equipment Ltd. Co. since March 2016, and the executive director and general manager of Hangzhou Forasen Technology Ltd. Co. since November 2012, of Harbin Forasen Energy Technology Ltd. Co. since December 2013, and of Hangzhou Xinying Industrial Co., Ltd. since December 2013. He earned his Bachelor’s Degree majored in Biochemistry and Microbiology from Hangzhou University (now called “Zhejiang University”) in Hangzhou, China in July 1990. Mr. Wang has been appointed as a director because he has significant experience in leading and advising our Company and understands our industry. Mr. Wang is the husband of our director, Ms. Zhang.

Lingge Wu. Prior to being appointed as the Registrant’s CFO, Ms. Wu worked for the Registrant as the financial manager from August 2021. From July 2018 to July 2021, Ms. Wu served as the deputy financial manager of the Registrant. From July 2017 to June 2018, Ms. Wu served as the assistant financial manager at Hangzhou Suyuan Agriculture Technology Co., Ltd. (now Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd.). From July 2015 to June 2017, Ms. Wu served as the accountant of Hangzhou Suyuan Agriculture Technology Co., Ltd. (now Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd.). Ms. Wu received her Bachelor Degree of Aquarium Science and Technology from Hunan Agricultural University in 2015, she also received her Bachelor Degree of Accounting from Hunan Agricultural University in 2015.

Dehong Zhang. Mr. Zhang has been our Chief Operating Officer since March 1, 2021. Mr. Zhang has been a manager of Zhejiang Forest Food Co., Ltd., one of the Registrant’s subsidiaries, since July 2017. From August 2015 to June 2017, Mr. Zhang was the assistant to the general manager of Forasen Group Co., Ltd. From July 2011 to July 2015, Mr. Zhang served as a senior macro-economic analyst at Zheshang Futures Research Center. From April 2008 to March 2011, Mr. Zhang was a financial derivatives analyst and investment consultant of Toyo Securities Co. Mr. Zhang acquired his doctoral degree in financial engineering from Japan Advanced Institute of Science and Technology in March 2006, his master in economics from Yamaguchi University in March 2003 and his bachelor’s degree in international economics from Yamaguchi University in March 2001. Mr. Zhang is a brother of Yefang Zhang, CEO and Chairwoman of the Registrant, and a brother-in-law of Zhengyu Wang, the Registrant’s director and Yefang Zhang’s husband.

Qinyi Fu. Mr. Fu has been our independent director since June 2021. Mr. Fu is a PRC Certified Public Accountant. He has been a partner at Da Hua Certified Public Accountants since June 2018. Prior to joining Da Hua Certified Public Accountants, he was a partner at Ruihua Certified Public Accountants from December 2015 to May 2018, a manager in Deloitte China Certified Public Accountants from January 2012 to December 2015, and an auditor in Ernst & Young China Certified Public Accountants from September 2010 to January 2012. Since October 2018, Mr. Fu has been an independent director at Blue Hat Interactive Entertainment Technology (NASDAQ: BHAT) and a member of its audit committee. Mr. Fu received his bachelor’s degree in international economics and trade in July 2007 and his master’s degree in international economics in July 2010, both from Xiamen University.

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Hongdao Qian. Mr. Qian has been our independent director since July 2017. Mr. Qian has been a professor on the faculty of the Guanghua Law School at Zhejiang University since September 2005. His research, writing and teaching focuses on corporate governance, economic analysis of law and Western jurisprudence. Prior to joining Guanghua Law School, Mr. Qian was a Professor at the Institute of Law, China Academy of Social Sciences; a Lecturer in Economics at Peking University and a Prosecutor in the People’s Procuratorate of Zhejiang Province. Mr. Qian currently is an independent director of Tantech, a Nasdaq listed company and a related party of us. He is also an independent director of Zhejiang Sunflower Light Energy Science & Technology LLC, a public company listed on Shenzhen Stock Exchange in China, Zhejiang Kema Moca Material Limited Company, a public company listed on National Equities Exchange and Quotations in China and OuBao Security Technology Co., Ltd., a private company. Mr. Qian currently serves as Vice Chairman of the Chinese Society of Comparative Law, Executive Subeditor of the China Academic Yearbook and President of the China Rule of Law Research Institute, where he has organized a team of scholars to create China’s first Rule of Law index using empirical methods. Mr. Qian earned his bachelor of law from Jilin University in 1986, his master of law from North-West University of Politics and Law in 1994 and his doctor of law from Peking University in 1997. Mr. Qian was a visiting scholar at Waseda University in Japan, Stanford University in California and both Oxford and Cambridge Universities in England. Mr. Qian has been appointed as a director because of his expertise in economics and law.

Hui Ruan. Dr. Ruan has been our independent director since June 2020. Dr. Hui Ruan has been an associate professor and a supervisor of master’s degree program at the College of Biosystems Engineering and Food Science of Zhejiang University in China from 2003. Dr. Ruan has been a member of the youth committee of the Chinese Institute of Food Science and Technology since 2007. From 2005 to 2006, he cooperated with a number of universities in U.S. to conduct research as a visiting scholar. Dr. Ruan has received a second prize of National science and technology improvement award and a first prize of Zhejiang science and technology improvement award. He is awarded more than 60 patents and published over 100 papers. Dr. Ruan has been a peer review expert at Chinese national natural science fund, three provincial natural science funds, and several international journals including Carbohydrate Polymer, Journal of Food Science and New Biotechnology. Dr. Ruan received his doctoral degree in food science and engineering from Zhejiang University in 2003, his master degree of physiology from Hangzhou University in 1995, and his bachelor degree of biology from Hangzhou University in 1990. Dr. Ruan has been appointed as a director because of his rich academic experiences in food science.

Election of Officers

Our executive officers are elected by, and serve at the discretion of, our Board of Directors. Our Chief Executive Officer and Chairwoman of our Board of Directors, Yefang Zhang, is married to one of our directors, Zhengyu Wang. Other than this relationship, Mr. Dehong Zhang is a brother of Yefang Zhang, CEO and Chairwoman of the Registrant, and a brother-in-law of Zhengyu Wang, the Registrant’s director and Yefang Zhang’s husband.

B. Compensation

EXECUTIVE COMPENSATION

Our compensation committee has not started approving our salary and benefit policies. Our Board of Directors determined the compensation to be paid to our executive officers based on our financial and operating performance and prospects, and contributions made by the officers’ to our success. Each of the named officers will be measured by a series of performance criteria by the Board of Directors, or the compensation committee on a yearly basis. Such criteria will be set forth based on certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance and overall corporate performance.

Our Board of Directors has not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. The Board of Directors will make an independent evaluation of appropriate compensation to key employees, with input from management. The Board of Directors has oversight of executive compensation plans, policies and programs.

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Summary Executive Compensation Table

The following table presents summary information regarding the total compensation awarded to, earned by, or paid to each of the named executive officers for services rendered to us for the years ended September 30, 2023 and 2022.

						All Other
	Fiscal	Salary		Bonus		Compensation		Total
Name and Principal Position	Year	($)		($)(1)		($)(2)		($)
Yefang Zhang	2022		175,587		-		308		175,895
Chief Executive Officer	2023		161,626		-		-		161,626
Wenhua Liu(3)	2022		18,298				1,094		19,392
Former Chief Financial Officer	2023		-		-		-		-
Dehong Zhang(4)	2022		49,904				8,994		58,898
Chief Operating Officer	2023		61,248		-		7,484		68,732
Lingge Wu(5)	2022		29,599				1,767		31,366
Chief Financial Officer	2023		30,284		-		1,626		31,910

______________ 

(1) No officer received a bonus in the years ended September 30, 2023 and 2022.

(2) Consists of social security payments required under Chinese law. Although we also reimburse the referenced individuals for reasonable expenses, such reimbursements do not, in the aggregate, exceed $10,000 for any individual in any year presented and are not considered perquisites because they are integrally and directly related to the performance of such recipients’ jobs.

(3) Wenhua Liu resigned on March 22, 2022.

(4) Dehong Zhang began his position as Chief Operating Officer on March 1, 2021.

(5) Lingge Wu was appointed as our Chief Financial Officer on March 22, 2022.

Director Compensation

The following section presents information regarding the compensation paid during the fiscal years ended September 30, 2023 and 2022 to members of our Board of Directors who are not also our employees (referred to herein as “Non-Employee Directors”). Currently we have the following Non-Employee Directors: Zhengyu Wang, husband of Yefang Zhang, and three (3) Non-Employee Directors: Qinyi Fu, Hongdao Qian and Hui Ruan.

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Non-Employee Directors

Historically, we have not paid our directors for acting as such, as they have consisted of our Chief Executive Officer and her spouse. Since the fiscal year ended September 30, 2018, we decided to pay our independent directors an annual cash retainer to be determined from time to time by our Board of Directors. We may also provide stock, option or other equity-based incentives to our directors for their services provided in such capacity. We also reimburse our Non-Employee Directors for any out-of-pocket expenses incurred by them in connection with their services provided in such capacity. Pursuant to our service agreements with our directors, neither we nor our subsidiaries provide benefits to directors upon termination of employment. The compensation for our employee directors is fully reflected in the above Summary Executive Compensation Table.

Summary Director Compensation Table

Name	Fiscal Year	Fees earned or paid in cash ($)		All Other Compensation ($)(1)		Total ($)
Hongdao Qian (2)	2023		10,000		-		10,000
	2022		10,000		-		10,000
Hui Ruan (3)	2023		10,000		-		10,000
	2022		10,000		-		10,000
Qinyi Fu (4)	2023		10,000		-		10,000
	2022		10,000		-		10,000

_____________

(1) No Non-Employee Director received other compensation for the years ended September 30, 2023 and 2022.

(2) Mr. Hongdao Qian’s term began on July 7, 2017. He is entitled to a board fee of $10,000 per year beginning from July 7, 2017.

(3)  Dr. Hui Ruan’s term began on June 19, 2020. He is entitled to a board fee of $10,000 per year beginning from June 19, 2020.

(4) Qinyi Fu’s term began on June 3, 2021. He is entitled to a board fee of $10,000 per years beginning from June 3, 2021.

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Employment Agreements

Each employee is required to enter into an employment agreement. Accordingly, all of our employees, including management, have executed their employment agreements. Our employment agreements with our executives provide the amount of each executive officer’s salary and establish their eligibility to receive a bonus. Our employment agreements with our executive officers generally provide for a salary to be paid monthly. The agreements also provide that executive officers are to work full time for our company and are entitled to all legal holidays as well as other paid leave in accordance with PRC laws and regulations and our internal work policies. The employment agreements also provide that we will pay for all mandatory social security programs for our executive officers in accordance with PRC regulations. In addition, our employment agreements with our executive officers prevent them from rendering services for our competitors for so long as they are employed.

Other than the salary, bonuses, equity grants and necessary social benefits required by the government, which are defined in the employment agreements, we currently do not provide other benefits to the officers. Our executive officers are not entitled to severance payments upon the termination of their employment agreement or following a change in control.

We have not provided retirement benefits (other than a state pension scheme in which all of our employees in China participate) or severance or change of control benefits to our named executive officers.

Under Chinese law, we may terminate an employment agreement without penalty by providing the employee thirty days’ prior written notice or one month’s wages in lieu of notice if the employee is incompetent or remains incompetent after training or adjustment of the employee’s position in other limited cases. If we wish to terminate an employment agreement in the absence of cause, then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are, however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us.

We may increase the salary from time to time without entering a new employment agreement.

Yefang Zhang

We entered into an employment agreement with our Chief Executive Officer, Ms. Yefang Zhang, effective August 6, 2020. Under the terms of Ms. Zhang’s employment, Ms. Zhang is entitled to the following:

· Base compensation of RMB87,300 per month.

· Reimbursement of reasonable expenses incurred by Ms. Zhang.

Ms. Zhang’s employment may be terminated at any time by either party upon presentation of 30 days’ prior notice or immediately for cause.

Lingge Wu

We entered into a new employment agreement with our chief financial officer, Ms. Lingge Wu, effective March 22, 2022. Under the terms of Ms. Wu’s employment, Ms. Wu is entitled to the following:

· Base compensation of RMB 250,000 per year.

· Reimbursement of reasonable expenses incurred by Ms. Wu.

Ms. Wu’s employment may be terminated at any time by either party upon presentation of 30 days’ prior notice or immediately for cause.

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Dehong Zhang

We renewed the employment agreement with our chief operating officer, Mr. Dehong Zhang, effective on April 1, 2023. Under the terms of Mr. Zhang’s employment, Mr. Zhang is entitled to the following:

· Base compensation of RMB 500,000 per year.

· Reimbursement of reasonable expenses incurred by Mr. Zhang.

Mr. Zhang’s employment may be terminated at any time by either party upon presentation of 30 days’ prior notice or immediately for cause.

C. Board Practices

Board of Directors and Board Committees

Our Board of Directors currently consists of five (5) directors. A majority of our Board of Directors (namely, Qinyi Fu, Hongdao Qian and Hui Ruan) are independent, as such term is defined by the Nasdaq Capital Market.

A director may vote in respect of any contract or transaction in which he is interested, provided, however that the nature of the interest of any director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee thereof of the nature of a director’s interest shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any particular transaction. A director may be counted for a quorum upon a motion in respect of any contract or arrangement which he shall make with our company, or in which he is so interested and may vote on such motion.

We do not have a lead independent director, and we do not anticipate having a lead independent director because we will encourage our independent directors to freely voice their opinions on a relatively small company board. We believe this leadership structure is appropriate because we are a relatively small company in the process of listing on a public exchange. Our Board of Directors plays a key role in our risk oversight. The Board of Directors makes all relevant Company decisions. As a smaller company with a small Board of Directors, we believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.

Board Committees

We have established three standing committees under the board: the audit committee, the compensation committee and the nominating committee. Each committee has three members, and each member is independent, as such term is defined by The Nasdaq Capital Market. The audit committee will be responsible for overseeing the accounting and financial reporting processes of our company and audits of the financial statements of our company, including the appointment, compensation and oversight of the work of our independent auditors. The compensation committee of the Board of Directors will review and make recommendations to the board regarding our compensation policies for our officers and all forms of compensation, and will also administer and have authority to make grants under our incentive compensation plans and equity-based plans (but our board retains the authority to interpret those plans). The nominating committee of the Board of Directors will be responsible for the assessment of the performance of the board, considering and making recommendations to the board with respect to the nominations or elections of directors and other governance issues. The nominating committee considers diversity of opinion and experience when nominating directors.

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The candidates of members of the audit committee, the compensation committee and the nominating committee are set forth below. All such members qualify as independent under the rules of The Nasdaq Capital Market.

Director	Audit	Compensation	Nominating
	Committee	Committee	Committee
Qinyi Fu	(1)(2)(3)	(1)	(1)
Hongdao Qian	(1)	(1)	(1)(2)
Hui Ruan	(1)	(1)(2)	(1)

____________

(1) Committee member

(2) Committee chair

(3) Audit committee financial expert

Duties of Directors

As a matter of Cayman Islands law, a director of a Cayman Islands company is considered a fiduciary of the company. Accordingly, directors owe fiduciary duties to their companies to act in accordance with the best interests of the company, to exercise their powers for the purposes for which they are conferred and not to place themselves in a position where there is a conflict between their personal interests and their duty to the company. Accordingly, a director owes a company a duty not to make a profit based on his or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duties to a third party. However, a company’s articles of association may permit a director to vote on a matter in which he or she has a personal interest if he or she has disclosed the nature of his or her interest to the board of directors. Our First Amended and Restated Articles of Association provide that a director must disclose the nature and extent of any material interests in any contract or arrangement, and that he or she may not vote at any meeting on any resolution concerning an interested matter.

A director of a Cayman Islands company also owes to the company duties to exercise independent judgment in carrying out his functions and to exercise reasonable skill, care and diligence, which has both objective and subjective elements. Recent Cayman Islands case law confirmed that directors must exercise the care, skill and diligence that would be exercised by a reasonably diligent person having the general knowledge, skill and experience reasonably to be expected of a person acting as a director. Additionally, a director must exercise the knowledge, skill and experience that he or she actually possesses.

Interested Transactions

A director may vote, attend a board meeting or, presuming that the director is an officer and that it has been approved, sign a document on our behalf with respect to any contract or transaction in which he or she is interested. We require directors to promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction we have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction.

Remuneration and Borrowing

The directors may receive such remuneration as our Board of Directors may determine or change from time to time. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. Our Board of Directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.

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Qualification

A majority of our Board of Directors is required to be independent. There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

Director Compensation

All directors hold office until the next annual meeting of shareholders at which they are re-elected and until their successors have been duly elected and qualified. Our Chief Executive Officer and Chairwoman of our Board of Directors, Yefang Zhang is married to one of our directors, Zhengyu Wang. Officers are elected by and serve at the discretion of the Board of Directors. Employee directors do not receive any compensation for their services. Non-employee directors will be entitled to receive such remuneration as our Board of Directors may determine or change from time to time for serving as directors and may receive incentive option grants from our company. In addition, each non-employee director is entitled to be repaid or prepaid all travel, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our Board of Directors or committees of our Board of Directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as a director.

Board Diversity

The table below provides certain information regarding the diversity of our board of directors as of the date of this report.

Country of Principal Executive Offices:	China
Foreign Private Issuer:	Yes
Disclosure Prohibited under Home Country Law:	No
Total Number of Directors:	5

Gender Identity	Female		Male
Directors		1		4
Demographic Background
Underrepresented Individual in Home Country Jurisdiction				1
LGBTQ+				-
Did not disclose demographic background				-

Limitation of Director and Officer Liability

Under Cayman Islands law, each of our directors and officers, in performing his or her functions, is required to act honestly and in good faith with a view to our best interests and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Cayman Islands law does not limit the extent to which a company’s Memorandum and Articles of Association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

Under our First Amended and Restated Memorandum and Articles of Association, we may indemnify our directors, officers and liquidators against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings to which they are party or are threatened to be made a party by reason of their acting as our director, officer or liquidator. To be entitled to indemnification, these persons must have acted honestly and in good faith with a view to the best interest of the company and, in the case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission. These provisions will not limit the liability of directors under United States federal securities laws.

The decision of our Board of Directors as to whether the director acted honestly and in good faith with a view to our best interests and as to whether the director had no reasonable cause to believe that his or her conduct was unlawful, is in the absence of fraud sufficient for the purposes of indemnification, unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entry of no plea does not, by itself, create a presumption that a director did not act honestly and in good faith and with a view to our best interests or that the director had reasonable cause to believe that his or her conduct was unlawful. If a director to be indemnified has been successful in defense of any proceedings referred to above, the director is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the director or officer in connection with the proceedings.

We may purchase and maintain insurance in relation to any of our directors or officers against any liability asserted against the directors or officers and incurred by the directors or officers in that capacity, whether or not we have or would have had the power to indemnify the directors or officers against the liability as provided in our First Amended and Restated Memorandum and Articles of Association.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers or persons controlling our company under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Related Party Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics applicable to our directors, officers and employees in connection with our application to list on the Nasdaq Capital Market.

D. Employees

As of September 30, 2023, we employed a total of 56  full-time and no part time employees in the following functions:

	Number of Employees
Department	September 30,		September 30,		September 30,
	2023		2022		2021
Senior Management		7		7		6
Human Resource & Administration		4		3		4
Finance		7		7		8
Procurement		4		4		3
Production		36		22		35	(1)
Sales & Marketing		8		6		3
Quality Control		2		2		2
E-commerce		0		4		5	(2)
Business Development		2		1		1
Total		70		56		67

____________

(1) Some production employees resigned due to COVID-19 in 2022.

(2) We began to reduce the size of our E-commerce business in the fiscal year ended September 30, 2020, and close most of our E-commerce operations in January 2023.

Our employees are not represented by a labor organization or covered by a collective bargaining agreement. We have not experienced any work stoppages.

We are required under PRC law to make contributions to employee benefit plans at specified percentages of our after-tax profit. In addition, we are required by PRC law to cover employees in China with various types of social insurance. For the years ended September 30, 2023, 2022 and 2021, we contributed approximately $55,801, $69,393 and $50,889 to the employee benefit plans and social insurance, respectively. The effect on our liquidity by the payments for these contributions is immaterial. We believe that we are in material compliance with the relevant PRC employment laws.

Over 76% of our employees at FLS Mushroom, Farmmi biotechnology and Farmmi Food are female workers. We have bought life insurance for all workers of Farmmi Food’s factory.

E. Share Ownership

For information regarding the share ownership of our directors and senior management, see “Item 7. Major Shareholders and Related Party Transactions - A. Major Shareholders.”

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Equity Compensation Program

We have established a pool for shares and share options for our employees. This pool contains shares and options to purchase 1,168,000 of our Ordinary Shares, equal to 10% of the number of Ordinary Shares outstanding at the conclusion of our initial public offering. Subject to approval by the Compensation Committee of our Board of Directors, we may grant shares or options in any percentage determined for a particular grant.

At the annual shareholder meeting held in July 2021, our shareholders approved a 40 million shares incentive plan. In February 2022 we filed a registration statement on Form S-8 for the 2021 Plan, and we subsequently canceled the reserved but unissued 30 million shares in February 2022.

Any options granted will vest at a rate of 20% per year for five years and have a per share exercise price equal to the fair market value of one of our Ordinary Shares on the date of grant. We expect to grant shares and/or options under this pool to certain employees. We have not yet determined the recipients of any such grants. For the year ended September 30, 2022, 10 million ordinary shares were issued to eight employees and $2 million was accounted as share-based compensation expense in general and administration expenses. As of September 30, 2023, the remaining ordinary shares available to be issued under our 2021 plan were 2,857 shares following the reverse share split completed in September 2023.

Compensation Recoupment (Clawback) Policy

We maintain a compensation clawback policy, which we adopted in November 2023 in compliance with Nasdaq listing requirements. In the event that the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under U.S. federal securities law, the policy provides that the Company will recoup compensation from each current or former executive officer who, during the three-year period preceding the date on which an accounting restatement is required, received incentive compensation based on the erroneous financial data that exceeds the amount of incentive-based compensation the executive would have received based on the restatement. The Compensation Committee administers the Company’s Clawback Policy and has discretion to determine how to seek recovery under the policy and may forgo recovery if it determines that recovery would be impracticable.

F. Disclosure of a registrant’s action to recover erroneously awarded compensation.

Not applicable.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth information with respect to beneficial ownership of our Ordinary Shares as of January 24, 2024 by:

· Each person who is known by us to beneficially own 5% or more of our outstanding Ordinary Shares;

· Each of our directors and named executive officers; and

· All directors and named executive officers as a group.

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The number and percentage of Ordinary Shares beneficially owned are based on 6,291,786 Ordinary Shares issued and outstanding. Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of 5% or more of our Ordinary Shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares underlying options, warrants or convertible securities held by each such person that are exercisable, convertible or repayable within 60 days of January 24, 2024 are deemed outstanding and are deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all Ordinary Shares shown as beneficially owned by them. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of our Company at Farmmi, Inc., Fl 1, Building No. 1, 888 Tianning Street, Liandu District, Lishui City, Zhejiang Province, People’s Republic of China 323000. The shareholders of record listed in the table are not located in the United States.

	Ordinary Shares beneficially owned(1)(2)
	Number		Percent
Directors and Named Executive Officers:
Yefang Zhang(3)(4)		47,500		0.76	%
Zhengyu Wang(3)(4)		47,500		0.76	%
Lingge Wu		-		-
Dehong Zhang		-		-
Hongdao Qian		-		-
Hui Ruan		-		-
Qinyi Fu		-		-
All directors and executive officers as a group (seven (7) persons)		47,500		0.76	%
Principal Shareholders:
FarmNet Limited(3)		46,500		0.74	%

______________

(1) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the Ordinary Shares.

(2) Assuming the exercise of all the Warrants, no change to the initial conversion rate or the initial exercise price.

(3) The sole shareholder of FarmNet Limited is Ms. Yefang Zhang, who is the Chief Executive Officer and Chairwoman of our company. Ms. Zhang’s spouse is Mr. Zhengyu Wang, a director of our company. By virtue of this relationship, Mr. Wang may be deemed to share beneficial ownership of the shares of, and voting and investment power over, our company held by FarmNet Limited with Ms. Zhang.

(4) Consists of 46,500 ordinary shares held directly by FarmNet Limited and 1,000 ordinary shares held directly by children individually who are members of the household of Yefang Zhang and Zhengyu Wang.

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B. Related party transactions

In addition to the executive officer and director compensation arrangements discussed in “Executive Compensation,” below we describe transactions for the years ended September 30, 2023, 2022 and 2021, to which we have been a participant, in which the amount involved in the transactions is material to us or the related party.

The relationship and the nature of related party transactions are summarized as follow:

Name of related party	Relationship to the Company	Nature of transactions
Zhejiang Yili Yuncang Technology Group Co., Ltd	10% equity interest owned by the Company	Prepayment of electricity and water expenses for office leased to the Company
FarmNet Limited	Owned 0.8% equity interest of the Company	Payment of expenses by the Company.
Epakia Canada Inc	Legal representative of Epakia Canada Inc is a director of the Company	Payment of expenses by the Company.
Shanghai Zhongjian Yiting Medical Health Technology Partnership	A partnership jointly set up by the Company with another limited partner ("LP").	Payment of expenses by the Company.
Zhejiang Tantech Bamboo Technology Co., Ltd	Under common control of Mr Zhengyu Wang and Ms Yefang Zhang, CEO of the Company	Lease factory building to the Company and charging water and electricity for offices leased to the Company.
Forasen Holdings Group Co., Ltd	Owned by Mr Zhengyu Wang, a director of the Company	Purchases from the Company
Yefang Zhang	CEO and Chairwoman of the Board of Directors of the Company	Payment of expenses for the Company and provide a guarantee as additional security for a loan.
Xinyang Wang	Shareholder of Nongyuan Network	Provide guarantees and a real property as additional security for certain loans.
Dehong Zhang	The brother of Ms Yefang Zhang, CEO and Chairwoman of the Board of Directors of the Company	Provide guarantees as an additional security for certain loans
Ms Aihong Wang	The sister of Mr Zhengyu Wang, a director of the Company	Provide a guarantee as an additional security for a revolving loan

Due from related parties consisted of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Yili Yuncang Holding Group Co., Ltd	$	103,417		-
Zhejiang Yili Yuncang Technology Group Co., Ltd		-	$	29,055
FarmNet		4,100		-
Epakia Canada Inc		2,996		-
Shanghai Zhongjian Yiting Medical Health Technology Partnership		308		30,928
Dehong Zhang		137		-
Total	$	110,958	$	59,983

Amount due from Zhejiang Yili Yuncang Holding Group Co., Ltd was mainly related to prepayment of electricity and water expenses for offices leased to the Company.

Amounts due from FarmNet Limited, Epakia Canada Inc, Shanghai Zhongjian Yiting Medical Health Technology Partnership and Dehong Zhang were mainly related to expenses paid by the Company which can be recoverable from these related parties.

Due to related parties from the Company consisted of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Tantech Bamboo Technology Co., Ltd.	$	24,496	$	948
Yefang Zhang		9,150		-
Forasen Holdings Group Co., Ltd		168		-
Total	$	33,814	$	948

Amount due to Zhejiang Tantech Bamboo Technology Co., Ltd. were related to water and electricity expenses for offices leased to the Company.

Amount due to Forasen Holdings Group Co., Ltd and Yefang Zhang were related to payment of expenses by related parties for the Company. Amount was due on demand and non-interest bearing.

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September 30, 2021

		Due from		Due to		Sales to		Purchases from		Lease Expenses
Name of Related Party	Relationship	Related Party		Related Party(1)		Related Party		Related Party		Incurred (Deducted)
	Owned by Ms. Yefang Zhang, our CEO
	and her husband and our director, Mr.
Forasen Group	Zhengyu Wang	$	-	$	-	$	1,066	$	-	$	-
	Forasen Holding Group Co., Ltd. and
	Farmmi, Inc. are both ultimately owned
	and controlled by Mr. Zhengyu Wang
Forasen Holding Group Co., Ltd.	and Ms. Yefang Zhang.		-		-		325		-		-
Zhejiang Forasen Zhutan Co., Ltd.	Controlled by CEO Yefang Zhang		-		-		288		-		-
	Controlled by Chairman of the
Hangzhou Forasen Technology Co, Ltd	Company, Mr. Zhengyu Wang		-		-		158		-		-
	Controlled by Zhengyu Wang and CEO
Hangzhou Xinying Industrial Co., Ltd.	Yefang Zhang		-		-		49		-		-
Hangzhou Carbon Technology Co., Ltd.	Controlled by CEO Yefang Zhang		-		-		33		-		-
Shenzhen Daliniu New Energy Car
Rental Co., Ltd			-		-		33		-		-
Zhejiang Tantech Bamboo Technology	Controlled by Zhengyu Wang and
Co., Ltd.	Yefang Zhang		-		3,032		-		-	$	6,596
Hangzhou Forasen Technology Co., Ltd.	Controlled by Zhengyu Wang		-				-		-	$	(39,005	)
	Shareholder of the Company and 100%
	owned by Company’s CEO, Yefang
Farmnet	Zhang		-		54,600		-		-		-
Total		$	-	$	57,632	$	1,952	$	-	$	32,409

_____________ 

(1) The balance of due to related parties was interest-free and due upon demand.

Sales to related parties

The Company periodically sells merchandise to its affiliates during the ordinary course of business. For the years ended September 30, 2023, 2022 and 2021, the Company recorded sales to related parties of nil, $1,016 and $1,952, respectively.

Operating lease from related parties

The following table summarizing operating leases with related parties, Zhejiang Tantech Bamboo Technology Co., Ltd. and Zhejiang Yili Yuncang Holding Group Co., Ltd, detailing lease begin date, lease end date, leasing purpose, leasing areas in square meters, annual rent in RMB and its equivalent in USD.

Zhejiang Tantech Bamboo Technology Co., Ltd.	Lease No 1		Lease No. 2		Lease No. 3		Total
Lease begin date	August 1, 2021		July 14, 2021		March 1, 2023
Lease end date	July 31, 2031		July 13, 2031		February 29, 2028
Leasing purpose	Factory building		Factory building		Office
Annual rent in RMB		168,854		421,431		131,835		722,120
Annual rent in USD	$	23,940	$	59,750	$	18,691	$	102,381
Area (in square meters)		1,180		1,914		479		3,573

Zhejiang Yili Yuncang Holding Group Co., Ltd
Lease begin date	August 1, 2023
Lease end date	July 31, 2025
Leasing purpose	Office
Annual rent in RMB		9,795
Annual rent in USD	$	1,389
Area (in square meters)		15

For the years ended September 30, 2023, 2022 and 2021, the Company incurred lease expenses of $66,116, $88,847 and $86,556, respectively.

Sublease to a related party

In August 2020, the Company entered into a sublease agreement with Hangzhou Forasen Technology Co., Ltd to sublease its office space. The lease term is two years with annual rent of RMB 283,258 (equivalent of $41,639). This lease was terminated on February 14, 2022.

For the years ended September 30, 2022 and 2021, the Company recorded lease income of $14,262 and $40,026, respectively.

Guarantees provided by related parties

The Company’s related parties provide guarantees for the Company’s short-term bank loans (see Note 8). The Company’s related parties also pledged their properties as collaterals to safeguard the Company’s short-term bank loans (see Note 8).

The Company and Forasen Group signed a Non-Competition Agreement which provides that Forasen Group should not engage in any business that the Company engages in, except purchasing products from us. In addition, Mr. Wang and Ms. Zhang signed a Non-Competition Agreement with the Company and Tantech which provides that Mr. Wang and Ms. Zhang shall not vote in favor or otherwise cause Tantech to engage in the business that the Company conducts.

Our company and Forasen Group signed a Non-Competition Agreement which provides that Forasen Group should not engage in any business that our company engages in, except purchasing products from us. In addition, Mr. Wang and Ms. Zhang signed a Non-Competition Agreement with our company and Tantech which provides that Mr. Wang and Ms. Zhang shall not vote in favor or otherwise cause Tantech to engage in the business that we conduct.

Therefore, we do not believe that there are business activities of Mr. Wang and Ms. Zhang that would compete directly with our business operations. We have also adopted a policy that prohibits loans to related parties by the Company.

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Future Related Party Transactions

The Corporate Governance Committee of our Board of Directors must approve all related party transactions. All related party transactions will be made or entered into on terms that are no less favorable to use than can be obtained from unaffiliated third parties. Related party transactions that we have previously entered into were not approved by independent directors, as we had no independent directors at that time.

C. Interests of experts and counsel

Not applicable for annual reports on Form 20-F.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

Please refer to Item 18.

Legal and Administrative Proceedings

From time to time, we have been involved in litigation relating to contract disputes and other matters in the ordinary course of our business. See “Item 3 - Key Information - Risk Factors - Risks Related to Our Business and Industry - We have guaranteed third parties’ debt, and a failure by such parties to repay their debts may be enforced against our company.” We are not currently a party to any material legal or administrative proceedings.

Dividend Policy

We have never declared or paid any cash dividends on our Ordinary Shares. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of Directors may deem relevant.

Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either its profit or share premium account, but a dividend may not be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. According to our First Amended and Restated Articles of Association, dividends can be declared and paid out of funds lawfully available to us, which include the share premium account. Dividends, if any, would be paid in proportion to the number of Ordinary Shares a shareholder holds.

If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our foreign-owned Chinese subsidiaries (Farmmi Enterprise, Farmmi Technology, Farmmi Agricultural, FLS Mushroom and Farmmi Food). Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to their shareholders only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Farmmi Enterprise and Farmmi Technology are also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its Board of Directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

In addition, pursuant to the EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to Farmmi International by Farmmi Enterprise and Farmmi Technology are subject to withholding tax at a rate of 10% unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

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Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from operations in China may be used to pay dividends to our company. Farmmi Enterprise and Farmmi Technology may go to a licensed bank to remit its after-tax profits out of China. Nevertheless, the bank will require Farmmi Enterprise and Farmmi Technology to produce the following documents for verification before it may transfer the dividends to Farmmi International’s overseas bank account of: (1) tax payment statement and tax return; (2) auditor’s report issued by a Chinese certified public accounting firm confirming the availability of profits and dividends for distribution in the current year; (3) the Board minutes authorizing the distribution of dividends to its shareholders; (4) the foreign exchange registration certificate issued by SAFE; (5) the capital verification report issued by a Chinese certified public accounting firm; (6) if the declared dividends will be distributed out of accumulated profits earned in prior years, Farmmi Enterprise and Farmmi Technology must appoint a Chinese certified public accounting firm to issue an auditors’ report to the bank to certify Farmmi Enterprise and Farmmi Technology’s financial position during the years from which the profits arose; and (7) other information as required by SAFE.

B. Significant Changes

We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

Item 9. The Offer and Listing

A. Offer and listing details

Our Ordinary Shares have been listed on NASDAQ since February 16, 2018.

As of January 24, 2024, there were approximately 21 holders of record of our Ordinary Shares.

B. Plan of distribution

Not applicable for annual reports on Form 20-F.

C. Markets

Our Ordinary Shares are listed on the Nasdaq Capital Market under the symbol “FAMI.”

D. Selling shareholders

Not applicable for annual reports on Form 20-F.

E. Dilution

Not applicable for annual reports on Form 20-F.

F. Expenses of the issue

Not applicable for annual reports on Form 20-F.

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Item 10. Additional Information

A. Share capital

Not applicable for annual reports on Form 20-F.

B. Memorandum and articles of association

The information required by this item is incorporated by reference to the material headed “Description of Share Capital” in our Registration Statement on Form F-1, File no. 333-221569, filed with the SEC on November 15, 2017, as amended.

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C. Material contracts

On February 25, 2022, Farmmi, Inc. entered into a securities purchase agreement with certain purchasers pursuant to Regulation S under the Securities Act of 1933. Pursuant to the Securities Purchase Agreement, Farmmi agreed to transfer, assign, set over and deliver to the Purchasers and the Purchasers agree, severally and not jointly, to acquire from Farmmi in the aggregate 30,000,000 of Farmmi’s ordinary shares at $0.20 per share for $6,000,000.

On September 26, 2022, Farmmi entered into a securities purchase agreement with Streeterville Capital, LLC (“Streeterville”), pursuant to which the Company issued to the Investor, in an unregistered private transaction, an unsecured promissory note on September 26, 2022 in the original principal amount of $6,440,000.00 (the “Note”), convertible into ordinary shares, of the Company for $6,000,000.00 in gross proceeds.

On September 30 2022, Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd entered into a Share Transfer Agreement and Supplemental Agreement with Zhejiang Jingcai Industrial Co., Ltd. to sell Zhejiang FLS Mushroom Co., LTD for RMB 24,100,000.

On July 12, 2023, Farmmi entered into a securities purchase agreement with certain purchasers pursuant to Regulation S of the Securities Act. Pursuant to the agreement, the company agreed to issue and sell to the purchasers and the Purchasers agreed to purchase from the Company, an aggregate of 21,052,632 ordinary shares, at a price of $0.38 per share for aggregate gross proceeds of 8,000,000.

On November 13, 2023, Farmmi and Streeterville entered an Amendment to the Convertible Promissory Note to extend the term of the Note from twelve months to twenty four months from the Purchase Price Date, or until September 28, 2024.  

On January 12, 2024, Farmmi and Streeterville entered into a Forbearance Agreement, under which Streeterville agreed to withdraw a December Redemption Notice and not to seek to enforce any remedies under the Note with respect to the December Redemption Notice.

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D. Exchange controls

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans or foreign currency is to be remitted into China under the capital account, such as a capital increase or foreign currency loans to our PRC subsidiaries.

In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. In addition, SAFE promulgated Circular 45 on November 9, 2011 in order to clarify the application of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

We typically do not need to use our offshore foreign currency to fund our PRC operations. In the event we need to do so, we will apply to obtain the relevant approvals of SAFE and other PRC government authorities as necessary.

Regulation of Dividend Distribution

The principal laws, rules and regulations governing dividend distribution by foreign-invested enterprises in the PRC are the Company Law of the PRC, as amended, the Wholly Foreign-owned Enterprise Law and its implementation regulations and the Equity Joint Venture Law and its implementation regulations. Under these laws, rules and regulations, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to set aside as general reserves at least 10% of their after-tax profit, until the cumulative amount of such reserves reaches 50% of their registered capital. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

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E. Taxation

The following sets forth the material Cayman Islands, Chinese and U.S. federal income tax consequences related to an investment in our Ordinary Shares. It is directed to U.S. Holders (as defined below) of our Ordinary Shares and is based upon laws and relevant interpretations thereof in effect as of the date of this report, all of which are subject to change. This description does not deal with all possible tax consequences relating to an investment in our Ordinary Shares, such as the tax consequences under state, local and other tax laws. Unless otherwise noted in the following discussion, this section is the opinion of Kaufman & Canoles, P.C., our U.S. counsel, insofar as it relates to legal conclusions with respect to matters of U.S. federal income tax law, and of Zhejiang Zhengbiao Law Firm, our PRC counsel, insofar as it relates to legal conclusions with respect to matters of Chinese tax law.

The following brief description applies only to U.S. Holders (defined below) that hold Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the tax laws of the United States in effect as of the date of this report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of shares and you are, for U.S. federal income tax purposes,

· an individual who is a citizen or resident of the United States;

· a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;

· an estate whose income is subject to U.S. federal income taxation regardless of its source; or

· a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

WE URGE POTENTIAL PURCHASERS OF OUR SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING 

THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR SHARES. 

People’s Republic of China Enterprise Taxation

Under the PRC Enterprise Income Tax Law, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise.

Our PRC subsidiaries and PRC consolidated VIE are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the EIT Law, which became effective on January 1, 2008, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards.

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In addition, the SAT Circular 82 issued by the SAT in April 2009 specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued the SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration details of determination on resident status and administration on post-determination matters. Farmmi, Inc. is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its Board of Directors and the resolutions of its shareholders) are maintained, outside the PRC. As such, we do not believe that Farmmi, Inc. meet all of the conditions above or are PRC resident enterprises for PRC tax purposes. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us. If the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. One example is that a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares. See “Item 3 - Key Information - Risk Factors - Risk Related to Doing Business in China - Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and has a material adverse effect on our results of operations and the value of your investment.”

As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries through Farmmi International. The EIT Law and its implementing rules provide those dividends paid by a PRC entity to a non-resident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or SAT Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. In August 2015, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatment under Tax Treaties, or SAT Circular 60, which became effective on November 1, 2015. SAT Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Farmmi International may be able to benefit from the 5% withholding tax rate for the dividends it receives from Farmmi Enterprise and Farmmi Technology, if it satisfies the conditions prescribed under SAT Circular 81 and other relevant tax rules and regulations. However, according to SAT Circular 81 and SAT Circular 60, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.

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In January 2009, the SAT promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, pursuant to which the entities that have the direct obligation to make certain payments to a non-resident enterprise should be the relevant tax withholders for the non-resident enterprise, and such payments include: income from equity investments (including dividends and other return on investment), interest, rents, royalties and income from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Further, the measures provide that in case of an equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment must, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred should assist the tax authorities to collect taxes from the relevant non-resident enterprise. The SAT issued a SAT Circular 59 together with the MOF in April 2009 and a SAT Circular 698 in December 2009. Both Circular 59 and Circular 698 became effective retroactively as of January 1, 2008. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. Under SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by disposition of the equity interests of an overseas holding company, and such overseas holding company is located in certain low tax jurisdictions, the non-resident enterprise, being the transferor, must report to the relevant tax authority of the PRC “resident enterprise” this Indirect Transfer. The PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC tax at a rate of up to 10%. On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or SAT Bulletin 7, to supersede existing provisions in relation to the Indirect Transfer as set forth in Circular 698, while the other provisions of Circular 698 remain in force. SAT Bulletin 7 introduces a new tax regime that is significantly different from that under Circular 698. Public Notice extends its tax jurisdiction to capture not only Indirect Transfer as set forth under Circular 698 but also transactions involving transfer of immovable property in China and assets held under the establishment and place, in China of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses transfer of the equity interest in a foreign intermediate holding company widely. In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer as they have to make self-assessment on whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. Although it appears that SAT Circular 698 and/or SAT Bulletin 7 was not intended to apply to share transfers of publicly traded companies, there is uncertainty as to the application of SAT Circular 698 and/or SAT Bulletin 7 and we and our non-resident investors may be at risk of being required to file a return and being taxed under SAT Circular 698 and/or SAT Bulletin 7 and we may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698 and/or SAT Bulletin 7.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any holder of Ordinary Shares. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands. The Cayman Islands is not party to any double tax treaties which are applicable to any payments made by or to our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Ordinary Shares, nor will gains derived from the disposal of our Ordinary Shares be subject to Cayman Islands income or corporation tax.

There is no income tax treaty or convention currently in effect between the United States and the Cayman Islands.

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United States Federal Income Taxation

The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:

· banks;

· financial institutions;

· insurance companies;

· regulated investment companies;

· real estate investment trusts;

· broker-dealers;

· traders that elect to mark-to-market;

· U.S. expatriates;

· tax-exempt entities;

· persons liable for alternative minimum tax;

· persons holding our Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction;

· persons that actually or constructively own 10% or more of our voting shares;

· persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as consideration; or

· persons holding our Ordinary Shares through partnerships or other pass-through entities.

Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. Federal tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares.

Taxation of Dividends and Other Distributions on our Ordinary Shares

Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the Ordinary Shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Capital Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Ordinary Shares, including the effects of any change in law after the date of this report.

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Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends.

The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our Ordinary Shares will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”

To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles.

Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

Taxation of Dispositions of Ordinary Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the Ordinary Shares for more than one year, you will be eligible for (a) reduced tax rates of 0% (for individuals in the 10% or 15% tax brackets), (b) higher tax rates of 20% (for individuals in the 39.6% tax bracket) or (c) 15% for all other individuals. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes.

Passive Foreign Investment Company

Based on our current and anticipated operations and the composition of our assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current taxable year. Our actual PFIC status for the current taxable year ending will not be determinable until the close of such taxable year and, accordingly, there is no guarantee that we will not be a PFIC for the current taxable year. Because PFIC status is a factual determination for each taxable year which cannot be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:

· at least 75% of its gross income is passive income; or

· at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.

We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change from no to yes. In particular, because the value of our assets for purposes of the asset test will generally be determined based on the market price of our Ordinary Shares, our PFIC status will depend in large part on the market price of our Ordinary Shares. Accordingly, fluctuations in the market price of the Ordinary Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we receive upon cash exercises, if any, of the Warrants to purchase the Ordinary Shares offered hereby. If we are a PFIC for any year during which you hold Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Ordinary Shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a “deemed sale” election with respect to the Ordinary Shares.

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If we are a PFIC for any taxable year during which you hold Ordinary Shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as an excess distribution. Under these special tax rules:

· the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares;

· the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

· the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even if you hold the Ordinary Shares as capital assets.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for the Ordinary Shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the Ordinary Shares as of the close of your taxable year over your adjusted basis in such Ordinary Shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary Shares. Your basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “- Taxation of Dividends and Other Distributions on our Ordinary Shares” generally would not apply.

The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including the Nasdaq Capital Market. If the Ordinary Shares are regularly traded on the Nasdaq Capital Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC.

Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold Ordinary Shares in any year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 regarding distributions received on the Ordinary Shares and any gain realized on the disposition of the Ordinary Shares.

You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed above.

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Information Reporting and Backup Withholding

Dividend payments with respect to our Ordinary Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders.

Under the Hiring Incentives to Restore Employment Act of 2010, certain United States Holders are required to report information relating to Ordinary Shares, subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

F. Dividends and paying agents

Not applicable for annual reports on Form 20-F.

G. Statement by experts

Not applicable for annual reports on Form 20-F.

H. Documents on display

We are subject to the information requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information with the SEC. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to interest rate risk primarily relates to excess cash invested in short-term instruments with original maturities of less than a year and long-term held-to-maturity securities with maturities of greater than a year. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if we have to sell securities that have declined in market value due to changes in interest rates. We have not been, and do not expect to be, exposed to material interest rate risks, and therefore have not used any derivative financial instruments to manage our interest risk exposure.

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As of September 30, 2023, we had approximately $4.7 million in outstanding bank loans, with interest rate ranging from 3.2% to 16.2%, if interest rates increased/decreased by 1 percentage point, with all other variables having remained constant, and assuming the amount of bank borrowings outstanding at the end of the year was outstanding for the entire year, profit attributable to equity owners of our company would have been approximately RMB0.3 million ($47,411) lower/higher, respectively, mainly as a result of interest expense on loans.

We had cash of $12.8 million as of September 30, 2023, and no other short-term investments and long-term held-to-maturity investments as of September 30, 2023.

Foreign Exchange Risk

Our functional currency is the RMB, and our financial statements are presented in U.S. dollar. The RMB depreciated by 7.9% in 2021, appreciated by 1.2% in 2022 and depreciated by 2.5% in 2023. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operation. The negative impact attributable to changes in revenue and expenses due to 1% change in foreign currency translation are summarized as follows.

	Year Ended September 30,
	2023		2022		2021
Impact on revenue	$	1,103,649	$	982,311	$	392,839
Impact on operating expenses	$	22,454	$	44,512	$	10,973
Impact on net income	$	25,438	$	22,020	$	47,049

Currently, all of our assets, liabilities, revenues and costs are denominated in RMB. However, we may generate revenues denominated in U.S. dollar, and our offering will be in U.S. dollar. Therefore, a portion of our cash and cash equivalents and short-term financial assets may be denominated in U.S. dollar in the future. Our exposure to foreign exchange risk will primarily relate to those financial assets denominated in U.S. dollars. Any significant revaluation of RMB against U.S. dollar may materially affect our earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars in the future. See “Item 3 - Key Information - Risk Factors - Risks Related to Doing Business in China - Fluctuations in exchange rates could adversely affect our business and the value of our securities.”

Commodity Risk

As a manufacturer of dried edible fungi products, our Company is exposed to the risk of an increase in the price of raw edible fungi and, as a result, dried edible fungi. We have not entered into any contract to hedge any specific commodity risk. Moreover, our Company does not purchase or trade on commodity instruments or positions; instead, it purchases commodities for use.

Item 12. Description of Securities Other than Equity Securities

With the exception of Items 12.D.3 and 12.D.4, this Item 12 is not applicable for annual reports on Form 20-F. As to Items 12.D.3 and 12.D.4, this Item 12 is not applicable, as the Company does not have any American Depositary Shares.

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Part II

Item 13. Defaults, Dividend Arrearages and Delinquencies

We do not have any material defaults in the payment of principal, interest, or any installments under a sinking or purchase fund as described in Item 13.

Item 14. Material Modifications to the Rights of Securities Holders and Use of Proceeds

A. Not applicable.

B. Not applicable.

C. Not applicable.

D. Not applicable.

E. Not applicable.

Item 15. Controls and Procedures

(a) Disclosure Controls and Procedures.

The Company’s management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of September 30, 2023, our company carried out an evaluation, under the supervision of and with the participation of management, including our Company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of our Company’s disclosure controls and procedures. Included in this Annual Report on Form 20-F, the chief executive officer and chief financial officer concluded that our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were ineffective in timely alerting them to information required to be included in the Company’s SEC filings.

(b) Management’s annual report on internal control over financial reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. We used the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”) in performing the assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2023. Based on the assessment, management determined that, as of September 30, 2023, we did not maintain effective internal control over financial reporting, because:

· We did not have sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP. Specifically, our control did not operate effectively to ensure the appropriate and timely analysis of and accounting for unusual and non-routine transactions and certain financial statement accounts;

· We have not established an internal control department and had a lack of adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned; and

· We have not established sufficient risk assessment in accordance with the requirement of COSO 2013 Framework.

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A material weakness is a deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have hired additional accounting staffs and are in the progress of improving our system security environment and conducting regular backup plan and penetration testing to ensure the network and information security. In addition, we plan to address the weaknesses identified above by implementing the following measures:

· Improve the design and documentation related to multiple levels of review over financial statements included in our SEC filings;

· Expand the design and assessment test work over the monitoring function of entity level controls;

· Enhance documentation retention policies over test work related to our continuous management assessments of internal control effectiveness; and

· Expand documentation practices and policies related to various key controls to provide support and audit trails for both internal management assessment as well as external auditor testing.

Especially for the identified material weakness related to internal control, we plan to hire experts to improve and test our internal control and the set up a series of standard and recurring internal audit work procedures before September 2024. We schedule to perform self-assessment of internal control effectiveness on a continuous basis, which will be led by our accounting and risk management department within fiscal year 2024. We also plan to hire more competent personnel and involve professional service companies to help us implement SOX 404 compliance together with the establishment of our internal audit function.

However, we cannot assure you that we will remediate our material weaknesses in a timely manner. See "Risk Factors-Risks Relating to Our Business and Industry-If we fail to implement and maintain an effective internal controls over financing reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud." in the annual report for the year ended September 30, 2023.

(c) Attestation report of the registered public accounting firm.

Not applicable.

(d) Changes in internal control over financial reporting.

There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

The Company’s board of directors has determined that Qinyi Fu qualifies as an “audit committee financial expert” in accordance with applicable Nasdaq Capital Market standards. The Company’s board of directors has also determined that Qinyi Fu and the other members of the Audit Committee are all “independent” in accordance with the applicable Nasdaq Capital Market standards.

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Item 16B. Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to the Company’s directors, officers, employees and advisors. The Code of Ethics is attached it as an exhibit to this annual report. We have also posted a copy of our code of business conduct and ethics on our website at https://www.farmmi.com/.

Item 16C. Principal Accountant Fees and Services

YCM CPA Inc was appointed by the Company to serve as its independent registered public accounting firm for fiscal years 2023 and 2022.

Fees Paid to Independent Registered Public Accounting Firm

Audit Fees

During fiscal year 2023 and 2022, YCM CPA Inc’s audit fees were $235,000 and $220,000, respectively.

Audit-Related Fees

During fiscal years 2023 and 2022, YCM CPA Inc’s audit-related fees were $0.

Tax Fees

During fiscal years 2023 and 2022, YCM CPA Inc’s tax fees were $0.

All Other Fees

During fiscal years 2023 and 2022, YCM CPA Inc’s other fees were $0.

Audit Committee Pre-Approval Policies

Before YCM CPA Inc was engaged by the Company to render audit or non-audit services, the engagement was pre-approved by the Company’s audit committee. All services rendered by YCM CPA Inc have been so pre-approved.

Percentage of Hours

The percentage of hours expended on the principal accountants’ engagement to audit our consolidated financial statements for fiscal year 2023 that were attributed to work performed by persons other than YCM CPA Inc’s full-time permanent employees was less than 50%.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Neither the Company nor any affiliated purchaser has purchased any shares or other units of any class of the Company’s equity securities registered by the Company pursuant to Section 12 of the Securities Exchange Act during the fiscal year ended September 30, 2023.

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Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

We are incorporated in the Cayman Islands and our corporate governance practices are governed by applicable Cayman Islands law. In addition, because our Ordinary Shares are listed on The Nasdaq Capital Market, we are subject to Nasdaq’s corporate governance requirements.

As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. If we opt to rely on such exemptions in the future, such decision might afford less protection to holders of our Ordinary Shares.

Section 5605(b)(1) of the Nasdaq Listing Rules requires listed companies to have, among other things, a majority of its board members to be independent, and Section 5605(d) and 5605(e) require listed companies to have independent director oversight of executive compensation and nomination of directors. As a foreign private issuer, however, we are permitted to follow home country practice in lieu of the above requirements. Our Board of Directors could make such a decision to depart from such requirements by ordinary resolution.

The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors or the implementation of a nominating and corporate governance committee. Since a majority of our board of directors would not consist of independent directors if we relied on the foreign private issuer exemption, fewer board members would be exercising independent judgment and the level of board oversight on the management of our company might decrease as a result. In addition, we could opt to follow Cayman Islands law instead of the Nasdaq requirements that mandate that we obtain shareholder approval for certain dilutive events, such as an issuance that will result in a change of control, certain transactions other than a public offering involving issuances of 20% or greater interests in the company and certain acquisitions of the shares or assets of another company.

Item 16H. Mine Safety Disclosure

Not applicable.

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Item 16J. Insider Trading Policy

Not applicable.

Item 16K. Cybersecurity

Not applicable.

136

Part III

Item 17. Financial Statements

See Item 18.

Item 18. Financial Statements

Our consolidated financial statements are included at the end of this annual report, beginning with page F-1.

137

Item 19. Exhibits

The following documents are filed as part of this annual report:

Exhibit No.	Description of Exhibit	Included	Form	Filing Date
1.1	Memorandum and Articles of Association of Farmmi, Inc.	By Reference	F-1	2017-11-15
1.2	Third Amended and Restated Memorandum and Articles of Association of Farmmi, Inc.	Herewith
2.1	Specimen Ordinary Share Certificate	By Reference	F-1	2017-11-15
2.2	Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934	Herewith
4.1	Employment Agreement with Yefang Zhang	By Reference	20-F	2021-01-29
4.2	Employment Agreement with Lingge Wu	By Reference	6-k	2022-03-25
4.3	Employment Agreement with Dehong Zhang	Herewith
4.4	Translation of Exclusive Management Consulting and Technology Agreement between Hangzhou Suyuan Agriculture Technology Co., Ltd. and Hangzhou Nongyuan Network Investment Management Co., Ltd. dated December 10, 2019.	By Reference	6-K	2020-05-20
4.5	Translation of Equity Pledge Agreement among Hangzhou Suyuan Agriculture Technology Co., Ltd., Xinyang Wang and Hangzhou Nongyuan Network Investment Management Co., Ltd. dated December 10, 2019.	By Reference	6-K	2020-05-20
4.6	Translation of Exclusive Call Option Agreement among Hangzhou Suyuan Agriculture Technology Co., Ltd., Xinyang Wang and Hangzhou Nongyuan Network Investment Management Co., Ltd. dated December 10, 2019.	By Reference	6-K	2020-05-20
4.7	Translation of Proxy Agreement among Hangzhou Suyuan Agriculture Technology Co., Ltd., Xinyang Wang and Hangzhou Nongyuan Network Investment Management Co., Ltd. dated December 10, 2019.	By Reference	6-K	2020-05-20
4.8	Translation of Power of Attorney between Xinyang Wang and Zhengyu Wang dated December 10, 2019.	By Reference	6-K	2020-05-20
4.9	Translation of Termination Agreement among Zhengyu Wang, Hangzhou Suyuan Agriculture Technology Co., Ltd. and Hangzhou Nongyuan Network Investment Management Co., Ltd. dated May 15, 2020 with the effective date of December 10, 2019.	By Reference	6-K	2020-05-20
4.10	Translation of Joint Statement among Zhengyu Wang, Dehong Zhang, XinyangWang, Hangzhou Suyuan Agriculture Technology Co., Ltd. and Hangzhou Nongyuan Network Investment Management Co., Ltd. dated May 15, 2020 with the effective date of December 10, 2019.	By Reference	6-K	2020-05-20
4.11	Translation of Non-competition Agreement by and between Farmmi, Inc. and Forasen Group, dated December 16, 2016	By Reference	F-1	2017-11-15
4.12	Non-competition Agreement by and among Zhengyu Wang, Yefang Zhang, Farmmi, Inc. and Tantech Holdings Ltd, dated June 30, 2017	By Reference	20-F	2021-01-29
4.13	Securities Purchase Agreement	By Reference	6-K	2018-11-02
4.14	Shareholder Pledge Agreement	By Reference	6-K/A	2018-11-09

138

4.15	Registration Rights Agreement	By Reference	6-K	2018-11-02
4.16	Summary Translation of Lease Agreement with Zhejiang Tantech Bamboo Technology Co., Ltd, dated July 6, 2020	By Reference	20-F	2021-01-29
4.17	Translation of Lease Agreement with Forasen Group, dated August 1, 2020	By Reference	20-F	2021-01-29
4.18	Summary Translation of Lease Agreement with four individuals, dated June 15, 2020	By Reference	20-F	2021-01-29
4.19	Underwriting Agreement by and between Farmmi, Inc. and Aegis Capital Corp, dated March 22, 2021	By Reference	6-K	2021-03-24
4.20	Underwriting Agreement by and between Farmmi, Inc. and Aegis Capital Corp, dated April 28, 2021	By Reference	6-K	2021-05-03
4.21	Underwriting Agreement by and between Farmmi, Inc. and Aegis Capital Corp, dated September 13, 2021	By Reference	6-K	2021-9-14
4.22	Securities Purchase Agreement with Investors dated February 25, 2022	By Reference	6-K	2022-03-02
4.23	Securities Purchase Agreement with Streeterville Capital, LLC dated September 26, 2022	By Reference	6-K	2022-09-27
4.24	Convertible Promissory Note dated September 26, 2022	By Reference	6-K	2022-09-27
4.25	Amendment to Convertible Promissory Note dated November 13, 2023	By Reference	6-K	2023-12-08
4.26	Forbearance Agreement with Streeterville Capital, LLC dated January 12, 2024	By Reference	6-K	2024-01-18
8.1	List of subsidiaries	Herewith
11.1	Code of Business Conduct and Ethics of Farmmi, Inc.	By Reference	F-1	2017-11-15
12.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 and Securities and Exchange Commission Release 34-46427	Herewith
12.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 and Securities and Exchange Commission Release 34-46427	Herewith
13.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Herewith
13.2	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Herewith
15.1	Consent of YCM CPA, Inc.	Herewith
97.1	Clawback Policy	Herewith
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

139

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	Farmmi, Inc.
Date: January 29, 2024	By:	/s/ Yefang Zhang
	Name:	Yefang Zhang
	Title:	Chief Executive Officer

140

FARMMI, INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2022 AND 2021

FARMMI, INC.

TABLE OF CONTENTS

	Page
Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms (PCAOB ID: 6781)	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)	F-4
Consolidated Statements of Changes in Stockholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of Farmmi, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Farmmi, Inc. and subsidiaries (collectively, the “Company”) as of September 30, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for the years ended September 30, 2023, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for years ended September 30, 2023, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or are required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

Estimates of Reserves on Advance to Suppliers

Description of the Matter

As described in Note 4 to the consolidated financial statements, the Company has approximately $116.3 million  advance to suppliers as of September 30, 2023. The Company’s management reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. Reserves estimates depend on analyzing historical quantity and quality, monitoring suppliers’ ability to deliver a sufficient supply and other economic factors.

We identified the allowance of advance to suppliers as a critical audit matter because the estimates involve significant judgements of the management. There are uncertainties in estimating reserves and recoverability of these advances.

How the Critical Audit Matter Was Addressed in the Audit

In order to address the matter above, we performed the following audit procedures, among others:

· Conducted background research of the major suppliers and their guarantees;

· Analyzed and tested the historical usage data, purchase history and the aging of the outstanding balances;

· Obtained the purchase contracts and tested the advances made associated with the contracts;

· Obtained existing future sales orders and analyzed the reasonableness of the purchase contract;

· Sent confirmations to major suppliers to identify any corroboratory or contrary evidence.

/s/ YCM CPA, Inc.

We have served as the Company’s auditor since 2021.

PCAOB ID 6781

Irvine, California

January 29, 2024

F-2

Farmmi, Inc.

Consolidated Balance Sheets

	September 30,			September 30,
	2023			2022
Assets
Current Assets
Cash	$	12,789,735		$	41,167,501
Short-term deposit		-			35,144,444
Short-term investments		-			5,820
Notes receivable		-			3,528,235
Accounts receivable, net		24,677,445			16,351,244
Advances to suppliers, net		116,343,961			48,633,604
Other receivable		-			7,440,705
Inventories, net		3,901,848			716,278
Other current assets		347,228			206,566
Due from a related party		110,958			59,983
Total current assets		158,171,175			153,254,380
Biological assets		9,187,640			9,638,722
Long-term investments		6,900,280			140,578
Property and equipment, net		24,532			44,868
Intangible assets, net		-			6,747
Right-of-use assets, net		516,459			534,351
Deferred tax assets		-			163,207
Total Assets	$	174,800,086		$	163,782,853
Liabilities and Shareholders' Equity
Current Liabilities
Short-term loans	$	2,412,281		$	-
Long-term loans - current portion		676,284			1,505,353
Convertible promissory notes		5,788,742			2,178,511
Derivative liability		-			3,450,000
Note payable		-			12,385
Accounts payable		1,105,674			197,137
Due to related parties		33,814			948
Operating lease liabilities – current		69,062			46,543
Other current liabilities		627,125			898,444
Total current liabilities		10,712,982			8,289,321
Long-term loans - non-current portion		1,652,561			292,285
Operating lease liabilities – non-current		458,617			517,156
Total Liabilities		12,824,160			9,098,762
Commitment and contingencies
Shareholders' Equity
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively1		1,218,816			597,768
Additional paid-in capital		160,571,517			152,162,565
Statutory reserve		1,695,629			1,153,813
Retained earnings		16,905,488			14,903,491
Accumulated other comprehensive (loss) income		(18,415,524	)		(14,133,546	)
Total Shareholders' Equity		161,975,926			154,684,091
Total Liabilities and Shareholders' Equity	$	174,800,086		$	163,782,853

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. All shares and associated amounts have been retroactively restated to reflect the reverse stock split.

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Farmmi, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

	For the Years Ended September 30,
	2023			2022			2021
Revenues
Sales to third parties	$	110,364,887		$	99,212,363		$	39,287,999
Sales to related parties		-			1,016			1,952
Total revenues		110,364,887			99,213,379			39,289,951
Cost of revenues		(106,078,132	)		(93,775,293	)		(34,180,670	)
Gross profit		4,286,755			5,438,086			5,109,281
Operating expenses
Allowance for doubtful accounts		32,007			(57,173	)		875,094
Selling and distribution expenses		(145,292	)		(305,367	)		(292,709	)
General and administrative expenses		(2,132,095	)		(4,133,178	)		(2,838,790	)
Total operating expenses		(2,245,380	)		(4,495,718	)		(2,256,405	)
Income from operations		2,041,375			942,368			2,852,876
Other income (expenses)
Change in fair value of derivative liability		873,767			419,649			-
Interest income		743,858			516,869			33,576
Interest expense		(650,813	)		(134,144	)		(73,866	)
Amortization of debt issuance costs		(1,691,609	)		(48,160	)		-
Government grant		1,439,208			-			-
Other income, net		101,520			409,030			(379,225	)
Total other income (expenses), net		815,931			1,163,244			(419,515	)
Income before income taxes		2,857,306			2,105,612			2,433,361
Provision for income taxes		(313,493	)		118,367			(25,571	)
Net income from continuing operations		2,543,813			2,223,979			2,407,790
Discontinued operations
Net loss from discontinued operations, net of tax		-			-			(51,352	)
Net income		2,543,813			2,223,979			2,356,438
Net loss attributable to non-controlling interest from discontinued operations		-			-			1,976
Net income	$	2,543,813		$	2,223,979		$	2,358,414
Comprehensive income
Net income	$	2,543,813		$	2,223,979		$	2,356,438
Foreign currency translation		(4,281,978	)		(16,344,967	)		1,990,561
Total comprehensive (loss) income		(1,738,165	)		(14,120,988	)		4,398,351
Comprehensive income attributable to noncontrolling interest		-			-			(46,525	)
Comprehensive (loss) income attributable to Farmmi, Inc.	$	(1,738,165	)	$	(14,120,988	)	$	4,351,826
Weighted average number of ordinary shares1
Basic		3,628,923			2,905,984			514,212
Diluted		8,452,875			2,905,984			522,276
Earnings per ordinary share1
Earnings (loss) per ordinary share - basic	$	0.70		$	0.77		$	4.58
- Continuing operations	$	0.70		$	0.77		$	4.68
- Discontinued operations		-			-		$	(0.10)
Earnings (loss) per ordinary share - diluted	$	0.30		$	0.77		$	4.51
- Continuing operations	$	0.30		$	0.77		$	4.61
- Discontinued operations		-			-		$	(0.10)

________ 

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. 

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Farmmi, Inc. 

Consolidated Statements of Changes in Shareholder’s Equity 

For the Years Ended September 30, 2023, 2022 and 2021

							Additional								Other			Farmmi, Inc.’s						Total
	Ordinary shares1						Paid in			Statutory		Retained			Comprehensive			Shareholders'			Noncontrolling			Shareholders'
	Shares			Amount			Capital			Reserve		Earnings			Income (loss)			Equity			Interest			Equity
Balance at September 30, 2020		102,588		$	20,518		$	20,335,228		$	972,092	$	6,770,426		$	186,912		$	28,285,176		$	869,981		$	29,155,157
Share-based compensation expenses		2,983			597			1,260,077			-		-			-			1,260,674			-			1,260,674
Issuance of ordinary shares and warrants, net		1,307,758			261,552			125,748,986			-		-			-			126,010,538						126,010,538
Warrants exercised for cash		1,375,572			275,114			(256,064	)		-		-			-			19,050			-			19,050
Foreign currency translation gain		-			-			-			-		-			1,942,060			1,942,060			48,501			1,990,561
Net income for the year		-			-			-			-		2,358,414			-			2,358,414			(1,976	)		2,356,438
Statutory reserve		-			-			-			1,463		(1,463	)		-			-			-			-
Balance at September 30, 2021		2,788,901		$	557,781		$	147,088,227		$	973,555	$	9,127,377		$	2,128,972		$	159,875,912		$	916,506		$	160,792,418
Share-based compensation expenses		50,000			10,000			1,997,328			-		-			-			2,007,328			-			2,007,328
Issuance of ordinary shares, net		150,000			30,000			5,970,000			-		-			-			6,000,000			-			6,000,000
Reverse share-split adjustment		(66	)		(13	)		13			-		-			-			-			-			-
Foreign currency translation gain		-			-			-			-		-			(16,344,967	)		(16,344,967	)		-			(16,344,967	)
Disposal of a subsidiary		-			-			(2,893,003	)		-		3,732,393			82,449			921,839			(916,506	)		5,333
Net income for the year		-			-			-			-		2,223,979			-			2,223,979			-			2,223,979
Statutory reserve		-			-			-			180,258		(180,258	)		-			-			-			-
Balance at September 30, 2022		2,988,835		$	597,768		$	152,162,565		$	1,153,813	$	14,903,491		$	(14,133,546)		$	154,684,091			-		$	154,684,091
Issuance of ordinary shares, net		2,631,579			526,316			7,403,684			-		-			-			7,930,000			-			7,930,000
Issuance of ordinary shares for promissory notes redemption		474,137			94,827			1,005,173			-		-			-			1,100,000			-			1,100,000
Reverse share-split adjustment		(473	)		(95	)		95			-		-			-			-			-			-
Foreign currency translation loss		-			-			-			-		-			(4,281,978	)		(4,281,978	)		-			(4,281,978	)
Net income for the year		-			-			-			-		2,543,813			-			2,543,813			-			2,543,813
Statutory reserve		-			-			-			541,816		(541,816	)		-			-			-			-
Balance at September 30, 2023		6,094,078		$	1,218,816		$	160,571,517		$	1,695,629	$	16,905,488		$	(18,415,524)		$	161,975,926			-		$	161,975,926

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. All shares and associated amounts have been retroactively restated to reflect the reverse stock split.

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Farmmi, Inc.

Consolidated Statements of Cash Flows

	2023			2022			2021
Cash flows from operating activities
Net income	$	2,543,813		$	2,223,979		$	2,356,438
Net loss from discontinued operations		-			-			51,352
Net income from continuing operations		2,543,813			2,223,979			2,407,790
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Changes in allowances - accounts receivable		7,915			(89	)		(116,862	)
Changes in allowances - advances to suppliers		-			3,526			(758,232	)
Changes in allowances - inventories		(40,963	)		53,736			(19,323	)
Changes in allowances - long-term investment		92,944			-			-
Depreciation and amortization		26,870			64,287			68,418
Amortization of operating lease right-of-use assets		45,473			85,280			-
Non-cash lease expenses		-			-			91,573
Loss on short-term investment		5,870			145,843			-
Gain from disposal of property and equipment		-			-			-
Loss on disposal of property and equipment		124			-			-
Loss from disposal of subsidiaries		(5,592	)		15,243			-
Amortization of debt issuance costs		1,691,609			48,160			-
Interest receivable from other receivable		-			(445,693	)		-
Amortization of biological assets		217,207			218,317			-
Deferred income tax provision		164,600			(176,633	)		-
Change in fair value of derivative liability		(873,767	)		(419,649	)		-
Share-based compensation		-			2,007,328			1,260,674
Changes in operating assets and liabilities:
Accounts receivable		(9,045,179	)		6,483,703			(13,040,158	)
Advances to suppliers		(71,298,597	)		12,767,241			(40,989,649	)
Notes receivables		3,558,349			(3,818,479	)		-
Inventory, net		(3,272,753	)		515,599			(1,212,031	)
Other current assets		(222,440	)		(49,765	)		(258,117	)
Accounts payable		946,285			156,598			26,404
Operating lease liabilities		(63,467	)		(38,478	)		(75,879	)
Other current liabilities		(232,463	)		795,434			(559,915	)
Net cash provided by (used in) operating activities from continuing operations		(75,754,162	)		20,635,488			(53,231,108	)
Net cash provided by operating activities from discontinued operations		-			-			324,095
Net cash (used in) provided by operating activities		(75,754,162	)		20,635,488			(52,907,013	)
Cash flows from investing activities
Purchase of property and equipment		(314	)		(2,946	)		(4,686	)
Purchase of intangible assets		-			-			(1,363	)
Additions to biological assets		-			-			-
Short-term deposits		35,444,402			(35,296,981	)		(2,772,430	)
Advances to a third party		-			-			(107,817	)
Acquisition of subsidiaries		-			(1,521,422	)		-
Repayment of advances to a third party		-			106,500			-
Proceeds from disposal of subsidiary, net of cash		12,998			2,662,459			-
Purchase of long-term investments		(7,088,880	)		(152,142	)		-
Purchase of short-term investments		-			(152,142	)		-
Other receivables		(7,504,211	)		(7,607,108	)		(9,241,432	)
Advances to related parties		(7,096	)		(27,297	)		-
Repayment of advances to related party		30,872			-			-
Net cash used in investing activities from continuing operations		35,896,193			(41,991,079	)		(12,127,728	)
Net cash used in investing activities from discontinued operations		-			-			(130,492	)
Net cash provided by (used in) investing activities		35,896,193			(41,991,079	)		(12,258,220	)
Cash flows from financing activities
Gross proceeds from bank acceptance notes payable		-			13,404			-
Repayment of bank acceptance notes payable		(12,491	)		-			(3,388,525	)
Net proceeds from share issuance		7,930,000			6,000,000			126,029,588
Net proceeds from convertible note issuance		-			6,000,000			-
Borrowings from bank loans		4,779,323			1,959,591			2,310,358
Repayments of bank loans		(1,688,040	)		(2,283,527	)		(628,931	)
Repayment of advances from related parties		-			(54,600	)		(2,147,199	)
Proceeds from advances from related parties		9,150			-			489,997
Net cash provided by financing activities from continuing operations		11,017,942			11,634,868			122,665,288
Net cash (used by) provided by financing activities from discontinued operations		-			-			(252,488	)
Net cash provided by financing activities		11,017,942			11,634,868			122,412,800
Effect of exchange rate changes on cash		462,261			(8,363,680	)		(150,204	)
Net (decrease) increase in cash		(28,377,766	)		(18,084,403	)		57,097,363
Cash, beginning of year		41,167,501			59,251,904			2,165,151
Cash, end of year	$	12,789,735		$	41,167,501		$	59,262,514
Less: cash from discontinued operations		-			-			(10,610	)
Cash, end of year	$	12,789,735		$	41,167,501		$	59,251,904
		-						-
Reconciliation of cash and restricted cash, beginning of year
Cash	$	41,167,501		$	59,251,904		$	481,906
Restricted cash		-			-			1,617,000
Cash from continuing operations		41,167,501			59,251,904			2,098,906
Cash from discontinued operations		-			-			66,245
Cash and restricted cash, beginning of year	$	41,167,501		$	59,251,904		$	2,165,151
Reconciliation of cash and restricted cash, end of year
Cash	$	12,789,735		$	41,167,501		$	59,251,904
Cash from continuing operations		12,789,735			41,167,501			59,251,904
Cash from discontinued operations		-			-			10,610
Cash and restricted cash, end of year	$	12,789,735		$	41,167,501		$	59,262,514
Supplemental disclosure information:
Income taxes paid	$	67,572		$	5,443		$	22,100
Interest paid	$	165,179		$	82,970		$	116,700
Non-cash financing activities
Right of use assets obtained in exchange for operating lease obligations	$	2,888			-		$	593,457
Conversion of notes to ordinary shares	$	1,100,000			-			-
Accrued interest for convertible notes	$	1,691,609		$	5,753			-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and nature of business

Farmmi, Inc. (“FAMI” or the “Company”) is a holding company incorporated under the laws of the Cayman Islands on July 28, 2015. FAMI owns 100% equity interest of Farmmi International Limited (“Farmmi International”), a Hong Kong company, which in turn owns 100% equity interest of Farmmi (Hangzhou) Enterprise Management Co., Ltd. (“Farmmi Enterprise”), Lishui Farmmi Technology Co., Ltd. (“Farmmi Technology”), Zhejiang Farmmi (Hangzhou) Ecology Agriculture Development Co., Ltd. (“Farmmi Ecology”) and Farmmi (Hangzhou) Health Development Co., Ltd (“Farmmi Heath Development”), four wholly foreign-owned entities (each, a “WFOE”) formed by Farmmi International under the laws of the People’s Republic of China (“PRC” or “China”).

Farmmi Health Development owns 100% equity interest in Zhejiang Farmmi Medical Health Technology Co., Ltd (“Farmmi Medical Health”) which was established under the laws of the PRC on September 18, 2021.

Farmmi Enterprise, Farmmi Technology and Farmmi Ecology own 30%, 40% and 30% of equity interests in Zhejiang Farmmi Holdings Group Co., Ltd. (“Farmmi Holdings”), respectively, which was established under the laws of the PRC on September 18, 2021.

On December 23, 2021, a board resolution of Zhejiang Farmmi Agricultural Technology Group Co., Ltd. (“Farmmi Agricultural”) (formerly known as Hangzhou Suyuan Agriculture Technology Co., Ltd., “Suyuan Agriculture”), a company incorporated in the PRC, was passed to reorganize certain companies mentioned below with nil consideration.

Under the above-mentioned reorganization, (i) on December 30, 2021, Farmmi Holdings started to own 100% interest in Farmmi Agricultural, which was previously owned by Farmmi Enterprise (31.7%) and Farmmi Technology (68.3%); (ii) Farmmi Agricultural owns 100% of the equity interest of Zhejiang Farmmi Agricultural Supply Chain Co., Ltd (“Farmmi Supply Chain”), a company established under the laws of the PRC, on February 10, 2022 and was previously 100% owned by Farmmi Ecology.

On September 27, 2021, the Company, through its subsidiary, Zhejiang Farmmi Agricultural Supply Chain Co., Ltd., acquired Jiangxi Xiangbo Agriculture and Forestry Development Co. Ltd (“Jiangxi Xiangbo”), established under the laws of the PRC, from Ganzhou Tengguang Agriculture and Forestry Development Co., Ltd. for a total price of RMB70 million ($11 million). After the consummation of the acquisition, Farmmi Supply Chain owns 100% equity interest in Jiangxi Xiangbo, which in turn owns 100% interest in Yudu County Yada Forestry Co., Ltd, established under the laws of the PRC (“Yudu Yada”). As a result, Jiangxi Xiangbo and Yudu Yada became the subsidiaries of the Company.

On September 27, 2021, the Company, through its subsidiary, Zhejiang Farmmi Agricultural Supply Chain Co., Ltd., acquired Guoning Zhonghao (Ningbo) Trading Co., Ltd. (“Guoning Zhonghao”), established under the laws of the PRC, from Ningbo Guoning Zhonghao Technology Co., Ltd. and Jianxin Huang, an individual, for a total consideration of RMB5,000 ($788). After the consummation of the acquisition, Farmmi Supply Chain owns 100% equity interest in Guoning Zhonghao.

Farmmi Agricultural owns 100% of equity interests in Zhejiang FLS Mushroom Co., Ltd. (“FLS Mushroom”), Zhejiang Farmmi Biotechnology Co., Ltd. (“Farmmi Biotech”) and Zhejiang Farmmi Food Co., Ltd. (“Farmmi Food”) and 77.2% equity interest in Lishui Farmmi E-Commerce Co., Ltd. (“Farmmi E-Commerce”). FLS Mushroom, Farmmi Biotech, Farmmi Food, and Farmmi E-Commerce”) were all established under the laws of the PRC. The remaining 22.8% equity interest in Farmmi E-Commerce is owned by Hangzhou Nongyuan Network Technology Co., Ltd. (“Nongyuan Network”). Nongyuan Network was incorporated on December 8, 2015 under the laws of the PRC and focuses on the development of network marketing and provides a network platform for sales of agriculture products.

F-7

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and nature of business (Continued)

On September 18, 2016, Farmmi Agricultural entered into a series of contractual agreements with Zhengyu Wang, the then sole-owner of Nongyuan Network. These agreements include an Exclusive Management Consulting and Technology Agreement, an Equity Pledge Agreement, an Exclusive Call Option Agreement, a Proxy Agreement and a Power of Attorney (collectively, the “Original VIE Agreements”). The Original VIE Agreements empowered Farmmi Agricultural to exercise management control over the activities that most significantly impact the operation results of Nongyuan Network, obligated Farmmi Agricultural to absorb a majority of the risk of loss from Nongyuan Network’s activities, and entitled Farmmi Agricultural to receive a majority of their residual returns. In essence, Farmmi Agricultural and the Company had gained effective control over Nongyuan Network.

On December 4, 2019, Zhengyu Wang transferred 100% of his shares of Nongyuan Network to his daughter Xinyang Wang. As a result, Xinyang Wang started to hold 100% of the ownership interest of Nongyuan Network. On December 10, 2019, Xinyang Wang, as the new sole owner of Nongyuan Network, signed a series of VIE agreements (the “Xinyang Wang VIE Agreements”) with Nongyuan Network and Farmmi Agricultural. On May 15, 2020, the following agreements were signed with the effective date of December 10, 2019:

(1)	Zhengyu Wang, Nongyuan Network and Farmmi Agricultural signed a termination agreement to confirm that the Original VIE Agreements had been terminated because Zhengyu Wang was no longer the shareholder of Nongyuan Network;
(2)	Zhengyu Wang, Dehong Zhang (the legal representative of Nongyuan Network), Xinyang Wang, Nongyuan Network and Farmmi Agricultural signed a joint statement to confirm that the board of directors of the Company had the ultimate authority over the matters of the VIE (defined below), Nongyuan Network.

FAMI believes that Xinyang Wang VIE Agreements enable Farmmi Agricultural and FAMI to keep effective control over Nongyuan Network, and as a result Nongyuan Network should be considered as a Variable Interest Entity (“VIE”) under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 Consolidation. Accordingly, the accounts of Nongyuan Network are consolidated with those of Farmmi Agricultural.

On September 7, 2021, Zhejiang Yitang Medical Service Co., Ltd. (“Yitang Mediservice”) was established under the laws of the PRC. Nongyuan Network and Farmmi Ecology own 95% and 5% of the equity interests in Yitang Mediservice, respectively. In April 20, 2023, Yitang Mediservice was reorganized and Farmmi Medical Health and Farmmi Ecology own 95% and 5% of the equity interests in Yitang Mediservice.

On September 17, 2021, Zhejiang Yiting Medical Technology Co., Ltd. (“Yiting Meditech”) was established under the laws of the PRC. Yitang Mediservice owns 100% interest in Yiting Meditech.

On January 10, 2022, Lishui Yifeng Medical Health Technology Co., Ltd (“Yifeng Medihealth”) was established under the laws of the PRC. Yitang Mediservice owns 100% of the equity interest in Yifeng Medihealth. Yifeng Medihealth was deregistered in April 2023.

On January 10, 2022, Lishui Yilong Enterprise Management Co., Ltd (“Yilong Enterprise”) was established under the laws of the PRC. Yitang Mediservice owns 100% of the equity interest in Yilong Enterprise. Yilong Enterprise was deregistered in April 2023.

On January 19, 2022, Lishui Yifeng Yilong Medical Technology Development Partnership (Limited Partnership) (“YF YL MediTech”) was established under the laws of the PRC. Yifeng Medihealth owns 20% and Yilong Enterprise owns 80% interest in YF YL MediTech. YF YL MediTech was deregistered in April 2023.

F-8

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and nature of business (Continued)

On January 19, 2022, Lishui Yitang Shangke Medical and Health Technology Partnership (Limited Partnership) (“YT SK Medihealth”) was established under the laws of the PRC. Yifeng Medihealth owns 20% and Yilong Enterprise owns 80% interest in YT SK Medihealth. Yifeng Medihealth was deregistered in April 2023.

On May 27, 2022, Zhejiang Farmmi Ecological Agriculture Technology Co., Ltd (“Farmmi Eco Agri”) was established under the laws of the PRC. Farmmi International owns 100% of the equity interest in Farmmi Eco Agri.

On July 13, 2022, Farmmi Canada Inc. (Farmmi Canada) was established under the laws of the Canada. Farmmi Inc. owns 100% of the equity interest in Farmmi Canada.

On September 27, 2021, an agreement was signed to divest 100% interest in Forest Food to a third party for total cash consideration of RMB18.2 million (approximately $2.8 million) on October 1, 2021. Certain prior periods of the Company have been reclassified to conform to current period presentation as discontinued operations. Such reclassifications had no effect on net income (loss) or cash flows as previously reported.

On September 30, 2022, an agreement was signed to divest 100% interest in FLS Mushroom to a third party for total cash consideration of RMB24.1 million (approximately $3.4 million) on October 1, 2022.

On November 14, 2022, Ningbo Farmmi Baitong Trade Co., Ltd (“Ningbo Farmmi Trade”) was established under the laws of the PRC. Farmmi Agricultural owns 100% equity of Ningbo Farmmi Trade.

On August 24, 2023, Farmmi USA Inc (“Farmmi USA”) was established under the laws of the United States of America. FAMI owns 100% equity of Farmmi USA.

As of September 30, 2023, details of the subsidiaries of FAMI are set out below:

Name of Entity	Date of Incorporation	Place of Incorporation	% of Ownership	Principal activities
FAMI	July 28, 2015	Cayman	Parent	Holding company
Farmmi International	August 20, 2015	Hong Kong	100%	Holding company
Farmmi Enterprise	May 23, 2016	Zhejiang, China	100%	Holding company
Farmmi Technology	June 6, 2016	Zhejiang, China	100%	Holding company
Farmmi Agricultural	December 8, 2015	Zhejiang, China	100%	Holding company
FLS Mushroom	March 25, 2011	Zhejiang, China	100%	Light processing and distribution of dried mushrooms
Farmmi Food	December 26, 2017	Zhejiang, China	100%	Dehydrating, further processing and distribution of edible fungus
Farmmi E-Commerce	March 22, 2019	Zhejiang, China	100%	Technology development, technical services and technical consultation related to agricultural products
Farmmi Biotech	April 7, 2021	Zhejiang, China	100%	Research and development of mushroom powder and mushroom extract
Farmmi Ecology	April 25, 2021	Zhejiang, China	100%	Holding company
Farmmi Supply Chain	May 11, 2021	Zhejiang, China	100%	Agricultural products supply chain
Farmmi Health Development	September 17, 2021	Zhejiang, China	100%	Health development
Farmmi Medical Health	September 18, 2021	Zhejiang, China	100%	Medical health
Farmmi Holdings	September 18, 2021	Zhejiang, China	100%	Holding company
Jiangxi Xiangbo	June 18, 2021	Jiangxi, China	100%	Holding company
Yudu Yada	November 10, 2010	Jiangxi, China	100%	Forestry development
Guoning Zhonghao	June 15, 2021	Zhejiang, China	100%	Agriculture exporting
Farmmi Eco Agri	May 27, 2022	Zhejiang, China	100%	Agriculture products
Farmmi Canada	July 13, 2022	Canada	100%	Agriculture products
Ningbo Farmmi Trade	November 14, 2022	Zhejiang, China	100%	Agriculture products
Yitang Mediservice	September 7, 2021	Zhejiang, China	100%	Medical services
Yiting Meditech	September 17, 2021	Zhejiang, China	100%	Medical technology
Farmmi USA	August 24, 2023	California, USA	100%	Trading
Nongyuan Network	July 7, 2016	Zhejiang, China	0 (VIE)	Trading

FAMI through its subsidiaries, VIE and VIE’s subsidiaries (herein collectively referred to as the “Company”) are principally engaged in processing, distributing and trading dried Shiitake mushrooms, Mu Er (also known as auricularia auricula-judae or jelly fungi), corn, cotton, forestry and other products.

Note 2 - Summary of significant accounting policies

Basis of presentation and principles of consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

F-9

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Basis of presentation and principles of consolidation (Continued)

The consolidated financial statements of the Company include the financial statements of the Company, its subsidiaries, the VIEs and the subsidiaries of the VIEs. All inter-company transactions and balances between the Company, its subsidiaries, the VIEs and the subsidiaries of the VIEs have been eliminated upon consolidation. Results of subsidiaries, businesses acquired from third parties and the VIEs are consolidated from the date on which control is transferred to the Company.

Consolidation of variable interest entities

In accordance with accounting standards regarding consolidation of variable interest entities (“VIEs”), VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The Company determined that Nongyuan Network is a VIE because the Company is the primary beneficiary of risks and rewards of this VIE.

The condensed consolidating table below disaggregated the Consolidated Balance Sheets of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated as of September 30, 2023 and 2022.

	As of September 30, 2023
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	144,664,527	$	131,992,092	$	7,086,579	$	151,681,406		-
Current assets excluding intercompany receivables		138,871,675		353,985		18,841,671		103,844	$	158,171,175
Current assets	$	283,536,202	$	132,346,077	$	25,928,250	$	151,785,250	$	158,171,175
Investment in subsidiaries		-	$	37,712,692		-		-		-
Non-current assets excluding investment in subsidiaries	$	16,627,615		-	$	1,296		-	$	16,628,911
Non-current assets	$	16,627,615	$	37,712,692	$	1,296		-	$	16,628,911
Total assets	$	300,163,817	$	170,058,769	$	25,929,546	$	151,785,250	$	174,800,086
Intercompany payables	$	290,760,077	$	124,634,218	$	19,812,080	$	218,229		-
Current liabilities excluding intercompany payables		634,111		756,017		3,530,735		5,792,119	$	10,712,982
Current liabilities	$	291,394,188	$	125,390,235	$	23,342,815	$	6,010,348	$	10,712,982
Non-current liabilities	$	533,315	$	106,737		1,471,126		-	$	2,111,178
Total liabilities	$	291,927,503	$	125,496,972	$	24,813,941	$	6,010,348	$	12,824,160
Total shareholders' equity (net assets)	$	8,236,314	$	44,561,797	$	1,115,605	$	145,774,902	$	161,975,926

	As of September 30, 2022
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	163,676,919	$	114,994,912		-	$	140,445,311		-
Current assets excluding intercompany receivables	$	91,926,232	$	33,986	$	57,133,125	$	4,161,037	$	153,254,380
Current assets	$	255,603,151	$	115,028,898	$	57,133,125	$	144,606,348	$	153,254,380
Investment in subsidiaries		-	$	40,424,517		-		-		-
Non-current assets excluding investment in subsidiaries	$	10,500,217	$	8,484	$	19,772		-	$	10,528,473
Non-current assets	$	10,500,217	$	40,433,001	$	19,772		-	$	10,528,473
Total assets	$	266,103,368	$	155,461,899	$	57,152,897	$	144,606,348	$	163,782,853
Intercompany payables	$	255,440,223	$	109,255,668	$	54,420,549	$	702		-
Current liabilities excluding intercompany payables	$	590,393	$	226,814	$	1,789,357	$	5,682,757	$	8,289,321
Current liabilities	$	256,030,616	$	109,482,482	$	56,209,906	$	5,683,459	$	8,289,321
Non-current liabilities	$	657,734	$	151,707		-		-	$	809,441
Total liabilities	$	256,688,350	$	109,634,189	$	56,209,906	$	5,683,459	$	9,098,762
Total shareholders' equity (net assets)	$	9,415,018	$	45,827,710	$	942,991	$	138,922,889	$	154,684,091

F-10

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Consolidation of variable interest entities (Continued)

The condensed consolidating table below disaggregated the Consolidated Statements of Operations and Comprehensive Income (Loss) of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the financial years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	74,224,063		$	16,034,543		$	20,106,281			-		$	110,364,887
Cost of revenues		(70,021,350	)		(16,023,779	)		(20,033,003	)		-			(106,078,132	)
Gross profit		4,202,713			10,764			73,278			-			4,286,755
Operating expenses		(1,028,294	)		(71,676	)		(231,462	)		(913,948	)		(2,245,380	)
Income (loss) from operations		3,174,419			(60,912	)		(158,184	)		(913,948	)		2,041,375
Other income (expenses)		1,514,162			(68,416	)		634,225			(1,264,040	)		815,931
Income (loss) before income taxes		4,688,581			(129,328	)		476,041			(2,177,988	)		2,857,306
Provision for income taxes		(270,874	)		(8,556	)		(34,063	)		-			(313,493	)
Net income (loss)	$	4,417,707		($137,884)			$	441,978		($2,177,988)			$	2,543,813

	For the year ended September 30, 2022
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	64,795,082		$	9,111,073		$	25,307,224			-		$	99,213,379
Cost of revenues		(60,272,018	)		(9,053,547	)		(24,449,728	)		-			(93,775,293	)
Gross profit		4,523,064			57,526			857,496			-			5,438,086
Operating expenses		(782,009	)		(50,344	)		(701,516	)		(2,961,849	)		(4,495,718	)
Income (loss) from operations		3,741,055			7,182			155,980			(2,961,849	)		942,368
Other income (expenses)		560,497			20,510			213,771			368,466			1,163,244
Income (loss) before income taxes		4,301,552			27,692			369,751			(2,593,383	)		2,105,612
Provision for income taxes		114,801			9,182			(5,616	)		-			118,367
Net income (loss)	$	4,416,353		$	36,874		$	364,135			(2,593,383	)	$	2,223,979

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary			VIE and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Revenues from continuing operations	$	33,068,045		$	762,771		$	5,459,135		$	-		$	39,289,951
Cost of revenues from continuing operations		(28,847,801	)		(742,933	)		(4,589,936	)		-			(34,180,670	)
Gross profit from continuing operations		4,220,244			19,838			869,199			-			5,109,281
Operating expenses		588,892			(8,940	)		(804,851	)		(2,031,506	)		(2,256,405	)
Income (loss) from operations		4,809,136			10,898			64,348			(2,031,506	)		2,852,876
Other expenses		(391,819	)		(19,990	)		(2,033	)		(5,673	)		(419,515	)
Income (loss) before income taxes		4,417,317			(9,092	)		62,315			(2,037,179	)		2,433,361
Provision for income taxes		(8,085	)		-			(17,486	)		-			(25,571	)
Net income (loss) from continuing operations	$	4,409,232		$	(9,092	)	$	44,829		$	(2,037,179	)	$	2,407,790

F-11

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Consolidation of variable interest entities (Continued)

The condensed consolidating table below disaggregated the Consolidated Statements of Cash Flows of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the financial years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities	($17,601,436)			($579,125)			($45,586,506)			($11,987,095)			($75,754,162)
Net cash provided by (used in) investing activities		(7,121,332	)		-			43,017,525			-			35,896,193
Net cash provided by (used in) financing activities		32,778			539,287			2,515,877			7,930,000			11,017,942
Effect of exchange rate changes on cash		462,420			5,227			(5,386	)		-			462,261
Net (decrease) increase in cash and restricted cash		(24,227,570	)		(34,611	)		(58,490	)		(4,057,095	)		(28,377,766	)
Cash, beginning of year		183,030			37,393			61,196			4,057,179			41,167,501
Cash, end of year	($24,044,540)			$	2,782		$	2,706		$	84		$	12,789,735

	For the year ended September 30, 2022
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities from continuing operations	$	(14,188,275	)	$	(3,189,440	)	$	46,404,339		$	(8,391,136	)	$	20,635,488
Net cash provided by (used in) investing activities from continuing operations		1,140,848			2,738,559			(45,870,486	)		-			(41,991,079	)
Net cash provided by (used in) financing activities from continuing operations		649,782			373,382			(899,449	)		11,511,153			11,634,868
Effect of exchange rate changes on cash and restricted cash		(8,345,494	)		(5,078	)		(13,108	)		-			(8,363,680	)
Net (decrease) increase in cash and restricted cash		(20,743,139	)		(82,577	)		(378,704	)		3,120,017			(18,084,403	)
Cash and restricted cash from continuing operations, beginning of year		183,030			116,447			434,135			522,915			59,251,904
Cash and restricted cash from continuing operations, end of year	$	(20,560,109	)	$	33,870		$	55,431		$	4,057,179		$	41,167,501

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary of			VIE and its						Consolidated
	consolidated			the VIE			subsidiaries			FAMI			total
Net cash provided by (used in) operating activities
from continuing operations	$	67,709,967		$	3,246,067		$	(338,559	)	$	(123,848,583	)	$	(53,231,108	)
Net cash used in investing activities from continuing
operations		(9,353,935	)		(2,772,430	)		(1,363	)		-			(12,127,728	)
Net cash provided by (used in) financing activities
from continuing operations		144,197			(616,095	)		(1,232,191	)		124,369,377			122,665,288
Effect of exchange rate changes on cash and
restricted cash		(506,653	)		258,485			94,714			-			(153,454	)
Net increase (decrease) in cash and restricted cash		57,993,576			116,027			(1,477,399	)		520,794			57,152,998
Cash and restricted cash from continuing operations,
beginning of year		183,030			420			1,913,335			2,121			2,098,906
Cash and restricted cash from continuing operations,	$	58,176,606		$	116,447		$	435,936		$	522,915		$	59,251,904
end of year

F-12

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Consolidation of variable interest entities (Continued)

Cash is transferred within the Company through the banking system in PRC. Under the VIE agreements, the Company intends to distribute 95% of VIE’s earnings after eliminating VIE’s accumulated losses and making appropriation of VIE’s after-tax net income into the statutory surplus reserve based on at least 10% of the after-tax net income determined in accordance with generally accepted accounting principles of the PRC. When there are retained earnings available for distribution, the distribution of VIE’s earnings will be through payment of service fees to Farmmi Agricultural, such service fee is subject to 6% value-added sales tax, other taxes of 12% which calculation is based on 6% value-added taxes and Farmmi Agricultural is subject to corporate income tax up to 25% for its net income. Under the VIE agreements, when there is a change of shareholder in VIE, amount owed by VIE to the Company should be first settled. The condensed consolidating table below quantified the transfer between FAMI, its subsidiaries, VIE and its subsidiaries, WFOE that is the primary beneficiary of the VIE and the investors for the years ended September 30, 2023, 2022 and 2021, respectively. These transfers were mainly for the purpose of providing working capital between FAMI, its subsidiaries, VIE and its subsidiaries and WFOE that is the primary beneficiary of the VIE.

	For the year ended September 30, 2023
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI		-		-		-	$	212,652		-
WFOE that is the primary beneficiary of the VIE		-		-	$	505,077	$	9,054,194		-
VIE and its subsidiaries		-	$	1,411,434		-	$	12,944		-
Other entities that are consolidated		-	$	1,893,667	$	71,277		-		-

	For the year ended September 30, 2022
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	1,217,137		-	$	913,005		-
WFOE that is the primary beneficiary of the VIE		-			$	14,594,586	$	19,188,742		-
VIE and its subsidiaries		-	$	6,394,084			$	15,293,176		-
Other entities that are consolidated	$	984,655	$	26,961,378	$	14,744,568				-

	For the year ended September 30, 2021
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	-	$	45,500	$	124,670,237	$	-
WFOE that is the primary beneficiary of the VIE	$	1,668,758			$	-	$	38,204,550	$	-
VIE and its subsidiaries	$	-	$	-			$	1,601,406	$	-
Other entities that are consolidated	$	319,981	$	24,075,199	$	5,624,880			$	-

F-13

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Use of estimates

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts and advances to suppliers, the valuation of inventories, the useful lives of property and equipment, the valuation of derivative liabilities of the notes, the recoverability of long-lived assets, valuation of warrants and the valuation of deferred tax assets.

Cash

Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. All cash balances are in bank accounts in PRC. Cash maintained in banks within the People’s Republic of China of less than RMB0.5 million (equivalent to $68,531) per bank are covered by "deposit insurance regulation" promulgated by the State Council of the People’s Republic of China.

F-14

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Short-term deposit

Short-term deposit relates to fixed terms cash deposits with financial institutions with original maturities of more than three months and less than a year. As of September 30, 2023 and 2022, the Company had short-term deposit of nil and $35,144,444 earning interest at 2.05% per annum with one year maturity on October 15, 2022.

Accounts receivable, net

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when 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, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2023 and 2022, allowance for doubtful accounts was $14,719 and $7,249, respectively.

Advances to suppliers, net

Advances to suppliers represent prepayments made to ensure continuous high-quality supplies and favorable purchase prices for premium quality. These advances are directly related to the purchases of raw materials used to fulfill sales orders. The Company is required from time to time to make cash advances when placing its purchase orders. These advances are settled upon suppliers delivering raw materials to the Company when the transfer of ownership occurs. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. As of September 30, 2023 and 2022, allowance for doubtful accounts was $3,176 and $3,258, respectively.

Inventory, net

The Company values its inventories at the lower of cost, determined on a weighted average basis, or net realizable value. The Company reviews its inventories periodically to determine if any reserves are necessary for potential obsolescence or if the carrying value exceeds net realizable value. The Company recorded inventory reserve of $8,809 and $49,652 as of September 30, 2023 and 2022, respectively.

Biological assets 

Biological assets mainly consist of bamboo forests managed for future bamboo harvest and sales, of which the Company owned 82 forest right certificates with expiry dates ranging from December 30, 2026 to December 9, 2070 and with an area of 9.6 km². The forest types are mixed mature forests which can be harvested for commercial purposes. The forests mainly consist of bamboo, fir trees and other trees. Biological assets are initially measured at cost and subsequently depreciated on a straight-line basis over its estimated useful lives.

Depreciation expense was $0.2 million and $0.2 million for the years ended September 30, 2023 and 2022, respectively.

Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment are as follows:

Machinery and equipment	5 - 10 years
Transportation equipment	4 years
Office equipment	3 - 5 years

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized.

F-15

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Intangible assets, net

Intangible assets consist primarily of purchased software. Intangible assets are stated at cost less accumulated amortization, which are amortized using the straight-line method with the estimated useful lives of three years.

Amortization expenses were $6,805, $31,984 and $46,085 for the years ended September 30, 2023, 2022 and 2021, respectively.

Impairment of long-lived assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for fiscal years ended September 30, 2023, 2022 and 2021.

Revenue recognition

The Company follows ASU 2014-09 Revenue from Contracts with Customers (“ASC Topic 606”). In accordance with ASC 606, to determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation .

The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. All of the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as a price per ton.

The Company’s contract liabilities primarily include advance from customers. As of September 30, 2023 and 2022, the contract liabilities are $0.4 million and $0.6 million, respectively, and included in other current liabilities on the consolidated balance sheets. For fiscal years ended September 30, 2023, 2022 and 2021, there was no revenue recognized from performance obligations related to prior periods.

Refer to Note 14 - Segment reporting for details of revenue segregation.

Cost of revenues

Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.

F-16

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Earnings (loss) per share

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings per Share (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The component of basic and diluted EPS were as follows:

Year Ended September 30,	2023		2022		2021
Net income available for ordinary shareholders (A)	$	2,543,813	$	2,223,979	$	2,356,437
- continuing operations	$	2,543,813	$	2,223,979	$	2,407,790
- discontinued operations		-		-	($51,353)
Weighted average outstanding ordinary shares (B)
- basic		3,628,923		2,905,984		514,213
- diluted		8,452,875		2,905,984		522,276
Earnings (loss) per ordinary share - basic (A/B)	$	0.70	$	0.77	$	4.58
- Continuing operations	$	0.70	$	0.77	$	4.68
- Discontinued operations	$	0.00	$	0.00	($0.10)
Earnings (loss) per ordinary share - diluted (A/B)	$	0.30	$	0.77	$	4.51
- Continuing operations	$	0.30	$	0.77	$	4.61
- Discontinued operations	$	0.00	$	0.00	($0.10)

____________ 

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. 

Fair value of financial instruments

The FASB ASC Topic 820, Fair Value Measurements, defines fair value, establishes a three-level valuation hierarchy for fair value measurements and enhances disclosure requirements.

The three levels are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.

Level 3 - Inputs to the valuation methodology are unobservable.

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, restricted cash, accounts receivable, advances to suppliers, other current assets, accounts payable, due to related parties, operating lease liabilities -current, other current liabilities, short-term bank loans and bank acceptance notes payable approximate their recorded values due to their short-term maturities. The fair value of longer term long-term bank loan and operating lease liabilities approximate their recorded values as their stated interest rates approximate the rates currently available.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and 2022 and indicates the fair value hierarchy of the valuation technique that the Company utilized to determine such fair value.

	Fair value measured as of September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	-	$	-	$	-	$	-
Biological assets	$	-	$	-	$	9,187,640	$	9,187,640
Liabilities:
Derivative liability	$	-	$	-	$	-	$	-

	Fair value measured as of September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	5,820	$	-	$	-	$	5,820
Biological assets	$	-	$	-	$	9,638,722	$	9,638,722
Liabilities:
Derivative liability	$	-	$	-	$	3,450,000	$	3,450,000

F-17

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Debt issuance costs and debt discounts

The Company may record debt issuance costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.

Fair value of the embedded derivatives in the convertible promissory notes

The convertible promissory notes consisted of a liability component (“financial liability”) and an embedded derivative conversion feature (“derivative liability”). The net proceeds of these convertible promissory notes were first allocated to the fair value of the derivative liability. Subsequent changes in fair value of the derivative liability were recorded in other income.

The Company measures the fair value of the embedded derivative by reference to the fair value on the issuance date and maturity date of the convertible promissory notes and revalues them at each reporting date. In determining the fair value of the embedded derivatives, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate; market price at the reporting date; risk-free interest rate; and the remaining life of the embedded derivatives. The inputs used in the Black-Scholes model are taken from observable markets. Changes to assumptions used can affect the amounts recognized in the consolidated financial statements.

Concentrations of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable and advances to suppliers. As of September 30, 2023 and 2022, $12.8 million and $76.3 million of the Company’s cash is maintained in banks within the People’s Republic of China of which deposits of RMB0.5 million (equivalent to $68,531) per bank are covered by “deposit insurance regulation” promulgated by the State Council of the People’s Republic of China. The Company has not experienced any losses in such accounts. A significant portion of the Company’s sales are credit sales primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas. The Company also makes cash advances to certain suppliers to ensure the stable supply of key raw materials. The Company performs ongoing credit evaluations of its customers and key suppliers to help further reduce credit risk.

Comprehensive income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustment from the Company not using the U.S. dollar as its functional currency.

Leases

The Company adopted ASU 2016-02, Leases on October 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets for office space operating leases.

F-18

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Foreign currency translation

The Company’s financial information is presented in U.S. dollars (“USD”). The functional currency of the Company is the Chinese Yuan Renminbi (“RMB”), the currency of PRC. Any transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of operations as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. The financial information is first prepared in RMB and then translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

The exchange rates in effect as of September 30, 2023 and 2022 were RMB1 for $0.1371 and $0.1406, respectively. The average exchange rates for the years ended September 30, 2023, 2022 and 2021 were RMB1 for $0.1418, $0.1521 and $0.1540, respectively.

Shipping and handling expenses

All shipping and handling costs are expensed as incurred and included in selling expenses. Total shipping and handling expenses were $60,204, $244,490 and $235,956 for the years ended September 30, 2023, 2022 and 2021, respectively.

Value added tax

The Company is generally subject to the value added tax (“VAT”) for selling merchandise. Before May 1, 2018, the applicable VAT rate was 13% or 17% (depending on the type of goods involved) for products sold in PRC. After May 1, 2018, the Company is subject to a tax rate of 12% or 16%, and after April 1, 2019, the tax rate was further reduced to 9% or 13% based on the new Chinese tax law. Pursuant to approval issued by the State Administration of Taxation, Farmmi Eco Agri’s and Nongyuan Network’s major operation can be classified as agriculture products and its revenue is exempt from VAT, Nongyuan Network was exempted from VAT up to January 2023. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax authorities have the right to assess a penalty based on the amount of taxes which is determined to be late or deficient, with any penalty being expensed in the period when a determination is made by the tax authorities that a penalty is due. During the reporting periods, the Company had no dispute with PRC tax authorities and there was no tax penalty incurred.

Income taxes

The Company is subject to the income tax laws of the PRC, a subsidiary in Canada is subject to income tax laws of Canada and a subsidiary in the United States of America is subject to income tax laws of the United States of America. No taxable income was generated outside the PRC for the year ended September 30, 2021. The Company accounts for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or not be deductible in the future.

F-19

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Income taxes (Continued)

ASC 740-10-25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There were no material uncertain tax positions as of September 30, 2023 and 2022. As of September 30, 2023, the tax years ended December 31, 2015 through December 31, 2022 for the Company’s subsidiaries remain open for statutory examination by PRC and Canada tax authorities.

Statement of Cash Flows

In accordance with ASC 230, Statement of Cash Flows, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

Risks and uncertainties

The operations of the Company are primarily located in PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in PRC, in addition to the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political and social conditions in PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company’s sales, purchases and expense transactions are denominated in RMB, and a substantial part of the Company’s assets and liabilities are also denominated in RMB. RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order to effect the remittance.

The Company’s operating entities in PRC do not carry any business interruption insurance, product liability insurance or any other insurance policy except for a limited property insurance policy. As a result, the Company may incur uninsured losses, increasing the possibility that investors would lose their entire investment in the Company.

The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic-the first pandemic caused by a coronavirus. The outbreak has reached more than 160 countries, resulting in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. The Chinese government has ordered quarantines, travel restrictions, and the temporary closure of stores and facilities. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.

Because of the shelter-in-place orders and travel restrictions mandated by the Chinese government, the production and sales activities of the Company temporarily suspended during the end of January and February 2020, which adversely impacted the Company’s production and sales during that period. Although the production and sales have resumed at the end of March 2020, if COVID-19 further impacts its production and sales, the Company’s financial condition, results of operations, and cash flows could continue to be adversely affected.

F-20

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (Continued)

Risks and uncertainties (Continued)

Consequently, the COVID-19 outbreak has adversely affected the Company’s business operations and condition and operating results for 2020, including but not limited to material negative impact on its total revenue, slower collection of accounts receivable and accrued allowance for bad debt, slower utilization of advances to suppliers and accrued allowance, and inventory allowance. The COVID-19 impact on the Company’s business operations and operating results for fiscal 2022 appears to be minimal and appears to be temporary. The Company will continue to monitor and modify the operating strategies.

Recent accounting pronouncements

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt this guidance effective October 1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements but does not expect this guidance will have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplify the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for smaller reporting companies, as defined by the SEC. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures.

F-21

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Accounts receivable, net

Accounts receivable from the Company consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Accounts receivable	$	24,692,164		$	16,358,493
Less: allowance for doubtful accounts		(14,719	)		(7,249	)
Accounts receivable, net	$	24,677,445		$	16,351,244

Allowance for doubtful accounts of $14,719 and $7,249 was made for certain accounts receivable as of September 30, 2023 and 2022, respectively. The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers.

Note 4 - Advances to suppliers, net

Advances to suppliers consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Advances to suppliers:
Lishui Zhelin Trading Co., Ltd	$	53,405,200		$	7,289,180
Jingning Liannong Trading Co., Ltd		20,231,750			16,761,798
Qingyuan Nongbang Mushroom Industry Co., Ltd		15,417,317			12,521,949
Zhongjin Boda (Hangzhou) Industrial Co., Ltd		10,964,912			-
Ningbo Runcai Supply Chain Management Co., Ltd		10,279,605			-
Ningbo Caixiang Trading Co., Ltd.		-			4,372,934
Others		6,048,353			7,691,001
Total	$	116,347,137		$	48,636,862
Less: allowance for doubtful accounts		(3,176	)		(3,258	)
Advances to suppliers, net	$	116,343,961		$	48,633,604

On April 1, 2016, the Company entered into two separate framework supply agreements (“Framework Agreements”) with two co-operatives, Jingning Liannong Trading Co., Ltd (“JLT”) and Qingyuan Nongbang Mushroom Industry Co., Ltd (“QNMI”). These two Framework Agreements were renewed for another three years in April 2019 upon expiration and were further renewed for another three years in June 2021. Jingning County and Qingyuan County where JLT and QNMI are located produce premium Shiitake and Mu Er.

In order to enter into the trading of agricultural products in bulk, the Company signed a framework agreement on agricultural products purchase and sales cooperation with Ningbo Caixiang Trading Co., Ltd. on May 25, 2021. Ningbo Caixiang Trading Co., Ltd. is located in Ningbo City, a port city, and is the gathering and distributing place of agriculture products in bulks in the Yangtze River Delta region, with rich resources of agricultural products. The contract with Ningbo Caixiang Trading Co., Ltd. expired in May 2022, and the two parties renewed the agricultural product supply agreement in May 2022, with a validity of 3 years. The agreement agreed that Ningbo Caixiang should provide the Company with agricultural products of no less than RMB200 million yuan (including but not limited to cotton, corn, etc.) and pay part of the payment in advance to lock up the goods.

On April 1, 2020, the Company signed a framework cooperation agreement with Lishui Zhelin Trading Co., Ltd. (“Zhelin Trade”), which is valid for 4 years. Zhelin Trade is located in the agricultural product distribution center in Liandu District - Southwest Zhejiang Agricultural Trade City, which has convenient logistics and timely agricultural product information. Therefore, the cooperation agreement stipulates that Zhelin Trade will process and deliver edible mushroom products on behalf of Zhelin Trade, and the Company is required to make advance payment to ensure the timeliness of goods supply and delivery.

On August 5, 2023, the Company signed an agricultural product framework agreement with Zhongjin Boda (Hangzhou) Industrial Co., Ltd (“Zhongjin Boda”), mainly for the purchase of agricultural products such as corn, cotton, soybeans, etc. The agreement was signed for a period of 2 years. Zhongjin Boda used to be a large supplier of the company and had sufficient capacity to supply goods.

On August 25, 2023, the Company signed an agricultural product framework agreement with Ningbo Runcai Supply Chain Management Co., Ltd (“Ningbo Runcai”), mainly for the purchase of agricultural products such as red dates and corn. The agreement was signed for a period of 2 years. Ningbo Runcai is located in Ningbo, the largest port city in Zhejiang Province, and has abundant sources of goods that can meet the company's procurement needs for supply.

The Company has signed agreements with these two suppliers mainly as a reserve supplier of bulk agricultural products.

F-22

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Advances to suppliers, net (Continued)

Due to the increase of edible fungus business and preventing untimely supply of goods arising from natural disasters, the Company signed a cooperation agreement with Suizhou Huayu Ecological Agriculture Co., Ltd. on August 1, 2022. Suizhou Huayu is located in Suizhou City, Hubei Province. Suizhou City is the main production area of edible fungi in central China. The cultivation of edible fungi in this area is mainly family farms and cooperatives. Advance payment is required to ensure supply, The timely and stable supply of goods and the quality of goods can be guaranteed by paying the suppliers in advance.

Many competitors of the Company and other large buyers go there to source their supplies. Family farms and co-operatives traditionally request advance payments to secure supplies. By making advance payments to these suppliers, the Company is also able to lock in a more favorable price for premium quality than would be available in the open market. Allowance for doubtful accounts of $3,176 and $3,258 was made for certain advances to suppliers as of September 30, 2023 and 2022.

The Framework Agreements only provide general guidelines. Actual prices are negotiated and agreed upon in individual purchase orders, and are typically set at market prices based on the quality grade and quantities determined and agreed with the suppliers. Prices may vary based on market demand and crop condition etc. The Company can generally secure the premium quality raw material supplies at prices slightly higher than the typical market prices for average quality raw materials. The quality of supplies must meet standardized specifications of both the mushroom industry and standards set by the Company.

The Company advances certain initial payments based on its estimated purchase plan from these suppliers and additional advances based on individual purchase orders placed. The Company pays advances for no other reason than to secure an adequate supply of dried mushrooms to meet its sales demands. The Company’s purchase orders require that the advances shall be refunded by suppliers if they fail to produce any dried mushrooms or fail to deliver supplies to the Company timely.

Advances to suppliers are carried at cost and evaluated for recoverability. The realizability evaluation process is similar to that of the lower of cost or net realizable value evaluation process for inventories. The Company periodically evaluates its advances for recoverability by monitoring suppliers’ ability to deliver a sufficient supply of mushrooms as well as current crop and market condition. This includes analyzing historical quantity and quality of production with monitoring of crop information provided by the Company’s field personnel related to weather or disaster or any other reason. If for any reason the Company believes that it will not receive supplies of the contracted volumes, the Company will assess its advances for any likelihood of recoverability and adjust advances on its financial statements at the lower of cost or estimated recoverable amounts. The advances are made primarily to these suppliers, which are co-operatives formed by many family farms, with which the Company has had long-term relationships over the years. If any of these family farms fail to deliver supplies, the Company would expect to receive a refund of the advances through these suppliers. The Company accrues for any allowance for possible loss on advances when there is doubt as to the collectability of the refund.

Note 5 - Inventories, net

Inventories, net, from the Company’s continuing operations consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Raw materials	$	520,216		$	620,252
Packaging materials		69,420			63,703
Finished goods		3,321,021			81,975
Inventory		3,910,657			765,930
Less: allowance for inventory reserve		(8,809	)		(49,652	)
Inventory, net	$	3,901,848		$	716,278

Allowance for inventory reserve were $8,809 and $49,652 as of September 30, 2023 and 2022, respectively.

F-23

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Other receivable

On November 5, 2021, one of the Company’s subsidiaries singed an Equity Transfer Framework Agreement to invest 15.97% interest in an entity, Shanghai Jiaoda Onlly Co., Ltd., from four third parties for a total consideration of RMB509.6 million (approximately $71.6 million). On November 5, 2021, the Company paid a deposit of RMB50 million ($7.0 million) as a prepayment for the acquisition. However, the Company decided to withdraw from the investment due to the adjustment of its business strategy and a third party is willing to undertake the above-mentioned investment. Upon consummation of the investment by that third party, the above-mentioned deposit will be returned to the Company from the seller and the Company may charge that third party with an interest of 6.5% per annum on that deposit counting from the payment date. The Company received RMB50 million ($7.0 million) in full on October 12, 2022. As of September 30, 2023 and 2022, interest receivable amounted to nil and RMB2.9 million ($0.4 million), respectively.

Note 7 - Property and equipment, net

Property and equipment from the Company’s continuing operations, stated at cost less accumulated depreciation, consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Machinery and equipment	$	62,973		$	64,449
Transportation equipment		48,009			49,241
Office equipment		19,492			20,254
Subtotal		130,474			133,944
Accumulated depreciation		(105,942	)		(89,076	)
Total	$	24,532		$	44,868

Depreciation expense was $19,752, $32,303 and $22,332 for the years ended September 30, 2023, 2022 and 2021, respectively.

F-24

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Loans

Short-term and long-term loans from the Company consist of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Short-term loans
Xiaoshan Rural Commercial Bank	$	1,041,667	$	-
China Guangfa Bank Co., Ltd.		685,307		-
Bank of Beijing		411,184		-
Industrial Bank Co., Ltd		274,123		-
Total short-term loan	$	2,412,281	$	-
Long-term loans - current portion
Bank of Beijing	$	-	$	1,124,622
WeBank Co., Ltd		285,934		-
Jiangsu Suning Bank		186,472		140,578
Huaneng Guicheng Trust Co., Ltd.		100,054		80,832
China Resources Shenzhen Investment Trust Co., Ltd.		82,237		159,321
Zhejiang Mintai Commercial Bank		21,587		-
Total long-term loans - current portion	$	676,284	$	1,505,353
Long-term loans - non-current portion
Bank of Beijing		1,096,491		-
Xiaoshan Rural Commercial Bank		328,947		-
WeBank Co., Ltd		127,874		-
Huaneng Guicheng Trust Co., Ltd.		48,999		57,988
Jiangsu Suning Bank		32,261		140,578
Zhejiang Mintai Commercial Bank		17,989		-
China Resources Shenzhen Investment Trust Co., Ltd.		-		93,719
Total long-term loans - non-current portion	$	1,652,561	$	292,285
Total short-term and long-term loans	$	4,741,126	$	1,797,638

F-25

The following table summarizing the loan commencement date, loan maturity date, loan amount in RMB and its equivalent to the United States dollar, and the effective annual interest rate of each secured and unsecured short-term and long-term loan:

	Loan	Loan	Loan		Loan		Effective
	commencement	maturity	amount		amount		interest
As of September 30, 2023	date	date	in RMB		in USD		rate			Note
Secured short-term loans
Xiaoshan Rural Commercial Bank	June 19, 2023	June 18, 2024		7,600,000	$	1,041,667		3.20	%		1
China Guangfa Bank Co., Ltd.	November 1, 2022	October 31, 2023		5,000,000		685,307		3.95	%		2
Industrial Bank Co., Ltd	January 16, 2023	January 14, 2024		2,000,000		274,123		5.13	%		3
Total secured short-term loans				14,600,000	$	2,001,097
Unsecured short-term loan
Bank of Beijing	January 17, 2023	January 17, 2024		3,000,000		411,184		4.65	%
Total unsecured short-term loans				3,000,000	$	411,184
Total short-term loans				17,600,000	$	2,412,281
Secured long-term loans
Long-term loans, current portion
WeBank Co., Ltd	April 12, 2023	April 1, 2025		885,000	$	121,300		12.56	%		4
WeBank Co., Ltd	May 15, 2023	May 15, 2025		500,000		68,531		9.00	%		4
WeBank Co., Ltd	August 14, 2022	August 1, 2024		479,167		65,675		14.40	%		4
WeBank Co., Ltd	May 15, 2023	May 1, 2025		90,000		12,336		13.86	%		4
WeBank Co., Ltd	August 1, 2023	July 28, 2025		67,500		9,252		14.11	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		64,500		8,840		12.78	%		4
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		137,061		12.0	%		5
Jiangsu Suning Bank	May 15, 2023	May 1, 2025		210,000		28,783		13.86	%		6
Jiangsu Suning Bank	August 1, 2023	August 1, 2025		150,500		20,628		12.78	%		6
Huaneng Guicheng Trust Co., Ltd.	December 30, 2022	December 28, 2024		430,000		58,936		12.91	%		7
Huaneng Guicheng Trust Co., Ltd.	August 1, 2023	August 1, 2025		300,000		41,118		16.2	%		7
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		600,000		82,237		14.4	%		8
Zhejiang Mintai Commercial Bank	August 1, 2023	July 28, 2025		157,500		21,587		14.11	%		9
Total long-term loans, current portion				4,934,167	$	676,284
Long-term loans, non-current portion
Bank of Beijing	April 3, 2023	April 2, 2026		8,000,000		1,096,491		4.75	%		10
Xiaoshan Rural Commercial Bank	June 19, 2023	June 18, 2026		2,400,000		328,947		4.50	%		1
WeBank Co., Ltd	April 12, 2023	April 1, 2025		442,500		60,651		12.56	%		4
WeBank Co., Ltd	May 15, 2023	May 15, 2025		333,333		45,687		9.00	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		56,250		7,710		13.86	%		4
WeBank Co., Ltd	August 1, 2023	July 28, 2025		52,500		7,196		14.11	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		48,375		6,630		12.78	%		4
Huaneng Guicheng Trust Co., Ltd.	August 1, 2023	August 1, 2025		250,000		34,265		16.20	%		7
Huaneng Guicheng Trust Co., Ltd.	December 30, 2022	December 28, 2024		107,500		14,734		12.91	%		7
Jiangsu Suning Bank	May 15, 2023	May 1, 2025		122,500		16,790		13.86	%		6
Jiangsu Suning Bank	August 1, 2023	August 1, 2025		112,875		15,471		12.78	%		6
Zhejiang Mintai Commercial Bank	July 1, 2022	July 1, 2024		131,250		17,989		14.4	%		6
Total long-term loans, non-current portion				12,057,083	$	1,652,561
Total short-term and long-term loans				34,591,250	$	4,741,126

F-26

	Loan	Loan	Loan		Loan		Effective
	commencement	maturity	amount		amount		interest
For the year ended September 30, 2022	date	date	in RMB		in USD		rate			Note
Secured long-term bank loans
Long-term loans, current portion
Bank of Beijing	April 6, 2022	April 5, 2026		8,000,000	$	1,124,622		4.8	%		2
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		140,578		12.0	%		5
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		800,000		112,462		14.4	%		6
Huaneng Guicheng Trust Co., Ltd.	August 14, 2022	August 1, 2024		575,000		80,832		14.4	%		7
China Resources Shenzhen Investment Trust Co., Ltd.	April 30, 2021	April 28, 2023		333,334		46,859		10.8	%		6
Total long-term loans, current portion				10,708,334	$	1,505,353
Long-term loans, non-current portion
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		140,578		12.0	%		6
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		666,667		93,719		14.4	%		6
Huaneng Guicheng Trust Co., Ltd.	August 14, 2022	August 1, 2024		412,500		57,988		14.4	%		7
Total long-term loans, non-current portion				2,079,167	$	292,285
Total short-term and long-term loans				12,787,501	$	1,797,638

___________ 

(1) The loan is secured by real property owned by Mr. Dehong Zhang, a legal representative of Farmmi Food.

(2) The loan is guaranteed by Ms Xinyang Wang, the 100% shareholder of Nongyuan Network, Ms Aihong Wang, sister to Mr Zhengyu Wang, Chairman of the Company, and Mr. Dehong Zhang, a legal representative of Farmmi Food.

(3) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food for up to RMB2 million ($0.3 million).

(4) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food for up to RMB5 million ($0.7 million).

(5) The loan is guaranteed by the CEO of the Company, Ms Yefang Zhang on the outstanding principal and interest.

(6) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food on the outstanding principal and interest.

(7) These loans are guaranteed by a related party, Mr. Dehong Zhang, a legal representative of Farmmi Agricultural for up to RMB3 million ($0.4 million) of the outstanding principal and interest.

(8) These loans are guaranteed by a related party, Mr. Dehong Zhang, a legal representative of Farmmi Agricultural for up to RMB3 million ($0.4 million) of the outstanding principal and interest.

(9) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food for up to RMB5 million ($0.7 million).

(10) The loan is guaranteed by Ms Xinyang Wang, the 100% shareholder of Nongyuan Network, for up to RMB16 million ($2.2 million) of the outstanding principal and interest and is collateralized by a property owned by Ms Xinyang Wang which has a valuation of RMB19.2 million ($2.6 million).

Interest expenses amounted to $0.2 million, $0.1 million and $53,009 for the years ended September 30, 2023, 2022 and 2021, respectively.

F-27

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Convertible promissory note and derivative liability

On September 26, 2022, the Company completed a $6.42 million convertible promissory note with an institutional investor (the “Investor”). Pursuant to the Securities Purchase Agreement, dated as of September 26, 2022, the Company issued and sold to the Investor a convertible promissory note of $6.42 million due on September 25, 2023, convertible into ordinary shares, $0.025 par value per share, at a discount of $0.42 million. Upon issuance, this convertible promissory note converts at the 80% of the market price. The Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $3.87 million and a debt discount of $3.87 million upon issuance of this convertible promissory note. The debt discount was amortized over the term of the convertible promissory note and, for the years ended September 30, 2023 and 2022, the Company recorded amortization of debt issuance cost of $1.7 million and $48,160 in other expenses, respectively. 

Subsequent to September 30, 2022, the Company received comments from the Staff of NASDAQ Listing Qualifications that the Note did not provide for a floor price for the possible future conversions and that a future priced security without a floor price has public interest implications pursuant to NASDAQ Listing Rule 5101 (the “Rule”); management of the Company determined that the floor price under the Note is assumed to be $0.12, which is calculated based on an 80% discount of the Nasdaq Minimum Price of $0.5785 on the date of the Company’s entry into the Agreement with the Investor; and the Company believes it to be in the best interests of the Company and the shareholders that the Company shall repay the Note in cash in the event conversions would result in the aggregate effective conversion price falling below $0.12. After the effect of the reverse stock split adjustment, the floor price of the Note is assumed to be $0.96.

As of September 30, 2023 and 2022, the fair value of this derivative liability was nil and $3.45 million. For the years ended September 30, 2023 and 2022, the change in fair value of derivative liability of $0.9 million and $0.42 million was recorded in other income, respectively. For the year ended September 30, 2023, 474,137 ordinary shares were issued for the redemption of $1.1 million convertible notes. As of September 30, 2023 and 2022, the balance of the convertible promissory note, net of amortization, amounted to $5.8 million and $2.2 million, respectively.

The following table provides quantitative information regarding Level 3 fair value measurements inputs of the derivative liability at the measurement date:

	As of		As of
	September 30,		September 30,
	2023		2022
Exercise price		-	$	0.45
Ordinary share price		-	$	0.56
Term (in years)		-		1
Volatility		-		88.39	%
Risk-free interest rate		-		4.05	%
Dividend yield		-		-

F-28

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Shareholders’ Equity

Ordinary shares

On September 12, 2020, the authorized share capital of the Company was increased from 20,000,000 ordinary shares of $0.001 par value each to 200,000,000 ordinary shares of $0.001 par value each. On July 22, 2021, the authorized share capital of the Company was increased from 200,000,000 ordinary shares of $0.001 par value each to 600,000,000 ordinary shares of $0.001 par value each. On May 31, 2022, the Company consolidated its ordinary share at a ratio of one-for-twenty-five. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight and, immediately following the share consolidation, the authorized share capital of the Company be increased from $2.5 million divided into 12.5 million ordinary shares of $0.20 par value each to $100 million divided into 500 million ordinary shares of $0.20 par value each, by creation of an additional 487.5 million ordinary shares of $0.20 par value each.

During the year ended September 30, 2022, the Company issued 30,000,000 ordinary shares at $0.20 per ordinary share for a gross proceed of $6,000,000 in February 2022. After share consolidation in May 2022 and September 2023, the issuance of 30 million ordinary shares was first retrospectively adjusted to 1.2 million ordinary shares and then 150,000 ordinary shares.

During the year ended September 30, 2023, the Company issued 21,052,632 ordinary shares at $0.38 per ordinary share for a gross proceed of $8,000,000 in July 2023. After share consolidation in September 2023, the issuance of 21,052,632 ordinary shares was retrospectively adjusted to 2,631,579 ordinary shares.

During the year ended September 30, 2023, 474,137 ordinary shares were issued for the redemption of $1.1 million convertible notes.

Share incentive plan

The Company established a pool for shares and share options for employees. This pool contains shares and options to purchase 1,168,000 ordinary shares, equal to 10% of the number of ordinary shares outstanding at the conclusion of the initial public offering. Subject to approval by the Compensation Committee of our Board of Directors, the Company may grant shares or options in any percentage determined for a particular grant. Any options granted will vest at a rate of 20% per year for five years and have a per share exercise price equal to the fair market value of one of ordinary shares on the date of grant. For the year ended September 30, 2021, 596,600 ordinary shares were issued to four employees and $805,410 was accounted as share-based compensation expense in general and administration expenses. As of September 30, 2022, the remaining ordinary shares available to be issued are 571,400 and, after the share consolidation on May 31, 2022, the remaining ordinary shares available to be issued are 22,856. As of September 30, 2023, after share consolidation on September 25, 2023, the remaining ordinary shares available to be issued are 2,857.

Statutory reserve

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. As of September 30, 2023 and 2022, the balance of the required statutory reserves was $0.7 million and $1.2 million, respectively.

F-29

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Taxes

Corporation income tax (“CIT”)

The Company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled.

FAMI is incorporated in the Cayman Islands as an offshore holding company and is not subject to tax on income or capital gain under the laws of the Cayman Islands.

Farmmi International is incorporated in Hong Kong as a holding company with no activities. Under the Hong Kong tax laws, an entity is not subject to income tax if no revenue is generated in Hong Kong.

In China the Corporate Income Tax Law generally applies an income tax rate of 25% to all enterprises. Most of the China subsidiaries are subject to corporate income tax at a statutory rate of 25% on net income reported after certain tax adjustments. Certain subsidiaries were identified as small-scaled minimal profit enterprises. Once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the part of its taxable income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and 3 million is subject to a reduced rate of 10%.

Under the Enterprise Income Tax (“EIT”) Law of PRC, domestic enterprises and foreign investment enterprises are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis. EIT is typically governed by the local tax authority in China. Each local tax authority at times may grant special tax treatment to local enterprises as a way to encourage specific agricultural industry and stimulate local economy. Farmmi Eco Agri is engaged in agricultural industry and their income are tax exempted. Net income of $3.9 million, $2.8 million and $4.02 million was exempt from income tax for the years ended September 30, 2023, 2022 and 2021, respectively. The estimated tax savings as the result of the tax break for the years ended September 30, 2023, 2022 and 2021 amounted to $1.0 million, $0.7 million and  $1.0 million, respectively. After adjusted for share consolidation, per share effect of the tax exemption were $0.27, $0.24 and $1.95 for the years ended September 30, 2023, 2022 and 2021, respectively.

The following table reconciles PRC statutory rates to the Company’s effective tax rates for the years ended September 30, 2023, 2022 and 2021:

	For the Years Ended September 30,
	2023			2022			2021
Statutory PRC income tax rate		25.0	%		25.0	%		25.0	%
Effect of income tax exemption (a)		(40.9	%)		(50.8	%)		(41.0	%)
Favorable tax rate impact (a)		13.3	%		(14.8	%)		(0.3	%)
Permanent difference		-			0.1	%		(8.2	%)
Changes of deferred tax assets valuation allowances		(5.8	%)		7.2	%		2.0	%
Non-PRC entities not subject PRC income tax		19.4	%		27.7	%		23.6	%
Total		11.0	%		(5.6	%)		1.1	%

_______ 

(a) Income tax exemption refers to entity engaged in agricultural industry and its income is tax exempted. Favorable refer to entities are identified as a small-scale minimal profit enterprise, the part of its taxable income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and 3 million is subject to a reduced rate of 10%.

F-30

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Taxes (continued)

Corporation income tax (“CIT”) (Continued)

The provision for income tax from the Company consists of the following:

	For the Years Ended September 30,
	2023		2022			2021
Current income tax provision	$	148,893	$	58,266		$	25,571
Deferred income tax provision		164,600		(176,633	)		-
Total	$	313,493	($118,367)			$	25,571

Deferred tax liabilities and assets attributable to different tax jurisdictions are not offset. Components of deferred tax assets and liabilities were as follows:

	As of			As of
	September 30,			September 30,
	2023			2022
Net operating loss (“NOL”) carry forward	$	284,283		$	168,126
Allowance for inventory		2,202			12,413
Allowance for doubtful accounts		4,474			836
Valuation allowance		(290,959	)		(18,168	)
Total		-		$	163,207

The deferred tax expense (benefit) is the change of deferred tax assets and deferred tax liabilities resulting from the temporary difference between tax basis and U.S. GAAP. Certain subsidiaries had a cumulative net operating loss of approximately $0.7 million as of September 30, 2023, which may be available to reduce future taxable income. Deferred tax assets were primarily the result of these net operating losses.

As of each reporting date, management considers evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. On the basis of this evaluation, a valuation allowance of $181,375 was recorded against the gross deferred tax asset balance at September 30, 2023. The amount of the deferred tax asset is considered unrealizable because it is more likely than not that certain subsidiaries will not generate sufficient future taxable income to utilize the net operating loss.

Note 12 - Concentration of major customers and suppliers

For the year ended September 30, 2023, two major customers accounted for approximately 41% and 12% of the Company’s total sales, respectively. For the year ended September 30, 2022, two major customers accounted for approximately 31% and 16% of the Company’s total sales, respectively. For the year ended September 30, 2021, two major customers accounted for approximately 64% and 14% of the Company’s total sales, respectively. Any decrease in sales to this major customer may negatively impact the Company’s operations and cash flows if the Company fails to increase its sales to other customers.

As of September 30, 2023, two major customers accounted for approximately 87% and 12% of the Company’s accounts receivable balance, respectively. As of September 30, 2022, two major customers accounted for approximately 65% and 34% of the Company’s accounts receivable balance, respectively.

For the year ended September 30, 2023, one major suppliers accounted for approximately 14% of the total purchases. For the year ended September 30, 2022, two major suppliers accounted for approximately 23% and 21% of the total purchases, respectively. For the year ended September 30, 2021, four major suppliers accounted for approximately 37%, 20%, 18% and 16% of the total purchases, respectively.

As of September 30, 2023, three major suppliers accounted for approximately 46%, 18% and 13% of the Company’s advances to suppliers’ balance. As of September 30, 2022, four major suppliers accounted for approximately 35%, 26%, 15% and 15% of the Company’s advances to suppliers’ balance.

F-31

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Leases

The Company rent its factories in Lishui City Zhejiang Province from a related party, Zhejiang Tantech Bamboo Technology Co., Ltd., for processing dried edible fungi and a floor in an office building in Hangzhou from third parties.

As of September 30, 2023 and 2022, the remaining average lease term was 7.1 years and 8.2 years, respectively. The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, the Company estimates its incremental borrowing rate based on actual incremental borrowing interest rates from financial institutions in order to discount lease payments to present value. The weighted average discount rate of the Company’s operating leases was 10.2% per annum and 10.0% per annum, as of September 30, 2023 and 2022, respectively.

Supplemental balance sheet information related to operating leases from the Company’s continuing operations was as follows:

	As of		As of
	September 30,		September 30,
	2023		2022
Right-of-use assets under operating leases	$	516,459	$	534,351
Operating lease liabilities, current		69,062		46,543
Operating lease liabilities, non-current		458,617		517,156
Total operating lease liabilities	$	527,679	$	563,699

For the years ended September 30,
2024	$	119,232
2025		98,975
2026		98,975
2027		98,975
2028		88,434
Thereafter		242,716
Total Future minimum lease payments		747,307
Less: Imputed interest		(219,628	)
Total	$	527,679

F-32

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14 - Segment reporting

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments.

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company currently has three main products from which revenue is earned and expenses are incurred: Shiitake Mushroom, Mu Er Mushroom and other edible fungi and other agricultural products. The operations of these product categories have similar economic characteristics. In particular, the Company uses the same or similar production processes; sells to the same or similar type of customers and uses the same or similar methods to distribute these products. The resources required by these products share high similarity. Switching cost between different products is minimal. Production is primarily determined by sales orders received and market trend. Therefore, management, including the chief operating decision maker, primarily relies on the revenue data of different products in allocating resources and assessing performance. Based on management’s assessment, the Company has determined that it has only one operating segment and therefore one reportable segment as defined by ASC. Since June 2021, the Company’s operations were expanded into bulk agricultural commodity trading, such as cotton and corn bulk trading, The Company obtains control over these commodities as a principal from its suppliers before selling these commodities to its customers.

The following table presents revenue by major product categories (from third parties and related party) from the Company’s continuing operations for the years ended September 30, 2023, 2022 and 2021, respectively:

	For the Years Ended September 30,
	2023		2022		2021
Tapioca	$	39,977,734		-		-
Corn		27,430,969	$	10,778,197	$	1,796,006
Shiitake		19,655,465		19,859,533		20,494,362
Mu Er		16,301,157		19,123,152		16,524,723
Cotton		5,547,927		47,950,345		-
Cornstarch		1,338,782		-		-
Other products		112,853		1,502,152		474,860
Total	$	110,364,887	$	99,213,379	$	39,289,951

F-33

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Related party transactions

The relationship and the nature of related party transactions are summarized as follow:

Name of related party	Relationship to the Company	Nature of transactions
Zhejiang Yili Yuncang Technology Group Co., Ltd	10% equity interest owned by the Company	Prepayment of electricity and water expenses for office leased to the Company
FarmNet Limited	Owned 0.8% equity interest of the Company	Payment of expenses by the Company.
Epakia Canada Inc	Legal representative of Epakia Canada Inc is a director of the Company	Payment of expenses by the Company.
Shanghai Zhongjian Yiting Medical Health Technology Partnership	A partnership jointly set up by the Company with another limited partner ("LP").	Payment of expenses by the Company.
Zhejiang Tantech Bamboo Technology Co., Ltd	Under common control of Mr Zhengyu Wang and Ms Yefang Zhang, CEO of the Company	Lease factory building to the Company and charging water and electricity for offices leased to the Company.
Forasen Holdings Group Co., Ltd	Owned by Mr Zhengyu Wang, the Chairman of Board of Directors of the Company	Purchases from the Company
Yefang Zhang	CEO of the Company	Payment of expenses for the Company and provide a guarantee as additional security for a loan.
Xinyang Wang	Shareholder of Nongyuan Network	Provide guarantees and a real property as additional security for certain loans.
Dehong Zhang	Ms Yefang Zhang's, CEO of the Company, brother	Provide guarantees as an additional security for certain loans
Ms Aihong Wang	Mr Zhengyu Wang's, the Chairman of Board of Directors of the Company, sister.	Provide a guarantee as an additional security for a revolving loan

F-34

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Related party transactions (continued)

Due from related parties consisted of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Yili Yuncang Holding Group Co., Ltd	$	103,417	$	-
Zhejiang Yili Yuncang Technology Group Co., Ltd		-		29,055
FarmNet		4,100		-
Epakia Canada Inc		2,996		-
Shanghai Zhongjian Yiting Medical Health Technology Partnership		308		30,928
Dehong Zhang		137		-
Total	$	110,958	$	59,983

Amount due from Zhejiang Yili Yuncang Holding Group Co., Ltd was mainly related to prepayment of electricity and water expenses for offices leased to the Company.

Amounts due from FarmNet Limited, Epakia Canada Inc, Shanghai Zhongjian Yiting Medical Health Technology Partnership and Dehong Zhang were mainly related to expenses paid by the Company which can be recoverable from these related parties.

Due to related parties from the Company consisted of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Tantech Bamboo Technology Co., Ltd.	$	24,496	$	948
Yefang Zhang		9,150		-
Forasen Holdings Group Co., Ltd		168		-
Total	$	33,814	$	948

Amount due to Zhejiang Tantech Bamboo Technology Co., Ltd. were related to water and electricity expenses for offices leased to the Company.

Amount due to Forasen Holdings Group Co., Ltd and Yefang Zhang were related to payment of expenses by related parties for the Company. Amount was due on demand and non-interest bearing.

Sales to related parties

The Company periodically sells merchandise to its affiliates during the ordinary course of business. For the years ended September 30, 2023, 2022 and 2021, the Company recorded sales to related parties of nil, $1,016 and $1,952, respectively.

F-35

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Related party transactions (continued)

Operating lease from related parties

The following table summarizing operating leases with related parties, Zhejiang Tantech Bamboo Technology Co., Ltd. and Zhejiang Yili Yuncang Holding Group Co., Ltd, detailing lease begin date, lease end date, leasing purpose, leasing areas in square meters, annual rent in RMB and its equivalent in USD.

Zhejiang Tantech Bamboo Technology Co., Ltd.	Lease No 1		Lease No. 2		Lease No. 3		Total
Lease begin date	August 1, 2021		July 14, 2021		March 1, 2023
Lease end date	July 31, 2031		July 13, 2031		February 29, 2028
Leasing purpose	Factory building		Factory building		Office
Annual rent in RMB		168,854		421,431		131,835		722,120
Annual rent in USD	$	23,940	$	59,750	$	18,691	$	102,381
Area (in square meters)		1,180		1,914		479		3,573

Zhejiang Yili Yuncang Holding Group Co., Ltd
Lease begin date	August 1, 2023
Lease end date	July 31, 2025
Leasing purpose	Office
Annual rent in RMB		9,795
Annual rent in USD	$	1,389
Area (in square meters)		15

For the years ended September 30, 2023, 2022 and 2021, the Company incurred lease expenses of $66,116, $88,847 and $86,556, respectively.

Sublease to a related party

In August 2020, the Company entered into a sublease agreement with Hangzhou Forasen Technology Co., Ltd to sublease its office space. The lease term is two years with annual rent of RMB 283,258 (equivalent of $41,639). This lease was terminated on February 14, 2022.

For the years ended September 30, 2022 and 2021, the Company recorded lease income of $14,262 and $40,026, respectively.

Guarantees provided by related parties

The Company’s related parties provide guarantees for the Company’s short-term bank loans (see Note 8). The Company’s related parties also pledged their properties as collaterals to safeguard the Company’s short-term bank loans (see Note 8).

The Company and Forasen Group signed a Non-Competition Agreement which provides that Forasen Group should not engage in any business that the Company engages in, except purchasing products from us. In addition, Mr. Wang and Ms. Zhang signed a Non-Competition Agreement with the Company and Tantech which provides that Mr. Wang and Ms. Zhang shall not vote in favor or otherwise cause Tantech to engage in the business that the Company conducts.

F-36

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16 - Subsequent events

On September 26, 2022, Farmmi, Inc., a Cayman Islands company (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company issued to the Investor an unsecured promissory note (the “Note” and together with the Purchase Agreement, the “Agreements”) in the original principal amount of $6,440,000, convertible into ordinary shares of the Company (the “Ordinary Shares”) for $6,000,000 in gross proceeds. The Note bears interest at a rate of 7% per year and have a term of twelve months after the purchase price of the Note is delivered by the Investor to the Company (the “Purchase Price Date”). Under the Agreements, the Investor has the right to redeem the Note six months after the Purchase Price Date, and redemptions may be satisfied in cash, Ordinary Shares or a combination of cash and Ordinary Shares at the Company’s election.

On November 13, 2023 (the “Agreement Date”), the Company and the Investor entered an Amendment to Convertible Promissory Note (the “Extension Agreement”), both parties mutually agreed to extend the term of the Note from twelve months to twenty-four months from the Purchase Price Date, or September 28, 2024. As consideration for the term extension and related costs incurred by the Investor, the Company agreed to pay to the Investor an extension fee equal to seven percent (7%) of the outstanding balance of the Note as of the Agreement Date (the “Extension Fee”), which is added to the remaining outstanding balance of the Note. The Company further agreed to repay the Note by a minimum of $250,000 per month beginning December 2023 and also to pay ten percent (10%) of any funds raised through public offerings within five trading days of the closing dates until the remaining outstanding balance of the Note is paid in full. In addition, the Company is required to pay any redemption amount in cash, if on the applicable redemption date, the Redemption Conversion Price (defined in the Note) is below $1.00 per share. Other than the terms amended by the Extension Agreement, other provisions of the Note remain unchanged.

On January 12, 2024, the Company and the Investor entered a Forbearance Agreement, the Company entered into a forbearance agreement (the “Agreement”) with the Investor, pursuant to which the Investor agreed to refrain and forbear from bringing any action to enforce any remedies against the Company for failure to deliver the cash amount in accordance to a certain redemption notice delivered to the Company by the Lender on January 20, 2023 (the “Forbearance”). In exchange for the Forbearance, the Company agreed to pay the Lender a forbearance fee equal to 10% of the outstanding balance as of the date of the Agreement.

The Forbearance will terminate immediately upon the Company’s failure to comply with certain terms and conditions set forth in the Agreement. Upon termination of the Forbearance, the Investor may seek all recourse available to it under the terms of the Note, the Agreement, any other documents entered into in conjunction therewith, or applicable laws. In addition, except as expressly set forth in the Agreement, the Forbearance does not constitute a waiver of, or an amendment to, any right, power, or remedy of the Investor under the Note or all other documents entered into in conjunction therewith as in effect prior to the date of the Agreement.

In January 2024, 200,000 ordinary shares were issued for the redemption of $0.2 million convertible notes.

Note 17 - Condensed financial information of the parent company

Pursuant to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall 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. The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with such requirement and concluded that it was applicable to the Company as the restricted net assets of the Company’s PRC subsidiaries exceeded 25% of the consolidated net assets of the Company, therefore, the condensed financial statements for the parent company are included herein.

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 subsidiaries in the form of loans, advances or cash dividends without the consent of a third party

The condensed financial information of the parent company has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company used the equity method to account for investment in its subsidiaries. Such investment is presented on the condensed balance sheets as “Investment in subsidiaries” and the respective profit or loss as “Equity in earnings of subsidiaries” on the condensed statements of income.

The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S GAAP have been condensed or omitted.

The Company did not pay any dividend for the periods presented. As of September 30, 2023 and 2022, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements, if any.

F-37

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 - Condensed financial information of the parent company (continued)

Farmmi, Inc.

Parent Company Balance Sheets

	As of		As of
	September 30,		September 30,
	2023		2022
Assets
Current assets
Cash	$	84	$	4,057,179
Other receivables		103,760		103,858
		103,844		4,161,037
Non-current assets
Investment in subsidiaries		167,664,201		156,151,565
Total assets	$	167,768,045	$	160,312,602
Liabilities and Shareholders’ Equity
Current liabilities
Interest payable		3,377		-
Convertible promissory notes		5,788,742		2,178,511
Derivative liability		-		3,450,000
Total liabilities		5,792,119	$	5,628,511
Commitments and contingencies
Shareholders’ equity
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively		1,218,816		597,768
Additional paid-in capital		160,571,517		152,162,565
Retained earnings		185,593		1,923,758
Total shareholders’ equity		161,975,926		154,684,091
Total liabilities and shareholders’ equity	$	167,768,045	$	160,312,602

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight and, immediately following the share consolidation, the authorized share capital of the Company be increased from $2.5 million divided into 12.5 million ordinary shares of $0.20 par value each to $100 million divided into 500 million ordinary shares of $0.20 par value each. The issued and outstanding ordinary shares had been retrospectively adjusted from 23,906,985 ordinary shares to 2,988,835 ordinary shares at September 30, 2022. Also, the ordinary share amount and additional paid-in capital had been retrospectively adjusted from $597,675 and $152,162,658 to $597,768 and $152,162,565 as of September 30, 2022, respectively.

F-38

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 - Condensed Financial Information of the Parent Company (continued)

Farmmi, Inc.

Parent Company Statements of Operations

	For the Years Ended September 30,
	2023			2022			2021
Operating expenses:
General and administrative expenses	($913,948)			($2,961,849)			($2,031,506)
Other expenses
Change in fair value of derivative liability		873,767			419,649			-
Interest expenses		(445,766	)		-			-
Amortization of debt issuance costs		(1,691,609	)		(48,160	)		-
Other expenses		(432	)		(3,024	)		(5,672	)
Loss from operations		(2,177,988	)		(2,593,384	)		(2,037,178	)
Equity in income of subsidiaries and VIE		4,721,801			4,817,363			4,395,592
Comprehensive income attributable to the Company	$	2,543,813		$	2,223,979		$	2,358,414

F-39

FARMMI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 - Condensed financial information of the parent company (continued)

Farmmi, Inc.

Parent Company Statements of Cash Flows

	For the Years Ended September 30,
	2023			2022			2021
Cash flows from operating activities
Net income	$	2,543,813		$	2,223,979		$	2,358,414
Adjustments to reconcile net income to net cash used in operating activities
Equity in earnings of subsidiaries		(4,721,801	)		(4,817,363	)		(4,395,592	)
Amortization of debt issuance costs		1,691,609			48,160			-
Change in fair value of derivative liability		(873,767	)		(419,649	)		-
Share-based compensation		-			2,007,328			1,260,674
Other current assets		98			21,223			(125,081	)
Other current liabilities		(50,869	)		54,246			(40,000	)
Net cash used in operating activities		(1,410,917	)		(882,076	)		(941,585	)
Cash flows from investing activities
Investing in subsidiaries		(10,576,178	)		(7,529,060	)		(122,726,999	)
Net cash used in investing activities		(10,576,178	)		(7,529,060	)		(122,726,999	)
Cash flows from financing activities
Net proceeds from share issuance		7,930,000			6,000,000			126,029,588
Net proceeds from issuance of convertible promissory notes		-			6,000,000			-
Proceeds from advances from related parties		-			-			298,297
Repayment of advances from related parties		-			(54,600	)		(2,138,508	)
Net cash provided by financing activities		7,930,000			11,945,400			124,189,377
Net (decrease) increase in cash and restricted cash		(4,057,095	)		3,534,264			520,793
Cash, beginning of year		4,057,179			522,915			2,122
Cash, end of year	$	84		$	4,057,179		$	522,915

F-40

EX-1.2

EXHIBIT 1.2

THE COMPANIES ACT (AS REVISED)

COMPANY LIMITED BY SHARES

THIRD AMENDED AND RESTATED

MEMORANDUM

AND

ARTICLES OF ASSOCIATION

OF

Farmmi, Inc.

(Adopted pursuant to shareholder resolutions of the company dated May 14, 2022)

5126576-2
		Filed: 25-May-2022 15:23 EST
	www.verify.gov.ky File#: 302493	Auth Code: D62753390248

THE COMPANIES ACT (AS REVISED)

COMPANY LIMITED BY SHARES

THIRD AMENDED AND RESTATED

MEMORANDUM OF ASSOCIATION

OF

Farmmi, Inc.

(Adopted pursuant to shareholder resolutions of the company dated May 14, 2022)

1.	The name of the Company is Farmmi, Inc.
2.	The registered office of the Company shall be situated at the office of Tricor Services (Cayman Islands) Limited, Second Floor, Century Yard, Cricket Square, P.O. Box 902, Grand Cayman, KY1-1103, Cayman Islands or at such other place in the Cayman Islands as the directors may at any time decide.
3.	The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by any law as provided by Section 7(4) of the Companies Act (as revised).
4.	The Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit as provided by Section 27 (2) of the Companies Act (as revised).
5.	Nothing in the preceding paragraphs shall be deemed to permit the Company to carry on the business of a bank or trust company without being licensed in that behalf under the provisions of the Banks and Trust Companies Act (as revised), or to carry on insurance business from within the Cayman Islands or the business of an insurance manager, agent, sub-agent or broker without being licensed in that behalf under the provisions of the Insurance Act (as revised), or to carry on the business of company management without being licensed in that behalf under the Companies Management Act (as revised).
6.	The Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands, but nothing in this paragraph shall be so construed as to prevent the Company effecting and concluding contracts in the Cayman Islands and exercising in the Cayman Islands any of its power necessary for the carrying on of its business outside the Cayman Islands.
7.	The liability of each Member is limited to the amount, if any, unpaid on such Member’s shares.
8.	The share capital of the Company is US$600,000 divided into 24,000,000 ordinary shares of US$0.025 par value each with power for the Company, subject to the provisions of the Companies Act (as revised) and the Articles of Association, to redeem or purchase any of its shares and to sub-divide or consolidate the said shares or any of them and to issue all or any part of its capital whether original, redeemed, increased or reduced, with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide, every issue of shares, whether stated to be ordinary, preference or otherwise, shall be subject to the powers on the part of the Company hereinbefore provided.

9.	The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
10.	Capitalised terms that are not defined in this Memorandum of Association bear the same meaning as those given in the Articles of Association of the Company.

5126576-2
		Filed: 25-May-2022 15:23 EST
	www.verify.gov.ky File#: 302493	Auth Code: D62753390248

THE COMPANIES ACT (AS REVISED)

COMPANY LIMITED BY SHARES

SECOND AMENDED AND RESTATED ARTICLES OF ASSOCIATION

OF

Farmmi, Inc.

(Adopted pursuant to shareholder resolutions of the company dated May 14, 2022)

Preliminary

1.	The regulations contained in Table A in the First Schedule of the Law shall not apply to the Company and the following regulations shall be the Articles of Association of the Company.
2.	In these Articles:

(a) the following terms shall have the meanings set opposite if not inconsistent with the subject or context:

“allotment”	shares are taken to be allotted when a person acquires the unconditional right to be included in the Register of Members in respect of those shares;
“Articles”	these articles of association of the Company as from time to time amended by Special Resolution;
“Audit Committee”	the audit committee of the Company formed by the Board pursuant to Article 102 hereof, or any successor of the audit committee;
“Board” or “Board of Directors”	means the board of directors of the Company;
“clear days”	in relation to a period of notice means that period excluding both the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect;
“Clearing House”	a clearing house recognized by the laws of the jurisdiction in which shares in the capital of the Company (or depository receipts thereof) are listed or quoted on a stock exchange or interdealer quotation system in such jurisdiction;
“Company”	the above named company;
“Company’s Web-site”	means the website of the Company, its web-address or domain name;
“Compensation Committee”	the compensation committee of the Company formed by the Board pursuant to Article 102 hereof, or any successor of the compensation committee;
“Designated Stock Exchange”	the Nasdaq Capital Market and any other stock exchange or interdealer quotation system on which shares in the capital of the Company are listed or quoted;
“Directors”	means the Directors for the time being of the Company or, as the case may be, those Directors assembled as a board or as a committee of the board;

5126576-2
		Filed: 25-May-2022 15:23 EST
	www.verify.gov.ky File#: 302493	Auth Code: D62753390248

“dividend”	includes a distribution or interim dividend or interim distribution;
“electronic”	has the same meaning as in the Electronic Transactions Act (as revised);
“electronic communication”	a communication sent by electronic means, including electronic posting to the Company’s Website, transmission to any number, address or internet website (including SEC’s website) or other electronic delivery methods as otherwise decided and approved by not less than two-thirds of the vote of the Board;
“electronic record”	has the same meaning as in the Electronic Transactions Act (as revised);
“electronic signature”	has the same meaning as in the Electronic Transactions Act (as revised);
“Equity Securities”	shares and any securities convertible into or exchangeable or exercisable for shares;
“Exchange Act”	the Securities Exchange Act of 1934, as amended;
“executed”	means any mode of execution;
“holder”	in relation to any share, the Member whose name is entered in the Register of Members as the holder of the share;
“Indemnified Person”	means every Director, alternate Director, Secretary or other officer for the time being or from time to time of the Company;
“Independent Directors”	means a Director who is an independent director as defined in any Designated Stock Exchange Rules or in Rule 10A-3 under the Exchange Act, as the case may be;
“Islands”	the British Overseas Territory of the Cayman Islands;
“Law”	the Companies Act (as revised);
“Member”	has the same meaning as in the Law;
“Memorandum”	the memorandum of association of the Company as from time to time amended;
“month”	a calendar month;
“Nominating and Corporate Governance Committee”	the nominating and corporate governance committee of the Company formed by the Board pursuant to Article 102 hereof, or any successor of the nominating and corporate governance committee;
“officer”	includes a Director or a Secretary;
“Ordinary Resolution”	a resolution (i) of a duly constituted general meeting of the Company passed by a simple majority of the votes cast by, or on behalf of, the Members entitled to vote present in person or by proxy and voting at the meeting or (ii) approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed byone or more of the Members and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed;

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“Other Indemnitors”	means persons or entities other than the Company that may provide indemnification, advancement of expenses and/or insurance to the Indemnified Persons in connection with such Indemnified Persons involvement in the management of the Company;
“paid up”	means paid up as to the par value and any premium payable in respect of the issue of any shares and includes credited as paid up;
“Person”	any individual, corporation, general or limited partnership, limited liability company, joint stock company, joint venture, estate, trust, association, organization or any other entity or governmental entity;
“Register of Members”	the register of Members required to be kept pursuant to the Law;
“Seal”	the common seal of the Company including every duplicate seal;
“SEC”	the United States Securities and Exchange Commission of the United States of America or any other federal agency for the time being administering the Securities Act;
“Secretary”	any person appointed by the Directors to perform any of the duties of the secretary of the Company, including a joint, assistant or deputy secretary;
“Securities Act”	means the Securities Act of 1933 of the United States of America, as amended, or any similar federal statute and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time;
“share”	a share in the share capital of the Company, and includes stock (except where a distinction between shares and stock is expressed or implied) and includes a fraction of a share;
“signed”	includes an electronic signature or a representation of a signature affixed by mechanical means;

“Special Resolution”	a resolution (i) which has been passed by a majority of not less than two-thirds (or, in respect of any resolution to approve any amendments to any provisions of these Articles that relate to or have an impact upon the procedures regarding the election, appointment, removal of Directors and/or the size of the Board, by two-thirds) of such Members as, being entitled to do so, vote in person or by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given or (ii) approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the Special Resolution so adopted shall be the date on which the instrument or the last of such instruments, if more than one, is executed;
“subsidiary”	a company is a subsidiary of another company if that other company:
	(i) holds a majority of the voting rights in it; (ii) is a member of it and has the right to appoint or remove a majority of its board of directors; or (iii) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it; or (iv) is a subsidiary of a company which is itself a subsidiary of that other company. For the purpose of this definition the expression “company” includes any body corporate established in or outside of the Islands;

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“Transfer”	with respect to any Equity Securities of the Company, any sale, assignment, Lien, hypothecation, pledge, conveyance in trust, gift, transfer by bequest, devise or descent, or other transfer or disposition of any kind, including, but not limited to, transfers pursuant to divorce or legal separation, transfers to receivers,levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary, involuntarily or by operation of law, directly or indirectly (including the Transfer of a controlling interest in any entity the assets of which consist at least in part of Equity Securities). “transferor” and “transferee” have meanings corresponding to the foregoing;
“Treasury Share”	means a Share held in the name of the Company as a treasury share in accordance with the Law;
“U.S. Person”	means a Director who is citizen or resident of the United States of America;
“written” and “in writing”	includes all modes of representing or reproducing words in visible form including in the form of an electronic record;

(b)	unless the context otherwise requires, words or expressions defined in the law shall have the same meanings herein but excluding any statutory modification thereof not in force when these Articles become binding on the Company;
(c)	unless the context otherwise requires:

(i)	words importing the singular number shall include the plural number and vice-versa;
(ii)	words importing the masculine gender only shall include the feminine gender; and
(iii)	words importing persons only shall include companies or associations or bodies of person whether incorporated or not;

(d)	the word “may” shall be construed as permissive and the word “shall” shall be construed as imperative;
(e)	the headings herein are for convenience only and shall not affect the construction of these Articles;
(f)	references to statutes are, unless otherwise specified, references to statutes of the Islands and, subject to paragraph (b) above, include any statutory modification or re-enactment thereof for the time being in force; and
(g)	where an Ordinary Resolution is expressed to be required for any purpose, a Special Resolution is also effective for that purpose.

Commencement of Business

3.	The business of the Company may be commenced as soon after incorporation as the Directors shall see fit, notwithstanding that only some of the shares may have been allotted.
4.	The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company including the expenses of registration.

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Situation of offices of the Company

5.	(a)	The registered office of the Company shall be at such address in the Islands as the Directors shall from time to time determine.
	(b)	The Company, in addition to its registered office, may establish and maintain such other offices, places of business and agencies in the Islands and elsewhere as the Directors may from time to time determine.

Shares

6.	(a)	Subject to the rules of any Designated Stock Exchange and to the provisions, if any, in the Memorandum and these Articles, the Directors have general and unconditional authority to allot, grant options over, offer or otherwise deal with or dispose of any unissued shares in the capital of the Company without the approval of holders of Shares (whether forming part of the original or any increased share capital), either at a premium or at par, with or without preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise and to such persons, on such terms and conditions, and at such times as the Directors may decide, but so that no share shall be issued at a discount, except in accordance with the provisions of the Law. In particular and without prejudice to the generality of the foregoing, the Board is hereby empowered to authorize by resolution or resolutions from time to time and without the approval of holders of Shares the issuance of one or more classes or series of preferred Shares, to cause to be issued such preferred shares and to fix the designations, powers, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any, including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase or decrease the size of any such class or series (but not below the number of Shares of any class or series of preferred Shares then outstanding) to the extent permitted by Law. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any class or series of preferred shares may, to the extent permitted by law, provide that such class or series shall be superior to, rank equally with or be junior to the preferred Shares of any other class or series.
	(b)	The Company shall not issue shares or warrants to bearer.
	(c)	Subject to the rules of any Designated Stock Exchange, the Directors have general and unconditional authority to issue warrants or convertible securities of similar nature conferring the right upon the holders thereof to subscribe for, purchase or receive any class of shares or securities in the capital of the Company to such persons, on such terms and conditions, and at such times as the Directors may decide.
	(d)	The Company may issue fractions of a share of any class and a fraction of a share shall be subject to and carry the corresponding fraction of liabilities (whether with respect to nominal or par value, premium, contribution, calls or otherwise howsoever), limitations, preferences, privileges, qualifications, restrictions, rights and other attributes of a whole share of that class of shares.

7.

The Company may, in so far as the Law permits, pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the capital of the Company. Such commissions may be satisfied by the payment of cash or the allotment of fully or partly paid up shares or partly in one way and partly in the other. The Company may also, on any issue of shares, pay such brokerage fees as may be lawful.

8.

Except as required by law, no person shall be recognised by the Company as holding any share upon any trust, and the Company shall not be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share (except only as by these Articles or by law otherwise provided) or any other rights in respect of any share except an absolute right to the entirety thereof in the holder.

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9.	(a)	If at any time the share capital is divided into different classes of shares, the rights attached to any class of shares (unless otherwise provided by these Articles or the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of two-thirds of the issued shares of that class or with the sanction of a Special Resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting, the provisions of these Articles relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be any one or more persons holding or representing by proxy not less than one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll;
	(b)	The rights conferred upon the holders of the shares of any class shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

10. The Directors may accept contributions to the capital of the Company otherwise than in consideration of the issue of shares and the amount of any such contribution shall, unless otherwise agreed at the time of such contribution is made, be treated as share premium and shall be subject to the provisions of the Law and these Articles applicable to share premium.

Share Certificates

11.	A Member shall only be entitled to a share certificate if the Directors resolve that share certificates shall be issued. Share certificates representing Shares, if any, shall be in such form as the Directors may determine. Share certificates shall be signed by one or more Directors or other person authorised by the Directors. The Directors may authorise certificates to be issued with the authorised signature(s) affixed by mechanical process. All certificates for Shares shall be consecutively numbered or otherwise identified and shall specify the Shares to which they relate. All certificates surrendered to the Company for transfer shall be cancelled and subject to the Articles and no new certificate shall be issued until the former certificate representing a like number of relevant Shares shall have been surrendered and cancelled.
12.	Every share certificate of the Company shall bear legends required under the applicable laws, including the Securities Act.
13.	If a share certificate is defaced, worn-out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and payment of the expenses reasonably incurred by the Company in investigating evidence as the Directors may determine but otherwise free of charge, and (in the case of defacement or wearing-out) on delivery to the Company of the old certificate.

Lien

14.	The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) payable at a fixed time or called in respect of that share. The Directors may at any time declare any share to be wholly or in part exempt from the provisions of this Article. The Company’s lien on a share shall extend to any amount in respect of it.
15.	The Company may sell in such manner as the Directors determine any shares on which the Company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within fourteen (14) clear days after notice has been given to the holder of the share or to the person entitled to it in consequence of the death or bankruptcy of the holder, demanding payment and stating that if the notice is not complied with the shares may be sold.
16.	To give effect to a sale the Directors may authorise some person to execute an instrument of transfer of the shares sold to, or in accordance with the directions of, the purchaser. The title of the transferee to the shares shall not be affected by any irregularity or invalidity in the proceedings in reference to the sale.
17.	The net proceeds of the sale, after payment of the costs, shall be applied in payment of so much of the sum for which the lien exists as is presently payable, and any residue shall (upon surrender to the Company for cancellation of the certificate for the shares sold and subject to a like lien for any moneys not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale.

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Calls on shares and Forfeiture

18.	Subject to the terms of allotment, the Directors may make calls upon the Members in respect of any moneys unpaid on their shares (whether in respect of nominal value or premium) and each Member shall (subject to receiving at least fourteen (14) clear days’ notice specifying when and where payment is to be made) pay to the Company as required by the notice the amount called on his shares. A call may be required to be paid by installments. A call may, before receipt by the Company of any sum due thereunder, be revoked in whole or in part and payment of a call may be postponed in whole or in part. A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect of which the call was made.
19.	A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed.
20.	The joint holders of a share shall be jointly and severally liable to pay all calls in respect of the share.
21.	If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call or, if no rate is fixed, at an annual rate of ten percent (10%) but the Directors may waive payment of the interest wholly or in part.
22.	An amount payable in respect of a share on allotment or at any fixed date, whether in respect of nominal value or premium or as an installment of a call, shall be deemed to be a call, and if it is not paid when due all the provisions of the Articles shall apply as if that amount had become due and payable by virtue of a call.
23.	Subject to the terms of allotment, the Directors may make arrangements on the issue of shares for a difference between the holders in the amounts and times of payment of calls on their shares.
24.	If a call remains unpaid after it has become due and payable the Directors may give to the person from whom it is due not less than fourteen (14) clear days’ notice requiring payment of the amount unpaid, together with any interest which may have accrued. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited.
25.	If the notice is not complied with any share in respect of which it was given may, before the payment is required by the notice has been made, be forfeited by a resolution of the Directors and the forfeiture shall include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture.
26.	Subject to the provisions of the Law, a forfeited share may be sold, re-allotted or otherwise disposed of on such terms and in such manner as the Directors determine either to the person who was before the forfeiture the holder or to any other person, and at any time before a sale, re-allotment or other disposition, the forfeiture may be canceled on such terms as the Directors think fit. Where for the purposes of its disposal a forfeited share is to be transferred to any person the Directors may authorize any person to execute an instrument of transfer of the share to that person.
27.	A person any of whose shares have been forfeited shall cease to be a Member in respect of them and shall surrender to the Company for cancellation the certificate for the shares forfeited but shall remain liable to the Company for all moneys which at the date of forfeiture were presently payable by him to the Company in respect of those shares with interest at the rate at which interest was payable on those moneys before the forfeiture or, if no interest was so payable, at an annual rate of ten percent (10%) from the date of forfeiture until payment but the Directors may waive payment wholly or in part or enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal.
28.	A statutory declaration by a Director or the Secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share and the declaration shall (subject to the execution of an instrument of transfer if necessary) constitute a good title to the share and the person to whom the share is disposed of shall not be bound to see to the application of the consideration, if any, nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture or disposal of the share.

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Transfer of Shares

29.	Subject to these Articles, any Member may transfer all or any of his shares by an instrument of transfer in the usual or common form or in a form prescribed by any Designated Stock Exchange or in any other form approved by the Board and may be under hand or, if the transferor or transferee is a Clearing House, by hand or by electronic machine imprinted signature or by such other manner of execution as the Board may approve from time to time.
30.	The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the Board may dispense with the execution of the instrument of transfer by the transferee in any case which it thinks fit in its discretion to do so. Without prejudice to Article 29, the Board may also resolve, either generally or in any particular case, upon request by either the transferor or transferee, to accept mechanically executed transfers. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register of Members in respect thereof. Nothing in these Articles shall preclude the Board from recognizing a renunciation of the allotment or provisional allotment of any share by the allottee in favour of some other person.
31.	(1) The Board may, in its absolute discretion, and without giving any reason therefore, refuse to register a transfer of any share that is not a fully paid up share to a person of whom it does not approve, or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also, without prejudice to the foregoing generality, refuse to register a transfer of any share to more than four joint holders or a transfer of any share that is not a fully paid up share on which the Company has a lien.
	(2) The Board may, in its absolute discretion, and without giving any reason therefore, determine that the Company shall maintain one or more branch registers of Members in accordance with the Law. The Board may also, in its absolute discretion, and without giving any reason therefore, determine which register of Members shall constitute the principal register and which shall constitute the branch register or registers, and to vary such determination from time to time.
32.	Without limiting the generality of Article 31, the Board may decline to recognise any instrument of transfer unless:

(a)	a fee of such maximum sum as any Designated Stock Exchange may determine to be payable or such lesser sum as the Board may from time to time require is paid to the Company in respect thereof;
(b)	the instrument of transfer is in respect of only one class of shares;
(c)	the Shares are fully paid and free of any lien;
(d)	the instrument of transfer is lodged at the registered office or such other place at which the Register of Members is kept in accordance with the accompanied by any relevant share certificate(s) and/or such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do); and
(e)	if applicable, the instrument of transfer is duly and properly stamped.

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33.	If the Directors refuse to register a transfer of a share, they shall within one month after the date on which the transfer was lodged with the Company send to the transferee notice of the refusal.
34.	The registration of transfers of shares or of any class of shares may, after compliance with any notice requirement of any Designated Stock Exchange, be suspended and the Register of Members be closed at such times and for such periods (not exceeding in the whole thirty (30) days in any year) as the Board may determine.
35.	The Company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the Directors refuse to register shall be returned to the person lodging it when notice of the refusal is given.

Transmission of Shares

36.	If a Member dies the survivor, or survivors where he was a joint holder, and his personal representatives where he was a sole holder or the only survivor of joint holders shall be the only persons recognised by the Company as having any title to his interest; but nothing in the Articles shall release the estate of a deceased Member from any liability in respect of any share which had been jointly held by him.
37.	A person becoming entitled to a share in consequence of the death or bankruptcy of a Member may, upon such evidence being produced as the Directors may properly require, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the holder he shall give notice to the Company to that effect. If he elects to have another person registered he shall execute an instrument of transfer of the share to that person. All the Articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by the Member and the death or bankruptcy of the Member had not occurred.
38.	A person becoming entitled to a share by reason of the death or bankruptcy of a Member shall have the rights to which he would be entitled if he were the holder of the share, except that he shall not, before being registered as the holder of the share, be entitled in respect of it to attend or vote at any meeting of the Company or at any separate meeting of the holders of any class of shares in the Company.

Changes of Capital

39. (a) Subject to and in so far as permitted by the provisions of the Law, the Company may from time to time by Ordinary Resolution alter or amend the Memorandum to:

	(i)	increase its share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe;
	(ii)	consolidate and divide all or any of its share capital into shares of larger amounts than its existing shares;
	(iii)	convert all or any of its paid up shares into stock and reconvert that stock into paid up shares of any denomination;
	(iv)	sub-divide its existing shares, or any of them, into shares of smaller amounts than is fixed by the Memorandum; and
	(v)	cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.
(b)	Except so far as otherwise provided by the conditions of issue, the new shares shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture and otherwise as the shares in the original share capital.

40. Whenever as a result of a consolidation of shares any Members would become entitled to fractions of a share, the Directors may, on behalf of those Members, sell the shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Law, the Company) and distribute the net proceeds of sale in due proportion among those Members, and the Directors may authorize some person to execute an instrument of transfer of the shares to, or in accordance with the directions of the purchaser. The transferee shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale.

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41. The Company may by Special Resolution reduce its share capital and any capital redemption reserve in any manner and with, and subject to, any incident, consent, order or other matter required by law.

Redemption and Purchase of Own Shares

42.	Subject to the provisions of the Law and these Articles, the Company may:
	(a)	issue shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company or the Member on such terms and in such manner as the Directors may, before the issue of shares, determine;
	(b)	purchase its own shares (including any redeemable shares) in such manner and on such terms as the Directors may determine and agree with the relevant Member; and
	(c)	make a payment in respect of the redemption or purchase of its own shares in any manner authorised by the Law, including out of capital.
43.	The Directors may, when making a payment in respect of the redemption or purchase of shares, if so authorized by the terms of issue of the shares (or otherwise by agreement with the holder of such shares) make such payment in cash or in specie (or partly in one and partly in the other).
44.	Upon the date of redemption or purchase of a share, the holder shall cease to be entitled to any rights in respect thereof (excepting always the right to receive (i) the price therefore and (ii) any dividend which had been declared in respect thereof prior to such redemption or purchase being effected) and accordingly his name shall be removed from the Register of Members with respect thereto and the share shall be cancelled.

Treasury Shares

45.	The Directors may, prior to the purchase, redemption or surrender of any Share, determine that such Share shall be held as a Treasury Share.
46.	The Directors may determine to cancel a Treasury Share or transfer a Treasury Share on such terms as they think proper (including, without limitation, for nil consideration).

Register of Members

47.	The Company shall maintain or cause to be maintained an overseas or local Register of Members in accordance with the Law.
48.	The Directors may determine that the Company shall maintain one or more branch registers of Members in accordance with the Law. The Directors may also determine which register of Members shall constitute the principal register and which shall constitute the branch register or registers, and to vary such determination from time to time.

Closing Register of Members or Fixing Record Date

49. For the purpose of determining Members entitled to notice of, or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any dividend or other distribution, or in order to make a determination of Members for any other purpose, the Directors may provide that the Register of Members shall be closed for transfers for a stated period which shall not in any case exceed forty (40) clear days. If the Register shall be so closed for the purpose of determining those Members that are entitled to receive notice of, attend or vote at a meeting of Members, the Register shall be so closed for at least ten (10) clear days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the Register.

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50.

In lieu of, or apart from, closing the Register of Members, the Directors may fix in advance or arrears a date as the record date for any such determination of Members entitled to notice of, or to vote at any meeting of the Members or any adjournment thereof, or for the purpose of determining the Members entitled to receive payment of any dividend or other distribution, or in order to make a determination of Members for any other purpose.

51.

If the Register of Members is not so closed and no record date is fixed for the determination of Members entitled to notice of, or to vote at, a meeting of Members or Members entitled to receive payment of a dividend or other distribution, the date on which notice of the meeting is sent or posted or the date on which the resolution of the Directors resolving to pay such dividend or other distribution is passed, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Article, such determination shall apply to any adjournment thereof.

General Meetings

52.	All general meetings other than annual general meetings shall be called extraordinary general meetings and the Company shall specify the meeting as such in the notices calling it.
53.	An annual general meeting of the Company shall be held in each year (other than the year in which these Articles were adopted) at such time as determined by the Board and the Company may, but shall not (unless required by the Law) be obliged to, in each year hold any other general meeting. The agenda of the annual general meeting shall include the adoption of the Company’s annual accounts, the appropriation of the Company’s profits among other items included in the agenda by the Board.
54.	At these meetings the report of the Directors (if any) shall be presented and they can take place in any other the Directors may decide.
55.	The Directors may, whenever they think fit, convene an extraordinary general meeting of the Company, and they shall on a Members’ requisition in accordance with the Articles forthwith proceed to convene an extraordinary general meeting of the Company.
56.	A Members’ requisition is a requisition of Members holding at the date of deposit of the requisition not less than two-thirds, in par value of the issued shares which as at that date carry the right to vote at general meetings of the Company.
57.	The Members’ requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the registered office, and may consist of several documents in like form each signed by one or more requisitionists.
58.	If there are no Directors as at the date of the deposit of the Members’ requisition or if the Directors do not within twenty-one days from the date of the deposit of the Members’ requisition duly proceed to convene a general meeting to be held within a further twenty-one days, the requisitionists, or any of them representing more than one-half of the total voting rights of all of the requisitionists, may themselves convene a general meeting, but any meeting so convened shall be held no later than the day which falls three months after the expiration of the said twenty-one day period.
59.	A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by Directors.

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60.	Notwithstanding any other provision of the Articles, the Members who requisition a meeting:
	a)	May propose only Ordinary Resolutions to be considered and voted upon at such meeting; and
	b)	Shall have no right to propose any resolutions with respect to the election, appointment or removal of Directors or with respect to the size of the Board of Directors.

61. Save as set out in Articles 52 to 60, the Members have no right to propose resolutions to be considered or voted upon at annual general meetings or extraordinary general meetings of the Company.

Notice of General Meetings

62. At least ten (10) clear days’ notice specifying the place, the day and the hour of each general meeting and the general nature of such business to be transacted thereat shall be given in the manner hereinafter provided, or in such other manner (if any) as may be prescribed by Ordinary Resolution, to such persons as are entitled to vote or may otherwise be entitled under these Articles to receive such notices from the Company; provided that a general meeting of the Company shall, whether or not the notice specified in this Article has been given and whether or not the provisions of the Articles regarding general meetings have been complied with, be deemed to have been duly convened if it is so agreed:

(a)	in the case of an annual general meeting, by all of the Members entitled to attend and vote thereat; and
(b)	in the case of an extraordinary general meeting, by a majority in number of the Members having a right to attend and vote at the meeting, together holding not less than 95%, in par value of the Shares giving that right.

63. The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that general meeting.

Proceedings at General Meetings

64.	No business shall be transacted at any meeting unless a quorum is present at the time when the meeting proceeds to business. Members holding not less than an aggregate of one-third in nominal value of the total issued voting shares in the Company entitled to vote upon the business to be transacted, shall be a quorum.
65.	Members may participate in a general meeting at which no special resolutions are proposed by means of conference telephone or other electronic means by which all persons participating in the meeting can hear each other and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.
66.	If a quorum is not present within half an hour from the time appointed for the meeting to commence or if during such a meeting a quorum ceases to be present, the meeting, if convened upon a Members’ requisition, shall be dissolved and in any other case it shall stand adjourned and shall reconvene on the same day in the next week at the same time and/or place or to such other day, time and/or place as the Directors may determine, and if at the reconvened meeting a quorum is not present within half an hour from the time appointed for the meeting to commence, the Members present shall be a quorum.
67.	If the Directors wish to make this facility available for a specific general meeting or all general meetings of the Company, participation in any general meeting of the Company may be by means of a telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.
68.	The chairman of the board of Directors or in his absence some other Director nominated by the Directors shall preside as chairman of the meeting, but if neither the chairman nor such other Director (if any) is present within fifteen minutes after the time appointed for holding the meeting and willing to act, the Directors present shall elect one of their number to be chairman and, if there is only one Director present and willing to act, he shall be chairman. If no Director is willing to act as chairman, or if no Director is present within fifteen minutes after the time appointed for holding the meeting, the Members present in person or by proxy and entitled to vote shall choose one of their number to be chairman.

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69.	The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Company, restrictions on entry to such meeting after the time prescribed for the commencement thereof, and the opening and closing of the polls. The chairman of the meeting shall announce at each such meeting the date and time of the opening and the closing of the polls for each matter upon which the Members will vote at such meeting.
70.	A Director shall, notwithstanding that he is not a Member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the Company.
71.	The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than business which might properly have been transacted at the meeting had the adjournment not taken place. When a meeting is adjourned for fourteen days or more, at least seven (7) clear days’ notice shall be given specifying the time and place of the adjourned meeting and the general nature of the business to be transacted. Otherwise it shall not be necessary to give any such notice.
72.	At each meeting of the Members, all corporate actions, including the election of Directors, to be taken by vote of the Members (except as otherwise required by applicable law and except as otherwise provided in these Articles) shall be authorised by Ordinary Resolution. Where a separate vote by a class or classes or series is required, the affirmative vote of the majority of Shares of such class or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series (unless provided otherwise in the resolutions providing for the issuance of such series).
61.	At any general meeting a resolution put to the vote of the meeting shall be decided on a poll.
62.	A poll shall be taken in such manner as the chairman directs and he may appoint scrutineers (who need not be Members) and fix a place and time for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.
63.	In the case of equality of votes, the chairman shall be entitled to a casting vote in addition to any other vote he may have.
64.	Any action required or permitted to be taken at any annual or extraordinary general meetings of the Company may be taken only upon the vote of the Members at an annual or extraordinary general meeting duly noticed and convened in accordance with these Articles and the Law and may not be taken by written resolution of the Members.
65.	If for so long as the Company has only one Member:

(a)	in relation to a general meeting, the sole Member or a proxy for that Member or (if the Member is a corporation) a duly authorized representative of that Member is a quorum and Article 64 is modified accordingly;
(b)	the sole Member may agree that any general meeting be called by shorter notice than that provided for by the Articles; and
(c)	all other provisions of the Articles apply with any necessary modification (unless the provision expressly provides otherwise).

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Votes of Members

78.	Subject to any rights or restrictions attached to any shares, every Member who (being an individual) is present in person or by proxy or (being a corporation) is present by a duly authorized representative not being himself a Member entitled to vote, shall have one vote, and on a poll every Member and every person representing a Member by proxy shall have one vote for every share of which he is the holder.
79.	In the case of joint holders, the vote of the senior joint holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the Register of Members.
80.	A Member in respect of whom an order has been made by any court having jurisdiction (whether in the Islands or elsewhere) in matters concerning mental disorder may vote, by his receiver, curator bonis or other person authorized in that behalf appointed by that court, and any such receiver, curator bonis or other person may vote by proxy. Evidence to the satisfaction of the Directors of the authority of the person claiming to exercise the right to vote shall be received at the registered office of the Company, or at such other place as is specified in accordance with the Articles for the deposit or delivery of forms of appointment of a proxy, or in any other manner specified in the Articles for the appointment of a proxy, not less than forty-eight eight hours before the time appointed for holding the meeting or adjourned meeting at which the right to vote is to be exercised and in default the right to vote shall not be exercisable.
81.	No Member shall, unless the Directors otherwise determine, be entitled to vote at any general meeting or at any separate meeting of the holders of any class of shares in the Company, either in person or by proxy, in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid.
82.	No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the meeting shall be valid. Any objection made in due time shall be referred to the chairman whose decision shall be final and conclusive.
83.	Votes may be given either personally or by proxy. Deposit or delivery of a form of appointment of a proxy does not preclude a Member from attending and voting at the meeting or at any adjournment of it.
84.	A Member entitled to more than one vote need not, if he votes, use all his votes or cast all votes he uses the same way.
85.	Subject as set out herein, an instrument appointing a proxy shall be in writing in any usual form or in any other form which the Directors may approve and shall be executed by or on behalf of the appointor save that, subject to the Law, the Directors may accept the appointment of a proxy received in an electronic communication at an address specified for such purpose, on such terms and subject to such conditions as they consider fit. The Directors may require the production of any evidence which they consider necessary to determine the validity of any appointment pursuant to this Article.
86.	The form of appointment of a proxy and any authority under which it is executed or a copy of such authority certified notarially or in some other way approved by the Directors may:

(a)	in the case of an instrument in writing, be left at or sent by post to the registered office of the Company or such other place within the Islands as is specified in the notice convening the meeting or in any form of appointment of proxy sent out by the Company in relation to the meeting at any time before the time for holding the meeting or adjourned meeting at which the person named in the form of appointment of proxy proposes to vote;
(b)	in the case of an appointment of a proxy contained in an electronic communication, where an address has been specified by or on behalf of the Company for the purpose of receiving electronic communications:
(i)	in the notice convening the meeting; or
(ii)	in any form of appointment of a proxy sent out by the Company in relation to the meeting; or

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(iii)	in any invitation contained in an electronic communication to appoint a proxy issued by the Company in relation to the meeting;
	be received at such address at any time before the time for holding the meeting or adjourned meeting at which the person named in the form of appointment of proxy proposes to vote;
(c)	in the case of a poll taken more than forty-eight eight hours after it is demanded, be deposited or delivered as required by paragraphs (a) or (b) of this Article after the poll has been demanded and at any time before the time appointed for the taking of the poll; or
(d)	where the poll is taken immediately but is taken not more than forty-eight eight hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman or to the secretary or to any Director;
	and a form of appointment of proxy which is not deposited or delivered in accordance with this Article is invalid.

87.

Any corporation or other non-natural person which is a Member of the Company may in accordance with its constitutional documents, or in the absence of such provision by resolution of its directors or other governing body, authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members, and the person so authorized shall be entitled to exercise the same powers on behalf of the corporation which he represents as the corporation could exercise if it were an individual Member.

88.

A vote or poll demanded by proxy or by the duly authorized representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting or demanding a poll unless notice of the determination was received by the Company at the registered office of the Company or, in the case of a proxy, any other place specified for delivery or receipt of the form of appointment of proxy or, where the appointment of a proxy was contained in an electronic communication, at the address at which the form of appointment was received, before the commencement of the meeting or adjourned meeting at which the vote is given or the poll demanded or (in the case of a poll taken otherwise than on the same day as the meeting or adjourned meeting) the time appointed for taking the poll.

Number of Directors

89.	The Board shall consist of such number of Directors as a majority of the Directors then in office may determine from time to time, provided that, unless otherwise determined by the Members in a general meeting acting by Special Resolution, the Board shall consist of not less than five (5) Directors, and subject always to the rights (if any) of the holders of preferred shares (if any) to elect additional directors under specified circumstances.
90.	The Board of Directors shall have a chairman of the Board of Directors elected and appointed by a majority of the Directors then in office. The Directors may also elect a vice-chairman of the Board of Directors. The period for which the chairman and the vice-chairman shall hold office shall also be determined by a majority of all of the Directors then in office. The chairman of the Board of Directors shall preside as chairman at every meeting of the Board of Directors. To the extent the chairman of the Board of Directors is not present at a meeting of the Board of Directors, the vice-chairman of the Board of Directors (if any), or in his absence, the attending Directors may choose one Director to be the chairman of the meeting. Observed Article 122 below, the chairman of the Board of Directors’ voting rights as to the matters to be decided by the Board of Directors shall be the same as other Directors.
91.	The Board may, from time to time, and except as required by applicable law or the listing rules of any Designated Stock Exchange, adopt, institute, amend, modify or revoke the corporate governance policies or initiatives, which shall be intended to set forth the policies of the Company and the Board on various corporate governance related matters as the Board shall determine by resolution from time to time.

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Alternate Directors

92.	Any Director (but not an alternate Director) may by writing appoint any other Director, or any other person willing to act, to be an alternate Director and by writing may remove from office an alternate Director so appointed by him.
93.	An alternate Director shall be entitled to receive notice of all meetings of Directors and of all meetings of committees of Directors of which his appointor is a member, to attend and vote at every such meeting at which the Director appointing him is not personally present, to sign any written resolution of the Directors, and generally to perform all the functions of his appointor as a Director in his absence.
94.	An alternate Director shall cease to be an alternate Director if his appointor ceases to be a Director.
95.	Any appointment or removal of an alternate Director shall be by notice to the Company signed by the Director making or revoking the appointment or in any other manner approved by the Directors.
96.	Subject to the provisions of the Articles, an alternate Director shall be deemed for all purposes to be a Director and shall alone be responsible for his own acts and defaults and shall not be deemed to be the agent of the Director appointing him.

Proxy Directors

97.	(a)	A Director but not an alternate Director may be represented at any meetings of the Board of Directors by a proxy appointed by him in which event the presence or vote of the proxy shall for all purposes be deemed to be that of the Director.
	(b)	The provisions of Articles 82 to 87 shall mutatis mutandis apply to the appointment of proxies by Directors.
		Any person appointed as a proxy pursuant to paragraph (a) above shall be the agent of the Director, and not an officer of the Company.

Powers of Directors

98.

Subject to the provisions of the Law, the Memorandum and the Articles, and to any directions given by Ordinary Resolution and the listing rules of any Designated Stock Exchange, the business of the Company shall be managed by the Directors who may exercise all the powers of the Company. No alteration of the Memorandum or Articles and no such direction shall invalidate any prior act of the Directors which would have been valid if that alteration had not been made or that direction had not been given. The powers given by this Article shall not be limited by any special power given to the Directors by the Articles and a meeting of Directors at which a quorum is present may exercise all powers exercisable by the Directors.

99.

The Board may exercise all the powers of the Company to raise capital or borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the Law, to issue debentures, bonds and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Delegation of Directors’ Powers

100. Subject to these Articles, the Directors may from time to time appoint any Person, whether or not a director of the Company, to hold such office in the Company as the Directors may think necessary for the administration of the Company, including without prejudice to the foregoing generality, the office of the chief executive officer, chief operating officer and chief financial officer, one or more vice presidents, managers or controllers, and for such term and at such remuneration (whether by way of salary or commission or participation in profits or partly in one way and partly in another), and with such powers and duties as the Directors may think fit.

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101.	The Directors may, by power of attorney or otherwise, appoint any person to be the agent of the Company for such purposes and on such conditions as they determine, including authority for the agent to delegate all or any of his powers.
102.	Subject to applicable law and the listing rules of any Designated Stock Exchange, the Directors may delegate any of their powers to any committee (including, without limitation, an Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee), consisting of one or more Directors. They may also delegate to any managing Director or any Director holding any other executive office such of their powers as they consider desirable to be exercised by him. Any such delegation may be made subject to any conditions the Directors may impose, and either collaterally with or to the exclusion of its own powers and may be revoked or altered. Subject to any such conditions, the proceedings of a committee with two or more Members shall be governed by the provisions of the Articles regulating the proceedings of Directors so far as they are capable of applying. Where a provision of the Articles refers to the exercise of a power, authority or discretion by the Directors and that power, authority or discretion has been delegated by the Directors to a committee, the provision shall be construed as permitting the exercise of the power, authority or discretion by the committee.
103.	The Board may establish an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee and, if such committees are established, it shall adopt formal written charters for such committees and review and assess the adequacy of such formal written charters on an annual basis. Each of these committees shall be empowered to do all things necessary to exercise the rights of such committee set forth in these Articles and shall have such powers as the Board may delegate pursuant to Article 101. Each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, if established, shall consist of such number of directors as the Board shall from time to time determine (or such minimum number as may be required from time to time by any Designated Stock Exchange). For so long as any class of Shares are listed on a Designated Stock Exchange, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee shall be made up of such number of Independent Directors as required from time to time by any Designated Stock Exchange Rules or otherwise required by applicable law.

Appointment, Disqualification and Removal of Directors

104.	The first directors shall be appointed in writing by the subscriber or subscribers to the Memorandum.
105.	Each Director shall hold office until his successor is duly elected or appointed or his earlier resignation or removal notwithstanding any agreement between the Company and such Director. Directors are eligible for re-election.
106.	Subject to Article 111, any vacancies on the Board arising other than upon the expiry of a Director’s term at an annual general meeting can be filled only by the affirmative vote of a simple majority of the remaining Directors holding office (notwithstanding that the remaining Directors may constitute less than a quorum) appointing an interim Director to fill such vacancy until the next annual general meeting of Shareholders. Additions to the existing Board can be filled only by the affirmative vote of a simple majority of the remaining Directors holding office (notwithstanding that the remaining Directors may constitute less than a quorum).
107.	Members do not have the right to nominate, elect or remove Directors, or to fill any Board vacancies arising other than upon the expiry of a Director’s term at an annual general meeting pursuant to Article 103.
108.	There is no age limit for Directors of the Company.
109.	No shareholding qualification shall be required for a Director. A Director who is not a Member shall nevertheless be entitled to receive notice of and to attend and speak at general meetings of the Company.
110.	The Board must at all times comply with the residency and citizenship requirements of U.S. securities laws applicable to foreign private issuers and shall at no time have a majority of Directors who are U.S. Persons. Notwithstanding any other provision in these Articles, no appointment or election of a U.S. Person as a Director shall be permitted if such appointment or election would have the effect of creating a majority of Directors who are U.S. Persons, and any such appointment or election shall be disregarded for all purposes.

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111.	The office of a Director shall be vacated if:
	(a)	he becomes prohibited by law from being a Director;
	(b)	he becomes bankrupt or makes any arrangement or composition with his creditors generally;
	(c)	he dies, or is, in the opinion of all his co-Directors, incapable by reason of mental disorder of discharging his duties as Director;
	(d)	he resigned his office by notice to the Company;
	(e)	he has for more than six months been absent without permission of the Directors from meetings of Directors held during that period and the Directors resolve that his office be vacated;
112.	In the event of a vacancy, a replacement Director shall be nominated by a simple majority of the remaining Directors holding office, or if a Nominating and Corporate Governance Committee has been established, by such committee, upon which the remaining Directors holding office may elect and appoint any such nominee as an interim Director pursuant to Article 105.

Remuneration of Directors

113.	The Directors shall be entitled to such remuneration as the Board may determine and, unless otherwise determined, the remuneration shall be deemed to accrue from day to day. If established, the Compensation Committee will assist the Board in reviewing and approving compensation decisions.
114.	A Director who, at the request of the Directors, goes or resides outside of the Islands, makes a special journey or performs a special service on behalf of the Company may be paid such reasonable additional remuneration (whether by way of salary, percentage of profits or otherwise) and expenses as the Directors may decide.

Directors’ Expenses

115. The Directors may be paid all traveling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of Directors or committees of Directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties.

Directors’ Appointments and Interests

116.

The Directors may appoint one or more of their body to the office of managing Director or to any other executive office under the Company, and the Company may enter into an agreement or arrangement with any Director for his/her employment, subject to applicable law and any listing rules of the SEC or any Designated Stock Exchange, or for the provision by him of any services outside the scope of the ordinary duties of a Director. Any such appointment, agreement or arrangement may be made upon such terms as the Directors determine and they may remunerate any such Director for his services as they think fit. Any appointment of a Director to an executive office shall terminate automatically if he ceases to be a Director but without prejudice to any claim to damages for breach of the contract of service between the Director and the Company.

117.

Subject to the Law and listing rules of any Designated Stock Exchange, if he has disclosed to the Directors the nature and extent of any material interest of his, a Director notwithstanding his office:

(a) may be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise interested;

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(b)	may be a Director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the Company or in which the Company is otherwise interested; and
(c)	shall not, by reason of his office, be accountable to the Company for any benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit.

118. For the purposes of the preceding Article:

(a)	a general notice given to the Directors that a Director is to be regarded as having an interest of the nature and extent specified in the notice in any transaction or arrangement in which a specified person or class of persons is interested shall be deemed to be a disclosure that the Director has an interest in any such transaction of the nature and extent so specified; and
(b)	an interest of which a Director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his.

119.

A Director must disclose any material interest pursuant to the Articles, and such Director may not vote at any meeting of Directors or of a committee of Directors on any resolution concerning a matter in which he has, directly or indirectly, an interest or duty. The Director shall be counted in the quorum present at a meeting when any such resolution is under consideration and such resolution may be passed by a majority of the disinterested Directors present at the meeting even if such disinterested Directors together constitute less than a quorum.

120.

Notwithstanding the foregoing, no “Independent Director” as defined in the rules of any Designated Stock Exchange or in Rule 10A-3 under the Exchange Act, and with respect of whom the Board has determined constitutes an “Independent Director” for purposes of compliance with applicable law or the Company’s listing requirements, shall without the consent of the Audit Committee take any of the foregoing actions or any other action that would reasonably be likely to affect such Director’s status as an “Independent Director” of the Company.

Directors’ Gratuities and Pensions

121. The Directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any existing Director or any Director who has held but no longer holds any executive office or employment with the Company or with any body corporate which is or has been a subsidiary of the Company or a predecessor in business of the Company or of any such subsidiary, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

Proceedings of Directors

122.

The quorum for the transaction of the business of the Directors may be fixed by the Directors, and unless so fixed shall be equal to a majority of the Directors then holding office if there are two or more Directors, and shall be one if there is only one Director. A person who holds office as an alternate Director shall, if his appointor is not present, be counted in the quorum. A Director who also acts as an alternate Director shall, if his appointor is not present, count twice towards the quorum.

123.

Subject to the provisions of the Articles, the Directors may regulate their proceedings as they determine is appropriate. Questions arising at any meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote. A Director who is also an alternate Director shall be entitled in the absence of his appointor to a separate vote on behalf of his appointor in addition to his own vote.

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124.	Meetings of the Directors shall be held at least once every calendar quarter and shall take place either in China or in the United States or elsewhere previously agreed among the Directors. A person may participate in a meeting of the Directors or any committee of Directors by conference telephone or other communications equipment by means of which all the persons participating in the meeting can communicate with each other at the same time. Participation by a person in a meeting in this manner is treated as presence in person at that meeting and is counted in a quorum and entitled to vote.
125.	A resolution in writing (in one or more counterparts) signed by all the Directors or all the members of a committee of the Directors (an alternate Director being entitled to sign such a resolution on behalf of his appointor and if such alternate Director is also a Director, being entitled to sign such resolution both on behalf of his appointer and in his capacity as a Director) shall be as valid and effectual as if it had been passed at a meeting of the Directors, or committee of Directors as the case may be, duly convened and held.
126.	A Director or alternate Director may, or other officer of the Company on the direction of a Director or alternate Director shall, call a meeting of the Directors by at least five (5) clear days’ notice in writing to every Director and alternate Director which notice shall set forth the general nature of the business to be considered unless notice is waived by all the Directors (or their alternates) either at, before or after the meeting is held. To any such notice of a meeting of the Directors all the provisions of the Articles relating to the giving of notices by the Company to the Members shall apply mutatis mutandis.
127.	The continuing Directors (or a sole continuing Director, as the case may be) may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to the Articles as the necessary quorum of Directors the continuing Directors or Director may act for the purpose of increasing the number of Directors to be equal to such fixed number, or of summoning a general meeting of the Company, but for no other purpose.
128.	The Directors may elect a chairman of their board and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within thirty minutes after the time appointed for the meeting to commence, the Directors present may choose one of their number to be chairman of the meeting.
129.	All acts done by any meeting of the Directors or of a committee of the Directors (including any person acting as an alternate Director) shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any Director or alternate Director, and/or that they or any of them were disqualified, and/or had vacated their office and/or were not entitled to vote, be as valid as if every such person had been duly appointed and/or not disqualified to be a Director or alternate Director and/or had not vacated their office and/or had been entitled to vote, as the case may be.
130.	A Director who is present at a meeting of the Directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Company immediately after the conclusion of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action.

Secretary and other officers

131. The Directors may by resolution appoint a Secretary and may by resolution also appoint such other officers as may from time to time be required upon such terms as the duration of office, remuneration and otherwise as they may think fit. Such Secretary or other officers need not be Directors and in the case of the other officers may be ascribed such titles as the Directors may decide. The Directors may by resolution remove any Secretary or other officer appointed pursuant to this Article.

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Minutes

132. The Directors shall cause minutes to be made in books kept for the purposes of recording:

(a)	all appointments of officers made by the Directors; and
(b)	all resolutions and proceedings of meetings of the Company, of the holders of any class of shares in the Company, and of the Directors, and of committees of Directors, including the names of the Directors present at each such meeting.

Seal

133.	(a)	The Company may, if the Directors so determine, have a Seal. The Seal shall only be used by the authority of the Directors or of a committee of Directors authorised by the Directors. The Directors may determine who shall sign any instrument to which the Seal is affixed, and unless otherwise so determined every such instrument shall be signed by a Director and by the Secretary or by a second Director.
	(b)	The Company may have for use in any place or places outside the Islands a duplicate Seal or Seals, each of which shall be a reproduction of the Seal of the Company and, if the Directors so determine, shall have added on its face the name of every place where it is to be used.
	(c)	The Directors may by resolution determine (i) that any signature required by this Article need not be manual, but may be affixed by some other method or system of reproduction or mechanical or electronic signature and/or; (ii) that any document may bear a printed reproduction of the Seal in lieu of affixing the Seal thereto.
	(d)	No document or deed otherwise duly executed and delivered by or on behalf of the Company shall be regarded as invalid merely because at the date of the delivery of the deed or document, the Director, Secretary or other officer or person who shall have executed the same or affixed the Seal thereto, as the case may be, for and on behalf of the Company shall have ceased to hold such office and authority on behalf of the Company.

Dividends

134.	Subject to the provisions of the Law, the Company may by Ordinary Resolution declare dividends (including interim dividends) in accordance with the respective rights of the Members, but no dividend shall exceed the amount recommended by the Directors.
135.	Subject to the provisions of the Law, the Directors may declare dividends in accordance with the respective rights of the Members and authorize payment of the same out of the funds of the Company lawfully available therefore. If at any time the share capital is divided into different classes of shares the Directors may pay dividends on shares which confer deferred or non-preferred rights with regard to dividends as well as on shares which confer preferential rights with regard to dividends, but no dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrears. The Directors may also pay at intervals settled by them any dividend payable at a fixed rate if it appears that there are sufficient funds of the Company lawfully available for distribution to justify the payment. Provided the Directors act in good faith they shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of a dividend on any shares having deferred or non-preferred rights.
136.	The Directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they think proper as a reserve or reserves which shall, at the discretion of the Directors, be applicable for meeting contingencies, or for equalising dividends or for any other purpose to which those funds may be properly applied and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares in the capital of the Company) as the Directors may from time to time think fit.
137.	Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. All dividends shall be paid in proportion to the number of shares a Member holds during any portion or portions of the period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly.

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138.	The Directors may deduct from a dividend or other amounts payable to a person in respect of a share any amounts due from him to the Company on account of a call or otherwise in relation to a share.
139.	Any Ordinary Resolution, or Directors’ resolution declaring a dividend may direct that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty arises in regard to such distribution, the Directors may settle the same and in particular may issue fractional certificates and fix the value for distribution of any assets and may determine that cash shall be paid to any Member upon the footing of the value so fixed in order to adjust the rights of Members and may vest any assets in trustees.
140.	Any dividend or other moneys payable on or in respect of a share may be paid by cheque sent by post to the registered address of the person entitled or, if two or more persons are the holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to the registered address of that one of those persons who is first named in the Register of Members or to such person and to such address as the person or persons entitled may in writing direct. Subject to any applicable law or regulations, every cheque shall be made payable to the order of the person or persons entitled or to such other person as the person or persons entitled may in writing direct and payment of the cheque shall be a good discharge to the Company. Any joint holder or other person jointly entitled to a share as aforesaid may give receipts for any dividend or other moneys payable in respect of the share.
141.	No dividend or other moneys payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share.
142.	Any dividend which has remained unclaimed for six years from the date when it became due for payment shall, if the Directors so resolve, be forfeited and cease to remain owing by the Company.

Accounting Records and Audit

143.	The books of account relating to the Company’s affairs shall be kept in such manner as may be determined from time to time by the Directors. The books of account shall be kept at the registered office, or at such other place or places as the Directors think fit, and shall always be open to the inspection of the Directors.
144.	The Directors may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors, and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by applicable law, listing rules of any Designated Stock Exchange, or authorized by the Directors or by Ordinary Resolution.
145.	Subject to Article 143, a printed copy of the Directors’ report, accompanied by the consolidated statements of financial position, profit or loss, comprehensive income (loss), cash flows and changes in shareholders’ equity, including every document required by the Law to be annexed thereto, made up to the end of the applicable financial year, shall be sent to each person entitled thereto at least ten (10) days before the date of the general meeting and laid before the Company at the annual general meeting held in accordance with Article 53 provided that this Article 144 shall not require a copy of those documents to be sent to any person whose address the Company is not aware or to more than one of the joint holders of any shares.
146.	The requirement to send to a person referred to in Article 144 the documents referred to in that Article shall be deemed satisfied where, in accordance with all applicable laws, rules and regulations, including, without limitation, the rules of any Designated Stock Exchange, the Company publishes copies of the documents referred to in Article 144 on the Company’s Web-sites, transmits it to SEC’s website or in any other permitted manner (including by sending any other form of electronic communication), and that person has agreed or is deemed by the Company to have agreed to treat the publication or receipt of such documents in such manner as discharging the Company’s obligation to send to him a copy of such documents.

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147.	Respected Article 147 below, subject to the applicable law and rules of any Designated Stock Exchange, the accounts relating to the Company’s affairs shall be audited in such manner as may be determined from time to time by the Company by Ordinary Resolution or failing any such determination by the Directors or failing any determination as aforesaid shall not be audited.
148.	The Audit Committee (or in the absence of such an Audit Committee, the Board) shall appoint an auditor of the Company who shall hold office until removed from office by a resolution of the Audit Committee (or the Board, as applicable) and shall fix his or their remuneration.
149.	Every auditor of the Company shall have a right of access at all times to the books and accounts of the Company and shall be entitled to require from the Directors and officers of the Company such information and explanation as may be necessary for the performance of the duties of the auditors.

Capitalisation of Profits

150. The Directors may:

(a)	subject as provided in this Article, resolve to capitalize any undivided profits of the Company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of the Company’s share premium account or capital redemption reserve;
(b)	appropriate the sum resolved to be capitalised to the Members who would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by them respectively, or in paying up in full unissued shares or debentures of the Company of a nominal amount equal to such sum, and allot the shares or debentures credited as fully paid to those Members, or as they may direct, in those proportions, or partly in one way and partly in the other;
(c)	resolve that any shares so allotted to any Member in respect of a holding by him of any partly-paid shares rank for dividend, so long as such shares remain partly paid, only to the extent that such partly paid shares rank for dividend;
(d)	make such provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures becoming distributable under this Article in fractions; and
(e)	authorize any person to enter on behalf of all the Members concerned into an agreement with the Company providing for the allotment of them respectively, credited as fully paid, of any shares or debentures to which they may be entitled upon such capitalization, any agreement made under such authority being binding on all such Members.

Share Premium Account

151.	The Directors shall in accordance with Section 34 of the Law establish a share premium account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any share or capital contributed as described in Article 10.
152.	There shall be debited to any share premium account:
	(a)	on the redemption or purchase of a share the difference between the nominal value of such share and the redemption or purchase price provided always that at the discretion of the Directors such sum may be paid out of the profits of the Company or, if permitted by Section 37 of the Law, out of capital; and
	(b)	any other amounts paid out of any share premium account as permitted by Section 34 of the Law.

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Notices

153.	Except as otherwise provided in these Articles, and subject to the rules of any Designated Stock Exchanges, any notice or document may be served by the Company or by the Person entitled to give notice to any Member either personally, or by posting it airmail or air courier service in a prepaid letter addressed to such Member at his address as appearing in the Register, or by electronic mail to any electronic mail address such Member may have specified in writing for the purpose of such service of notices, or by advertisement in appropriate newspapers in accordance with the requirements of any Designated Stock Exchange, or by facsimile or by placing it on the Company’s Website. In the case of joint holders of a Share, all notices shall be given to that one of the joint holders whose name stands first in the Register in respect of the joint holding, and notice so given shall be sufficient notice to all the joint holders.
154.	Notices posted to addresses outside the Cayman Islands shall be forwarded by prepaid airmail.
155.	Any notice or other document, if served by:

(a)	post, shall be deemed to have been served five days after the time when the letter containing the same is posted;
(b)	facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission of the facsimile in full to the facsimile number of the recipient;
(c)	recognized courier service, shall be deemed to have been served 48 hours after the time when the letter containing the same is delivered to the courier service;
(d)	electronic mail, shall be deemed to have been served immediately upon the time of the transmission by electronic mail; or
(e)	placing it on the Company’s Website, shall be deemed to have been served one (1) hour after the notice or document is placed on the Company’s Website.
In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed and duly posted or delivered to the courier service.

156.	A Member present, either in person or by proxy, at any meeting of the Company or of the holders of any class of shares in the Company shall be deemed to have received notice of the meeting, and, where requisite, of the purpose for which it was called.
157.	Any notice or document delivered or sent by post to or left at the registered address of any Member in accordance with the terms of these Articles shall notwithstanding that such Member be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be deemed to have been duly served in respect of any Share registered in the name of such Member as sole or joint holder, unless his name shall at the time of the service of the notice or document, have been removed from the Register as the holder of the Share, and such service shall for all purposes be deemed a sufficient service of such notice or document on all Persons interested (whether jointly with or as claiming through or under him) in the Share.
158.	Notice of every general meeting of the Company shall be given to:

(a)	all Members holding Shares with the right to receive notice and who have supplied to the Company an address, facsimile number or email address for the giving of notices to them; and
(b)	every Person entitled to a Share in consequence of the death or bankruptcy of a Member, who but for his death or bankruptcy would be entitled to receive notice of the meeting.
No other Person shall be entitled to receive notices of general meetings.

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Winding Up

159.

If the Company is wound up, the liquidator may, with the sanction of a Special Resolution and any other sanction required by the Law, divide among the Members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the Members as he with the like sanction determines, but no Member shall be compelled to accept any assets upon which there is a liability.

160.

If the Company shall be wound up and the assets available for distribution amongst the Members as such shall be insufficient to repay the whole of the paid up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up, on the shares held by them respectively. And if in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst the Members in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. This Article is to be without prejudice to the rights of the holders of shares issued upon special terms and conditions.

Indemnity

161.	(a)	Every Indemnified Person for the time being and from time to time of the Company and the personal representatives of the same shall be indemnified and secured harmless out of the assets and funds of the Company against all actions, proceedings, costs, charges, expenses, losses, damages, liabilities, judgments, fines, settlements and other amounts (including reasonable attorneys’ fees and expenses and amounts paid in settlement and costs of investigation (collectively “Losses”) incurred or sustained by him otherwise than by reason of his own dishonesty in or about the conduct of the Company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any Losses incurred by him in defending or investigating (whether successfully or otherwise) any civil, criminal, investigative and administrative proceedings concerning or in any way related to the Company or its affairs in any court whether in the Islands or elsewhere. Such Losses incurred in defending or investigating any such proceeding shall be paid by the Company as they are incurred upon receipt, in each case, of an undertaking by or on behalf of the Indemnified Person to repay such amounts if it is ultimately determined by a non-appealable order of a court of competent jurisdiction that such Indemnified Person is not entitled to indemnification hereunder with respect thereto. However, the Company will not indemnify its directors, officers, or persons controlling it for liabilities arising under the Securities Act, because it is the SEC’s opinion that such indemnification is against public policy as expressed in such act and is, therefore, unenforceable.
	(b)	No such Indemnified Person of the Company and the personal representatives of the same shall be liable (i) for the acts, receipts, neglects, defaults or omissions of any other Director or officer or agent of the Company or (ii) by reason of his having joined in any receipt for money not received by him personally or in any other act to which he was not a direct party for conformity or (iii) for any loss on account of defect of title to any property of the Company or (iv) on account of the insufficiency of any security in or upon which any money of the Company shall be invested or (v) for any loss incurred through any bank, broker or other agent or any other party with whom any of the Company’s property may be deposited or (vi) for any loss, damage or misfortune whatsoever which may happen in or arise from the execution or discharge of the duties, powers, authorities or discretions of his office or in relation thereto or (vii) for any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgement or oversight on such Person’s part, unless he has acted dishonestly, with willful default or through fraud.
	(c)	The Company hereby acknowledges that certain Indemnified Persons may have certain rights to indemnification, advancement of expenses and/or insurance from or against (other than directors’ and officers’ or similar insurance obtained or maintained by or on behalf of the Company or any of its subsidiaries, including any such insurance obtained or maintained pursuant to Article 161 hereof) the Other Indemnitors. The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to an Indemnified Person are primary and any obligation of the Other Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Indemnified Person are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by an Indemnified Person and shall be liable for the full amount of all Losses to the extent legally permitted and as required by the terms of these Articles (or any other agreement between the Company and an Indemnified Person), without regard to any rights an Indemnified Person may have against the Other Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Other Indemnitors from any and all claims against the Other Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Other Indemnitors on behalf of an Indemnified Person with respect to any claim for which such Indemnified Person has sought indemnification from the Company shall affect the foregoing and respected Article 164 below, the Other Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Indemnified Person against the Company. For the avoidance of doubt, no Person or entity providing Directors’ or officers’ or similar insurance obtained or maintained by or on behalf of the Company or any of its subsidiaries, including any Person providing such insurance obtained or maintained pursuant to Article 161 hereof shall be an Other Indemnitor.

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162.	The Directors may exercise all the power of the Company to purchase and maintain insurance for the benefit of a Person who is or was (whether or not the Company would have the power to indemnify such Person against such liability under the provisions of Article 160 or under applicable law):
	(a)	a Director, alternate Director, Secretary or auditor of the Company or of a company which is or was a subsidiary undertaking of the Company or in which the Company has or had an interest (whether direct or indirect); or
	(b)	the trustee of a retirement benefits scheme or other trust in which a person referred to in the preceding paragraph is or has been interested,
		indemnifying him against any liability which may lawfully be insured against by the Company.

Financial Year

163. Unless the Directors otherwise prescribe, the financial year of the Company shall end on 30th September in each year and, following the year of incorporation, shall begin on 1stOctober each year.

Amendment of Memorandum and Articles

164.	(a)	Subject to the Law, the Company may by Special Resolution change its name or change the provisions of the Memorandum with respect to its objects, powers or any other matter specified therein.
	(b)	Subject to the Law and as provided in these Articles, the Company may at any time and from time to time by Special Resolution, alter or amend these Articles in whole or in part.

Claims Against the Company

165. Notwithstanding Article 160(c), unless otherwise determined by a majority of the Board, in the event that (i) any Member (the “Claiming Party”) initiates or asserts any claim or counterclaim (“Claim”) or joins, offers substantial assistance to or has a direct financial interest in any Claim against the Company and (ii) the Claiming Party (or the third party that received substantial assistance from the Claiming Party or in whose Claim the Claiming Party had a direct financial interest) does not obtain a judgment on the merits in which the Claiming Party prevails, then each Claiming Party shall, to the fullest extent permissible by law, be obligated jointly and severally to reimburse the Company for all fees, costs and expenses (including, but not limited to, all reasonable attorneys’ fees and other litigation expenses) that the Company may incur in connection with such Claim.

Transfer by way of Continuation

166.

The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing.

In furtherance of a resolution adopted pursuant to this Article, the Directors may cause an application to be made to the Registrar of Companies to deregister the Company in the Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the Company.

Information

167. No Member shall be entitled to require discovery of or any information respecting any detail of the Company’s trading or any matter which is or may be in the nature of a trade secret or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interests of the Members of the Company to communicate to the public.

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EX-2.2

EXHIBIT 2.2

Description of Securities

Registered under Section 12 of the Securities Exchange Act of 1934

As of September 30, 2023, Farmmi, Inc. (the “Company,” “we,” “our” or “us”) had one class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, as follows:

Title of each class	Symbol	Name of each exchange on which registered
Ordinary Shares, par value US$0.20 per share	FAMI	Nasdaq Capital Market

Capitalized terms used but not defined herein shall have the meanings given to them in the annual report on Form 20-F.

Description of Ordinary Shares

The following is a summary of material provisions of our currently effective amended and restated memorandum and articles (the “Memorandum and Articles”), as well as the Companies Act (As Amended) of the Cayman Islands (the “Companies Act”) insofar as they relate to the material terms of our ordinary shares. Notwithstanding this, because it is a summary, it may not contain all the information that you may otherwise deem important. For more complete information, you should read the entire Memorandum and Articles, filed herewith.

Type and Class of Securities

We have one class of ordinary shares. The par value of our ordinary shares is US$0.20 per share. The number of ordinary shares that had been issued as of the end of the latest fiscal year is provided on the cover of the annual report on Form 20-F for such fiscal year.

All of our issued and outstanding ordinary shares are issued credited as fully paid and non-assessable. Our ordinary shares may be held in either certificated or uncertificated form.

Preemptive Rights

The ordinary shares are not subject to any pre-emptive or similar rights under the Companies Act or pursuant to the Memorandum and Articles.

Limitations or Qualifications

Each ordinary share entitles the holder thereof to one vote on all matters subject to the vote at general meetings of our company, voting together as one class.

Rights of Other Types of Securities

Not applicable.

Rights of ordinary shares

Ordinary Shares

Our authorized share capital is US$100,000,000 divided into 500,000,000 ordinary shares of US$0.20 nominal or par value each. All of our issued and outstanding ordinary shares are fully paid and non-assessable. 

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Dividends

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors, subject to the Companies Act and our Memorandum and Articles. Our Memorandum and Articles provide that dividends may be declared and paid out of funds of our Company lawfully available therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.

Voting rights

Subject to any rights or restrictions as to voting attached to any shares, unless any share carries special voting rights, on a show of hands every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote per Ordinary Share. On a poll, every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote for each share of which he or the person represented by proxy is the holder. In addition, all shareholders holding shares of a particular class are entitled to vote at a meeting of the holders of that class of shares. Votes may be given either personally or by proxy. 

Transfer of Ordinary Shares

Any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.

However, our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which our company has a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:

(a)	the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
(b)	the instrument of transfer is in respect of only one class of ordinary shares;
(c)	the instrument of transfer is properly stamped, if required;
(d)	the ordinary shares transferred are fully paid up and free of any lien in favor of us; and
(e)	any applicable fee of such maximum sum as the applicable stock exchange may determine to be payable, or such lesser sum as our board of directors may from time to time require, related to the transfer is paid to us.

If our directors refuse to register a transfer, they are required, within three months after the date on which the instrument of transfer was lodged, to send to each of the transferor and the transferee notice of such refusal.

Liquidation

On a winding up of our company, if the assets available for distribution among our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus will be distributed among our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by its shareholders in proportion to the par value of the shares held by them.

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Calls on ordinary shares and forfeiture of ordinary shares

Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. Any ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

Requirements to Change the Rights of Holders of Ordinary Shares

If at any time the share capital is divided into different classes of shares, the rights attached to any class of shares (unless otherwise provided by these Articles or the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of two-thirds of the issued shares of that class or with the sanction of a Special Resolution passed at a separate general meeting of the holders of the shares of that class. The necessary quorum shall be one or more persons holding or representing by proxy at least one-third in nominal or par value amount of the issued shares of the relevant class (but so that if at any adjourned meeting of such holders a quorum as above defined is not present, those shareholders who are present shall form a quorum).

The rights conferred upon the holders of the shares of any class issued with preferred or other rights will not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be materially adversely varied by the creation or issue of further shares ranking pari passu with or subsequent to such existing class of shares or the redemption or purchase of any shares of any class by us.

Limitations on the Rights to Own Ordinary Shares

There are no limitations under the laws of the Cayman Islands or under the Memorandum and Articles that limit the right of non-resident or foreign owners to hold or vote ordinary shares.

Provisions Affecting Any Change of Control

Anti-Takeover Provisions. Some provisions of our Memorandum and Articles may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and Articles for a proper purpose and for what they believe in good faith to be in the best interests of our company.

Ownership Threshold

There are no provisions under the laws of the Cayman Islands or under the Memorandum and Articles that govern the ownership threshold above which shareholder ownership must be disclosed.  

Differences Between the Law of Different Jurisdictions

The Companies Act is modelled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.

Mergers and Similar Arrangements

A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be approved by the directors of each constituent company and authorization by a special resolution of the members of each constituent company.

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A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.

The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.

Save in certain circumstances, a dissentient shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

· the statutory provisions as to the required majority vote have been met;

· the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;

· the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.

When a takeover offer is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.

If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits

In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoing principle, including when:

· a company acts or proposes to act illegally or ultra vires;

· the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and

· those who control the company are perpetrating a “fraud on the minority.”

Indemnification of Directors and Executive Officers and Limitation of Liability

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Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud which may attach to such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we intend to enter into indemnification agreements with our directors and senior executive officers that will provide such persons with additional indemnification beyond that provided in our Memorandum and Articles.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Anti-Takeover Provisions in the Memorandum and Articles of Association

Some provisions of our Memorandum and Articles may discourage, delay or prevent a change in control of our company or management that shareholders may consider favourable, including provisions that authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and Articles, as amended and restated from time to time, for what they believe in good faith to be in the best interests of our company.

Directors’ Fiduciary Duties

Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

Shareholder Action by Written Consent

Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Our Memorandum and Articles provide that shareholders may not approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.

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Shareholder Proposals

Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings or allow our shareholders to requisition a shareholders’ meeting. Our Memorandum and Articles allow our shareholders to requisition shareholders’ meetings.

Cumulative Voting

Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. As permitted under Cayman Islands law, our Memorandum and Articles do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.

Removal of Directors

Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our Memorandum & Articles, directors may be removed with or without cause, by an ordinary resolution of our shareholders. 

Transactions with Interested Shareholders

The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.

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Dissolution; Winding Up

Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.

Under the Companies Act and our Memorandum and Articles, our company may be dissolved, liquidated or wound up by the vote of holders of two-thirds of our shares voting at a meeting.

Variation of Rights of Shares

Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our Memorandum and Articles, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Amendment of Governing Documents

Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands law, our Memorandum and Articles may only be amended by a special resolution of shareholders.

Rights of Non-Resident or Foreign Shareholders

There are no limitations imposed by our Memorandum and Articles on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Memorandum and Articles governing the ownership threshold above which shareholder ownership must be disclosed.

Directors’ Power to Issue Shares

Subject to applicable law, our board of directors is empowered to issue or allot shares or grant options and warrants with or without preferred, deferred, qualified or other special rights or restrictions.

Changes in Capital

We may from time to time by ordinary resolution:

· increase the share capital by new shares of the amount fixed by that ordinary resolution and with the attached rights, priorities and privileges set out in that ordinary resolution;

· consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;

· convert all or any of our paid up shares into stock, and reconvert that stock into paid up shares of any denomination;

· sub-divide our existing shares, or any of them into shares of a smaller amount than that fixed by the our Memorandum, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced ordinary share shall be the same as it was in case of the ordinary share from which the reduced ordinary share is derived; and

· cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the ordinary shares so cancelled or, in the case of shares without nominal par value, diminish the number of shares into which its capital is divided.

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We may by special resolution, subject to any confirmation or consent required by the Companies Act, reduce our share capital or any capital redemption reserve in any manner permitted by law.

Debt Securities

Not applicable.

Warrants and Rights

Not applicable.

Other Securities

Not applicable.

Description of American Depositary Shares

Not applicable.

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EX-4.3

EXHIBIT 4.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement“) is signed on December 7, 2023, effective as of April 1 , 2023 (the “Effective Date“) by and between DEHENG ZHANG (“Employee“) and FARMMI, INC.

WHEREAS, Farmmi desires to employ Employee as the Chief Operating Officer of Farmmi, Inc., the parent company of its subsidiaries (all referred to collectively herein as “Farmmi“); and

WHEREAS, Employee and Farmmi desire to establish and govern the employment relationship under the terms and conditions set forth in this Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein, the adequacy of which is acknowledged, Employee and Farmmi hereby agree as follows:

1. Employment. Employee is being employed by Farmmi as the Chief Operating Officer upon and subject to the terms and conditions of this Agreement. During the term of his employment under this Agreement, Employee shall report to Farmmi’s Chief Executive Officer and Board of Directors, or to such other persons as Farmmi may designate from time to time. Farmmi reserves the right to change Employee’s title, duties, and reporting relationships as may be determined by it to be in the best interests of Farmmi.

2. Duties.

(a) During the term of his employment under this Agreement, Employee will perform his duties hereunder at such time or times as Farmmi may reasonably request. Employee’s duties may be varied by Farmmi from time to time without violating the terms of this Agreement and shall include: (i) devoting his best efforts and his entire business time to further properly the interests and revenues of Farmmi to the satisfaction of Farmmi, (ii) being subject to Farmmi’s direction and control at all times with respect to his activities on behalf of Farmmi, (iii) complying with all rules, orders, regulations, policies, practices and decisions of Farmmi, (iv) truthfully and accurately maintaining and preserving all records and making all reports as Farmmi may require, and (v) fully accounting for all monies and other property of Farmmi of which he may from time to time have custody and delivering the same to Farmmi whenever and however directed to do so.

(b) In performing his duties, Employee shall not undertake any action inconsistent with or harmful to the best interests of Farmmi. Employee shall perform his duties and responsibilities in a professional manner and consistent with the overall goals and objectives of Farmmi and applicable federal, state, and local law.

(c) In performing his duties, Employee shall be familiar with and shall comply with: (i) all applicable federal, state, and local laws and regulations; (ii) the policies and decisions of Farmmi’s Board of Directors; and (iii) all policies, procedures, and requirements enacted by Farmmi’s Board of Directors, as they may be amended from time to time. Employee agrees to adhere to and support Farmmi’s policies and practices as set forth in any employee handbook or policy manual. Employee acknowledges and agrees that Farmmi may amend or update its employee handbooks or policy manuals from time to time by written notice to Employee.

(d) During his employment with Farmmi, Employee shall devote his full time, attention, and best efforts to the operations of Farmmi and the fulfillment of his duties. Employee agrees that, during his employment with Farmmi, he will exercise the highest degree of loyalty and will conduct his duties with the highest degree of care. During his employment with Farmmi, Employee shall not directly or indirectly engage in any other business activity, whether as an employee, employer, consultant, principal, officer, or otherwise and whether or not done for compensation, gain, or other financial or economic advantage.

3. Compensation.

(a) For all services rendered by Employee to Farmmi, Hangzhou Nongyuan Network Technology Co., Ltd., a PRC company (“Nongyuan Network“) (also referred to as 杭州农源网络科技有限公司 in Chinese) shall pay Employee an base gross annual salary of Seventy Eight Thousand US Dollor ($78,000). Employee’s annual gross salary will be paid to Employee in accordance with Nongyuan Network’s standard payroll policies and practices, beginning with the first regularly scheduled pay date following the Effective Date of this Agreement. Employee understands and acknowledges that the base gross annual salary to be paid to him under this Agreement will be reduced by all applicable federal and state payroll and withholding taxes and any other deductions authorized by Employee for the provision of employee benefits or otherwise. Nongyuan Network will conduct an annual performance review of Employee, and any changes in Employee’s salary shall be determined in the sole discretion of Nongyuan Network.

4. Expenses. Farmmi shall reimburse Employee for all ordinary and necessary out-of-pocket expenses incurred and paid by Employee in the course of the performance of Employee’s duties pursuant to this Agreement, provided that Employee incurred such expenses consistent with Farmmi’s policies in effect from time to time with respect to travel, entertainment and other business expenses. To receive such expenses reimbursement, Employee shall submit written requests, along with supporting documentation and/or receipts, in compliance with Farmmi’s requirements with respect to the manner of approval and reporting of such expenses.

5. Additional Benefits.

(a) Subject to meeting the eligibility requirements to participate in such plans under the terms and conditions established by the plans, Employee shall be eligible to participate in all employee benefits programs provided by Farmmi to its employees, as such may be established and modified from time to time in the discretion of Farmmi. However, nothing contained in this Agreement shall be construed to obligate Farmmi in any manner to maintain any existing plans, put into effect any plans not presently in existence, or provide special benefits to Employee.

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(b) During the term of this Agreement, Employee shall be entitled to all national statutory annual paid vacation leave per year. Employee understands and agrees that all vacation time shall be approved by the Chief Executive Officer before Employee takes such leave. Employee’s ability to carry over unused vacation leave from year to year and to receive payment for unused vacation leave upon termination of employment shall be governed by Farmmi’s policies in existence at the time of such occurrence.

6. Indemnity. Farmmi will indemnify Employee against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings to which Employee is party or are threatened to be made a party by reason of Employee acting as the Chief Operating Officer. To be entitled to indemnification, Employee must have acted honestly and in good faith with a view to the best interest of Farmmi and, in the case of criminal proceedings, Employee must have had no reasonable cause to believe Employee’s conduct was unlawful. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission. These provisions will not limit Employee’s liability under United States federal securities laws.

7. Termination.

(a) Either party may terminate this Agreement at any time, for any reason or for no reason, with or without cause, upon thirty (30) days’ written notice to the other party.

(b) Notwithstanding Paragraph 7(a) above, Employee’s employment with Farmmi shall terminate immediately upon: (i) the death, disability, or adjudication of legal incompetence of Employee; (ii) Farmmi’s ceasing to carry on its business without assigning this Agreement; or (iii) Farmmi becoming bankrupt. For purposes of this Agreement, Employee shall be deemed to be disabled when Employee has become unable, by reason of physical or mental disability, to satisfactorily perform the essential functions of his job and there is no reasonable accommodation that can be provided to enable him to perform satisfactorily those essential functions. Such matters shall be determined by, or to the reasonable satisfaction of, Farmmi.

(c) Notwithstanding Paragraph 7(a) above, Farmmi may immediately terminate this Agreement for cause, effective upon the provision of notice to Employee, for the following reasons: (i) Employee’s repeated failure to satisfactorily and substantially perform his duties as an employee of Farmmi (other than any such failure resulting from a disability), which failure has continued without remedy for more than thirty (30) days after Farmmi has provided written notice thereof; (ii) Employee’s dishonesty, incompetence, willful misconduct, gross negligence, or breach of fiduciary duty; (iii) failure to comply with the lawful directives of Farmmi’s Board of Directors; (iv) failure to abide by and/or comply with any laws or regulations governing or relating to the operations of Farmmi; (v) failure to abide by and/or comply with any other applicable laws, including, but not limited to, laws prohibiting discrimination and harassment in the workplace; (vi) theft, misappropriation, or misuse of Farmmi’s property or assets; (vii) Employee’s conviction of or plea of guilty or nolo contendere to any felony or any other crime involving theft, dishonesty, or fraudulent conduct; or (viii) breach of Employee’s obligations under this Agreement.

(d) In the event Employee’s employment with Farmmi is terminated by Employee or Employer for any or no reason, Farmmi shall pay or provide to Employee any salary that Employee shall have earned and not yet received through the date of such employment termination, determined on a pro rata basis based on the number of work days in the month of termination.

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8. Employee Covenants.

(a) Non-Disclosure and Return of Confidential Information.

(i) Employee acknowledges that, as an employee of Farmmi, Employee will be provided access to, and may develop or assist in developing on Farmmi’s behalf, confidential and proprietary information and trade secrets. As used in this Agreement, “Confidential Information“ shall be deemed to include, but shall not be limited to, information and materials related to Farmmi’s business procedures, methods, and manufacturing processes for producing its products; marketing plans and strategies; customer lists, business histories, customer presentations, strategic business opportunities and plans; market research, analyses of customer information, and prospective customer lists; pricing of goods sold, margins, and sales strategies; accounting, operational, organizational, and financial data, processes, and services; technical know-how; research and development; proprietary computer software and hardware; and any other information that is not generally known to the public or within the industry in which Farmmi competes. “Confidential Information“ shall also be deemed to include information or material received by Farmmi from others and intended by them to be kept in confidence by its recipients. “Confidential Information“ shall not include Employee’s general skills and knowledge concerning general business practices not specific to Farmmi’s business, nor shall it include information that has become widely disseminated and generally available to the public through no wrongful act or omission on the part of Employee.

(ii) At all times during and after employment with Farmmi, Employee shall take all reasonable steps necessary to preserve the confidential and proprietary nature of Confidential Information and to prevent the inadvertent or accidental disclosure of Confidential Information. Employee will not use, disclose, transfer, or make available any Confidential Information other than: (i) as required by the proper performance of Employee’s duties for Farmmi; (ii) as authorized by Farmmi; and (iii) as required by an order or subpoena from a court of competent jurisdiction and/or administrative agency, provided that, prior to such disclosure, Employee promptly notifies Farmmi so that Farmmi may take appropriate action with such court or agency to protect its Confidential Information. Employee will not remove any Confidential Information from Farmmi’s premises or make copies of such materials except for use in Farmmi’s business. Employee shall not retain any tangible, intangible, or electronic copies of any Confidential Information after the termination of his employment with Farmmi for any reason.

(iii) If part of the Confidential Information is known by public, but other parts or the whole is not public knowledge yet, the whole Confidential Information still has confidential value. Employee agrees to have non-disclosure covenant for such Confidential Information. Employee shall not disclose such information directly or indirectly, or solicit any third party to put together Confidential Information by collecting the public part(s).

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(iv) During his employment with Farmmi, for the interest of Farmmi, Employee shall promptly report to Farmmi the Confidential Information arising out of work, submit a written report, and assist Farmmi to obtain the right of such information. Such Confidential Information shall be owned Farmmi exclusively. During employment with Farmmi, employee shall fully disclose all of his conceptions about Farmmi’s business to Farmmi.

(v) The compensation paid to Employee by Farmmi has included all the consideration for Employee to perform the covenants in Paragraph 8(a).

(vi) Employee warrants that, unless Employee has stated to Farmmi in writing, Employee’s usage or disclosure of any confidential information during employment with Farmmi does not violate any confidentiality agreement between Employee and any previous employer or other party. No matter if Employee is bound by such confidentiality agreement, Employee shall not disclose it to Farmmi, or solicit Farmmi to use any confidential information of Employee’s any previous employer or other party.

(b) Non-Compete.

(i) Employee acknowledges that, during the course of his employment, Employee will be granted access to and may develop or assist in developing Farmmi’s Confidential Information and goodwill. Employee recognizes and agrees that in light of his extensive access to and knowledge of such Confidential Information and in order to protect Farmmi’s goodwill with its customers, Farmmi has a reasonable and legitimate interest in protecting itself from unfair competition as set forth in subsection (ii).

(ii) Non-Compete Period is the course of employment with Farmmi and a period of two (2) years after Employee’s employment with Farmmi ceases (whether voluntarily or involuntarily and for whatever reason) . During the Non-Compete Period, Employee shall not, on his own behalf or on behalf of any other person or entity, compete with Farmmi by engaging in a position where Employee holds any registered or beneficial ownership/stock interest, or as its employee, consultant, management, director or other capacity, holds any interest of any company or entity that competes with the goods and services provided by Farmmi, or helps or assists such company by any way; (ii) usurp business opportunities provided by other parties to Farmmi, use Farmmi’s resources to create any business opportunity for himself; take commission fee related to Farmmi’s transactions, sign contracts or conduct transactions with Farmmi without proper approval under internal rules of Farmmi; or conduct other actions detrimental to Farmmi’s interests and/or competitive position, (iii) use any of Farmmi’s names, any other name that Farmmi uses to operate business, or any similar name, or use such name to build or create any entrepreneur entity, organization or domain name, or use it in any other way without written consent of Farmmi, or (iv) call himself employee of Farmmi or related with Farmmi in any way, after termination of his employment with Farmmi. This restriction shall only apply within any geographic area serviced by Employee for Farmmi at any time during the one (1) year period preceding Employee’s termination of employment.

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(iii) During the Non-Compete Period, if Employee continues performing all the covenants in Paragraph 8(b), Farmmi will pay Employee compensation. The calculation of such compensation is: if Employee continues performing non-compete covenant within twenty (24) months after the termination of employment, Farmmi will pay Employee compensation equaling to six (6) months of base salary prior to the termination of employment and pay it month by month. Employee confirms that such compensation is enough and reasonable. Employee further agrees that Farmmi has the right at its sole discretion to choose to pay consideration for Employee to perform the covenants in Paragraph 8(b), or choose to cease payment of consideration to waive Employee’s covenants in Paragraph 8(b). Farmmi has the right at its sole discretion to require Employee to continue to perform the non-compete covenant (but the term shall not exceed 24 months after the termination of the employment).

(iv) The benefits obtained (including already obtained or agreed to obtain) by Employee through conducting restricted actions in the Non-Compete Period shall belong to Farmmi.

(c) Non-Solicitation of Customers. Employee specifically agrees that, at all times during his employment with Farmmi and for a period of two (2) years Employee will not solicit or offer to any Customer of Farmmi any goods or services that compete with the goods or services provided by Farmmi. For purposes of this Agreement, the term “Customer“ means: (i) any person or entity that contracted with Farmmi for goods or services at any time during the twelve (12) month period preceding the Employee‘s termination of employment; and (ii) any person or entity to whom Farmmi made a proposal or presentation for the provision of goods or services at any time during the six (6) month period preceding Employee’s termination of employment. Except as set forth in Paragraph 8(b), this restriction is not intended to prohibit Employee from providing goods or services to persons or entities who are not Customers of Company.

(d) Non-Solicitation of Employees. Employee specifically agrees that, at all times during his employment with Farmmi and for a period of two (2) years after Employee’s employment with Farmmi ceases (whether voluntarily or involuntarily and for whatever reason), Employee shall not, on Employee’s own behalf or on behalf of any other person or entity, hire, recruit, solicit for employment, or assist in solicitation or hiring any other employee who works for Farmmi. This includes, but is not limited to: (i) providing to any such prospective employer the identities of any of Farmmi’s employees; (ii) providing to any such prospective employer information about the quantity of work, quality of work, special knowledge, or personal characteristics of any person who is still employed at the Farmmi at the time such information is provided; and/or (iii) assisting any of Farmmi’s employees in obtaining employment with any such prospective employer through the dissemination of resumes and applications, or otherwise. Employee also specifically agrees that he will not provide the information set forth in subparts (i), (ii), or (iii) above to any prospective employer during interviews preceding possible employment.

(e) Intellectual Property.

(i) Employee agrees to disclose to Farmmi all inventions, ideas, works of authorship and other trade secrets made, developed and/or conceived by him and arising out of Employee’s employment at all times during his employment with Farmmi and for a period of one (1) year.

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(ii) Employee further agrees that all such inventions, ideas, works of authorship and other trade secrets made shall be “works made for hire“ and that Farmmi shall be deemed the author thereof under the U.S. Copyright Act or other applicable law, and all work product is and shall be free from any claim or retention of rights thereto on the part of Employee.

(iii) In any event and at any time, Employee hereby irrevocably assigns to Farmmi any and all right, title interest in such inventions, ideas, works of authorship and other trade secrets made, including any and all patents and/or copyrights in connection with any of the foregoing, and agrees to do any and all acts necessary, and sign any and all instruments, which Farmmi may request to secure all rights related to the foregoing in the United States or in any foreign country.

(iv) By exhibit to this Agreement, Employee lists all inventions he owns, including the ones he invents by himself and the ones he invents with others. All the inventions, completed prior to the employment with Farmmi, and owned by Employee, or although owned by third party but Employee can use within the scope of agreement, are called Prior Inventions. If no exhibit discloses such inventions, it deems that Employee states such Prior Invention does not exist. If, during his employment with Farmmi, Employee uses any Prior Invention on products, service, procedure, or machine equipment of Farmmi, Farmmi automatically gets non-exclusive, free, irrevocable, permanent and global license (including sublicensing to others through different levels of sublicense) to produce, modify, use and sell such Prior Invention. In light of the foregoing, Employee agrees that, without prior written consent of Farmmi, Employee shall not use any Prior Invention which has been used on Farmmi’s products or service, or authorize others to use.

(v) During his employment with Farmmi, Employee confirms the compensation paid from Farmmi to Employee fully covers the work for enforcing the invention, such as proposal of concept, creation, development, improvement or simplification. Employee represents to give up all legal priority rights to apply patent or trademark, rights to transfer any invention or technology products, and rights to claim or challenge the ownership of “works made for hire.“

(vi) Employee acknowledges and agrees that the covenants and rights in Paragraph 8(e) will be effective for an indefinite period, and will not be restricted by the termination of employment with Farmmi.

(f) Return of Company Property.

Upon the request of Farmmi or upon the termination of Employee’s employment with Farmmi for any reason, Employee shall return to Farmmi: (a) all Confidential Information; (b) all other records, designs, patents, business plans, financial statements, manuals, memoranda, lists, correspondence, reports, records, charts, advertising materials, and other data or property delivered to or compiled by Employee by or on behalf of Farmmi or its operating subsidiaries, or their representatives, vendors, or customers that pertain to Farmmi’s business, whether in paper, electronic, or other form; and (c) all keys, credit cards, computers, telephones, PDA’s, equipment, and other property of Farmmi. Employee shall not retain or cause to be retained any copies of the foregoing. Employee hereby agrees that all of the foregoing shall be and remain the property of Farmmi, and be subject, at all times to its discretion and control.

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(g) Enforcement.

(i) Employee and Farmmi have examined in detail the covenants and restrictions set forth in Paragraph 8 (including all subsections) of this Agreement and agree that the restraints imposed upon Employee are reasonable in light of the legitimate interests of Farmmi and are not unduly restrictive of Employee’s ability to earn a living following the termination of his employment.

(ii) Employee understands and agrees that the covenants and restrictions set forth in Paragraph 8 (including all subsections) of this Agreement survive the termination of his employment (regardless of the reason) and remain binding and enforceable against him according to the restrictions’ respective terms.

(iii) If any of the covenants contained in Paragraph 8 (including all subsections) of this Agreement are held by a court or other enforcement authority to be overly broad by reason of time period, geography or scope, the court shall modify any time period, geography or scope deemed overly broad to the maximum time period, geography or scope that such court or other enforcement authority finds reasonable and enforceable in light of all the circumstances present at the time such determination is made and this Agreement shall be deemed to be amended at such time to reflect such determination.

(iv) Employee agrees that a breach by him of any of the covenants and restrictions set forth in Paragraph 8 (including all subsections) of this Agreement will result in irreparable injury to Farmmi for which a remedy at law shall be insufficient. Employee agrees that in the event of a breach or threatened breach of such covenants, Farmmi shall be entitled to temporary, preliminary, and permanent injunctive relief without the need to prove irreparable harm and without the necessity of placing a bond for such injunction. The application of any form of injunctive relief shall not make any other legal or equitable remedy unavailable.

(v) In the event that the Employee is found by a court or other enforcement authority to have breached any of the covenants and restrictions set forth in Paragraph 8 (including all subsections) of this Agreement, then the time periods set forth in such restrictions, if any, shall automatically be extended by the length of time which Employee shall have been in breach of any of said provisions.

9. Survival of Obligations. All obligations of Employee that by their nature involve performance after the expiration or termination of Employee’s employment with Farmmi, or that cannot be ascertained to have been fully performed until after the expiration or termination of Employee’s employment with Farmmi, shall survive the expiration or termination of this Agreement. Except as otherwise specifically provided in this Agreement, all of Farmmi’s obligations under this Agreement will terminate at the time this Agreement or Employee’s employment with Farmmi is terminated for any reason.

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10. Notice. Any notice, request, consent or communication under this Agreement shall be effective only if it is in writing and personally delivered or sent by certified mail, return receipt requested, postage prepaid, or by a nationally recognized overnight delivery service, with delivery confirmed, addressed as follows:

If to Farmmi:	Farmmi, Inc. Fl 1, Building No. 1, 888 Tianning Street, Liandu District Lishui, Zhejiang Province People’s Republic of China 323000
With a Copy to:	Anthony W. Basch Kaufman & Canoles, P.C. Two James Center, 14th Floor 1021 E. Cary St. Richmond, VA 23219
If to Employee:	DEHENG ZHANG Fl 1, Building No. 1, 888 Tianning Street, Liandu District Lishui, Zhejiang Province People’s Republic of China 323000

or such other persons and/or addresses as shall be furnished in writing by any party to the other party, and shall be deemed to have been given only upon its delivery in accordance with this Paragraph 10.

11. No Conflicts. Employee represents and warrants to Farmmi that neither the execution nor delivery of this Agreement, nor the performance of Employee’s obligations hereunder will conflict with, or result in a breach of, any term, condition, or provision of, or constitute a default under, any obligation, contract, agreement, covenant or instrument to which Employee is a party or under which Employee is bound, including, but not limited to, the breach by Employee of a fiduciary duty to any former employers.

12. Defined Terms. A term defined in any part of this Agreement shall have the defined meaning wherever the term is used in this Agreement.

13. Assignment.

(a) This Agreement may be assigned by Farmmi to any successor, subsidiary or affiliated entity or in connection with sale, merger, or consolidation of Farmmi with another entity. Additionally, this Agreement shall be deemed to have been assigned without any further action on the part of Farmmi to a successor entity in the event of a sale, merger, or consolidation of Farmmi. Such assignment may occur without prior notice to Employee and without the provision of any additional consideration to Employee.

9

(b) Employee understands and agrees that the duties and obligations of Employee under this Agreement are personal in nature and cannot be assigned, in whole or in part, by Employee.

14. Waiver.

(a) Any failure of any party on one or more occasions to enforce or require the strict keeping and performance of any of the terms and conditions of this Agreement shall not constitute a waiver of such terms and conditions of this Agreement, shall not constitute a waiver of such term or condition at any future time, and shall not prevent any party from insisting on the strict keeping and performance of such terms and conditions at a later time.

(b) The existence of any claim or cause of action of the Employee against Farmmi, whether predicated upon an alleged breach of this Agreement or otherwise, shall not relieve Employee of his obligations under this Agreement and shall not constitute a defense to the enforcement by Farmmi of any provision of this Agreement, including but not limited to the covenants contained in Paragraph 8 of this Agreement.

15. Governing Law. This Agreement is deemed to have been entered into in China and shall be construed and interpreted at all times and in all respects in accordance with the laws of China without regard to the principles of conflicts of laws, and jurisdiction and venue for any action relating in any manner to this Agreement shall be in a court of competent jurisdiction located in or having jurisdiction over China.

16. Attorneys’ Fees. In the event there is any litigation to enforce this Agreement, the prevailing party will be awarded its/his costs, expenses, and reasonable attorneys’ fees.

17. Severability. In the event that any provision of this Agreement shall be determined by a court or tribunal having proper jurisdiction to be invalid, or illegal, or unenforceable, the remainder of this Agreement shall not be affected but shall continue in full force and effect as though such invalid, illegal or unenforceable provision were not originally part of this Agreement.

18. Amendment. This Agreement may not be amended or modified except by an agreement in writing signed by all the parties hereto.

19. Construction of Agreement. Each party to this Agreement agrees and acknowledges that no presumption, inference, or conclusion of any kind shall be made or drawn against the drafter or drafter(s) of this Agreement. Each party to this Agreement also agrees and acknowledges that he/it has contributed to the final version of this Agreement through comments and negotiations.

20. Headings. The headings used in this Agreement are for convenience only and shall not be used to construe or interpret the meaning or intent of any provision.

10

21. Entire Agreement. This Agreement represents and contains the entire agreement and understanding between the parties with respect to the terms and conditions of this Agreement and supersedes any and all prior and contemporaneous written and oral agreements, understandings, representations, inducements, promises, warranties, and conditions between the parties with respect to the terms and conditions of this Agreement. No agreement, understanding, representation, inducement, promise, warranty or condition of any kind with respect to the terms and conditions of this Agreement shall be relied upon by either party unless expressly incorporated herein.

22. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one agreement that is binding upon both of the parties hereto, notwithstanding that both parties are not signatories to the same counterpart.

[Signature page follows]

11

[Signature page]

IN WITNESS WHEREOF, the parties have executed this Employment Agreement to be effective as of the date indicated above:

	FARMMI, INC.
	/s/ (Corporate Chop)
/s/ DEHENG ZHANG	/s/ YEFANG ZHANG
DEHENG ZHANG	YEFANG ZHANG
Date: December 7, 2023	Date: December 7, 2023

12

EX-8.1

EXHIBIT 8.1

List of Subsidiaries

Subsidiary / Consolidated Entities	Jurisdiction of incorporation or organization
Farmmi International Limited	Hong Kong
Farmmi Canada Inc.	Canada
Farmmi USA Inc	California
Farmmi (Hangzhou) Enterprise Management Co., Ltd.	People’s Republic of China
Zhejiang Farmmi Agricultural Science and Technology Group Co.,
Ltd. (former Hangzhou Suyuan Agriculture Technology Co., Ltd.)	People’s Republic of China
Hangzhou Nongyuan Network Technology Co., Ltd. (consolidated entity which the
Registrant controls via contractual arrangements)	People’s Republic of China
Lishui Farmmi Technology Co., Ltd.	People’s Republic of China
Zhejiang Farmmi Food Co., Ltd.	People’s Republic of China
Lishui Farmmi E-Commerce Co., Ltd.	People’s Republic of China
Zhejiang Farmmi Biotechnology Co., Ltd..	People’s Republic of China
Farmmi (Hangzhou) Ecology Agriculture Development Co., Ltd.	People’s Republic of China
Zhejiang Farmmi Agricultural Supply Chain Co., Ltd.	People’s Republic of China
Zhejiang Yitang Medical Service Co., Ltd.	People’s Republic of China
Zhejiang Yiting Medical Technology Co., Ltd.	People’s Republic of China
Farmmi (Hangzhou) Health Development Co., Ltd.	People’s Republic of China
Zhejiang Farmmi Healthcare Technology Co., Ltd.	People’s Republic of China
Zhejiang Farmmi Holding Group Co. LTD	People’s Republic of China
Jiangxi Xiangbo Agriculture and Forestry Development Co. Ltd.	People’s Republic of China
Yudu County Yada Forestry Co., Ltd.	People’s Republic of China
Guoning Zhonghao (Ningbo) Trade Co., Ltd.	People’s Republic of China
Shanghai Zhongjian Yiting Healthcare Technology Partnership
(Limited Partnership)	People’s Republic of China
Zhejiang Farmmi Ecological Agricultural Technology Co., Ltd.	People’s Republic of China
Zhejiang Suyuan Agricultural Technology Co., Ltd	People’s Republic of China
Ningbo Farmmi Baitong Trade Co., Ltd	People’s Republic of China

EX-12.1

EXHIBIT 12.1

CERTIFICATION

I, Yefang Zhang, certify that:

1.	I have reviewed this annual report on Form 20-F of Farmmi, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: January 29, 2024	By:	/s/ Yefang Zhang
	Name:	Yefang Zhang
	Title:	Chief Executive Officer

EX-12.2

EXHIBIT 12.2

CERTIFICATION

I, Lingge Wu, certify that:

1.	I have reviewed this annual report on Form 20-F of Farmmi, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: January 29, 2024	By:	/s/ Lingge Wu
	Name:	Lingge Wu
	Title:	Chief Financial Officer

EX-13.1

EXHIBIT 13.1

CERTIFICATION

In connection with the Annual Report of Farmmi, Inc. (the “Company”) on Form 20-F for the fiscal year ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yefang Zhang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 29, 2024	By:	/s/ Yefang Zhang
	Name:	Yefang Zhang
	Title:	Chief Executive Officer

EX-13.2

EXHIBIT 13.2

CERTIFICATION

In connection with the Annual Report of Farmmi, Inc. (the “Company”) on Form 20-F for the fiscal year ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lingge Wu, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 29, 2024	By:	/s/ Lingge Wu
	Name:	Lingge Wu
	Title:	Chief Financial Officer

EX-15.1

EXHIBIT 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (File No. 333-224463; File No. 333-262696) and Forms F-3 (File No. 333-254036; File No. 333-254397) of our report dated January 29, 2024, relating to the consolidated financial statements of Farmmi Inc. included in its annual report (Form 20-F) for the years ended September 30, 2023, 2022 and 2021. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ YCM CPA, Inc.

PCAOB ID 6781

Irvine, California

January 29, 2024

EX-97.1

 EXHIBIT 97.1 

FARMMI, INC.

(the “Company”)

CLAWBACK POLICY

Introduction

The Board of Directors of the Company (the “Board”) believes that it is in the best interests of the Company and its shareholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy and deters wrongdoing. The Board has therefore adopted this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the United States federal securities laws (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the rules or regulations of the Securities and Exchange Commission thereunder, and applicable standards of any national securities exchange on which the Company’s securities are listed (the “Listing Standards”).

Administration

This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee of the Board, in which case references herein to the Board shall be deemed references to the Compensation Committee. Any determinations made by the Board shall be final and binding on all affected individuals.

Covered Executives

This Policy applies to the Company’s current and former executive officers, as determined by the Board in accordance with the definition in Section 10D of the Exchange Act and the Listing Standards, and such other executive officers who may from time to time be deemed subject to the Policy by the Board (“Covered Executives”).

Recoupment; Accounting Restatement

In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, the Board will require reimbursement or forfeiture of any excess Incentive Compensation received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement.

1

Incentive Compensation

For purposes of this Policy, Incentive Compensation means any of the following; provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:

· Annual bonuses and other short- and long-term cash incentives

· Stock options

· Stock appreciation rights

· Restricted stock

· Restricted stock units

· Performance shares

· Performance units

 

Financial reporting measures include:

· Company stock price

· Total shareholder return

· Revenues

· Net income

· Earnings before interest, taxes, depreciation, and amortization (EBITDA)

· Funds from operations

· Liquidity measures such as working capital or operating cash flow

· Return measures such as return on invested capital or return on assets

· Earnings measures such as earnings per share

 

Excess Incentive Compensation: Amount Subject to Recovery

The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Board, without regard to any taxes paid by the Covered Executive in respect of the Incentive Compensation paid based on the erroneous data.

If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.

2

Method of Recoupment

The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which may include, without limitation:

(a)	requiring reimbursement of cash Incentive Compensation previously paid;
(b)	seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
(c)	offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;
(d)	cancelling outstanding vested or unvested equity awards; and/or
(e)	taking any other remedial and recovery action permitted by law, as determined by the Board.

 

No Indemnification

The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.

Interpretation

The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act, any applicable rules or regulations adopted by the Securities and Exchange Commission, and the Listing Standards.

Effective Date

This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and shall apply to Incentive Compensation that is received by Covered Executives on or after October 2, 2023 (even if such Incentive Compensation was approved, awarded, or granted to Covered Executives prior to October 2, 2023).

Amendment; Termination

The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted or amended by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with the Listing Standards and any other rules or standards adopted by a national securities exchange on which the Company’s securities are listed. The Board may terminate this Policy at any time.

3

Other Recoupment Rights

Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.

Relationship to Other Plans and Agreements

The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. In the event of any inconsistency between the terms of the Policy and the terms of any employment agreement, equity award agreement, or similar agreement under which Incentive Compensation has been granted, awarded, earned or paid to a Covered Executive, whether or not deferred, the terms of the Policy shall govern.

Acknowledgment

The Covered Executive shall sign an acknowledgment form in which they acknowledge that they have read and understand the terms of the Policy and are bound by the Policy.

Impracticability

The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the Board in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed.

Successors

This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.

4

XML

Cover	12 Months Ended
	Sep. 30, 2023 shares
Document Information Line Items
Entity Registrant Name	FARMMI, INC.
Entity Central Index Key	0001701261
Document Type	20-F
Amendment Flag	false
Entity Voluntary Filers	No
Current Fiscal Year End Date	--09-30
Entity Well Known Seasoned Issuer	No
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2023
Entity Common Stock Shares Outstanding	6,094,078
Document Annual Report	true
Document Transition Report	false
Entity File Number	001-38397
Entity Incorporation State Country Code	E9
Entity Address Address Line 1	Fl 1, Building No. 1
Entity Address Address Line 2	888 Tianning Street, Liandu District
Entity Address City Or Town	Lishui
Entity Address Region	Lishui
Entity Address Country	CN
Entity Address Postal Zip Code	323000
Icfr Auditor Attestation Flag	false
Auditor Firm Id	6781
Security 12b Title	Ordinary Shares, $0.20 par value per share
Trading Symbol	FAMI
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Document Shell Company Report	false
Document Registration Statement	false
Entity Accounting Standard	U.S. GAAP
Auditor Name	YCM CPA, Inc.
Auditor Location	Irvine, California
Business Contact [Member]
Document Information Line Items
Entity Address Address Line 1	Fl 1, Building No. 1
Entity Address Address Line 2	888 Tianning Street, Liandu District
Entity Address City Or Town	Lishui
Entity Address Country	CN
Entity Address Postal Zip Code	323000
City Area Code	86
Local Phone Number	0578-82612876
Contact Personnel Email Address	wlg@farmmi.com
Contact Personnel Name	Lingge Wu

XML

Consolidated Balance Sheets - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Current Assets
Cash	$ 12,789,735	$ 41,167,501
Short-term deposit	0	35,144,444
Short-term investments	0	5,820
Notes receivable	0	3,528,235
Accounts receivable, net	24,677,445	16,351,244
Advances to suppliers, net	116,343,961	48,633,604
Other receivable	0	7,440,705
Inventories, net	3,901,848	716,278
Other current assets	347,228	206,566
Due from a related party	110,958	59,983
Total current assets	158,171,175	153,254,380
Biological assets	9,187,640	9,638,722
Long-term investments	6,900,280	140,578
Property and equipment, net	24,532	44,868
Intangible assets, net	0	6,747
Right-of-use assets, net	516,459	534,351
Deferred tax assets	0	163,207
Total Assets	174,800,086	163,782,853
Current Liabilities
Short-term loans	2,412,281	0
Long-term loans - current portion	676,284	1,505,353
Convertible promissory notes	5,788,742	2,178,511
Derivative liability	0	3,450,000
Note payable	0	12,385
Accounts payable	1,105,674	197,137
Due to related parties	33,814	948
Operating lease liabilities - current	69,062	46,543
Other current liabilities	627,125	898,444
Total current liabilities	10,712,982	8,289,321
Long-term loans - non-current portion	1,652,561	292,285
Operating lease liabilities - non-current	458,617	517,156
Total Liabilities	12,824,160	9,098,762
Shareholders' Equity
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively	1,218,816	597,768
Additional paid-in capital	160,571,517	152,162,565
Statutory reserve	1,695,629	1,153,813
Retained earnings	16,905,488	14,903,491
Accumulated other comprehensive (loss) income	(18,415,524)	(14,133,546)
Total Shareholders' Equity	161,975,926	154,684,091
Total Liabilities and Shareholders' Equity	$ 174,800,086	$ 163,782,853

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2023	Sep. 30, 2022
Consolidated Balance Sheets
Ordinary share, par or stated value per share (in dollars per share)	$ 0.20	$ 0.20
Ordinary share, shares authorized	500,000,000	500,000,000
Ordinary share, shares, issued	6,094,078	2,988,835
Ordinary share, shares, outstanding	6,094,078	2,988,835

XML

Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Revenues
Sales to third parties	$ 110,364,887	$ 99,212,363	$ 39,287,999
Sales to related parties	0	1,016	1,952
Total revenues	110,364,887	99,213,379	39,289,951
Cost of revenues	(106,078,132)	(93,775,293)	(34,180,670)
Gross profit	4,286,755	5,438,086	5,109,281
Operating expenses
Allowance for doubtful accounts	32,007	(57,173)	875,094
Selling and distribution expenses	(145,292)	(305,367)	(292,709)
General and administrative expenses	(2,132,095)	(4,133,178)	(2,838,790)
Total operating expenses	(2,245,380)	(4,495,718)	(2,256,405)
Income from operations	2,041,375	942,368	2,852,876
Other income (expenses)
Change in fair value of derivative liability	873,767	419,649	0
Interest income	743,858	516,869	33,576
Interest expense	(650,813)	(134,144)	(73,866)
Amortization of debt issuance costs	(1,691,609)	(48,160)	0
Government grant	1,439,208	0	0
Other income, net	101,520	409,030	(379,225)
Total other income (expenses), net	815,931	1,163,244	(419,515)
Income before income taxes	2,857,306	2,105,612	2,433,361
Provision for income taxes	(313,493)	118,367	(25,571)
Net income from continuing operations	2,543,813	2,223,979	2,407,790
Discontinued operations
Net loss from discontinued operations, net of tax	0	0	(51,352)
Net income	2,543,813	2,223,979	2,356,438
Net loss attributable to non-controlling interest from discontinued operations	0	0	1,976
Net income	2,543,813	2,223,979	2,358,414
Comprehensive income
Net income	2,543,813	2,223,979	2,356,438
Foreign currency translation	(4,281,978)	(16,344,967)	1,990,561
Total comprehensive (loss) income	(1,738,165)	(14,120,988)	4,398,351
Comprehensive income attributable to noncontrolling interest	0	0	(46,525)
Comprehensive (loss) income attributable to Farmmi, Inc.	$ (1,738,165)	$ (14,120,988)	$ 4,351,826
Weighted average number of ordinary shares
Basic	3,628,923	2,905,984	514,212
Diluted	8,452,875	2,905,984	522,276
Earnings per ordinary share
Earnings (loss) per ordinary share - basic	$ 0.70	$ 0.77	$ 4.58
- Continuing operations	0.70	0.77	4.68
- Discontinued operations	0	0	(0.10)
Earnings (loss) per ordinary share - diluted	0.30	0.77	4.51
- Continuing operations	0.30	0.77	4.61
- Discontinued operations	$ 0	$ 0	$ (0.10)

XML

Consolidated Statements of Changes in Shareholders Equity - USD ($)	Total	Ordinary Shares	Accumulated other comprehensive Income (loss)	Additional Paid-In Capital	Statutory Reserve	Retained Earnings (Accumulated Deficit)	Total Farmmi Inc Shareholders Equity	Noncontrolling Interest
Balance, shares at Sep. 30, 2020		102,588
Balance, amount at Sep. 30, 2020	$ 29,155,157	$ 20,518	$ 186,912	$ 20,335,228	$ 972,092	$ 6,770,426	$ 28,285,176	$ 869,981
Share-based compensation expenses, shares		2,983
Share-based compensation expenses, amount	1,260,674	$ 597	0	1,260,077	0	0	1,260,674	0
Issuance of ordinary shares and warrants, net, shares		1,307,758
Issuance of ordinary shares and warrants, net, amount	126,010,538	$ 261,552	0	125,748,986	0	0	126,010,538
Warrants exercised for cash, shares		1,375,572
Warrants exercised for cash, amount	19,050	$ 275,114	0	(256,064)	0	0	19,050	0
Foreign currency translation gain	1,990,561	0	1,942,060	0	0	0	1,942,060	48,501
Net income for the year	2,356,438	0	0	0	0	2,358,414	2,358,414	(1,976)
Statutory reserve	0	$ 0	0	0	1,463	(1,463)	0	0
Balance, shares at Sep. 30, 2021		2,788,901
Balance, amount at Sep. 30, 2021	160,792,418	$ 557,781	2,128,972	147,088,227	973,555	9,127,377	159,875,912	916,506
Share-based compensation expenses, shares		50,000
Share-based compensation expenses, amount	2,007,328	$ 10,000	0	1,997,328	0	0	2,007,328	0
Issuance of ordinary shares and warrants, net, shares		150,000
Issuance of ordinary shares and warrants, net, amount	6,000,000	$ 30,000	0	5,970,000	0	0	6,000,000	0
Foreign currency translation gain	(16,344,967)	0	(16,344,967)	0	0	0	(16,344,967)	0
Net income for the year	2,223,979	0	0	0	0	2,223,979	2,223,979	0
Statutory reserve	0	$ 0	0	0	180,258	(180,258)	0	0
Reverse share-split adjustment, shares		(66)
Reverse share-split adjustment, amount	0	$ (13)	0	13	0	0	0	0
Disposal of a subsidiary	5,333	$ 0	82,449	(2,893,003)	0	3,732,393	921,839	(916,506)
Balance, shares at Sep. 30, 2022		2,988,835
Balance, amount at Sep. 30, 2022	154,684,091	$ 597,768	(14,133,546)	152,162,565	1,153,813	14,903,491	154,684,091	0
Issuance of ordinary shares and warrants, net, shares		2,631,579
Issuance of ordinary shares and warrants, net, amount	7,930,000	$ 526,316	0	7,403,684	0	0	7,930,000	0
Foreign currency translation gain	(4,281,978)	0	(4,281,978)	0	0	0	(4,281,978)	0
Net income for the year	2,543,813	0	0	0	0	2,543,813	2,543,813	0
Statutory reserve	0	$ 0	0	0	541,816	(541,816)	0	0
Reverse share-split adjustment, shares		(473)
Reverse share-split adjustment, amount	0	$ (95)	0	95	0	0	0	0
Issuance of ordinary shares for promissory notes redemption, shares		474,137
Issuance of ordinary shares for promissory notes redemption, amount	1,100,000	$ 94,827	0	1,005,173	0	0	1,100,000	0
Balance, shares at Sep. 30, 2023		6,094,078
Balance, amount at Sep. 30, 2023	$ 161,975,926	$ 1,218,816	$ (18,415,524)	$ 160,571,517	$ 1,695,629	$ 16,905,488	$ 161,975,926	$ 0

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities
Net income	$ 2,543,813	$ 2,223,979	$ 2,356,438
Net loss from discontinued operations	0	0	51,352
Net income from continuing operations	2,543,813	2,223,979	2,407,790
Changes in allowances - accounts receivable	7,915	(89)	(116,862)
Changes in allowances - advances to suppliers	0	3,526	(758,232)
Changes in allowances - inventories	(40,963)	53,736	(19,323)
Changes in allowances - long-term investment	92,944	0	0
Depreciation and amortization	26,870	64,287	68,418
Amortization of operating lease right-of-use assets	45,473	85,280	0
Non-cash lease expenses	0		91,573
Loss on short-term investment	5,870	145,843	0
Gain from disposal of property and equipment	0	0	0
Loss on disposal of property and equipment	124	0	0
Loss from disposal of subsidiaries	(5,592)	15,243	0
Amortization of debt issuance costs	1,691,609	48,160	0
Interest receivable from other receivable	0	(445,693)	0
Amortization of biological assets	217,207	218,317	0
Deferred income tax provision	164,600	(176,633)	0
Change in fair value of derivative liability	(873,767)	(419,649)	0
Share-based compensation	0	2,007,328	1,260,674
Changes in operating assets and liabilities:
Accounts receivable	(9,045,179)	6,483,703	(13,040,158)
Advances to suppliers	(71,298,597)	12,767,241	(40,989,649)
Notes receivables	3,558,349	(3,818,479)	0
Inventory, net	(3,272,753)	515,599	(1,212,031)
Other current assets	(222,440)	(49,765)	(258,117)
Accounts payable	946,285	156,598	26,404
Operating lease liabilities	(63,467)	(38,478)	(75,879)
Other current liabilities	(232,463)	795,434	(559,915)
Net cash provided by (used in) operating activities from continuing operations	(75,754,162)	20,635,488	(53,231,108)
Net cash provided by operating activities from discontinued operations	0	0	324,095
Net cash (used in) provided by operating activities	(75,754,162)	20,635,488	(52,907,013)
Cash flows from investing activities
Purchase of property and equipment	(314)	(2,946)	(4,686)
Purchase of intangible assets	0	0	(1,363)
Additions to biological assets	0	0	0
Short-term deposits	35,444,402	(35,296,981)	(2,772,430)
Advances to a third party	0	0	(107,817)
Acquisition of subsidiaries	0	(1,521,422)	0
Repayment of advances to a third party	0	106,500	0
Proceeds from disposal of subsidiary, net of cash	12,998	2,662,459	0
Purchase of long-term investments	(7,088,880)	(152,142)	0
Purchase of short-term investments		(152,142)	0
Other receivables	(7,504,211)	(7,607,108)	(9,241,432)
Advances to related parties	(7,096)	(27,297)	0
Repayment of advances to related party	30,872	0	0
Net cash used in investing activities from continuing operations	35,896,193	(41,991,079)	(12,127,728)
Net cash used in investing activities from discontinued operations	0	0	(130,492)
Net cash provided by (used in) investing activities	35,896,193	(41,991,079)	(12,258,220)
Cash flows from financing activities
Gross proceeds from bank acceptance notes payable	0	13,404	0
Repayment of bank acceptance notes payable	(12,491)	0	(3,388,525)
Net proceeds from share issuance	7,930,000	6,000,000	126,029,588
Net proceeds from convertible note issuance	0	6,000,000	0
Borrowings from bank loans	4,779,323	1,959,591	2,310,358
Repayments of bank loans	(1,688,040)	(2,283,527)	(628,931)
Repayment of advances from related parties	0	(54,600)	(2,147,199)
Proceeds from advances from related parties	9,150	0	489,997
Net cash provided by financing activities from continuing operations	11,017,942	11,634,868	122,665,288
Net cash (used by) provided by financing activities from discontinued operations	0	0	(252,488)
Net cash provided by financing activities	11,017,942	11,634,868	122,412,800
Effect of exchange rate changes on cash	462,261	(8,363,680)	(150,204)
Net (decrease) increase in cash	(28,377,766)	(18,084,403)	57,097,363
Cash, beginning of year	41,167,501	59,251,904	2,165,151
Cash	12,789,735	41,167,501	59,251,904
Less: cash from discontinued operations	0	0	(10,610)
Cash end of year	12,789,735	41,167,501	59,251,904
Reconciliation of cash and restricted cash, beginning of year
Cash	41,167,501	59,251,904	481,906
Restricted cash	0	0	1,617,000
Cash from continuing operations	41,167,501	59,251,904	2,098,906
Cash from discontinued operations	0	0	66,245
Reconciliation of cash and restricted cash, end of year
Cash from continuing operations	12,789,735	41,167,501	59,251,904
Cash from discontinued operations	0	0	10,610
Supplemental disclosure information:
Income taxes paid	67,572	5,443	22,100
Interest paid	165,179	82,970	116,700
Non-cash financing activities
Right of use assets obtained in exchange for operating lease obligations	2,888	0	593,457
Conversion of notes to ordinary shares	1,100,000	0	0
Accrued interest for convertible notes	$ 1,691,609	$ 5,753	$ 0

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Organization and nature of business

12 Months Ended

Sep. 30, 2023

Organization and nature of business

Organization and nature of business

Note 1 - Organization and nature of business

Farmmi, Inc. (“FAMI” or the “Company”) is a holding company incorporated under the laws of the Cayman Islands on July 28, 2015. FAMI owns 100% equity interest of Farmmi International Limited (“Farmmi International”), a Hong Kong company, which in turn owns 100% equity interest of Farmmi (Hangzhou) Enterprise Management Co., Ltd. (“Farmmi Enterprise”), Lishui Farmmi Technology Co., Ltd. (“Farmmi Technology”), Zhejiang Farmmi (Hangzhou) Ecology Agriculture Development Co., Ltd. (“Farmmi Ecology”) and Farmmi (Hangzhou) Health Development Co., Ltd (“Farmmi Heath Development”), four wholly foreign-owned entities (each, a “WFOE”) formed by Farmmi International under the laws of the People’s Republic of China (“PRC” or “China”).

Farmmi Health Development owns 100% equity interest in Zhejiang Farmmi Medical Health Technology Co., Ltd (“Farmmi Medical Health”) which was established under the laws of the PRC on September 18, 2021.

Farmmi Enterprise, Farmmi Technology and Farmmi Ecology own 30%, 40% and 30% of equity interests in Zhejiang Farmmi Holdings Group Co., Ltd. (“Farmmi Holdings”), respectively, which was established under the laws of the PRC on September 18, 2021.

On December 23, 2021, a board resolution of Zhejiang Farmmi Agricultural Technology Group Co., Ltd. (“Farmmi Agricultural”) (formerly known as Hangzhou Suyuan Agriculture Technology Co., Ltd., “Suyuan Agriculture”), a company incorporated in the PRC, was passed to reorganize certain companies mentioned below with nil consideration.

Under the above-mentioned reorganization, (i) on December 30, 2021, Farmmi Holdings started to own 100% interest in Farmmi Agricultural, which was previously owned by Farmmi Enterprise (31.7%) and Farmmi Technology (68.3%); (ii) Farmmi Agricultural owns 100% of the equity interest of Zhejiang Farmmi Agricultural Supply Chain Co., Ltd (“Farmmi Supply Chain”), a company established under the laws of the PRC, on February 10, 2022 and was previously 100% owned by Farmmi Ecology.

On September 27, 2021, the Company, through its subsidiary, Zhejiang Farmmi Agricultural Supply Chain Co., Ltd., acquired Jiangxi Xiangbo Agriculture and Forestry Development Co. Ltd (“Jiangxi Xiangbo”), established under the laws of the PRC, from Ganzhou Tengguang Agriculture and Forestry Development Co., Ltd. for a total price of RMB70 million ($11 million). After the consummation of the acquisition, Farmmi Supply Chain owns 100% equity interest in Jiangxi Xiangbo, which in turn owns 100% interest in Yudu County Yada Forestry Co., Ltd, established under the laws of the PRC (“Yudu Yada”). As a result, Jiangxi Xiangbo and Yudu Yada became the subsidiaries of the Company.

On September 27, 2021, the Company, through its subsidiary, Zhejiang Farmmi Agricultural Supply Chain Co., Ltd., acquired Guoning Zhonghao (Ningbo) Trading Co., Ltd. (“Guoning Zhonghao”), established under the laws of the PRC, from Ningbo Guoning Zhonghao Technology Co., Ltd. and Jianxin Huang, an individual, for a total consideration of RMB5,000 ($788). After the consummation of the acquisition, Farmmi Supply Chain owns 100% equity interest in Guoning Zhonghao.

Farmmi Agricultural owns 100% of equity interests in Zhejiang FLS Mushroom Co., Ltd. (“FLS Mushroom”), Zhejiang Farmmi Biotechnology Co., Ltd. (“Farmmi Biotech”) and Zhejiang Farmmi Food Co., Ltd. (“Farmmi Food”) and 77.2% equity interest in Lishui Farmmi E-Commerce Co., Ltd. (“Farmmi E-Commerce”). FLS Mushroom, Farmmi Biotech, Farmmi Food, and Farmmi E-Commerce”) were all established under the laws of the PRC. The remaining 22.8% equity interest in Farmmi E-Commerce is owned by Hangzhou Nongyuan Network Technology Co., Ltd. (“Nongyuan Network”). Nongyuan Network was incorporated on December 8, 2015 under the laws of the PRC and focuses on the development of network marketing and provides a network platform for sales of agriculture products.

On September 18, 2016, Farmmi Agricultural entered into a series of contractual agreements with Zhengyu Wang, the then sole-owner of Nongyuan Network. These agreements include an Exclusive Management Consulting and Technology Agreement, an Equity Pledge Agreement, an Exclusive Call Option Agreement, a Proxy Agreement and a Power of Attorney (collectively, the “Original VIE Agreements”). The Original VIE Agreements empowered Farmmi Agricultural to exercise management control over the activities that most significantly impact the operation results of Nongyuan Network, obligated Farmmi Agricultural to absorb a majority of the risk of loss from Nongyuan Network’s activities, and entitled Farmmi Agricultural to receive a majority of their residual returns. In essence, Farmmi Agricultural and the Company had gained effective control over Nongyuan Network.

On December 4, 2019, Zhengyu Wang transferred 100% of his shares of Nongyuan Network to his daughter Xinyang Wang. As a result, Xinyang Wang started to hold 100% of the ownership interest of Nongyuan Network. On December 10, 2019, Xinyang Wang, as the new sole owner of Nongyuan Network, signed a series of VIE agreements (the “Xinyang Wang VIE Agreements”) with Nongyuan Network and Farmmi Agricultural. On May 15, 2020, the following agreements were signed with the effective date of December 10, 2019:

(1)	Zhengyu Wang, Nongyuan Network and Farmmi Agricultural signed a termination agreement to confirm that the Original VIE Agreements had been terminated because Zhengyu Wang was no longer the shareholder of Nongyuan Network;
(2)	Zhengyu Wang, Dehong Zhang (the legal representative of Nongyuan Network), Xinyang Wang, Nongyuan Network and Farmmi Agricultural signed a joint statement to confirm that the board of directors of the Company had the ultimate authority over the matters of the VIE (defined below), Nongyuan Network.

FAMI believes that Xinyang Wang VIE Agreements enable Farmmi Agricultural and FAMI to keep effective control over Nongyuan Network, and as a result Nongyuan Network should be considered as a Variable Interest Entity (“VIE”) under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 Consolidation. Accordingly, the accounts of Nongyuan Network are consolidated with those of Farmmi Agricultural.

On September 7, 2021, Zhejiang Yitang Medical Service Co., Ltd. (“Yitang Mediservice”) was established under the laws of the PRC. Nongyuan Network and Farmmi Ecology own 95% and 5% of the equity interests in Yitang Mediservice, respectively. In April 20, 2023, Yitang Mediservice was reorganized and Farmmi Medical Health and Farmmi Ecology own 95% and 5% of the equity interests in Yitang Mediservice.

On September 17, 2021, Zhejiang Yiting Medical Technology Co., Ltd. (“Yiting Meditech”) was established under the laws of the PRC. Yitang Mediservice owns 100% interest in Yiting Meditech.

On January 10, 2022, Lishui Yifeng Medical Health Technology Co., Ltd (“Yifeng Medihealth”) was established under the laws of the PRC. Yitang Mediservice owns 100% of the equity interest in Yifeng Medihealth. Yifeng Medihealth was deregistered in April 2023.

On January 10, 2022, Lishui Yilong Enterprise Management Co., Ltd (“Yilong Enterprise”) was established under the laws of the PRC. Yitang Mediservice owns 100% of the equity interest in Yilong Enterprise. Yilong Enterprise was deregistered in April 2023.

On January 19, 2022, Lishui Yifeng Yilong Medical Technology Development Partnership (Limited Partnership) (“YF YL MediTech”) was established under the laws of the PRC. Yifeng Medihealth owns 20% and Yilong Enterprise owns 80% interest in YF YL MediTech. YF YL MediTech was deregistered in April 2023.

On January 19, 2022, Lishui Yitang Shangke Medical and Health Technology Partnership (Limited Partnership) (“YT SK Medihealth”) was established under the laws of the PRC. Yifeng Medihealth owns 20% and Yilong Enterprise owns 80% interest in YT SK Medihealth. Yifeng Medihealth was deregistered in April 2023.

On May 27, 2022, Zhejiang Farmmi Ecological Agriculture Technology Co., Ltd (“Farmmi Eco Agri”) was established under the laws of the PRC. Farmmi International owns 100% of the equity interest in Farmmi Eco Agri.

On July 13, 2022, Farmmi Canada Inc. (Farmmi Canada) was established under the laws of the Canada. Farmmi Inc. owns 100% of the equity interest in Farmmi Canada.

On September 27, 2021, an agreement was signed to divest 100% interest in Forest Food to a third party for total cash consideration of RMB18.2 million (approximately $2.8 million) on October 1, 2021. Certain prior periods of the Company have been reclassified to conform to current period presentation as discontinued operations. Such reclassifications had no effect on net income (loss) or cash flows as previously reported.

On September 30, 2022, an agreement was signed to divest 100% interest in FLS Mushroom to a third party for total cash consideration of RMB24.1 million (approximately $3.4 million) on October 1, 2022.

On November 14, 2022, Ningbo Farmmi Baitong Trade Co., Ltd (“Ningbo Farmmi Trade”) was established under the laws of the PRC. Farmmi Agricultural owns 100% equity of Ningbo Farmmi Trade.

On August 24, 2023, Farmmi USA Inc (“Farmmi USA”) was established under the laws of the United States of America. FAMI owns 100% equity of Farmmi USA.

As of September 30, 2023, details of the subsidiaries of FAMI are set out below:

Name of Entity	Date of Incorporation	Place of Incorporation	% of Ownership	Principal activities
FAMI	July 28, 2015	Cayman	Parent	Holding company
Farmmi International	August 20, 2015	Hong Kong	100%	Holding company
Farmmi Enterprise	May 23, 2016	Zhejiang, China	100%	Holding company
Farmmi Technology	June 6, 2016	Zhejiang, China	100%	Holding company
Farmmi Agricultural	December 8, 2015	Zhejiang, China	100%	Holding company
FLS Mushroom	March 25, 2011	Zhejiang, China	100%	Light processing and distribution of dried mushrooms
Farmmi Food	December 26, 2017	Zhejiang, China	100%	Dehydrating, further processing and distribution of edible fungus
Farmmi E-Commerce	March 22, 2019	Zhejiang, China	100%	Technology development, technical services and technical consultation related to agricultural products
Farmmi Biotech	April 7, 2021	Zhejiang, China	100%	Research and development of mushroom powder and mushroom extract
Farmmi Ecology	April 25, 2021	Zhejiang, China	100%	Holding company
Farmmi Supply Chain	May 11, 2021	Zhejiang, China	100%	Agricultural products supply chain
Farmmi Health Development	September 17, 2021	Zhejiang, China	100%	Health development
Farmmi Medical Health	September 18, 2021	Zhejiang, China	100%	Medical health
Farmmi Holdings	September 18, 2021	Zhejiang, China	100%	Holding company
Jiangxi Xiangbo	June 18, 2021	Jiangxi, China	100%	Holding company
Yudu Yada	November 10, 2010	Jiangxi, China	100%	Forestry development
Guoning Zhonghao	June 15, 2021	Zhejiang, China	100%	Agriculture exporting
Farmmi Eco Agri	May 27, 2022	Zhejiang, China	100%	Agriculture products
Farmmi Canada	July 13, 2022	Canada	100%	Agriculture products
Ningbo Farmmi Trade	November 14, 2022	Zhejiang, China	100%	Agriculture products
Yitang Mediservice	September 7, 2021	Zhejiang, China	100%	Medical services
Yiting Meditech	September 17, 2021	Zhejiang, China	100%	Medical technology
Farmmi USA	August 24, 2023	California, USA	100%	Trading
Nongyuan Network	July 7, 2016	Zhejiang, China	0 (VIE)	Trading

FAMI through its subsidiaries, VIE and VIE’s subsidiaries (herein collectively referred to as the “Company”) are principally engaged in processing, distributing and trading dried Shiitake mushrooms, Mu Er (also known as auricularia auricula-judae or jelly fungi), corn, cotton, forestry and other products.

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Summary of significant accounting policies

12 Months Ended

Sep. 30, 2023

Summary of significant accounting policies

Summary of significant accounting policies

Note 2 - Summary of significant accounting policies

Basis of presentation and principles of consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated financial statements of the Company include the financial statements of the Company, its subsidiaries, the VIEs and the subsidiaries of the VIEs. All inter-company transactions and balances between the Company, its subsidiaries, the VIEs and the subsidiaries of the VIEs have been eliminated upon consolidation. Results of subsidiaries, businesses acquired from third parties and the VIEs are consolidated from the date on which control is transferred to the Company.

Consolidation of variable interest entities

In accordance with accounting standards regarding consolidation of variable interest entities (“VIEs”), VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The Company determined that Nongyuan Network is a VIE because the Company is the primary beneficiary of risks and rewards of this VIE.

The condensed consolidating table below disaggregated the Consolidated Balance Sheets of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated as of September 30, 2023 and 2022.

	As of September 30, 2023
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	144,664,527	$	131,992,092	$	7,086,579	$	151,681,406		-
Current assets excluding intercompany receivables		138,871,675		353,985		18,841,671		103,844	$	158,171,175
Current assets	$	283,536,202	$	132,346,077	$	25,928,250	$	151,785,250	$	158,171,175
Investment in subsidiaries		-	$	37,712,692		-		-		-
Non-current assets excluding investment in subsidiaries	$	16,627,615		-	$	1,296		-	$	16,628,911
Non-current assets	$	16,627,615	$	37,712,692	$	1,296		-	$	16,628,911
Total assets	$	300,163,817	$	170,058,769	$	25,929,546	$	151,785,250	$	174,800,086
Intercompany payables	$	290,760,077	$	124,634,218	$	19,812,080	$	218,229		-
Current liabilities excluding intercompany payables		634,111		756,017		3,530,735		5,792,119	$	10,712,982
Current liabilities	$	291,394,188	$	125,390,235	$	23,342,815	$	6,010,348	$	10,712,982
Non-current liabilities	$	533,315	$	106,737		1,471,126		-	$	2,111,178
Total liabilities	$	291,927,503	$	125,496,972	$	24,813,941	$	6,010,348	$	12,824,160
Total shareholders' equity (net assets)	$	8,236,314	$	44,561,797	$	1,115,605	$	145,774,902	$	161,975,926

	As of September 30, 2022
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	163,676,919	$	114,994,912		-	$	140,445,311		-
Current assets excluding intercompany receivables	$	91,926,232	$	33,986	$	57,133,125	$	4,161,037	$	153,254,380
Current assets	$	255,603,151	$	115,028,898	$	57,133,125	$	144,606,348	$	153,254,380
Investment in subsidiaries		-	$	40,424,517		-		-		-
Non-current assets excluding investment in subsidiaries	$	10,500,217	$	8,484	$	19,772		-	$	10,528,473
Non-current assets	$	10,500,217	$	40,433,001	$	19,772		-	$	10,528,473
Total assets	$	266,103,368	$	155,461,899	$	57,152,897	$	144,606,348	$	163,782,853
Intercompany payables	$	255,440,223	$	109,255,668	$	54,420,549	$	702		-
Current liabilities excluding intercompany payables	$	590,393	$	226,814	$	1,789,357	$	5,682,757	$	8,289,321
Current liabilities	$	256,030,616	$	109,482,482	$	56,209,906	$	5,683,459	$	8,289,321
Non-current liabilities	$	657,734	$	151,707		-		-	$	809,441
Total liabilities	$	256,688,350	$	109,634,189	$	56,209,906	$	5,683,459	$	9,098,762
Total shareholders' equity (net assets)	$	9,415,018	$	45,827,710	$	942,991	$	138,922,889	$	154,684,091

The condensed consolidating table below disaggregated the Consolidated Statements of Operations and Comprehensive Income (Loss) of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the financial years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	74,224,063		$	16,034,543		$	20,106,281			-		$	110,364,887
Cost of revenues		(70,021,350	)		(16,023,779	)		(20,033,003	)		-			(106,078,132	)
Gross profit		4,202,713			10,764			73,278			-			4,286,755
Operating expenses		(1,028,294	)		(71,676	)		(231,462	)		(913,948	)		(2,245,380	)
Income (loss) from operations		3,174,419			(60,912	)		(158,184	)		(913,948	)		2,041,375
Other income (expenses)		1,514,162			(68,416	)		634,225			(1,264,040	)		815,931
Income (loss) before income taxes		4,688,581			(129,328	)		476,041			(2,177,988	)		2,857,306
Provision for income taxes		(270,874	)		(8,556	)		(34,063	)		-			(313,493	)
Net income (loss)	$	4,417,707		($137,884)			$	441,978		($2,177,988)			$	2,543,813

	For the year ended September 30, 2022
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	64,795,082		$	9,111,073		$	25,307,224			-		$	99,213,379
Cost of revenues		(60,272,018	)		(9,053,547	)		(24,449,728	)		-			(93,775,293	)
Gross profit		4,523,064			57,526			857,496			-			5,438,086
Operating expenses		(782,009	)		(50,344	)		(701,516	)		(2,961,849	)		(4,495,718	)
Income (loss) from operations		3,741,055			7,182			155,980			(2,961,849	)		942,368
Other income (expenses)		560,497			20,510			213,771			368,466			1,163,244
Income (loss) before income taxes		4,301,552			27,692			369,751			(2,593,383	)		2,105,612
Provision for income taxes		114,801			9,182			(5,616	)		-			118,367
Net income (loss)	$	4,416,353		$	36,874		$	364,135			(2,593,383	)	$	2,223,979

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary			VIE and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Revenues from continuing operations	$	33,068,045		$	762,771		$	5,459,135		$	-		$	39,289,951
Cost of revenues from continuing operations		(28,847,801	)		(742,933	)		(4,589,936	)		-			(34,180,670	)
Gross profit from continuing operations		4,220,244			19,838			869,199			-			5,109,281
Operating expenses		588,892			(8,940	)		(804,851	)		(2,031,506	)		(2,256,405	)
Income (loss) from operations		4,809,136			10,898			64,348			(2,031,506	)		2,852,876
Other expenses		(391,819	)		(19,990	)		(2,033	)		(5,673	)		(419,515	)
Income (loss) before income taxes		4,417,317			(9,092	)		62,315			(2,037,179	)		2,433,361
Provision for income taxes		(8,085	)		-			(17,486	)		-			(25,571	)
Net income (loss) from continuing operations	$	4,409,232		$	(9,092	)	$	44,829		$	(2,037,179	)	$	2,407,790

The condensed consolidating table below disaggregated the Consolidated Statements of Cash Flows of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the financial years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities	($17,601,436)			($579,125)			($45,586,506)			($11,987,095)			($75,754,162)
Net cash provided by (used in) investing activities		(7,121,332	)		-			43,017,525			-			35,896,193
Net cash provided by (used in) financing activities		32,778			539,287			2,515,877			7,930,000			11,017,942
Effect of exchange rate changes on cash		462,420			5,227			(5,386	)		-			462,261
Net (decrease) increase in cash and restricted cash		(24,227,570	)		(34,611	)		(58,490	)		(4,057,095	)		(28,377,766	)
Cash, beginning of year		183,030			37,393			61,196			4,057,179			41,167,501
Cash, end of year	($24,044,540)			$	2,782		$	2,706		$	84		$	12,789,735

	For the year ended September 30, 2022
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities from continuing operations	$	(14,188,275	)	$	(3,189,440	)	$	46,404,339		$	(8,391,136	)	$	20,635,488
Net cash provided by (used in) investing activities from continuing operations		1,140,848			2,738,559			(45,870,486	)		-			(41,991,079	)
Net cash provided by (used in) financing activities from continuing operations		649,782			373,382			(899,449	)		11,511,153			11,634,868
Effect of exchange rate changes on cash and restricted cash		(8,345,494	)		(5,078	)		(13,108	)		-			(8,363,680	)
Net (decrease) increase in cash and restricted cash		(20,743,139	)		(82,577	)		(378,704	)		3,120,017			(18,084,403	)
Cash and restricted cash from continuing operations, beginning of year		183,030			116,447			434,135			522,915			59,251,904
Cash and restricted cash from continuing operations, end of year	$	(20,560,109	)	$	33,870		$	55,431		$	4,057,179		$	41,167,501

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary of			VIE and its						Consolidated
	consolidated			the VIE			subsidiaries			FAMI			total
Net cash provided by (used in) operating activities
from continuing operations	$	67,709,967		$	3,246,067		$	(338,559	)	$	(123,848,583	)	$	(53,231,108	)
Net cash used in investing activities from continuing
operations		(9,353,935	)		(2,772,430	)		(1,363	)		-			(12,127,728	)
Net cash provided by (used in) financing activities
from continuing operations		144,197			(616,095	)		(1,232,191	)		124,369,377			122,665,288
Effect of exchange rate changes on cash and
restricted cash		(506,653	)		258,485			94,714			-			(153,454	)
Net increase (decrease) in cash and restricted cash		57,993,576			116,027			(1,477,399	)		520,794			57,152,998
Cash and restricted cash from continuing operations,
beginning of year		183,030			420			1,913,335			2,121			2,098,906
Cash and restricted cash from continuing operations,	$	58,176,606		$	116,447		$	435,936		$	522,915		$	59,251,904
end of year

Cash is transferred within the Company through the banking system in PRC. Under the VIE agreements, the Company intends to distribute 95% of VIE’s earnings after eliminating VIE’s accumulated losses and making appropriation of VIE’s after-tax net income into the statutory surplus reserve based on at least 10% of the after-tax net income determined in accordance with generally accepted accounting principles of the PRC. When there are retained earnings available for distribution, the distribution of VIE’s earnings will be through payment of service fees to Farmmi Agricultural, such service fee is subject to 6% value-added sales tax, other taxes of 12% which calculation is based on 6% value-added taxes and Farmmi Agricultural is subject to corporate income tax up to 25% for its net income. Under the VIE agreements, when there is a change of shareholder in VIE, amount owed by VIE to the Company should be first settled. The condensed consolidating table below quantified the transfer between FAMI, its subsidiaries, VIE and its subsidiaries, WFOE that is the primary beneficiary of the VIE and the investors for the years ended September 30, 2023, 2022 and 2021, respectively. These transfers were mainly for the purpose of providing working capital between FAMI, its subsidiaries, VIE and its subsidiaries and WFOE that is the primary beneficiary of the VIE.

	For the year ended September 30, 2023
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI		-		-		-	$	212,652		-
WFOE that is the primary beneficiary of the VIE		-		-	$	505,077	$	9,054,194		-
VIE and its subsidiaries		-	$	1,411,434		-	$	12,944		-
Other entities that are consolidated		-	$	1,893,667	$	71,277		-		-

	For the year ended September 30, 2022
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	1,217,137		-	$	913,005		-
WFOE that is the primary beneficiary of the VIE		-			$	14,594,586	$	19,188,742		-
VIE and its subsidiaries		-	$	6,394,084			$	15,293,176		-
Other entities that are consolidated	$	984,655	$	26,961,378	$	14,744,568				-

	For the year ended September 30, 2021
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	-	$	45,500	$	124,670,237	$	-
WFOE that is the primary beneficiary of the VIE	$	1,668,758			$	-	$	38,204,550	$	-
VIE and its subsidiaries	$	-	$	-			$	1,601,406	$	-
Other entities that are consolidated	$	319,981	$	24,075,199	$	5,624,880			$	-

Use of estimates

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts and advances to suppliers, the valuation of inventories, the useful lives of property and equipment, the valuation of derivative liabilities of the notes, the recoverability of long-lived assets, valuation of warrants and the valuation of deferred tax assets.

Cash

Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. All cash balances are in bank accounts in PRC. Cash maintained in banks within the People’s Republic of China of less than RMB0.5 million (equivalent to $68,531) per bank are covered by "deposit insurance regulation" promulgated by the State Council of the People’s Republic of China.

Short-term deposit

Short-term deposit relates to fixed terms cash deposits with financial institutions with original maturities of more than three months and less than a year. As of September 30, 2023 and 2022, the Company had short-term deposit of nil and $35,144,444 earning interest at 2.05% per annum with one year maturity on October 15, 2022.

Accounts receivable, net

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when 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, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2023 and 2022, allowance for doubtful accounts was $14,719 and $7,249, respectively.

Advances to suppliers, net

Advances to suppliers represent prepayments made to ensure continuous high-quality supplies and favorable purchase prices for premium quality. These advances are directly related to the purchases of raw materials used to fulfill sales orders. The Company is required from time to time to make cash advances when placing its purchase orders. These advances are settled upon suppliers delivering raw materials to the Company when the transfer of ownership occurs. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. As of September 30, 2023 and 2022, allowance for doubtful accounts was $3,176 and $3,258, respectively.

Inventory, net

The Company values its inventories at the lower of cost, determined on a weighted average basis, or net realizable value. The Company reviews its inventories periodically to determine if any reserves are necessary for potential obsolescence or if the carrying value exceeds net realizable value. The Company recorded inventory reserve of $8,809 and $49,652 as of September 30, 2023 and 2022, respectively.

Biological assets 

Biological assets mainly consist of bamboo forests managed for future bamboo harvest and sales, of which the Company owned 82 forest right certificates with expiry dates ranging from December 30, 2026 to December 9, 2070 and with an area of 9.6 km². The forest types are mixed mature forests which can be harvested for commercial purposes. The forests mainly consist of bamboo, fir trees and other trees. Biological assets are initially measured at cost and subsequently depreciated on a straight-line basis over its estimated useful lives.

Depreciation expense was $0.2 million and $0.2 million for the years ended September 30, 2023 and 2022, respectively.

Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment are as follows:

Machinery and equipment	5 - 10 years
Transportation equipment	4 years
Office equipment	3 - 5 years

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized.

Intangible assets, net

Intangible assets consist primarily of purchased software. Intangible assets are stated at cost less accumulated amortization, which are amortized using the straight-line method with the estimated useful lives of three years.

Amortization expenses were $6,805, $31,984 and $46,085 for the years ended September 30, 2023, 2022 and 2021, respectively.

Impairment of long-lived assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for fiscal years ended September 30, 2023, 2022 and 2021.

Revenue recognition

The Company follows ASU 2014-09 Revenue from Contracts with Customers (“ASC Topic 606”). In accordance with ASC 606, to determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation .

The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. All of the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as a price per ton.

The Company’s contract liabilities primarily include advance from customers. As of September 30, 2023 and 2022, the contract liabilities are $0.4 million and $0.6 million, respectively, and included in other current liabilities on the consolidated balance sheets. For fiscal years ended September 30, 2023, 2022 and 2021, there was no revenue recognized from performance obligations related to prior periods.

Refer to Note 14 - Segment reporting for details of revenue segregation.

Cost of revenues

Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.

Earnings (loss) per share

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings per Share (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The component of basic and diluted EPS were as follows:

Year Ended September 30,	2023		2022		2021
Net income available for ordinary shareholders (A)	$	2,543,813	$	2,223,979	$	2,356,437
- continuing operations	$	2,543,813	$	2,223,979	$	2,407,790
- discontinued operations		-		-	($51,353)
Weighted average outstanding ordinary shares (B)
- basic		3,628,923		2,905,984		514,213
- diluted		8,452,875		2,905,984		522,276
Earnings (loss) per ordinary share - basic (A/B)	$	0.70	$	0.77	$	4.58
- Continuing operations	$	0.70	$	0.77	$	4.68
- Discontinued operations	$	0.00	$	0.00	($0.10)
Earnings (loss) per ordinary share - diluted (A/B)	$	0.30	$	0.77	$	4.51
- Continuing operations	$	0.30	$	0.77	$	4.61
- Discontinued operations	$	0.00	$	0.00	($0.10)

____________ 

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. 

Fair value of financial instruments

The FASB ASC Topic 820, Fair Value Measurements, defines fair value, establishes a three-level valuation hierarchy for fair value measurements and enhances disclosure requirements.

The three levels are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.

Level 3 - Inputs to the valuation methodology are unobservable.

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, restricted cash, accounts receivable, advances to suppliers, other current assets, accounts payable, due to related parties, operating lease liabilities -current, other current liabilities, short-term bank loans and bank acceptance notes payable approximate their recorded values due to their short-term maturities. The fair value of longer term long-term bank loan and operating lease liabilities approximate their recorded values as their stated interest rates approximate the rates currently available.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and 2022 and indicates the fair value hierarchy of the valuation technique that the Company utilized to determine such fair value.

	Fair value measured as of September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	-	$	-	$	-	$	-
Biological assets	$	-	$	-	$	9,187,640	$	9,187,640
Liabilities:
Derivative liability	$	-	$	-	$	-	$	-

	Fair value measured as of September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	5,820	$	-	$	-	$	5,820
Biological assets	$	-	$	-	$	9,638,722	$	9,638,722
Liabilities:
Derivative liability	$	-	$	-	$	3,450,000	$	3,450,000

Debt issuance costs and debt discounts

The Company may record debt issuance costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.

Fair value of the embedded derivatives in the convertible promissory notes

The convertible promissory notes consisted of a liability component (“financial liability”) and an embedded derivative conversion feature (“derivative liability”). The net proceeds of these convertible promissory notes were first allocated to the fair value of the derivative liability. Subsequent changes in fair value of the derivative liability were recorded in other income.

The Company measures the fair value of the embedded derivative by reference to the fair value on the issuance date and maturity date of the convertible promissory notes and revalues them at each reporting date. In determining the fair value of the embedded derivatives, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate; market price at the reporting date; risk-free interest rate; and the remaining life of the embedded derivatives. The inputs used in the Black-Scholes model are taken from observable markets. Changes to assumptions used can affect the amounts recognized in the consolidated financial statements.

Concentrations of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable and advances to suppliers. As of September 30, 2023 and 2022, $12.8 million and $76.3 million of the Company’s cash is maintained in banks within the People’s Republic of China of which deposits of RMB0.5 million (equivalent to $68,531) per bank are covered by “deposit insurance regulation” promulgated by the State Council of the People’s Republic of China. The Company has not experienced any losses in such accounts. A significant portion of the Company’s sales are credit sales primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas. The Company also makes cash advances to certain suppliers to ensure the stable supply of key raw materials. The Company performs ongoing credit evaluations of its customers and key suppliers to help further reduce credit risk.

Comprehensive income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustment from the Company not using the U.S. dollar as its functional currency.

Leases

The Company adopted ASU 2016-02, Leases on October 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets for office space operating leases.

Foreign currency translation

The Company’s financial information is presented in U.S. dollars (“USD”). The functional currency of the Company is the Chinese Yuan Renminbi (“RMB”), the currency of PRC. Any transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of operations as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. The financial information is first prepared in RMB and then translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

The exchange rates in effect as of September 30, 2023 and 2022 were RMB1 for $0.1371 and $0.1406, respectively. The average exchange rates for the years ended September 30, 2023, 2022 and 2021 were RMB1 for $0.1418, $0.1521 and $0.1540, respectively.

Shipping and handling expenses

All shipping and handling costs are expensed as incurred and included in selling expenses. Total shipping and handling expenses were $60,204, $244,490 and $235,956 for the years ended September 30, 2023, 2022 and 2021, respectively.

Value added tax

The Company is generally subject to the value added tax (“VAT”) for selling merchandise. Before May 1, 2018, the applicable VAT rate was 13% or 17% (depending on the type of goods involved) for products sold in PRC. After May 1, 2018, the Company is subject to a tax rate of 12% or 16%, and after April 1, 2019, the tax rate was further reduced to 9% or 13% based on the new Chinese tax law. Pursuant to approval issued by the State Administration of Taxation, Farmmi Eco Agri’s and Nongyuan Network’s major operation can be classified as agriculture products and its revenue is exempt from VAT, Nongyuan Network was exempted from VAT up to January 2023. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax authorities have the right to assess a penalty based on the amount of taxes which is determined to be late or deficient, with any penalty being expensed in the period when a determination is made by the tax authorities that a penalty is due. During the reporting periods, the Company had no dispute with PRC tax authorities and there was no tax penalty incurred.

Income taxes

The Company is subject to the income tax laws of the PRC, a subsidiary in Canada is subject to income tax laws of Canada and a subsidiary in the United States of America is subject to income tax laws of the United States of America. No taxable income was generated outside the PRC for the year ended September 30, 2021. The Company accounts for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or not be deductible in the future.

ASC 740-10-25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There were no material uncertain tax positions as of September 30, 2023 and 2022. As of September 30, 2023, the tax years ended December 31, 2015 through December 31, 2022 for the Company’s subsidiaries remain open for statutory examination by PRC and Canada tax authorities.

Statement of Cash Flows

In accordance with ASC 230, Statement of Cash Flows, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

Risks and uncertainties

The operations of the Company are primarily located in PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in PRC, in addition to the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political and social conditions in PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company’s sales, purchases and expense transactions are denominated in RMB, and a substantial part of the Company’s assets and liabilities are also denominated in RMB. RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order to effect the remittance.

The Company’s operating entities in PRC do not carry any business interruption insurance, product liability insurance or any other insurance policy except for a limited property insurance policy. As a result, the Company may incur uninsured losses, increasing the possibility that investors would lose their entire investment in the Company.

The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic-the first pandemic caused by a coronavirus. The outbreak has reached more than 160 countries, resulting in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. The Chinese government has ordered quarantines, travel restrictions, and the temporary closure of stores and facilities. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.

Because of the shelter-in-place orders and travel restrictions mandated by the Chinese government, the production and sales activities of the Company temporarily suspended during the end of January and February 2020, which adversely impacted the Company’s production and sales during that period. Although the production and sales have resumed at the end of March 2020, if COVID-19 further impacts its production and sales, the Company’s financial condition, results of operations, and cash flows could continue to be adversely affected.

Consequently, the COVID-19 outbreak has adversely affected the Company’s business operations and condition and operating results for 2020, including but not limited to material negative impact on its total revenue, slower collection of accounts receivable and accrued allowance for bad debt, slower utilization of advances to suppliers and accrued allowance, and inventory allowance. The COVID-19 impact on the Company’s business operations and operating results for fiscal 2022 appears to be minimal and appears to be temporary. The Company will continue to monitor and modify the operating strategies.

Recent accounting pronouncements

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt this guidance effective October 1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements but does not expect this guidance will have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplify the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for smaller reporting companies, as defined by the SEC. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures.

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Accounts receivable net

12 Months Ended

Sep. 30, 2023

Accounts receivable net

Accounts receivable, net

Note 3 - Accounts receivable, net

Accounts receivable from the Company consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Accounts receivable	$	24,692,164		$	16,358,493
Less: allowance for doubtful accounts		(14,719	)		(7,249	)
Accounts receivable, net	$	24,677,445		$	16,351,244

Allowance for doubtful accounts of $14,719 and $7,249 was made for certain accounts receivable as of September 30, 2023 and 2022, respectively. The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers.

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Advances to suppliers net

12 Months Ended

Sep. 30, 2023

Advances to suppliers net

Advances to suppliers, net

Note 4 - Advances to suppliers, net

Advances to suppliers consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Advances to suppliers:
Lishui Zhelin Trading Co., Ltd	$	53,405,200		$	7,289,180
Jingning Liannong Trading Co., Ltd		20,231,750			16,761,798
Qingyuan Nongbang Mushroom Industry Co., Ltd		15,417,317			12,521,949
Zhongjin Boda (Hangzhou) Industrial Co., Ltd		10,964,912			-
Ningbo Runcai Supply Chain Management Co., Ltd		10,279,605			-
Ningbo Caixiang Trading Co., Ltd.		-			4,372,934
Others		6,048,353			7,691,001
Total	$	116,347,137		$	48,636,862
Less: allowance for doubtful accounts		(3,176	)		(3,258	)
Advances to suppliers, net	$	116,343,961		$	48,633,604

On April 1, 2016, the Company entered into two separate framework supply agreements (“Framework Agreements”) with two co-operatives, Jingning Liannong Trading Co., Ltd (“JLT”) and Qingyuan Nongbang Mushroom Industry Co., Ltd (“QNMI”). These two Framework Agreements were renewed for another three years in April 2019 upon expiration and were further renewed for another three years in June 2021. Jingning County and Qingyuan County where JLT and QNMI are located produce premium Shiitake and Mu Er.

In order to enter into the trading of agricultural products in bulk, the Company signed a framework agreement on agricultural products purchase and sales cooperation with Ningbo Caixiang Trading Co., Ltd. on May 25, 2021. Ningbo Caixiang Trading Co., Ltd. is located in Ningbo City, a port city, and is the gathering and distributing place of agriculture products in bulks in the Yangtze River Delta region, with rich resources of agricultural products. The contract with Ningbo Caixiang Trading Co., Ltd. expired in May 2022, and the two parties renewed the agricultural product supply agreement in May 2022, with a validity of 3 years. The agreement agreed that Ningbo Caixiang should provide the Company with agricultural products of no less than RMB200 million yuan (including but not limited to cotton, corn, etc.) and pay part of the payment in advance to lock up the goods.

On April 1, 2020, the Company signed a framework cooperation agreement with Lishui Zhelin Trading Co., Ltd. (“Zhelin Trade”), which is valid for 4 years. Zhelin Trade is located in the agricultural product distribution center in Liandu District - Southwest Zhejiang Agricultural Trade City, which has convenient logistics and timely agricultural product information. Therefore, the cooperation agreement stipulates that Zhelin Trade will process and deliver edible mushroom products on behalf of Zhelin Trade, and the Company is required to make advance payment to ensure the timeliness of goods supply and delivery.

On August 5, 2023, the Company signed an agricultural product framework agreement with Zhongjin Boda (Hangzhou) Industrial Co., Ltd (“Zhongjin Boda”), mainly for the purchase of agricultural products such as corn, cotton, soybeans, etc. The agreement was signed for a period of 2 years. Zhongjin Boda used to be a large supplier of the company and had sufficient capacity to supply goods.

On August 25, 2023, the Company signed an agricultural product framework agreement with Ningbo Runcai Supply Chain Management Co., Ltd (“Ningbo Runcai”), mainly for the purchase of agricultural products such as red dates and corn. The agreement was signed for a period of 2 years. Ningbo Runcai is located in Ningbo, the largest port city in Zhejiang Province, and has abundant sources of goods that can meet the company's procurement needs for supply.

The Company has signed agreements with these two suppliers mainly as a reserve supplier of bulk agricultural products.

Due to the increase of edible fungus business and preventing untimely supply of goods arising from natural disasters, the Company signed a cooperation agreement with Suizhou Huayu Ecological Agriculture Co., Ltd. on August 1, 2022. Suizhou Huayu is located in Suizhou City, Hubei Province. Suizhou City is the main production area of edible fungi in central China. The cultivation of edible fungi in this area is mainly family farms and cooperatives. Advance payment is required to ensure supply, The timely and stable supply of goods and the quality of goods can be guaranteed by paying the suppliers in advance.

Many competitors of the Company and other large buyers go there to source their supplies. Family farms and co-operatives traditionally request advance payments to secure supplies. By making advance payments to these suppliers, the Company is also able to lock in a more favorable price for premium quality than would be available in the open market. Allowance for doubtful accounts of $3,176 and $3,258 was made for certain advances to suppliers as of September 30, 2023 and 2022.

The Framework Agreements only provide general guidelines. Actual prices are negotiated and agreed upon in individual purchase orders, and are typically set at market prices based on the quality grade and quantities determined and agreed with the suppliers. Prices may vary based on market demand and crop condition etc. The Company can generally secure the premium quality raw material supplies at prices slightly higher than the typical market prices for average quality raw materials. The quality of supplies must meet standardized specifications of both the mushroom industry and standards set by the Company.

The Company advances certain initial payments based on its estimated purchase plan from these suppliers and additional advances based on individual purchase orders placed. The Company pays advances for no other reason than to secure an adequate supply of dried mushrooms to meet its sales demands. The Company’s purchase orders require that the advances shall be refunded by suppliers if they fail to produce any dried mushrooms or fail to deliver supplies to the Company timely.

Advances to suppliers are carried at cost and evaluated for recoverability. The realizability evaluation process is similar to that of the lower of cost or net realizable value evaluation process for inventories. The Company periodically evaluates its advances for recoverability by monitoring suppliers’ ability to deliver a sufficient supply of mushrooms as well as current crop and market condition. This includes analyzing historical quantity and quality of production with monitoring of crop information provided by the Company’s field personnel related to weather or disaster or any other reason. If for any reason the Company believes that it will not receive supplies of the contracted volumes, the Company will assess its advances for any likelihood of recoverability and adjust advances on its financial statements at the lower of cost or estimated recoverable amounts. The advances are made primarily to these suppliers, which are co-operatives formed by many family farms, with which the Company has had long-term relationships over the years. If any of these family farms fail to deliver supplies, the Company would expect to receive a refund of the advances through these suppliers. The Company accrues for any allowance for possible loss on advances when there is doubt as to the collectability of the refund.

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Inventories net

12 Months Ended

Sep. 30, 2023

Inventories net

Inventories, net

Note 5 - Inventories, net

Inventories, net, from the Company’s continuing operations consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Raw materials	$	520,216		$	620,252
Packaging materials		69,420			63,703
Finished goods		3,321,021			81,975
Inventory		3,910,657			765,930
Less: allowance for inventory reserve		(8,809	)		(49,652	)
Inventory, net	$	3,901,848		$	716,278

Allowance for inventory reserve were $8,809 and $49,652 as of September 30, 2023 and 2022, respectively.

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Other receivable

12 Months Ended

Sep. 30, 2023

Other receivable

Other receivable

Note 6 - Other receivable

On November 5, 2021, one of the Company’s subsidiaries singed an Equity Transfer Framework Agreement to invest 15.97% interest in an entity, Shanghai Jiaoda Onlly Co., Ltd., from four third parties for a total consideration of RMB509.6 million (approximately $71.6 million). On November 5, 2021, the Company paid a deposit of RMB50 million ($7.0 million) as a prepayment for the acquisition. However, the Company decided to withdraw from the investment due to the adjustment of its business strategy and a third party is willing to undertake the above-mentioned investment. Upon consummation of the investment by that third party, the above-mentioned deposit will be returned to the Company from the seller and the Company may charge that third party with an interest of 6.5% per annum on that deposit counting from the payment date. The Company received RMB50 million ($7.0 million) in full on October 12, 2022. As of September 30, 2023 and 2022, interest receivable amounted to nil and RMB2.9 million ($0.4 million), respectively.

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Property and equipment net

12 Months Ended

Sep. 30, 2023

Property and equipment net

Property, plant and equipment, net

Note 7 - Property and equipment, net

Property and equipment from the Company’s continuing operations, stated at cost less accumulated depreciation, consisted of the following:

	As of			As of
	September 30,			September 30,
	2023			2022
Machinery and equipment	$	62,973		$	64,449
Transportation equipment		48,009			49,241
Office equipment		19,492			20,254
Subtotal		130,474			133,944
Accumulated depreciation		(105,942	)		(89,076	)
Total	$	24,532		$	44,868

Depreciation expense was $19,752, $32,303 and $22,332 for the years ended September 30, 2023, 2022 and 2021, respectively.

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Loans

12 Months Ended

Sep. 30, 2023

Loans

Loans

Note 8 - Loans

Short-term and long-term loans from the Company consist of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Short-term loans
Xiaoshan Rural Commercial Bank	$	1,041,667	$	-
China Guangfa Bank Co., Ltd.		685,307		-
Bank of Beijing		411,184		-
Industrial Bank Co., Ltd		274,123		-
Total short-term loan	$	2,412,281	$	-
Long-term loans - current portion
Bank of Beijing	$	-	$	1,124,622
WeBank Co., Ltd		285,934		-
Jiangsu Suning Bank		186,472		140,578
Huaneng Guicheng Trust Co., Ltd.		100,054		80,832
China Resources Shenzhen Investment Trust Co., Ltd.		82,237		159,321
Zhejiang Mintai Commercial Bank		21,587		-
Total long-term loans - current portion	$	676,284	$	1,505,353
Long-term loans - non-current portion
Bank of Beijing		1,096,491		-
Xiaoshan Rural Commercial Bank		328,947		-
WeBank Co., Ltd		127,874		-
Huaneng Guicheng Trust Co., Ltd.		48,999		57,988
Jiangsu Suning Bank		32,261		140,578
Zhejiang Mintai Commercial Bank		17,989		-
China Resources Shenzhen Investment Trust Co., Ltd.		-		93,719
Total long-term loans - non-current portion	$	1,652,561	$	292,285
Total short-term and long-term loans	$	4,741,126	$	1,797,638

The following table summarizing the loan commencement date, loan maturity date, loan amount in RMB and its equivalent to the United States dollar, and the effective annual interest rate of each secured and unsecured short-term and long-term loan:

	Loan	Loan	Loan		Loan		Effective
	commencement	maturity	amount		amount		interest
As of September 30, 2023	date	date	in RMB		in USD		rate			Note
Secured short-term loans
Xiaoshan Rural Commercial Bank	June 19, 2023	June 18, 2024		7,600,000	$	1,041,667		3.20	%		1
China Guangfa Bank Co., Ltd.	November 1, 2022	October 31, 2023		5,000,000		685,307		3.95	%		2
Industrial Bank Co., Ltd	January 16, 2023	January 14, 2024		2,000,000		274,123		5.13	%		3
Total secured short-term loans				14,600,000	$	2,001,097
Unsecured short-term loan
Bank of Beijing	January 17, 2023	January 17, 2024		3,000,000		411,184		4.65	%
Total unsecured short-term loans				3,000,000	$	411,184
Total short-term loans				17,600,000	$	2,412,281
Secured long-term loans
Long-term loans, current portion
WeBank Co., Ltd	April 12, 2023	April 1, 2025		885,000	$	121,300		12.56	%		4
WeBank Co., Ltd	May 15, 2023	May 15, 2025		500,000		68,531		9.00	%		4
WeBank Co., Ltd	August 14, 2022	August 1, 2024		479,167		65,675		14.40	%		4
WeBank Co., Ltd	May 15, 2023	May 1, 2025		90,000		12,336		13.86	%		4
WeBank Co., Ltd	August 1, 2023	July 28, 2025		67,500		9,252		14.11	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		64,500		8,840		12.78	%		4
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		137,061		12.0	%		5
Jiangsu Suning Bank	May 15, 2023	May 1, 2025		210,000		28,783		13.86	%		6
Jiangsu Suning Bank	August 1, 2023	August 1, 2025		150,500		20,628		12.78	%		6
Huaneng Guicheng Trust Co., Ltd.	December 30, 2022	December 28, 2024		430,000		58,936		12.91	%		7
Huaneng Guicheng Trust Co., Ltd.	August 1, 2023	August 1, 2025		300,000		41,118		16.2	%		7
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		600,000		82,237		14.4	%		8
Zhejiang Mintai Commercial Bank	August 1, 2023	July 28, 2025		157,500		21,587		14.11	%		9
Total long-term loans, current portion				4,934,167	$	676,284
Long-term loans, non-current portion
Bank of Beijing	April 3, 2023	April 2, 2026		8,000,000		1,096,491		4.75	%		10
Xiaoshan Rural Commercial Bank	June 19, 2023	June 18, 2026		2,400,000		328,947		4.50	%		1
WeBank Co., Ltd	April 12, 2023	April 1, 2025		442,500		60,651		12.56	%		4
WeBank Co., Ltd	May 15, 2023	May 15, 2025		333,333		45,687		9.00	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		56,250		7,710		13.86	%		4
WeBank Co., Ltd	August 1, 2023	July 28, 2025		52,500		7,196		14.11	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		48,375		6,630		12.78	%		4
Huaneng Guicheng Trust Co., Ltd.	August 1, 2023	August 1, 2025		250,000		34,265		16.20	%		7
Huaneng Guicheng Trust Co., Ltd.	December 30, 2022	December 28, 2024		107,500		14,734		12.91	%		7
Jiangsu Suning Bank	May 15, 2023	May 1, 2025		122,500		16,790		13.86	%		6
Jiangsu Suning Bank	August 1, 2023	August 1, 2025		112,875		15,471		12.78	%		6
Zhejiang Mintai Commercial Bank	July 1, 2022	July 1, 2024		131,250		17,989		14.4	%		6
Total long-term loans, non-current portion				12,057,083	$	1,652,561
Total short-term and long-term loans				34,591,250	$	4,741,126

	Loan	Loan	Loan		Loan		Effective
	commencement	maturity	amount		amount		interest
For the year ended September 30, 2022	date	date	in RMB		in USD		rate			Note
Secured long-term bank loans
Long-term loans, current portion
Bank of Beijing	April 6, 2022	April 5, 2026		8,000,000	$	1,124,622		4.8	%		2
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		140,578		12.0	%		5
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		800,000		112,462		14.4	%		6
Huaneng Guicheng Trust Co., Ltd.	August 14, 2022	August 1, 2024		575,000		80,832		14.4	%		7
China Resources Shenzhen Investment Trust Co., Ltd.	April 30, 2021	April 28, 2023		333,334		46,859		10.8	%		6
Total long-term loans, current portion				10,708,334	$	1,505,353
Long-term loans, non-current portion
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		140,578		12.0	%		6
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		666,667		93,719		14.4	%		6
Huaneng Guicheng Trust Co., Ltd.	August 14, 2022	August 1, 2024		412,500		57,988		14.4	%		7
Total long-term loans, non-current portion				2,079,167	$	292,285
Total short-term and long-term loans				12,787,501	$	1,797,638

___________ 

(1) The loan is secured by real property owned by Mr. Dehong Zhang, a legal representative of Farmmi Food.

(2) The loan is guaranteed by Ms Xinyang Wang, the 100% shareholder of Nongyuan Network, Ms Aihong Wang, sister to Mr Zhengyu Wang, Chairman of the Company, and Mr. Dehong Zhang, a legal representative of Farmmi Food.

(3) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food for up to RMB2 million ($0.3 million).

(4) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food for up to RMB5 million ($0.7 million).

(5) The loan is guaranteed by the CEO of the Company, Ms Yefang Zhang on the outstanding principal and interest.

(6) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food on the outstanding principal and interest.

(7) These loans are guaranteed by a related party, Mr. Dehong Zhang, a legal representative of Farmmi Agricultural for up to RMB3 million ($0.4 million) of the outstanding principal and interest.

(8) These loans are guaranteed by a related party, Mr. Dehong Zhang, a legal representative of Farmmi Agricultural for up to RMB3 million ($0.4 million) of the outstanding principal and interest.

(9) The loan is guaranteed by Mr. Dehong Zhang, a legal representative of Farmmi Food for up to RMB5 million ($0.7 million).

(10) The loan is guaranteed by Ms Xinyang Wang, the 100% shareholder of Nongyuan Network, for up to RMB16 million ($2.2 million) of the outstanding principal and interest and is collateralized by a property owned by Ms Xinyang Wang which has a valuation of RMB19.2 million ($2.6 million).

Interest expenses amounted to $0.2 million, $0.1 million and $53,009 for the years ended September 30, 2023, 2022 and 2021, respectively.

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Convertible promissory note and derivative liability

12 Months Ended

Sep. 30, 2023

Convertible promissory note and derivative liability

Convertible promissory note and derivative liability

Note 9 - Convertible promissory note and derivative liability

On September 26, 2022, the Company completed a $6.42 million convertible promissory note with an institutional investor (the “Investor”). Pursuant to the Securities Purchase Agreement, dated as of September 26, 2022, the Company issued and sold to the Investor a convertible promissory note of $6.42 million due on September 25, 2023, convertible into ordinary shares, $0.025 par value per share, at a discount of $0.42 million. Upon issuance, this convertible promissory note converts at the 80% of the market price. The Company accounted for this conversion feature as a derivative liability. In connection herewith, the Company recorded a derivative liability of $3.87 million and a debt discount of $3.87 million upon issuance of this convertible promissory note. The debt discount was amortized over the term of the convertible promissory note and, for the years ended September 30, 2023 and 2022, the Company recorded amortization of debt issuance cost of $1.7 million and $48,160 in other expenses, respectively. 

Subsequent to September 30, 2022, the Company received comments from the Staff of NASDAQ Listing Qualifications that the Note did not provide for a floor price for the possible future conversions and that a future priced security without a floor price has public interest implications pursuant to NASDAQ Listing Rule 5101 (the “Rule”); management of the Company determined that the floor price under the Note is assumed to be $0.12, which is calculated based on an 80% discount of the Nasdaq Minimum Price of $0.5785 on the date of the Company’s entry into the Agreement with the Investor; and the Company believes it to be in the best interests of the Company and the shareholders that the Company shall repay the Note in cash in the event conversions would result in the aggregate effective conversion price falling below $0.12. After the effect of the reverse stock split adjustment, the floor price of the Note is assumed to be $0.96.

As of September 30, 2023 and 2022, the fair value of this derivative liability was nil and $3.45 million. For the years ended September 30, 2023 and 2022, the change in fair value of derivative liability of $0.9 million and $0.42 million was recorded in other income, respectively. For the year ended September 30, 2023, 474,137 ordinary shares were issued for the redemption of $1.1 million convertible notes. As of September 30, 2023 and 2022, the balance of the convertible promissory note, net of amortization, amounted to $5.8 million and $2.2 million, respectively.

The following table provides quantitative information regarding Level 3 fair value measurements inputs of the derivative liability at the measurement date:

	As of		As of
	September 30,		September 30,
	2023		2022
Exercise price		-	$	0.45
Ordinary share price		-	$	0.56
Term (in years)		-		1
Volatility		-		88.39	%
Risk-free interest rate		-		4.05	%
Dividend yield		-		-

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Shareholders Equity

12 Months Ended

Sep. 30, 2023

Shareholders Equity

Shareholders' Equity

Note 10 - Shareholders’ Equity

Ordinary shares

On September 12, 2020, the authorized share capital of the Company was increased from 20,000,000 ordinary shares of $0.001 par value each to 200,000,000 ordinary shares of $0.001 par value each. On July 22, 2021, the authorized share capital of the Company was increased from 200,000,000 ordinary shares of $0.001 par value each to 600,000,000 ordinary shares of $0.001 par value each. On May 31, 2022, the Company consolidated its ordinary share at a ratio of one-for-twenty-five. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight and, immediately following the share consolidation, the authorized share capital of the Company be increased from $2.5 million divided into 12.5 million ordinary shares of $0.20 par value each to $100 million divided into 500 million ordinary shares of $0.20 par value each, by creation of an additional 487.5 million ordinary shares of $0.20 par value each.

During the year ended September 30, 2022, the Company issued 30,000,000 ordinary shares at $0.20 per ordinary share for a gross proceed of $6,000,000 in February 2022. After share consolidation in May 2022 and September 2023, the issuance of 30 million ordinary shares was first retrospectively adjusted to 1.2 million ordinary shares and then 150,000 ordinary shares.

During the year ended September 30, 2023, the Company issued 21,052,632 ordinary shares at $0.38 per ordinary share for a gross proceed of $8,000,000 in July 2023. After share consolidation in September 2023, the issuance of 21,052,632 ordinary shares was retrospectively adjusted to 2,631,579 ordinary shares.

During the year ended September 30, 2023, 474,137 ordinary shares were issued for the redemption of $1.1 million convertible notes.

Share incentive plan

The Company established a pool for shares and share options for employees. This pool contains shares and options to purchase 1,168,000 ordinary shares, equal to 10% of the number of ordinary shares outstanding at the conclusion of the initial public offering. Subject to approval by the Compensation Committee of our Board of Directors, the Company may grant shares or options in any percentage determined for a particular grant. Any options granted will vest at a rate of 20% per year for five years and have a per share exercise price equal to the fair market value of one of ordinary shares on the date of grant. For the year ended September 30, 2021, 596,600 ordinary shares were issued to four employees and $805,410 was accounted as share-based compensation expense in general and administration expenses. As of September 30, 2022, the remaining ordinary shares available to be issued are 571,400 and, after the share consolidation on May 31, 2022, the remaining ordinary shares available to be issued are 22,856. As of September 30, 2023, after share consolidation on September 25, 2023, the remaining ordinary shares available to be issued are 2,857.

Statutory reserve

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. As of September 30, 2023 and 2022, the balance of the required statutory reserves was $0.7 million and $1.2 million, respectively.

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Taxes

12 Months Ended

Sep. 30, 2023

Taxes

Taxes

Note 11 - Taxes

Corporation income tax (“CIT”)

The Company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled.

FAMI is incorporated in the Cayman Islands as an offshore holding company and is not subject to tax on income or capital gain under the laws of the Cayman Islands.

Farmmi International is incorporated in Hong Kong as a holding company with no activities. Under the Hong Kong tax laws, an entity is not subject to income tax if no revenue is generated in Hong Kong.

In China the Corporate Income Tax Law generally applies an income tax rate of 25% to all enterprises. Most of the China subsidiaries are subject to corporate income tax at a statutory rate of 25% on net income reported after certain tax adjustments. Certain subsidiaries were identified as small-scaled minimal profit enterprises. Once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the part of its taxable income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and 3 million is subject to a reduced rate of 10%.

Under the Enterprise Income Tax (“EIT”) Law of PRC, domestic enterprises and foreign investment enterprises are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis. EIT is typically governed by the local tax authority in China. Each local tax authority at times may grant special tax treatment to local enterprises as a way to encourage specific agricultural industry and stimulate local economy. Farmmi Eco Agri is engaged in agricultural industry and their income are tax exempted. Net income of $3.9 million, $2.8 million and $4.02 million was exempt from income tax for the years ended September 30, 2023, 2022 and 2021, respectively. The estimated tax savings as the result of the tax break for the years ended September 30, 2023, 2022 and 2021 amounted to $1.0 million, $0.7 million and  $1.0 million, respectively. After adjusted for share consolidation, per share effect of the tax exemption were $0.27, $0.24 and $1.95 for the years ended September 30, 2023, 2022 and 2021, respectively.

The following table reconciles PRC statutory rates to the Company’s effective tax rates for the years ended September 30, 2023, 2022 and 2021:

	For the Years Ended September 30,
	2023			2022			2021
Statutory PRC income tax rate		25.0	%		25.0	%		25.0	%
Effect of income tax exemption (a)		(40.9	%)		(50.8	%)		(41.0	%)
Favorable tax rate impact (a)		13.3	%		(14.8	%)		(0.3	%)
Permanent difference		-			0.1	%		(8.2	%)
Changes of deferred tax assets valuation allowances		(5.8	%)		7.2	%		2.0	%
Non-PRC entities not subject PRC income tax		19.4	%		27.7	%		23.6	%
Total		11.0	%		(5.6	%)		1.1	%

_______ 

(a) Income tax exemption refers to entity engaged in agricultural industry and its income is tax exempted. Favorable refer to entities are identified as a small-scale minimal profit enterprise, the part of its taxable income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and 3 million is subject to a reduced rate of 10%.

Note 11 - Taxes (continued)

Corporation income tax (“CIT”) (Continued)

The provision for income tax from the Company consists of the following:

	For the Years Ended September 30,
	2023		2022			2021
Current income tax provision	$	148,893	$	58,266		$	25,571
Deferred income tax provision		164,600		(176,633	)		-
Total	$	313,493	($118,367)			$	25,571

Deferred tax liabilities and assets attributable to different tax jurisdictions are not offset. Components of deferred tax assets and liabilities were as follows:

	As of			As of
	September 30,			September 30,
	2023			2022
Net operating loss (“NOL”) carry forward	$	284,283		$	168,126
Allowance for inventory		2,202			12,413
Allowance for doubtful accounts		4,474			836
Valuation allowance		(290,959	)		(18,168	)
Total		-		$	163,207

The deferred tax expense (benefit) is the change of deferred tax assets and deferred tax liabilities resulting from the temporary difference between tax basis and U.S. GAAP. Certain subsidiaries had a cumulative net operating loss of approximately $0.7 million as of September 30, 2023, which may be available to reduce future taxable income. Deferred tax assets were primarily the result of these net operating losses.

As of each reporting date, management considers evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. On the basis of this evaluation, a valuation allowance of $181,375 was recorded against the gross deferred tax asset balance at September 30, 2023. The amount of the deferred tax asset is considered unrealizable because it is more likely than not that certain subsidiaries will not generate sufficient future taxable income to utilize the net operating loss.

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Concentration of major customers and suppliers

12 Months Ended

Sep. 30, 2023

Concentration of major customers and suppliers

Concentration of major customers and suppliers

Note 12 - Concentration of major customers and suppliers

For the year ended September 30, 2023, two major customers accounted for approximately 41% and 12% of the Company’s total sales, respectively. For the year ended September 30, 2022, two major customers accounted for approximately 31% and 16% of the Company’s total sales, respectively. For the year ended September 30, 2021, two major customers accounted for approximately 64% and 14% of the Company’s total sales, respectively. Any decrease in sales to this major customer may negatively impact the Company’s operations and cash flows if the Company fails to increase its sales to other customers.

As of September 30, 2023, two major customers accounted for approximately 87% and 12% of the Company’s accounts receivable balance, respectively. As of September 30, 2022, two major customers accounted for approximately 65% and 34% of the Company’s accounts receivable balance, respectively.

For the year ended September 30, 2023, one major suppliers accounted for approximately 14% of the total purchases. For the year ended September 30, 2022, two major suppliers accounted for approximately 23% and 21% of the total purchases, respectively. For the year ended September 30, 2021, four major suppliers accounted for approximately 37%, 20%, 18% and 16% of the total purchases, respectively.

As of September 30, 2023, three major suppliers accounted for approximately 46%, 18% and 13% of the Company’s advances to suppliers’ balance. As of September 30, 2022, four major suppliers accounted for approximately 35%, 26%, 15% and 15% of the Company’s advances to suppliers’ balance.

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Leases

12 Months Ended

Sep. 30, 2023

Leases

Leases

Note 13 - Leases

The Company rent its factories in Lishui City Zhejiang Province from a related party, Zhejiang Tantech Bamboo Technology Co., Ltd., for processing dried edible fungi and a floor in an office building in Hangzhou from third parties.

As of September 30, 2023 and 2022, the remaining average lease term was 7.1 years and 8.2 years, respectively. The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, the Company estimates its incremental borrowing rate based on actual incremental borrowing interest rates from financial institutions in order to discount lease payments to present value. The weighted average discount rate of the Company’s operating leases was 10.2% per annum and 10.0% per annum, as of September 30, 2023 and 2022, respectively.

Supplemental balance sheet information related to operating leases from the Company’s continuing operations was as follows:

	As of		As of
	September 30,		September 30,
	2023		2022
Right-of-use assets under operating leases	$	516,459	$	534,351
Operating lease liabilities, current		69,062		46,543
Operating lease liabilities, non-current		458,617		517,156
Total operating lease liabilities	$	527,679	$	563,699

For the years ended September 30,
2024	$	119,232
2025		98,975
2026		98,975
2027		98,975
2028		88,434
Thereafter		242,716
Total Future minimum lease payments		747,307
Less: Imputed interest		(219,628	)
Total	$	527,679

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Segment reporting

12 Months Ended

Sep. 30, 2023

Segment reporting

Segment reporting

Note 14 - Segment reporting

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments.

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company currently has three main products from which revenue is earned and expenses are incurred: Shiitake Mushroom, Mu Er Mushroom and other edible fungi and other agricultural products. The operations of these product categories have similar economic characteristics. In particular, the Company uses the same or similar production processes; sells to the same or similar type of customers and uses the same or similar methods to distribute these products. The resources required by these products share high similarity. Switching cost between different products is minimal. Production is primarily determined by sales orders received and market trend. Therefore, management, including the chief operating decision maker, primarily relies on the revenue data of different products in allocating resources and assessing performance. Based on management’s assessment, the Company has determined that it has only one operating segment and therefore one reportable segment as defined by ASC. Since June 2021, the Company’s operations were expanded into bulk agricultural commodity trading, such as cotton and corn bulk trading, The Company obtains control over these commodities as a principal from its suppliers before selling these commodities to its customers.

The following table presents revenue by major product categories (from third parties and related party) from the Company’s continuing operations for the years ended September 30, 2023, 2022 and 2021, respectively:

	For the Years Ended September 30,
	2023		2022		2021
Tapioca	$	39,977,734		-		-
Corn		27,430,969	$	10,778,197	$	1,796,006
Shiitake		19,655,465		19,859,533		20,494,362
Mu Er		16,301,157		19,123,152		16,524,723
Cotton		5,547,927		47,950,345		-
Cornstarch		1,338,782		-		-
Other products		112,853		1,502,152		474,860
Total	$	110,364,887	$	99,213,379	$	39,289,951

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Related party transactions

12 Months Ended

Sep. 30, 2023

Related party transactions

Related party transactions

Note 15 - Related party transactions

The relationship and the nature of related party transactions are summarized as follow:

Name of related party	Relationship to the Company	Nature of transactions
Zhejiang Yili Yuncang Technology Group Co., Ltd	10% equity interest owned by the Company	Prepayment of electricity and water expenses for office leased to the Company
FarmNet Limited	Owned 0.8% equity interest of the Company	Payment of expenses by the Company.
Epakia Canada Inc	Legal representative of Epakia Canada Inc is a director of the Company	Payment of expenses by the Company.
Shanghai Zhongjian Yiting Medical Health Technology Partnership	A partnership jointly set up by the Company with another limited partner ("LP").	Payment of expenses by the Company.
Zhejiang Tantech Bamboo Technology Co., Ltd	Under common control of Mr Zhengyu Wang and Ms Yefang Zhang, CEO of the Company	Lease factory building to the Company and charging water and electricity for offices leased to the Company.
Forasen Holdings Group Co., Ltd	Owned by Mr Zhengyu Wang, the Chairman of Board of Directors of the Company	Purchases from the Company
Yefang Zhang	CEO of the Company	Payment of expenses for the Company and provide a guarantee as additional security for a loan.
Xinyang Wang	Shareholder of Nongyuan Network	Provide guarantees and a real property as additional security for certain loans.
Dehong Zhang	Ms Yefang Zhang's, CEO of the Company, brother	Provide guarantees as an additional security for certain loans
Ms Aihong Wang	Mr Zhengyu Wang's, the Chairman of Board of Directors of the Company, sister.	Provide a guarantee as an additional security for a revolving loan

Due from related parties consisted of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Yili Yuncang Holding Group Co., Ltd	$	103,417	$	-
Zhejiang Yili Yuncang Technology Group Co., Ltd		-		29,055
FarmNet		4,100		-
Epakia Canada Inc		2,996		-
Shanghai Zhongjian Yiting Medical Health Technology Partnership		308		30,928
Dehong Zhang		137		-
Total	$	110,958	$	59,983

Amount due from Zhejiang Yili Yuncang Holding Group Co., Ltd was mainly related to prepayment of electricity and water expenses for offices leased to the Company.

Amounts due from FarmNet Limited, Epakia Canada Inc, Shanghai Zhongjian Yiting Medical Health Technology Partnership and Dehong Zhang were mainly related to expenses paid by the Company which can be recoverable from these related parties.

Due to related parties from the Company consisted of the following:

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Tantech Bamboo Technology Co., Ltd.	$	24,496	$	948
Yefang Zhang		9,150		-
Forasen Holdings Group Co., Ltd		168		-
Total	$	33,814	$	948

Amount due to Zhejiang Tantech Bamboo Technology Co., Ltd. were related to water and electricity expenses for offices leased to the Company.

Amount due to Forasen Holdings Group Co., Ltd and Yefang Zhang were related to payment of expenses by related parties for the Company. Amount was due on demand and non-interest bearing.

Sales to related parties

The Company periodically sells merchandise to its affiliates during the ordinary course of business. For the years ended September 30, 2023, 2022 and 2021, the Company recorded sales to related parties of nil, $1,016 and $1,952, respectively.

Operating lease from related parties

The following table summarizing operating leases with related parties, Zhejiang Tantech Bamboo Technology Co., Ltd. and Zhejiang Yili Yuncang Holding Group Co., Ltd, detailing lease begin date, lease end date, leasing purpose, leasing areas in square meters, annual rent in RMB and its equivalent in USD.

Zhejiang Tantech Bamboo Technology Co., Ltd.	Lease No 1		Lease No. 2		Lease No. 3		Total
Lease begin date	August 1, 2021		July 14, 2021		March 1, 2023
Lease end date	July 31, 2031		July 13, 2031		February 29, 2028
Leasing purpose	Factory building		Factory building		Office
Annual rent in RMB		168,854		421,431		131,835		722,120
Annual rent in USD	$	23,940	$	59,750	$	18,691	$	102,381
Area (in square meters)		1,180		1,914		479		3,573

Zhejiang Yili Yuncang Holding Group Co., Ltd
Lease begin date	August 1, 2023
Lease end date	July 31, 2025
Leasing purpose	Office
Annual rent in RMB		9,795
Annual rent in USD	$	1,389
Area (in square meters)		15

For the years ended September 30, 2023, 2022 and 2021, the Company incurred lease expenses of $66,116, $88,847 and $86,556, respectively.

Sublease to a related party

In August 2020, the Company entered into a sublease agreement with Hangzhou Forasen Technology Co., Ltd to sublease its office space. The lease term is two years with annual rent of RMB 283,258 (equivalent of $41,639). This lease was terminated on February 14, 2022.

For the years ended September 30, 2022 and 2021, the Company recorded lease income of $14,262 and $40,026, respectively.

Guarantees provided by related parties

The Company’s related parties provide guarantees for the Company’s short-term bank loans (see Note 8). The Company’s related parties also pledged their properties as collaterals to safeguard the Company’s short-term bank loans (see Note 8).

The Company and Forasen Group signed a Non-Competition Agreement which provides that Forasen Group should not engage in any business that the Company engages in, except purchasing products from us. In addition, Mr. Wang and Ms. Zhang signed a Non-Competition Agreement with the Company and Tantech which provides that Mr. Wang and Ms. Zhang shall not vote in favor or otherwise cause Tantech to engage in the business that the Company conducts.

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Subsequent events

12 Months Ended

Sep. 30, 2023

Subsequent events

Subsequent events

Note 16 - Subsequent events

On September 26, 2022, Farmmi, Inc., a Cayman Islands company (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company issued to the Investor an unsecured promissory note (the “Note” and together with the Purchase Agreement, the “Agreements”) in the original principal amount of $6,440,000, convertible into ordinary shares of the Company (the “Ordinary Shares”) for $6,000,000 in gross proceeds. The Note bears interest at a rate of 7% per year and have a term of twelve months after the purchase price of the Note is delivered by the Investor to the Company (the “Purchase Price Date”). Under the Agreements, the Investor has the right to redeem the Note six months after the Purchase Price Date, and redemptions may be satisfied in cash, Ordinary Shares or a combination of cash and Ordinary Shares at the Company’s election.

On November 13, 2023 (the “Agreement Date”), the Company and the Investor entered an Amendment to Convertible Promissory Note (the “Extension Agreement”), both parties mutually agreed to extend the term of the Note from twelve months to twenty-four months from the Purchase Price Date, or September 28, 2024. As consideration for the term extension and related costs incurred by the Investor, the Company agreed to pay to the Investor an extension fee equal to seven percent (7%) of the outstanding balance of the Note as of the Agreement Date (the “Extension Fee”), which is added to the remaining outstanding balance of the Note. The Company further agreed to repay the Note by a minimum of $250,000 per month beginning December 2023 and also to pay ten percent (10%) of any funds raised through public offerings within five trading days of the closing dates until the remaining outstanding balance of the Note is paid in full. In addition, the Company is required to pay any redemption amount in cash, if on the applicable redemption date, the Redemption Conversion Price (defined in the Note) is below $1.00 per share. Other than the terms amended by the Extension Agreement, other provisions of the Note remain unchanged.

On January 12, 2024, the Company and the Investor entered a Forbearance Agreement, the Company entered into a forbearance agreement (the “Agreement”) with the Investor, pursuant to which the Investor agreed to refrain and forbear from bringing any action to enforce any remedies against the Company for failure to deliver the cash amount in accordance to a certain redemption notice delivered to the Company by the Lender on January 20, 2023 (the “Forbearance”). In exchange for the Forbearance, the Company agreed to pay the Lender a forbearance fee equal to 10% of the outstanding balance as of the date of the Agreement.

The Forbearance will terminate immediately upon the Company’s failure to comply with certain terms and conditions set forth in the Agreement. Upon termination of the Forbearance, the Investor may seek all recourse available to it under the terms of the Note, the Agreement, any other documents entered into in conjunction therewith, or applicable laws. In addition, except as expressly set forth in the Agreement, the Forbearance does not constitute a waiver of, or an amendment to, any right, power, or remedy of the Investor under the Note or all other documents entered into in conjunction therewith as in effect prior to the date of the Agreement.

In January 2024, 200,000 ordinary shares were issued for the redemption of $0.2 million convertible notes.

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Condensed Financial Information of the Parent Company

12 Months Ended

Sep. 30, 2023

Condensed Financial Information of the Parent Company

Condensed Financial Information of the Parent Company

Note 17 - Condensed financial information of the parent company

Pursuant to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall 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. The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with such requirement and concluded that it was applicable to the Company as the restricted net assets of the Company’s PRC subsidiaries exceeded 25% of the consolidated net assets of the Company, therefore, the condensed financial statements for the parent company are included herein.

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 subsidiaries in the form of loans, advances or cash dividends without the consent of a third party

The condensed financial information of the parent company has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company used the equity method to account for investment in its subsidiaries. Such investment is presented on the condensed balance sheets as “Investment in subsidiaries” and the respective profit or loss as “Equity in earnings of subsidiaries” on the condensed statements of income.

The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S GAAP have been condensed or omitted.

The Company did not pay any dividend for the periods presented. As of September 30, 2023 and 2022, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements, if any.

Farmmi, Inc.

Parent Company Balance Sheets

	As of		As of
	September 30,		September 30,
	2023		2022
Assets
Current assets
Cash	$	84	$	4,057,179
Other receivables		103,760		103,858
		103,844		4,161,037
Non-current assets
Investment in subsidiaries		167,664,201		156,151,565
Total assets	$	167,768,045	$	160,312,602
Liabilities and Shareholders’ Equity
Current liabilities
Interest payable		3,377		-
Convertible promissory notes		5,788,742		2,178,511
Derivative liability		-		3,450,000
Total liabilities		5,792,119	$	5,628,511
Commitments and contingencies
Shareholders’ equity
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively		1,218,816		597,768
Additional paid-in capital		160,571,517		152,162,565
Retained earnings		185,593		1,923,758
Total shareholders’ equity		161,975,926		154,684,091
Total liabilities and shareholders’ equity	$	167,768,045	$	160,312,602

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight and, immediately following the share consolidation, the authorized share capital of the Company be increased from $2.5 million divided into 12.5 million ordinary shares of $0.20 par value each to $100 million divided into 500 million ordinary shares of $0.20 par value each. The issued and outstanding ordinary shares had been retrospectively adjusted from 23,906,985 ordinary shares to 2,988,835 ordinary shares at September 30, 2022. Also, the ordinary share amount and additional paid-in capital had been retrospectively adjusted from $597,675 and $152,162,658 to $597,768 and $152,162,565 as of September 30, 2022, respectively.

Farmmi, Inc.

Parent Company Statements of Operations

	For the Years Ended September 30,
	2023			2022			2021
Operating expenses:
General and administrative expenses	($913,948)			($2,961,849)			($2,031,506)
Other expenses
Change in fair value of derivative liability		873,767			419,649			-
Interest expenses		(445,766	)		-			-
Amortization of debt issuance costs		(1,691,609	)		(48,160	)		-
Other expenses		(432	)		(3,024	)		(5,672	)
Loss from operations		(2,177,988	)		(2,593,384	)		(2,037,178	)
Equity in income of subsidiaries and VIE		4,721,801			4,817,363			4,395,592
Comprehensive income attributable to the Company	$	2,543,813		$	2,223,979		$	2,358,414

Farmmi, Inc.

Parent Company Statements of Cash Flows

	For the Years Ended September 30,
	2023			2022			2021
Cash flows from operating activities
Net income	$	2,543,813		$	2,223,979		$	2,358,414
Adjustments to reconcile net income to net cash used in operating activities
Equity in earnings of subsidiaries		(4,721,801	)		(4,817,363	)		(4,395,592	)
Amortization of debt issuance costs		1,691,609			48,160			-
Change in fair value of derivative liability		(873,767	)		(419,649	)		-
Share-based compensation		-			2,007,328			1,260,674
Other current assets		98			21,223			(125,081	)
Other current liabilities		(50,869	)		54,246			(40,000	)
Net cash used in operating activities		(1,410,917	)		(882,076	)		(941,585	)
Cash flows from investing activities
Investing in subsidiaries		(10,576,178	)		(7,529,060	)		(122,726,999	)
Net cash used in investing activities		(10,576,178	)		(7,529,060	)		(122,726,999	)
Cash flows from financing activities
Net proceeds from share issuance		7,930,000			6,000,000			126,029,588
Net proceeds from issuance of convertible promissory notes		-			6,000,000			-
Proceeds from advances from related parties		-			-			298,297
Repayment of advances from related parties		-			(54,600	)		(2,138,508	)
Net cash provided by financing activities		7,930,000			11,945,400			124,189,377
Net (decrease) increase in cash and restricted cash		(4,057,095	)		3,534,264			520,793
Cash, beginning of year		4,057,179			522,915			2,122
Cash, end of year	$	84		$	4,057,179		$	522,915

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Summary of significant accounting policies (Policies)

12 Months Ended

Sep. 30, 2023

Summary of significant accounting policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated financial statements of the Company include the financial statements of the Company, its subsidiaries, the VIEs and the subsidiaries of the VIEs. All inter-company transactions and balances between the Company, its subsidiaries, the VIEs and the subsidiaries of the VIEs have been eliminated upon consolidation. Results of subsidiaries, businesses acquired from third parties and the VIEs are consolidated from the date on which control is transferred to the Company.

Consolidation of Variable Interest Entities

In accordance with accounting standards regarding consolidation of variable interest entities (“VIEs”), VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The Company determined that Nongyuan Network is a VIE because the Company is the primary beneficiary of risks and rewards of this VIE.

The condensed consolidating table below disaggregated the Consolidated Balance Sheets of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated as of September 30, 2023 and 2022.

	As of September 30, 2023
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	144,664,527	$	131,992,092	$	7,086,579	$	151,681,406		-
Current assets excluding intercompany receivables		138,871,675		353,985		18,841,671		103,844	$	158,171,175
Current assets	$	283,536,202	$	132,346,077	$	25,928,250	$	151,785,250	$	158,171,175
Investment in subsidiaries		-	$	37,712,692		-		-		-
Non-current assets excluding investment in subsidiaries	$	16,627,615		-	$	1,296		-	$	16,628,911
Non-current assets	$	16,627,615	$	37,712,692	$	1,296		-	$	16,628,911
Total assets	$	300,163,817	$	170,058,769	$	25,929,546	$	151,785,250	$	174,800,086
Intercompany payables	$	290,760,077	$	124,634,218	$	19,812,080	$	218,229		-
Current liabilities excluding intercompany payables		634,111		756,017		3,530,735		5,792,119	$	10,712,982
Current liabilities	$	291,394,188	$	125,390,235	$	23,342,815	$	6,010,348	$	10,712,982
Non-current liabilities	$	533,315	$	106,737		1,471,126		-	$	2,111,178
Total liabilities	$	291,927,503	$	125,496,972	$	24,813,941	$	6,010,348	$	12,824,160
Total shareholders' equity (net assets)	$	8,236,314	$	44,561,797	$	1,115,605	$	145,774,902	$	161,975,926

	As of September 30, 2022
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	163,676,919	$	114,994,912		-	$	140,445,311		-
Current assets excluding intercompany receivables	$	91,926,232	$	33,986	$	57,133,125	$	4,161,037	$	153,254,380
Current assets	$	255,603,151	$	115,028,898	$	57,133,125	$	144,606,348	$	153,254,380
Investment in subsidiaries		-	$	40,424,517		-		-		-
Non-current assets excluding investment in subsidiaries	$	10,500,217	$	8,484	$	19,772		-	$	10,528,473
Non-current assets	$	10,500,217	$	40,433,001	$	19,772		-	$	10,528,473
Total assets	$	266,103,368	$	155,461,899	$	57,152,897	$	144,606,348	$	163,782,853
Intercompany payables	$	255,440,223	$	109,255,668	$	54,420,549	$	702		-
Current liabilities excluding intercompany payables	$	590,393	$	226,814	$	1,789,357	$	5,682,757	$	8,289,321
Current liabilities	$	256,030,616	$	109,482,482	$	56,209,906	$	5,683,459	$	8,289,321
Non-current liabilities	$	657,734	$	151,707		-		-	$	809,441
Total liabilities	$	256,688,350	$	109,634,189	$	56,209,906	$	5,683,459	$	9,098,762
Total shareholders' equity (net assets)	$	9,415,018	$	45,827,710	$	942,991	$	138,922,889	$	154,684,091

The condensed consolidating table below disaggregated the Consolidated Statements of Operations and Comprehensive Income (Loss) of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the financial years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	74,224,063		$	16,034,543		$	20,106,281			-		$	110,364,887
Cost of revenues		(70,021,350	)		(16,023,779	)		(20,033,003	)		-			(106,078,132	)
Gross profit		4,202,713			10,764			73,278			-			4,286,755
Operating expenses		(1,028,294	)		(71,676	)		(231,462	)		(913,948	)		(2,245,380	)
Income (loss) from operations		3,174,419			(60,912	)		(158,184	)		(913,948	)		2,041,375
Other income (expenses)		1,514,162			(68,416	)		634,225			(1,264,040	)		815,931
Income (loss) before income taxes		4,688,581			(129,328	)		476,041			(2,177,988	)		2,857,306
Provision for income taxes		(270,874	)		(8,556	)		(34,063	)		-			(313,493	)
Net income (loss)	$	4,417,707		($137,884)			$	441,978		($2,177,988)			$	2,543,813

	For the year ended September 30, 2022
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	64,795,082		$	9,111,073		$	25,307,224			-		$	99,213,379
Cost of revenues		(60,272,018	)		(9,053,547	)		(24,449,728	)		-			(93,775,293	)
Gross profit		4,523,064			57,526			857,496			-			5,438,086
Operating expenses		(782,009	)		(50,344	)		(701,516	)		(2,961,849	)		(4,495,718	)
Income (loss) from operations		3,741,055			7,182			155,980			(2,961,849	)		942,368
Other income (expenses)		560,497			20,510			213,771			368,466			1,163,244
Income (loss) before income taxes		4,301,552			27,692			369,751			(2,593,383	)		2,105,612
Provision for income taxes		114,801			9,182			(5,616	)		-			118,367
Net income (loss)	$	4,416,353		$	36,874		$	364,135			(2,593,383	)	$	2,223,979

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary			VIE and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Revenues from continuing operations	$	33,068,045		$	762,771		$	5,459,135		$	-		$	39,289,951
Cost of revenues from continuing operations		(28,847,801	)		(742,933	)		(4,589,936	)		-			(34,180,670	)
Gross profit from continuing operations		4,220,244			19,838			869,199			-			5,109,281
Operating expenses		588,892			(8,940	)		(804,851	)		(2,031,506	)		(2,256,405	)
Income (loss) from operations		4,809,136			10,898			64,348			(2,031,506	)		2,852,876
Other expenses		(391,819	)		(19,990	)		(2,033	)		(5,673	)		(419,515	)
Income (loss) before income taxes		4,417,317			(9,092	)		62,315			(2,037,179	)		2,433,361
Provision for income taxes		(8,085	)		-			(17,486	)		-			(25,571	)
Net income (loss) from continuing operations	$	4,409,232		$	(9,092	)	$	44,829		$	(2,037,179	)	$	2,407,790

The condensed consolidating table below disaggregated the Consolidated Statements of Cash Flows of the Company into FAMI, the VIE and its subsidiaries, the WFOE that is the primary beneficiary of the VIEs and an aggregation of other entities that are consolidated for the financial years ended September 30, 2023, 2022 and 2021.

	For the year ended September 30, 2023
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities	($17,601,436)			($579,125)			($45,586,506)			($11,987,095)			($75,754,162)
Net cash provided by (used in) investing activities		(7,121,332	)		-			43,017,525			-			35,896,193
Net cash provided by (used in) financing activities		32,778			539,287			2,515,877			7,930,000			11,017,942
Effect of exchange rate changes on cash		462,420			5,227			(5,386	)		-			462,261
Net (decrease) increase in cash and restricted cash		(24,227,570	)		(34,611	)		(58,490	)		(4,057,095	)		(28,377,766	)
Cash, beginning of year		183,030			37,393			61,196			4,057,179			41,167,501
Cash, end of year	($24,044,540)			$	2,782		$	2,706		$	84		$	12,789,735

	For the year ended September 30, 2022
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities from continuing operations	$	(14,188,275	)	$	(3,189,440	)	$	46,404,339		$	(8,391,136	)	$	20,635,488
Net cash provided by (used in) investing activities from continuing operations		1,140,848			2,738,559			(45,870,486	)		-			(41,991,079	)
Net cash provided by (used in) financing activities from continuing operations		649,782			373,382			(899,449	)		11,511,153			11,634,868
Effect of exchange rate changes on cash and restricted cash		(8,345,494	)		(5,078	)		(13,108	)		-			(8,363,680	)
Net (decrease) increase in cash and restricted cash		(20,743,139	)		(82,577	)		(378,704	)		3,120,017			(18,084,403	)
Cash and restricted cash from continuing operations, beginning of year		183,030			116,447			434,135			522,915			59,251,904
Cash and restricted cash from continuing operations, end of year	$	(20,560,109	)	$	33,870		$	55,431		$	4,057,179		$	41,167,501

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary of			VIE and its						Consolidated
	consolidated			the VIE			subsidiaries			FAMI			total
Net cash provided by (used in) operating activities
from continuing operations	$	67,709,967		$	3,246,067		$	(338,559	)	$	(123,848,583	)	$	(53,231,108	)
Net cash used in investing activities from continuing
operations		(9,353,935	)		(2,772,430	)		(1,363	)		-			(12,127,728	)
Net cash provided by (used in) financing activities
from continuing operations		144,197			(616,095	)		(1,232,191	)		124,369,377			122,665,288
Effect of exchange rate changes on cash and
restricted cash		(506,653	)		258,485			94,714			-			(153,454	)
Net increase (decrease) in cash and restricted cash		57,993,576			116,027			(1,477,399	)		520,794			57,152,998
Cash and restricted cash from continuing operations,
beginning of year		183,030			420			1,913,335			2,121			2,098,906
Cash and restricted cash from continuing operations,	$	58,176,606		$	116,447		$	435,936		$	522,915		$	59,251,904
end of year

Cash is transferred within the Company through the banking system in PRC. Under the VIE agreements, the Company intends to distribute 95% of VIE’s earnings after eliminating VIE’s accumulated losses and making appropriation of VIE’s after-tax net income into the statutory surplus reserve based on at least 10% of the after-tax net income determined in accordance with generally accepted accounting principles of the PRC. When there are retained earnings available for distribution, the distribution of VIE’s earnings will be through payment of service fees to Farmmi Agricultural, such service fee is subject to 6% value-added sales tax, other taxes of 12% which calculation is based on 6% value-added taxes and Farmmi Agricultural is subject to corporate income tax up to 25% for its net income. Under the VIE agreements, when there is a change of shareholder in VIE, amount owed by VIE to the Company should be first settled. The condensed consolidating table below quantified the transfer between FAMI, its subsidiaries, VIE and its subsidiaries, WFOE that is the primary beneficiary of the VIE and the investors for the years ended September 30, 2023, 2022 and 2021, respectively. These transfers were mainly for the purpose of providing working capital between FAMI, its subsidiaries, VIE and its subsidiaries and WFOE that is the primary beneficiary of the VIE.

	For the year ended September 30, 2023
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI		-		-		-	$	212,652		-
WFOE that is the primary beneficiary of the VIE		-		-	$	505,077	$	9,054,194		-
VIE and its subsidiaries		-	$	1,411,434		-	$	12,944		-
Other entities that are consolidated		-	$	1,893,667	$	71,277		-		-

	For the year ended September 30, 2022
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	1,217,137		-	$	913,005		-
WFOE that is the primary beneficiary of the VIE		-			$	14,594,586	$	19,188,742		-
VIE and its subsidiaries		-	$	6,394,084			$	15,293,176		-
Other entities that are consolidated	$	984,655	$	26,961,378	$	14,744,568				-

	For the year ended September 30, 2021
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	-	$	45,500	$	124,670,237	$	-
WFOE that is the primary beneficiary of the VIE	$	1,668,758			$	-	$	38,204,550	$	-
VIE and its subsidiaries	$	-	$	-			$	1,601,406	$	-
Other entities that are consolidated	$	319,981	$	24,075,199	$	5,624,880			$	-

Use of Estimates

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant items subject to such estimates and assumptions include allowance for doubtful accounts and advances to suppliers, the valuation of inventories, the useful lives of property and equipment, the valuation of derivative liabilities of the notes, the recoverability of long-lived assets, valuation of warrants and the valuation of deferred tax assets.

Cash

Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. All cash balances are in bank accounts in PRC. Cash maintained in banks within the People’s Republic of China of less than RMB0.5 million (equivalent to $68,531) per bank are covered by "deposit insurance regulation" promulgated by the State Council of the People’s Republic of China.

Short-term deposit

Short-term deposit relates to fixed terms cash deposits with financial institutions with original maturities of more than three months and less than a year. As of September 30, 2023 and 2022, the Company had short-term deposit of nil and $35,144,444 earning interest at 2.05% per annum with one year maturity on October 15, 2022.

Accounts Receivable, net

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when 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, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection prove unsuccessful. As of September 30, 2023 and 2022, allowance for doubtful accounts was $14,719 and $7,249, respectively.

Advances to Suppliers, net

Advances to suppliers represent prepayments made to ensure continuous high-quality supplies and favorable purchase prices for premium quality. These advances are directly related to the purchases of raw materials used to fulfill sales orders. The Company is required from time to time to make cash advances when placing its purchase orders. These advances are settled upon suppliers delivering raw materials to the Company when the transfer of ownership occurs. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund an advance. As of September 30, 2023 and 2022, allowance for doubtful accounts was $3,176 and $3,258, respectively.

Inventory, net

The Company values its inventories at the lower of cost, determined on a weighted average basis, or net realizable value. The Company reviews its inventories periodically to determine if any reserves are necessary for potential obsolescence or if the carrying value exceeds net realizable value. The Company recorded inventory reserve of $8,809 and $49,652 as of September 30, 2023 and 2022, respectively.

Biological assets

Biological assets mainly consist of bamboo forests managed for future bamboo harvest and sales, of which the Company owned 82 forest right certificates with expiry dates ranging from December 30, 2026 to December 9, 2070 and with an area of 9.6 km². The forest types are mixed mature forests which can be harvested for commercial purposes. The forests mainly consist of bamboo, fir trees and other trees. Biological assets are initially measured at cost and subsequently depreciated on a straight-line basis over its estimated useful lives.

Depreciation expense was $0.2 million and $0.2 million for the years ended September 30, 2023 and 2022, respectively.

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment are as follows:

Machinery and equipment	5 - 10 years
Transportation equipment	4 years
Office equipment	3 - 5 years

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized.

Intangible Assets, net

Intangible assets consist primarily of purchased software. Intangible assets are stated at cost less accumulated amortization, which are amortized using the straight-line method with the estimated useful lives of three years.

Amortization expenses were $6,805, $31,984 and $46,085 for the years ended September 30, 2023, 2022 and 2021, respectively.

Impairment of Long-lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for fiscal years ended September 30, 2023, 2022 and 2021.

Revenue Recognition

The Company follows ASU 2014-09 Revenue from Contracts with Customers (“ASC Topic 606”). In accordance with ASC 606, to determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation .

The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. All of the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as a price per ton.

The Company’s contract liabilities primarily include advance from customers. As of September 30, 2023 and 2022, the contract liabilities are $0.4 million and $0.6 million, respectively, and included in other current liabilities on the consolidated balance sheets. For fiscal years ended September 30, 2023, 2022 and 2021, there was no revenue recognized from performance obligations related to prior periods.

Refer to Note 14 - Segment reporting for details of revenue segregation.

Cost of Revenues

Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.

Earnings (loss) per share

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings per Share (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The component of basic and diluted EPS were as follows:

Year Ended September 30,	2023		2022		2021
Net income available for ordinary shareholders (A)	$	2,543,813	$	2,223,979	$	2,356,437
- continuing operations	$	2,543,813	$	2,223,979	$	2,407,790
- discontinued operations		-		-	($51,353)
Weighted average outstanding ordinary shares (B)
- basic		3,628,923		2,905,984		514,213
- diluted		8,452,875		2,905,984		522,276
Earnings (loss) per ordinary share - basic (A/B)	$	0.70	$	0.77	$	4.58
- Continuing operations	$	0.70	$	0.77	$	4.68
- Discontinued operations	$	0.00	$	0.00	($0.10)
Earnings (loss) per ordinary share - diluted (A/B)	$	0.30	$	0.77	$	4.51
- Continuing operations	$	0.30	$	0.77	$	4.61
- Discontinued operations	$	0.00	$	0.00	($0.10)

____________ 

1. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. 

Fair Value of Financial Instruments

The FASB ASC Topic 820, Fair Value Measurements, defines fair value, establishes a three-level valuation hierarchy for fair value measurements and enhances disclosure requirements.

The three levels are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.

Level 3 - Inputs to the valuation methodology are unobservable.

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, restricted cash, accounts receivable, advances to suppliers, other current assets, accounts payable, due to related parties, operating lease liabilities -current, other current liabilities, short-term bank loans and bank acceptance notes payable approximate their recorded values due to their short-term maturities. The fair value of longer term long-term bank loan and operating lease liabilities approximate their recorded values as their stated interest rates approximate the rates currently available.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and 2022 and indicates the fair value hierarchy of the valuation technique that the Company utilized to determine such fair value.

	Fair value measured as of September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	-	$	-	$	-	$	-
Biological assets	$	-	$	-	$	9,187,640	$	9,187,640
Liabilities:
Derivative liability	$	-	$	-	$	-	$	-

	Fair value measured as of September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	5,820	$	-	$	-	$	5,820
Biological assets	$	-	$	-	$	9,638,722	$	9,638,722
Liabilities:
Derivative liability	$	-	$	-	$	3,450,000	$	3,450,000

Debt Issuance Costs and Debt Discounts

The Company may record debt issuance costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.

Fair value of the embedded derivatives in the convertible promissory notes

The convertible promissory notes consisted of a liability component (“financial liability”) and an embedded derivative conversion feature (“derivative liability”). The net proceeds of these convertible promissory notes were first allocated to the fair value of the derivative liability. Subsequent changes in fair value of the derivative liability were recorded in other income.

The Company measures the fair value of the embedded derivative by reference to the fair value on the issuance date and maturity date of the convertible promissory notes and revalues them at each reporting date. In determining the fair value of the embedded derivatives, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate; market price at the reporting date; risk-free interest rate; and the remaining life of the embedded derivatives. The inputs used in the Black-Scholes model are taken from observable markets. Changes to assumptions used can affect the amounts recognized in the consolidated financial statements.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable and advances to suppliers. As of September 30, 2023 and 2022, $12.8 million and $76.3 million of the Company’s cash is maintained in banks within the People’s Republic of China of which deposits of RMB0.5 million (equivalent to $68,531) per bank are covered by “deposit insurance regulation” promulgated by the State Council of the People’s Republic of China. The Company has not experienced any losses in such accounts. A significant portion of the Company’s sales are credit sales primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas. The Company also makes cash advances to certain suppliers to ensure the stable supply of key raw materials. The Company performs ongoing credit evaluations of its customers and key suppliers to help further reduce credit risk.

Comprehensive Income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity but are excluded from net income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustment from the Company not using the U.S. dollar as its functional currency.

Leases

The Company adopted ASU 2016-02, Leases on October 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets for office space operating leases.

Foreign Currency Translation

The Company’s financial information is presented in U.S. dollars (“USD”). The functional currency of the Company is the Chinese Yuan Renminbi (“RMB”), the currency of PRC. Any transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of operations as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. The financial information is first prepared in RMB and then translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

The exchange rates in effect as of September 30, 2023 and 2022 were RMB1 for $0.1371 and $0.1406, respectively. The average exchange rates for the years ended September 30, 2023, 2022 and 2021 were RMB1 for $0.1418, $0.1521 and $0.1540, respectively.

Shipping and Handling Expenses

All shipping and handling costs are expensed as incurred and included in selling expenses. Total shipping and handling expenses were $60,204, $244,490 and $235,956 for the years ended September 30, 2023, 2022 and 2021, respectively.

Value Added Tax

The Company is generally subject to the value added tax (“VAT”) for selling merchandise. Before May 1, 2018, the applicable VAT rate was 13% or 17% (depending on the type of goods involved) for products sold in PRC. After May 1, 2018, the Company is subject to a tax rate of 12% or 16%, and after April 1, 2019, the tax rate was further reduced to 9% or 13% based on the new Chinese tax law. Pursuant to approval issued by the State Administration of Taxation, Farmmi Eco Agri’s and Nongyuan Network’s major operation can be classified as agriculture products and its revenue is exempt from VAT, Nongyuan Network was exempted from VAT up to January 2023. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax authorities have the right to assess a penalty based on the amount of taxes which is determined to be late or deficient, with any penalty being expensed in the period when a determination is made by the tax authorities that a penalty is due. During the reporting periods, the Company had no dispute with PRC tax authorities and there was no tax penalty incurred.

Income Taxes

The Company is subject to the income tax laws of the PRC, a subsidiary in Canada is subject to income tax laws of Canada and a subsidiary in the United States of America is subject to income tax laws of the United States of America. No taxable income was generated outside the PRC for the year ended September 30, 2021. The Company accounts for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or not be deductible in the future.

ASC 740-10-25 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There were no material uncertain tax positions as of September 30, 2023 and 2022. As of September 30, 2023, the tax years ended December 31, 2015 through December 31, 2022 for the Company’s subsidiaries remain open for statutory examination by PRC and Canada tax authorities.

Statement of Cash Flows

In accordance with ASC 230, Statement of Cash Flows, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

Risks and Uncertainties

The operations of the Company are primarily located in PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in PRC, in addition to the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political and social conditions in PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company’s sales, purchases and expense transactions are denominated in RMB, and a substantial part of the Company’s assets and liabilities are also denominated in RMB. RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order to effect the remittance.

The Company’s operating entities in PRC do not carry any business interruption insurance, product liability insurance or any other insurance policy except for a limited property insurance policy. As a result, the Company may incur uninsured losses, increasing the possibility that investors would lose their entire investment in the Company.

The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic-the first pandemic caused by a coronavirus. The outbreak has reached more than 160 countries, resulting in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. The Chinese government has ordered quarantines, travel restrictions, and the temporary closure of stores and facilities. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.

Because of the shelter-in-place orders and travel restrictions mandated by the Chinese government, the production and sales activities of the Company temporarily suspended during the end of January and February 2020, which adversely impacted the Company’s production and sales during that period. Although the production and sales have resumed at the end of March 2020, if COVID-19 further impacts its production and sales, the Company’s financial condition, results of operations, and cash flows could continue to be adversely affected.

Consequently, the COVID-19 outbreak has adversely affected the Company’s business operations and condition and operating results for 2020, including but not limited to material negative impact on its total revenue, slower collection of accounts receivable and accrued allowance for bad debt, slower utilization of advances to suppliers and accrued allowance, and inventory allowance. The COVID-19 impact on the Company’s business operations and operating results for fiscal 2022 appears to be minimal and appears to be temporary. The Company will continue to monitor and modify the operating strategies.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt this guidance effective October 1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements but does not expect this guidance will have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplify the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for smaller reporting companies, as defined by the SEC. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures.

XML

Organization and nature of business (Table)

12 Months Ended

Sep. 30, 2023

Organization and nature of business

details of the subsidiaries of FAMI

Name of Entity	Date of Incorporation	Place of Incorporation	% of Ownership	Principal activities
FAMI	July 28, 2015	Cayman	Parent	Holding company
Farmmi International	August 20, 2015	Hong Kong	100%	Holding company
Farmmi Enterprise	May 23, 2016	Zhejiang, China	100%	Holding company
Farmmi Technology	June 6, 2016	Zhejiang, China	100%	Holding company
Farmmi Agricultural	December 8, 2015	Zhejiang, China	100%	Holding company
FLS Mushroom	March 25, 2011	Zhejiang, China	100%	Light processing and distribution of dried mushrooms
Farmmi Food	December 26, 2017	Zhejiang, China	100%	Dehydrating, further processing and distribution of edible fungus
Farmmi E-Commerce	March 22, 2019	Zhejiang, China	100%	Technology development, technical services and technical consultation related to agricultural products
Farmmi Biotech	April 7, 2021	Zhejiang, China	100%	Research and development of mushroom powder and mushroom extract
Farmmi Ecology	April 25, 2021	Zhejiang, China	100%	Holding company
Farmmi Supply Chain	May 11, 2021	Zhejiang, China	100%	Agricultural products supply chain
Farmmi Health Development	September 17, 2021	Zhejiang, China	100%	Health development
Farmmi Medical Health	September 18, 2021	Zhejiang, China	100%	Medical health
Farmmi Holdings	September 18, 2021	Zhejiang, China	100%	Holding company
Jiangxi Xiangbo	June 18, 2021	Jiangxi, China	100%	Holding company
Yudu Yada	November 10, 2010	Jiangxi, China	100%	Forestry development
Guoning Zhonghao	June 15, 2021	Zhejiang, China	100%	Agriculture exporting
Farmmi Eco Agri	May 27, 2022	Zhejiang, China	100%	Agriculture products
Farmmi Canada	July 13, 2022	Canada	100%	Agriculture products
Ningbo Farmmi Trade	November 14, 2022	Zhejiang, China	100%	Agriculture products
Yitang Mediservice	September 7, 2021	Zhejiang, China	100%	Medical services
Yiting Meditech	September 17, 2021	Zhejiang, China	100%	Medical technology
Farmmi USA	August 24, 2023	California, USA	100%	Trading
Nongyuan Network	July 7, 2016	Zhejiang, China	0 (VIE)	Trading

XML

Summary of significant accounting policies (Tables)

12 Months Ended

Sep. 30, 2023

Summary of significant accounting policies

Schedule of carrying amount of this variable interest entities of financials

	As of September 30, 2023
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	144,664,527	$	131,992,092	$	7,086,579	$	151,681,406		-
Current assets excluding intercompany receivables		138,871,675		353,985		18,841,671		103,844	$	158,171,175
Current assets	$	283,536,202	$	132,346,077	$	25,928,250	$	151,785,250	$	158,171,175
Investment in subsidiaries		-	$	37,712,692		-		-		-
Non-current assets excluding investment in subsidiaries	$	16,627,615		-	$	1,296		-	$	16,628,911
Non-current assets	$	16,627,615	$	37,712,692	$	1,296		-	$	16,628,911
Total assets	$	300,163,817	$	170,058,769	$	25,929,546	$	151,785,250	$	174,800,086
Intercompany payables	$	290,760,077	$	124,634,218	$	19,812,080	$	218,229		-
Current liabilities excluding intercompany payables		634,111		756,017		3,530,735		5,792,119	$	10,712,982
Current liabilities	$	291,394,188	$	125,390,235	$	23,342,815	$	6,010,348	$	10,712,982
Non-current liabilities	$	533,315	$	106,737		1,471,126		-	$	2,111,178
Total liabilities	$	291,927,503	$	125,496,972	$	24,813,941	$	6,010,348	$	12,824,160
Total shareholders' equity (net assets)	$	8,236,314	$	44,561,797	$	1,115,605	$	145,774,902	$	161,975,926

	As of September 30, 2022
	Other entities		WFOE that is
	that are		the primary		VIE and its				Consolidated
	consolidated		beneficiary		subsidiaries		FAMI		total
Intercompany receivables	$	163,676,919	$	114,994,912		-	$	140,445,311		-
Current assets excluding intercompany receivables	$	91,926,232	$	33,986	$	57,133,125	$	4,161,037	$	153,254,380
Current assets	$	255,603,151	$	115,028,898	$	57,133,125	$	144,606,348	$	153,254,380
Investment in subsidiaries		-	$	40,424,517		-		-		-
Non-current assets excluding investment in subsidiaries	$	10,500,217	$	8,484	$	19,772		-	$	10,528,473
Non-current assets	$	10,500,217	$	40,433,001	$	19,772		-	$	10,528,473
Total assets	$	266,103,368	$	155,461,899	$	57,152,897	$	144,606,348	$	163,782,853
Intercompany payables	$	255,440,223	$	109,255,668	$	54,420,549	$	702		-
Current liabilities excluding intercompany payables	$	590,393	$	226,814	$	1,789,357	$	5,682,757	$	8,289,321
Current liabilities	$	256,030,616	$	109,482,482	$	56,209,906	$	5,683,459	$	8,289,321
Non-current liabilities	$	657,734	$	151,707		-		-	$	809,441
Total liabilities	$	256,688,350	$	109,634,189	$	56,209,906	$	5,683,459	$	9,098,762
Total shareholders' equity (net assets)	$	9,415,018	$	45,827,710	$	942,991	$	138,922,889	$	154,684,091

	For the year ended September 30, 2023
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	74,224,063		$	16,034,543		$	20,106,281			-		$	110,364,887
Cost of revenues		(70,021,350	)		(16,023,779	)		(20,033,003	)		-			(106,078,132	)
Gross profit		4,202,713			10,764			73,278			-			4,286,755
Operating expenses		(1,028,294	)		(71,676	)		(231,462	)		(913,948	)		(2,245,380	)
Income (loss) from operations		3,174,419			(60,912	)		(158,184	)		(913,948	)		2,041,375
Other income (expenses)		1,514,162			(68,416	)		634,225			(1,264,040	)		815,931
Income (loss) before income taxes		4,688,581			(129,328	)		476,041			(2,177,988	)		2,857,306
Provision for income taxes		(270,874	)		(8,556	)		(34,063	)		-			(313,493	)
Net income (loss)	$	4,417,707		($137,884)			$	441,978		($2,177,988)			$	2,543,813

	For the year ended September 30, 2022
	Other entities			WFOE that is
	that are			the primary			VIE and its						Consolidated
	consolidated			beneficiary			subsidiaries			FAMI			total
Revenues	$	64,795,082		$	9,111,073		$	25,307,224			-		$	99,213,379
Cost of revenues		(60,272,018	)		(9,053,547	)		(24,449,728	)		-			(93,775,293	)
Gross profit		4,523,064			57,526			857,496			-			5,438,086
Operating expenses		(782,009	)		(50,344	)		(701,516	)		(2,961,849	)		(4,495,718	)
Income (loss) from operations		3,741,055			7,182			155,980			(2,961,849	)		942,368
Other income (expenses)		560,497			20,510			213,771			368,466			1,163,244
Income (loss) before income taxes		4,301,552			27,692			369,751			(2,593,383	)		2,105,612
Provision for income taxes		114,801			9,182			(5,616	)		-			118,367
Net income (loss)	$	4,416,353		$	36,874		$	364,135			(2,593,383	)	$	2,223,979

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary			VIE and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Revenues from continuing operations	$	33,068,045		$	762,771		$	5,459,135		$	-		$	39,289,951
Cost of revenues from continuing operations		(28,847,801	)		(742,933	)		(4,589,936	)		-			(34,180,670	)
Gross profit from continuing operations		4,220,244			19,838			869,199			-			5,109,281
Operating expenses		588,892			(8,940	)		(804,851	)		(2,031,506	)		(2,256,405	)
Income (loss) from operations		4,809,136			10,898			64,348			(2,031,506	)		2,852,876
Other expenses		(391,819	)		(19,990	)		(2,033	)		(5,673	)		(419,515	)
Income (loss) before income taxes		4,417,317			(9,092	)		62,315			(2,037,179	)		2,433,361
Provision for income taxes		(8,085	)		-			(17,486	)		-			(25,571	)
Net income (loss) from continuing operations	$	4,409,232		$	(9,092	)	$	44,829		$	(2,037,179	)	$	2,407,790

	For the year ended September 30, 2023
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities	($17,601,436)			($579,125)			($45,586,506)			($11,987,095)			($75,754,162)
Net cash provided by (used in) investing activities		(7,121,332	)		-			43,017,525			-			35,896,193
Net cash provided by (used in) financing activities		32,778			539,287			2,515,877			7,930,000			11,017,942
Effect of exchange rate changes on cash		462,420			5,227			(5,386	)		-			462,261
Net (decrease) increase in cash and restricted cash		(24,227,570	)		(34,611	)		(58,490	)		(4,057,095	)		(28,377,766	)
Cash, beginning of year		183,030			37,393			61,196			4,057,179			41,167,501
Cash, end of year	($24,044,540)			$	2,782		$	2,706		$	84		$	12,789,735

	For the year ended September 30, 2022
				WFOE
	Other			that is the
	entities			primary			VIE
	that are			beneficiary			and its						Consolidated
	consolidated			of the VIE			subsidiaries			FAMI			total
Net cash (used in) provided by operating activities from continuing operations	$	(14,188,275	)	$	(3,189,440	)	$	46,404,339		$	(8,391,136	)	$	20,635,488
Net cash provided by (used in) investing activities from continuing operations		1,140,848			2,738,559			(45,870,486	)		-			(41,991,079	)
Net cash provided by (used in) financing activities from continuing operations		649,782			373,382			(899,449	)		11,511,153			11,634,868
Effect of exchange rate changes on cash and restricted cash		(8,345,494	)		(5,078	)		(13,108	)		-			(8,363,680	)
Net (decrease) increase in cash and restricted cash		(20,743,139	)		(82,577	)		(378,704	)		3,120,017			(18,084,403	)
Cash and restricted cash from continuing operations, beginning of year		183,030			116,447			434,135			522,915			59,251,904
Cash and restricted cash from continuing operations, end of year	$	(20,560,109	)	$	33,870		$	55,431		$	4,057,179		$	41,167,501

	For the financial year ended September 30, 2021
				WFOE
	Other			that is the
	entities			primary
	that are			beneficiary of			VIE and its						Consolidated
	consolidated			the VIE			subsidiaries			FAMI			total
Net cash provided by (used in) operating activities
from continuing operations	$	67,709,967		$	3,246,067		$	(338,559	)	$	(123,848,583	)	$	(53,231,108	)
Net cash used in investing activities from continuing
operations		(9,353,935	)		(2,772,430	)		(1,363	)		-			(12,127,728	)
Net cash provided by (used in) financing activities
from continuing operations		144,197			(616,095	)		(1,232,191	)		124,369,377			122,665,288
Effect of exchange rate changes on cash and
restricted cash		(506,653	)		258,485			94,714			-			(153,454	)
Net increase (decrease) in cash and restricted cash		57,993,576			116,027			(1,477,399	)		520,794			57,152,998
Cash and restricted cash from continuing operations,
beginning of year		183,030			420			1,913,335			2,121			2,098,906
Cash and restricted cash from continuing operations,	$	58,176,606		$	116,447		$	435,936		$	522,915		$	59,251,904
end of year

	For the year ended September 30, 2023
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI		-		-		-	$	212,652		-
WFOE that is the primary beneficiary of the VIE		-		-	$	505,077	$	9,054,194		-
VIE and its subsidiaries		-	$	1,411,434		-	$	12,944		-
Other entities that are consolidated		-	$	1,893,667	$	71,277		-		-

	For the year ended September 30, 2022
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	1,217,137		-	$	913,005		-
WFOE that is the primary beneficiary of the VIE		-			$	14,594,586	$	19,188,742		-
VIE and its subsidiaries		-	$	6,394,084			$	15,293,176		-
Other entities that are consolidated	$	984,655	$	26,961,378	$	14,744,568				-

	For the year ended September 30, 2021
	Transfer to
			WFOE that
			is the				Other
			primary		VIE		entities
			beneficiary		and its		that are
Transfer from	FAMI		of the VIE		subsidiaries		consolidated		Investors
FAMI			$	-	$	45,500	$	124,670,237	$	-
WFOE that is the primary beneficiary of the VIE	$	1,668,758			$	-	$	38,204,550	$	-
VIE and its subsidiaries	$	-	$	-			$	1,601,406	$	-
Other entities that are consolidated	$	319,981	$	24,075,199	$	5,624,880			$	-

Schedule of useful lives of property and equipment, net

Machinery and equipment	5 - 10 years
Transportation equipment	4 years
Office equipment	3 - 5 years

Summary of component of basic and diluted EPS

Year Ended September 30,	2023		2022		2021
Net income available for ordinary shareholders (A)	$	2,543,813	$	2,223,979	$	2,356,437
- continuing operations	$	2,543,813	$	2,223,979	$	2,407,790
- discontinued operations		-		-	($51,353)
Weighted average outstanding ordinary shares (B)
- basic		3,628,923		2,905,984		514,213
- diluted		8,452,875		2,905,984		522,276
Earnings (loss) per ordinary share - basic (A/B)	$	0.70	$	0.77	$	4.58
- Continuing operations	$	0.70	$	0.77	$	4.68
- Discontinued operations	$	0.00	$	0.00	($0.10)
Earnings (loss) per ordinary share - diluted (A/B)	$	0.30	$	0.77	$	4.51
- Continuing operations	$	0.30	$	0.77	$	4.61
- Discontinued operations	$	0.00	$	0.00	($0.10)

Summary of Fair value of financial instruments

	Fair value measured as of September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	-	$	-	$	-	$	-
Biological assets	$	-	$	-	$	9,187,640	$	9,187,640
Liabilities:
Derivative liability	$	-	$	-	$	-	$	-

	Fair value measured as of September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments	$	5,820	$	-	$	-	$	5,820
Biological assets	$	-	$	-	$	9,638,722	$	9,638,722
Liabilities:
Derivative liability	$	-	$	-	$	3,450,000	$	3,450,000

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Accounts receivable net (Tables)

12 Months Ended

Sep. 30, 2023

Accounts receivable net

Schedule of accounts receivable

	As of			As of
	September 30,			September 30,
	2023			2022
Accounts receivable	$	24,692,164		$	16,358,493
Less: allowance for doubtful accounts		(14,719	)		(7,249	)
Accounts receivable, net	$	24,677,445		$	16,351,244

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Advances to suppliers net (Tables)

12 Months Ended

Sep. 30, 2023

Advances to suppliers net

Schedule of advance to suppliers

	As of			As of
	September 30,			September 30,
	2023			2022
Advances to suppliers:
Lishui Zhelin Trading Co., Ltd	$	53,405,200		$	7,289,180
Jingning Liannong Trading Co., Ltd		20,231,750			16,761,798
Qingyuan Nongbang Mushroom Industry Co., Ltd		15,417,317			12,521,949
Zhongjin Boda (Hangzhou) Industrial Co., Ltd		10,964,912			-
Ningbo Runcai Supply Chain Management Co., Ltd		10,279,605			-
Ningbo Caixiang Trading Co., Ltd.		-			4,372,934
Others		6,048,353			7,691,001
Total	$	116,347,137		$	48,636,862
Less: allowance for doubtful accounts		(3,176	)		(3,258	)
Advances to suppliers, net	$	116,343,961		$	48,633,604

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Inventories net (Tables)

12 Months Ended

Sep. 30, 2023

Inventories net

Schedule of inventory

	As of			As of
	September 30,			September 30,
	2023			2022
Raw materials	$	520,216		$	620,252
Packaging materials		69,420			63,703
Finished goods		3,321,021			81,975
Inventory		3,910,657			765,930
Less: allowance for inventory reserve		(8,809	)		(49,652	)
Inventory, net	$	3,901,848		$	716,278

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Property and equipment net (Tables)

12 Months Ended

Sep. 30, 2023

Property and equipment net

Schedule of property, plant and equipment, stated at cost less accumulated depreciation

	As of			As of
	September 30,			September 30,
	2023			2022
Machinery and equipment	$	62,973		$	64,449
Transportation equipment		48,009			49,241
Office equipment		19,492			20,254
Subtotal		130,474			133,944
Accumulated depreciation		(105,942	)		(89,076	)
Total	$	24,532		$	44,868

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Loans (Tables)

12 Months Ended

Sep. 30, 2023

Loans

Schedule of short-term and long-term loans

	As of		As of
	September 30,		September 30,
	2023		2022
Short-term loans
Xiaoshan Rural Commercial Bank	$	1,041,667	$	-
China Guangfa Bank Co., Ltd.		685,307		-
Bank of Beijing		411,184		-
Industrial Bank Co., Ltd		274,123		-
Total short-term loan	$	2,412,281	$	-
Long-term loans - current portion
Bank of Beijing	$	-	$	1,124,622
WeBank Co., Ltd		285,934		-
Jiangsu Suning Bank		186,472		140,578
Huaneng Guicheng Trust Co., Ltd.		100,054		80,832
China Resources Shenzhen Investment Trust Co., Ltd.		82,237		159,321
Zhejiang Mintai Commercial Bank		21,587		-
Total long-term loans - current portion	$	676,284	$	1,505,353
Long-term loans - non-current portion
Bank of Beijing		1,096,491		-
Xiaoshan Rural Commercial Bank		328,947		-
WeBank Co., Ltd		127,874		-
Huaneng Guicheng Trust Co., Ltd.		48,999		57,988
Jiangsu Suning Bank		32,261		140,578
Zhejiang Mintai Commercial Bank		17,989		-
China Resources Shenzhen Investment Trust Co., Ltd.		-		93,719
Total long-term loans - non-current portion	$	1,652,561	$	292,285
Total short-term and long-term loans	$	4,741,126	$	1,797,638

	Loan	Loan	Loan		Loan		Effective
	commencement	maturity	amount		amount		interest
As of September 30, 2023	date	date	in RMB		in USD		rate			Note
Secured short-term loans
Xiaoshan Rural Commercial Bank	June 19, 2023	June 18, 2024		7,600,000	$	1,041,667		3.20	%		1
China Guangfa Bank Co., Ltd.	November 1, 2022	October 31, 2023		5,000,000		685,307		3.95	%		2
Industrial Bank Co., Ltd	January 16, 2023	January 14, 2024		2,000,000		274,123		5.13	%		3
Total secured short-term loans				14,600,000	$	2,001,097
Unsecured short-term loan
Bank of Beijing	January 17, 2023	January 17, 2024		3,000,000		411,184		4.65	%
Total unsecured short-term loans				3,000,000	$	411,184
Total short-term loans				17,600,000	$	2,412,281
Secured long-term loans
Long-term loans, current portion
WeBank Co., Ltd	April 12, 2023	April 1, 2025		885,000	$	121,300		12.56	%		4
WeBank Co., Ltd	May 15, 2023	May 15, 2025		500,000		68,531		9.00	%		4
WeBank Co., Ltd	August 14, 2022	August 1, 2024		479,167		65,675		14.40	%		4
WeBank Co., Ltd	May 15, 2023	May 1, 2025		90,000		12,336		13.86	%		4
WeBank Co., Ltd	August 1, 2023	July 28, 2025		67,500		9,252		14.11	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		64,500		8,840		12.78	%		4
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		137,061		12.0	%		5
Jiangsu Suning Bank	May 15, 2023	May 1, 2025		210,000		28,783		13.86	%		6
Jiangsu Suning Bank	August 1, 2023	August 1, 2025		150,500		20,628		12.78	%		6
Huaneng Guicheng Trust Co., Ltd.	December 30, 2022	December 28, 2024		430,000		58,936		12.91	%		7
Huaneng Guicheng Trust Co., Ltd.	August 1, 2023	August 1, 2025		300,000		41,118		16.2	%		7
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		600,000		82,237		14.4	%		8
Zhejiang Mintai Commercial Bank	August 1, 2023	July 28, 2025		157,500		21,587		14.11	%		9
Total long-term loans, current portion				4,934,167	$	676,284
Long-term loans, non-current portion
Bank of Beijing	April 3, 2023	April 2, 2026		8,000,000		1,096,491		4.75	%		10
Xiaoshan Rural Commercial Bank	June 19, 2023	June 18, 2026		2,400,000		328,947		4.50	%		1
WeBank Co., Ltd	April 12, 2023	April 1, 2025		442,500		60,651		12.56	%		4
WeBank Co., Ltd	May 15, 2023	May 15, 2025		333,333		45,687		9.00	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		56,250		7,710		13.86	%		4
WeBank Co., Ltd	August 1, 2023	July 28, 2025		52,500		7,196		14.11	%		4
WeBank Co., Ltd	August 1, 2023	August 1, 2025		48,375		6,630		12.78	%		4
Huaneng Guicheng Trust Co., Ltd.	August 1, 2023	August 1, 2025		250,000		34,265		16.20	%		7
Huaneng Guicheng Trust Co., Ltd.	December 30, 2022	December 28, 2024		107,500		14,734		12.91	%		7
Jiangsu Suning Bank	May 15, 2023	May 1, 2025		122,500		16,790		13.86	%		6
Jiangsu Suning Bank	August 1, 2023	August 1, 2025		112,875		15,471		12.78	%		6
Zhejiang Mintai Commercial Bank	July 1, 2022	July 1, 2024		131,250		17,989		14.4	%		6
Total long-term loans, non-current portion				12,057,083	$	1,652,561
Total short-term and long-term loans				34,591,250	$	4,741,126

	Loan	Loan	Loan		Loan		Effective
	commencement	maturity	amount		amount		interest
For the year ended September 30, 2022	date	date	in RMB		in USD		rate			Note
Secured long-term bank loans
Long-term loans, current portion
Bank of Beijing	April 6, 2022	April 5, 2026		8,000,000	$	1,124,622		4.8	%		2
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		140,578		12.0	%		5
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		800,000		112,462		14.4	%		6
Huaneng Guicheng Trust Co., Ltd.	August 14, 2022	August 1, 2024		575,000		80,832		14.4	%		7
China Resources Shenzhen Investment Trust Co., Ltd.	April 30, 2021	April 28, 2023		333,334		46,859		10.8	%		6
Total long-term loans, current portion				10,708,334	$	1,505,353
Long-term loans, non-current portion
Jiangsu Suning Bank	September 2, 2022	September 1, 2024		1,000,000		140,578		12.0	%		6
China Resources Shenzhen Investment Trust Co., Ltd.	July 1, 2022	July 1, 2024		666,667		93,719		14.4	%		6
Huaneng Guicheng Trust Co., Ltd.	August 14, 2022	August 1, 2024		412,500		57,988		14.4	%		7
Total long-term loans, non-current portion				2,079,167	$	292,285
Total short-term and long-term loans				12,787,501	$	1,797,638

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Convertible promissory note and derivative liability (Tables)

12 Months Ended

Sep. 30, 2023

Convertible promissory note and derivative liability

Schedule of derivative liability

	As of		As of
	September 30,		September 30,
	2023		2022
Exercise price		-	$	0.45
Ordinary share price		-	$	0.56
Term (in years)		-		1
Volatility		-		88.39	%
Risk-free interest rate		-		4.05	%
Dividend yield		-		-

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Taxes (Tables)

12 Months Ended

Sep. 30, 2023

Taxes

Schedule of effective tax rates

	For the Years Ended September 30,
	2023			2022			2021
Statutory PRC income tax rate		25.0	%		25.0	%		25.0	%
Effect of income tax exemption (a)		(40.9	%)		(50.8	%)		(41.0	%)
Favorable tax rate impact (a)		13.3	%		(14.8	%)		(0.3	%)
Permanent difference		-			0.1	%		(8.2	%)
Changes of deferred tax assets valuation allowances		(5.8	%)		7.2	%		2.0	%
Non-PRC entities not subject PRC income tax		19.4	%		27.7	%		23.6	%
Total		11.0	%		(5.6	%)		1.1	%

Schedule of provision for income tax

	For the Years Ended September 30,
	2023		2022			2021
Current income tax provision	$	148,893	$	58,266		$	25,571
Deferred income tax provision		164,600		(176,633	)		-
Total	$	313,493	($118,367)			$	25,571

Schedule of components of deferred tax

	As of			As of
	September 30,			September 30,
	2023			2022
Net operating loss (“NOL”) carry forward	$	284,283		$	168,126
Allowance for inventory		2,202			12,413
Allowance for doubtful accounts		4,474			836
Valuation allowance		(290,959	)		(18,168	)
Total		-		$	163,207

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Leases (Tables)

12 Months Ended

Sep. 30, 2023

Leases

Summary of supplemental balance sheet information related to operating leases

	As of		As of
	September 30,		September 30,
	2023		2022
Right-of-use assets under operating leases	$	516,459	$	534,351
Operating lease liabilities, current		69,062		46,543
Operating lease liabilities, non-current		458,617		517,156
Total operating lease liabilities	$	527,679	$	563,699

Summary of maturities of operating lease liabilities

For the years ended September 30,
2024	$	119,232
2025		98,975
2026		98,975
2027		98,975
2028		88,434
Thereafter		242,716
Total Future minimum lease payments		747,307
Less: Imputed interest		(219,628	)
Total	$	527,679

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Segment reporting (Tables)

12 Months Ended

Sep. 30, 2023

Segment reporting

Schedule of revenue by major product categories

	For the Years Ended September 30,
	2023		2022		2021
Tapioca	$	39,977,734		-		-
Corn		27,430,969	$	10,778,197	$	1,796,006
Shiitake		19,655,465		19,859,533		20,494,362
Mu Er		16,301,157		19,123,152		16,524,723
Cotton		5,547,927		47,950,345		-
Cornstarch		1,338,782		-		-
Other products		112,853		1,502,152		474,860
Total	$	110,364,887	$	99,213,379	$	39,289,951

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Related party transactions (Tables)

12 Months Ended

Sep. 30, 2023

Related party transactions

Schedule of relationship and the nature of related party transactions

Name of related party	Relationship to the Company	Nature of transactions
Zhejiang Yili Yuncang Technology Group Co., Ltd	10% equity interest owned by the Company	Prepayment of electricity and water expenses for office leased to the Company
FarmNet Limited	Owned 0.8% equity interest of the Company	Payment of expenses by the Company.
Epakia Canada Inc	Legal representative of Epakia Canada Inc is a director of the Company	Payment of expenses by the Company.
Shanghai Zhongjian Yiting Medical Health Technology Partnership	A partnership jointly set up by the Company with another limited partner ("LP").	Payment of expenses by the Company.
Zhejiang Tantech Bamboo Technology Co., Ltd	Under common control of Mr Zhengyu Wang and Ms Yefang Zhang, CEO of the Company	Lease factory building to the Company and charging water and electricity for offices leased to the Company.
Forasen Holdings Group Co., Ltd	Owned by Mr Zhengyu Wang, the Chairman of Board of Directors of the Company	Purchases from the Company
Yefang Zhang	CEO of the Company	Payment of expenses for the Company and provide a guarantee as additional security for a loan.
Xinyang Wang	Shareholder of Nongyuan Network	Provide guarantees and a real property as additional security for certain loans.
Dehong Zhang	Ms Yefang Zhang's, CEO of the Company, brother	Provide guarantees as an additional security for certain loans
Ms Aihong Wang	Mr Zhengyu Wang's, the Chairman of Board of Directors of the Company, sister.	Provide a guarantee as an additional security for a revolving loan

Schedule of due from related parties

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Yili Yuncang Holding Group Co., Ltd	$	103,417	$	-
Zhejiang Yili Yuncang Technology Group Co., Ltd		-		29,055
FarmNet		4,100		-
Epakia Canada Inc		2,996		-
Shanghai Zhongjian Yiting Medical Health Technology Partnership		308		30,928
Dehong Zhang		137		-
Total	$	110,958	$	59,983

Schedule of due to related parties

	As of		As of
	September 30,		September 30,
	2023		2022
Zhejiang Tantech Bamboo Technology Co., Ltd.	$	24,496	$	948
Yefang Zhang		9,150		-
Forasen Holdings Group Co., Ltd		168		-
Total	$	33,814	$	948

Schedule of Operating lease from related parties

Zhejiang Tantech Bamboo Technology Co., Ltd.	Lease No 1		Lease No. 2		Lease No. 3		Total
Lease begin date	August 1, 2021		July 14, 2021		March 1, 2023
Lease end date	July 31, 2031		July 13, 2031		February 29, 2028
Leasing purpose	Factory building		Factory building		Office
Annual rent in RMB		168,854		421,431		131,835		722,120
Annual rent in USD	$	23,940	$	59,750	$	18,691	$	102,381
Area (in square meters)		1,180		1,914		479		3,573

Zhejiang Yili Yuncang Holding Group Co., Ltd
Lease begin date	August 1, 2023
Lease end date	July 31, 2025
Leasing purpose	Office
Annual rent in RMB		9,795
Annual rent in USD	$	1,389
Area (in square meters)		15

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Condensed Financial Information of the Parent Company (Tables)

12 Months Ended

Sep. 30, 2023

Condensed Financial Information of the Parent Company

Summary of Parent Company Balance Sheets

	As of		As of
	September 30,		September 30,
	2023		2022
Assets
Current assets
Cash	$	84	$	4,057,179
Other receivables		103,760		103,858
		103,844		4,161,037
Non-current assets
Investment in subsidiaries		167,664,201		156,151,565
Total assets	$	167,768,045	$	160,312,602
Liabilities and Shareholders’ Equity
Current liabilities
Interest payable		3,377		-
Convertible promissory notes		5,788,742		2,178,511
Derivative liability		-		3,450,000
Total liabilities		5,792,119	$	5,628,511
Commitments and contingencies
Shareholders’ equity
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively		1,218,816		597,768
Additional paid-in capital		160,571,517		152,162,565
Retained earnings		185,593		1,923,758
Total shareholders’ equity		161,975,926		154,684,091
Total liabilities and shareholders’ equity	$	167,768,045	$	160,312,602

Summary of Parent Company Statements of Operations

	For the Years Ended September 30,
	2023			2022			2021
Operating expenses:
General and administrative expenses	($913,948)			($2,961,849)			($2,031,506)
Other expenses
Change in fair value of derivative liability		873,767			419,649			-
Interest expenses		(445,766	)		-			-
Amortization of debt issuance costs		(1,691,609	)		(48,160	)		-
Other expenses		(432	)		(3,024	)		(5,672	)
Loss from operations		(2,177,988	)		(2,593,384	)		(2,037,178	)
Equity in income of subsidiaries and VIE		4,721,801			4,817,363			4,395,592
Comprehensive income attributable to the Company	$	2,543,813		$	2,223,979		$	2,358,414

Summary of Parent Company Statements of Cash Flows

	For the Years Ended September 30,
	2023			2022			2021
Cash flows from operating activities
Net income	$	2,543,813		$	2,223,979		$	2,358,414
Adjustments to reconcile net income to net cash used in operating activities
Equity in earnings of subsidiaries		(4,721,801	)		(4,817,363	)		(4,395,592	)
Amortization of debt issuance costs		1,691,609			48,160			-
Change in fair value of derivative liability		(873,767	)		(419,649	)		-
Share-based compensation		-			2,007,328			1,260,674
Other current assets		98			21,223			(125,081	)
Other current liabilities		(50,869	)		54,246			(40,000	)
Net cash used in operating activities		(1,410,917	)		(882,076	)		(941,585	)
Cash flows from investing activities
Investing in subsidiaries		(10,576,178	)		(7,529,060	)		(122,726,999	)
Net cash used in investing activities		(10,576,178	)		(7,529,060	)		(122,726,999	)
Cash flows from financing activities
Net proceeds from share issuance		7,930,000			6,000,000			126,029,588
Net proceeds from issuance of convertible promissory notes		-			6,000,000			-
Proceeds from advances from related parties		-			-			298,297
Repayment of advances from related parties		-			(54,600	)		(2,138,508	)
Net cash provided by financing activities		7,930,000			11,945,400			124,189,377
Net (decrease) increase in cash and restricted cash		(4,057,095	)		3,534,264			520,793
Cash, beginning of year		4,057,179			522,915			2,122
Cash, end of year	$	84		$	4,057,179		$	522,915

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Organization and nature of business (Details)	12 Months Ended
	Sep. 30, 2023
FAMI
Entity Incorporation Date Of Incorporation	Jul. 28, 2015
Entity Incorporation, State Country Name	Cayman
Principal Activities	Holding company
Nongyuan Network
Entity Incorporation Date Of Incorporation	Jul. 07, 2016
Entity Incorporation, State Country Name	Zhejiang, China
Principal Activities	Trading
Farmmi International
Entity Incorporation Date Of Incorporation	Aug. 20, 2015
Entity Incorporation, State Country Name	Hong Kong
% of Ownership	100.00%
Principal Activities	Holding company
Farmmi Enterprise
Entity Incorporation Date Of Incorporation	May 23, 2016
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Holding company
Farmmi Technology
Entity Incorporation Date Of Incorporation	Jun. 06, 2016
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Holding company
Farmmi Agricultural
Entity Incorporation Date Of Incorporation	Dec. 08, 2015
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Holding company
FLS Mushroom
Entity Incorporation Date Of Incorporation	Mar. 25, 2011
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Light processing and distribution of dried mushrooms
Farmmi Food
Entity Incorporation Date Of Incorporation	Dec. 26, 2017
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Dehydrating, further processing and distribution of edible fungus
Farmmi E-Commerce
Entity Incorporation Date Of Incorporation	Mar. 22, 2019
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Technology development, technical services and technical consultation related to agricultural products
Farmmi Biotech
Entity Incorporation Date Of Incorporation	Apr. 07, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Research and development of mushroom powder and mushroom extract
Farmmi Ecology
Entity Incorporation Date Of Incorporation	Apr. 25, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Holding company
Farmmi Supply Chain
Entity Incorporation Date Of Incorporation	May 11, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Agricultural products supply chain
Farmmi Health Development
Entity Incorporation Date Of Incorporation	Sep. 17, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Health development
Farmmi Medical Health
Entity Incorporation Date Of Incorporation	Sep. 18, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Medical health
Farmmi Holdings
Entity Incorporation Date Of Incorporation	Sep. 18, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Holding company
Jiangxi Xiangbo
Entity Incorporation Date Of Incorporation	Jun. 18, 2021
Entity Incorporation, State Country Name	Jiangxi, China
% of Ownership	100.00%
Principal Activities	Holding company
Yudu Yada
Entity Incorporation Date Of Incorporation	Nov. 10, 2010
Entity Incorporation, State Country Name	Jiangxi, China
% of Ownership	100.00%
Principal Activities	Forestry development
Guoning Zhonghao
Entity Incorporation Date Of Incorporation	Jun. 15, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Agriculture exporting
Farmmi Eco Agri
Entity Incorporation Date Of Incorporation	May 27, 2022
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Agriculture products
Farmmi Canada
Entity Incorporation Date Of Incorporation	Jul. 13, 2022
Entity Incorporation, State Country Name	Canada
% of Ownership	100.00%
Principal Activities	Agriculture products
Ningbo Farmmi Trade
Entity Incorporation Date Of Incorporation	Nov. 14, 2022
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Agriculture products
Yitang Mediservice
Entity Incorporation Date Of Incorporation	Sep. 07, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Medical services
Yiting Meditech
Entity Incorporation Date Of Incorporation	Sep. 17, 2021
Entity Incorporation, State Country Name	Zhejiang, China
% of Ownership	100.00%
Principal Activities	Medical technology
Farmmi USA
Entity Incorporation Date Of Incorporation	Aug. 24, 2023
Entity Incorporation, State Country Name	California, USA
% of Ownership	100.00%
Principal Activities	Trading

XML

Organization and nature of business (Details Narrative) - USD ($)	1 Months Ended	12 Months Ended
	Sep. 27, 2021	Sep. 30, 2022	Sep. 30, 2023	Aug. 24, 2023	Apr. 20, 2023	Nov. 14, 2022	Jul. 13, 2022	May 27, 2022	Jan. 19, 2022	Jan. 10, 2022	Dec. 31, 2021	Sep. 18, 2021	Sep. 17, 2021	Sep. 07, 2021	Dec. 04, 2019	Jul. 28, 2015
Forest Food Member
Net Proceeds From Issuance Initial Public Offering	$ 2,800,000
Percentage Of Controlling Interest Transferred													100.00%
Nongyuan Network | Xinyang Wang
Noncontrolling Interest, Ownership Percentage by Parent															100.00%
Farmmi Enterprise
% of Ownership			100.00%
Farmmi Enterprise | Farmmi Holdings Group Co Ltd
Noncontrolling Interest, Ownership Percentage by Parent												30.00%
FLS Mushroom
Noncontrolling Interest, Ownership Percentage by Parent		100.00%
Net Proceeds From Issuance Initial Public Offering		$ 3,400,000
% of Ownership			100.00%
Farmmi International Limited | FAMI
Noncontrolling Interest, Ownership Percentage by Parent																100.00%
Farmmi Health Development
% of Ownership			100.00%
Farmmi Health Development | Farmmi Medical Health One
Noncontrolling Interest, Ownership Percentage by Parent												100.00%
Farmmi Technology
% of Ownership			100.00%
Farmmi Technology | Farmmi Holdings Group Co Ltd
Noncontrolling Interest, Ownership Percentage by Parent												40.00%
Farmmi Ecology
% of Ownership			100.00%
Farmmi Ecology | Farmmi Holdings Group Co Ltd
Noncontrolling Interest, Ownership Percentage by Parent												30.00%
Farmmi Holdings
% of Ownership			100.00%
Farmmi Holdings | Farmmi Agricultural One
Noncontrolling Interest, Ownership Percentage by Parent											100.00%
Farmmi Agricultural
% of Ownership			100.00%
Farmmi Agricultural | Farmmi Agricultural Supply Chain Co Ltd
Noncontrolling Interest, Ownership Percentage by Parent											100.00%
Farmmi Agricultural | Zhejiang FLS Mushroom Co., Ltd
Noncontrolling Interest, Ownership Percentage by Parent			100.00%
Farmmi Agricultural | Ningbo Farmmi Trade One
% of Ownership						100.00%
Ganzhou Tengguang | Forestry Development Co Ltd
Net Proceeds From Issuance Initial Public Offering	$ 11,000,000
Farmmi Supply Chain
% of Ownership			100.00%
Farmmi Supply Chain | Jiangxi Xiangbo One
Noncontrolling Interest, Ownership Percentage by Parent	100.00%
Farmmi Supply Chain | Guoning Zhonghao One
% of Ownership	100.00%
Yada Forestry Co., Ltd
% of Ownership	100.00%
Ningbo Guoning Zhonghao Technology Co., Ltd | Jianxin Huang
Net Proceeds From Issuance Initial Public Offering	$ 788
Farmmi USA
% of Ownership			100.00%
Farmmi USA | FAMI
% of Ownership				100.00%
Yitang Mediservice
% of Ownership			100.00%
Yitang Mediservice | Nongyuan Network
Noncontrolling Interest, Ownership Percentage by Parent														95.00%
Yitang Mediservice | Farmmi Medical Health
Noncontrolling Interest, Ownership Percentage by Parent					95.00%
Yitang Mediservice | Farmmi Ecology
Noncontrolling Interest, Ownership Percentage by Parent														5.00%
Yitang Mediservice One | Farmmi Ecology One
Noncontrolling Interest, Ownership Percentage by Parent					5.00%
Yitang Mediservice One | Yiting Meditech
Noncontrolling Interest, Ownership Percentage by Parent													100.00%
Yitang Mediservice One | Yifeng Medihealth
Noncontrolling Interest, Ownership Percentage by Parent										100.00%
Yitang Mediservice Two | Yilong Enterprise
Noncontrolling Interest, Ownership Percentage by Parent										100.00%
YF YL MediTech | Yifeng Medihealth
Noncontrolling Interest, Ownership Percentage by Parent									20.00%
YF YL MediTech | Yilong Enterprise
Noncontrolling Interest, Ownership Percentage by Parent									80.00%
YT SK Medihealth | Yifeng Medihealth
Noncontrolling Interest, Ownership Percentage by Parent									20.00%
YT SK Medihealth | Yilong Enterprise
Noncontrolling Interest, Ownership Percentage by Parent									80.00%
Farmmi International
% of Ownership			100.00%
Farmmi International | Farmmi Eco Agri One
Noncontrolling Interest, Ownership Percentage by Parent								100.00%
Farmmi Canada
% of Ownership			100.00%
Farmmi Canada | Farmmi Canada Inc.
Noncontrolling Interest, Ownership Percentage by Parent							100.00%

XML

Summary of significant accounting policies (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2020
Intercompany receivables	$ 0	$ 0
Current assets from continuing operations excluding intercompany receivables	158,171,175	153,254,380
Current assets	158,171,175	153,254,380
Non-current assets excluding investment in subsidiaries	16,628,911	10,528,473
Non-current assets	16,628,911	10,528,473
Total assets from continuing operations	174,800,086	163,782,853
Current liabilities from continuing operations	10,712,982	8,289,321
Amount of liabilities excluding intercompany payables.	158,171,175	153,254,380
Investment in subsidiaries	0	0
Total liabilities from continuing operations	12,824,160	9,098,762
Total shareholders' equity (net assets)	161,975,926	154,684,091
Non-current liabilities	2,111,178	809,441
Total shareholders' equity (net assets)	161,975,926	154,684,091	$ 160,792,418	$ 29,155,157
Nongyuan Network
Intercompany receivables	131,992,092	114,994,912
Current assets from continuing operations excluding intercompany receivables	353,985	33,986
Current assets	132,346,077	115,028,898
Non-current assets excluding investment in subsidiaries	0	8,484
Non-current assets	37,712,692	40,433,001
Total assets from continuing operations	170,058,769	155,461,899
Current liabilities from continuing operations	125,390,235	109,482,482
Amount of liabilities excluding intercompany payables.	756,017	226,814
Investment in subsidiaries	37,712,692	40,424,517
Non-current liabilities	106,737	151,707
Intercompany payables	124,634,218	109,255,668
Total shareholders' equity (net assets)	44,561,797	45,827,710
Total liabilities from continuing operations	125,496,972	109,634,189
Other [Member]
Intercompany receivables	144,664,527	163,676,919
Current assets from continuing operations excluding intercompany receivables	138,871,675	91,926,232
Current assets	283,536,202	255,603,151
Non-current assets excluding investment in subsidiaries	16,627,615	10,500,217
Non-current assets	16,627,615	10,500,217
Total assets from continuing operations	300,163,817	266,103,368
Current liabilities from continuing operations	291,394,188	256,030,616
Amount of liabilities excluding intercompany payables.	634,111	590,393
Investment in subsidiaries	0	0
Total liabilities from continuing operations	291,927,503	256,688,350
Non-current liabilities	533,315	657,734
Intercompany payables	290,760,077	255,440,223
Total shareholders' equity (net assets)	8,236,314	9,415,018
variable interest entity and subsidiaries.
Intercompany receivables	7,086,579	0
Current assets from continuing operations excluding intercompany receivables	18,841,671	57,133,125
Current assets	25,928,250	57,133,125
Non-current assets excluding investment in subsidiaries	1,296	19,772
Non-current assets	1,296	19,772
Total assets from continuing operations	25,929,546	57,152,897
Current liabilities from continuing operations	23,342,815	56,209,906
Amount of liabilities excluding intercompany payables.	3,530,735	1,789,357
Investment in subsidiaries	0	0
Total liabilities from continuing operations	24,813,941	56,209,906
Non-current liabilities	1,471,126	0
Total shareholders' equity (net assets)	1,115,605	942,991
Intercompany payables	19,812,080	54,420,549
FAMI
Intercompany receivables	151,681,406	140,445,311
Current assets from continuing operations excluding intercompany receivables	103,844	4,161,037
Current assets	151,785,250	144,606,348
Non-current assets excluding investment in subsidiaries	0	0
Non-current assets	0	0
Total assets from continuing operations	151,785,250	144,606,348
Current liabilities from continuing operations	6,010,348	5,683,459
Amount of liabilities excluding intercompany payables.	5,792,119	5,682,757
Investment in subsidiaries	0	0
Total liabilities from continuing operations	6,010,348	5,683,459
Total shareholders' equity (net assets)	145,774,902	138,922,889
Non-current liabilities	0	0
Intercompany payables	$ 218,229	$ 702

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Summary of significant accounting policies (Details 1) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Revenues	$ 110,364,887	$ 99,213,379	$ 39,289,951
Cost of revenues	(106,078,132)	(93,775,293)	(34,180,670)
Gross profit from continuing operations	4,286,755	5,438,086	5,109,281
Operating expenses	2,245,380	4,495,718	2,256,405
Income (loss) from operations	2,041,375	942,368	2,852,876
Income (loss) before income taxes	2,857,306	2,105,612	2,433,361
Provision for income taxes	(313,493)	118,367	(25,571)
Net income (loss) from continuing operations	2,543,813	2,223,979	2,407,790
Gross profit	4,286,755	5,438,086	5,109,281
Nongyuan Network
Revenues	16,034,543	9,111,073	762,771
Cost of revenues	(16,023,779)	(9,053,547)	(742,933)
Operating expenses	(71,676)	50,344	(8,940)
Income (loss) from operations	60,912	7,182	10,898
Other Income		20,510	19,990
Income (loss) before income taxes	129,328	27,692	(9,092)
Provision for income taxes	(8,556)	9,182	0
Net income (loss) from continuing operations	10,764	57,526	19,838
Net income (loss) from continuing operations	137,884	(36,874)	(9,092)
Other Income		(20,510)	(19,990)
Other [Member]
Revenues	74,224,063	64,795,082	33,068,045
Cost of revenues	(70,021,350)	(60,272,018)	(28,847,801)
Gross profit from continuing operations	4,202,713	4,523,064	4,220,244
Operating expenses	1,028,294	782,009	(588,892)
Income (loss) from operations	3,174,419	3,741,055	4,809,136
Other Income	1,514,162	560,497	391,819
Income (loss) before income taxes	4,688,581	4,301,552	4,417,317
Provision for income taxes	(270,874)	114,801	(8,085)
Net income (loss) from continuing operations	4,417,707	4,416,353	4,409,232
Gross profit	4,202,713	4,523,064	4,220,244
Other Income	(1,514,162)	(560,497)	(391,819)
variable interest entity and subsidiaries.
Revenues	20,106,281	25,307,224	5,459,135
Gross profit from continuing operations	73,278	857,496	869,199
Operating expenses	(231,462)	701,516	804,851
Income (loss) from operations	(158,184)	155,980	64,348
Other Income	634,225	213,771	2,033
Income (loss) before income taxes	476,041	369,751	62,315
Provision for income taxes	(34,063)	(5,616)	(17,486)
Net income (loss) from continuing operations	441,978	364,135	44,829
Gross profit	73,278	857,496	869,199
Cost of revenues from continuing operations	(20,033,003)	(24,449,728)	(4,589,936)
Other Income	(634,225)	(213,771)	(2,033)
FAMI
Revenues	0	0	0
Operating expenses	(913,948)	2,961,849	2,031,506
Income (loss) from operations	913,948	(2,961,849)	(2,031,506)
Other Income	1,264,040	368,466	5,673
Income (loss) before income taxes	(2,177,988)	(2,593,383)	(2,037,179)
Provision for income taxes	0	0	0
Net income (loss) from continuing operations	0	0	0
Cost of revenues from continuing operations	0	0	0
Net income (loss) from continuing operations	(2,177,988)	(2,593,383)	(2,037,179)
Other Income	(1,264,040)	(368,466)	(5,673)
Consolidated [Member]
Revenues	110,364,887	99,213,379	39,289,951
Cost of revenues	(106,078,132)	(93,775,293)	(34,180,670)
Gross profit from continuing operations	4,286,755	5,438,086	5,109,281
Operating expenses	(2,245,380)	(4,495,718)	(2,256,405)
Income (loss) from operations	2,041,375	942,368	2,852,876
Other Income	815,931	1,163,244	419,515
Income (loss) before income taxes	2,857,306	2,105,612	2,433,361
Provision for income taxes	(313,493)	118,367	(25,571)
Net income (loss) from continuing operations	2,543,813	2,223,979	2,407,790
Gross profit	4,286,755	5,438,086	5,109,281
Other Income	$ (815,931)	$ (1,163,244)	$ (419,515)

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Summary of significant accounting policies (Details 2) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Net cash provided by (used in) operating activities from continuing operations	$ (75,754,162)	$ 20,635,488	$ (53,231,108)
Net cash used in investing activities from continuing operations	35,896,193	(41,991,079)	(12,127,728)
Net cash provided by (used in) financing activities from continuing operations	11,017,942	11,634,868	122,665,288
Effect of exchange rate changes on cash and restricted cash	462,261	(8,363,680)	(153,454)
Net increase (decrease) in cash and restricted cash	(28,377,766)	(18,084,403)	57,152,998
Cash and restricted cash from continuing operations, beginning of year	41,167,501	59,251,904	2,098,906
Cash and restricted cash from continuing operations, end of year	12,789,735	41,167,501	59,251,904
Net cash used in investing activities from continuing operations	35,896,193	(41,991,079)	(12,258,220)
Nongyuan Network
Net cash provided by (used in) operating activities from continuing operations	(579,125)	(3,189,440)	3,246,067
Net cash used in investing activities from continuing operations	0	2,738,559	(2,772,430)
Net cash provided by (used in) financing activities from continuing operations	539,287	373,382	(616,095)
Effect of exchange rate changes on cash and restricted cash	5,227	(5,078)	258,485
Net increase (decrease) in cash and restricted cash	(34,611)	(82,577)	116,027
Cash and restricted cash from continuing operations, beginning of year	37,393	116,447	420
Cash and restricted cash from continuing operations, end of year	2,782	33,870	116,447
Other [Member]
Net cash provided by (used in) operating activities from continuing operations	(17,601,436)	(14,188,275)	67,709,967
Net cash used in investing activities from continuing operations	(7,121,332)	1,140,848	(9,353,935)
Net cash provided by (used in) financing activities from continuing operations	32,778	649,782	144,197
Effect of exchange rate changes on cash and restricted cash	462,420	(8,345,494)	(506,653)
Net increase (decrease) in cash and restricted cash	(24,227,570)	(20,743,139)	57,993,576
Cash and restricted cash from continuing operations, beginning of year	183,030	183,030	183,030
Cash and restricted cash from continuing operations, end of year	(24,044,540)	(20,560,109)	58,176,606
variable interest entity and subsidiaries.
Net cash provided by (used in) operating activities from continuing operations	(45,586,506)	46,404,339	(338,559)
Net cash provided by (used in) financing activities from continuing operations	2,515,877	(899,449)	(1,232,191)
Effect of exchange rate changes on cash and restricted cash	(5,386)	(13,108)	94,714
Net increase (decrease) in cash and restricted cash	(58,490)	(378,704)	(1,477,399)
Cash and restricted cash from continuing operations, beginning of year	61,196	434,135	1,913,335
Cash and restricted cash from continuing operations, end of year	2,706	55,431	435,936
Net cash used in investing activities from continuing operations	43,017,525	(45,870,486)	(1,363)
FAMI
Net cash provided by (used in) operating activities from continuing operations	(11,987,095)	(8,391,136)	(123,848,583)
Net cash used in investing activities from continuing operations	0	0	0
Net cash provided by (used in) financing activities from continuing operations	7,930,000	11,511,153	124,369,377
Effect of exchange rate changes on cash and restricted cash	0	0	0
Net increase (decrease) in cash and restricted cash	(4,057,095)	3,120,017	520,794
Cash and restricted cash from continuing operations, beginning of year	4,057,179	522,915	2,121
Cash and restricted cash from continuing operations, end of year	$ 84	$ 4,057,179	$ 522,915

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Summary of significant accounting policies (Details 3) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Nongyuan Network
FAMI	$ 0	$ 1,217,137	$ 0
WFOE that is the primary beneficiary of the VIE	0
Other entities that are consolidated	1,893,667	26,961,378	24,075,199
Investors	0	0	0
VIE and its subsidiaries	1,411,434	6,394,084	0
Other [Member]
FAMI	212,652	913,005	124,670,237
WFOE that is the primary beneficiary of the VIE	9,054,194	19,188,742	38,204,550
Investors	0	0	0
VIE and its subsidiaries	12,944	15,293,176	1,601,406
variable interest entity and subsidiaries.
FAMI	0	0	45,500
WFOE that is the primary beneficiary of the VIE	505,077	14,594,586	0
Other entities that are consolidated	71,277	14,744,568	5,624,880
Investors	0	0	0
VIE and its subsidiaries	0
FAMI
FAMI	0
WFOE that is the primary beneficiary of the VIE	0	0	1,668,758
Other entities that are consolidated	0	984,655	319,981
Investors	0	0	0
VIE and its subsidiaries	$ 0	$ 0	$ 0

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Summary of significant accounting policies (Details 4)	12 Months Ended
	Sep. 30, 2023
Transportation equipment
Intangible assets estimated useful lives	4 years
Minimum | Machinery and equipment
Intangible assets estimated useful lives	5 years
Minimum | Office equipment
Intangible assets estimated useful lives	3 years
Maximum | Machinery and equipment
Intangible assets estimated useful lives	10 years
Maximum | Office equipment
Intangible assets estimated useful lives	5 years

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Summary of significant accounting policies (Details 5) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Component of basic and diluted EPS
Net income (loss) available for common shareholders (A)	$ 2,543,813	$ 2,223,979	$ 2,356,437
Weighted average outstanding shares of ordinary shares (B)	3,628,923	2,905,984	514,213
Diluted ordinary shares and ordinary shares equivalents (C)	8,452,875	2,905,984	522,276
Earnings per share
Basic (A/B)	$ 0.70	$ 0.77	$ 4.58
Diluted (A/C)	$ 0.30	$ 0.77	$ 4.51
Continuing operations
Component of basic and diluted EPS
Net income (loss) available for common shareholders (A)	$ 2,543,813	$ 2,223,979	$ 2,407,790
Earnings per share
Basic (A/B)	$ 0.70	$ 0.77	$ 4.68
Diluted (A/C)	$ 0.30	$ 0.77	$ 4.61
Discontinued operations
Component of basic and diluted EPS
Net income (loss) available for common shareholders (A)	$ 0	$ 0	$ (51,353)
Earnings per share
Basic (A/B)	$ 0.00	$ 0.00	$ (0.10)
Diluted (A/C)	$ 0.00	$ 0.00	$ (0.10)

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Summary of significant accounting policies (Details 6) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Biological assets	$ 9,187,640	$ 9,638,722
Short term investment	0	5,820
Derivative liability	0	3,450,000
Level 1 Member
Biological assets	0	0
Short term investment	0	5,820
Derivative liability	0	0
Level 2 Member
Biological assets	0	0
Short term investment	0	0
Derivative liability	0	0
Level 3 Member
Biological assets	9,187,640	9,638,722
Short term investment	0	0
Derivative liability	$ 0	$ 3,450,000

XML

Summary of significant accounting policies (Details Narrative)	12 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2023 CNY (¥)
Distribute percentage of earnings after eliminating Variable interest entity accumulated losses	95.00%
Percentage of Variable interest entity after tax net income gain loss	10.00%
Percentage of service fee is subject value added sales tax	6.00%
Percentage of service fee is subject value added other taxe	12.00%
Percentage of service fee is subject value added tax	6.00%			6.00%
Subject to corporate income tax maximum percentage of net income loss	25.00%
Cash | ¥				¥ 68,531
Allowance for doubtful accounts	$ 14,719	$ 7,249
Inventory reserve	8,809	49,652
Allowance for doubtful debts relating to advances to suppliers	3,176	3,258
Depreciation expense	200,000	200,000
Contract liabilities, current	400,000	600,000
Cash maintained with People's Republic of China	$ 12,800,000	$ 76,300,000
Exchange rates (per RMB1)	0.1371	0.1406		0.1371
Average exchange rates	0.1418	0.1521	0.1540
Investment Interest Rate	2.05%			2.05%
Short-term deposit	$ 0	$ 35,144,444
Shipping and handling
Shipping and handling expenses	60,204	244,490	$ 235,956
Amortization expenses
Amortization expenses	$ 6,805	$ 31,984	$ 46,085

XML

Accounts receivable net (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Accounts receivable net
Accounts receivable	$ 24,692,164	$ 16,358,493
Less: allowance for doubtful accounts	(14,719)	(7,249)
Accounts receivable	$ 24,677,445	$ 16,351,244

XML

Accounts receivable net (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Accounts receivable net
Allowance for doubtful accounts	$ 14,719	$ 7,249

XML

Advances to suppliers net (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Advances to suppliers	$ 116,343,961	$ 48,633,604
Less: allowance for doubtful accounts	(3,176)	(3,258)
Advances to suppliers, net	116,347,137	48,636,862
Lishui Zhelin Trading Co., Ltd
Advances to suppliers	53,405,200	7,289,180
Jingning Liannong Trading Co., Ltd
Advances to suppliers	20,231,750	16,761,798
Qingyuan Nongbang Mushroom Industry Co., Ltd
Advances to suppliers	15,417,317	12,521,949
Zhongjin Boda (Hangzhou) Industrial Co., Ltd
Advances to suppliers	10,964,912	0
Ningbo Runcai Supply Chain Management Co., Ltd
Advances to suppliers	10,279,605	0
Ningbo Caixiang Trading Co., Ltd.
Advances to suppliers	0	4,372,934
Others
Advances to suppliers	$ 6,048,353	$ 7,691,001

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Advances to suppliers net (Details Narrative) - USD ($)	1 Months Ended
	Apr. 30, 2020	Sep. 30, 2023	Sep. 30, 2022
Advances to suppliers net
Frame work Agreement	4 years
Allowance for doubtful debts relating to advances to suppliers		$ 3,176	$ 3,258

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Inventories net (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Inventories net
Raw materials	$ 520,216	$ 620,252
Packaging materials	69,420	63,703
Finished goods	3,321,021	81,975
Inventories	3,910,657	765,930
Less: allowance for inventory reserve	(8,809)	(49,652)
Total	$ 3,901,848	$ 716,278

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Inventories net (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Inventories net
Allowance for inventory reserve	$ 8,809	$ 49,652

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Other receivable (Details narrative) - USD ($)	Oct. 12, 2022	Nov. 05, 2021	Sep. 30, 2023	Sep. 30, 2022	Sep. 26, 2022
Frame work Agreement interest rate			6.50%		7.00%
Shanghai Jiaoda Onlly Co Ltd [Member]
Company received amount	$ 7,000,000.0
Interest receivable			$ 0	$ 400,000
Total consideration		$ 71,600,000
Payment to party		$ 7,000,000.0
Frame work Agreement interest rate		15.97%

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Property and equipment net (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Subtotal	$ 130,474	$ 133,944
Accumulated depreciation	(105,942)	(89,076)
Total	24,532	44,868
Machinery and equipment
Subtotal	62,973	64,449
Transportation equipment.
Subtotal	48,009	49,241
Office equipment
Subtotal	$ 19,492	$ 20,254

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Property and equipment net (Details narrative) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Property and equipment net
Depreciation expense	$ 19,752	$ 32,303	$ 22,332

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Loans (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Short-term loans	$ 2,412,281	$ 0
Total long-term loans - current portion	676,284	1,505,353
Total long-term loans - non-current portion	1,652,561	292,285
Total short-term and long-term loans	4,741,126	1,797,638
Huaneng Guicheng Trust Co Ltd [Member]
Total long-term loans - current portion	100,054	80,832
Long-term loans - non-current portion	48,999	57,988
Bank of Beijing Hangzhou Branch [Member]
Short-term loans	411,184	0
Total long-term loans - current portion	0	1,124,622
Long-term loans - non-current portion	1,096,491	0
China Resources Shenzhen Investment Trust Co Ltd [Member]
Total long-term loans - current portion	82,237	159,321
Long-term loans - non-current portion	0	93,719
Jiangsu Suning Bank Member
Total long-term loans - current portion	186,472	140,578
Long-term loans - non-current portion	32,261	140,578
China Guangfa Bank Co., Ltd. [Member]
Short-term loans	685,307	0
Industrial Bank Co., Ltd [Member]
Short-term loans	274,123	0
Zhejiang Mintai Commercial Bank (Hangzhou Branch).
Total long-term loans - current portion	21,587	0
Long-term loans - non-current portion	17,989	0
Xiaoshan Rural Commercial Bank [Member]
Short-term loans	1,041,667	0
Long-term loans - non-current portion	328,947	0
WeBank Co., Ltd [Member]
Total long-term loans - current portion	285,934	0
Long-term loans - non-current portion	$ 127,874	$ 0

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Loans (Details 1) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Loan amount in RMB	$ 4,934,167	$ 10,708,334
Total short-term and long-term loans	4,741,126	1,797,638
Short-term loans	2,412,281	0
Total long-term loans - current portion	676,284	1,505,353
Total long-term loans - non-current portion	1,652,561	292,285
Huaneng Guicheng Trust Co Ltd [Member]
Total long-term loans - current portion	100,054	80,832
Long-term loans - non-current portion	48,999	57,988
China Guangfa Bank Co., Ltd. [Member]
Short-term loans	685,307	0
Industrial Bank Co., Ltd [Member]
Short-term loans	274,123	0
Bank of Beijing Hangzhou Branch [Member]
Short-term loans	411,184	0
Total long-term loans - current portion	0	1,124,622
Long-term loans - non-current portion	1,096,491	0
China Resources Shenzhen Investment Trust Co Ltd [Member]
Total long-term loans - current portion	82,237	159,321
Long-term loans - non-current portion	0	93,719
Jiangsu Suning Bank Member
Total long-term loans - current portion	186,472	140,578
Long-term loans - non-current portion	32,261	140,578
WeBank Co., Ltd [Member]
Total long-term loans - current portion	285,934	0
Long-term loans - non-current portion	127,874	0
Xiaoshan Rural Commercial Bank [Member]
Short-term loans	1,041,667	0
Long-term loans - non-current portion	328,947	0
Secured short-term loans [Member]
Loan amount in RMB	14,600,000
Short-term loans	2,001,097	0
Secured short-term loans [Member] | China Guangfa Bank Co., Ltd. [Member]
Loan amount in RMB	5,000,000
Short-term loans	$ 685,307	0
Loan commencement date	Nov. 01, 2022
Loan maturity date	Oct. 31, 2023
Effective interest rate	3.95%
Secured short-term loans [Member] | Industrial Bank Co., Ltd [Member]
Loan amount in RMB	$ 2,000,000
Short-term loans	$ 274,123	0
Loan commencement date	Jan. 16, 2023
Loan maturity date	Jan. 14, 2024
Effective interest rate	5.13%
Secured short-term loans [Member] | Xiaoshan Rural Commercial Bank [Member]
Loan amount in RMB	$ 7,600,000
Short-term loans	$ 1,041,667	0
Loan commencement date	Jun. 19, 2023
Loan maturity date	Jun. 18, 2024
Effective interest rate	3.20%
Unsecured short-term loans [Member]
Loan amount in RMB	$ 3,000,000
Short-term loans	411,184	0
Unsecured short-term loans [Member] | Bank of Beijing Hangzhou Branch [Member]
Loan amount in RMB	3,000,000
Short-term loans	$ 411,184	0
Loan commencement date	Jan. 17, 2023
Loan maturity date	Jan. 17, 2024
Effective interest rate	4.65%
Total short-term loans [Member]
Loan amount in RMB	$ 17,600,000
Short-term loans	2,412,281	0
Secured long-term loans [Member] | Huaneng Guicheng Trust Co Ltd [Member]
Loan amount in RMB	$ 430,000	$ 575,000
Loan commencement date	Dec. 30, 2022	Aug. 14, 2022
Loan maturity date	Dec. 28, 2024	Aug. 01, 2024
Effective interest rate	12.91%	14.40%
Total long-term loans - current portion	$ 58,936	$ 80,832
Total long-term loans - non-current portion		57,988
Secured long-term loans [Member] | Huaneng Guicheng Trust Co Ltd One [Member]
Loan amount in RMB	$ 300,000
Loan commencement date	Aug. 01, 2023
Loan maturity date	Aug. 01, 2025
Effective interest rate	16.20%
Total long-term loans - current portion	$ 41,118	0
Total long-term loans - non-current portion		57,988
Secured long-term loans [Member] | Bank of Beijing Hangzhou Branch [Member]
Loan amount in RMB		$ 8,000,000
Loan commencement date		Apr. 06, 2022
Loan maturity date		Apr. 05, 2026
Effective interest rate		4.80%
Total long-term loans - current portion		$ 1,124,622
Secured long-term loans [Member] | China Resources Shenzhen Investment Trust Co Ltd One [Member]
Loan amount in RMB		$ 333,334
Loan commencement date		Apr. 30, 2021
Loan maturity date		Apr. 28, 2023
Effective interest rate		10.80%
Total long-term loans - current portion		$ 46,859
Secured long-term loans [Member] | WeBank Co., Ltd [Member]
Loan amount in RMB	$ 885,000
Loan commencement date	Apr. 12, 2023
Loan maturity date	Apr. 01, 2025
Effective interest rate	12.56%
Total long-term loans - current portion	$ 121,300	1,124,622
Secured long-term loans [Member] | WeBank Co., Ltd One [Member]
Loan amount in RMB	$ 500,000
Loan commencement date	May 15, 2023
Loan maturity date	May 15, 2025
Effective interest rate	9.00%
Total long-term loans - current portion	$ 68,531	1,124,622
Secured long-term loans [Member] | WeBank Co., Ltd Two [Member]
Loan amount in RMB	$ 479,167
Loan commencement date	Aug. 14, 2022
Loan maturity date	Aug. 01, 2024
Effective interest rate	14.40%
Total long-term loans - current portion	$ 65,675	1,124,622
Secured long-term loans [Member] | WeBank Co., Ltd Three [Member]
Loan amount in RMB	$ 90,000
Loan commencement date	May 15, 2023
Loan maturity date	May 01, 2025
Effective interest rate	13.86%
Total long-term loans - current portion	$ 12,336	1,124,622
Secured long-term loans [Member] | WeBank Co., Ltd Four [Member]
Loan amount in RMB	$ 67,500
Loan commencement date	Aug. 01, 2023
Loan maturity date	Jul. 28, 2025
Effective interest rate	14.11%
Total long-term loans - current portion	$ 9,252	1,124,622
Secured long-term loans [Member] | WeBank Co., Ltd Five [Member]
Loan amount in RMB	$ 64,500
Loan commencement date	Aug. 01, 2023
Loan maturity date	Aug. 01, 2025
Effective interest rate	12.78%
Total long-term loans - current portion	$ 8,840	1,124,622
Secured long-term loans [Member] | Jiangsu Suning Bank One [Member]
Loan amount in RMB	$ 210,000
Loan commencement date	May 15, 2023
Loan maturity date	May 01, 2025
Effective interest rate	13.86%
Total long-term loans - current portion	$ 28,783	1,124,622
Secured long-term loans [Member] | Jiangsu Suning Bank Two [Member]
Loan amount in RMB	$ 150,500
Loan commencement date	Aug. 01, 2023
Loan maturity date	Aug. 01, 2025
Effective interest rate	12.78%
Total long-term loans - current portion	$ 20,628	1,124,622
Secured long-term loans [Member] | Zhejiang Mintai Commercial Bank [Member]
Loan amount in RMB	$ 157,500
Loan commencement date	Aug. 01, 2023
Loan maturity date	Jul. 28, 2025
Effective interest rate	14.11%
Total long-term loans - current portion	$ 21,587	1,124,622
Secured long-term loans [Member] | Xiaoshan Rural Commercial Bank [Member]
Loan amount in RMB	$ 2,400,000
Loan commencement date	Jun. 19, 2023
Loan maturity date	Jun. 18, 2026
Effective interest rate	4.50%
Total long-term loans - current portion		1,124,622
Long-term loans - non-current portion	$ 328,947
long-term loans [Member] | China Resources Shenzhen Investment Trust Co Ltd [Member]
Loan amount in RMB	$ 600,000	$ 800,000
Loan commencement date	Jul. 01, 2022	Jul. 01, 2022
Loan maturity date	Jul. 01, 2024	Jul. 01, 2024
Effective interest rate	14.40%	14.40%
Total long-term loans - current portion		$ 112,462
Total long-term loans - non-current portion	$ 82,237
Secured long-term loans current [Member]
Loan amount in RMB	107,500
Total long-term loans - current portion	1,580,263	1,505,353
Long-term loans, non-current portiont [Member]
Loan amount in RMB	20,628
Total long-term loans - non-current portion	176,797
Long-term loans, non-current portiont [Member] | Huaneng Guicheng Trust Co Ltd [Member]
Loan amount in RMB	$ 107,500
Loan commencement date	Dec. 30, 2022
Loan maturity date	Dec. 28, 2024
Effective interest rate	12.91%
Long-term loans - non-current portion	$ 14,734	0
Long-term loans, non-current portiont [Member] | Huaneng Guicheng Trust Co Ltd One [Member]
Loan amount in RMB	$ 250,000	$ 412,500
Loan commencement date	Aug. 01, 2023	Aug. 14, 2022
Loan maturity date	Aug. 01, 2025	Aug. 01, 2024
Effective interest rate	16.20%	14.40%
Total long-term loans - current portion		$ 112,462
Total long-term loans - non-current portion	$ 34,265	57,988
Long-term loans, non-current portiont [Member] | Bank of Beijing Hangzhou Branch [Member]
Loan amount in RMB	$ 8,000,000
Loan commencement date	Apr. 03, 2023
Loan maturity date	Apr. 02, 2026
Effective interest rate	4.75%
Total long-term loans - current portion	$ 1,096,491
Long-term loans, non-current portiont [Member] | China Resources Shenzhen Investment Trust Co Ltd [Member]
Loan amount in RMB		$ 666,667
Loan commencement date		Jul. 01, 2022
Loan maturity date		Jul. 01, 2024
Effective interest rate		14.40%
Total long-term loans - current portion		$ 1,124,622
Long-term loans - non-current portion		93,719
Long-term loans, non-current portiont [Member] | Jiangsu Suning Bank Member
Loan amount in RMB	$ 122,500	$ 1,000,000
Loan commencement date	May 15, 2023	Sep. 02, 2022
Loan maturity date	May 01, 2025	Sep. 01, 2024
Effective interest rate	13.86%	12.00%
Long-term loans - non-current portion	$ 16,790	$ 140,578
Long-term loans, non-current portiont [Member] | WeBank Co., Ltd [Member]
Loan amount in RMB	$ 442,500
Loan commencement date	Apr. 12, 2023
Loan maturity date	Apr. 01, 2025
Effective interest rate	12.56%
Long-term loans - non-current portion	$ 60,651
Long-term loans, non-current portiont [Member] | WeBank Co., Ltd One [Member]
Loan amount in RMB	$ 333,333
Loan commencement date	May 15, 2023
Loan maturity date	May 15, 2025
Effective interest rate	9.00%
Long-term loans - non-current portion	$ 45,687
Long-term loans, non-current portiont [Member] | Jiangsu Suning Bank Two [Member]
Loan amount in RMB	$ 112,875
Loan commencement date	Aug. 01, 2023
Loan maturity date	Aug. 01, 2025
Effective interest rate	12.78%
Total long-term loans - current portion	$ 15,471
Long-term loans, non-current portiont [Member] | Zhejiang Mintai Commercial Bank [Member]
Loan amount in RMB	$ 131,250
Loan commencement date	Jul. 01, 2022
Loan maturity date	Jul. 01, 2024
Effective interest rate	14.40%
Long-term loans - non-current portion	$ 17,989
Long-term loans, non-current portiont [Member] | WeBank Co., Ltd Two [Member]
Loan amount in RMB	$ 56,250
Loan commencement date	Aug. 01, 2023
Loan maturity date	Aug. 01, 2025
Effective interest rate	13.86%
Long-term loans - non-current portion	$ 7,710
Long-term loans, non-current portiont [Member] | WeBank Co., Ltd Three [Member]
Loan amount in RMB	$ 52,500
Loan commencement date	Aug. 01, 2023
Loan maturity date	Jul. 28, 2025
Effective interest rate	14.11%
Long-term loans - non-current portion	$ 7,196
Long-term loans, non-current portiont [Member] | WeBank Co., Ltd Four [Member]
Loan amount in RMB	$ 48,375
Loan commencement date	Aug. 01, 2023
Loan maturity date	Aug. 01, 2025
Effective interest rate	12.78%
Long-term loans - non-current portion	$ 6,630
Long-term loans, current portiont [Member] | Jiangsu Suning Bank Member
Loan amount in RMB	$ 1,000,000	$ 1,000,000
Loan commencement date	Sep. 02, 2022	Sep. 02, 2022
Loan maturity date	Sep. 01, 2024	Sep. 01, 2024
Effective interest rate	12.00%	12.00%
Total long-term loans - current portion	$ 137,061	$ 140,578

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Loans (Details Narrative) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Interest expenses amount	$ 200,000	$ 100,000	$ 53,009
Ms Xinyang Wang [Member]
Percentage of ownership interest	100.00%
Outstanding principal amount	$ 2,200,000
Property owned valuation	2,600,000
Mr Dehong Zhang [Member]
Outstanding principal amount	400,000
Loan amount	300,000
Mr Dehong Zhang One [Member]
Outstanding principal amount	400,000
Loan amount	700,000
Mr Dehong Zhang Two [Member]
Loan amount	$ 700,000

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Convertible promissory note and derivative liability (Details) - Convertible promissory note [Member] - $ / shares	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Exercise price	$ 0	$ 0.45
Ordinary share price	$ 0	$ 0.56
Term (in years)		1 year
Volatility		88.39%
Risk-free interest rate		4.05%
Dividend yield	0.00%	0.00%

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Convertible promissory note and derivative liability (Details Narrative) - USD ($)	1 Months Ended	12 Months Ended
	Sep. 26, 2022	Sep. 30, 2023	Sep. 30, 2022
Derivative liability		$ 0	$ 3,450,000
Shares issued		474,137
Redemption of convertible notes		$ 1,100,000
Convertible promissory note [Member]
Issued Convertible promissory note	$ 6,420,000
Derivative liability	3,870,000	0	3,450,000
Change in fair value of derivative liability		$ 900,000	420,000
Debt discount	3,870,000
Convertible promissory note	$ 64,200
Convertible into ordinary shares price	$ 0.025
Shares issued		474,137
Description of effect of reverse stock split		After the effect of the reverse stock split adjustment, the floor price of the Note is assumed to be $0.96
Description of amortized		the Company determined that the floor price under the Note is assumed to be $0.12, which is calculated based on an 80% discount of the Nasdaq Minimum Price of $0.5785 on the date of the Company’s entry into the Agreement with the Investor
Discount amount	$ 420,000
Amortization of debt issuance costs		$ 1,700,000	1,700,000.0
Other expenses		48,160	48,160
Redemption of convertible notes		1,100,000
Net of amortization		$ 5,800,000	$ 2,200,000
Conversion price			$ 0.12

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Shareholders Equity (Details Narrative) - USD ($)	1 Months Ended		12 Months Ended
	May 31, 2022	Feb. 28, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021	Jul. 22, 2021	Jul. 21, 2021	Sep. 12, 2020	Sep. 11, 2020
Common stock, shares authorized			500,000,000	500,000,000
Remaining ordinary shares to be issued			2,857
Description of dividend shares	the Company consolidated its ordinary share at a ratio of one-for-twenty-five. On September 25, 2023, the Company consolidated its ordinary shares at a ratio of one-for-eight and, immediately following the share consolidation, the authorized share capital of the Company be increased from $2.5 million divided into 12.5 million ordinary shares of $0.20 par value each to $100 million divided into 500 million ordinary shares of $0.20 par value each, by creation of an additional 487.5 million ordinary shares of $0.20 par value each
Common stock, shares issued			474,137
Ordinary shares, par value (in dollars per share)				$ 0.38		$ 0.001	$ 0.001	$ 0.001	$ 0.001
Statutory reserve			$ 700,000	$ 1,200,000
Share-based compensation expense					$ 805,410
Redemption of convertible notes			$ 1,100,000
Shares issued under Share incentive plan			1,168,000
Percentage of shares issued under share incentive plan			10.00%
Vesting percentage			20.00%
Shares Vested under Share incentive plan					596,600
Remaining ordinary shares available Share incentive plan	22,856			571,400
Statutory surplus reserve			10.00%
Price per share			$ 0.38	$ 0.20
Ordinary share issued			30,000,000
Proceeds from issuance of stock		$ 6,000,000	$ 8,000,000
Share consolidation description			the issuance of 21,052,632 ordinary shares was retrospectively adjusted to 2,631,579 ordinary shares	the issuance of 30 million ordinary shares was first retrospectively adjusted to 1.2 million ordinary shares and then 150,000 ordinary shares
Common stock, shares authorized
Common stock, shares authorized						600,000,000	200,000,000	200,000,000	20,000,000
Farmmi Inc.
Ownership in subsidiary				50.00%

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Taxes (Details)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Taxes
Statutory PRC income tax rate	25.00%	25.00%	25.00%
Effect of income tax exemption (a)	(40.90%)	(50.80%)	(41.00%)
Favorable tax rate impact (a)	(13.30%)	(14.80%)	(0.30%)
Permanent difference	0.00%	0.10%	(8.20%)
Changes of deferred tax assets valuation allowances	(5.80%)	7.20%	2.00%
Non-PRC entities not subject to PRC income tax	19.40%	27.70%	23.60%
Total	11.00%	(5.60%)	1.10%

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Taxes (Details 1) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Taxes
Current income tax provision	$ 148,893	$ 58,266	$ 25,571
Deferred income tax provision	164,600	(176,633)	0
Total	$ 313,493	$ (118,367)	$ 25,571

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Taxes (Details 2) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Taxes
Net operating loss carryforwards	$ 284,283	$ 168,126
Allowance for inventory	2,202	12,413
Allowance for doubtful accounts	4,474	836
Valuation allowance	(290,959)	(18,168)
Total	$ 0	$ 163,207

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Taxes (Details narrative) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Net income exempt from income tax	$ 390,000	$ 28,000	$ 40,200.00
Tax savings from tax break	$ 1,000,000.0	$ 700,000	$ 1,000,000.0
Per share effect of the tax exemption	$ 0.27	$ 0.24	$ 1.95
Cumulative net operating loss	$ 700,000
Valuation allowance	$ 181,375
Corporate income tax at a statutory rate	25.00%	25.00%	25.00%
Minimum
Corporate income tax at a statutory rate	5.00%
Represents the amount of threshold taxable income for determining tax rate.	$ 1,000,000
Scenario of Taxable Income Between One Million And Three Million.
Corporate income tax at a statutory rate	10.00%
Represents the amount of threshold taxable income for determining tax rate.	$ 3,000,000
Scenario of Taxable Income Between One Million And Three Million. | Maximum
Represents the amount of threshold taxable income for determining tax rate.	$ 3,000,000
Scenario of Taxable Income Not More Than One Million.
Corporate income tax at a statutory rate	5.00%
Represents the amount of threshold taxable income for determining tax rate.	$ 1,000,000
Scenario of Taxable Income Not More Than One Million. | Minimum
Represents the amount of threshold taxable income for determining tax rate.	$ 1,000,000

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Concentration of major customers and suppliers (Details Narrative)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Major Supplier One [Member]
Major purchase percent	14.00%		37.00%
Advances to suppliers	46.00%	35.00%
Major Supplier Two [Member]
Major purchase percent		23.00%	20.00%
Advances to suppliers	18.00%	26.00%
Major Supplier Three [Member]
Major purchase percent		21.00%	18.00%
Advances to suppliers	13.00%	15.00%
Major Supplier Four [Member]
Major purchase percent			16.00%
Advances to suppliers		15.00%
Major Customer One [Member]
Sale percent	41.00%	31.00%	64.00%
Accounts receivable percent	87.00%	65.00%
Major Customer Two [Member]
Sale percent	12.00%	16.00%	14.00%
Accounts receivable percent	12.00%	34.00%

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Leases (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Supplemental balance sheet information related to operating leases
Right-of-use assets under operating leases	$ 516,459	$ 534,351
Operating lease liabilities, current	69,062	46,543
Operating lease liabilities, non-current	458,617	517,156
Total operating lease liabilities	$ 527,679	$ 563,699

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Leases (Details 1) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Maturities of operating lease liabilities
2024	$ 119,232
2025	98,975
2026	98,975
2027	98,975
2028	88,434
Thereafter	242,716
Total future minimum lease payments	747,307
Less: Imputed interest	(219,628)
Total	$ 527,679	$ 563,699

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Leases (Details Narrative) - Restatement adjustment - ASU 2016-02 [Member]	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Remaining lease term	7 years 1 month 6 days	8 years 2 months 12 days
Discount rate	10.20%	10.00%

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Segment reporting (Details) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Revenue from Contract with Customer, Including Assessed Tax	$ 110,364,887	$ 99,213,379	$ 39,289,951
Shiitake [Member]
Revenue from Contract with Customer, Including Assessed Tax	19,655,465	19,859,533	20,494,362
Mu Er [Member]
Revenue from Contract with Customer, Including Assessed Tax	16,301,157	19,123,152	16,524,723
Cotton [Member]
Revenue from Contract with Customer, Including Assessed Tax	5,547,927	47,950,345	0
Corn [Member]
Revenue from Contract with Customer, Including Assessed Tax	27,430,969	10,778,197	1,796,006
Other products [Member]
Revenue from Contract with Customer, Including Assessed Tax	112,853	1,502,152	474,860
Tapioca [Member]
Revenue from Contract with Customer, Including Assessed Tax	39,977,734	0	0
Cornstarch [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 1,338,782	$ 0	$ 0

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Related party transactions (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Due from related parties	$ 110,958	$ 59,983
Zhejiang Yili Yuncang Holding Group Co Ltd [Member]
Due from related parties	103,417	0
Zhejiang Yili Yuncang Technology Group Co., Ltd [Member]
Due from related parties	0	29,055
FarmNet [Member]
Due from related parties	4,100	0
Epakia Canada Inc [Member]
Due from related parties	2,996	0
Shanghai Zhongjian Yiting Medical Health Technology Partnership [Member]
Due from related parties	308	30,928
Dehong Zhang [Member]
Due from related parties	$ 137	$ 0

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Related party transactions (Details 1) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Due to related parties	$ 33,814	$ 948
Zhejiang Tantech Bamboo Technology Co., Limited [Member]
Due to related parties	24,496	948
Yefang Zhango [Member]
Due to related parties	9,150	0
Forasen Holdings Group Co., Ltd [Member]
Due to related parties	$ 168	$ 0

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Related party transactions (Details 2)	12 Months Ended
	Sep. 30, 2023 CNY (¥) ft²	Sep. 30, 2023 USD ($) ft²	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)
Annual rent in USD		$ 66,116	$ 88,847	$ 86,556
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Lease No 1 [Member]
Annual rent in USD		$ 23,940
Lease begin date	Aug. 01, 2021	Aug. 01, 2021
Lease end date	Jul. 31, 2031	Jul. 31, 2031
Leasing purpose	Factory building	Factory building
Area (in square meters) | ft²	1,180	1,180
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Lease No 2 [Member]
Annual rent in USD		$ 59,750
Lease begin date	Jul. 14, 2021	Jul. 14, 2021
Lease end date	Jul. 13, 2031	Jul. 13, 2031
Leasing purpose	Factory building	Factory building
Area (in square meters) | ft²	1,914	1,914
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Lease No 3 [Member]
Annual rent in USD		$ 18,691
Lease begin date	Mar. 01, 2023	Mar. 01, 2023
Lease end date	Feb. 29, 2028	Feb. 29, 2028
Leasing purpose	Office	Office
Area (in square meters) | ft²	479	479
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Operating Lease From Related Parties [Member]
Annual rent RMB		$ 722,120
Annual rent in USD		$ 102,381
Area (in square meters) | ft²	3,573	3,573
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Lease No 1 [Member] | RMB [Member]
Annual rent RMB | ¥	¥ 168,854
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Lease No 2 [Member] | RMB [Member]
Annual rent RMB | ¥	421,431
Zhejiang Tantech Bamboo Technology Co., Limited [Member] | Lease No 3 [Member] | RMB [Member]
Annual rent RMB | ¥	¥ 131,835
Zhejiang Yili Yuncang Holding Group Co., Ltd [Member] | Lease No 1 [Member]
Annual rent RMB		$ 9,795
Annual rent in USD		$ 1,389
Lease begin date	Aug. 01, 2023	Aug. 01, 2023
Lease end date	Jul. 31, 2025	Jul. 31, 2025
Leasing purpose	Office	Office
Area (in square meters) | ft²	15	15

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Related party transactions (Details Narrative) - USD ($)	1 Months Ended	12 Months Ended
	Aug. 31, 2020	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Revenue from Related Parties		$ 0	$ 1,016	$ 1,952
Lease expenses		$ 66,116	88,847	86,556
Hangzhou Forasen Technology Co., Ltd. [Member]
Payments for Rent	$ 41,639
Lease income			$ 14,262	$ 40,026
Lease terminated date		February 14, 2022

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Subsequent events (Details Narrative) - USD ($)			1 Months Ended	12 Months Ended
	Jan. 01, 2024	Nov. 13, 2023	Sep. 26, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Common stock share issued				474,137
Original principal amount			$ 6,440,000
Proceeds from issuance of common stock			$ 6,000,000	$ 7,930,000	$ 6,000,000	$ 126,029,588
Bears interest rate			7.00%	6.50%
Payment to related party				$ 0	$ 54,600	$ 2,147,199
Subsequent Event [Member]
Common stock share issued	200,000
Common stock share issued for redemption of notes amount	$ 200,000
November 13 2023 [Member] | Subsequent Event [Member]
Payment to related party		$ 250,000
Conversion Price per shares		$ 1.00

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Condensed financial information of the parent company Balance Sheets (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Other receivables	$ 0	$ 7,440,705
Total current assets	158,171,175	153,254,380
Net assets	174,800,086	163,782,853
Derivative liability	0	3,450,000
Total Liabilities	12,824,160	9,098,762
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively	1,218,816	597,768
Additional paid-in capital	160,571,517	152,162,565
Retained earnings	16,905,488	14,903,491
Total shareholders' equity	161,975,926	154,684,091
Total liabilities and shareholders' equity	174,800,086	163,782,853
FAMI
Total current assets	151,785,250	144,606,348
Net assets	151,785,250	144,606,348
Total Liabilities	6,010,348	5,683,459
Total shareholders' equity	145,774,902	138,922,889
FAMI | Reportable legal entity
Cash	84	4,057,179
Other receivables	103,760	103,858
Total current assets	103,844	4,161,037
Investment in subsidiaries	167,664,201	156,151,565
Net assets	167,768,045	160,312,602
Interest payable	3,377	0
Convertible promissory notes	5,788,742	2,178,511
Derivative liability	0	3,450,000
Total Liabilities	5,792,119	5,628,511
Ordinary share, $0.20 par value, 500 million shares authorized, 6,094,078 and 2,988,835 shares issued and outstanding at September 30, 2023 and 2022, respectively	1,218,816	597,768
Additional paid-in capital	160,571,517	152,162,565
Retained earnings	185,593	1,923,758
Total shareholders' equity	161,975,926	154,684,091
Total liabilities and shareholders' equity	$ 167,768,045	$ 160,312,602

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Condensed Financial Information of the Parent Company Parentheticals (Details) - $ / shares	Sep. 30, 2023	Sep. 30, 2022
Ordinary share, par value	$ 0.20	$ 0.20
Ordinary share, shares authorized	500,000,000	500,000,000
Ordinary share, shares, issued	6,094,078	2,988,835
Ordinary share, shares, outstanding	6,094,078	2,988,835
FAMI | Reportable legal entity
Ordinary share, par value	$ 0.20	$ 0.20
Ordinary share, shares authorized	500,000,000	500,000,000
Ordinary share, shares, issued	6,094,078	2,988,835
Ordinary share, shares, outstanding	6,094,078	2,988,835

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Condensed Financial Information of the Parent Company (Details 1) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
General and administrative expenses	$ (2,132,095)	$ (4,133,178)	$ (2,838,790)
Comprehensive income attributable to the Company	2,543,813	2,223,979	2,356,438
FAMI | Reportable legal entity
General and administrative expenses	(913,948)	(2,961,849)	(2,031,506)
Change in Fair value of derivative liability	873,767	419,649	0
Interest expenses	(445,766)	0	0
Amortization of debt issuance costs	(1,691,609)	(48,160)	0
Other expenses	(432)	(3,024)	(5,672)
Loss from operations	(2,177,988)	(2,593,384)	(2,037,178)
Equity in income of subsidiaries and VIE	4,721,801	4,817,363	4,395,592
Comprehensive income attributable to the Company	$ 2,543,813	$ 2,223,979	$ 2,358,414

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Condensed Financial Information of the Parent Company (Details 2) - USD ($)	12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2021
Net income (loss)	$ 2,543,813	$ 2,223,979	$ 2,356,438
Amortization of debt issuance costs	1,691,609	48,160	0
Share-based compensation	0	2,007,328	1,260,674
Other current assets	(222,440)	(49,765)	(258,117)
Other current liabilities	(232,463)	795,434	(559,915)
Net cash used in operating activities	(75,754,162)	20,635,488	(52,907,013)
Acquisition of subsidiaries	0	(1,521,422)	0
Net cash used in investing activities	35,896,193	(41,991,079)	(12,258,220)
Net proceeds from issuance of convertible promissory notes	0	6,000,000	0
Proceeds from advances from related parties	30,872	0	0
Net cash provided by financing activities	11,017,942	11,634,868	122,412,800
Net increase (decrease) in cash and restricted cash	(28,377,766)	(18,084,403)	57,097,363
Cash, beginning of year	41,167,501	59,251,904	2,165,151
Cash end of year	12,789,735	41,167,501	59,251,904
FAMI | Reportable legal entity
Net income (loss)	2,543,813	2,223,979	2,358,414
Equity in earnings of subsidiary	(4,721,801)	(4,817,363)	(4,395,592)
Amortization of debt issuance costs	1,691,609	48,160	0
Change in fair value of derivative liability	(873,767)	(419,649)	0
Share-based compensation	0	2,007,328	1,260,674
Other current assets	98	21,223	(125,081)
Other current liabilities	(50,869)	54,246	(40,000)
Net cash used in operating activities	(1,410,917)	(882,076)	(941,585)
Acquisition of subsidiaries	(10,576,178)	(7,529,060)	(122,726,999)
Net cash used in investing activities	(10,576,178)	(7,529,060)	(122,726,999)
Net proceeds from share issuance	7,930,000	6,000,000	126,029,588
Net proceeds from issuance of convertible promissory notes	0	6,000,000	0
Proceeds from advances from related parties	0	0	298,297
Repayment of advances from related parties	0	(54,600)	(2,138,508)
Net cash provided by financing activities	7,930,000	11,945,400	124,189,377
Net increase (decrease) in cash and restricted cash	(4,057,095)	3,534,264	520,793
Cash, beginning of year	4,057,179	522,915	2,122
Cash end of year	$ 84	$ 4,057,179	$ 522,915

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Condensed Financial Information of the Parent Company (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Ordinary share, par value	$ 0.20	$ 0.20
Ordinary share, shares authorized	500,000,000	500,000,000
Ordinary share, issued	6,094,078	2,988,835
Ordinary share, issued, value	$ 1,218,816	$ 597,768
Additional paid-in capital	$ 160,571,517	$ 152,162,565
FAMI | Reportable legal entity
Ordinary share, par value	$ 0.20	$ 0.20
Ordinary share, shares authorized	500,000,000	500,000,000
Ordinary share, issued	6,094,078	2,988,835
Ordinary share, issued, value	$ 1,218,816	$ 597,768
Additional paid-in capital	$ 160,571,517	$ 152,162,565
Minimum
Ordinary share, shares authorized	2,500,000
Maximum
Ordinary share, shares authorized	12,500,000