Note 5 – Discontinued Operations

In February 2020, the Company discontinued its grocery stores business as the Company has been operating at losses in this business. As a result, the results of operations for the Company’s grocery stores business are reported as discontinued operations under the guidance of Accounting Standards Codification 205.

Reconciliation of the carrying amounts of major classes of assets and liabilities from discontinued operations in the consolidated balance sheets as of June 30, 2020 and 2019 is as follow:

Carrying amounts of major classes of assets included as part of discontinued operations of CQ Pengmei:


	June 30, 2020		June 30, 2019
CURRENT ASSETS:
Cash and cash equivalents	$	2,523	$	19,015
Other receivables, net		57,395		20,967
Inventories		—		112,641
Security deposits		3,267		21,844
Total current assets of discontinued operations		63,185		174,467

OTHER ASSETS:
Other receivables		48,371		122,584
Prepaid expenses		—		508,271
Plant and equipment, net		25,752		1,213,983
Operating lease right-of-use assets		505,329		—
Total other assets of discontinued operations		579,452		1,844,838

Total assets of discontinued operations	$	642,637	$	2,019,305

Carrying amounts of major classes of liabilities included as part of discontinued operations of CQ Pengmei:

CURRENT LIABILITIES:
Short-term loan – banks	$	336,845	$	364,071
Loans from third parties		474,135		626,201
Accounts payable		64,725		217,953
Customer deposits		6,519		2,618
Other payables and accrued liabilities		416,227		571,553
Other payables – related parties		29,846		88,670
Operating lease liabilities		116,904		—
Taxes payable		—		987
Total current liabilities of discontinued operations		1,445,201		1,872,053

OTHER LIABILITIES:
Operating lease liabilities - noncurrent		417,729		—

Total liabilities of discontinued operations	$	1,862,930	$	1,872,053

Reconciliation of the amounts of major classes of income and losses from discontinued operations in the consolidated statements of operations and comprehensive loss for the years ended June 30, 2020, 2019 and 2018.


	For the Year Ended		For the Year Ended		For the Year Ended
	June 30,		June 30,		June 30,
	2020		2019		2018
Supermarket and grocery store	$	1,574,965	$	3,465,885	$	—

Cost of revenue		1,435,597		3,114,906		—

Gross profit		139,368		350,979		—

OPERATING EXPENSES:
Selling		438,458		704,766		—
General and administrative		162,976		189,553		—
Provision for right-of-use assets		250,181		—		—
Loss on disposal of long-lived assets		276,648		—		—
Impairment of long-lived assets		724,987		—		—
Total operating expenses		1,853,250		894,319		—

Loss from operations		(1,713,882)		(543,340)		—

OTHER INCOME (EXPENSES)
Interest income		14		33		—
Interest expense		(114,853)		(110,350)		—
Other finance expense		(3,156)		(20,532)		—
Other income, net		35,640		11,568		—
Total other expense, net		(82,355)		(119,281)		—

Loss before income taxes		(1,796,237)		(662,621)		—

Income tax expense		—		—		—

Net loss from discontinued operations	$	(1,796,237)	$	(662,621)	$	—