6-K

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

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For the six months ended March 31, 2022

Commission File Number: 001-38397

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Farmmi, Inc.
(Registrant’s name)
Fl 1, Building No. 1,888 Tianning Street, Liandu District
Lishui, Zhejiang Province
People’s Republic of China 323000
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.:

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Form 20-F  ☒	Form 40-F ☐

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Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by Regulation S-T Rule 101(b)(1): ☐

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Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by Regulation S-T Rule 101(b)(7): ☐

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​ Incorporation By Reference

This report on Form 6-K is hereby incorporated by reference into the Company’s registration statements on Form S-8 (file No. 333-224463), Form S-8 (file No. 333-262696), Form F-1 (file No. 333-228677), Form F-3 (file No. 333-254036), Form F-3 (file No. 333-254397), Form F-1 (file No. 333-255387) and Form F-1MEF (file No. 333-255590).

Explanatory Note:

The Registrant is filing this Report on Form 6-K to report its financial results for the six months ended March 31, 2022 and to discuss its recent corporate developments.

Attached as exhibits to this Report on Form 6-K are:

(1)	the unaudited condensed interim consolidated financial statements and related notes as Exhibit 99.1;
(2)	Management’s Discussion and Analysis of Financial Condition and Results of Operations as Exhibit 99.2;
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(3)	Press release dated August 22, 2022;
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(4)	Interactive Data File disclosure as Exhibit 101 in accordance with Rule 405 of Regulation S-T.
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​ SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this current 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. 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.

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Exhibit Index:

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99.1	​	Unaudited Consolidated Financial Statements and Related Notes for the Six Months Ended March 31, 2022 and 2021
99.2	​	Management’s Discussion and Analysis of Financial Condition and Results of Operations
99.3	​	Press release dated August 22, 2022
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.

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​ SIGNATURES

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

​	FARMMI, **** INC.
Date: August 22, 2022	By:	/s/ Yefang Zhang
​	Name:	Yefang Zhang
​	Title:	Chief Executive Officer

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Exhibit 99.1

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FARMMI, INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022 AND SEPTEMBER 30, 2021 AND

FOR THE SIX MONTHS ENDED MARCH 31, 2022 AND 2021

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FARMMI, INC.

TABLE OF CONTENTS

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​	Page
Unaudited Condensed Consolidated Financial Statements	​
Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and September 30, 2021	F-3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Six Months Ended March 31, 2022 and 2021	F-4
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended March 31, 2022 and 2021	F-5
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2022 and 2021	F-6
Notes to Unaudited Condensed Consolidated Financial Statements	F-7 - F-41

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Farmmi, Inc.

Condensed Consolidated Balance Sheets

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​	​	​	​	​	​	​
​	****	March 31,		****	September 30,
​	​	2022		​	2021
​	​	(Unaudited)		​	​	​
Assets		​	​		​
Current Assets		​			​
Cash	​	$	15,272,941	​	$	59,251,904
Short-term deposit	​	​	39,436,531	​	​	2,793,556
Short-term investments	​	​	183,632	​	​	—
Notes receivable	​		3,943,653	​		—
Accounts receivable, net	​		19,152,497	​		24,473,318
Advances to suppliers, net	​	​	70,637,460	​	​	66,718,632
Other receivable	​		7,887,306	​		—
Inventories, net	​	​	5,315,452	​	​	1,371,540
Other current assets	​	​	391,683	​	​	490,699
Due from a related party	​	​	337,746	​	​	—
Current assets from discontinued operations	​	​	—	​	​	205,887
Total current assets	​		162,558,901	​		155,305,536
​	​	​	​	​	​	​
Prepayment to acquire a subsidiary	​		—	​		9,311,854
Long-term investments	​	​	157,746	​	​	—
Property, plant and equipment, net	​	​	11,105,683	​	​	79,482
Intangible assets, net	​	​	22,716	​	​	40,075
Right-of-use assets	​	​	953,209	​	​	776,665
Non-current assets from discontinued operations	​		—	​		173,289
Total Assets	​	$	174,798,255	​	$	165,686,901
​	​	​	​	​	​	​
Liabilities and Shareholders' Equity	​			​
Current Liabilities	​			​
Short-term bank loans	​	$	2,208,446	​	$	2,172,766
Accounts payable	​	​	710,066	​	​	56,457
Due to related parties	​	​	—	​	​	57,632
Operating lease liabilities – current	​		216,288	​		155,532
Other current liabilities	​	​	140,938	​	​	161,716
Current liabilities from discontinued operations	​		—	​		1,542,323
Total current liabilities	​		3,275,738	​		4,146,426
Long-term bank loan	​	​	97,652	​	​	142,264
Operating lease liabilities – non-current	​	​	776,327	​	​	605,793
Non-current liabilities from discontinued operations	​		—	​		—
Total Liabilities	​		4,149,717	​		4,894,483
​	​	​	​	​	​	​
Commitment and contingencies	​	​	​	​	​	​
​	​	​	​	​	​	​
Shareholders' Equity	​			​
​	​		​	​		​
Ordinary share, $0.025 par value, 24,000,000 shares authorized, 23,906,985 and 22,311,215 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively^1^	​		597,675	​		557,781
Additional paid-in capital	​		152,162,660	​		147,088,227
Statutory reserve	​		990,699	​		973,555
Retained earnings	​		12,255,687	​		9,127,377
Accumulated other comprehensive income	​	​	4,641,817	​	​	2,128,972
Total Farmmi, Inc.’s Shareholders’ Equity	​		170,648,538	​		159,875,912
Noncontrolling Interest	​	​	—	​	​	916,506
Total Shareholders' Equity	​	​	170,648,538	​	​	160,792,418
​	​	​	​	​	​	​
Total Liabilities and Shareholders' Equity	​	$	174,798,255	​	$	165,686,901
1.	On May 31, 2022, the Company consolidated its ordinary shares at the ratio of one-for-twenty-five. The authorized number of ordinary shares had been retrospectively adjusted from 600,000,000 ordinary shares, $0.001 par value, to 24,000,000 ordinary shares, $0.025 par value, and the issued and outstanding ordinary shares had been retrospectively adjusted from 597,780,383 ordinary shares to 23,906,985 ordinary shares and from 557,780,383 ordinary shares to 22,311,215 ordinary shares at March 31, 2022 and March 31, 2021, respectively.
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The accompanying notes are an integral part of these condensed consolidated financial statements.

​ F-3

Farmmi, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

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​	​	​	​	​	​	​
​	​	For the Six Months Ended
​	​	March 31,
​	****	2022		****	2021
Revenues		​			​
Sales to third parties	​	$	42,134,665	​	$	16,958,368
Sales to related parties	​		1,050	​		1,618
Total revenues	​		42,135,715	​		16,959,986
​	​	​	​	​	​	​
Cost of revenues	​		(39,148,005)	​		(14,133,327)
​	​	​	​	​	​	​
Gross Profit	​		2,987,710	​		2,826,659
​	​	​	​	​	​	​
Operating income (expenses)	​		​	​		​
Allowance for doubtful debts	​	​	(361,847)	​	​	358,558
Selling and distribution expenses	​		(127,345)	​		(142,986)
General and administrative expenses	​		(3,113,214)	​		(1,621,591)
Total operating expenses	​		(3,602,406)	​		(1,406,019)
​	​	​	​	​	​	​
(Loss) income from operations	​		(614,696)	​		1,420,640
​	​	​	​	​	​	​
Other income (expenses)	​		​	​		​
Interest income	​		71,814	​		170
Interest expense	​		(122,290)	​		(21,364)
Other expenses, net	​		81,823	​		(2,272)
Total other income (expenses)	​		31,347	​		(23,466)
​	​	​	​	​	​	​
Loss (income) before income taxes	​		(583,349)	​		1,397,174
​	​	​	​	​	​	​
Income taxes	​		3,590	​		17,628
​	​	​	​	​	​	​
Net (loss) income from continuing operations	​		(586,939)	​		1,379,546
​	​	​	​	​	​	​
Discontinued operations	​		​	​		​
Net loss from discontinued operations, net of tax	​	​	—	​	​	(17,607)
​	​	​	​	​	​	​
Net (loss) income	​	​	(586,939)	​	​	1,361,939
​	​		​	​		​
Net loss attributable to non-controlling interest from discontinued operations	​	​	—	​	​	677
​	​		​	​		​
Net (loss) income attributable to Farmmi, Inc.	​	$	(586,939)	​	$	1,362,616
​	​		​	​		​
Comprehensive income (loss)	​	​	​	​	​	​
Net (loss) income	​	$	(586,939)	​	$	1,379,546
Other comprehensive income: foreign currency translation gain	​	​	2,430,396	​	​	1,187,295
Total comprehensive income	​		1,843,457	​		2,566,841
Comprehensive (income) loss attributable to noncontrolling interest	​	​	—	​	​	(32,643)
​	​	​	​	​	​	​
Comprehensive income attributable to Farmmi, Inc.	​	$	1,843,457	​	$	2,534,198
​	​	​	​	​	​	​
Weighted average number of shares^1^	​	​	​	​	​	​
Basic	​	​	22,583,259	​	​	834,226
Diluted	​	​	22,583,259	​	​	834,226
​	​	​	​	​	​	​
Basic (loss) earnings per ordinary share	​	$	(0.03)	​	$	1.63
Continuing operations	​	$	(0.03)	​	$	1.65
Discontinued operations	​	​	—	​	$	(0.02)
​	​	​	​	​	​	​
Diluted (loss) earnings per ordinary share	​	$	(0.03)	​	$	1.63
Continuing operations	​	$	(0.03)	​	$	1.65
Discontinued operations	​	​	—	​	$	(0.02)
1.	On May 31, 2022, the Company consolidated its ordinary shares at the ratio of one-for-twenty-five. The weighted average number of shares had been retrospectively adjusted from 564,581,482 to 22,583,259 for the six months ended March 31, 2022 and from 20,855,641 to 834,226 for the six months ended March 31, 2021. As a result, the basic and diluted (loss) earnings per ordinary share had been retrospectively adjusted from ($0.00) to ($0.03) for the six months ended March 31, 2022 and from $0.07 to $1.63 for the six months ended March 31, 2021. For continuing operations, the basic and diluted earnings per ordinary share had been retrospectively adjusted from $0.07 to $1.65 for the six months ended March 31, 2021 and, for the discontinued operations, the basic and diluted loss per ordinary share had been retrospectively adjusted from ($0.00) to ($0.02) for the six months ended March 31, 2021.
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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​ F-4

Farmmi, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the Six Months Ended March 31, 2022 and 2021

(Unaudited)

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​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​		​	​	​	​	Accumulated		​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Additional		​	​		​	​	​	​	Other		​	Total		​	Noncontrolling
​	​	Ordinary Shares				​	Paid in		​	Statutory		​	Retained		​	Comprehensive		​	Farmmi, Inc.’s		​	​	​	​	Total
​	****	Shares	****	Amount		****	Capital		****	Reserve		****	Earnings		****	Income		****	Shareholders’ Equity		****	Interest		****	Shareholders' Equity
Balance at September 30, 2020	​	820,708	​	$	20,518	​	$	20,335,228	​	$	972,092	​	$	6,770,426	​	$	186,912	​	$	28,285,176	​	$	869,981	​	$	29,155,157
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Share-based compensation expenses	​	23,864	​	​	597	​	​	804,813	​	​	—	​	​	—	​	​	—	​	​	805,410	​	​	—	​	​	805,410
Issuance of common shares, net	​	258,779	​	​	6,469	​	​	6,702,571	​	​	—	​	​	—	​	​	—	​	​	6,709,040	​	​	—	​	​	6,709,040
Foreign currency translation gain	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	1,153,975	​	​	1,153,975	​	​	33,320	​	​	1,187,295
Net income (loss) for the year	​	—	​	​	—	​	​	—	​	​	—	​	​	1,362,616	​	​	—	​	​	1,362,616	​	​	(677)	​	​	1,361,939
Statutory reserve	​	—	​	​	—	​	​	—	​	​	3,217	​	​	(3,217)	​	​	—	​	​	—	​	​	—	​	​	—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at March 31, 2021	​	1,103,351	​	$	27,584	​	$	27,842,612	​	$	975,309	​	$	8,129,825	​	$	1,340,887	​	$	38,316,217	​	$	902,624	​	$	39,218,841
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at September 30, 2021		22,311,215	​	$	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	​	400,000	​	​	10,000	​	​	1,997,328	​	​	—	​	​	—	​	​	—	​	​	2,007,328	​	​	—	​	​	2,007,328
Issuance of common shares, net		1,200,000	​		30,000	​		5,970,000	​		—	​		—	​		—	​		6,000,000	​		—	​		6,000,000
Reverse share-split adjustment	​	(4,230)	​	​	(106)	​	​	106	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—
Foreign currency translation gain		—	​		—	​		—	​		—	​		—	​		2,430,396	​		2,430,396	​		—	​		2,430,396
Disposal of a subsidiary	​	—	​	​	—	​	​	(2,893,001)	​	​	—	​	​	3,732,392	​	​	82,449	​	​	921,840	​	​	(916,506)	​	​	5,334
Net loss for the year	​	—	​	​	—	​	​	—	​	​	—	​	​	(586,938)	​	​	—	​	​	(586,938)	​	​	—	​	​	(586,938)
Statutory reserve	​	—	​	​	—	​	​	—	​	​	17,144	​	​	(17,144)	​	​	—	​	​	—	​	​	—	​	​	—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at March 31, 2022		23,906,985	​	$	597,675	​	$	152,162,660	​	$	990,699	​	$	12,255,687	​	$	4,641,817	​	$	170,648,538	​	$	—	​	$	170,648,538

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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​ F-5

​ Farmmi, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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​	​	​	​	​	​	​
​	​	For the Six Months Ended March 31,
​		2022		****	2021
Cash flows from operating activities		​			​
Net (loss) income	​	$	(586,939)	​	$	1,361,939
Net (income) loss from discontinued operations	​		—	​		17,607
Net (loss) income from continuing operations	​	​	(586,939)	​	​	1,379,546
Adjustments to reconcile net (loss) income to net cash provided by operating activities:	​	​	​	​	​	​
Changes in allowances - accounts receivable	​	​	(183)	​	​	217,244
Changes in allowances - advances to suppliers	​		362,030	​		(575,802)
Changes in allowances - inventories	​		—	​		(19,180)
Depreciation and amortization	​	​	36,339	​	​	32,122
Non-cash lease expenses	​	​	(163,301)	​	​	—
Gain on short-term investments	​		(25,809)	​		—
Loss from disposal of a subsidiary	​		15,757	​		—
Share-based compensation	​		2,000,000	​		805,410
Changes in operating assets and liabilities:	​	​	​	​	​	​
Accounts receivable	​		5,705,789	​		(3,338,643)
Advances to suppliers	​	​	(3,176,809)	​	​	11,849,581
Inventories, net	​		(3,909,673)	​		(102,143)
Notes receivable	​		(3,931,869)	​		—
Other current assets	​		9,203,508	​		39,397
Accounts payable	​	​	663,072	​	​	65,948
Operating lease liabilities	​		218,136	​		—
Other current liabilities	​		(35,704)	​		(636,270)
Net cash provided by operating activities from continuing operations	​		6,374,344	​		9,717,210
Net cash provided by operating activities from discontinued operations	​	​	—	​	​	8,049
Net cash provided by operating activities	​		6,374,344	​		9,725,259
​	​	​	​	​	​	​
Cash flows from investing activities	​	​	​	​	​	​
Purchase of property, plant and equipment	​		(1,094)	​		—
Purchase of intangible assets	​		—	​		(1,353)
Short-term deposits	​	​	(36,487,740)	​	​	(2,751,873)
Acquisition of subsidiaries	​	​	(11,009,232)	​	​	—
Other receivable	​	​	(7,863,737)	​	​	—
Proceeds from disposal of a subsidiary	​	​	2,752,278	​	​	—
Purchase of long-term investments	​	​	(157,275)	​	​	—
Purchase of short-term investments	​	​	(157,275)	​	​	—
Net cash used in investing activities from continuing operations	​		(52,924,075)	​		(2,753,226)
Net cash used in investing activities from discontinued operations	​	​	—	​	​	(14,745)
Net cash used in investing activities	​		(52,924,075)	​		(2,767,971)
​	​	​	​	​	​	​
Cash flows from financing activities	​	​	​	​	​	​
Net proceeds from stock issuance	​		6,000,000	​		6,709,040
Repayments of bank loans	​		(46,808)	​		(168,170)
Repayment of advances from related parties	​		(57,673)	​		—
Proceeds from advances from related parties	​		—	​		302,793
Net cash provided by financing activities from continuing operations	​		5,895,519	​		6,843,663
Net cash provided by financing activities from discontinued operations	​	​	—	​	​	—
Net cash provided by financing activities	​	​	5,895,519	​	​	6,843,663
​	​	​	​	​	​	​
Effect of exchange rate changes on cash and restricted cash	​	​	(3,335,361)	​		78,715
​	​	​	​	​	​	​
Net (decrease) increase in cash and restricted cash	​	​	(43,989,573)	​		13,879,666
​	​	​	​	​	​	​
Cash and restricted cash, beginning of year	​	​	59,262,514	​		2,165,151
​	​	​	​	​	​	​
Cash and restricted cash, end of year	​	$	15,272,941	​	$	16,044,817
Less: cash from discontinued operations	​	​	—	​	​	62,099
Cash and restricted cash, end of year	​	$	15,272,941	​	$	15,982,718
​	​	​	​	​	​	​
Reconciliation of cash and restricted cash, beginning of year	​	​	​	​	​	​
Cash	​	$	59,251,904	​	$	481,906
Restricted cash	​	​	—	​	​	1,617,000
Cash from continuing operations	​	$	59,251,904	​	$	2,098,906
Cash from discontinued operations	​	​	10,610	​	​	66,245
Cash and restricted cash, beginning of year	​	$	59,262,514	​	$	2,165,151
​	​	​	​	​	​	​
Reconciliation of cash and restricted cash, end of year	​	​	​	​	​	​
Cash	​	$	15,272,941	​	$	14,303,790
Restricted cash	​	​	—	​	​	1,678,928
Cash from continuing operations	​	$	15,272,941	​	$	15,982,718
Cash from discontinued operations	​	​	—	​	​	62,099
Cash and restricted cash, end of year	​	$	15,272,941	​	$	16,044,817
​	​	​	​	​	​	​
Supplemental disclosure information:	​	​	​	​	​	​
Income taxes paid	​	$	5,626	​	$	327
Interest paid	​	$	85,769	​	$	46,922
Non-cash financing activities	​	​	​	​	​	​
Right of use assets obtained in exchange for operating lease obligations	​	$	401,615	​	$	836,994

​

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

​

​ F-6

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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 Fammi 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 Fammi 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 UNAUDITED CONDENSED 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.

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 November 23, 2021, the Company incorporated Shanghai Zhongjian Yiting Healthcare Technology Partnership (Limited Partnership) (“Zhongjian Yiting”), and Yiting Meditech owns 93.75% of the ownership interest of it.

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.

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.

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. F-8

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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.

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.

As of March 31, 2022, details of the subsidiaries of FAMI are set out below:

​

​	​	​	​	​	​	​	​	​
​	​	Date of	​	Place of	​	% of	​	​
Name of Entity		Incorporation		Incorporation		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
Nongyuan Network	​	July 7, 2016	​	Zhejiang, China	​	0 (VIE)	​	Trading
Yitang Mediservice	​	September 7, 2021	​	Zhejiang, China	​	100% subsidiary of the VIE	​	Medical services
Yiting Meditech	​	September 17, 2021	​	Zhejiang, China	​	100% subsidiary of the VIE	​	Medical technology
Yifeng Medihealth	​	January 10, 2022	​	Zhejiang, China	​	100% subsidiary of the VIE	​	Medical health
Yilong Enterprise	​	January 10, 2022	​	Zhejiang, China	​	100% subsidiary of the VIE	​	Management services
YF YL MediTech	​	January 19, 2022	​	Zhejiang, China	​	100% subsidiary of the VIE	​	Medical technology
YT SK Medihealth	​	January 19, 2022	​	Zhejiang, China	​	100% subsidiary of the VIE	​	Medical health

​

On May 27, 2022, Zhejiang Farmmi Ecological Agriculture Technology Co., Ltd (“Farmmi Eco Agri”) was established under the laws of the PRC. FLS Mushroom 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. F-9

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Organization and nature of business (continued)

FAMI, Farmmi International, Farmmi Enterprise, Farmmi Technology, Farmmi Agricultural, FLS Mushroom, Farmmi Food, Farmmi E-Commerce, Farmmi Biotech, Farmmi Ecology, Farmmi Supply Chain, Farmmi Health Development, Farmmi Medical Health,Farmmi Holdings, Jiangxi Xiangbo, Yudu Yada, Guoning Zhonghao, Nongyuan Network, Yitang Mediservice, Yitang Meditech, Yifeng Medihealth, Yilong Enterprise, YF YL Meditech and YT SK Medihealth (herein collectively referred to as the “Company”) are engaged in processing and distributing dried Shiitake mushrooms, Mu Er mushrooms, corn and cotton. Farmmi Holdings, FLS Mushroom, Nongyuan Network, Farmmi Agricultural, Farmmi Technology, Farmmi Food, Farmmi E-Commerce, Farmmi Biotech, Farmmi Supply Chain, Farmmi Supply Chain and Guoning Zhonghao are the main operating entities located in China, all other entities holding companies or dormant without any material activities. Approximately 99.9% of the Company’s products are sold in China.

​

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 reflect the principal activities of the Company’s main operation subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

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.

​ F-10

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 — Summary of significant accounting policies (continued)

Consolidation of variable interest entities (Continued)

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 Condensed Consolidated Balance Sheets of the Company into 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 March 31, 2022 and September 30, 2021.

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	As of March 31, 2022 (unaudited)
​	​	Other entities		​	WFOE that is		​	​	​	​	​	​	​	​	​
​	​	that are		​	the primary		​	VIE and its		​	​	​	​	Consolidated
​	****	consolidated		****	beneficiary		****	subsidiaries		****	FAMI		****	total
Intercompany receivables	​	$	106,843,773	​	$	11,982,107	​	$	10,291,830	​	$	140,204,080	​	$	—
Current assets excluding intercompany receivables	​	​	77,959,520	​	​	15,190,119	​	​	68,959,351	​	​	449,911	​	​	162,558,901
Current assets	​	​	184,803,293	​	​	27,172,226	​	​	79,251,181	​	​	140,653,991	​	​	162,558,901
Investment in subsidiaries	​	​	—	​	​	21,431,357	​	​	—	​	​	—	​	​	—
Non-current assets excluding investment in subsidiaries	​	​	3,930,124	​	​	—	​	​	8,309,230	​	​	—	​	​	12,239,354
Non-current assets	​	​	3,930,124	​	​	21,431,357	​	​	8,309,230	​	​	—	​	​	12,239,354
Total assets	​	$	188,733,417	​	$	48,603,583	​	$	87,560,411	​	$	140,653,991	​	$	174,798,255
Intercompany payables	​	$	162,478,017	​	$	20,794,381	​	$	84,379,932	​	$	1,669,460	​	$	—
Current liabilities excluding intercompany payables	​	​	480,302	​	​	364,289	​	​	2,431,147	​	​	—	​	​	3,275,738
Current liabilities	​	​	162,958,319	​	​	21,158,670	​	​	86,811,079	​	​	1,669,460	​	​	3,275,738
Non-current liabilities	​	​	629,481	​	​	—	​	​	244,498	​	​	—	​	​	873,979
Total liabilities	​	​	163,587,800	​	​	21,158,670	​	​	87,055,577	​	​	1,669,460	​	​	4,149,717
Total shareholders’ equity (net assets)	​	$	25,145,617	​	$	27,444,913	​	$	504,834	​	$	138,984,531	​	$	170,648,538

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	As of September 30, 2021
​	​	Other entities		​	WFOE that is		​	​	​	​	​	​	​	​	​
​	​	that are		​	the primary		​	VIE and its		​	​	​	​	Consolidated
​	****	consolidated		****	beneficiary of the VIE		****	subsidiaries		****	FAMI			total
Intercompany receivables	​	$	10,263,832	​	$	16,147,194	​	$	582,137	​	$	134,585,007	​	$	—
Current assets excluding intercompany receivables	​	​	141,332,281	​	​	6,658,940	​	​	6,666,318	​	​	647,997	​	​	155,305,536
Current assets	​	​	151,596,113	​	​	22,806,134	​	​	7,248,455	​	​	135,233,004	​	​	155,305,536
Investment in subsidiaries	​	​	—	​	​	9,016,979	​	​	—	​	​	—	​	​	—
Non-current assets excluding investment in subsidiaries	​	​	10,126,547	​	​	—	​	​	254,818	​	​	—	​	​	10,381,365
Non-current assets	​	​	10,126,547	​	​	9,016,979	​	​	254,818	​	​	—	​	​	10,381,365
Total assets	​	$	161,722,660	​	$	31,823,113	​	$	7,503,273	​	$	135,233,004	​	$	165,686,901
Intercompany payables	​	$	151,314,338	​	$	4,809,089	​	$	3,785,283	​	$	1,669,460	​	$	—
Current liabilities excluding intercompany payables	​	​	1,682,220	​	​	1,415	​	​	2,408,191	​	​	54,600	​	​	4,146,426
Current liabilities	​	​	152,996,558	​	​	4,810,504	​	​	6,193,474	​	​	1,724,060	​	​	4,146,426
Non-current liabilities	​	​	691,808	​	​	—	​	​	56,249	​	​	—	​	​	748,057
Total liabilities	​	​	153,688,366	​	​	4,810,504	​	​	6,249,723	​	​	1,724,060	​	​	4,894,483
Total shareholders’ equity (net assets)	​	$	8,034,294	​	$	27,012,609	​	$	1,253,550	​	$	133,508,944	​	$	160,792,418

​ F-11

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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 six months ended March 31, 2022 and 2021.

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2022 (unaudited)
​	​	Other entities		​	WFOE that is		​	​	​	​	​	​	​	​	​
​	​	that are		​	the primary		​	VIE and its		​	​	​	​	Consolidated
​	****	consolidated		****	beneficiary		****	subsidiaries		****	FAMI		****	total
Revenues	​	$	31,295,055	​	$	1,635,180	​	$	9,205,480	​	$	—	​	$	42,135,715
Cost of revenues	​		(28,722,969)	​		(1,593,024)	​		(8,832,012)	​		—	​		(39,148,005)
Gross profit	​		2,572,086	​		42,156	​		373,468	​		—	​		2,987,710
Operating expenses	​		(463,455)	​		(95,927)	​		(513,142)	​		(2,529,882)	​		(3,602,406)
Income (loss) from operations	​		2,108,631	​		(53,771)	​		(139,674)	​		(2,529,882)	​		(614,696)
Other expenses	​		52,050	​		42,526	​		(61,369)	​		(1,860)	​		31,347
Income (loss) before income taxes	​		2,160,681	​		(11,245)	​		(201,043)	​		(2,531,742)	​		(583,349)
Provision for income taxes	​		(3,590)	​		—	​		—	​		—	​		(3,590)
Net income (loss)	​	$	2,157,091	​	$	(11,245)	​	$	(201,043)	​	$	(2,531,742)	​	$	(586,939)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2021 (unaudited)
​	​	Other entities		​	​	​	​	WFOE that is		​	​	​	​	​	​	​	​	​
​	​	that are		​	Discontinued		​	the primary		​	VIE and its		​	​	​	​	Consolidated
​	****	consolidated		****	operations		****	beneficiary		****	subsidiaries		****	FAMI		****	total
Revenues	​	$	14,408,483	​	$	827,742	​	$	—	​	$	2,551,503	​	$	—	​	$	17,787,728
Cost of revenues	​		(11,985,576)	​		(666,486)	​		—	​		(2,147,751)	​		—	​		(14,799,813)
Gross profit	​		2,422,907	​		161,256	​		—	​		403,752	​		—	​		2,987,915
Operating expenses	​		228,373	​		(139,441)	​		(7,759)	​		(359,128)	​		(1,267,506)	​		(1,545,461)
Income (loss) from operations	​		2,651,280	​		21,815	​		(7,759)	​		44,624	​		(1,267,506)	​		1,442,454
Other expenses	​		(804)	​		(39,837)	​		(16,591)	​		(5,663)	​		(408)	​		(63,303)
Income (loss) before income taxes	​		2,650,476	​		(18,022)	​		(24,350)	​		38,961	​		(1,267,914)	​		1,379,151
Provision for income taxes	​		(1,449)	​		415	​		—	​		(16,178)	​		—	​		(17,212)
Net income (loss)	​	$	2,649,027	​	$	(17,607)	​	$	(24,350)	​	$	22,783	​	$	(1,267,914)	​	$	1,361,939

​

​ F-12

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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 six months ended March 31, 2022 and 2021.

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 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	​	$	(44,026,361)	​	$	9,735,052	​	$	47,125,836	​	$	(6,460,183)	​	$	6,374,344
Net cash (used in) provided by investing activities from continuing operations	​		(8,389,513)	​		2,830,945	​		(47,365,507)	​		—	​		(52,924,075)
Net cash provided by financing activities from continuing operations	​		(49,881)	​		—	​		—	​		5,945,400	​		5,895,519
Effect of exchange rate changes on cash and restricted cash	​		(3,381,344)	​		39,573	​		6,410	​		—	​		(3,335,361)
Net increase (decrease) in cash and restricted cash	​		(55,847,099)	​		12,605,570	​		(233,261)	​		(514,783)	​		(43,989,573)
Cash and restricted cash from continuing operations, beginning of year	​		183,030	​		116,447	​		434,135	​		522,915	​		59,262,514
Cash and restricted cash from continuing operations, end of year	​	$	(55,664,069)	​	$	12,722,017	​	$	200,874	​	$	8,132	​	$	15,272,941

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the six months ended March 31, 2021
​	​	​	​	​	​		​	WFOE		​	​	​	​	​	​	​	​	​
​	​	Other		​	​		​	that is		​	​	​	​	​	​	​	​	​
​	​	entities		​	​		​	primary		​	VIE		​	​	​	​	​	​
​	​	that are		​	Discontinued		​	beneficiary		​	and its		​	​	​	​	Consolidated
​	****	consolidated		****	operations		****	of the VIE		****	subsidiaries		****	FAMI		****	total
Net cash (used in) provided by operating activities from continuing and discontinued operations	​	$	5,872,759	​	$	8,049	​	$	10,567,362	​	$	(306,414)	​	$	(6,416,497)	​	$	9,725,259
Net cash (used in) provided by investing activities from continuing and discontinued operations	​		(1,353)	​		(14,745)	​		(2,751,873)	​		—	​		—	​		(2,767,971)
Net cash provided by financing activities from contiuing and discontinued operations	​		8,468	​		—	​		(168,170)	​		—	​		7,003,365	​		6,843,663
Effect of exchange rate changes on cash and restricted cash	​		14,980	​		2,550	​		(12,590)	​		73,775	​		—	​		78,715
Net increase (decrease) in cash and restricted cash	​		5,894,854	​		(4,146)	​		7,634,729	​		(232,639)	​		586,868	​		13,879,666
Cash and restricted cash from continuing and discontinued operations, beginning of year	​		183,030	​		66,245	​		420	​		1,913,335	​		2,121	​		2,165,151
Cash and restricted cash from continuing and discontinued operations, end of year	​	$	6,077,884	​	$	62,099	​	$	7,635,149	​	$	1,680,696	​	$	588,989	​	$	16,044,817

​

​ F-13

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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 six months ended March 31, 2022. 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.

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Transfer to
​	​	Holding		​	​	​	​	Consolidated		​	Other		​	​
Transfer from	****	Company		****	WFOE		****	VIE		****	subsidiaries		****	Investors
Holding company		​	—		​	—		​	—	​	$	943,648		—
WFOE		​	—		​	—	​	$	4,567,844	​	$	3,524,104		—
Consolidated VIE		​	—	​	$	3,280,144	​		—	​	$	5,601,154		—
Other subsidiaries	​	$	59,910	​	$	7,911,605	​	$	14,977,567	​		—		—
Investors	​		—	​		—	​		—	​		—		—

​

​ F-14

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

Use of estimates

In preparing the unaudited condensed consolidated financial statements in conformity with U.S. 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 unaudited condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. 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, plant and equipment, the valuation of beneficial conversion feature of the convertible notes, and the valuation of deferred tax assets. Actual results could differ from those estimates.

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 ($78,873) 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 March 31, 2022 and September 30, 2021, the Company had short-term deposit of $39,436,531 and $2,793,556 at an interest rate 2.05% per annum with one year maturity in October 2022 and 2% per annum with one year maturity on March 23, 2022, respectively.

Short-term investments

The Company accounts for all investments in accordance with ASC topic 320 (“ASC 320”), Investments – Debt and Equity Securities. The Company classifies the investments in debt and equity securities as “held-to-maturity”, “trading” or “available-for-sale”, whose classification determines the respective accounting methods stipulated by ASC 320. All investments with original maturities of greater than three months not exceeding twelve months are classified as short-term investments, while those of more than twelve months are classified as long-term investments. Investments that are expected to be realized in cash during the next twelve months are also included in short-term investments. Dividend and interest income, including amortization of the premium and discount arising at acquisition, for all categories of investments in securities, are included in earnings. Any realized gains or losses on the sale of the short-term investments, are determined on a specific identification method, and such gains and losses are reflected in earnings during the period in which gains or losses are realized.

The securities that the Company has the positive intent and the ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost.

The securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Unrealized holding gains and losses for trading securities are included in earnings.

Investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. Available-for-sale investments are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. Realized gains or losses are included in earnings during the period in which the gain or loss is realized. An impairment loss on the available-for-sale securities is recognized in the consolidated statements of income when the decline in value is determined to be other-than-temporary. F-15

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

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 March 31, 2022 and September 30, 2021, allowance for doubtful accounts was $8,043 and $8,094, 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 March 31, 2022 and September 30, 2021, allowance for doubtful accounts was $363,115 and nil, 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 no inventory reserve as of March 31, 2022 and September 30, 2021.

Long-term investments

The Company’s long-term investments consist of equity securities without readily determinable fair value.

The Company adopted ASC Topic 321, Investments-Equity Securities (“ASC 321”) from September 1, 2018. Pursuant to ASC 321, for equity securities measured at fair value with changes in fair value record in earnings, the Company does not assess whether those investments are impaired. For those equity securities that the Company selects to use the measurement alternative, the Company uses the measurement alternative to measure those investments at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company makes a qualitative assessment of whether the investment is impaired at each reporting date. If a qualitative assessment indicates that the investment is impaired, the Company has to estimate the investment’s fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, (“ASC 820”). If the fair value is less than the investment’s carrying value, the Company recognizes an impairment loss in net income equal to the difference between the carrying value and fair value.

As of March 31, 2022, the Company evaluated its investments, taking into consideration, including, but not limited to, the duration, degree and causes of the decline in financial results, its intent and ability to hold the investment and the invested companies' financial performance and near-term prospects. Based on the evaluation, the company’s long-term investment is not impaired.

​ F-16

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 — Summary of significant accounting policies (continued)

Property, plant and equipment, net

Property, plant 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:

​

​	​	​
Forestry		fair value
Plant, machinery and equipment		5 – 10 years
Transportation equipment		4 years
Office equipment	​	3 – 5 years
Leasehold improvement	​	Shorter of lease term or useful life

​

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 $17,965 and $23,239 for the six months ended March 31, 2022 and 2021, respectively.

​ F-17

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

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 the six months ended March 31, 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 March 31, 2022 and September 30, 2021, the contract liabilities are $37,897 and $12,177, respectively, and included in other current liabilities on the consolidated balance sheets. For the six months ended March 31, 2022 and 2021, there was no revenue recognized from performance obligations related to prior periods.

Refer to Note 15 — 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-18

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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:

​

​	​	​	​	​	​	​
Six months ended March 31,	****	2022		****	2021
Net (loss) income available for ordinary shareholders (A)	​	$	(586,939)	​	$	1,362,616
- continuing operations	​		(586,939)	​		1,379,546
- discontinued operations	​		—	​		(16,930)
​	​	​	​	​	​	​
Weighted average ordinary shares outstanding (B)	​	​	​	​	​	​
- continuing and discontinued operations	​	​	22,583,259	​	​	834,226
​	​	​	​	​	​	​
(Loss) earnings per share - basic and diluted (A/B)	​	$	(0.03)	​	$	1.63
- continued operations	​	$	(0.03)	​	$	1.65
- discontinued operations	​		—	​	$	(0.02)
1.	On May 31, 2022, the Company consolidated its ordinary shares at the ratio of one-for-twenty-five. The weighted average number of shares had been retrospectively adjusted from 564,581,482 to 22,583,259 for the six months ended March 31, 2022 and from 20,855,641 to 834,226 for the six months ended March 31, 2021. As a result, the basic and diluted (loss) earnings per ordinary share had been retrospectively adjusted from ($0.00) to ($0.03) for the six months ended March 31, 2022 and from $0.07 to $1.63 for the six months ended March 31, 2021. For continuing operations, the basic and diluted earnings per ordinary share had been retrospectively adjusted from $0.07 to $1.65 for the six months ended March 31, 2021 and, for the discontinued operations, the basic and diluted loss per ordinary share had been retrospectively adjusted from ($0.00) to ($0.02) for the six months ended March 31, 2021.
---	---

F-19

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

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, short-term deposit, short-term investments, notes receivable, accounts receivable, advances to suppliers, other current assets, short-term bank loans accounts payable, due to related parties, operating lease liabilities –current and other current liabilities, approximate their recorded values due to their short-term in nature. The fair value of longer term operating lease liabilities approximate their recorded values as their stated interest rates approximate the rates currently available.

​ F-20

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

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 March 31, 2022 and September 30 2021, $53,477,429 and $3,985,359 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 $78,873) 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-21

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED 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 March 31, 2022 and September 30, 2021 were RMB1 for $0.1577 and $0.1552, respectively. The average exchange rates for the six months ended March 31, 2022 and 2021 were RMB1 for $0.1573 and $0.1529, 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 $105,918 and $146,366 for the six months ended March 31, 2022 and 2021, respectively, which included selling and distribution expenses in the accompanying unaudited condensed statements of operations.

​ F-22

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

Value added tax

The Company is generally subject to the value added tax (“VAT”) for selling merchandise, except for FLS Mushroom. 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, FLS Mushroom’s major operation can be classified as agriculture products and its revenue is exempt from VAT. 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. No taxable income was generated outside the PRC for the six months ended March 31, 2022 and 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 March 31, 2022 and September 30, 2021. As of March 31, 2022, the tax years ended December 31, 2015 through December 31, 2021 for the Company’s PRC subsidiary remain open for statutory examination by PRC 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.

​ F-23

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

Risks and uncertainties

The operations of the Company are 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 2021 and for the six months ended March 31, 2022 appears to be minimal and appears to be temporary. The Company will continue to monitor and modify the operating strategies.

​ F-24

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued)

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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740, and also improves consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The Company will adopt this ASU within annual reporting period of September 30, 2022 and expects that the adoption of this ASU will not have a material impact on the Company’s 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-25

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Business combinations

During the six months ended March 31, 2022, the Company completed two acquisitions. These acquisitions are expected to strengthen the Company’s business expansion and to generate synergy with the Company’s organic business. The results of the acquired entities’ operations have been included in the Company’s consolidated financial statements since their respective dates of acquisition. The Company completed the valuation necessary to assess the fair value of the acquired assets and liabilities, resulting from which the amounts of goodwill were determined and recognized as of the respective acquisition dates.

Goodwill arising from the business combinations, which are not tax deductible, are mainly attributable to synergies expected to be achieved from the acquisitions. Pro forma financial information of the acquirees is not presented as the effects of the acquisitions on the Company’s consolidated financial statements were not material.

(a)Acquisition of Jiangxi Xiangbo

On September 27, 2021, Farmmi Supply Chain entered into an acquisition agreement with Ganzhou Tengguang Agriculture and Forestry Development Co., Ltd., a third party, to acquire all the shares of Jiangxi Xiangbo for a total price of RMB70 million ($11 million) based on the Company’s strategy to expand its forest related business. The acquisition closed on October 25, 2021 when the Company obtained 100% of its equity interest.

The allocation of the purchase price as of the date of acquisition is summarized as follows:

​

​	​	​	​	​
​	​	For the six months ended March 31,
​	****	2022	****	2022
​		RMB		$
Net tangible assets (i)		75,528,400	​	11,914,312
Goodwill		(5,528,400)	​	(872,084)
Total fair value of purchase price allocation	****	70,000,000	​	11,042,228
​	​	​	​	​
Consideration		70,000,000	​	11,042,228

​

(i)Net tangible assets consisted of forestry of RMB75.5 million ($11.9 million) as of the date of acquisition.

The purchase price allocation for the acquisition was based on a valuation determined by the Company with the assistance of an independent third-party valuation firm.

(b)Acquisition of Guoning Zhonghao

On September 27, 2021, the Company acquired Guoning Zhonghao from Ningbo Guoning Zhonghao Technology Co., Ltd. and Jianxin Huang for a total consideration of RMB5,000 ($789). The acquisition closed on November 22, 2021 when the Company obtained control of 100% Guoning Zhonghao equity interest. F-26

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Business combinations (continued)

The allocation of the purchase price as of the date of acquisition is summarized as follows:

​

​	​	​	​	​
​	​	For the six months ended March 31,
​	****	2022	****	2022
​		RMB		$
Net tangible liabilities (i)	​	(15,219)	​	(2,401)
Goodwill	​	(20,219)	​	(3,189)
Total fair value of purchase price allocation	​	5,000	​	788
​	​	​	​	​
Consideration	​	5,000	​	788

​

(i)	Net tangible liabilities primarily included cash of RMB9,941 ($1,568), other current assets of RMB840 ($133) and other current liabilities of RMB26,000 ($4,101) as of the date of acquisition.

​

Note 4 — Accounts receivable, net

Accounts receivable from the Company’s continuing operations consisted of the following:

​

​	​	​	​	​	​	​
​	​	As of		​	As of
​	​	March 31,		​	September 30,
​	****	2022		****	2021
​	​	(unaudited)		​	​	​
Accounts receivable - trade	​	$	19,160,519	​	$	24,481,363
Accounts receivable - related party	​		21	​		49
Accounts receivable	​		19,160,540	​		24,481,412
Less: allowance for doubtful accounts	​	​	(8,043)	​	​	(8,094)
Accounts receivable, net	​	$	19,152,497	​	$	24,473,318

​

Allowance for doubtful accounts of $8,043 and $8,094 was made for certain accounts receivable as of March 31, 2022 and September 30, 2021, respectively. The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers. $0.75 million or 3.9% of the March 31, 2022 balance has been subsequently collected as of August 10, 2022. The Company expects to collect the remaining balance of accounts receivable by September 2022.

​

​ F-27

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 — Advances to suppliers, net

Movement of advances to suppliers from the Company’s continuing operations is as follows:

​

​	​	​	​	​	​	​
​	​	As of		​	As of
​	​	March 31,		​	September 30,
​		2022			2021
​	​	(unaudited)		​	​	​
Beginning balance	​	$	66,718,632	​	$	24,074,122
Increased during the year	​	​	107,334,100	​	​	88,407,729
Less: utilized during the year	​	​	(104,157,291)	​	​	(47,418,080)
Exchange rate difference	​	​	1,105,133	​	​	1,654,861
Sub-total	​	​	71,000,575	​	​	66,718,632
Less: allowance for doubtful accounts	​	​	(363,115)	​	​	—
Ending balance	​	$	70,637,460	​	$	66,718,632

​

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. 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 $363,115 and nil was made for certain advances to suppliers as of March 31, 2022 and September 30, 2021, respectively.

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 two 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 JLT and QNMI, 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 JLT/QNMI. The Company accrues for any allowance for possible loss on advances when there is doubt as to the collectability of the refund.

​ F-28

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 — Advances to suppliers, net (continued)

As of August 8, 2022, approximately $21.6 million, or 30.6% has been utilized, and the remaining balance is expected to be utilized by March 2023. The Company continuously makes advances to its suppliers on a rolling basis, which typically represent 30% of the total amount of each purchase order. The Company may maintain its outstanding advance payments at a relatively high level going forward because the Company anticipates continuous large orders from its largest customer, China Forestry Group Corporation.

​

Note 6 — Inventories, net

Inventories, net, from the Company’s continuing operations consisted of the following:

​

​	​	​	​	​	​	​
​	​	As of		​	As of
​	​	March 31,		​	September 30,
​		2022			2021
​	​	​	(unaudited)	​	​	​
Raw materials	​	$	903,887	​	$	1,070,837
Packaging materials	​	​	58,719	​	​	56,723
Finished goods	​	​	4,352,846	​	​	243,980
Inventory	​	​	5,315,452	​	​	1,371,540
Less: allowance for inventory reserve	​		—	​		—
Inventory, net	​	$	5,315,452	​	$	1,371,540

​

​

Note 7 – 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 $80.4 million). On November 5, 2021, the Company paid a deposit of RMB50 million ($7.9 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.

​

Note 8 — Property, plant and equipment, net

Property, plant and equipment, stated at cost less accumulated depreciation, consisted of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31,		​	September 30,
​	​	2022		​	2021
​	​	(unaudited)		​	​	​
Forestry	​	$	11,042,228	​	​	—
Plant, machinery and equipment	​		72,361	​		70,113
Transportation equipment	​		55,255	​		54,362
Office equipment	​		21,827	​		21,474
Subtotal	​		11,191,671	​		145,949
Accumulated depreciation	​	​	(85,988)	​	​	(66,467)
Total	​	$	11,105,683	​	$	79,482

​

Depreciation expense was $18,375 and $25,594 for the six months ended March 31, 2022 and 2021, respectively. F-29

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9 — Loans

Short-term and long-term loans from the Company’s continuing operations consist of the following:

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31,		​	September 30,
​	​	2022		​	2021
​	​	(unaudited)		​	​	​
Short-term loan	​	​	​	​	​	​
Zhejiang Mintai Commercial Bank (Hangzhou Branch) (1)	​	$	2,208,446	​	$	2,172,766
Total short-term loan	​	​	2,208,446	​	​	2,172,766
​	​	​	​	​	​	​
Long-term loan	​	​	​	​	​	​
China Resources Shenzhen Investment Trust Co., Ltd. (2)	​	​	97,652	​	​	142,264
Total short-term and long-term loans	​	$	2,306,098	​	$	2,315,030
(1)	The loan in the amount of RMB14 million ($2.2 million) from Zhejiang Mintai Commercial Bank (Hangzhou Branch), was facilitated on August 5, 2021 through Nongyuan, a subsidiary of the Company, as working capital for nine months, with the original maturity of July 5, 2022 at an annual effective interest rate of 7.056%.
---	---

The loan is guaranteed by Ci Ge Ma Holdings (Hangzhou) Co., Ltd., and Aijiang Wang and is secured by a real property owned by Xinyang Wang, the 100% shareholder of Nongyuan Network.

(2)

The revolving loan in the amount of RMB1 million ($157,746) from China Resources Shenzhen Investment Trust Co., Ltd., was facilitated on April 30, 2021 through Farmmi Food, a subsidiary of the Company, as working capital for two years, with the original maturity of April 28, 2023 at an annual effective interest rate of 10.8%. As of March 31, 2022, the outstanding amount of the revolving loan was RMB0.6 million (approximately $97,652).

This revolving loan is guaranteed by a related party, Mr. Dehong Zhang, a legal representative of Farmmi Food.

Interest expenses amounted to $85,125 and $46,922 for the six months ended March 31, 2022 and 2021, respectively.

​

Note 10 — Convertible notes payable

On November 1, 2018, the Company completed a $7.5 million private placement with an institutional investor (the “Buyer”). Pursuant to the Securities Purchase Agreement, dated as of November 1, 2018 (the “Securities Purchase Agreement”), the Company issued and sold to the Buyer an aggregate of $7.5 million of senior convertible notes due on April 1, 2020 (the “Notes”) and warrants (the “Investor Warrants”) to purchase an aggregate of 800,000 of the Company’s ordinary shares, $0.001 par value per share (“Ordinary Shares”). Additionally, the Company issued warrants to purchase 10% of the shares placed under the Notes (initially 119,808) to the placement agent, at an exercise price of $7.183 per share (the “Placement Agent Warrants”). The Placement Agent Warrants have a term of four years and are subject to adjustment under certain events.

The Notes were initially convertible into 1,198,084 Ordinary Shares at the rate of $6.26 per Ordinary Share, which rate is subject to adjustment as referenced in the form of Notes. The Notes bear interest at 10% per year. The Investor Warrants are exercisable by the holder thereof at any time on or after November 1, 2018 and before November 1, 2022. One year from the date of issuance of the Investor Warrants, the Exercise Price of the Investor Warrants will be lowered to the then-current Market Price (as such term is defined in the Notes) of an Ordinary Share, if such Market Price is less than the initial Exercise Price of $6.53 per Ordinary Share. F-30

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 — Convertible notes payable (continued)

On March 10, 2020, the Company adjusted the warrant exercise price of the Investor Warrants and the Placement Agent Warrants to $2 per Ordinary Share according to the terms of these warrants. On July 10, 2020, according to the terms of the Placement Agent Warrants, the Company adjusted the number of shares underlying the Placement Agent Warrants from 119,808 to 812,694, ten percent (10%) of the number of Ordinary Shares issued by the Company in repayment of principal under the Notes.

At the time of issuance, the Company allocated the proceeds to the Notes and Investor Warrants based on their relative fair values, and evaluated the intrinsic value of the beneficial conversion feature (“BCF”) associated with the conversion feature of the Notes. The Investor Warrants and BCF were recorded into additional paid-in capital.

The Investor Warrants were treated as a discount on the Notes and were valued at $1,496,153. Additionally, the Notes were considered to have an embedded BCF because the effective conversion price was less than the fair value of the Company’s common stock on November 1, 2018. The value of the BCF was $670,618 and was also recorded as a discount on the Notes. Hence, in connection with the issuance of the Notes and the Investor Warrants, together with other issuance costs, the Company recorded a total debt discount of $3,206,932 that was amortized over the term of the Notes. The Company repaid $2.6 million in cash for the Notes and $6.1 million (including principal and interest) was converted into 8,585,702 shares as of June 22, 2020. At September 30, 2020, the Notes balance was Nil.

On March 29, 2021, May 4, 2021, September 20, 2021 and February 28, 2022, the Company adjusted the warrant exercise price of the Investor Warrants and the Placement Agent Warrants to $1.15, $0.30, $0.22 and $0.20 per Ordinary Share according to the terms of these warrants, respectively. On May 31, 2022, the Company consolidated its ordinary share at the ratio of one-for-twenty-five and, as a result, the warrant exercise price was adjusted to $5 per Ordinary Share. The Company measured the modified warrants of each date and recognized a fair value totaled of $462,592. See Note 11.

​

​ F-31

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 —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 the ratio of one-for-twenty-five. The authorized number of ordinary shares was reduced from 600,000,000 ordinary shares, $0.001 par value, to 24,000,000 ordinary shares, $0.025 par value.

During the six months ended March 31, 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.

Warrants

A summary of the status of the Company’s outstanding warrants as of March 31, 2022 and September 30, 2021 and changes during the years then ended are presented below:

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	Weighted
​	​	​	​	Weighted		​	​	​	​	average
​	​	Number	​	average		​	Total		​	remaining
​	​	of	​	exercise		​	intrinsic		​	contractual
​	****	warrants	****	price		****	value		****	life (in years)
Outstanding as of September 30, 2021		1,612,694	​	$	0.22	​	$	354,793		1.1
Outstanding as of March 31, 2022		1,612,694	​	$	0.20	​	$	—		0.6
Warrants exercisable as of March 31, 2022		1,612,694	​	$	5.00	​	$	—		0.6

​

On March 29, 2021, May 4, 2021, September 20, 2021 and February 28, 2022, the Company adjusted the warrant exercise price of the Investor Warrants and the Placement Agent Warrants to $1.15, $0.30, $0.22 and $0.20 per Ordinary Share according to the terms of these warrants, respectively. The Company measured the modified warrants of each date and recognized a fair value of $7,328 for the six months ended March 31, 2022.

The fair value of the warrants has been estimated using Black-Scholes option pricing model. Inherent in the assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield as presented below:

​

​	​	​	​	​
​	​	For the six	​	For the six
​	​	months ended	​	months ended
​	​	March 31, 2022	​	March 31, 2021
​		(unaudited)		(unaudited)
Exercise price	​	$5 - $5.5	​	$1.15 - $2.00
Stock price	​	$3.25 - $9.75	​	$0.76 - $2.21
Term (in years)	​	0.6 - 1.1	​	1.6 - 2.1
Volatility	​	137%	​	28%
Risk-free interest rate	​	0.09% - 0.69%	​	0.06% - 0.15%
Dividend yield	​	—	​	—

​ F-32

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 —Shareholders’ Equity (continued)

Warrants (Continued)

The fair value of the Investor Warrants and Placement Agent Warrants was computed using the Black-Scholes option-pricing model. Variables used in the option-pricing model include (1) risk-free interest rate of 2.94% at the date of grant, (2) expected warrant life of 4 years, (3) expected volatility of 72.57%, and (4) expected dividend yield of 0.

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 March 31, 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.

On July 22, 2021, the Company’s shareholders approved the 2021 Stock 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 February 14, 2022, the Company filed a Form S-8 to issue 10,000,000 Shares under the 2021 Plan to certain employees, all of which had been issued. On February 15, 2022, the Company cancelled the reserved but unissued 30,000,000 Shares under the 2021 Plan and released the reservation of such Shares. Share-based compensation expenses related to the restricted share units granted was recognized with the amount of $2,000,000 for the six months ended March 31, 2022 in general and administration expenses.

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 March 31, 2022 and September 30, 2021, the balance of the required statutory reserves was $990,699 and $975,333, respectively.

​

Noncontrolling interest

The Company’s noncontrolling interest of 3.85%in Forest Food as of September 30, 2021, respectively, consists of the following:

​

​	​	​	​	​	​
​	****	As of	****	As of
​	​	March 31,	​	September 30,
Non-controlling interest	​	2022	​	2021
Paid-in capital	​	—	​	$	107,461
Additional paid-in capital	​	—	​		807,953
Foreign currency translation gain (loss) attributed to noncontrolling interest	​	—	​		14,588
Net loss attributed to noncontrolling interest	​	—	​		(13,496)
Total noncontrolling interest	​	—	​	$	916,506

​

​

​

​ F-33

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 12 — Concentration of major customers and suppliers

For the six months ended March 31, 2022 and 2021, one major customer accounted for approximately 39% and 79% of the Company’s total sales, respectively. Any decrease in sales to these major customers may negatively impact the Company’s operations and cash flows if the Company fails to increase its sales to other customers.

As of March 31, 2022, one major customer accounted for approximately 86% of the Company’s accounts receivable balance, respectively. As of September 30, 2021, two major customers accounted for approximately 75% and 18% of the Company’s accounts receivable balance, respectively.

For the six months ended March 31, 2022, three major suppliers accounted for approximately 33%, 15% and 12% of the total purchases, respectively. For the six months ended March 31, 2021, three major suppliers accounted for approximately 53%, 26% and 15% of the total purchases, respectively.

​

As of March 31, 2022, four major suppliers accounted for approximately 40%, 31% 18% and 11% of the Company’s advances to suppliers balance. As of September 30, 2021, four major suppliers accounted for approximately 32%, 28%, 24% and 16% of the Company’s advances to suppliers balance.

​

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 March 31, 2022 and September 30, 2021, the remaining average lease term was an average of 7.3 years and 7.9 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 10.8% per annum and 9.3% per annum, as of March 31, 2022 and September 30, 2021, respectively.

​ F-34

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Leases (continued)

Supplemental balance sheet information related to operating leases from the Company’s continuing operations was as follows:

​

​	​	​	​	​	​	​
​	****	As of		​	As of
​	​	March 31,		​	September 30,
​	​	2022		****	2021
Right-of-use assets under operating leases	​	$	953,209	​	$	776,665
Operating lease liabilities, current	​	​	216,288	​	​	155,532
Operating lease liabilities, non-current	​		776,327	​		605,793
Total operating lease liabilities	​	$	992,615	​	$	761,325

​

​	​	​	​
​		As of
​	​	March 31,
Twelve months ending March 31,	​	2022
2023	​	$	304,587
2024	​	​	191,558
2025	​	​	191,558
2026	​	​	191,558
2027	​	​	93,115
Thereafter	​	​	419,018
Total Future minimum lease payments	​	​	1,391,394
Less: Imputed interest	​		(398,779)
Total	​	$	992,615

​

​

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.

​ F-35

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 14 — Segment reporting (continued)

The following table presents revenue by major product categories (from third parties and related party) from the Company’s continuing operations for the six months ended March 31, 2022 and 2021, respectively:

​

​	​	​	​	​	​	​
​	​	For the six		​	For the six
​	​	months ended		​	months ended
​	****	March 31, 2022		****	March 31, 2021
​	​	(unaudited)		​	(unaudited)
Shiitake	​	$	10,009,944	​	$	9,413,658
Mu Er	​		10,854,307	​		7,203,277
Cotton	​	​	10,283,106	​	​	—
Corn	​	​	10,209,876	​	​	—
Other edible fungi and other agricultural products	​		778,482	​		343,051
Total	​	$	42,135,715	​	$	16,959,986

​

All of the Company’s long-lived assets are located in PRC. As the Company generates all of its revenue in PRC, no geographical segments are presented.

​

​

​

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
Forasen Group Co., Ltd. (“Forasen Group”)	​	Owned by Mr Zhengyu Wang, the Chairman<br>of Board of Directors of the Company	​	Purchases from the<br>Company
Zhejiang Tantech Bamboo Technology Co., Ltd	​	Under common control of Mr Zhengyu<br>Wang and Ms Yefang Zhang, CEO of the<br>Company	​	Lease factory building to the<br>Company; purchases from<br>the Company
Hangzhou Forasen Technology Co., Ltd	​	Controlled by Mr. Zhengyu Wang	​	Sublease of office space<br>from the Company.
Xinyang Wang	​	Shareholder of Nongyuan Network	​	Provide a real property as additional security for a short-term bank.
Dehong Zhang	​	CEO of the Company, Yefang Zhang’s brother	​	Provide a guarantee as an additional security for a revolving loan

​

​ F-36

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 15 — Related party transactions (continued)

Due from related parties consisted of the following:

​

​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31,		​	September 30,
​	****	2022		****	2021
Yefang Zhang	​	$	319,467		—
Farmnet	​		18,200		—
Xinyang Wang	​		79		—
Total	​	$	337,746		—

​

As of March 31, 2022, balances due from related parties mainly consisted of payment of expenses on behalf of related parties. As of August 19, 2022, balances due from related parties were fully repaid.

Due to related parties consisted of the following:

​

​	​	​	​	​	​
​	​	As of	​	As of
​	​	March 31,	​	September 30,
​	****	2022	****	2021
Farmnet		—	​	$	54,600
Zhejiang Tantech Bamboo Technology Co., Ltd.		—	​		3,032
Total		—	​	$	57,632

​

As of September 30, 2021, the balance of due to related parties mainly consisted of advances from the Company’s related parties for working capital purposes during the Company’s normal course of business. These advances were non-interest bearing and due on demand and were fully repaid to related parties as of March 31, 2022.

Sales to related parties

The Company periodically sells merchandise to its related parties during the ordinary course of business. For the six months ended March 31, 2022 and 2021, the Company recorded sales to related parties of $1,050 and $1,618, respectively.

Operating lease from related parties

In July 2020, the Company entered into a lease agreement with Zhejiang Tantech Bamboo Technology Co., Ltd. for leasing the factory building. The lease term is 10 years with annual rent of RMB459,360 (equivalent of $67,526). This lease agreement was terminated on July 13, 2021.

In August 2020, the Company entered into a one-year lease agreement with Forasen Group for leasing a processing facility, with monthly rent of RMB 9,200 (equivalent of $1,313). This lease agreement was not renewed upon maturity.

In July 2021, the Company entered into a lease agreement with Zhejiang Tantech Bamboo Technology Co., Ltd. for leasing the factory building. The lease term is 10 years with annual rent of RMB459,360 (equivalent of $72,462).

For the six months ended March 31, 2022 and 2021, the Company recorded lease expense of $4,912 and $30,513, respectively, and interest expense arising from lease of $8,366 and $10,124, respectively. F-37

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 15 — Related party transactions (continued)

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 RMB283,258 (equivalent of $41,639). This lease was terminated on February 14, 2022.

For the six months ended March 31, 2022 and 2021, the Company recorded lease income of $21,555 and $19,810, respectively.

Guarantees provided by related parties

The Company’s related parties provide guarantees for the Company’s short-term bank loans (see Note 9). The Company’s related party also pledged their properties as collaterals to safeguard the Company’s short-term bank loans (see Note 9).

Note 16 – Subsequent events

1.	On May 31, 2022, the Company consolidated its ordinary shares at the ratio of one-for-twenty-five. The share consolidation reduced the authorized number of ordinary shares from 600,000,000 ordinary shares to 24,000,000 ordinary shares and the issued and outstanding ordinary shares from 597,780,383 ordinary shares to 23,911,215 ordinary shares.
2.	On May 27, 2022, Zhejiang Farmmi Ecological Agriculture Technology Co., Ltd (“Farmmi Eco Agri”) was established under the laws of the PRC. FLS Mushroom owns 100% of the equity interest in Farmmi Eco Agri.
---	---
3.	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.
---	---

​ F-38

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 2022 and September 30, 2021, 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-39

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 17 — Condensed financial information of the parent company (continued)

​

Farmmi, Inc.

Parent Company Balance Sheets

​

​	​	​	​	​	​	​
​	****	As of		****	As of
​	​	March 31,		​	September 30,
​	​	2022		​	2021
Assets		​			​
Current assets		​			​
Cash	​	$	8,132	​	$	522,915
Due from related parties	​	​	337,667	​	​	—
Other receivables	​		104,112	​		125,081
​	​	​	449,911	​	​	647,996
Non-current assets	​			​
Investment in subsidiaries	​		170,198,627	​		160,199,022
Total assets	​	$	170,648,538	​	$	160,847,018
​	​	​	​	​	​	​
Liabilities and Shareholders’ Equity	​			​
​	​	​	​	​	​	​
Current liabilities	​			​
Due to related parties	​		—	​		54,600
Total liabilities	​		—	​	$	54,600
​	​	​	​	​	​	​
Commitments and contingencies	​			​
​	​	​	​	​	​	​
Shareholders’ equity	​			​
Ordinary share, $0.025 par value, 24,000,000 shares authorized, 23,906,985 and 22,311,215 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively	​		597,675	​		557,781
Additional paid-in capital	​		152,162,660	​		147,088,227
Retained earnings	​		17,888,203	​		13,146,410
Total shareholders’ equity	​		170,648,538	​		160,792,418
​	​	​	​	​	​	​
Total liabilities and shareholders’ equity	​	$	170,648,538	​	$	160,847,018

​

​ F-40

FARMMI, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 17 — Condensed financial information of the parent company (continued)

​

Farmmi, Inc.

Parent Company Statements of Operations

​

​	​	​	​	​	​	​
​	​	For the six		​	For the six
​	​	months ended		​	months ended
​		March 31, 2022			March 31, 2021
​	​	(unaudited)		​	(unaudited)
Operating expenses:		​			​
General and administrative expenses	​	$	(2,529,882)	​	$	(1,267,506)
​	​	​	​	​	​	​
Other expenses	​			​
Other expenses	​		(1,861)	​		(408)
​	​	​	​	​	​	​
Loss from operations	​		(2,531,743)	​		(1,267,914)
Equity in income of subsidiaries and VIE	​		1,944,804	​		2,630,530
Net (loss) income attributable to Farmmi, Inc.	​	$	(586,939)	​	$	1,362,616

​

Farmmi, Inc.

Parent Company Statements of Cash Flows

​

​	​	​	​	​	​	​
​	​	For the six		​	For the six
​	​	months ended		​	months ended
​		March 31, 2022			March 31, 2021
​	​	(unaudited)		​	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES	​	​	​	​	​	​
Net loss	​	$	(2,531,742)	​	$	(1,267,914)
Share-based compensation	​	​	2,000,000	​	​	805,410
Adjustments to reconcile net cash flows from operating activities	​	​	​	​	​	​
Equity in earnings of subsidiaries	​	​	1,944,804	​	​	2,630,530
Other current assets	​	​	(316,697)	​	​	(1,446)
Other current liabilities	​	​	—	​	​	(36,929)
Net cash provided by operating activities	​	​	1,096,365	​	​	2,129,651
​	​	​	​	​	​	​
Cash flow from financing activities	​	​	​	​	​	​
Investment in subsidiaries	​	​	(7,556,548)	​	​	(8,546,149)
Net proceeds from issuance of ordinary shares	​	​	6,000,000	​	​	6,709,040
Advances from related parties	​	​	—	​	​	294,325
Repayment of advances from related parties	​		(54,600)	​		—
Net cash used in financing activities	​	​	(1,611,148)	​	​	(1,542,784)
Change in cash	​		(514,783)	​		586,867
Cash, beginning of year	​		522,915	​		2,122
Cash, end of year	​	$	8,132	​	$	588,989

​

​

​ F-41

Exhibit 99.2

​

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

​

The following discussion and analysis of our company ’ s financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors.

​

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 are a supplier of agricultural products. Traditionally our business has been focused on the processing and/or sales of a variety of mushrooms, edible fungi and other agricultural products. In 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.

​

As disclosed in our annual report for the fiscal year ended March 31, 2021, 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. After we select and filter the dried edible fungi for specific size and quality from our suppliers, we may further dehydrate them, as deemed necessary, to ensure the uniform level of dryness of our products, and then package them for sale, at our own processing facilities. Mainly through distributors, we offer gourmet dried mushrooms to domestic and overseas retail supermarkets, produce distributors and foodservice distributors and operators.

​

In June 2021, we began to expand into the bulk agricultural commodity trading industry. We purchase certain agricultural commodities from upstream third-party suppliers and then sell them 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.

​

Currently, we estimate that approximately 95.4% of our products are sold in China to domestic distributors and the remaining 4.6% are sold internationally, including USA, Japan, Canada and other countries, through distributors. In addition, in order to enhance our e-commerce marketing presence, we developed our own e-commerce website, farmmi.com.cn.

​

Growth Strategy

​

Other than increasing market share, expanding sources of supply, productivity and sales network, and securing high quality raw materials with competitive price as disclosed in our annual report for the fiscal year ended September 30, 2021, we are also actively developing new business. We are taking advantage of the company's strengths in working capital position and strong sales force to further growths in agricultural product trading operations. By targeting the bulk agricultural commodity trading business, the company aims to improve capital use efficiency, leverage its strength, and expand trading operations into new industries to enhance the company's market competitiveness and profitability. The company plans to continue to strengthen its sales team, amplify the marketing and sales efforts in agricultural commodity trading, seize market opportunities, and further expand the trade of bulk agricultural products to include such as cotton, corn, soybean, sugar and other commodities.

​

​ 2

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 in Edible Fungi 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 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 the 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.

​

On the other hand, although we believe we distinguish our Company from our 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.

​

Competition in the Agricultural Commodity Trading Industry

​

The agricultural commodity trading industry has high barriers to enter because of the requirements for a large volume of product inventory, transportation, warehousing, logistics and distributions, and there are fewer participants in the industry as compared to the number of companies in other commodity trading industries, such as energy or steel products. As a result, the agricultural commodity trading industry in China is dominated by a few major players, including China Grain Reserves Corporation and China National Cotton Reserves Corporation as national policy implementation entities and COFCO Group as the agricultural commodity flow control entity. Provincial and municipal supply and marketing cooperative system enterprises, international agricultural product traders, and small and medium-sized private enterprises constitute the main participants in the product trade flows.

​

As a new participant in the agricultural commodity trading industry, the company is in its early stage of development both in terms of trading volume and the market share. Relying on its prior experience in agricultural product sales and established customer base, the company is well positioned to further expand its cooperation partners and customer base. It strives to gain a greater market share and enhance competitiveness through achieving optimal capital turnover and transaction efficiency. However, the company faces significant challenges in operating in the agricultural product trade industry, and potential risks associated with entering a new business or regions, difficulties in achieving strategic objectives and diversion of resources from our existing operations may affect the company's operating results and financial condition.

​

Economy and Politics

​

Our results of operations have been adversely affected, to the extent that the COVID-19 or any other epidemic harms the Chinese and global economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, almost all of which are beyond our control.

​

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.

​ 3

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.

​

China’s growth has outpaced worldwide production growth rates and became the largest worldwide edible mushroom producer. 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.

​

The recovery of economic activities in China since the end of COVID-19 lockdown in April 2020 has increased orders from our customers.

​

Our sales volume of Shiitake mushroom for the six months ended March 31, 2022 was approximately 757 tons. This number represents a decrease of 42 tons compared with 715 tons sales volume for the same period of fiscal 2021. In the meanwhile, our sales volume of Mu Er for the six months ended March 31, 2022 was approximately 783 tons. This number represents an increase of 236 tons compared with 547 tons sales volume for the same period of fiscal 2021. On an overall basis, our sales volume of Shiitake mushroom and Mu Er was 1,540 tons for the six months ended March 31, 2022, an increase of 278 tons as compared with 1,262 tons sales volume for the same period of fiscal 2021. The increased sales of Shiitake mushroom and Mu Er was primarily because of the recovery of economic activities in China since the end of COVID-19 lockdown in April 2020 which resulted in an increase of customer orders. We expect our sales of Shiitake mushroom and Mu Er will keep increase in the foreseeable future as we expect to receive more customer orders arising from the recovery of economic activities.

​

​ 4

Our aggregate employee salaries have been increasing.

​

During the period of October 2021 to March 2022, our monthly salary expense was as follows:

​

​

The increase in November 2021 monthly employee salaries was mainly due to salaries adjustments for certain employees. The increase in January 2022 monthly employee salaries was mainly due to payment of year-end bonus to certain employees. The decrease in monthly employee salaries of February was mainly due to the Chinese New Year Holiday, when certain employees took extended unpaid leaves during the holiday period.

​

Raw material costs have been on the upward trends.

​

With our deep understanding of the edible fungi market, constant market research, and communication with our suppliers, we have been able to obtain favorable price for premium raw materials. With increased sales orders we receive, we need to purchase additional raw materials to meet the new demand.

​

​ 5

During the period from October 2021 to March 2022, the average monthly unit price per ton for Shiitake and Mu Er we purchased were as follows:

​

​

We anticipate that for fiscal year 2022, the average unit price of Shiitake and Mu Er we purchase will be on an upward trends as the increased market demand for Shiitake mushroom and Mu Er and the reduced of supply contributed to the upward trends of the average unit price of Shiitake and Mu Er.

​

​ 6

We expect the agriculture industry in China to become increasingly reliant on Internet sales.

​

During the six months ended March 31, 2022 and 2021, our online sales accounted for 9.8% and 13.4% of our total Shiitake and Mu Er sales, respectively. For the six months ended March 31, 2022, our aggregate online sales were $2,041,045, a decrease of 14.5% compared with online sales for the same period in 2021, and the average monthly online sales were $340,174 as compared to $397,677 online sales for the same period in 2021. The following chart shows our online sales for each month from October 2020 to June 2021:

​

​

The online sales during the six months ended March 31, 2022 decreased as compared to the same period of last year. The decrease in monthly online sales was mainly attributable to the reduced in the demand for our products.

​

​ 7

Results of Operations for the Six Months Ended March 31, 2022 and 2021

​

The following table summarizes our results of operations for the six months ended March 31, 2022 and 2021:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	****	For the six		****	For the six
​	​	months ended		​	months ended		​	Variance	​	​
​	​	March 31, 2022		​	March 31, 2021		​	Amount	​	%	****
​	​	(unaudited)		​	(unaudited)		​	​	​	​
Revenues	​	$	42,135,715	​	$	16,959,986		25,175,729		148.4	%
Cost of revenues	​		(39,148,005)	​		(14,133,327)		25,014,678		177.0	%
Gross profit	​		2,987,710	​		2,826,659		161,051		5.7	%
Allowance for doubtful debts	​		(361,847)	​		358,558		720,405		200.9	%
Selling and distribution expenses	​		(127,345)	​		(142,986)		(15,641)		(10.9)	%
General and administrative expenses	​		(3,113,214)	​		(1,621,591)		1,491,623		92.0	%
(Loss) income from operations	​		(614,696)	​		1,420,640		(2,035,336)		(143.3)	%
Interest income	​		71,814	​		170		71,644		42143.5	%
Interest expense	​		(122,290)	​		(21,364)		100,926		472.4	%
Other expenses, net	​		81,823	​		(2,272)		(84,095)		(3701.4)	%
(Loss) income before income taxes	​		(583,349)	​		1,397,174		(1,980,523)		(141.8)	%
Provision for income taxes	​		(3,590)	​		(17,628)		(14,038)		(79.6)	%
Net (loss) income from continuing operations	​		(586,939)	​		1,379,546		(1,966,485)		(142.5)	%
Discontinued operations	​			​							​
Net loss from discontinued operations, net of tax	​		—	​		(17,607)		(17,607)		(100.0)	%
Net (loss) income	​	$	(586,939)	​	$	1,361,939		(1,948,878)		(143.1)	%

​

​ 8

Revenues

​

Our revenue derives from the following major product categories: Shiitake, Mu Er, other edible fungi and other agricultural products trading business (for examples, cotton and corn).

​

The following table sets forth the breakdown of our revenues for the six months ended March 31, 2022 and 2021, respectively:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	For the six months ended, March 31,								Variance
​	​	2022	****	%	****	2021	****	%	​	Amount		%
Shiitake		10,009,944		23.8	%	9,413,658		55.5	%	596,286		6.3	%
Mu Er		10,854,307		25.8	%	7,203,277		42.5	%	3,651,030		50.7	%
Cotton		10,283,106		24.4	%	—		0.0	%	10,283,106		100.0	%
Corn		10,209,876		24.2	%	—		0.0	%	10,209,876		100.0	%
Other agricultural products		778,482		1.8	%	343,051		2.0	%	435,431		126.9	%
Total		42,135,715		100.0	%	16,959,986		100.0	%	25,175,729		148.4	%

​

Total revenues for the six months ended March 31, 2022 increased by $25.2 million, or 148.4%, to $42.1 million from $17.0 million for the same period of last year.

​

Revenue from sales of Shiitake increased by $0.6 million or 6.3%, to $10.0 million for the six months ended March 31, 2022 from $9.4 million for the same period of last year, mainly due to the increased sales volume, from 715 tons for the six months ended March 31, 2021 to 757 tons for the six months ended March 31, 2022, which resulted in an increase of $0.6 million in revenue from sales of Shiitake. The increase in sales volume of Shiitake was mainly attributed to the recovery of economic activities in China which resulted in an increase of customer orders. Also, the average unit sales price for Shiitake increased from $13,165 per ton for the six months ended March 31, 2021 to $13,222 per ton for the six months ended March 31, 2022, which resulted in an increase of $41,869 in revenue from sales of Shiitake. The increase in the average unit sales price of Shiitake was a result of increase in cost of revenue of Shiitake by which we adjusted our sales price to coincide with the increase in cost price.

​

Revenue from sales of Mu Er increased by $3.7 million, or 50.7%, to $10.9 million for the six months ended March 31, 2022 from $7.2 million for the same period of last year, mainly due to the increased sales volume. Sales volume of Mu Er increased to 783 tons for the six months ended March 31, 2022 from 547 tons for the same period of last year, which resulted in an increase of $3.2 million in revenue from sales of Mu Er. The increase in sales volume of Mu Er was mainly attributed to the recovery of economic activities in China which resulted in an increase of customer orders. Also, the average unit sales price for Mu Er increased from $13,162 per ton for the six months ended March 31, 2021 to $13,862 per ton for the six months ended March 31, 2022, which resulted in an increase of $0.5 million in revenue from sales of Mu Er. The increase in average unit sales price of Mu Er was a result of increase in cost of revenue of Mu Er by which we adjusted our sales price to coincide with the increase in cost price.

​

Revenue from sales of cotton increased by $10.3 million, or 100%, to $10.3 million for the six months ended March 31, 2022 from nil for the same period of last year, mainly due to engagement of agricultural product trading business for the six months ended March 31, 2022. Sales volume of cotton amounted to 3,203 tons and the average unit sales price for cotton was $3,211 per ton.

​

Revenue from sales of corns increased by $10.2 million, or 100%, to $10.2 million for the six months ended March 31, 2022 from nil for the same period of last year, mainly due to engagement of agricultural product trading business for the six months ended March 31, 2022. Sales volume of cotton amounted to 27,234 tons and the average unit sales price for corn was $375 per ton.

​

Revenue from sales of other edible fungi and other agricultural products increased by $0.4 million, or 126.9%, to $0.8 million for the six months ended March 31, 2022 from $0.3 million for the same period of last year. The increase was mainly attributed to once-off sales of filter arising from a recently acquired subsidiary, Guoning Zhonghao, which fulfilling its last orders after the acquisition and its revenue amounted to $0.5 million. Aside from the sales of filter, sales of other edible fungi and other agricultural products decreased by $0.1 million, or 32.4%, to $0.2 million for the six months ended March 31, 2022 from $0.3 million for the same period of last year. The decrease was primarily attributable to the decrease in sales volume from 11 tons for the six months ended March 31, 2021 to 6 tons for the six months ended March 31, 2022, which resulted in a decrease of $0.1 million in revenue from sales of other edible fungi and other agricultural products. The decrease in sales volume of other edible fungi and other agricultural products was caused by lesser customer orders in other edible fungi and other agricultural products as the increase in average unit sales price reduced demand and orders from customers. The decrease was partially offset by an increase in average unit sales price from $31,444 per ton for the six months ended March 31, 2021 to $36,577 per ton for the six months ended March 31, 2022, which resulted in an increase of $44,277 in revenue from sales of other edible fungi and other agricultural products. The increase in average unit sales price was a result of increase in cost of revenue of other edible fungi and other agricultural products by which we adjusted our sales price to coincide with the increase in cost price.

​ 9

Cost of Revenues

​

The following table sets forth the breakdown of the Company’s cost of revenue of continuing operations for the six months ended March 31, 2022 and 2021, respectively:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	For the six months ended March 31,								Variance
​	​	2022	****	%	****	2021	****	%	​	Amount	****	%	****
Shiitake		8,709,035		22.2	%	7,856,071		55.6	%	852,964		10.9	%
Mu Er		9,458,565		24.2	%	6,005,144		42.5	%	3,453,421		57.5	%
Cotton		10,191,194		26.0	%	—		—		10,191,194		100.0	%
Corn		10,085,670		25.8	%	—		—		10,085,670		100.0	%
Other edible fungi		703,541		1.8	%	272,112		1.9	%	431,429		158.5	%
Total		39,148,005		100.0	%	14,133,327		100.0	%	25,014,678		177.0	%

​

Cost of revenues for the continued operations increased by $25.0 million, or 177.0%, to $39.2 million for the six months ended March 31, 2022 from $14.1 million for the same period of last year.

​

Cost of revenues of Shiitake for the continued operations increased by $0.9 million, or 10.9%, to $8.7 million for the six months ended March 31, 2022 from $7.9 million for the same period of last year. The increase was primarily attributable to the increase in sales volume from 715 tons for the six months ended March 31, 2021 to 757 tons for the six months ended March 31, 2022, which resulted in an increase of $0.5 million in cost of revenue of Shiitake. Also, the increase was caused by an increase in average unit cost of Shiitake from $10,987 per ton for the six months ended March 31, 2021 to $11,504 per ton for the six months ended March 31, 2022, which resulted in an increase of $0.4 million in cost of revenue of Shiitake. The increase in average unit cost was caused by increase in the cost of raw materials.

​

Cost of revenue of Mu Er for the continued operations increased by $3.5 million, or 57.5%, to $9.5 million for the six months ended March 31, 2022 from $6.0 million for the same period of last year. The increase was primarily attributable to the increase in sales volume from 547 tons for the six months ended March 31, 2021 to 783 tons for the six months ended March 31, 2022, which resulted in an increase of $2.7 million in cost of revenue of Mu Er. The increase was also caused by an increase in average unit cost of Mu Er from $10,973 per ton for the six months ended March 31, 2021 to $12,079 per ton for the six months ended March 31, 2022, which resulted in an increase of $0.8 million in cost of revenue of Mu Er. The increase in average unit cost was caused by increase in the cost of raw materials.

​

Cost of revenue of cotton increased by $10.2 million, or 100%, to $10.2 million for the six months ended March 31, 2022 from nil for the same period of last year, mainly due to engagement of agricultural product trading business for the six months ended March 31, 2022. Sales volume of cotton amounted to 3,203 tons and the average unit cost for cotton was $3,182 per ton.

​

Cost of revenue of corn increased by $10.1 million, or 100%, to $10.1 million for the six months ended March 31, 2022 from nil for the same period of last year, mainly due to engagement of agricultural product trading business for the six months ended March 31, 2022. Sales volume of corn amounted to 27,234 tons and the average unit cost for corn was $370 per ton.

​

Cost of revenue of other edible fungi and agricultural products for the continued operation increased by $0.4 million, or 158.5%, to $0.7 million for the six months ended March 31, 2022 from $0.3 million for the same period of last year. The increase was mainly attributed to once off sales of filter arising from a recently acquired subsidiary, Guoning Zhonghao, which fulfilling its last orders after the acquisition and its cost of revenue amounted to $0.5 million. Aside from the sales of filter, the cost of revenue of other edible fungi and agricultural products decreased by $0.1 million, or 35.0%, to $0.2 million for the six months ended March 31, 2022 from $0.3 million for the same period of last year. The decrease was primarily attributable to the decrease in sales volume from 11 tons for the six months ended March 31, 2021 to 6 tons for the six months ended March 31, 2022, which resulted in a decrease of $120,647 in cost of revenue of other edible fungi and agricultural products. The decrease was partially offset by an increase in average unit cost of other edible fungi and agricultural products from $24,946 per ton for the six months ended March 31, 2021 to $27,893 per ton for the six months ended March 31, 2022, which resulted in an increase of $25,428 in cost of revenue of other edible fungi and agricultural products. The increase in average unit cost was caused by increase in the cost of raw materials.

​

The overall increase in the cost of our raw materials is mainly due to the decrease in harvest this year as compared with last year. Additionally, the recovery of economic activities in China since the end of lockdown in April 2020 increased market demand for our products and the reduced of supply exacerbated the increase in the cost of raw materials.

​

​ 10

Gross Profit

​

The following table sets forth the breakdown of the Company’s gross profit of the continued operations for the six months ended March 31, 2022 and 2021, respectively:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	For the six months ended March 31,										Variance
​	​	2022		****	%	****	2021		****	%	​	Amount		****	%	****
Shiitake	​	$	1,300,909		43.5	%	$	1,557,587		55.1	%	$	(256,678)		(16.5)	%
Mu Er	​		1,395,742		46.7	%		1,198,133		42.4	%		197,609		16.5	%
Cotton	​		91,912		3.1	%		—		—	​		91,912		100.0	%
Corn	​		124,206		4.2	%		—		—	​		124,206		100.0	%
Other edible fungi and other agricultural products	​		74,941		2.5	%		70,939		2.5	%		4,049		5.7	%
Total	​	$	2,987,710		100.0	%	$	2,826,659		100.0	%	$	161,098		5.7	%

​

Overall gross profit of the continued operations increased by $0.2 million, or 5.7%, to $3.0 million for the six months ended March 31, 2022 from $2.8 million for the same period of fiscal 2021. Gross profit from sales of Shiitake decreased by $0.3 million, or 16.5%, to $1.3 million for the six months ended March 31, 2022 from $1.6 million for the same period of last year. Gross profit from sales of Mu Er increased by $0.2 million, or 16.5% to $1.4 million for the six months ended March 31, 2022 from $1.2 million for the same period of last year. Gross profit from sales of cotton increased by $91,912, or 100%, to $91,912 for the six months ended March 31, 2022 from nil for the same period of last year. Gross profit from sales of corn increased by $124,206, or 100%, to $124,206 for the six months ended March 31, 2022 from nil for the same period of last year. Gross profit from sales of other edible fungi and agricultural products increased by $4,049, or 5.7%, to $74,941 for the six months ended March 31, 2022 from $70,939 for the same period of last year. The increased gross profit was caused by increased sales for the six months ended March 31, 2022, as compared to the prior period.

​

Overall gross margin of the continued operations decreased by 9.6 percentage points to 7.1% for the six months ended March 31, 2022 from 16.7% for the same period of last year. Overall average unit margin decreased from $2,220 per ton for the six months ended March 31, 2021 to $93 per ton for the six months ended March 31, 2022. The decrease in overall gross margin was mainly attributed to the gross margin of cotton and corn were 0.9% and 1.2% which significantly reduced overall gross margin.

​

Allowance for doubtful debts

​

Allowance for doubtful debts of the continued operations increased by $0.7 million, or 200.9%, to $361,847 for the six months ended March 31, 2022 from reversal of allowance for doubtful debts of $358,558 for the same period of last year, primarily due to the increase in ageing of certain advances to suppliers.

​

Selling and distribution expenses

​

Selling and distribution expenses of the continued operations decreased by $15,641, or 10.9%, to $127,345 for the six months ended March 31, 2022 from $142,986 for the same period of last year. The decrease was primarily due to a decrease in shipping expenses by $10,476 when comparing with the same period of last year. The trading of agricultural products, such as cotton and corn, do not incur shipping expenses as the transactions of agricultural products are 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 so as to compensate for the delay in delivery which caused by sporadic lock down in certain China cities caused by COVID-19. Moreover, the decrease was caused by a once-off technology service fee of $4,039 incurred for the six months ended March 31, 2021 and no such technology service fee was incurred for the six months ended March 31, 2022.

​

General and administrative expenses

​

General and administrative expenses of the continued operations increased by $1.5 million, or 92.0%, to $3.1 million for the six months ended March 31, 2022 from $1.6 million for the same period of last year. The increase was primarily attributable to the share-based compensation expenses of $1.2 million arising from restricted shares granted to certain employees and increase in office and other general expenses of $0.3 million.

​

​ 11

Interest income

​

Interest income of the continued operations increased by $71,644, or 42,143.5%, to $71,814 for the six months ended March 31, 2022 from $170 for the same period of last year. The increase was primarily attributable to the increase in bank balances arising from proceeds arising from issuance of shares and warrants in 2021.

​

Interest expense

​

Interest expense of the continued operations was $122,290 for the six months ended March 31, 2022, as compared to $21,364 for the same period of last year. The increase in interest expense was primarily attributable to the higher effective interest rate for the six months ended March 31, 2022 as compared effective interest rate for the same period of last year.

​

Provision for income taxes

​

For the six months ended March 31, 2022 and 2021, our income tax expense of continued operations was $3,590 and $17,628, respectively. The income tax expenses for the six months ended March 31, 2022 and 2021 were as a result of certain PRC subsidiaries that have taxable income from operations. As for the income tax expenses for the six months ended March 31, 2020, the Company is in a loss position, the tax expense was primarily attributable to certain PRC entities that have taxable income from operations, the loss position was primarily incurred by overseas entities as a result of interest expenses of convertible notes.

​

​ 12

A total net income of $2.4 million and $2.4 million was exempt from income tax for the six months ended March 31, 2022 and 2021, respectively. The aggregate amount of our tax savings was approximately $0.6 million and $0.6 million for the six months ended March 31, 2022 and 2021, respectively. From April 1, 2022 to December 31, 2022, we expect to enjoy the tax exemption for 95% of our taxable income. The summary is below:

​

​	​	​	​
​	****	Exempted	Tax
​	​	net income	holiday
October 1, 2020 to September 30, 2021		RMB26.1 million (4.0 million)	RMB6.5 million ($1.0 million)
October 1, 2021 to March 31, 2022		RMB15.3 million (2.4 million)	RMB3.8 million ($0.6 million)
April 1, 2022 to December 31, 2022		95% of taxable income

All values are in US Dollars.

​

Net (loss) income from continuing operations

​

As a result of the factors described above, our net loss was $0.6 million for the six months ended March 31, 2022, a decrease of $2.0 million from net income of $1.4 million for the same period of fiscal year 2021.

​

Discontinued operations

​

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 $2.82 million) on September 30, 2021. As of September 30, 2021, the net assets of Forest Food were RMB17.7 million (approximately $2.75 million), the gain of disposal of discontinued operations was RMB0.48 million (approximately $74,000). The divestment was completed on October 1, 2021. Operating results for the six months ended March 31, 2021 has been retrospectively adjusted to the effect of the discontinued operations.

​

Net loss from discontinued operations decreased by $17,607, 100.0%, to nil for the six months ended March 31, 2022 from a net loss of $17,607 for the six months ended March 31, 2021. The decrease was mainly attributed to the completion of disposal of Forest Food.

​

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 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.

​

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.

​

​ 13

As of March 31, 2022 and September 30, 2021, we had cash of $15.3 million and $59.3 million for the continued operations, respectively. Total current assets as of March 31, 2022 amounted to $162.6 million, an increase of $7.3 million compared to $155.3 million at September 30, 2021. The increase of current assets was mainly attributable to the increase in prepayment for an investment. Current liabilities amounted to $3.3 million at March 31, 2022, in comparison to $4.1 million at September 30, 2021. This decrease of current liabilities was mainly attributable to the disposal of a discontinued operation.

​

Although management believes that the cash generated from operations will be sufficient to meet our normal working capital needs for at least the next twelve months, our ability to repay our current obligations will depend on the future realization of our current assets. Management has considered the historical experience, the economy, trends in the agricultural product industry, the expected collectability of accounts receivable and the realization of the inventories as of March 31, 2022. Based on the above considerations, management is of the opinion that we have sufficient funds to meet our working capital requirements and debt obligations as they become due. However, there is no assurance that management will be successful in our plan. There are a number of factors that could potentially arise which might result in shortfalls to what is anticipated, such as the demand for our products, economic conditions, the competition in the industry, and our bank and suppliers being able to provide continued support. If the future cash flow from operations and other capital resources is insufficient to fund our liquidity needs, we may be forced to obtain additional debt or equity capital, or refinance all or a portion of our debt.

​

Indebtedness. As of March 31, 2022, we have $2.2 million short-term bank loan and $97,652 long-term loan. As of July 5, 2022, the short-term bank loans were fully repaid. Beside these loans, we did not have any 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. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. 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.

​

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. On February 28, 2022, the Company issued and sold a total of 30 million ordinary shares at a price of $0.20 per share via private placements and the net proceeds were $6.0 million. As of March 31, 2022, we had total assets of $174.8 million, which includes cash of $15.3 million, short-term deposit of $39.4 million, accounts receivable of $19.2 million, advance to suppliers of $70.6 million, prepayment for an investment of $7.9 million and inventory of $5.3 million, working capital of $159.3 million, and total equity of $170.6 million.

​

Working Capital. Total working capital as of March 31, 2022 amounted to $159.3 million, compared to $152.5 million as of September 30, 2021.

​

Capital Needs. Our capital needs include our daily working capital needs and capital needs to finance the development of our business. We have established effective collection procedures of our accounts receivable, and have been able to realize or receive the refund of the advances to suppliers in the past. 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.

​

​ 14

Cash flows

​

The following table provides detailed information about our net cash flows for the six months ended March 31, 2022 and 2021:

​

​	​	​	​	​	​	​
​	****	For the six		****	For the six
​	​	months ended		​	months ended
​	​	March 31, 2022		​	March 31, 2021
Net cash provided by operating activities	​	$	6,374,344	​	$	9,725,259
Net cash used in investing activities	​		(52,924,075)	​		(2,767,971)
Net cash provided by financing activities	​		5,895,519	​		6,843,663
Effect of exchange rate changes on cash and restricted cash	​		(3,335,361)	​		78,715
Net increase (decrease) in cash and restricted cash	​		(43,989,573)	​		13,879,666
Cash and restricted cash, beginning of year	​		59,262,514	​		2,165,151
Cash and restricted cash, end of year	​		15,272,941	​		16,044,817
Less: cash from discontinued operations	​		—	​		62,099
Cash and restricted cash, end of year	​	$	15,272,941	​	$	15,982,718

​

Operating Activities

​

Net cash provided by operating activities was $6.4 million for the six months ended March 31, 2022. This was a decrease of $3.3 million compared to net cash provided by operating activities of $9.7 million for the six months ended March 31, 2021. The decrease in net cash provided by operating activities was primarily attributable to notes receivable of $4.0 million.

​

Investing Activities

​

For the six months ended March 31, 2022, net cash used in investing activities amounted to $52.9 million as compared to net cash used in investing activities of $2.8 million for the same period of 2021. The increase of $50.1 million was primarily due to short-term deposits of $36.5 million placed with a bank, acquisition of subsidiaries of $11.0 million and prepayment for an investment of $7.9 million.

​

Financing Activities

​

Net cash provided by financing activities amounted to $5.9 million for the six months ended March 31, 2022, as compared to net cash provided by financing activities of $6.8 million for the same period in 2021. The decrease of $0.9 million in net cash provided by financing activities was mainly due to net proceeds of $6.0 million arising from stock issuance.

​

Commitments and Contractual Obligations

​

The following table presents the Company’s material contractual obligations as of March 31, 2022:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	****	​		****	Less than		****	1-2		****	3-5			More than
Contractual obligations	​	Total		​	1 year		​	years		​	years		​	5 years
Short-term bank loan	​	$	2,208,446	​	$	2,208,446		​	—		​	—		​	—
Long-term bank loan	​		97,652	​		—		​	97,652		​	—		​	—
Operating lease obligations	​		1,391,394	​		304,587		​	191,558		​	476,231		​	419,018
Total	​	$	3,697,492	​	$	2,513,033	​	$	289,210	​	$	476,231	​	$	419,018

​ 15

Exhibit 99.3

​

Farmmi Reports Record Company First Half 2022 Revenue

​

·	148% Increase in 1H 2022 Revenue Compared to 1H 2021
·	49% of Revenue Generated from New Growth Segments
---	---
·	5.7% Expansion in 1H 2022 Gross Profit Compared to 1H 2021
---	---
·	$170.6 Million in Total Stockholders ’ Equity at March 31, 2022
---	---

​

LISHUI, China, August 22, 2022 – Farmmi, Inc. (“Farmmi” or the “Company”) (NASDAQ: FAMI), an agricultural products supplier in China, today announced its unaudited financial results for the six months ended March 31, 2022, with record revenue generated by new growth segments.

​

Ms. Yefang Zhang, Farmmi’s Chairwoman and CEO, commented, “We are very pleased with the 148% increase in revenue we drove for the first half of fiscal 2022, which represents a record revenue level for Farmmi. We achieved growth in our core segments, while generating nearly half of our revenue from new agricultural segments. Because our new cotton and corn businesses layer on top of our existing revenue streams, this is completely additive revenue that expands the breadth of our product lines, which we believe will further strengthen our existing customer relationships and attract important new customers. While we are pleased with our continued execution and accelerated growth, our results would have been even stronger absent rolling pandemic related shutdowns in China, higher logistics costs, supply chain constraints and a higher cost of goods. We worked hard to mitigate the macro weakness and impact of global inflation with price increases and efforts to increase efficiencies company-wide, while at the same time leveraging our competitive advantages, including premium product quality, stable and experienced employees, favorable production locations and strong relationships with our significant suppliers.”

​

Looking forward, Ms. Yefang Zhang, Farmmi’s Chairwoman and CEO, concluded, “We are very optimistic about the strength and durability of our diversified business moving forward, our advantaged competitive position and the excellent fundamentals underlying the agricultural markets we serve worldwide. As part of our strategic efforts, we fortified our balance sheet, ending the first six months of 2022 with $170.6 million in total stockholders’ equity. Actions we took to raise additional cash have helped insulate Farmmi from recent market volatility, while allowing us to remain focused on execution of our long-term growth strategy. Our stronger balance sheet gives larger domestic and international customers added confidence in Farmmi as a partner and allows us to accelerate investments in our organic business, while also pursuing strategic M&A opportunities. As an example, we saw the immediate benefit in the first half of 2022, with the added contribution from our new corn and cotton businesses. This also underscores our belief that with a market capitalization under $30 million, there is a clear disconnect in the valuation of our company, and our financial results, fundamentals and growth prospects. We are confident that, as we deliver further improvements in our financials, we will be able to drive a more appropriate valuation that rewards our shareholders.”

​

Financial Highlights

​

​	​	​	​	​	​	​	​	​	​
​	​	For the Six Months Ended March 31,
($millions, except per share and percentage data)	​	2022		​	2021		​	Change
Revenues		$	42.14		$	16.96		148.4	%
Shiitake	​		10.01	​		9.41		6.3	%
Mu Er	​		10.85	​		7.20		50.7	%
Cotton	​		10.28	​		nil		100.0	%
Corn	​		10.21	​		nil		100.0	%
Other agricultural products	​	​	0.78	​	​	0.34	​	126.9	%
Gross profit	​	​	2.99	​	​	2.83	​	5.7	%
Gross margin	​	​	7.10	%	​	16.70	%	(9.6) pp*	​
Income (loss) from operations	​	$	0.61	​	$	1.40	​	(143.3)	%
Net (loss) income attributable to Farmmi, Inc.	​	​	(0.59)	​	​	1.36	​	(143.1)	%
Basic and diluted income per share	​	​	(0.03)	​	​	1.63	​	(1.66)	​

*Notes: pp represents percentage points Page 1

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Subsequent Event: On May 31, 2022, the Company consolidated its ordinary shares at the ratio of one-for-twenty-five. The authorized number of ordinary shares had been retrospectively adjusted from 600,000,000 ordinary shares, $0.001 par value, to 24,000,000 ordinary shares, $0.025 par value, and the issued and outstanding ordinary shares had been retrospectively adjusted from 597,780,383 ordinary shares to 23,906,985 ordinary shares and from 557,780,383 ordinary shares to 22,311,215 ordinary shares at March 31, 2022 and March 31, 2021, respectively.

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Revenues

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Total revenues for the six months ended March 31, 2022 increased by $25.2 million, or 148.4%, to $42.1 million from $17.0 million for the same period of last year, as the company benefitted from higher volumes, higher selling prices to offset increased product costs, and the contribution of new agricultural segments, primarily corn and cotton. Revenue from sales of Shiitake increased by $0.6 million or 6.3%, to $10.0 million for the six months ended March 31, 2022 from $9.4 million for the same period of last year. Revenue from sales of Mu Er increased by $3.7 million, or 50.7%, to $10.9 million for the six months ended March 31, 2022 from $7.2 million for the same period of last year. Revenue from sales of cotton increased by $10.3 million, or 100%, to $10.3 million for the six months ended March 31, 2022 from nil for the same period of last year. Revenue from sales of corn increased by $10.2 million, or 100%, to $10.2 million for the six months ended March 31, 2022 from nil for the same period of last year. Revenue from sales of other edible fungi and other agricultural products increased by $0.4 million, or 126.9%, to $0.8 million for the six months ended March 31, 2022 from $0.3 million for the same period of last year.

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Cost of Revenues

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Cost of revenues for the continued operations increased by $25.0 million, or 177.0%, to $39.2 million for the six months ended March 31, 2022 from $14.1 million for the year-ago period.

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Cost of revenues of Shiitake for continued operations increased by $0.9 million, or 10.9%, to $8.7 million for the six months ended March 31, 2022 from $7.9 million for the same period of last year. Cost of revenue of Mu Er for continued operations increased by $3.5 million, or 57.5%, to $9.5 million for the six months ended March 31, 2022 from $6.0 million for the same period of last year. The increases were primarily attributable to the increases in sales volume, average unit costs, and the cost of raw materials.

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Cost of revenue of cotton increased by $10.2 million, or 100%, to $10.2 million for the six months ended March 31, 2022 from nil for the same period of last year. Cost of revenue of corn increased by $10.1 million, or 100%, to $10.1 million for the six months ended March 31, 2022 from nil for the same period of last year. Both increases reflect the addition of new revenue streams and costs in support of those new businesses.

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Cost of revenue of other edible fungi and agricultural products for the continued operation increased by $0.4 million, or 158.5%, to $0.7 million for the six months ended March 31, 2022 from $0.3 million for the same period of last year, as one-time costs were partially offset by lower costs related to a lower sales volume.

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Gross Profit

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Overall gross profit of the continued operations increased by $0.2 million, or 5.7%, to $3.0 million for the six months ended March 31, 2022 from $2.8 million in the year-ago period. Gross profit from sales of Shiitake decreased by $0.3 million, or 16.5%, to $1.3 million for the six months ended March 31, 2022 from $1.6 million for the same period of last year. Gross profit from sales of Mu Er increased by $0.2 million, or

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16.5% to $1.4 million for the six months ended March 31, 2022 from $1.2 million for the same period of last year. Gross profit from sales of cotton increased by $91,912, or 100%, to $91,912 for the six months ended March 31, 2022 from nil for the same period of last year. Gross profit from sales of corn increased by $124,206, or 100%, to $124,206 for the six months ended March 31, 2022 from nil for the same period of last year. Gross profit from sales of other edible fungi and agricultural products increased by $4,049, or 5.7%, to $74,941 for the six months ended March 31, 2022 from $70,939 for the same period of last year. The increased gross profit reflects increased sales for the six months ended March 31, 2022, as compared to the prior period.

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Overall gross margin of the continued operations decreased by 9.6 percentage points to 7.1% for the six months ended March 31, 2022 from 16.7% for the same period of last year.

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Operating Expenses

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Selling and distribution expenses of the continued operations decreased by $15,641, or 10.9%, to $127,345 for the six months ended March 31, 2022 from $142,986 for the same period of last year. General and administrative expenses of the continued operations increased by $1.5 million, or 92.0%, to $3.1 million for the six months ended March 31, 2022 from $1.6 million for the same period of last year. The increase was primarily attributable to the share-based compensation expenses of $1.2 million and other general expenses of $0.3 million.

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Interest expense was $122,290 for the six months ended March 31, 2022, as compared to $21,364 for the same period of last year. The increase in interest expense was primarily attributable to the higher effective interest rate for the six months ended March 31, 2022 as compared effective interest rate for the same period of last year, which was partially offset by interest income from increased bank balances.

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Net Income

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As a result of the factors described above, net loss attributable to ordinary shareholders was $0.6 million for the six months ended March 31, 2022, a decrease of $2.0 million from net income of $1.4 million for the same period of fiscal year 2021.

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Financial Condition

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Total working capital as of March 31, 2022 was $159.3 million, with a cash balance of $15.3 million, total current assets of $162.6 million and current liabilities of $3.3 million.

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About Farmmi, Inc.

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Established in 1998, Farmmi Inc. (NASDAQ: FAMI) is an agricultural products supplier, processor and retailer of edible mushrooms like Shiitake and Mu Er, as well as other agricultural products. In addition to its offline sales, Farmmi sells its products direct-to-consumer. The Company has recently expanded into agricultural product trading business, especially in the area of cotton and corn bulk trading. For further information about the Company, please visit: http://www.farmmi.com.cn/ir/.

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Forward-Looking Statements

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No statement made in this press release should be interpreted as an offer to purchase or sell any security. Such an offer can only be made in accordance with the Securities Act of 1933, as amended, and applicable state securities laws. Certain statements in this press release concerning our future growth prospects are forward-looking statements regarding our future business expectations and intended to qualify for the "safe harbor" under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding lingering effects of the Covid-19 pandemic on our customer’s businesses and our end purchaser’s disposable income, our ability to raise capital on any particular terms,

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fulfillment of customer orders, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, our ability to realize revenue from expanded operation and acquired assets in China, our ability to attract and retain skilled professionals, client concentration, industry segment concentration, and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings. These filings are available at www.sec.gov. Farmmi may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. In addition, please note that any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of the date of this press release. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.

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For more information, please contact Investor Relations:

Global IR Partners

David Pasquale

New York Office Phone: +1-914-337-8801

FAMI@Globalirpartners.com Page 4