WEB NEWS Deal Flow
Section 3—Securities and Trading Markets
Item 3.02 Unregistered Sales of Equity Securities
On July 21, 2015, in connection with a security purchase agreement between China Ginseng Holdings, Inc. (the “Company”) and an investor (the “Investor”), we closed a private placement to sell a Series A Convertible Debenture for a price of $1,600,000. The Debenture is convertible into 4,000,000 shares of our common stock, par value $0.001 per share, at a conversion price of $.40 per share.
On June 15, 2016, the Investor informed us its intent to convert the Debenture into shares of our common stock. Accordingly, pursuant to the Debenture, we will issue an aggregate amount of 4,000,000 shares of our common stock, to the Investor. The Offering was made in reliance upon the exemption from securities registration afforded by Regulation S (“Regulation S”) as promulgated under the Securities Act of 1933, as amended.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such securities contain a legend stating the same; the information contained herein is merely included to disclose the terms of the transaction mentioned herein.
Comments & Business Outlook
China Ginseng Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
2016
2015
2016
2015
REVENUES
$
253,619
$
15,148
$
315,365
$
167,362
COSTS AND EXPENSES
Cost of goods sold
220,580
60
251,341
115,878
Selling, general and administrative expenses
58,817
381,055
1,664,593
1,198,082
Bad debt expense (recovered)
(117,885
)
(22
)
(161,263
)
(42,272
)
Depreciation and amortization
14,743
21,342
67,789
67,276
Total Costs and Expenses
176,255
402,435
1,822,460
1,338,964
OTHER EXPENSE
Foreign Exchange
(2,014
)
87,045
Interest expense
699,695
182,346
1,554,136
715,578
Net Other Expense
697,681
182,346
1,641,181
715,578
LOSS BEFORE INCOME TAXES
(620,317
)
(569,633
)
(3,148,276
)
(1,887,180
)
PROVISION FOR INCOME TAXES
-
-
-
-
NET LOSS
(620,317
)
(569,633
)
(3,148,276
)
(1,887,180
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment
(169,633
)
18,374
(3,256
)
167,547
COMPREHENSIVE LOSS
$
(789,950
)
$
(551,259
)
$
(3,151,532
)
$
(1,719,633
)
NET LOSS PER COMMON SHARE (Basic and diluted)
$
(0.02
)
$
(0.01
)
$
(0.07
)
$
(0.04
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and diluted
45,397,297
44,397,297
45,397,297
44,397,297
Auditor trail
Item 4.01 Changes in Registrant’s Certifying Accountant
On April 26, 2016, China Ginseng Holdings, Inc. (the “Company”) was informed by its independent registered public accounting firm, Cowan, Gunteski & Co., P.A. (“Cowan”), that it has transferred its SEC practice to MSPC. As a result of the transfer and upon notice by Cowan to the Company on April 26, 2016, Cowan in effect has resigned as the Company’s independent registered public accounting firm and MSPC became the Company’s independent registered public accounting firm. The engagement of MSPC as the Company’s independent registered public accounting firm was ratified and approved by the Board of Directors of the Company on April 27, 2016.
From February 28, 2013 when Cowan was engaged, and subsequently through April 26, 2016, there were no disagreements between us and Cowan on any matter of accounting principals or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Cowan would have caused Cowan to make reference to the subject matter of the disagreements in connection with its reports.
During the Company’s two most recent fiscal years ended June 30, 2016 and 2015 and through April 26, 2016, the Company did not consult with MSPC on (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company’s financial statements, and MSPC did not provide either a written report or oral advice to the Company that MSPC concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K.
The Company has provided Cowan a copy of the disclosures in this Form 8-K and has requested that Cowan furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not Cowan agrees with the Company’s statements in this Item 4.01. A copy of the letter dated April 26, 2016 furnished by Cowan in response to that request is filed as Exhibit 16.1 to this Form 8-K. And a copy of the letter from Cowan about its resignation addressed to the Company is filed as Exhibit 16.2 to this Form 8-K.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
September 30,
2015
2014
REVENUE
$
21,625
$
5,242
COSTS AND EXPENSES
Cost of goods sold
15,304
2,901
Selling, general and administrative expenses
353, 812
329,218
Bad debt expense (recovery)
(49,970
)
-
Depreciation and amortization
13,263
30,309
Total Costs and Expenses
332,409
362,428
OTHER EXPENSES
Interest expense
350,780
225,720
Foreign Currency Exchange
89,059
(11,713
)
Total Other Expense
439,839
214,007
LOSS BEFORE TAXES
(750, 623
)
(571,193
)
PROVISION FOR INCOME TAXES
-
-
NET LOSS
$
(750,623
)
$
(571,193
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustment
(113,691
)
231,668
COMPREHENSIVE LOSS
$
(864,314
)
$
(339,525
)
NET LOSS PER COMMON SHARE (Basic and diluted)
$
(0.02
)
$
(0.01
)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Basic and diluted)
44,397,297
44,397,297
Management Discussion and Analysis
Our total revenue increased from $5,242 for the three months ended September 30, 2014 to $21,625 for the three months ended September 30, 2015, an increase of $16,383, or 313%. The revenue of $21,625 generated from sales by Hong Kong Huaxia, a wholly owned subsidiary of us. It sells health and specialized local products based on customer orders which vary from time to time. And the primarily reason for the increase was because we did discounted sales on remained cosmetic products.
On July 21, 2105, we raised 1.6 million dollars through private placement. Using the proceeds of this offering, we resumed ginseng beverage production in October 2105, and plan to apply a new reduced size ginseng beverage (40 ML) in November 2015. We estimate that it will be approved by SFDA by January 2016.
We believe that we will be able to improve our sales on ginseng juice in 2016 through 1) our own online shopping platform that has already started to develop since October 2015 which will provide customers with easy and convenient access to our products; 2) rebuilding our distribution network; 3) starting to establish our own nationwide store to sell ginseng beverage. However, assuming those changes having taken place, there is no assurance that our sales of ginseng beverage will meet our expectation as the market conditions may change.
The net loss for the three months ended September 30, 2015 was $750,623, an increase of $179,430 or 31%, compared to a net loss of $571,193 for the three months ended September 30, 2014. The primary reason for the increase in a net loss during the period ended September 30, 2015 was an increase in interest expense.
Comments & Business Outlook
CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES
For the Years Ended
2015
2014
REVENUE
$
272,607
$
2,610,024
COSTS AND EXPENSES
Cost of goods sold
185,679
2,089,423
Selling, general and administrative expenses
1,278,771
1,839,780
Bad debt expense
525,903
2,537,697
Depreciation and amortization
76,664
77,909
Impairment of investment
-
24,905
Total Costs and Expenses
2,067,017
6,569,714
OTHER EXPENSE
Interest expense
2,110,084
802,232
Total Other Expense
2,110,084
802,232
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES
(3,904,494
)
(4,761,922
)
PROVISION FOR INCOME TAXES
-
-
NET LOSS
(3,904,494
)
(4,761,922
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustment
(296,789
)
211,796
COMPREHENSIVE LOSS
$
(4,210,283
)
$
(4,550,126
)
NET LOSS PER COMMON SHARE (Basic and diluted)
$
(0.09
)
$
(0.11
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and diluted
44,397,297
44,397,297
Management Discussion and Analysis
We generated revenue of $272,607 from sales by Hong Kong Huaxia, a whole subsidiary of us in the year ended June 30, 2015. Hong Kong Huaxia sells health and specialized local products based on customer orders which vary from time to time.
Our total revenue decreased from $2,610,024 for the year ended June 30, 2014 to $272,607 for the year ended June 30, 2015, a decrease of $2,337,417 or 90%. The primary reason for the decrease was that we did not have any sales generated from ginseng and ginseng juice during the year ended June 30, 2015.
For the year ended June 30, 2015, we did not have sufficient capital to produce ginseng juice or harvest ginseng, and we did not take ginseng orders from the market.
As a result of the above factors, net loss was $3,904,494 for the year ended June 30, 2015, a decrease of $857,428 or 18%, as compared to the net loss of $4,761,922 for the year ended June 30, 2014. The decrease was primarily due to the decrease in selling, general administrative expenses and bad debt expense for the year ended June 30, 2015.
Deal Flow
Item 1.01 Entry into a Material Definitive Agreement.
On July 21, 2015 (the “Closing Date”), in connection with a security purchase agreement ( the “Purchase Agreement”) between China Ginseng Holdings, Inc. (hereinafter referred to as “we,” “us,” or the “Company”) and an investor (the “Investor”), we closed a private placement (the “Offering”) to sell a Series A Convertible Debenture for a price of $1,600,000. The Debenture is convertible into 4,000,000 shares of our common stock, par value $0.001 per share (the “Common Stock” and the “Conversion Share(s)”) at a price of $0.40 per share (the “Offering”). The Offering was made in reliance upon the exemption from securities registration afforded by Regulation S (“Regulation S”) as promulgated under the Securities Act of 1933, as amended.
Comments & Business Outlook
CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
2015
2014
2015
2014
REVENUES
$
15,148
$
-
$
167,362
$
2,551,181
COSTS AND EXPENSES
Cost of goods sold
60
-
115,878
2,080,737
Selling, general and administrative expenses
381,055
513,899
1,198,082
1,368,709
Bad debt expense (recovered)
(22
)
-
(42,272
)
(55,443
)
Depreciation and amortization
21,342
29,075
67,276
90,241
Total Costs and Expenses
402,435
542,974
1,338,964
3,484,244
OTHER EXPENSE
Interest expense
182,346
131,590
715,578
523,823
Net Other Expense
182,346
131,590
715,578
523,823
LOSS BEFORE INCOME TAXES
(569,633
)
(674,564
)
(1,887,180
)
(1,456,886
)
PROVISION FOR INCOME TAXES
-
-
-
-
NET LOSS
(569,633
)
(674,564
)
(1,887,180
)
(1,456,886
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment
18,374
(113,071
)
167,547
(150,618
)
COMPREHENSIVE LOSS
$
(551,259
)
$
(787,635
)
$
(1,719,633
)
$
(1,607,504
)
NET LOSS PER COMMON SHARE (Basic and diluted)
$
(0.01
)
$
(0.02
)
$
(0.04
)
$
(0.03
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –
Basic and diluted
44,397,297
44,397,297
44,397,297
44,397,297
Management Discussion and Analysis
Revenue
Our total revenue decreased from $2,551,181 in the nine months ended March 31, 2014 to $167,362 for the nine months ended March 31, 2015; a decrease of $2,383,819, or 93%. The primary reason for the decrease was that we did not have any sales generated from ginseng and ginseng juice during the nine months ended March 31, 2015. During the nine months ended March 31, 2015, we did not have sufficient capital to produce ginseng juice or harvest ginseng, and we did not take ginseng orders from the market.
We believe that we will be able to improve our sales through our online sales platform once we have enough capital to establish it. In order to improve our capital, we plan to raise funds through equity or debt, whichever is available to us. Meanwhile, we plan to search for appropriate business candidates for merger or acquisition to increase overall revenues of the Company through a diversification of products.
We had a net loss of $1,887,180 for the nine months ended March 31, 2015 and a net loss of $1,456,886 for the nine months ended March 31, 2014, an increase of $430,294, or 30%. The increase is primarily due to the decrease in revenues combined with an increase in interest expense during the nine months ended March 31, 2015.
Comments & Business Outlook
CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
For the Six Months Ended
December 31,
December 31,
2014
2013
2014
2013
REVENUES
$
146,972
$
2,484,432
$
152,214
$
2,546,825
COSTS AND EXPENSES
Cost of goods sold
112,917
2,070,925
115,818
2,077,579
Selling, general and administrative expenses
499,522
581,182
817,027
841,517
Bad debt expense (recovered)
(42,250
)
(16,138
)
(42,250
)
(55,348
)
Depreciation and amortization
15,625
30,690
45,934
61,166
Total Costs and Expenses
585,814
2,666,659
936,529
2,924,914
OTHER EXPENSE
Interest expense
307,512
332,213
533,232
392,233
Net Other Expense
307,512
332,213
533,232
392,233
LOSS BEFORE INCOME TAXES
(746,354
)
(514,440
)
(1,317,547
)
(770,322
)
PROVISION FOR INCOME TAXES
-
-
-
-
NET LOSS
(746,354
)
(514,440
)
(1,317,547
)
(770,322
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment
(82,495
)
(58,402
)
(149,173
)
(36,175
)
COMPREHENSIVE LOSS
$
(828,849
)
$
(572,842
)
$
(1,168,374
)
$
(806,497
)
NET LOSS PER COMMON SHARE (Basic and diluted)
$
(0.02
)
$
(0.01
)
$
(0.03
)
$
(0.02
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –
Basic and diluted
44,397,297
44,397,297
44,397,297
44,397,297
Management Discussion and Analysis
Revenue
We only generated revenue of $146,972 and $152,214 from sales by Hong Kong Huaxia, a wholly subsidiary of us in the three months and six months ended December 31, 2014, respectively. Hong Kong Huaxia sells health and specialized local products based on customer orders which vary from time to time.
We believe that we will be able to improve our sales through our online sales platform once we have enough capital to establish it. In order to improve our capital, we plan to raise funds through equity or debt, whichever is available to us. Meanwhile, we plan to search for appropriate business candidates for merger or acquisition to increase overall revenues of the Company through a diversification of products.
Net Loss
We had a net loss of $1,317,547 for the six months ended December 31, 2014 and a net loss of $770,322 for the six months ended December 31, 2013, an increase of $547,225, or 71 %. The increase is primarily due to the decrease in revenues combined with an increase in interest expense in 2014.
Comments & Business Outlook
China Ginseng Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
September 30,
2014
2013
REVENUE
$
5,242
$
62,393
COSTS AND EXPENSES
Cost of goods sold
2,901
6,654
Selling, general and administrative expenses
317,505
260,335
Bad debt expense
-
(39,210
)
Depreciation and amortization
30,309
30,476
Total Costs and Expenses
350,715
258,255
OTHER EXPENSE
Interest expense
225,720
60,020
Net Other Expense
225,720
60,020
LOSS BEFORE INCOME TAXES
(571,193
)
(255,882
)
PROVISION FOR INCOME TAXES
-
-
NET LOSS
$
(571,193
)
$
(255,882
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment
231,668
22,227
COMPREHENSIVE LOSS
$
(339,525
)
$
(233,655
)
NET LOSS PER COMMON SHARE (Basic and diluted)
$
(0.01
)
$
(0.01
)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Basic and diluted)
44,397,297
44,397,297
Management Discussion and Analysis
Revenue
Our total revenue decreased from $62,393 for the three months ended September 30, 2013 to $5,242 for the three months ended September 30, 2014, a decrease of $57,151, or 92%. The primarily reason for the decrease was because we did not have any sales generated from ginseng and ginseng juice during the three months ended September 30, 2014 due to the fact that we did not have enough capital to produce ginseng juice and we did not harvest ginseng nor take ginseng order from the market.
We only generated revenue of $5,242 from sales by Hong Kong Huaxia, a wholly subsidiary of us. It sells health and specialized local products based on customer orders which vary from time to time.
We believe that we will be able to improve our sales through our new online sales platform once we have enough capital. In order to improve our capital, we plan to raise funds through equity or debt, whichever is available to us. Meanwhile, we plan to search for appropriate business candidates for merger or acquisition to increase overall revenues of the Company through a diversification of products.
Net Loss
The net loss for the three months ended September 30, 2014 was $571,193, an increase of $315,311 or 123%, compared to a net loss of $255,882 for the three months ended September 30, 2013. The primary reason for the increase in a net loss during the period ended September 30, 2014 was a significant decrease in sales.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended
June 30,
2014
2013
REVENUE
$
2,610,024
$
3,563,165
COSTS AND EXPENSES
Cost of goods sold
2,089,423
2,671,572
Selling, general and administrative expenses
1,839,780
1,330,146
Bad debt expense
2,537,697
842,946
Depreciation and amortization
77,909
82,240
Impairment of investment
24,905
-
Impairment of ginseng crops
-
1,227,979
Total Costs and Expenses
6,569,714
6,154,883
OTHER EXPENSE
Interest expense
802,232
251,790
Total Other Expense
802,232
251,790
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES
(4,761,922
)
(2,843,508
)
PROVISION FOR INCOME TAXES
-
-
LOSS FROM CONTINUING OPERATIONS
(4,761,922
)
(2,843,508
)
DISCONTINUED OPERATIONS (net of tax)
Gain on disposal
-
695,818
Loss from operations
-
(1,498,314
)
Loss from Discontinued Operations
-
(802,496
)
NET LOSS
(4,761,922
)
(3,646,004
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustment
211,796
(169,400
)
COMPREHENSIVE LOSS
$
(4,550,126
)
$
(3,815,404
)
NET LOSS PER COMMON SHARE (Basic and diluted)
Loss from continuing operations per share
$
(0.11
)
$
(0.06
)
Loss from discontinued operations per share
-
(0.02
)
Net loss per share
$
(0.11
)
$
(0.08
)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING – Basic and diluted
44,397,297
44,397,297
Management Discussion and Analysis
Our total revenue decreased from $3,563,165 for the year ended June 30, 2013 to $2,610,024 for the year ended June 30, 2014, a decrease of $953,141 or 27%. The decrease was primarily due to the decrease of the sales of self-production ginseng, wine, ginseng beverage and Aoweisi Cosmetic.
The sales revenue from our ginseng production includes our own farming production and ginseng purchased from the farmers who leased land from us, collectively referred as our grown ginseng. For the year ended June 30, 2014, the sales of our grown ginseng decreased by $1,102,575 or 57%, compared to the year ended June 30, 2013. The decrease of sale s revenue was caused by significant decrease of quantity we sold to the market.
As a result of the above factors, net loss was $4,761,922 for the year ended June 30, 2014, an increase of $1,115,918 or 31%, as compared to the net loss of $3,646,004 for the year ended June 30, 2013.
Investor Alert
On May 16, 2014, the Board of Directors of China Ginseng Holdings, Inc. ( the “Company” or “we”, “us”) concluded that the unaudited condensed consolidated financial statements for the three and six month periods ended December 31, 2013 contained in our Form 10-Q originally filed on February 14, 2014 should no longer be relied upon due to errors in connection with an overstated depreciation expense by $97,609 for the six months ended December 31, 2013. In connection with the preparation of our condensed consolidated financial statements as of and for the nine months ended March 31, 2014, we reviewed the depreciation of machinery and equipment acquired during the nine months ended March 31, 2014 and determined that depreciation expense was overstated by $97,609 for the six months ended December 31, 2013. This error impacted property and equipment (net) and total assets in consolidated balance sheet as well as costs and expenses and net loss in the consolidated statements of operations. These errors were considered material to the consolidated financial statements.
Subsequently, our Board of Directors discussed this matter with our independent registered public accounting firm, Cowan, Gunteski & Co., P.A., and decided to restate the unaudited condensed consolidated financial statements for the three and six month periods ended December 31, 2013 to correctly record the depreciation expense during such periods.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
2014
2013
2014
2013
REVENUES
$ - $ 497,943 $ 2,551,181 $ 2,690,662
COSTS AND EXPENSES
Cost of goods sold
- 247,837 2,080,737 2,188,237
Selling, general and administrative expenses
513,899 157,932 1,368,709 856,001
Impairment of ginseng crops and inventory
- - - 922,695
Bad debt expense
- - (55,443 ) -
Depreciation and amortization
29,075
37,101
90,241
95,827
Total Costs and Expenses
542,974
442,870
3,484, 244
4,062,760
INCOME (LOSS) FROM OPERATIONS
(542,974
) 55,073
(933,063
) (1,372,098 )
NON OPERATING INCOME (EXPENSE)
Interest expense
(131,590 ) (67,565 ) (523,823 ) (227,261 )
Net Other Expense
(131,590 ) (67,565 ) (523,823 ) (227,261 )
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(674,564
) (12,492 )
(1,456,886
) (1,599,359 )
PROVISION FOR INCOME TAXES
- - - -
LOSS FROM CONTINUING OPERATIONS
(674,564
) (12,492 )
(1,456,886
) (1,599,359 )
LOSS FROM DISCONTINUED OPERATIONS
- (1,407,018 ) - (1,470,213 )
NET LOSS
$
(674,564
) $ (1,419,510 ) $
(1,456,886
) $ (3,069,572 )
OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment
(113,071 ) 64,552 (150,618 ) 37,277
COMPREHENSIVE LOSS
$
(787,635
) $ (1,354,958 ) $
(1,607,504
) $ (3,032,295 )
NET LOSS PER SHARE (Basic and Diluted)
Loss from Continuing operaions per share
$ (0.02 ) $ -
$
(0.03
) $ (0.04 )
Loss from discontinued operations per share
-
(0.03 )
-
(0.03 )
Net loss per common share $ (0.02 ) $ (0.03 ) $ (0.03 ) $ (0.07 )
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –
Basic
44,397,297 44,397,297 44,397,297 44,397,297
Diluted
44,397,297 44,397,297 44,397,297 44,397,297
Management Discussion and Analysis
Revenue
For the three months ended March 31, 2014 and 2013:
Net Loss
The net loss for the quarter ended March 31, 2014 was $674,564, a decrease of $744,947 or 52.48%, compared to a net loss of $1,419,511 for the quarter ended March 31, 2013.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
For the Six Months Ended
December 31,
December 31,
2013
2012
2013
2012
REVENUES
$
2,484,432
$
1,688,947
$
2,546,825
$
2,192,719
COSTS AND EXPENSES
Cost of goods sold
2,070,925
1,439,961
2,077,579
1,940,400
Selling, general and administrative expenses
581,182
368,864
841,517
699,924
Impairment of ginseng crops
-
-
-
920,840
Bad debt expense
(16,138
)
-
(55,348
)
-
Depreciation and amortization
128,299
29,898
158,775
58,726
Total Costs and Expenses
2,764,268
1,838,723
3,022,523
3,619,890
LOSS FROM OPERATIONS
(279,836
)
(149,776
)
(475,698
)
(1,427,171
)
NON OPERATING EXPENSE
Interest expense
332,213
77,035
392,233
159,696
Net Other Expense
332,213
77,035
392,233
159,696
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(612,049
)
(226,811
)
(867,931
)
(1,586,867
)
PROVISION FOR INCOME TAXES
-
-
-
-
LOSS FROM CONTINUING OPERATIONS
(612,049
)
(226,811
)
(867,931
)
(1,586,867
)
LOSS FROM DISCONTINUED OPERATIONS
-
(30,049
)
-
(63,195
)
NET LOSS
(612,049
)
(256,860
)
(867,931
)
(1,650,062
)
OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment
(59,238
)
16,133
(37,011
)
(27,275)
COMPREHENSIVE LOSS
$
(671,287
)
$
(240,727
)
$
(904,942
)
$
(1,677,337
)
NET LOSS PER COMMON SHARE (Basic and diluted)
Loss from continuing operations per share
$
(0.01
)
$
(0.01
)
$
(0.02
)
$
(0.04
)
Loss from discontinued operations per share
-
-
-
-
Net loss per share
$
(0.01
)
$
(0.01
)
$
(0.02
)
$
(0.04
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –
Basic
44,397,297
44,397,297
44,397,297
44,397,297
Diluted
44,397,297
44,397,297
44,397,297
44,397,297
Management Discussion and Analysis
Revenue
Net revenues are comprised of sales of self-production ginseng and purchased, Aoweisi cosmetic product and Ruiersui Capsules during the three months ended December 31, 2013. Our total revenue increased from $1,688,947 for the three months ended December 31, 2012 to $2,484,432 for the three months ended December 31, 2013, an increase of $795,485 or 47%. The increase was primarily attributable to the resale of purchased ginseng.
We generated $1,658,363, or 66.75% of sales from our purchased ginseng for the three months ended December 31, 2013, an increase of $1,116,166, or 206%. We generated $820,280, or 33.02% of sales from our self-production ginseng for the three months ended December 31, 2013, a decrease of $247,757, or 23%. The increases were primarily due to increased market price of ginseng and quantity we sold to the market. The market price increased by $50.26/kg, or 106% compared to the same period in 2012 due to nation-wide inflation in the three months ended December 31, 2013. And the quantity of our self-production ginseng increased by 2,188 kg during the three months ended December 31, 2013, compared to the same period in 2012. The increase in quantity we sold was due to the fact that ginseng harvested in calendar year 2013 was damaged by typhoon in August 2012 and not qualified for producing ginseng juice production.
5% of the increase was caused by increased quantity of sale
95% of the increase was caused by the increase of resale price of purchased ginseng
For the three months ended December 31, 2013, we had generated revenue of $1,561 and $4,228 from sales of Ruiersui capsules and Aoweisi cosmetic products, respectively. Those two products were sold through Hong Kong Huaxia based on consumers’ special orders. We do not expect this to be a major source of our revenue in the future.
We had no ginseng juice sales for the three month ended December 31, 2013 since we did not have enough capital to produce ginseng juice.
We had no wine production and sales for the three months ended December 31, 2013 because we did not receive orders from customers during that period.
Net Loss
The Net Loss for the three months ended December 31, 2013 was $612,049; a increase of $355,189 or 138%, compared to a net loss of $256,860 for the three months ended December 31, 2012. The increase is primarily due to the increase in operating expenses and administrative expenses, depreciation expenses and interest expense.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
For the Three Months Ended
For the Nine Months Ended
March 31,
March 31,
2012
2011
2012
2011
REVENUES
$ $ $ 3,147,262 $
COSTS AND EXPENSES
Cost of goods sold
1,723,270 2,478,869 2,641,501
Selling, general and administrative expenses
1,498,073
Depreciation and amortization
46,338
1,086,036 4,023,280
LOSS FROM OPERATIONS
(183,229 ) ) (876,018 ) (509,664 )
NON OPERATING INCOME (EXPENSE)
Foreign exchange
4,992 - 30,236 610
(100,635 ) (122,226 ) (248,579 ) (147,165 )
) (122,226 ) (218,343 ) (146,555 )
LOSS BEFORE INCOME TAXES
(278,872 ) (211,379 ) (1,094,361 ) (656,219 )
PROVISION FOR INCOME TAXES
21,803
NET LOSS
$ ) $ ) $ (1,116,164 ) $ )
OTHER COMPREHENSIVE INCOME
Translation Adjustment
37,614 89,380 102,017 214,615
COMPREHENSIVE LOSS
$ (244,348 ) $ (134,250 ) $ (1,014,147 ) $ (457,622 )
NET LOSS PER COMMON SHARE
Basic
$ (0.01 ) $ (0.01 ) $ (0.03 ) $ (0.02 )
Diluted
$ (0.01 ) $ (0.01 ) $ (0.03 ) $ (0.02 )
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING –
Basic
44,388,539 40,324,890
Diluted
44,397,297 42,841,375 44,388,539 40,324,890
See accompanying notes to consolidated financial statements.
Comments & Business Outlook
For the Six Months Ended
December 31,
December 31,
2011
2010
2011
2010
REVENUES
$ $ $ 2,244,455 $
COSTS AND EXPENSES
Cost of goods sold
1,031,186 1,754,652
1,126,816
30,532
1,680,605 2,912,000
LOSS FROM OPERATIONS
(328,555 ) (128,137 ) (667,545 ) (404,472 )
NON OPERATING EXPENSE
147,944
147,944
LOSS BEFORE INCOME TAXES
(419,683 ) (172,778 ) (815,489 ) (481,231 )
PROVISION FOR INCOME TAXES
18,713
NET LOSS
$ ) $ ) $ (834,202 ) $ )
OTHER COMPREHENSIVE INCOME
Translation Adjustment
33,788 54,340 64,403 125,235
COMPREHENSIVE LOSS
$ (388,155 ) $ (134,576 ) $ (769,799 ) $ (372,134 )
NET LOSS PER COMMON SHARE
Basic
$ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.01 )
Diluted
$ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.01 )
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING –
Basic
44,384,208 41,337,249
Diluted
44,397,297 42,515,237 44,384,208 41,337,249
Our cost of purchasing ginseng for resale increased substantially from $286,800 in the three months ended December 31, 2010 to $464,132 in the three months ended December 31, 2011 primarily because 1) the quality of the ginseng we purchased increased; 2) purchased price increased due to the nationwide inflation and the policy of the Chinese government restricted the amount of land available for ginseng farming (land under our company’s control was not subject to the change in government restrictions).
Investor Alert
As of September 30, 2011, there was no change in our loan payments compared with the three months ended September 30, 2010 since the loans remained constant. As of September 30, 2011, we had outstanding loan of 2,000,000 RMB (about $309,043) to Ji’An Qingshi Credit Cooperatives (“Ji’An Qingshi”). The principal terms of the loan are as follows:
2. Loan Purpose: Planting
3. Loan Amount: Principal of 2,000,000 RMB (about USD $309,043) with an annual interest of 6.325%
4. Loan Period: From February 4, 2002 to February 4, 2003; Repayment due date was February 4, 2003
5. Security: The loan is secured by assets of Tonghua including 14 carbon-steel storage cans; 16 high-speed steel storage cans and 150 tons of grape juice.
We have not paid any principal or interest of the loan ; however, Ji’An Qingshi verbally agreed in March 2008 not to call the loan. The material terms for the verbal agreement are: No principal or interest payments are required to be made until the Company is generating profits and interest continues to accrue until we repay the loan. Thus, the debt in Tonghua Linyuan acquisition will not have impact on our liquidity and capital resource before we start to repay the lender. Nevertheless, we had a net loss of $1,108,333 for the year ended June 30, 2011. If we continue operation without generating net income, Ji’An Qingshi might revoke the oral agreement and call the loan. If we can not pay off the loan in the event Ji’An Qingshi revokes the oral agreement, Ji’An Qingshi has the right to sell, initiate an auction sale or take any other methods to liquidate the secured assets and receive the payment of outstanding principal and interests senior to any other party out of the secured assets. As of the date of this filing, Tonghua Linyuan has 31 storage cans in total including 15 carbon-steel cans and 16 high-speed steel storage cans; 2 white-steel transport tanks, 1170 tons of grape juice. Therefore, if Ji’An Qinshi decides to revoke the oral agreement and call the loan, it will not lead to the close of operation and business of Tonghua Linyuan; however, it will cause extra costs for Tonghua Linyuan to rent additional storage cans from third parties.
Comments & Business Outlook
September 30,
2011
2010
REVENUES
$ $
COSTS AND EXPENSES
Cost of goods sold
Selling, general and administrative expenses
Depreciation and amortization
1,231,395
LOSS FROM OPERATIONS
(338,990 ) (276,335 )
NON OPERATING EXPENSE
LOSS BEFORE INCOME TAXES
(395,806 ) (308,453 )
PROVISION FOR INCOME TAXES
NET LOSS
$ ) $ )
OTHER COMPREHENSIVE INCOME
Translation Adjustment
30,615 70,895
COMPREHENSIVE LOSS
$ (381,644 ) $ (237,558 )
NET LOSS PER COMMON SHARE
Basic
$ (0.01 ) $ )
Diluted
$ (0.01 ) $ (0.01 )
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING –
Basic
Diluted
44,371,119 37,298,087
The increase in revenues was primarily due to the contribution of revenues from: $43,361 for the three months ended September 30, 2010 to $838,618 for the three months ended September 30, 2011, an increase of $795,257 or 1834%. These sales were supported by increased market demand and market price. For the three months ended September 30, 2011, the quantity of ginseng orders we received from the customers increased by 13,317kg compared to the order we received during the three months ended September 30, 2010; the market price increased by $35.88/kg compared to the same period time in 2010. The policy of the Chinese government restricted the amount of land available for ginseng farming (land under our company’s control was not subject to the change in government restrictions). Jilin Provincial Government in the nationwide promotion of ginseng resulted in the market demand and ginseng prices going higher in this quarter in 2011.
2. Ginseng beverage sales: For the three months ended September 30, 2011, about $52,511 or 6% of our revenue was generated from our ginseng juice product. This was a result of our marketing effort to the previously unaddressed beverage market. We have signed 19 distribution agreements since August, 2010; established 1 office branch in Jiangshu province and with their sales channels we have started to generate revenue from our ginseng beverage business. Since we just started sales of canned ginseng juice in December 31, 2010, the sales generated by Jilin Huamei was still a small part of our revenue for the three months ended September 30, 2011. However, we believe that there is a significant opportunity for functional drink in China and there are currently no leading brands in the market. With our unique production technology of ginseng beverage and our focus on high-end consumer, we anticipate that around 70% of our revenue will come from sales of ginseng beverage in next 3-5 years. Nevertheless, there is no assurance that our sales of ginseng beverage will generate 70% of our revenues in the next 3-5 years.
3. Wine sales: For the three months ended September 30, 2011, about $1,276 or 1% of our revenue was generated from our wine product. This was a result of our marketing effort to the previously unaddressed beverage market. We have signed 1 distribution agreement since November, 2010 and with their sales channels we have started to generate revenue from our wine business since April 2011. Since we just started sales of wine in April 2011, the sales of wine was a very small part of our revenue for the three months ended September 30, 2011. However, we believe that there is a significant opportunity for wine business in China because Chinese wine culture has a long history. Furthermore, our vineyard is located in Changbai Mountain, Jilin Province, which is the largest grape growing area in Asia and is adequate and suitable land for growing grapes. The climate in Changbai Mountain is ideal for growing grapes because of the significant temperature difference during day and night. It contributes to the accumulation of polyphenols and Flavonoids in grapes improving the taste and quality of the wine. Therefore we anticipate that around 20% of our revenue will come from sales of wine in next 3-5 years. Nevertheless, there is no assurance that our sales of wine will generate 20% of our revenues in the next 3-5 years.
The net loss is primarily due to the increase in operating expenses and administrative expenses. There also was an increase in the cost of purchasing ginseng for resale and in the cost of ginseng juice, wine production.
Investor Alert
On March 2, 2010, the Company entered into an agreement with Meihekou Hang Yilk Tax Warehousing Logistics, an auctioneer, to purchase office and production facilities. The Company obtained an 8 million RMB (about USD $1,236,170) bank loan from Meihekou City Rural Credit Union to pay the seller on November 8, 2010.
We are current on the payment of interest of this loan. The debt in 8 million RMB Meihekou Credit Union loan will not a have material impact on our liquidity and capital resources until such time as we are required to repay the principal. However, as of the date of this report, the 1,600,00 RMB principal payment is in default , and the Company got an oral agreement from the bank to pay the total amount of the loan on August 10, 2012. In addition, there are no financial covenants in the Meihekou Credit Union agreement that place restrictions or limits on our ability to raise capital in the future.
Comments & Business Outlook
For the Years Ended
June 30,
2011
2010
REVENUE
$ $
COSTS AND EXPENSES
Cost of goods sold
3,482,561 902,374
1,595,059 280,175
18,658 37,334
LOSS FROM OPERATIONS
(938,860 ) (483,232 )
NON OPERATING (INCOME) EXPENSE
Interest expense
) (141,567 )
Gain on disposal of equipment
57,386 -
Other expenses
- (4,353 )
(205,741 ) (145,920 )
LOSS BEFORE INCOME TAXES
(1,144,601 ) (629,152 )
PROVISION FOR INCOME TAXES
(36,268 ) 19,575
NET LOSS
$ ) $ )
NET LOSS PER COMMON SHARE
Basic
$ ) $ )
Diluted
$ (0.03 ) $ (0.02 )
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING –
Basic
Diluted
41,224,515 34,659,752
The Net Loss for the year ended June 30, 2011 was $1,108,333; an increase of $459,606 compared to a net loss of $648,727 for the year ended June 30, 2010. The net loss is primarily due to the increase in operating expenses and administrative expenses. There also was an increase in the cost of producing ginseng and in purchasing ginseng for resale.
Since our inception in 2004, we have been engaged in the business of farming, processing, distribution and marketing of fresh ginseng, dry ginseng, ginseng seeds, and seedlings. In March 2008, we acquired Tonghua Linyuan Grape Planting Co., to plant wild mountain grapes. Starting in August 2010, we have gradually shifted the focus of our business from direct sales of ginseng to canned ginseng juice and wine.
Although, China Ginseng Holdings has not generated any revenues from its ginseng beverage and wine businesses, we believe there is future potential to do so because (i) the China Ginseng market is recovering now, (ii) the demand and the price is in the uptrend due to Chinese government restrictions on the amount of land available for ginseng farming (land under our Company’s control was not affected by the government restrictions), and (iii) as of the date this filing, we have already entered into binding agreements with ten distributors to distribute our beverage in different cities.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended
For the Six Months Ended
December 31,
December 31,
2010
2009
2010
2009
REVENUE
$ 919,877
$ 58,579
$ 973,175
$ 90,195
COSTS AND EXPENSES
Cost of goods sold
819,222
67,984
864,481
82,898
Selling, general and administrative expenses
224,172
44,170
502,553
(5,358 )
Depreciation and amortization
4,620
7,567
10,613
14,551
Total Costs and Expenses
1,048,014
119,721
1,377,647
92,091
LOSS FROM OPERATIONS
(128,137 )
(61,142 )
(404,472 )
(1,896 )
NON OPERATING EXPENSES
Other expenses
-
(122 )
-
(122 )
Interest expense
(44,641 )
(35,258 )
(76,759 )
(70,505 )
Net Other Expenses
(44,641 )
(35,380 )
(76,759 )
(70,627 )
LOSS BEFORE INCOME TAXES
(172,778 )
(96,522 )
(481,231 )
(72,523 )
PROVISION FOR INCOME TAXES
(16,138 )
(9,788 )
(16,138 )
(9,788 )
NET LOSS
$ (188,916 )
$ (106,310 )
$ (497,369 )
$ (82,311 )
NET LOSS PER COMMON SHARE
Basic
$ (0.00 )
$ (0.00 )
$ (0.01 )
$ (0.00 )
Diluted
$ (0.00 )
$ (0.00 )
$ (0.01 )
$ (0.00 )
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING –
Basic
42,515,237
34,397,297
41,337,249
34,397,297
Diluted
42,515,237
34,397,297
41,337,249
34,397,297
We believe that the shift of business focus to ginseng juice production and wine production will bring more profit to the Company in the long term. Before we decided to enter into the business of ginseng juice production, we conducted research regarding the market for functional drink and especially ginseng beverage. “Functional drink” is a drink product that is non-alcoholic, ready to drink and includes in its formulation non-traditional ingredients, including herbs, vitamins, minerals, amino acids or additional raw fruit or vegetable ingredients, so as to provide specific health benefits that go beyond general nutrition. In July 2010, China Lano Chiyip Research Institute conducted an extensive research on functional drinks in Chinese domestic market and published a report on its research results (the “Lano Chiyip Report”). According to the Lano Chiyip Report, revenue of functional drink sales of the entire Chinese market increased from 0.84 billion RMB in 2000 to 3 billion RMB in 2005. In recent years, with deteriorating natural environment and increasing pressure of daily life, there are more and more people having the so called “sub-health conditions”, which is defined by the World Health Organization as a state between health and disease when the patient experiences reduction in his or her vitality and adaptability although there is no defined disease diagnosed. At the same time, people in China are becoming more concerned about their health and quality of life. There is increasing need for healthy food and drink, which has driven the growing market for functional beverages in China. China’s current consumption of functional drinks is only 0.5 kg/person annually, compared with 7 kg/person annually in Western countries. Therefore, we see great potential for sales of functional beverages in the China market.
Liquidity Requirements
We started our ginseng beverage production in August 2010 and sales in October, 2010. As of June 30, 2010, we raised capital $591,902 through private financing pursuant to Regulation S. Since June 30, 2010, we raised an additional $1,227,970 in private financing pursuant to Regulation S.
We intend to continue to seek additional financing until such time as we are able to support our growth through our operations. Meanwhile, we intend to continue to try and recruit the distributors in different cities in order to increase our sales.
Investor Alert
On
December 17, 2010 , the Board of Directors of China Ginseng Holdings, Inc. concluded that the consolidated financial statements included in the Registrant’s Registration Statement on Form 10 for the years ended June 30, 2009 and 2008 and for the nine months ended March 31, 2010 and 2009 (unaudited), should no longer be relied upon due to the lack of recording of imputed interest on related party loans, the lack of recording of amounts under subcontracting agreements with farmers to cultivate the Company’s ginseng crops and an error in the recording of negative goodwill on a previous acquisition.
Management and the Board of Directors of the Company discussed this matter with the Company’s principal accountants and decided to restate the financial statements for the years ended June 30, 2009 and 2008 and for the nine months ended March 31, 2010 and 2009. The effects of the restatements are presented in the following table:
Nine months ended
Nine months ended
Year ended
Year ended
March 31, 2010
March 31, 2009
June 30, 2009
June 30, 2008
As
Reported
As
Restated
As
Reported
As
Restated
As
Reported
As
Restated
As
Reported
As Restated
Receivable from farmers (2)
- $ 118,249 - - - $ 105,110 - $ 52,555
Long-term payable- farmers(2)
- 315,330 - - - 280,293 - 140,146
Property and equipment, net(3)
$ 1,411,978 1,294,696 - - $ 1,498,529 1,381,247 $ 1,630,894 1,513,612
Ginseng crops, Non-current portion(2)
- 23,370 - - 3,549,575 3,601,953 3,266,919 3,294,856
Additional paid-in capital (1)(2)(3)
4,243,566 4,384,382 $ 4,243,566 $ 4,436,409 4,243,566 4,420,548 4,243,566 4,299,995
Retained earnings(1) (2)(3)
(758,347 ) (1,016,445 ) - - (661,796 ) (1,078,865 ) (722,872 ) (956,237 )
Cost of sales(2)
253,690 301,107 879,356 926,719 836,216 899,367 232,609 292,263
Interest expense(1)
(15,361 ) (96,289 ) (27,478 ) (111,865 ) (27,231 ) (147,784 ) (4,701 ) (67,517 )
Net income (loss)(1), (2)
(96,551 ) (224,896 ) 114,069 (17,681 ) 61,076 (122,628 ) (451,353 ) (573,823 )
Earnings per share(4)
- - $ (0.01 ) $ (0.00 ) $ (0.01 ) $ (0.00 ) - -
Notes:
(1)
The Company determined that an imputed interest on loans with related parties that are non-interest bearing should be recorded as interest expense and a related capital contribution should be recorded utilizing the Company’s borrowing rate. The Company has accordingly computed the interest expense for each of the respective periods as follows: $120,533 and $62,816 for the years ended June 30, 2009 and 2008; $80,928 and 84,387 for the nine months ended March 31, 2010 and 2009. As the years prior to June 30, 2008 are not presented, an amount of $45,640 was reflected as an adjustment to the opening balance of the Company’s Accumulated Deficit.
(2)
The Company determined that the agreements it had entered into with the local farmers for the cultivation of portions of the Company’s land should be recorded. Accordingly, the Company has recorded the related receivables and payables due under the agreements and re-assessed its impairment computation utilizing the lower of cost or market rules. The nature of these agreements is discussed further in Note G. The following summarizes increases (decreases) resulting from these agreements:
March 31, 2010
June 30, 2009
June 30, 2008
Receivable from farmers
$ 118,249 $ 105,110 $ 52,555
Ginseng crops- non current
23,370 52,378 27,937
Long term payables to farmers
315,330 280,293 140,146
Accumulated deficit
(170,222 ) (122,805 ) (59,654 )
Cost of sales
47,417 63,151 59,654
Additionally, the Statement of Operations for the nine months ended March 31, 2009 was restated to reflect an additional impairment of Ginseng Crops of $47,363.
(3)
Upon the initial acquisition of Yanbian in 2005, the Company recognized negative goodwill of $ 117,282 as the excess of the fair value of the net assets of Yanbian over the purchase price. This negative goodwill resulted from two transactions, the initial acquisition of 55% and the subsequent acquisition of the remaining 45% of Yanbian. The Company erroneously recorded the negative goodwill relating the initial 55% acquisition as income rather than reducing its’ non-current assets, which was property and equipment. The Company also erroneously recorded the negative goodwill relating to the 45% acquisition as additional paid in capital. The Company restated its’ financial statements by decreasing its Property and equipment by $117,282, decreasing its Additional paid-in capital by $52,027 (representing the 45% acquisition) and decreasing its’ Opening accumulated deficit by $65,255 (representing the 55% acquisition.)
(4)
Adjustment of loss per share. The previously presented amounts were erroneously rounded from $ (0.00) to $ (0.01).
Investor Alert
On December 17, 2010, the Board of Directors of the Registrant concluded that the consolidated financial statements included in the Registrant’s Registration Statement on Form 10 for the years ended June 30, 2009 and 2008 and for the nine months ended September 30, 2010 and 2009 (Unaudited), should no longer be relied upon due to the lack of recording of imputed interest on related party loans, the lack of recording of amounts under subcontracting agreements with farmers to cultivate the Company’s ginseng crops and an error in the recording of negative goodwill on a previous acquisition.
Management and the Registrant’s Board of Directors discussed this matter with the Registrant’s independent registered public accounting firm. The Registrant amended and refiled its Registration Statement on Form 10 as a result of the matters described above.
Investor Alert
Pursuant to Rule 477 promulgated under the Securities Act of 1933, as amended (the “Act”), China Ginseng Holdings, Inc. (the “Registrant”) hereby respectfully requests the withdrawal of the above-referenced Registration Statement on Form SB-2 (File No. 333-142616), filed with the Securities and Exchange Commission (the “Commission”) on May 4, 2007, together with all exhibits thereto (the “Registration Statement”). The Company submits this request for withdrawal as it does not intend to pursue the contemplated public offering at this time. Instead, it intends to register its common stock on Form 10 to be filed in the future. The Company confirms that no securities have been distributed, issued or sold pursuant to the Registration Statement or the prospectus contained therein. The Company also acknowledges that no refund will be made for fees paid to the Commission in connection with filing of the Registration Statement. However, the Company requests, in accordance with Rule 457(p) under the Act that all fees paid to the Commission in connection with the filing of the Registration Statement be credited to the Company’s account to be offset against the filing fee for any future registration statement or registration statements. Your assistance in this matter is greatly appreciated. If you have any questions or require further information or documentation regarding the foregoing, please do not hesitate to contact Michael T. Williams, Esq., counsel to the Registrant, at 813-831-9348.
