Company: SISI
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010889
Chunk: 27

Company: SHINECO, INC.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 27
---

deferred taxes, and inventory reserves. Actual results could differ from those estimates.

Revenue Recognition

The Company generates its revenue primarily through
sales of Luobuma products, other agricultural products, healthy meals and rapid diagnostic and other products, as well as providing logistic
services and other processing services to external customers in accordance with ASC 606. ASC 606 establishes principles for reporting
information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide
goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services
to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services
recognized as performance obligations are satisfied.

With the adoption of ASC 606, “Revenue from
Contracts with Customers,” revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with
the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company has assessed
the impact of the guidance by reviewing its existing customer contracts to identify differences that will result from applying the new
requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control, and
principal versus agent considerations. In accordance with ASC 606, the Company evaluates whether it is appropriate to record the gross
amount of product sales and related costs or the net amount earned as commissions. When the Company is a principal, that the Company obtains
control of the specified goods or services before they are transferred to the customers, the revenue should be recognized in the gross
amount of consideration to which it expects to be entitled in exchange for the specified goods or services transferred. When the Company
is an agent and its obligation is to facilitate third parties in fulfilling their performance obligation for specified goods or services,
the revenue should be recognized in the net amount for the amount of commission which the Company earns in exchange for arranging for
the specified goods or services to be provided by other parties. Based on the assessment, the Company concluded that there was no change
to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material
changes to the Company’s financial statements upon adoption of ASC 606.

    11

More