Farmmi Sells Subsidiary for $6M to Streamline China Operations

TL;DR

**Farmmi sold a subsidiary for $6M to cut costs and streamline operations in China.**

AI Summary

Farmmi, Inc. (NASDAQ: FAMI) announced on February 5, 2024, that its wholly-owned subsidiary, Zhejiang Suyuan Agricultural Technology Co., Ltd, sold 100% of Zhejiang Farmmi Holdings Group Co., Ltd for RMB 43.1 million (approximately $6.0 million) to Lishui Chida Logistics Co., Ltd. This strategic disposition aims to streamline business operations in China and reduce maintenance costs associated with Farmmi Holding and its subsidiary, Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd. This matters to investors because it indicates a move to optimize the company's structure and potentially improve profitability by shedding non-core or costly assets.

Why It Matters

This sale could improve Farmmi's financial health by reducing operational costs and focusing resources on more profitable segments, potentially leading to better shareholder value.

Risk Assessment

Risk Level: low — The disposition of a subsidiary for cash to streamline operations is generally a positive or neutral event, reducing complexity and potential liabilities.

Analyst Insight

A smart investor would view this as a positive step towards operational efficiency and cost reduction. It would be prudent to monitor Farmmi's next earnings report for evidence of reduced operating expenses and improved profitability, and to understand how the $6.0 million in proceeds will be utilized.

Key Numbers

• $6.0M — Sale Price (The approximate amount Farmmi received from the sale of its subsidiary, Zhejiang Farmmi Holdings Group Co., Ltd.)
• 100% — Equity Sold (The percentage of equity in Zhejiang Farmmi Holdings Group Co., Ltd. that was sold.)
• RMB 43.1M — Sale Price (RMB) (The exact sale price in Chinese Yuan for Zhejiang Farmmi Holdings Group Co., Ltd.)

Key Players & Entities

• Farmmi, Inc. (company) — the registrant filing the 6-K
• Zhejiang Suyuan Agricultural Technology Co., Ltd (company) — wholly owned subsidiary of Farmmi, Inc. that sold Farmmi Holding
• Lishui Chida Logistics Co., Ltd (company) — unrelated third-party buyer of Farmmi Holding
• Zhejiang Farmmi Holdings Group Co., Ltd (company) — the subsidiary sold by Suyuan
• Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd (company) — wholly owned subsidiary of Farmmi Holding, also impacted by the sale
• Hangzhou Nongyuan Network Technology Co., Ltd. (company) — VIE that previously operated e-commerce for Farmmi Agriculture
• $6.0 million (dollar_amount) — approximate sale price of Farmmi Holding
• RMB 43.1 million (dollar_amount) — exact sale price of Farmmi Holding in Chinese Yuan
• January 31, 2024 (date) — date the share transfer agreement was entered into
• February 2024 (date) — month of the 6-K report

Forward-Looking Statements

• Farmmi's operating expenses will decrease in future financial reports due to the disposition of Farmmi Holding. (Farmmi, Inc.) — high confidence, target: Next earnings report
• Farmmi will continue to divest non-core assets to further streamline its business model. (Farmmi, Inc.) — medium confidence, target: Next 12-24 months
• The cash proceeds from the sale will be used to strengthen Farmmi's balance sheet or invest in core operations. (Farmmi, Inc.) — medium confidence, target: Next 6 months

FAQ

Key Financial Figures

• $6.0 million — yer for RMB 43.1 million (approximately $6.0 million). The sale of Farmmi Holding was intend

Filing Documents

• fami_6k.htm (6-K) — 21KB
• fami_ex41.htm (EX-4.1) — 62KB
• fami_ex991.htm (EX-99.1) — 55KB
• 0001477932-24-000538.txt ( ) — 139KB

From the Filing

fami_6k.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 For the month of February 2024 Commission File Number: 001-38397 Farmmi, Inc. (Translation of registrant's name into English) 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 Form 20-F or Form 40-F. Form 20-F Form 40-F EXPLANATORY NOTE Disposition of Subsidiaries On January 31, 2024, Zhejiang Suyuan Agricultural Technology Co., Ltd ("Suyuan"), a wholly owned subsidiary of the Registrant, entered into a share transfer agreement with Lishui Chida Logistics Co., Ltd, an unrelated third party. Under the agreement, Suyuan agreed to sell 100% of the equity of its wholly owned subsidiary, Zhejiang Farmmi Holdings Group Co., Ltd ("Farmmi Holding"), to the buyer for RMB 43.1 million (approximately $6.0 million). The sale of Farmmi Holding was intended to streamline the business operations of certain of the Registrant's subsidiaries in China and reduce the costs associated with maintaining Farmmi Holding and its wholly owned subsidiary, Zhejiang Farmmi Agricultural Science and Technology Group Co., Ltd. ("Farmmi Agriculture"). As previously reported, prior to January 2023, Hangzhou Nongyuan Network Technology Co., Ltd. ("Nongyuan Network" or "VIE"), through a series of VIE agreements with Farmmi Agriculture, operated the e-commerce websites and online sales of agriculture products for the Registrant's subsidiaries in China. Such contractual arrangements enabled Farmmi Agriculture to have effective control over and receive substantially all of the economic benefits of Nongyuan Network. After January 2023, the e-commerce platform operations have been halted. After the share transfer, Farmmi Agriculture's contractual arrangements with Nongyuan Network would be transferred to the buyer. Prior to the entry into the agreement, all of the business operations, customers and suppliers of Farmmi Holding and Farmmi Agriculture had been transferred to other operating subsidiaries of the Registrant. The purchase price to be paid by the buyer to Suyuan reflects the aggregate value of all the assets of the disposed entities. Pursuant to the agreement, the buyer is required to pay RMB15 million of the purchase price before February 10, 2024 and pay the remaining RMB28.1 million by March 10, 2024. The foregoing descriptions of the share transfer agreement are summaries of certain material terms of the agreement, do not purport to be complete and are qualified in their entirety by reference to the agreement, which is attached hereto as Exhibit 99.1. Appointment of New CFO Effective January 30, 2024, Ms. Lingge Wu resigned from her position as Chief Financial Officer ("CFO") of the Registrant. Ms. Wu's resignation was not the result of any disagreement with the Registrant or its board of directors. On February 4, 2024, the Registrant's board of directors approved the appointment of Mr. Zhimin Lu as the Registrant's CFO, effective February 4, 2024. Prior to being appointed as the Registrant's CFO, Mr. Zhimin Lu served as the chief financial officer of Zhongjian Heneng (Shanghai) Trading Co., Ltd., Shanghai Yunmihui Supply Chain Group Co., Ltd. and Jiangsu Paidile Packaging Technology Co., Ltd., three affiliated companies, from August 2021 to August 2023. Mr. Lu had served as the assistant chief financial officer and a finance manager with Shanghai Only Vision Enterprise Group Co., Ltd. from February 2018 to December 2020. He was a finance manager with Shanghai Sunsystem Electric Co., Ltd. from August 2005 to April 2016. From April 2002 to December 2003, Mr. Lu was an accounting supervisor at Shanghai Aurora Office Automation Sales Co., Ltd. Mr. Lu holds an intermediate level accountant qualification certificate. He received his Bachelor degree in Accounting from the Shanghai Lixin University of Accounting and Finance in 2014 and an Associate degree in Accounting from Chongqing Technology and Business University in 1996. Summary of Employment Agreement The employment agreement between Mr. Lu and the Registrant is effective on February 4, 2024. Under the terms of Mr. Lu's employment, Mr. Lu is entitled to the following: Base compensation of RMB 204,000 per year; and Reimbursement of reasonable expenses incurred by Mr. Lu. 2 Mr. Lu's employment may be terminated at any time by either party upon presentation of 30 days' prior notice or immediately for cause. The foregoing descriptions of the employment agreement are summaries of the material terms of such agreement, do not purport to be complete and are qualified in their entirety by reference to the employment agreement, which is filed as

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