Shineco, Inc. Reports Fiscal Year 2020 Financial Results
28 September 2020
BEIJING, Sept. 28, 2020 (GLOBE NEWSWIRE) -- Shineco, Inc. (“Shineco” or the “Company”; NASDAQ: TYHT), a producer and distributor of Chinese herbal medicines, organic agricultural and hemp products, as well as various health and well-being-focused plant-based products in China, announced today its financial results for the fiscal year ended June 30, 2020. Mr. Guocong Zhou, Chief Executive Officer of Shineco, commented, “In fiscal 2020, we achieved a revenue of USD23.68 million and a net loss of $6.63 million. Overall, our various financial indicators have experienced a significant decline, mainly due to the Company's business transformation and the impact of COVID-19. At present, the Company has formed a strategic plan integrating the entire industrial chain of industrial hemp. At the same time, the Company is also actively looking for investment opportunities in the biomedical field. I believe that as we gradually implement our projects, we will achieve success in the next fiscal year.” Fiscal Year 2020 Financial Highlights Fiscal Year 2020 Financial Results Revenue Revenue for the fiscal year ended June 30, 2020 decreased by $7.54 million, or 24.1%, to $23.68 million from $31.22 million for the same period in 2019, mainly due to the decrease in sales across all products. Revenue from Luobuma products decreased by $0.49 million, or 74.6%, to $0.17 million for the year ended June 30, 2020 from $0.66 million for the same period in 2019, mainly due to the decrease in revenue from Tenet-Jove and Tenet Huatai. Since the beginning of the year, we did not launch new products, and we mainly focused on clearing off our old stocks. In addition, our sales of Luobuma products were affected by the COVID-19 outbreak, as a result, sales decreased during the year ended June 30, 2020 as compared to the same period in 2019. Revenue from Chinese medicinal herbal products decreased slightly by $0.44 million, or 3.2%, to $13.27 million for the fiscal year ended June 30, 2020 from $13.71 million for the same period last year. The sales of Chinese medicinal herbal products were comparatively stable during the fiscal year ended June 30, 2020 as compared to the same period in 2019. The decrease was mainly due to the depreciation of RMB against US$. The average translation rate for the years ended June 30, 2020 and 2019 were at 1 RMB to 0.1422 USD and at 1 RMB to 0.1466 USD, respectively, which represented a decrease of 2.97%. Revenue from other agricultural products decreased by $6.60 million, or 39.2%, to $10.25 million for the fiscal year ended June 30, 2020 from $16.85 million for the same period in 2019. The decrease was mainly due to the decline of sales volume of yew trees during the second half of fiscal year ended June 30, 2020 as compared to the same period in 2019. Our sales of yew trees were affected by the COVID-19 outbreak, which resulted in less orders from our customers during the year ended June 30, 2020. Gross profit and Gross Margin Total cost of revenue decreased by $4.68 million, or 21.05%, to $17.56 million for the fiscal year ended June 30, 2020 from $22.25 million for the same period in 2019. Gross profit decreased by $2.85 million, or 31.8%, to $6.12 million for the fiscal year ended June 30, 2020 from $8.97 million for the same period in 2019. Overall gross margin decreased by 2.9 percentage points to 25.8% for the fiscal year ended June 30, 2020, compared to 28.7% for the same period in 2019. Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were negative 46.0%, and 24.3% and 29.0%, respectively, for the fiscal year ended June 30, 2020. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 54.0%, 24.6%, and 31.1%, respectively, for the same period in 2019. Operating income General and administrative expenses increased by $1.07 million, or 13.1%, to $9.22 million for the fiscal year ended June 30, 2020 from $8.15 million for the same period in 2019. The increase in general and administrative expenses was mainly due to an increase in bad debt expense of US$ 338,537, an increase in staff salary expenses due to the issuance of restricted shares to the management as compensation of US$ 1,022,660, as well as an increased general and administrative expenses of US$ 315,453 for our newly established entity TNB. The increase was partially offset by the decreased offering cost write-off of US$ 434,000. The US$ 434,000 was the valuation of the Commitment Shares retained by IFG Fund upon termination of the Purchase Agreement and Registration Rights Agreement during the year ended June 30, 2019. Selling expenses decreased by $0.32 million, or 45.1%, to $0.39 million for the fiscal year ended June 30, 2020 from $0.70 million for the same period in 2019. The decrease was primarily due to the decrease in advertising expense, commission expenses as well as shipping expenses of Tenet-Jove which was in line with the decrease in our sales during the year ended June 30, 2020. The decrease was also due to the decrease in salary related expenses as a result of reduced number of staff during the year ended June 30, 2020. Operating loss was $3.49 million for the fiscal year ended June 30, 2020, compared to operating income of $0.12 million for the same period in 2019. Net income (loss) Net loss was $6.51 million for the fiscal year ended June 30, 2020, compared to net income of $0.88 million for the same period in 2019. After the deduction of non-controlling interests, net loss attributable to common shareholders for the fiscal year ended June 30, 2020 was $6.63 million, or $2.25 per basic and diluted share. This compare to net income attributable to common shareholders of $0.80 million, $0.32 per basic and diluted share, for the same period in 2019. Financial Condition As of June 30, 2020, the Company had cash and cash equivalents of $32.37 million, compared to $35.33 million as of June 30, 2019. Net cash used in operating activities was $4.66 million for the fiscal year ended June 30, 2020, compared to net cash provided by operation activities of $3.50 million for the same period in 2019. Net cash provided by investing activities was $0.10 million for the fiscal year ended June 30, 2020, compared to net cash used in investing activities of $0.25 million for the same period in 2019. Net cash provided by financing activities was $2.63 million for the fiscal year ended June 30, 2020, compared to $1.81 million for the same period in 2019. About Shineco, Inc. Incorporated in Delaware in August 1997 and headquartered in Beijing, China, Shineco is a holding company. Through its subsidiaries and variable interest entities, Shineco undertakes vertically- and horizontally-integrated production, distribution, and sales channels to provide health and well-being focused plant-based products in China. Utilizing modern engineering technologies and biotechnologies, Shineco produces, among other products, Chinese herbal medicines, organic agricultural produce, and specialized textiles. For more information about Shineco, please visit http://tianyiluobuma.com. Forward-Looking Statements This press release contains information about Shineco's view of its future expectations, plans and prospects that constitute forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, the impact of the COVID-19 pandemic, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. Shineco encourages you to review other factors that may affect its future results in Shineco's registration statement and in its other filings with the Securities and Exchange Commission, including the risks described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the fiscal year ended June 30, 2020. The forward-looking statements in this press release are based on current expectations and Shineco assumes no obligation to update these forward-looking statements. For more information, please contact: Tina Xiao SHINECO, INC. SHINECO, INC. * Retrospectively restated for effect of stock split on August 14, 2020 SHINECO, INC. For the Fiscal Years Ended June 30 2020 2019 ($ millions) Revenue COGS Gross Margin Revenue COGS Gross Margin Luobuma products 0.17 0.25 -46.0 % 0.66 0.30 54.0 % Chinese medicinal herbal products 13.27 10.04 24.3 % 13.71 10.34 24.6 % Other agricultural products 10.25 7.28 29.0 % 16.85 11.61 31.1 % Total 23.68 17.56 25.8 % 31.22 22.25 28.7 %
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Phone: +1-917-609-0333
Email: tina.xiao@ascent-ir.com
CONSOLIDATED BALANCE SHEETS June 30, June 30, 2020 2019 ASSETS CURRENT ASSETS: Cash $ 32,371,372 $ 35,330,676 Accounts receivable, net 11,008,485 9,683,074 Due from related parties 120,939 188,453 Inventories, net 1,799,876 2,215,559 Advances to suppliers, net 13,313,946 11,833,994 Other current assets 905,380 1,710,619 TOTAL CURRENT ASSETS 59,519,998 60,962,375 Property and equipment, net 9,489,484 10,667,730 Land use right, net of accumulated amortization 1,195,943 1,264,309 Investments 4,515,124 6,650,944 Distribution rights 1,043,887 1,074,736 Long-term deposit and other noncurrent assets 96,280 103,864 Right of use assets 3,227,895 - Prepaid leases - 2,857,344 Deferred tax assets - 158,171 TOTAL ASSETS $ 79,088,611 $ 83,739,473 LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term loans $ 2,333,894 $ 2,410,147 Accounts payable 148,209 220,119 Advances from customers 6,324 382,091 Due to related parties 1,355,919 234,500 Other payables and accrued expenses 4,018,684 3,893,027 Operating lease liabilities - current 97,633 - Taxes payable 3,386,662 3,341,872 TOTAL CURRENT LIABILITIES 11,347,325 10,481,756 Income tax payable - noncurrent portion 566,022 625,603 Operating lease liabilities - non-current 401,891 - Deferred tax liability 260,972 - TOTAL LIABILITIES 12,576,210 11,107,359 Commitments and contingencies - - EQUITY: Common stock; par value $0.001, 100,000,000 shares authorized; 3,039,943 and 2,544,203 shares issued and outstanding at June 30, 2020 and June 30, 2019* 3,040 2,544 Additional paid-in capital 27,302,051 24,779,684 Statutory reserve 4,198,107 4,198,107 Retained earnings 40,106,518 46,735,190 Accumulated other comprehensive loss (6,283,835 ) (4,184,024 ) Total Stockholders’ equity of Shineco, Inc. 65,325,881 71,531,501 Non-controlling interest 1,186,520 1,100,613 TOTAL EQUITY 66,512,401 72,632,114 TOTAL LIABILITIES AND EQUITY $ 79,088,611 $ 83,739,473
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE LOSS For the Years Ended June 30, 2020 2019 REVENUE $ 23,684,626 $ 31,220,040 COST OF REVENUE Cost of product and services 17,507,674 22,175,906 Business and sales related tax 57,140 72,538 Total cost of revenue 17,564,814 22,248,444 GROSS PROFIT 6,119,812 8,971,596 OPERATING EXPENSES General and administrative expenses 9,223,576 8,153,496 Selling expenses 385,848 702,685 Total operating expenses 9,609,424 8,856,181 INCOME (LOSS) FROM OPERATIONS (3,489,612 ) 115,415 OTHER INCOME (EXPENSE) Impairment loss on unconsolidated entities (2,062,035 ) (200,000 ) Income from equity method investments 106,657 516,144 Purchase rebate income - 1,038,931 Other income 38,797 210,895 Interest expense, net (13,952 ) (11,998 ) Total other income (loss) (1,930,533 ) 1,553,972 INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (5,420,145 ) 1,669,387 PROVISION FOR INCOME TAXES 1,090,396 787,600 NET INCOME (LOSS) (6,510,541 ) 881,787 Net income attributable to non-controlling interest 118,131 85,598 NET INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC. $ (6,628,672 ) $ 796,189 COMPREHENSIVE LOSS Net income (loss) $ (6,510,541 ) $ 881,787 Other comprehensive loss: foreign currency translation loss (2,132,035 ) (2,713,246 ) Total comprehensive loss (8,642,576 ) (1,831,459 ) Less: comprehensive income attributable to non-controlling interest 85,907 47,164 COMPREHENSIVE LOSS ATTRIBUTABLE TO SHINECO, INC. $ (8,728,483 ) $ (1,878,623 ) Weighted average number of shares basic and diluted* 2,949,166 2,496,938 Basic and diluted earnings (loss) per common share $ (2.25 ) $ 0.32
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (6,510,541 ) $ 881,787 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,173,778 791,534 Loss from disposal of property and equipment 60,211 - Provision for doubtful accounts 4,718,317 4,379,780 Provision for (reversal of) inventory reserve 205,443 (3,657 ) Deferred tax benefit (provision) 416,834 (170,483 ) Income from equity method investments (106,657 ) (516,145 ) Impairment loss on unconsolidated entities 2,062,035 200,000 Value of shares issued to IFG Fund for equity, we subsequently cancelled - 434,000 Restricted shares issued for management 1,022,660 - Changes in operating assets and liabilities: Accounts receivable (2,653,944 ) 3,766,419 Advances to suppliers (4,768,490 ) (7,501,401 ) Inventories 148,540 68,009 Other receivables (671,306 ) (179,366 ) Prepaid expense and other assets 442,796 (10,875 ) Due from related parties 62,438 (64,317 ) Right of use assets (340,610 ) - Prepaid leases - 420,677 Accounts payable (65,945 ) (1,985,657 ) Advances from customers (366,762 ) 367,545 Other payables 446,854 2,220,059 Taxes payable 68,343 400,462 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (4,656,007 ) 3,498,371 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment (12,728 ) (96,038 ) Proceeds from disposal of property and equipment 79,225 - Payment for construction in progress - (41,768 ) Repayments (advances) of loans to third parties 38,279 (359,927 ) Repayments of loans from related parties - 251,342 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 104,776 (246,391 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term loans 2,346,453 2,418,162 Proceeds from other short-term loans - 43,967 Repayment of short-term loans (2,346,453 ) (2,198,330 ) Repayment of other short-term loans (7,110 ) (85,491 ) Proceeds from issuance of common stock 1,500,203 1,589,892 Proceeds from advances from related parties 1,132,314 44,271 NET CASH PROVIDED BY FINANCING ACTIVITIES 2,625,407 1,812,471 EFFECT OF EXCHANGE RATE CHANGE ON CASH (1,033,480 ) (1,220,828 ) NET INCREASE (DECREASE) IN CASH (2,959,304 ) 3,843,623 CASH - Beginning of the Year 35,330,676 31,487,053 CASH - End of the Year $ 32,371,372 $ 35,330,676 SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for income taxes $ 670,769 $ 694,084 Cash paid for interest $ 116,438 $ 115,384 SUPPLEMENTAL NON-CASH OPERATING ACTIVITY: Right-of-use assets obtained in exchange for operating lease obligations $ 900,356 $ - 
