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Shineco, Inc. Reports Fiscal Year 2020 Financial Results

Shineco, Inc.
·14 mins read

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

  • Revenue: $23.68 million (at 25.8% gross margin), down 24.1% from $31.22 million (at 28.7% gross margin) in fiscal year 2019, reflecting the decrease in sales across all products.

  • Gross profit: $6.12 million, down 31.8% from $8.97 million in fiscal year 2019.

  • Operating income (loss): a loss of $3.49 million, compared to income of $0.12 million in fiscal year 2019.

  • Net income (loss) attributable to Shineco: a loss of $6.63 million, compared to an income of $0.80 million in fiscal year 2019.

  • Earnings (Loss) per share: basic and diluted loss per share of 2.25, compared to basic and diluted earnings per share of $0.32 in fiscal year 2019.

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.

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

%

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
Ascent Investor Relations LLC
Phone: +1-917-609-0333
Email: tina.xiao@ascent-ir.com

SHINECO, INC.
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

SHINECO, INC.
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

* Retrospectively restated for effect of stock split on August 14, 2020

SHINECO, INC.
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

$

-