CHANGSHA, China, Oct. 28, 2019 /PRNewswire/ -- Urban Tea Inc. (the "Company," "we" or "Urban Tea") (MYT), a premier retailer of specialty teas and baked goods based in Hunan, China, today announced its financial results for the fiscal year ended June 30, 2019.
Ms. Kan Lu, Chief Financial Officer of Urban Tea Inc., commented, "We are pleased to announce the financial results for the fiscal year 2019. Our results reflect the sales from our specialty teas and baked good business, launched in October 2018. We believe our strong marketing and product development teams have positioned us to thrive in the mainland China market as well as in other overseas markets. We reiterate our plans to expand the number of stores we own and manage in 2019 as we grow our footprint in the specialty tea retail market."
Fiscal Year 2019 Financial Highlights
- Revenue was $0.40 million, compared with nil for fiscal year 2018.
- Gross profit was $0.17 million, compared with nil for fiscal year 2018.
- Gross margin was 41.1%, compared with nil for fiscal year 2018.
- Net income from discontinued operations was $28.49 million, compared with net loss from discontinued operations of $82.21 million for fiscal year 2018.
- Net income was $27.56 million, compared with net loss of $82.89 million for fiscal year 2018.
- Earnings per share was $1.53, compared with loss per share of $7.11 for fiscal year 2018.
Fiscal Year 2019 Financial Results
The Company commenced its new business of specialty tea product distribution and retail in October 2018. During the year ended June 30, 2019, the Company acquired six general retail stores and opened two flagship retail stores. The Company sold tea beverage drinks, light meals and other tea products in the retail stores. Customers place orders in stores and revenue is recognized when drinks and meals are delivered to the customers. For the year ended June 30, 2019, the Company generated revenues of $0.4 million from its existing eight retail stores.
For the period from July 1, 2019 to the date of this press release, we opened two new stores. We expect our revenues to continuously increase with the expansion of our stores.
Gross profit and gross margin
The cost of revenues is comprised of material costs of tea beverage drinks, light meals and other products. For the year ended June 30, 2019, the Company incurred cost of revenues of $0.23 million, leading to a gross profit of $0.17 million and a gross profit margin of 41%.
Currently we have a production, training and research institute center (the "Center") under construction, which is over 1,000 square-meter. The Center is planned to use to develop diversified drink products, foods and centralized logistics. We expect our gross profit margin to increase if we effectively take advantage of the Center.
General and administrative expenses were mainly comprised of employees' salaries and welfare expenses, retail stores and office rental expenses, share-based compensation expenses, professional consulting service fees and travel expenses.
General and administrative expenses increased from $0.89 million for the year ended June 30, 2018, to $2.20 million for the year ended June 30, 2019, representing an increase of $1.31 million, or 148%. The increase of general and administrative expenses was mainly attributable to an increase in operating expenses for of specialty tea product distribution and retail business and an increase in professional consulting service fees for entering into various material contracts and our disposal of a subsidiary.
Net income (loss) from discontinued operations
During the year ended June 30, 2019, the net income from discontinued operations was comprised of a net loss of $9.36 million from discontinued operations of fine chemical business against a gain of $37.85 million from disposal of the discontinued operations of fine chemical business.
On April 13, 2019, the Company disposed its chemical business, in exchange of cash purchase price of $1,750,000. The manufacturing and sales of organic compounds segment had a negative net asset of $36.10 million as of the date of disposal and incurred a net loss of $9.36 million for the period from July 1, 2018 to the date of disposal.
Net income (loss)
Net income was $27.26 million for the fiscal year ended June 30, 2019, compared with net loss of $82.89 million for the same period of last year. Earnings per share was $1.53 for the fiscal year ended June 30, 2019, compared with loss per share of $7.11 for the same period of last year.
As of June 30, 2019, the Company had cash of $4.67 million, compared with $0.96 million as of June 30, 2018.
Net cash used in operating activities was $1.06 million for the fiscal year ended June 30, 2019, compared with $3.18 million for the same period of last year.
Net cash used in investing activities was $4.44 million for the fiscal year ended June 30, 2019, compared with $1.13 million for the same period of last year. During the year ended June 30, 2019, we used cash in purchases of equipment for stores, construction of our Center and purchase of six tea stores under brand name of "Your Ladyship Tea".
Net cash provided by financing activities was $9.49 million for the fiscal year ended June 30, 2019, compared with $0.49 million for the same period of last year. During the year ended June 30, 2019, we raised net proceeds of $4.12 million from a registered direct offering in May 2019 and $5.5 million from certain private placements.
On September 28, 2019, the Company and Shanghai MYT entered into a Share Purchase Agreement (the "39 Pu SPA") with Hunan 39 PU Tea Co., Ltd. ("39 Pu") and certain shareholders of 39 Pu (the "39 Pu Shareholders"). Pursuant to the 39 Pu SPA, the Company shall deliver to the 39 Pu Shareholders total consideration of US$7.2 million ("Total Consideration"), of which US$3.00 million shall be paid in cash ("Cash Consideration") and US$4.2 million shall be paid in ordinary shares, no par value ("Ordinary Shares"), of the Company, at a price of US$0.30 per share, for a total of 14,000,000 Ordinary Shares ("Share Consideration"), in exchange for 39 Pu and 39 Pu Shareholders to enter into VIE Agreements (the "VIE Agreements") with Shanghai MYT. The VIE Agreements are designed to provide Shanghai MYT with the power, rights and obligations equivalent in all material respects to those it would possess as the majority equity holder of 39 Pu, including absolute rights to control the management, operations, assets, property and revenue of 39 Pu. 39 Pu has the necessary license to carry out the tea business in China. The 39 Pu SPA is subject to various conditions to closing, including, among other things, (a) Nasdaq approval of the listing of the Share Consideration, (b) the delivery of the duly executed VIE Agreements, and (c) the Company's receipt of a fairness opinion from Viewtrade Securities, Inc., an independent valuation firm engaged by the Company.
About Urban Team Inc.
Urban Tea, Inc. is an emerging specialty tea product distributer and retailer headquartered in Changsha City, Hunan Province, China. Through its wholly owned subsidiary, Shanghai Ming Yun Tang Tea Limited ("Shanghai MYT") which controls Hunan Ming Yun Tang Brand Management Co., Ltd. ("Hunan MYT"), the Company currently market a wide range of trendy tea drinks, light meals, and pastries targeting China's new urban generation in Hunan province. We focused on not only the taste of our products but also their aesthetic presentation and health benefits. Our products are currently being offered via our managed stores. We expect to start selling our products in our JV stores in mid-2019. For more information, please visit: ir.h-n-myt.com.
Safe Harbor Statement
This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the applicable securities laws, the Company does not assume a duty to update these forward-looking statements.