Exhibit 99.1

 

Shineco, Inc. Reports Fiscal Year 2019 Financial Results

 

BEIJING, Sep. 27, 2019 (GLOBE NEWSWIRE) — Shineco, Inc. (“Shineco” or the “Company”; NASDAQ: TYHT), a producer and distributor of Chinese herbal medicines, organic agricultural produce, specialized textiles, and other health and well-being focused plant-based products in China, announced today its financial results for the fiscal year ended June 30, 2019.

 

Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, “I am clearly disappointed with our 2019 fiscal year financial results but remain confident in our strategy and the fundamentals of our business model. We plan to develop new products and expand our distribution network as well as to grow our business through possible mergers and acquisitions of similar or synergetic businesses, all aimed at increasing awareness of our brand, developing customer loyalty, meeting customer demands in various markets and providing solid foundations for our continuous growth. To meet the increasing demand for our products, we plan to make capital improvements in our existing production facilities which would improve both their efficiency and capacity. In the short-run, we intend to increase our investment in our reliable supply network, personnel training, information technology applications and logistic system upgrades. As 2020 unfolds, we expect to continue to strengthen our competitive positions in industrial hemp industry to lay a firm foundation for long-term sustainable growth.”

 

Fiscal Year 2019 Financial Highlights

 

Revenue: $31.22 million (at 28.7% gross margin), down 28.9% from $43.90 million (at 33.7% gross margin) in fiscal year 2018, reflecting the decrease in sales across all products.

 

Gross Profit: $8.97 million, down 39.3% from $14.79 million in fiscal year 2018.

 

Operating Income: $0.12 million, down 98.8% from $9.27 million in fiscal year 2018.

 

Net income attributable to Shineco: $0.80 million, compared to $7.59 million in fiscal year 2018.

 

EPS: Net income per share of 0.04, compared to a net income per share of $0.36 in fiscal year 2018.

 

Fiscal Year 2019 Financial Results

 

Revenue

 

Revenue for the year ended June 30, 2019 decreased by $12.68 million, or 28.9%, to $31.22 million from $43.90 million for the same period of last year, mainly due to the decrease in sales across all products. 

 

   For the Fiscal Years Ended June 30 
   2019   2018 
($ millions)  Revenue   COGS   Gross Margin   Revenue   COGS   Gross Margin 
Luobuma products   0.66    0.30    54.6%   10.88    4.87    55.2%
Chinese medicinal herbal products   13.71    10.28    25.0%   14.18    10.70    24.5%
Other agricultural products   16.85    11.59    31.2%   18.83    13.43    28.7%
Total   31.22    22.25    28.7%   43.90    29.11    33.7%

 

Revenue from Luobuma products decreased by $10.22 million, or 93.9%, to $0.66 million for the year ended June 30, 2019 from $10.88 million for the same period of last year, mainly due to the decrease in revenue from Xinjiang Taihe of $8.21 million. As the nature environment in Xinjiang province is very vulnerable, the harvesting of wild Apocynum Venetum is strictly controlled by the local government, and the Company is required to obtain a permit from local authority before harvesting. In fiscal year 2019, the Company only managed to obtain the permit in the end of December 2018. The management estimated that it is unlikely to obtain new permit in the future, hence, the management decided to cease the wild Apocynum Venetum in Xinjiang province, and changed the Company’s strategy to develop industrial Apocynum Venetum business in Shanxi province instead. As a result, no revenue was generated by Xinjiang Taihe during the year ended June 30, 2019. The decrease was also due to the decrease in revenue from Tenet-Jove Xuzhou branch of $1.34 million as the business operation of this branch ceased in November 2017.

 

 

 

 

Revenue from Chinese medicinal herbal products decreased by $0.47 million, or 3.3%, to $13.71 million for the year ended June 30, 2019 from $14.18 million for the same period of last year. The sales of Chinese medicinal herbal products were comparatively stable during the year ended June 30, 2019 as compared to the same period in 2018. The decrease was due to the depreciation of RMB against US$. The average translation rate for the year ended June 30, 2019 and 2018 were at 1 RMB to 0.1466 USD and at 1 RMB to 0.1537 USD, respectively, which represented a decrease of 4.65%.

 

Revenue from other agricultural products decreased by $1.98 million, or 10.5%, to $16.85 million for the year ended June 30, 2019 from $18.83 million for the same period of last year. The decrease was mainly due to the decrease in sales volume of yew trees for the year ended June 30, 2019 as compared to the same period in 2018. The main reason of the decrease was that the Company sold $2.24 million in November 2017 to fulfill a one-time large order from one of the Company’s customers, Qingdao Ship Owners Association.

 

Gross profit and Gross Margin

 

Total cost of revenue decreased by $6.86 million, or 23.6%, to $22.25 million for the year ended June 30, 2019 from $29.11 million for the same period of last year. Gross profit decreased by $5.82 million, or 39.3%, to $8.97 million for the year ended June 30, 2019 from $14.79 million for the same period of last year. Overall gross margin decreased by 5.0 percentage points to 28.7% for the year ended June 30, 2019, compared to 33.7% for the same period of last year.

 

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 54.6%, 25.0%, and 31.2%, respectively, for the year ended June 30, 2019. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 55.2%, 24.5%, and 28.7%, respectively, for the same period of last year.

 

Operating income

 

General and administrative expenses increased by $4.17 million, or 104.6%, to $8.15 million for the year ended June 30, 2019 from $3.99 million for the same period of last year. The increase in general and administrative expenses was mainly due to an increase in bad debt expense of $4.12 million as well as an offering cost write-off of $0.43 million. The $0.43 million was the valuation of the Commitment Shares retained by IFG Fund upon termination of the Purchase Agreement and Registration Rights Agreement. The increase was partially offset by the decreased general and administrative expenses of $0.34 million for Tajite and Tiankunrunze as a result of reduced business activities during the year ended June 30, 2019.

 

Selling expenses decreased by $0.83 million, or 54.1%, to $0.70 million for the year ended June 30, 2019 from $1.53 million for the same period of last year. The decrease was primarily due to the decrease in selling expenses from Tenet-Jove Xuzhou branch of $0.26 million as the business operation of this branch ceased in November 2017. The decrease was also due to the decrease in advertising expenses, salary expenses and commissions from Tenet-Jove of $0.28 million, $0.14 million and $0.05 million for year ended June 30, 2019.

 

Operating income decreased by $9.16 million, or 98.8%, to $0.12 million for the year ended June 30, 2019 from $9.27 million for the same period of last year.

 

Net income

 

Net income decreased by $6.65 million, or 88.3%, to $0.88 million for the year ended June 30, 2019 from $7.53 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the year ended June 30, 2019 was $0.80 million, or $0.04 per basic and diluted share. This compared to net income attributable to common shareholders of $7.59 million, $0.36 per basic and diluted share, for the same period of last year.

 

2

 

 

Financial Condition

 

As of June 30, 2019, the Company had cash and cash equivalents of $35.33 million, compared to $31.49 million as of June 30, 2018. Net cash provided by operating activities was $3.50 million for the year ended June 30, 2019, compared to $9.85 million for the same period of last year. Net cash used in investing activities was $0.25 million for the year ended June 30, 2019, compared to $0.75 million for the same period of last year. Net cash provided by financing activities was $1.81 million for the year ended June 30, 2019, compared to net cash used in financing activities of $0.49 million for the same period of last year.

 

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. 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, 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.

 

For more information, please contact:

 

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

 

3

 

  

SHINECO, INC.

CONSOLIDATED BALANCE SHEETS

 

   June 30,   June 30, 
   2019   2018 
         
ASSETS          
CURRENT ASSETS:          
Cash  $35,330,676   $31,487,053 
Accounts receivable, net   9,683,074    15,478,336 
Due from related parties   188,453    388,261 
Inventories   2,215,559    2,364,558 
Advances to suppliers, net   11,833,994    4,977,407 
Deferred issuance cost   -    434,000 
Other current assets   1,710,619    1,034,780 
TOTAL CURRENT ASSETS   60,962,375    56,164,395 
           
Property and equipment, net   10,667,730    11,697,304 
Land use right, net of accumulated amortization   1,264,309    1,345,088 
Investments   6,650,944    6,567,090 
Distribution rights   1,074,736    1,114,837 
Long-term deposit and other noncurrent assets   103,864    113,764 
Long-term accounts receivable, net   -    2,700,367 
Prepaid leases   2,857,344    3,397,572 
Deferred tax assets   158,171    - 
TOTAL  ASSETS  $83,739,473   $83,100,417 
           
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES:          
Short-term loans  $2,410,147   $2,316,283 
Accounts payable   220,119    2,270,140 
Advances from customers   382,091    17,500 
Due to related parties   234,500    197,617 
Other payables and accrued expenses   3,893,027    1,736,735 
Taxes payable   3,341,872    2,991,624 
TOTAL CURRENT LIABILITIES   10,481,756    9,529,899 
           
Income tax payable - noncurrent portion   625,603    685,185 
Deferred tax liability   -    11,652 
TOTAL LIABILITIES   11,107,359    10,226,736 
           
Commitments and contingencies   -    - 
           
EQUITY:          
Common stock; par value $0.001, 100,000,000 shares authorized; 22,871,772 and 21,234,072 shares issued and outstanding at June 30, 2019 and June 30, 2018   22,872    21,234 
Additional paid-in capital   24,759,356    23,171,102 
Statutory reserve   4,198,107    4,085,819 
Retained earnings   46,735,190    46,051,289 
Accumulated other comprehensive loss   (4,184,024)   (1,509,212)
Total Stockholders’ equity of Shineco, Inc.   71,531,501    71,820,232 
Non-controlling interest   1,100,613    1,053,449 
TOTAL EQUITY   72,632,114    72,873,681 
           
TOTAL LIABILITIES AND EQUITY  $83,739,473   $83,100,417 

 

4

 

  

SHINECO, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

 

   For the Years Ended
June 30,
 
   2019   2018 
         
REVENUE  $31,220,040   $43,897,618 
           
COST OF REVENUE          
Cost of product and services   22,175,906    29,005,659 
Business and sales related tax   72,538    104,667 
Total cost of revenue   22,248,444    29,110,326 
           
GROSS PROFIT   8,971,596    14,787,292 
           
OPERATING EXPENSES          
General and administrative expenses   8,153,496    3,985,604 
Selling expenses   702,685    1,530,005 
Total operating expenses   8,856,181    5,515,609 
           
INCOME FROM OPERATIONS   115,415    9,271,683 
           
OTHER INCOME          
Impairment loss on goodwill   -    (2,153,298)
Impairment loss on an unconsolidated entity   (200,000)   - 
Income from equity method investments   516,144    907,794 
Purchase rebate income   1,038,931    1,377,108 
Other income   210,895    307,637 
Interest expense, net   (11,998)   (58,775)
Total other income   1,553,972    380,466 
           
INCOME BEFORE PROVISION FOR INCOME TAXES   1,669,387    9,652,149 
           
PROVISION FOR INCOME TAXES   787,600    2,123,587 
           
NET INCOME   881,787    7,528,562 
           
Net (loss) income attributable to non-controlling interest   85,598    (59,354)
           
NET INCOME ATTRIBUTABLE TO SHINECO, INC.  $796,189   $7,587,916 
           
COMPREHENSIVE INCOME          
Net income  $881,787   $7,528,562 
Other comprehensive income (loss): foreign currency translation gain (loss)   (2,713,246)   1,658,658 
Total comprehensive income (loss)   (1,831,459)   9,187,220 
Less: comprehensive (loss) income attributable to non-controlling interest   47,164    (32,466)
           
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC.  $(1,878,623)  $9,219,686 
           
Weighted average number of shares basic and diluted   22,472,442    21,119,004 
           
Basic and diluted earnings per common share  $0.04   $0.36 

 

5

 

  

SHINECO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Years Ended
June 30,
 
   2019   2018 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $881,787   $7,528,562 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   791,534    698,232 
Loss from disposal of property and equipment   -    5,557 
Provision for doubtful accounts   4,379,780    262,013 
(Decrease) increase in inventory reserve   (3,657)   124,601 
Deferred benefit provision   (170,483)   (28,138)
Income from equity method investments   (516,145)   (907,794)
Impairment loss on goodwill   -    2,153,298 
Impairment loss on an unconsolidated entity   200,000    - 
 Value of shares issued to IFG Fund for equity, we subsequently cancelled   434,000    - 
           
Changes in operating assets and liabilities:          
Accounts receivable   3,766,419    (3,569,821)
Advances to suppliers   (7,501,401)   (2,563,943)
Inventories   68,009    (25,031)
Other receivables   (179,366)   170,125 
Prepaid expense and other assets   (10,875)   4,442 
Due from related parties   (64,317)   126,293 
Prepaid leases   420,677    485,382 
Accounts payable   (1,985,657)   2,145,058 
Advances from customers   367,545    (70,459)
Other payables   2,220,059    1,272,263 
Taxes payable   400,462    2,036,079 
NET CASH PROVIDED BY OPERATING ACTIVITIES   3,498,371    9,846,719 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Acquisitions of property and equipment   (96,038)   (1,763,160)
Proceeds from disposal of property and equipment   -    607 
Payment for (refund of) construction in progress   (41,768)   58,671 
Repayments (advances) of loans from third parties   (359,927)   831,716 
Repayments from (advances to) related party   251,342    (53,793)
Income received from investments in unconsolidated entities   -    153,695 
Cash of subsidiary acquired   -    23,304 
NET CASH USED IN INVESTING ACTIVITIES   (246,391)   (748,960)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from short-term loans   2,418,162    2,459,122 
Proceeds from other short-term loans   43,967    - 
Repayment of short-term loans   (2,198,330)   (2,877,044)
Repayment of other short-term loans   (85,491)   - 
Proceeds from issuance of 1,637,700 of common stock   1,589,892    - 
Proceeds from (repayments to) related parties   44,271    (67,561)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   1,812,471    (485,483)
           
EFFECT OF EXCHANGE RATE CHANGE ON CASH   (1,220,828)   (279,774)
           
NET INCREASE IN CASH   3,843,623    8,332,502 
           
CASH - Beginning of the Year   31,487,053    23,154,551 
           
CASH - End of the Year  $35,330,676   $31,487,053 
           
SUPPLEMENTAL CASH FLOW DISCLOSURES:          
Cash paid for income taxes  $694,084   $857,201 
Cash paid for interest  $115,384   $133,930 
           
SUPPLEMENTAL NON-CASH INVESTING ACTIVITY:          
Issued 200,000 shares of deferred issuance cost  $-   $434,000 

  

6

 

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