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Farmmi, Inc. Reports Financial Results for the First Six Months of Fiscal Year 2018

LISHUI, China, Sept. 12, 2018 /PRNewswire/ -- Farmmi, Inc. (the "Company") (Nasdaq: FAMI), a leading agriculture products supplier in China, today announced its financial results for the first six months ended March 31, 2018.

Ms. Yefang Zhang, Chairwoman and CEO of the Company stated, "We are pleased to announce our fiscal results for the six months ended March 31, 2018. Our revenues reached $13.02 million and our net income was $1.20 million for the six months ended March 31, 2018. This was respectively an increase of 11.6% and 5.5% from the same period of 2017 as we successfully grew both our revenues and net income. "

Ms. Zhang continued: "In the coming months we plan to continue to execute our growth strategy as we attempt to increase our market share. We continue to develop our relationships with suppliers, both major suppliers and small family farms, and continue to control our costs and expenses, to achieve higher margin. We expect the demand for our products to continue to grow in China as consumption of mushroom products in China has consistently risen since 2011 and the overall per capital level of consumption in China still remains below that of Japan and the United States. We expect this domestic growth to continue to be a source of increased sales for us, while we simultaneously attempt to develop our international footprint."

First Six Months of Fiscal Year 2018 Financial Highlights



For the Six Months Ended March 31,

($ millions, except per share data)


2018


2017


% Change

Revenues


13.02


11.67


11.56%

   Shiitake


7.98


5.76


38.54%

   Mu Er


4.83


5.14


-5.88%

   Other edible fungi and other agricultural products


0.21


0.77


-72.24%

Gross profit


2.10


1.97


6.29%

Gross margin


16.12%


16.92%


0.80 pp*

Income from operations


1.28


1.26


1.77%

Net income attributable to Farmmi, Inc.


1.20


1.14


5.51%

EPS


0.12


0.11


9.09%

*Notes: pp represents percentage points

  • Revenues reached $13.02 million for the six months ended March 31, 2018, an increase of 11.56% from the same period of last year.
  • Gross profit was $2.10 million for the first six months ended March 31, 2018, an increase of 6.29% from the same period of last year.
  • Gross margin was 16.12% for the six months ended March 31, 2018, a decrease of 0.80 percentage points from the same period of last year.
  • Net income attributable to Farmmi, Inc. was $1.20 million for the six months ended March 31, 2018, an increase of 5.51% from the same period of last year.
  • Basic and diluted earnings per share were $0.12 for the six months ended March 31, 2018, as compared with $0.11 for the same period of last year.

First Six Months of Fiscal Year 2018 Financial Results

Revenue

Total revenues for the six months ended March 31, 2018 increased by $1.35 million, or 11.56%, to $13.02 million from $11.67 million for the same period of last year, mainly due to an increase in revenue from sales of Shiitake, partially offset by decrease in revenue from sales of Mu Er and other edible fungi and other agricultural products



For the Six Months Ended March 31,



2018


2017

($ millions)


Revenues


COGS


Gross
Profit


Revenues


COGS


Gross
Profit

Shiitake


7.98


6.70


1.28


5.76


4.79


0.97

Mu Er


4.83


4.04


0.79


5.14


4.25


0.89

Other edible fungi and other agricultural
products


0.21


0.18


0.03


0.77


0.65


0.12

Total


13.02


10.92


2.10


11.67


9.70


1.97

Revenues from sales of Shiitake increased by $2.22 million, or 38.54%, to $7.98 million for the six months ended March 31, 2018 from $5.76 million for the same period of last year, mainly due to the increased sales volume of our Shiitake products. Sales volume of Shiitake increased to 601 tons for the six months ended March 31, 2018 from 456 tons for the same period of last year.

Revenues from sales of Mu Er decreased by $0.31 million, or 5.88%, to $4.83 million for the six months ended March 31, 2018 from $5.14 million for the same period of last year. The decrease was primarily due to both the decreased unit sales price of products and the sales volume. Average unit sales price of Mu Er decreased by 8.19% due to the decreased price of supplies as result of abundant harvest during the six months ended March 31, 2018, as compared to the same period of last year. Sales volume of Mu Er also decreased slightly to 351 tons for the six months ended March 31, 2018 from 363 tons for the same period of last year. The decrease in revenue from sales of Mu Er was partially offset by the appreciation of RMB against USD. The average translation rates for the six months ended March 31, 2018 and 2017 were at 1 RMB to $0.1542 USD and at 1 RMB to $0.1458 USD, respectively, which represented an increase of 5.80%.

Revenues from sales of other edible fungi and other agricultural products decreased by $0.56 million, or 72.24%, to $0.21 million for the six months ended March 31, 2018 from $0.77 million for the same period of last year. The cause of the decrease was that the Company sold $0.44 million of Maitake mushroom in January 2017 to fill an unusual order, and no such order took place during the six months ended March 31, 2018. The online sales of the products of this category also decreased by $0.11 million to $0.18 for the six months ended March 31, 2018, compared to $0.29 million of the corresponding period of fiscal year 2017, mainly because the Company did not generate any revenue from the tea products in this period when one supplier raised the unit price of its tea products.

The Company plans to adopt Accounting Standard Codification 606 – Revenue from Contract with Customers ("ASC 606") for its fiscal year ending September 30, 2019 and all interim periods within. Preliminarily, the Company plans to adopt ASC 606 using the retrospective transition method and is continuing to evaluate the impact its pending adoption of ASC 606 will have on its consolidated financial statements. The Company believes that its current revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company's contracts. While no significant impact is expected upon adoption of the new guidance, the Company will not be able to make that determination until the time of adoption based upon outstanding contracts at that time.

Cost of Revenue

Cost of revenue increased by $1.22 million, or 12.64%, to $10.92 million for the six months ended March 31, 2018 from $9.70 million for the same period of last year.

Cost of revenue from sales of Shiitake increased by $1.91 million, or 39.95%, to $6.70 million for the six months ended March 31, 2018 from $4.79 million for the same period of last year. Cost of revenue from sales of Mu Er decreased by $0.21 million, or 5.03%, to $4.04 million for the six months ended March 31, 2018 from $4.25 million for the same period of last year. Cost of revenue from sales of other edible fungi and other agricultural products decreased by $0.47 million, or 72.17%, to $0.18 million for the six months ended March 31, 2018 from $0.65 million for the same period of last year

Gross Profit

Overall gross profit increased by $0.13 million, or 6.29%, to $2.10 million for the six months ended March 31, 2018 from $1.97 million for the same period of last year. Gross profit from sales of Shiitake increased by $0.30 million, or 30.30%, to $1.27 million for the six months ended March 31, 2018 from $0.97 million for the same period of last year. The increase of gross profit from sales of Shiitake is in line with increased sales revenue for the six months ended March 31, 2018. Gross profit from sales of Mu Er decreased by $0.1 million, or 9.95%, to $0.79 million for the six months ended March 31, 2018 from $0.89 million for the same period of last year. Gross profit from sales of other edible fungi and other agricultural products decreased by $0.09 million, or 72.67%, to $0.03 million for the six months ended March 31, 2018 from $0.12 million for the same period of last year. The decrease of gross profit from sales of Mu Er and other edible fungi and other agricultural products is in line with decreased sales revenue for the six months ended March 31, 2018.

Overall gross margin decreased by 0.80 percentage points to 16.92% for the six months ended March 31, 2018 from 16.12% for the same period of last year. The decrease in overall gross margin was primarily due to the slight increase in purchase prices of Mu Er as the Company procured more Mu Er from Northeast China which has better quality and higher unit price than Mu Er from other areas . The Company typically has a fixed sales price when receiving orders from its customers, any increase in purchase prices will have impact on the Company's profit margin.

Income from Operations

Selling and distribution expenses increased by $0.04 million, or 66.11%, to $0.09 million for the six months ended March 31, 2018 from $0.05 million for the same period of last year, primarily due to the increased shipping fee in line with the Company's increased sales volume.

General and administrative expenses increased by $0.07 million, or 9.92%, to $0.73 million for the six months ended March 31, 2018 from $0.67 million for the same period of last year. The increase was primarily attributable to the increased initial public offering related expenses, such as auditing fees, during the six months ended March 31, 2018.

Income from operations increased by $0.02 million, or 1.77%, to $1.28 million for the six months ended March 31, 2018 from $1.26 million for the same period of last year.

Interest Expense

Interest expense decreased by $0.02 million, or 22.54%, to $0.09 million for the six months ended March 31, 2018 from $0.11 million for the same period of last year. The decrease in interest expense was primarily attributable to decreased average balance of short-term bank loans. The decrease was partially offset by the higher interest rate during the six months ended March 31, 2018 as compared to same period of last year.

Provision for Income Taxes

For the six months ended March 31, 2018 and 2017, our income tax expense was $1,591 and $7,870, respectively. The low income tax expense was primarily due to the income tax exemption we received from the tax authority of Lishui City. According to the income tax incentive policy of Lishui City, for companies whose main operations are in Lishui City, and seek to go public outside of China, their corporate income taxes are exempted for up to three years, starting from one year before the company first submits its registration statement. Therefore, since the main operating subsidiaries of the Company are located in Lishui City, and the Company submitted its first registration statement in 2017, the Company has enjoyed the income taxes exemptions in calendar year 2016 and 2017, and expects to continue to enjoy the income taxes exemptions in calendar year 2018.

Net Income

Net income increased by $0.06 million, or 5.44%, to $1.20 million for the six months ended March 31, 2018 from $1.14 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the six months ended March 31, 2018 was $1.20 million, or $0.12 per basic and diluted share. This compared to net income attributable to common shareholders of $1.14 million, $0.11 per basic and diluted share, for the same period of last year.

Other comprehensive income (loss)

Other comprehensive income (loss) were $0.70 million of income and $0.24 million of loss for the six months ended March 31, 2018 and March 31, 2017, respectively. The increase was mainly due to the change of the exchange rate of RMB against US$.

Financial Condition

As of March 31, 2018, the Company had cash and cash equivalents of $4.87 million, compared with $2.59 million as of September 30, 2017. The Company had working capital as $18.85 million as of March 31, 2018, compared with $11.21 million as of September 30, 2017.

As of March 31, 2018, the Company had accounts receivable of $9.2 million. This represented a $4 million increase from $5.1 million as of September 30, 2017. The main reason for the significant balance was due to the credit sales made to one of our largest customers during the six months ended March 31, 2018. Subsequently we have collected $8.1 million, or 88% of the balance.

Recent Business Highlights

On July 10, 2018, the Company entered into a strategic cooperation framework agreement with Bantan Internet Technology PTE. LTD., a Singapore company, to pursue blockchain services.

On July 5, 2018, the Company announced that between March and June in 2018, it had entered into various sales contracts to supply three Asian distributors of dried edible fungi products including Shiitake mushrooms and Mu Er mushrooms.

On April 26, 2018, the Company prepared a Registration Statement in accordance with the requirements of Form S-8 under the Securities Act to register its ordinary shares, par value $0.001 per share, issuable pursuant to the Farmmi, Inc. 2018 Share Incentive Plan.

On March 14, 2018, the Company was awarded "Exemplary Publicly Listed Company" by Liandu District of Lishui Government, honoring its successfully listing on NASDAQ and the Company entered into a strategic cooperation framework agreement with Lishui Agricultural Investment Development Co., Ltd.

On February 23, 2018, the Company announced that ViewTrade Securities, Inc., who acted as the Sole Underwriter and Book-Runner of the Company's IPO, exercised the full over-allotment option to purchase an additional 252,000 ordinary shares at the IPO price of $4.00 per share for a total of gross proceeds of approximately $1,008,000 from the exercise of this over-allotment option.

On February 21, 2018, the Company announced the closing of its IPO of 1,680,000 ordinary shares at a price to the public of $4.00 per share for a total of $6,720,000 in gross proceeds.

About Farmmi, Inc.

Headquartered in Lishui, Zhejiang, Farmmi, Inc. (the "Company") (Nasdaq: FAMI), is an agricultural products supplier and primarily processes and sells Shiitake mushrooms, Mu Er mushrooms, other edible fungi, and other agricultural products. In addition, Farmmi Liangpin Market, the Company's ecommerce platform, provides an opportunity for consumers to access locally sourced agricultural products. For further information regarding the Company, please visit: http://ir.farmmi.com.cn/.

Forward-Looking Statements

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results.

For more information, please contact Investor Relations at:

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

 

 Farmmi, Inc. 

 Condensed Consolidated Balance Sheets 

 (Unaudited) 










March 31,


September 30,





2018


2017

Assets





Current Assets







Cash

$

4,867,414

$

2,590,539



Accounts receivable - trade


9,098,991


5,050,951



Accounts receivable - related party


85,555


93,506



Inventory, net


2,355,756


1,591,619



Deferred offering cost


-


278,820



Advance to suppliers


4,466,068


4,112,915



Other current assets


171,875


23,063


Total current assets


21,045,659


13,741,413








Property, plant and equipment, net  


77,644


102,516






Other Assets







Restricted cash


600,000


-



Long-term prepaid expenses


21,807


-

Total Assets

$

21,745,110

$

13,843,929






Liabilities and Equity






Current Liabilities







Short-term bank loans

$

1,751,398

$

1,652,917



Accounts payable - trade


291,637


415,819



Due to related parties


-


415,381



Advance from customers


69,419


-



Other current liabilities


79,231


45,731


Total current liabilities


2,191,685


2,529,848










Long-term bank loans


700,559


661,167

Total Liabilities


2,892,244


3,191,015








Equity







Common stock, $0.001 par value, 20,000,000 shares authorized,







11,932,000 and 10,000,000 shares issued and outstanding as of March 31, 2018 and September 30, 2017, respectively


11,932


10,000



Additional paid-in capital


11,322,819


5,023,080



Retained earnings 


5,203,670


4,004,317



Accumulated other comprehensive income


1,366,172


718,941


Total Stockholders' Equity


17,904,593


9,756,338








Noncontrolling Interest


948,273


896,576


Total Equity


18,852,866


10,652,914








Total Liabilities and Equity

$

21,745,110

$

13,843,929

 

 

 Farmmi, Inc. 

 Condensed Consolidated Statements of Income and Comprehensive Income 

 (Unaudited) 












 For the Six Months Ended March 31, 





2018


2017








 Revenues 






Sales to third parties 

$

12,865,585

$

11,268,264


Sales to related parties 


154,452


402,127



 Total revenue 


13,020,037


11,670,391








 Cost of revenues 


10,920,758


9,695,401






 Gross Profit 


2,099,279


1,974,990






 Operating expenses 






Selling and distribution expenses 


90,684


54,593


General and administrative expenses 


731,008


665,047


Total operating expenses 


821,692


719,640








 Income from operations 


1,277,587


1,255,350






 Other income (expenses) 






Interest income 


376


172


Interest expense 


(86,138)


(111,209)


Other income (expenses), net 


7,452


(561)


Total other expenses 


(78,310)


(111,598)








 Income before income taxes 


1,199,277


1,143,752






 Provision for income taxes 


1,591


7,870






 Net income  


1,197,686


1,135,882









Less: net loss attributable to noncontrolling interest 


(1,667)


(874)








 Net income attributable to Farmmi, Inc. 

$

1,199,353

$

1,136,756








Comprehensive income






Net income 


1,197,686


1,135,882


Other comprehensive income (loss): foreign currency translation gain (loss) 


700,595


(240,247)


Total comprehensive income 


1,898,281


895,635


Comprehensive income (loss) attributable to noncontrolling interest 


51,697


(29,577)








Comprehensive income attributable to Farmmi, Inc.

$

1,846,584

$

925,212









Weighted average number of shares, basic and diluted 


10,411,231


10,000,000








Basic and diluted earnings per common share 

$

0.12

$

0.11

 

 

 Farmmi, Inc. 

 Condensed Consolidated Statements of Cash Flows 

 (Unaudited) 

















For the Six Months Ended March 31,





2018


2017








Cash flows from operating activities





 Net income 

$      1,197,686


$      1,135,882


 Adjustments to reconcile net income to net cash 







provided by (used in) operating activities: 







Changes in allowances - accounts receivable 

12,909


-




Changes in allowances - other current assets 

-


22,901




Depreciation expense 

6,464


7,620




Loss from disposal of property and equipment 

833


-


 Changes in operating assets and liabilities: 







Accounts receivable 

(3,629,315)


3,197,144




Inventory 

(648,303)


(609,990)




Advance to suppliers 

(104,714)


(1,709,633)




Other current assets 

(144,724)


288,799




Long-term prepaid expenses 

4,370


-




Accounts payable 

(144,282)


236,508




Advance from customers 

67,241


(1,044,211)




Other current liabilities 

80,388


324,091




Taxes payable 

(50,578)


(81,684)

Net cash provided by (used in) operating activities

(3,352,025)


1,767,427








Cash flows from investing activities







Additions to property, plant and equipment 

(2,782)


(241)




Payments of  loans to related parties  

-


(977,634)

Net cash used in investing activities

(2,782)


(977,875)








Cash flows from financing activities







Gross Proceeds from Initial Public Offering - stock issuance 

7,728,000


-




Direct costs disbursed from Initial Public Offering proceeds in current period 

(1,147,549)


-




Escrow deposit paid under underwriting agreement 

(600,000)


-




Borrowings from bank loans 

-


2,915,200




Repayments of bank loans 

-


(3,644,000)




Repayments of loans from related parties 

(426,316)


(47,945)

Net cash provided by (used in) financing activities

5,554,135


(776,745)





Effect of exchange rate changes on cash and cash equivalents

77,547


(1,568)





Net increase in cash and cash equivalents

2,276,875


11,239





Cash and cash equivalents, beginning of year

2,590,539


47,241





Cash and cash equivalents, end of year

$      4,867,414


$          58,480








Supplemental disclosure information:





 Income taxes paid 

$             4,312


$            7,870


 Interest paid 

$           82,987


$        106,540

 

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SOURCE Farmmi, Inc.