Farmmi, Inc. Reports Financial Results for the Fiscal Year 2019

Farmmi, Inc. Reports Financial Results for the Fiscal Year 2019

Financial Highlights (Twelve Months ended 9/30/19 compared to 9/30/18):

  • 3.4% Increase in Revenue to $30.8 Million
  • 7.0% Increase in Gross Profit to $5.4 Million
  • 59 Basis Point Improvement in Gross Margin to 17.58%

LISHUI, China, Jan. 1, 2020 /PRNewswire/ — Farmmi, Inc. (the “Company”) (Nasdaq: FAMI), an agriculture products supplier in China, today announced its financial results for the fiscal year ended September 30, 2019.

Ms. Yefang Zhang, Farmmi’s Chairwoman and CEO, stated, “Fiscal year 2019 was a very successful year for Farmmi as we continued to execute on our long-term growth plan, further establish our brand and build the foundation for our future success.  Overall revenues would have been higher absent the impact of the depreciation of the RMB against the U.S. dollar.  We are very encouraged with the ongoing expansion of our online sales platform, which accounted for over 20% of total sales in the fiscal year 2019, representing an increase of more than 83% over the fiscal year 2018.  Our success in developing an effective online sales platform positions us for accelerated domestic growth as we are directly aligned with the shift in Chinese consumers purchasing higher volumes of products like ours both online and in brick and mortar stores.  This will also make our products accessible in international markets with the click of a mouse.”

Ms. Zhang continued: “We achieved a significant improvement in gross margin to 17.58% in fiscal year 2019 from 16.99% in fiscal year 2018, as we benefited from higher online sales combined with strategic programs targeting both pricing and operating costs.  We benefited from relatively stable unit prices for Shiitake, which was partially offset by unit price declines for Mu Er.  The pricing dynamic is a function both the overall supply dynamics and our deep understanding of the edible fungi market, constant market research, and communication with our key suppliers.  As a result, we have been able to obtain favorable prices for premium quality raw materials.  We are also pleased with our progress in further developing relationships with key partners, both major suppliers and family farms. We are benefitting from growth in orders across all channels, but have higher confidence given the strong, multi-year relationships we have with some of China’s largest exporters that can fuel our growth.  Overall, we are encouraged with our progress but have much work ahead of us as we continue to leverage our premium product quality, highly experienced employee base, local production facilities and strong supply chain relationships.  Our team is focused and we remain dedicated to building value for the Company and shareholders.”

Financial Highlights

 

For the Twelve Months Ended September 30,

 

($ millions, except per share data)

2019

   

2018

 

% Change

 

Revenues

$

30.84

   

$

29.82

   

3.43

%

   Shiitake

 

17.89

     

16.75

   

6.81

%

   Mu Er

 

11.66

     

12.19

   

(4.36)

%

   Other edible fungi and other agricultural products

 

1.29

     

0.88

   

47.15

%

Gross profit

 

5.42

     

5.07

   

7.00

%

Gross margin

 

17.58

%

   

16.99

%

 

0.59 pp*

Income from operations

$

3.04

   

$

3.08

   

(1.37)

%

Interest Expense

 

1.20

     

0.15

   

675.46

%

Net (loss) income

 

(0.31)

**

   

3.22

   

(109.63)

%

Basic and diluted (loss) earnings per share

 

(0.03)

**

   

0.29

   

(110.34)

%

Notes:

* pp represents percentage points

** The fiscal year ended September 30, 2019 reflects the significant negative impact of $3.31 million in expenses due to the amortization of debt issuance costs and interest expenses associated with the Company’s convertible notes issued in November 2018, as compared to $0.15 million in the same period of last year.

Revenue

 

For the Twelve Months September 30,

 

2019

 

2018

($ millions)

Revenues

 

COGS

 

Gross Profit

 

Revenues

 

COGS

 

Gross Profit

Shiitake

$

14.8

 

$

14.75

 

$

3.14

 

$

13.96

 

$

13.96

 

$

2.80

Mu Er

 

9.7

   

9.69

   

1.97

   

10.13

   

10.13

   

2.10

Other edible fungi and other agricultural products

 

0.98

   

0.98

   

0.31

   

0.66

   

0.66

   

0.21

Total

 

25.42

   

25.42

   

5.42

   

24.75

   

24.75

   

5.11

Total revenues for the fiscal year ended September 30, 2019 increased by $1.02 million, or 3.43%, to $30.8 million from $29.8 million.

Revenue from sales of Shiitake increased by $1.1 million, or 6.81%, to $17.9 million for the fiscal year ended September 30, 2019 from $16.8 million for the same period of last year, mainly due to the increased sales volume of our Shiitake products, from 1,299 tons for the fiscal year ended September 30, 2018 to 1,420 tons for the fiscal year ended September 30, 2019, while unit sales price for Shiitake remained relatively stable.

Revenue from sales of Mu Er decreased by $0.53 million, or 4.36%, to $11.7 million for the fiscal year ended September 30, 2019 from $12.2 million for the same period of last year, due a slight decrease in sales volume, and unit sales price due to the depreciation of RMB against U.S. dollar. Sales volume was 945 tons for the fiscal year ended September 30, 2019, as compared to 967 tons for the same period of last year, while average unit sales price was $12,338 and $12,606, respectively.

Revenue from sales of other edible fungi and other agricultural products increased by $0.41 million, or 47.15%, to $1.3 million for the fiscal year ended September 30, 2019 from $0.88 million for the same period of last year. The increase was primarily due to increased online sales of high-end edible fungi, which has higher unit sales prices. In addition, after the completion of software development and payment system upgrades in March 2018, the Company reorganized its operating team to put greater effort into advertising activities in order to enhance brand awareness and attract more customers. As a result, online sales increased significantly in the six months ended March 31, 2019.

Beginning October 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (FASB ASC Topic 606) using the modified retrospective method under which cumulative effects are recognized at the date of the initial application of ASC 606. With the adoption of ASC 606, revenue is recognized by following the five steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company believes that its current revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Based on the Company’s assessment, potential adjustments to input measures are not expected to be pervasive to the majority of its contracts. As such, the Company has concluded that the adoption of this new guidance did not result in a material cumulative catch-up adjustment to the opening balance sheet of retained earnings at the effective date or any other material impact on its consolidated financial statements.

Cost of Revenues

Cost of revenues increased by $0.67 million, or 2.70%, to $25.4 million for the fiscal year ended September 30, 2019 from $24.8 million for the same period of last year.

Cost of revenues of Shiitake increased by $0.8 million or 5.71%, to $14.8 million for the fiscal year ended September 30, 2019 from $14.0 million for the same period of last year.  Cost of revenues of Mu Er decreased by $0.44 million, or 4.41%, to $9.7 million for the fiscal year ended September 30, 2019 from $10.1 million for the same period of last year. Cost of revenues of other edible fungi and agricultural products increased by $0.32 million, or 48.02%, to $0.98 million for the fiscal year ended September 30, 2019 from $0.66 million for the same period of last year.

Gross Profit

Overall gross profit increased by $0.35 million, or 7.00%, to $5.42 million for the fiscal year ended September 30, 2019 from $5.07 million for the same period of the last year. Gross profit from sales of Shiitake increased by $0.34 million, or 12.29%, to $3.14 million for the fiscal year ended September 30, 2019 from $2.80 million for the same period of last year. Gross profit from sales of Mu Er decreased by $.09 million, or 4.07%, to $1.97 million for the fiscal year ended September 30, 2019 from $2.06 million for the same period of last year. Gross profit from sales of other edible fungi and agricultural products increased by $0.10 million, or 44.44%, to $0.31 million for the year ended September 30, 2019 from $0.21 million for the same period of last year. The increased overall gross profit was led by increased sales for the fiscal year ended September 30, 2019, as compared to the prior period.

Overall gross margin increased by 0.59 percentage points to 17.58% for the fiscal year ended September 30, 2019 from 16.99% for the same period of last year. The increase in overall gross margin was primarily due to increased revenue generated from the Company’s online shopping platforms, combined with strategic programs targeting both pricing and operating costs. Sales made through the online shopping platforms have higher gross margin than traditional sales.

Income from Operations

Selling and distribution expenses increased by $0.04 million, or 7.64 %, to $0.59 million for the fiscal year ended September 30, 2019 from $0.55 million for the same period of last year, primarily due to the increase in service fees, as more services were provided by third parties for the Company’s  online platforms along with the increased online business activities during the fiscal year ended September 30, 2019, as compared to the same period of last year.

General and administrative expenses increased by $0.35 million, or 24.61%, to $1.79 million for the fiscal year ended September 30, 2019 from $1.44 million for the same period of last year. The increase was primarily attributable to increased labor costs,  as the Company expanded its team to support demand growth in its business, along with increased costs associated with being a public company.

As a result, income from operations decreased by $0.42 million or 1.37%, to $3.04 million for the fiscal year ended September 30, 2019 from $3.08 million for the same period of last year.

Interest Expense

Interest expense was $1.20 million for the fiscal year ended September 30, 2019, as compared to $0.15 million for the same period of last year. The increase in interest expense was primarily attributable to the interest expense incurred for the senior convertible notes issued in November 2018.

Provision for Income Taxes

For the fiscal years ended September 30, 2019 and 2018, the Company’s income tax expense was $34,564 and $9,063, respectively. The low income tax expense was primarily due to an income tax incentive the Company received from the tax authority of Lishui City.  During the fiscal year ended September 30, 2019, the Company’s subsidiaries, FLS Mushroom and Farmmi Food received an income tax break from the local tax authority of Lishui City, for engaging in the agricultural products processing industry. Management expects that the Company will continue to enjoy the tax break going forward.

Net Income (loss)

Net loss was $0.31 million for the fiscal year ended September 30, 2019, a decrease of  $3.54 million from net income of $3.23 million for the same period of fiscal year 2018.  The fiscal year ended September 30, 2019 reflects the significant negative impact of $3.31 million in expenses due to the amortization of debt issuance costs and interest expenses associated with the Company’s convertible notes issued in November 2018, as compared to $0.15 million in the same period of last year.

Financial Condition

Primarily due to advances made to the Company’s suppliers, as of September 30, 2019, the Company had a balance of cash and cash equivalents of $0.14 million with a restricted cash balance of $0.6 million.  As of December 19, 2019, approximately $13.5 million, or 98% of the Company’s accounts receivable balance, as of September 30, 2019, was collected, and approximately $6.1 million or 44% of the Company’s advances to suppliers were utilized.  Advances were made based on sales orders received and expected demand over the coming months.  The remaining balance of advances to suppliers is expected to be fully utilized by March 2020.

About Farmmi, Inc.

Headquartered in Lishui, Zhejiang, Farmmi, Inc. (NASDAQ: FAMI), is a leading agricultural products supplier, processor and retailer of Shiitake mushrooms, Mu Er mushrooms, other edible fungi, and many other sought-after agricultural products.  The Company’s Farmmi Liangpin Market serves as a global trading platform for Chinese geographical indication agricultural products and is one of the largest platforms for consumers to access locally sourced agricultural products. For further information about 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.

 Farmmi, Inc. 

 Consolidated Balance Sheets 

 
   

September 30,

 

September 30,

   

2019

 

2018

Assets

       

Current Assets

       
   

Cash

$

135,125

$

4,925,165

   

Restricted cash

 

18,690

 

   

Accounts receivable, net – trade

 

13,824,937

 

8,601,269

   

Accounts receivable, net – related party

 

2,654

 

1,257

   

Inventory, net

 

1,459,247

 

1,808,143

   

Advances to suppliers

 

14,034,379

 

5,868,486

   

Other current assets

 

229,996

 

135,314

 

Total current assets

 

29,705,028

 

21,339,634

         

Property, plant and equipment, net  

 

139,468

 

136,363

Intangible assets, net

 

38,135

 

Restricted cash – long term

 

600,000

 

600,000

Total Assets

$

30,482,631

$

22,075,997

         

Liabilities and Equity

       
 

Current Liabilities

       
   

Short-term bank loan

$

1,400,894

$

1,455,580

   

Accounts payable – trade

 

293,264

 

343,141

   

Due to related parties

 

2,652,882

 

122,800

   

Advances from customers

 

5,926

 

   

Convertible notes payable

 

2,926,361

 

   

Other current liabilities

 

865,753

 

300,379

 

Total current liabilities

 

8,145,080

 

2,221,900

           
   

Long-term bank loan

 

 

640,455

Total Liabilities

 

8,145,080

 

2,862,355

         

Equity

       
         
   

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

     
   

12,589,857 and 11,932,000 shares issued and outstanding at September 30, 2019 and 2018

 

12,590

 

11,932

   

Additional paid-in capital

 

15,762,867

 

11,322,819

   

Statutory reserve 

 

597,528

 

229,512

   

Retained earnings 

 

6,321,384

 

6,996,837

   

Accumulated other comprehensive loss

 

(1,195,866)

 

(222,830)

 

Total Stockholders’ Equity

 

21,498,503

 

18,338,270

           
 

Non-controlling Interest

 

839,048

 

875,372

 

Total Equity

 

22,337,551

 

19,213,642

           

Total Liabilities and Equity

$

30,482,631

$

22,075,997

         
         

 Farmmi, Inc. 

 Consolidated Statements of Operations and Comprehensive Income (loss) 

     
             
   

 For the Years Ended September 30, 

   

2019

 

2018

 

2017

             

 Revenues 

           
 

 Sales to third parties 

$

30,825,552

$

29,663,670

$

25,866,459

 

 Sales to related party 

 

16,323

 

155,418

 

799,142

   

 Total revenues 

 

30,841,875

 

29,819,088

 

26,665,601

             

 Cost of revenues 

 

25,419,751

 

24,751,473

 

22,140,879

             

 Gross Profit 

 

5,422,124

 

5,067,615

 

4,524,722

             

 Operating expenses 

           
 

 Selling and distribution expenses 

 

589,381

 

547,532

 

140,019

 

 General and administrative expenses 

 

1,797,130

 

1,442,155

 

915,474

 

 Total operating expenses 

 

2,386,511

 

1,989,687

 

1,055,493

               

 Income from operations 

 

3,035,613

 

3,077,928

 

3,469,229

             

 Other (expenses) income  

           
 

 Interest income 

 

635

 

731

 

311

 

 Interest expense 

 

(1,197,317)

 

(154,400)

 

(209,159)

 

 Amortization of debt issuance costs 

 

(2,113,492)

 

 

 

 Other (expenses) income, net 

 

(1,879)

 

314,070

 

15,758

 

 Total other (expenses) income 

 

(3,312,053)

 

160,401

 

(193,090)

               

 (Loss) income before income taxes 

 

(276,440)

 

3,238,329

 

3,276,139

             

 Provision for income taxes 

 

34,564

 

9,063

 

5,793

             

 Net (loss) income 

 

(311,004)

 

3,229,266

 

3,270,346

             
 

 Less: net (loss) income attributable to non-controlling interest 

 

(3,567)

 

7,234

 

(964)

               

 Net (loss) income attributable to Farmmi, Inc. 

$

(307,437)

$

3,222,032

$

3,271,310

             

Comprehensive (loss) income

           
 

 Net (loss) income 

$

(311,004)

$

3,229,266

$

3,270,346

 

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

 

(1,005,793)

 

(970,209)

 

95,185

 

 Total comprehensive (loss) income 

 

(1,316,797)

 

2,259,057

 

3,365,531

 

 Comprehensive (loss) income attributable to non-controlling interest 

 

(36,324)

 

(21,204)

 

1,075

               

Comprehensive (loss) income attributable to Farmmi, Inc.

$

(1,280,473)

$

2,280,261

$

3,364,456

             
 

 Weighted average number of shares, basic and diluted 

 

11,678,773

 

11,173,699

 

10,000,000

               
 

 Basic and diluted (loss) earnings per common share 

$

(0.03)

$

0.29

$

0.33

                 
                 

 Farmmi, Inc. 

 Consolidated Statements of Changes in Stockholders’ Equity 

 For the Years Ended September 30, 2019, 2018 and 2017 

 
             

 Accumulated 

                   
         

 Additional 

 

 Other 

                   
 

 Common Stock 

 

 Paid in 

 

 Comprehensive 

 

 Statutory 

 

 Retained 

 

 Total Stockholders’ 

 

 Non-Controlling  

   
 

 Shares 

 

 Amount 

 

 Capital 

 

 Income (loss) 

 

 Reserves 

 

  Earnings 

 

 Equity 

 

 Interest 

 

 Total Equity 

 Balance at September 30, 2016 

10,000,000

 

$ 10,000

 

$         5,023,080

 

$              625,795

 

$             –

 

$      733,007

 

$                 6,391,882

 

$              895,501

 

$        7,287,383

                                   

 Foreign currency translation gain 

 

 

 

93,146

 

 

 

93,146

 

2,039

 

95,185

 Net income (loss) for the year 

 

 

 

 

 

3,271,310

 

3,271,310

 

(964)

 

3,270,346

 Statutory reserve  

 

 

 

 

229,512

 

(229,512)

 

 

 

                                   

 Balance at September 30, 2017 

10,000,000

 

$ 10,000

 

$         5,023,080

 

$              718,941

 

$  229,512

 

$  3,774,805

 

$                 9,756,338

 

$              896,576

 

$      10,652,914

                                   

 Proceeds from Initial Public Offering – stock issuance 

1,932,000

 

1,932

 

7,726,068

 

 

 

 

7,728,000

 

 

7,728,000

 Direct costs disbursed from Initial Public Offering proceeds 

 

 

(1,426,329)

 

 

 

 

(1,426,329)

 

 

(1,426,329)

 Foreign currency translation loss 

 

 

 

(941,771)

 

 

 

(941,771)

 

(28,438)

 

(970,209)

 Net income for the year 

 

 

 

 

 

3,222,032

 

3,222,032

 

7,234

 

3,229,266

                                   

 Balance at September 30, 2018 

11,932,000

 

$ 11,932

 

$       11,322,819

 

$            (222,830)

 

$  229,512

 

$  6,996,837

 

$               18,338,270

 

$              875,372

 

$      19,213,642

                                   

 Issuance of common shares for convertible notes redemption 

657,857

 

658

 

1,949,434

 

 

 

 

1,950,092

 

 

1,950,092

 Beneficial conversion feature associated with convertible notes 

 

 

670,618

 

 

 

 

670,618

 

 

670,618

 Issuance of warrants associated with convertible notes 

 

 

1,819,996

 

 

 

 

1,819,996

 

 

1,819,996

 Foreign currency translation loss 

 

 

 

(973,036)

 

 

 

(973,036)

 

(32,757)

 

(1,005,793)

 Net loss for the year 

 

 

 

 

 

(307,437)

 

(307,437)

 

(3,567)

 

(311,004)

 Statutory reserve  

 

 

 

 

368,016

 

(368,016)

 

 

 

                                   

 Balance at September 30, 2019 

12,589,857

 

$ 12,590

 

$       15,762,867

 

$         (1,195,866)

 

$  597,528

 

$  6,321,384

 

$               21,498,503

 

$              839,048

 

$      22,337,551

 
 

 Farmmi, Inc. 

 Consolidated Statements of Cash Flows 

 
 

For the Years Ended September 30,

 

2019

 

2018

 

2017

           

Cash flows from operating activities

         
 

 Net (loss) income 

$              (311,004)

 

$      3,229,266

 

$        3,270,346

 

 Adjustments to reconcile net (loss) income to net cash 

         
   

 (used in) provided by operating activities: 

         
   

 Depreciation and amortization expense 

46,779

 

24,886

 

21,939

   

 Loss from disposal of property and equipment 

 

873

 

   

 Accrued interest expense for convertible notes 

1,087,774

 

 

   

 Amortization of deferred financing costs 

2,113,492

 

 

 

 Changes in operating assets and liabilities: 

         
   

 Accounts receivable, net 

(5,759,327)

 

(3,804,464)

 

133,681

   

 Inventory, net 

291,652

 

(280,017)

 

(112,128)

   

 Advances to suppliers 

(8,705,402)

 

(1,980,862)

 

(378,713)

   

 Other current assets 

(103,561)

 

(118,755)

 

278,247

   

 Long-term prepaid expenses 

 

 

24,192

   

 Accounts payable 

(38,392)

 

(62,706)

 

(51,038)

   

 Advances from customers 

6,151

 

 

(1,090,595)

   

 Other current liabilities 

598,551

 

266,769

 

(91,012)

Net cash provided by (used in) operating activities

(10,773,287)

 

(2,725,010)

 

2,004,919

           

Cash flows from investing activities

         
   

 Purchase of property, plant and equipment 

(51,781)

 

(64,715)

 

(66,503)

   

 Purchase of intangible assets 

(43,124)

 

 

   

 Collections on loans to related parties 

 

 

2,192,762

Net cash (used in) provided by investing activities

(94,905)

 

(64,715)

 

2,126,259

           

Cash flows from financing activities

         
   

 Payments of deferred financing costs 

(716,318)

 

 

(278,820)

   

 Gross proceeds from issuance of convertible notes 

7,500,000

 

 

   

 Net proceeds from Initial Public Offering – stock issuance 

 

7,728,000

 

   

 Direct costs disbursed from Initial Public Offering proceeds 

 

(1,147,509)

 

   

 Borrowings from bank loans 

1,454,186

 

1,530,080

 

5,195,539

   

 Repayments of bank loans 

(2,094,028)

 

(1,683,088)

 

(6,809,972)

   

 Proceeds from loans from related parties 

 

 

239,125

   

 Repayments of loans from related parties 

(87,800)

 

(300,163)

 

Net cash provided by (used in) financing activities

6,056,040

 

6,127,320

 

(1,654,128)

           

Effect of exchange rate changes on cash, cash equivalents and restricted cash

40,802

 

(402,969)

 

66,248

           

Net (decrease) increase in cash, cash equivalents and restricted cash

(4,771,350)

 

2,934,626

 

2,543,298

           

Cash, cash equivalents and restricted cash, beginning of year

5,525,165

 

2,590,539

 

47,241

           

Cash, cash equivalents and restricted cash, end of year

$               753,815

 

$      5,525,165

 

$        2,590,539

           

Supplemental disclosure information:

         
 

 Income taxes paid 

$                  13,777

 

$           11,763

 

$              10,207

 

 Interest paid 

$               118,237

 

$         164,587

 

$           203,198

             

Non-cash financing activities

         
 

Conversion of notes to 657,857 shares of common stock

$            1,950,091

 

$                     –

 

$                       –

 

Accrued interest for convertible notes

$            1,087,774

 

$                     –

 

$                       –

 

Repayment of convertible notes by a related party on behalf of the Company

$            2,617,882

 

$                     –

 

$                       –

               

Cision View original content:http://www.prnewswire.com/news-releases/farmmi-inc-reports-financial-results-for-the-fiscal-year-2019-300980198.html

Source: Farmmi, Inc.