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     $ -