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      Shineco, Inc. Reports Fiscal Year 2018 Financial Results


      News provided by

      Shineco, Inc

      Oct 15, 2018, 16:30 ET

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      BEIJING, Oct. 15, 2018 /PRNewswire/ -- 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, 2018.

      Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, "We are proud of our achievements for fiscal year 2018 with total revenue increased by 30.7% to $43.90 million. Our revenue from Luobuma products increased 200.3% to $10.88 million as our investment in our Apocynum Industrial Park in Xinjiang began to realize its potential. We expect to see more revenue momentum as we continue to invest in key projects to position ourselves for long term growth and success. We are pleased with the reception our Luobuma product line has received over the past fiscal year and we are excited to continue to optimize our operations and improve our gross margins as we enter the new fiscal year."

      Fiscal Year 2018 Financial Highlights 


      For the Fiscal Years Ended June 30

      ($ millions, except per share data)

      2018


      2017


      % Change

      Revenue

      43.90


      33.59


      30.7%

      Luobuma products

      10.88


      3.62


      200.3%

      Chinese medicinal herbal products

      14.18


      13.25


      7.1%

      Other agricultural products

      18.83


      16.72


      12.6%

      Gross profit

      14.79


      10.74


      37.7%

      Gross margin

      33.7%


      32.0%


      1.7 pp*

      Operating income

      9.27


      7.45


      24.5%

      Operating margin

      21.1%


      22.2%


      -1.0 pp*

      Net income attributable to Shineco

      7.59


      8.47


      -10.4%

      EPS

      0.36


      0.41


      -12.5%

      *Notes: pp represents percentage points


      • Revenue: $43.90 million (at 33.7% gross margin), up 30.7% from $33.59 million (at 32.0% gross margin) in fiscal year 2017, reflecting the increase in sales across all products.
      • Luobuma Products Revenue: $10.88 million, growing 200.3% year-over-year from $3.62 million in fiscal year 2017.
      • Gross Profit: $14.79 million, up from $10.74 million in fiscal year 2017.
      • Operating Income: $9.27 million, growing 24.5% year-over-year from $7.45 million in fiscal year 2017.
      • Net income attributable to Shineco: $7.59 million, compared to $8.47 million in fiscal year 2017.
      • EPS: Net income per share of 0.36, compared to a net income per share of $0.41 in fiscal year 2017.

      Fiscal Year 2018 Financial Results 

      Revenue

      Revenue for the year ended June 30, 2018 increased by $10.31 million, or 30.7%, to $43.90 million from $33.59 million for the same period of last year, mainly due to the increase in sales across all products. 


      For the Fiscal Years Ended June 30


      2018


      2017

      ($ millions)

      Revenue


      COGS


      Gross
      Margin


      Revenue


      COGS


      Gross
      Margin

      Luobuma products

      10.88


      4.89


      55.1%


      3.62


      1.71


      52.8%

      Chinese medicinal herbal products

      14.18


      10.76


      24.1%


      13.25


      10.18


      23.1%

      Other agricultural products

      18.83


      13.46


      28.5%


      16.72


      10.96


      34.5%

      Total

      43.90


      29.11


      33.7%


      33.59


      22.85


      32.0%

      Revenue from Luobuma products increased by $7.26 million, or 200.3%, to $10.88 million for the year ended June 30, 2018 from $3.62 million for the same period of last year, mainly due to revenue generated by a new subsidiary, Xinjiang Taihe, of $8.21 million for the year ended June 30, 2018. Moreover, the increase of revenue from this segment was due to increased sales volume of health awareness related products. The Company also enhanced online sales promotions during the year ended June 30, 2018, which contributed to more sales revenue overall. The increase was partially offset by the decrease in revenue from Tenet-Jove Xuzhou branch of $1.59 million, as the business operation of this branch ceased in November 2017.

      Revenue from Chinese medicinal herbal products increased by $0.93 million, or 7.1%, to $14.18 million for the year ended June 30, 2018 from $13.25 million for the same period of last year. The increase was primarily due to the increased unit sales price in the herbal market during the period from October to December 2017, as well as more fulfilled sales orders from customers for the year ended June 30, 2018 than the same period in 2017.

      Revenue from other agricultural products increased by $2.11 million, or 12.6%, to $18.83 million for the year ended June 30, 2018 from $16.72 million for the same period of last year. The increase was mainly attributable to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees for year ended June 30, 2018 as compared to the same period in 2017.

      Gross profit and Gross Margin

      Total cost of revenue increased by $6.26 million, or 27.4%, to $29.11 million for the year ended June 30, 2018 from $22.85 million for the same period of last year. Gross profit increased by $4.05 million, or 37.7%, to $14.79 million for the year ended June 30, 2018 from $10.74 million for the same period of last year. Overall gross margin increased by 1.7 percentage points to 33.7% for the year ended June 30, 2018, compared to 32.0% for the same period of last year.

      Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 55.1%, 24.1%, and 28.5%, respectively, for the year ended June 30, 2018. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 52.8%, 23.1%, and 34.5%, respectively, for the same period of last year.

      Operating income

      Selling expenses increased by $0.05 million, or 3.3%, to $1.53 million for the year ended June 30, 2018 from $1.48 million for the same period of last year, primarily due to the acquisition of a new subsidiary, Tianjin Tajite, in October 2017. The increase in selling and distribution expenses was also a result of increased promotion expenses as the Company enhanced its online sales promotions, partially offset by decreased rent expense of warehouse and salary expenses due to more effective cost control during the years ended June 30, 2018 compared to the same period of 2017.

      General and administrative expenses increased by $2.17 million, or 119.8%, to $3.99 million for the year ended June 30, 2018 from $1.81 million for the same period of last year. The increase in general and administrative expenses was primarily attributable to the incorporation and acquisition of new subsidiaries, Tiankunrunze in second quarter of fiscal year 2017, and Xinjiang Taihe, Runze and Tianjin Tajite in fiscal year 2018. The increase in general and administrative expenses was also a result of increased bad debt expense, salary expenses as well as entertainment expense.

      Operating income increased by $1.83 million, or 24.5%, to $9.27 million for the year ended June 30, 2018 from $7.45 million for the same period of last year. Operating margin was 21.1% for the year ended June 30, 2018, compared to 22.2% for the same period of last year.

      Impairment loss on goodwill

      Impairment loss on goodwill was $2.15 million for the year ended June 30, 2018, representing an increase of 100.00%, as compared to the same period of last year. In conjunction with the preparation of consolidated financial statement for year ended June 30, 2018, the management performed evaluation on the impairment of goodwill. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded impairment loss on goodwill of Tianjin Tajite.

      Net income

      Net income decreased by $1.09 million, or 12.7%, to $7.53 million for the year ended June 30, 2018 from $8.62 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, 2018 was $7.59 million, or $0.36 per basic and diluted share. This compared to net income attributable to common shareholders of $8.47 million, $0.41 per basic and diluted share, for the same period of last year.

      Financial Condition

      As of June 30, 2018, the Company had cash and cash equivalents of $31.49 million, compared to $23.15 million as of June 30, 2017. Net cash provided by operating activities was $9.85 million for the year ended June 30, 2018, compared to net cash used in operating activities of $2.74 million for the same period of last year. Net cash used in investing activities was $0.75 million for the year ended June 30, 2018, compared to $0.73 million for the same period of last year. Net cash used in financing activities was $0.49 million for the year ended June 30, 2018, compared to net cash provided by financing activities of $5.38 million for the same period of last year.

      About Shineco, Inc.

      Incorporated in August 1997 and headquartered in Beijing, China, Shineco, Inc. ("Shineco" or the "Company") is a Delaware holding company that uses its subsidiaries' and variable interest entities' 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 the Company, please visit  www.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: [email protected]


      SHINECO, INC.

      CONSOLIDATED BALANCE SHEETS








      ASSETS







      June 30,


      June 30,


      2018


      2017







      CURRENT ASSETS:






          Cash

      $

      31,487,053


      $

      23,154,551

          Accounts receivable, net


      15,478,336



      14,480,004

          Due from related parties


      388,261



      448,833

          Inventories


      2,364,558



      2,346,273

          Advances to suppliers, net


      4,977,407



      2,396,123

          Deferred issuance cost


      434,000



      -

          Other current assets


      1,034,780



      1,900,143

      TOTAL CURRENT ASSETS


      56,164,395



      44,725,927







          Property and equipment, net


      11,697,304



      10,320,396

          Land use right, net of accumulated amortization


      1,345,088



      1,346,631

          Investments


      6,567,090



      5,695,080

          Deposit for business acquisition


      -



      2,065,686

          Distribution rights


      1,114,837



      -

          Long-term deposit and other noncurrent assets


      113,764



      112,883

          Long-term accounts receivable, net


      2,700,367



      -

          Prepaid leases


      3,397,572



      3,784,533

          Deferred tax assets


      -



      233,834

      TOTAL  ASSETS

      $

      83,100,417


      $

      68,284,970













      LIABILITIES AND EQUITY












      CURRENT LIABILITIES:






          Short-term loans

      $

      2,316,283


      $

      2,663,628

          Accounts payable


      2,270,140



      158,068

          Advances from customers


      17,500



      5,439

          Due to related parties


      197,617



      257,880

          Other payables and accrued expenses


      1,736,735



      337,107

          Taxes payable


      2,991,624



      1,608,926

      TOTAL CURRENT LIABILITIES


      9,529,899



      5,031,048







          Income tax payable - noncurrent portion


      685,185



      -

          Deferred tax liability


      11,652



      -

      TOTAL LIABILITIES


      10,226,736



      5,031,048







      Commitments and contingencies


      -



      -







      EQUITY:






          Common stock; par value $0.001, 100,000,000 shares authorized;






      21,234,072 and 21,034,072 shares issued and outstanding at June 30, 2018 and  June 30, 2017


      21,234



      21,034

          Additional paid-in capital


      23,171,102



      22,737,302

          Statutory reserve


      4,085,819



      3,484,449

          Retained earnings


      46,051,289



      39,064,743

          Accumulated other comprehensive loss


      (1,509,212)



      (3,140,982)

          Total Stockholders' equity of Shineco, Inc.


      71,820,232



      62,166,546

          Non-controlling interest


      1,053,449



      1,087,376

      TOTAL EQUITY


      72,873,681



      63,253,922







      TOTAL LIABILITIES AND EQUITY

      $

      83,100,417


      $

      68,284,970


      SHINECO, INC.

      CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME









      For the Years Ended June 30,


      2018


      2017





      REVENUE

      $

      43,897,618


      $

      33,592,337







      COST OF REVENUE






          Cost of product and services


      29,005,659



      22,776,035

          Business and sales related tax


      104,667



      75,974

                    Total cost of revenue


      29,110,326



      22,852,009







      GROSS PROFIT


      14,787,292



      10,740,328







      OPERATING EXPENSES






          General and administrative expenses


      3,985,604



      1,813,402

          Selling expenses


      1,530,005



      1,480,855

                    Total operating expenses


      5,515,609



      3,294,257







      INCOME FROM OPERATIONS


      9,271,683



      7,446,071







      OTHER INCOME






          Impairment loss on goodwill


      (2,153,298)



      -

          Income from equity method investments


      907,794



      927,697

          Purchase rebate income


      1,377,108



      1,136,162

          Other income 


      307,637



      348,181

          Interest income (expense), net


      (58,775)



      14,171

                    Total other income


      380,466



      2,426,211







      INCOME BEFORE PROVISION FOR INCOME TAXES


      9,652,149



      9,872,282







      PROVISION FOR INCOME TAXES


      2,123,587



      1,252,637







      NET INCOME


      7,528,562



      8,619,645







          Net (loss) income attributable to non-controlling interest


      (59,354)



      149,991







      NET INCOME ATTRIBUTABLE TO SHINECO, INC.

      $

      7,587,916


      $

      8,469,654







      COMPREHENSIVE INCOME






          Net income

      $

      7,528,562


      $

      8,619,645

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


      1,658,658



      (1,271,036)

          Total comprehensive income 


      9,187,220



      7,348,609

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


      (32,466)



      132,008







      COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC.

      $

      9,219,686


      $

      7,216,601







          Weighted average number of shares basic and diluted


      21,119,004



      20,616,335







          Earnings per common share

      $

      0.36


      $

      0.41


      SHINECO, INC.

      CONSOLIDATED STATEMENTS OF CASH FLOWS









      For the Years Ended June 30,


      2018


      2017







      CASH FLOWS FROM OPERATING ACTIVITIES:






      Net income

      $

      7,528,562


      $

      8,619,645

      Adjustments to reconcile net income to net cash provided by (used in) operating activities:






      Depreciation and amortization


      698,232



      575,196

      Loss (gain) from disposal of property and equipment


      5,557



      (8,063)

      Provision (recovery of) for doubtful accounts


      262,013



      (342,041)

      Increase in inventory reserve


      124,601



      37,292

      Deferred tax (benefit) provision


      (28,138)



      86,780

      Income from equity method investments


      (907,794)



      (927,697)

      Interest income from loans to related parties


      -



      (86,355)

      Impairment loss on goodwill


      2,153,298



      -







      Changes in operating assets and liabilities:






      Accounts receivable


      (3,569,821)



      (8,136,668)

      Advances to suppliers


      (2,563,943)



      (2,339,757)

      Inventories


      (25,031)



      2,122,982

      Other receivables


      170,125



      (72,891)

      Prepaid expense and other assets


      4,442



      (401,755)

      Due from related parties


      126,293



      (976,937)

      Prepaid leases


      485,382



      466,759

      Accounts payable


      2,145,058



      (96,137)

      Advances from customers


      (70,459)



      (3,950)

      Other payables


      1,272,263



      (1,614,992)

      Taxes payable


      2,036,079



      354,453

      NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES


      9,846,719



      (2,744,136)







      CASH FLOWS FROM INVESTING ACTIVITIES:






      Acquisitions of property and equipment


      (1,763,160)



      (49,863)

      Proceeds from disposal of property and equipment


      607



      17,688

      Payment for construction in progress


      58,671



      -

      Repayments of loans from third parties


      831,716



      4,839

      Loan advances to related party


      (53,793)



      -

      Repayments of loans from related parties


      -



      565,739

      Income received from investments in unconsolidated entities


      153,695



      990,839

      Deposit for business acquisition


      -



      (2,055,074)

      Deposit for potential investment


      -



      (200,000)

      Cash of subsidiary acquired


      23,304



      -

      NET CASH USED IN INVESTING ACTIVITIES


      (748,960)



      (725,832)







      CASH FLOWS FROM FINANCING ACTIVITIES:






      Proceeds from short-term loans


      2,459,122



      2,673,064

      Repayment of short-term loans


      (2,877,044)



      (2,701,321)

      Proceeds from initial public offering, net of offering costs


      -



      5,394,549

      Repayments of advances from related parties


      (67,561)



      17,683

      NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES


      (485,483)



      5,383,975







      EFFECT OF EXCHANGE RATE CHANGE ON CASH


      (279,774)



      (768,830)







      NET INCREASE IN CASH


      8,332,502



      1,145,177







      CASH - Beginning of the Period


      23,154,551



      22,009,374







      CASH - End of the Period

      $

      31,487,053


      $

      23,154,551







      SUPPLEMENTAL CASH FLOW DISCLOSURES:






      Cash paid for income taxes

      $

      857,201


      $

      845,792

      Cash paid for interest

      $

      133,930


      $

      150,175







      SUPPLEMENTAL NON-CASH INVESTING ACTIVITY:






      Issued 200,000 shares of deferred issuance cost

      $

      434,000


      $

      -

      SOURCE Shineco, Inc

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