Exhibit 99.1

 

Shineco, Inc. Reports Second Quarter of 2018 Financial Results

 

BEIJING, Feb. 12, 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, today announced its financial results for the second quarter ended December 31, 2017.

 

Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, "We are proud of all that we have accomplished in the first two quarters of our fiscal year and are pleased to report the second quarter of 2018 financial results with a 26.3% increase in net income as compared to the second quarter of 2017. We believe that our investment in our Apocynum Industrial Park and Institute of Chinese Apocynum Industrial Technology Research continues to strengthen the long-term outlook of Shineco as a positive long-term investment. In the short term we have seen tremendous growth in our Luobuma product line and are pleased that we have grown to become a high margin business, with revenues grown 327% compared to the second quarter ended December 31, 2016, and have achieved impressive results following our expansion over this past year. The past six months have been immensely positive for Shineco and we are excited to tackle the challenges and opportunities that the next six months will bring, as we anticipate continued future growth in our revenues and net income.”

 

Second Quarter of 2018 Financial Highlights

 

		For the Three Months Ended December 31
($ millions, except per share data)		2017				2016				% Change
Revenue			14.13				11.22				25.9	%
Luobuma products			3.89				0.91				327.0	%
Chinese medicinal herbal products			3.66				3.50				4.8	%
Other agricultural products			6.58				6.82				-3.4	%
Gross profit			4.82				3.95				21.9	%
Gross margin			34.1	%			35.2	%			-1.1	%
Operating income			3.24				2.53				28.2	%
Operating margin			22.9	%			22.5	%			0.4	%
Net income attributable to Shineco			3.60				2.85				26.3	%
EPS			0.17				0.14				26.3	%

 

·

Revenues increased by 25.9% to $14.13 million for the three months ended December 31, 2017 from $11.22 million for the same period of last year, mainly due to increases in sales from Luobuma products and Chinese medicinal herbal products and partially offset by decreased sales from other agricultural products.

 

·

Gross profit increased by 21.9% to $4.82 million for the three months ended December 31, 2017 from $3.95 million for the same period of last year. Gross margin decreased by 1.1 percentage points to 34.1% from 35.2% for the same period of last year.

 

·

Net income attributable to Shineco increased by 26.3% to $3.60 million, or $0.17 per basic and diluted share, for the three months ended December 31, 2017 from $2.85 million, or $0.14 per basic and diluted share, for the same period of last year. The increases in net income earnings per share were primarily a result of the increase in gross profit, partially offset by the increase in general and administrative expenses.

 

Second Quarter of 2018 Financial Results

 

Revenues

 

Revenues for the three months ended December 31, 2017 increased by $2.91 million, or 25.9%, to $14.13 million from $11.22 million for the same period of last year, mainly due to increases in sales from Luobuma products and Chinese medicinal herbal products and partially offset by decreased sales from other agricultural products.

 

 

		For the Three Months Ended December 31
		2017												2016
($ millions)		Revenues				COGS				Gross Margin				Revenues				COGS				Gross Margin
Luobuma products			3.89				1.87				51.7	%			0.91				0.44				51.0	%
Chinese medicinal herbal products			3.66				2.75				24.6	%			3.50				2.48				29.1	%
Other agricultural products			6.58				4.67				29.0	%			6.82				4.33				36.4	%
Business and sales related taxes			-				0.03				-				-				0.02				-
Total			14.13				9.31				34.1	%			11.22				7.27				35.2	%

 

Revenues from Luobuma products increased by $2.98 million, or 327.0%, to $3.89 million for the three months ended December 31, 2017 from $0.91 million for the same period of last year, mainly due to establishment of new subsidiary, Xinjiang Taihe, which generated revenue of $2.93 million.

 

Revenues from Chinese medicinal herbal products increased by $0.17 million, or 4.8%, to $3.66 million for the three months ended December 31, 2017 from $3.50 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers for the three months ended December 31, 2017 than the same period in 2016.

 

Revenues from other agricultural products decreased by $0.23 million, or 3.4%, to $6.58 million for the three months ended December 31, 2017 from $6.82 million for the same period of last year. The decrease was mainly due to the decrease in revenue of storage services, partially offset by the increased sales of yew trees.

 

Gross profit and Gross Margin

 

Total cost of goods sold increased by $2.04 million, or 28.1%, to $9.31 million for the three months ended December 31, 2017 from $7.27 million for the same period of last year. Gross profit increased by $0.86 million, or 21.9%, to $4.82 million for the three months ended December 31, 2017 from $3.95 million for the same period of last year. Overall gross margin decreased by 1.1 percentage points to 34.1% for the three months ended December 31, 2017, compared to 35.2% for the same period of last year.

 

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 51.7%, 24.6%, and 29.0%, respectively, for the three months ended December 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 51.0%, 29.1%, and 36.4%, respectively, for the same period of last year.

 

Operating income

 

Selling expenses increased by $0.05 million, or 9.6%, to $0.55 million for the three months ended December 31, 2017 from $0.50 million for the same period of last year, primarily due to the acquisition of new subsidiary, Tajite, in October, and increased promotion expenses, partly offset by decreased rent expense of warehouses and service fees of e-commerce websites. General and administrative expenses increased by $0.10 million, or 11.2%, to $1.03 million for the three months ended December 31, 2017 from $0.92 million for the same period of last year. The increase in general and administrative expenses was due to the incorporation of new subsidiaries, Tiankunrunze, Xinjiang Taihe and Tajite in 2017. As a result, total operating expenses increased by $0.15 million, or 10.7%, to $1.58 million for the three months ended December 31, 2017 from $1.43 million for the same period of last year.

 

Operating income increased by $0.71 million, or 28.2%, to $3.24 million for the three months ended December 31, 2017 from $2.53 million for the same period of last year. Operating margin was 22.9% for the three months ended December 31, 2017, compared to 22.5% for the same period of last year.

 

Net income

 

Net income increased by $0.68 million, or 23.6%, to $3.58 million for the three months ended December 31, 2017 from $2.90 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the three months ended December 31, 2017 was $3.60 million, or $0.17 per basic and diluted share. This compared to net income attributable to common shareholders of $2.85 million, $0.14 per basic and diluted share, for the same period of last year.

 

 

Six Months Ended December 31, 2017 Financial Results

 

		For the Six Months Ended December 31
($ millions, except per share data)		2017				2016				% Change
Revenue			21.94				17.59				24.7	%
Luobuma products			4.93				1.65				199.4	%
Chinese medicinal herbal products			6.93				6.68				3.8	%
Other agricultural products			10.08				9.27				8.8	%
Gross profit			6.91				5.87				17.7	%
Gross margin			31.5	%			33.4	%			-1.9	%
Operating income			4.20				3.59				17.0	%
Operating margin			19.1	%			20.4	%			-1.3	%
Net income attributable to Shineco			4.85				4.20				15.7	%
EPS			0.23				0.21				11.1	%

 

Revenues

 

Revenues for the six months ended December 31, 2017 increased by $4.35 million, or 24.7%, to $21.94 million from $17.59 million for the same period of last year, mainly due to increases in sales across all the products. 

 

		For the Six Months Ended December 31
		2017												2016
($ millions)		Revenues				COGS				Gross Margin				Revenues				COGS				Gross Margin
Luobuma products			4.93				2.45				50.1	%			1.65				0.81				50.4	%
Chinese medicinal herbal products			6.93				5.33				23.1	%			6.68				4.92				26.0	%
Other agricultural products			10.08				7.21				28.4	%			9.27				5.96				35.6	%
Business and sales related taxes			-				0.04				-				-				0.03				-
Total			21.94				15.04				31.5	%			17.59				11.72				33.4	%

 

Revenues from Luobuma products increased by $3.29 million, or 199.4%, to $4.93 million for the six months ended December 31, 2017 from $1.65 million for the same period of last year, mainly due to revenue generated by a new subsidiary, Xinjiang Taihe, of $2.93 million and increased sales volume of our health awareness related products. The Company also enhanced online sales promotions during the six months ended December 31, 2017, which contributed to more sales.

 

Revenues from Chinese medicinal herbal products increased by $0.25 million, or 3.8%, to $6.93 million for the six months ended December 31, 2017 from $6.68 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers.

 

Revenues from other agricultural products increased by $0.81 million, or 8.8%, to $10.08 million for the six months ended December 31, 2017 from $9.27 million for the same period of last year. The increase was mainly due to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees.

 

Gross profit and Gross Margin

 

Total cost of goods sold increased by $3.31 million, or 28.3%, to $15.04 million for the six months ended December 31, 2017 from $11.72 million for the same period of last year. Gross profit increased by $1.04 million, or 17.7%, to $6.91 million for the six months ended December 31, 2017 from $5.87 million for the same period of last year. Overall gross margin decreased by 1.9 percentage points to 31.5% for the six months ended December 31, 2017, compared to 33.4% for the same period of last year.

 

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 50.1%, 23.1%, and 28.4%, respectively, for the six months ended December 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 50.4%, 26.0%, and 35.6%, respectively, for the same period of last year.

 

 

Operating income

 

Selling expenses decreased by $0.04 million, or 4.2%, to $0.85 million for the six months ended December 31, 2017 from $0.88 million for the same period of last year, primarily due to decreased rent expense of warehouses, salary expenses, and service fees of e-commerce websites, partially offset by increased promotion expenses. General and administrative expenses increased by $0.47 million, or 33.3%, to $1.86 million for the six months ended December 31, 2017 from $1.40 million for the same period of last year. The increase in general and administrative expenses was primarily due to the incorporation of new subsidiaries, Tiankunrunze, Xinjiang Taihe and Tajite in 2017, as well as increased professional service fees, such as attorney’s fees, consulting fees and auditing fees.

 

Operating income increased by $0.61 million, or 17.0%, to $4.20 million for the six months ended December 31, 2017 from $3.59 million for the same period of last year. Operating margin was 19.1% for the six months ended December 31, 2017, compared to 20.4% for the same period of last year.

 

Net income

 

Net income increased by $0.56 million, or 13.2%, to $4.84 million for the six months ended December 31, 2017 from $4.28 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 December 31, 2017 was $4.85 million, or $0.23 per basic and diluted share. This compared to net income attributable to common shareholders of $4.20 million, $0.21 per basic and diluted share, for the same period of last year.

 

Financial Condition

 

As of December 31, 2017, the Company had cash of $29.35 million, compared to $23.15 million as of June 30, 2017. Working capital as of December 31, 2017 was $44.27 million as compared to $39.69 million at June 30, 2017. Net cash provided by operating activities was $7.78 million for the six months ended December 31, 2017, compared to net cash used in operating activities of $0.15 million for the same period of last year. Net cash used in investing activities was $0.49 million for the six months ended December 31, 2017, compared to $2.78 million for the same period of last year. Net cash used in financing activities was $1.47 million for the six months ended December 31, 2017, compared to net cash provided by financing activities of $5.79 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: tina.xiao@ascent-ir.com

 

 

SHINECO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

ASSETS
		December 31,				June 30,
		2017				2017
			(Unaudited)
CURRENT ASSETS:
Cash		$	29,351,613			$	23,154,551
Accounts receivable, net			15,068,392				14,480,004
Due from related parties			529,816				448,833
Inventories			2,502,196				2,346,273
Advances to suppliers, net			3,230,843				2,396,123
Loans to third parties, net			-				830,090
Other receivables, net			981,808				535,700
Short-term deposit			230,201				158,894
Prepaid expenses			138,967				375,459
TOTAL CURRENT ASSETS			52,033,836				44,725,927
Property and equipment at cost, net of accumulated depreciation and amortization			11,670,890				10,320,396
Land use right, net of accumulated amortization			1,385,421				1,346,631
Investments			6,280,999				5,695,080
Deposit for business acquisition			124,474				2,065,686
Distribution right			1,134,099				-
Long-term deposit and other noncurrent assets			116,633				112,883
Prepaid leases			3,698,929				3,784,533
Deferred tax assets			285,917				233,834
Goodwill			2,152,975				-
TOTAL  ASSETS		$	78,884,173			$	68,284,970
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term loans		$	1,203,764			$	2,663,628
Accounts payable			1,740,791				158,068
Advances from customers			105,785				5,439
Due to related parties			343,655				257,880
Other payables and accrued expenses			2,057,436				337,107
Taxes payable			2,024,768				1,608,926
Deferred tax liability			283,525				-
TOTAL LIABILITIES			7,759,724				5,031,048
Commitments and contingencies			-				-
EQUITY:
Common stock; par value $0.001, 100,000,000 shares authorized;
21,034,072 and 21,034,072 shares issued and outstanding at December 31, 2017 and  June 30, 2017			21,034				21,034
Additional paid-in capital			22,737,302				22,737,302
Statutory reserve			3,727,672				3,484,449
Retained earnings			43,675,155				39,064,743
Accumulated other comprehensive loss			(155,024	)			(3,140,982	)
Total Stockholders' equity of Shineco, Inc.			70,006,139				62,166,546
Non-controlling interest			1,118,310				1,087,376
TOTAL EQUITY			71,124,449				63,253,922
TOTAL LIABILITIES AND EQUITY		$	78,884,173			$	68,284,970

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

 

		For the Six Months Ended December 31,								For the Three Months Ended December 31,
		2017				2016				2017				2016
REVENUE		$	21,941,696			$	17,589,730			$	14,132,202			$	11,223,066
COST OF REVENUE
Cost of product and services			14,994,212				11,687,306				9,288,701				7,251,134
Business and sales related tax			41,337				33,964				25,724				18,419
Total cost of revenue			15,035,549				11,721,270				9,314,425				7,269,553
GROSS PROFIT			6,906,147				5,868,460				4,817,777				3,953,513
OPERATING EXPENSES
General and administrative expenses			1,863,924				1,398,341				1,028,373				924,577
Selling expenses			845,219				882,354				550,283				502,036
Total operating expenses			2,709,143				2,280,695				1,578,656				1,426,613
INCOME FROM OPERATIONS			4,197,004				3,587,765				3,239,121				2,526,900
OTHER INCOME
Income from equity method investments			350,652				401,768				202,194				240,586
Purchase rebate income			779,935				592,628				411,132				352,638
Other income			139,975				159,308				54,356				73,407
Interest income (expense), net			(31,324	)			40,538				(12,139	)			7,785
Total other income			1,239,238				1,194,242				655,543				674,416
INCOME BEFORE PROVISION FOR INCOME TAXES			5,436,242				4,782,007				3,894,664				3,201,316
PROVISION FOR INCOME TAXES			595,035				505,387				312,178				303,751
NET INCOME			4,841,207				4,276,620				3,582,486				2,897,565
Less: net income (loss) attributable to non-controlling interest			(12,428	)			80,177				(15,259	)			49,829
NET INCOME ATTRIBUTABLE TO SHINECO, INC.		$	4,853,635			$	4,196,443			$	3,597,745			$	2,847,736
COMPREHENSIVE INCOME
Net income		$	4,841,207			$	4,276,620			$	3,582,486			$	2,897,565
Other comprehensive income (loss): foreign currency translation gain (loss)			3,030,781				(2,514,175	)			1,561,371				(2,317,494	)
Total comprehensive income			7,871,988				1,762,445				5,143,857				580,071
Less: comprehensive income attributable to non-controlling interest			32,395				36,441				9,542				9,815
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC.		$	7,839,593			$	1,726,004			$	5,134,315			$	570,256
Weighted average number of shares basic and diluted			21,034,072				20,205,409				21,034,072				21,034,072
Basic and diluted earnings per common share		$	0.23			$	0.21			$	0.17			$	0.14

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Six Months Ended December 31,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	4,841,207			$	4,276,620
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			295,832				299,553
(Recovery of) provision for doubtful accounts			(18,931	)			298,297
Increase in inventory reserve			148,043				35,930
Deferred tax benefit			(41,523	)			(43,424	)
Income from equity method investments			(350,652	)			(401,768	)
Interest income from loans to related parties			-				(87,220	)
Changes in operating assets and liabilities:
Accounts receivable			35,996				(6,148,928	)
Advances to suppliers			(733,215	)			(282,288	)
Inventories			(145,327	)			2,530,386
Other receivables			(195,516	)			(399,914	)
Prepaid expense and other assets			189,270				(152,508	)
Due from related parties			(8,399	)			240,601
Prepaid leases			237,751				235,872
Accounts payable			1,544,313				5,444
Advances from customers			17,181				79,921
Other payables			1,640,458				(785,057	)
Taxes payable			323,744				151,820
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			7,780,232				(146,663	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment			(564,937	)			(31,952	)
Payment for construction in progress			(602,267	)			-
Loan advances to third parties			-				(979,465	)
Repayments of loans from third parties			830,889				-
Loan advances to related party			(52,698	)			-
Repayments of loans from related parties			-				501,119
Deposit for business acquisition			(121,959	)			(2,074,198	)
Deposit for potential investment			-				(200,000	)
Cash of subsidiary acquired			22,830				-
NET CASH (USED IN) INVESTING ACTIVITIES			(488,142	)			(2,784,496	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans			1,204,533				2,697,939
Repayment of short-term loans			(2,743,199	)			(2,414,589	)
Stock issuance cost payable			-				843,844
Proceeds from initial public offering, net of offering costs			-				4,550,705
Proceeds from advances from related parties			73,556				109,882
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(1,465,110	)			5,787,781
EFFECT OF EXCHANGE RATE CHANGE ON CASH			370,082				(1,122,302	)
NET INCREASE IN CASH			6,197,062				1,734,320
CASH - Beginning of the Period			23,154,551				22,009,374
CASH - End of the Period		$	29,351,613			$	23,743,694
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income tax		$	492,206			$	219,682
Cash paid for interest		$	69,498			$	71,586

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements