Shineco, Inc. Reports Fiscal Year 2018 Financial Results

BEIJING,Oct. 16,2018 --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 inChina,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 endedJune 30,2018increased by$10.31 million,or 30.7%,to$43.90 millionfrom$33.59 millionfor 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 endedJune 30,2018from$3.62 millionfor 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 millionfor the year endedJune 30,2018from$13.25 millionfor 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 millionfor the year endedJune 30,2018from$16.72 millionfor 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 millionfor the year endedJune 30,2018from$22.85 millionfor the same period of last year. Gross profit increased by$4.05 million,or 37.7%,to$14.79 millionfor the year endedJune 30,2018from$10.74 millionfor the same period of last year. Overall gross margin increased by 1.7 percentage points to 33.7% for the year endedJune 30,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 endedJune 30,2018. This compared to gross margins for Luobuma products,and other agricultural products of 52.8%,23.1%,and 34.5%,for the same period of last year.

Operating income

Selling expenses increased by$0.05 million,or 3.3%,to$1.53 millionfor the year endedJune 30,2018from$1.48 millionfor 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 millionfor the year endedJune 30,2018from$1.81 millionfor 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 millionfor the year endedJune 30,2018from$7.45 millionfor the same period of last year. Operating margin was 21.1% for the year endedJune 30,compared to 22.2% for the same period of last year.

Impairment loss on goodwill

Impairment loss on goodwill was $2.15 millionfor the year endedJune 30,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,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 millionfor the year endedJune 30,2018from$8.62 millionfor the same period of last year. After the deduction of non-controlling interests,net income attributable to common shareholders for the year endedJune 30,2018was$7.59 million,or$0.36per basic and diluted share. This compared to net income attributable to common shareholders of$8.47 million,$0.41per basic and diluted share,for the same period of last year.

Financial Condition

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

About Shineco,Inc.

Incorporated inAugust 1997and headquartered inBeijing,China,Shineco,Inc. ("Shineco" or the "Company") is aDelawareholding 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 inChina. 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 visitwww.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.

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

1,631

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

TOTALASSETS

$

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

5,048

Commitments and contingencies

-

-

EQUITY:

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

21,234,072 and 21,072 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

$

83,970

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

1,855

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

$

7,562

$

8,645

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

1,658,658

(1,036)

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

$

7,645

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

2,298

-

Changes in operating assets and liabilities:

Accounts receivable

(3,569,821)

(8,668)

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

1,177

CASH - Beginning of the Period

23,551

22,009,374

CASH - End of the Period

$

31,551

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

$

-

View original content:/news-releases/shineco-inc-reports-fiscal-year-2018-financial-results-300731196.html