Farmmi, Inc. Reports Fiscal Year 2018 Financial Results

LISHUI, China, Jan. 25, 2019 /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, 2018.

Ms. Yefang Zhang, Chairwoman and CEO of the Company stated, "We are pleased to announce our full year financial results for fiscal year 2018, our inaugural full year results as a public company. Our total revenue grew by 11.83% from fiscal year 2017 to $29.82 million, while our net income declined slightly by 1.26% to $3.23 million."

Ms. Zhang continued: "We are excited for the coming year as we exploit the foundations we have built in fiscal year 2018. Coupled with the reorganization of our online store operating team in March 2018, our online sales have been increasing since April 2018. Farmmi Jicai, our online store designed for centralized procurement, targeting small wholesale clients, such as restaurants and retailers began generating revenue. Farmmi Liangping Market, another online store, supplies geographical indication agricultural products, among other products. We are optimistic about the prospects of these platforms following the efforts we have made to strengthen our relationships with our family farm suppliers, to provide attractive products and a unique experience to our customers."

Fiscal Year 2018 Financial Highlights

*Notes: pp represents percentage points

• Revenue reached $29.82 million for the twelve months ended September 30, 2018, an increase of 11.83% from the same period of last year.
• Gross profit was $5.07 million for the twelve months ended September 30, 2018, an increase of 12.00% from the same period of last year.
• Gross margin was 16.99% for the twelve months ended September 30, 2018, an increase of 0.02 percentage points from the same period of last year.
• Net income attributable to Farmmi, Inc. was $3.22 million for the twelve months ended September 30, 2018, a decrease of 1.51% from the same period of last year.
• Basic and diluted earnings per share were $0.29 for the twelve months ended September 30, 2018, as compared with $0.33 for the same period of last year.

Fiscal Year 2018 Financial Results

Revenue

Total revenues for the twelve months ended September 30, 2018 increased by $3.15 million, or 11.83%, to $29.82 million from $26.67 million for the same period of last year, mainly due to an increase in revenue from sales of Shiitake and Mu Er, partially offset by decrease in revenue from sales of other edible fungi and other agricultural products. 

Revenue from sales of Shiitake increased by $0.50 million, or 3.10%, to $16.75 million for the twelve months ended September 30, 2018 from $16.25 million for the same period of last year, mainly due to the increased sales volume of Shiitake. Sales volume of Shiitake increased to 1,299 tons for the twelve months ended September 30, 2018 from 1,277 tons for the same period of last year. The increase was also due to the increased unit sales price per ton of Shiitake. Average unit sales price of Shiitake increased slightly by 1.35% to $12,897 for the twelve months ended September 30, 2018 from $12,725 for the same period of last year.

Revenue from sales of Mu Er increased by $2.95 million, or 31.93%, to $12.19 million for the twelve months ended September 30, 2018 from $9.24 million for the same period of last year. The increase was primarily due to the increased sales volume of Mu Er products. Sales volume of Mu Er increased to 967 tons for the twelve months ended September 30, 2018 from 684 tons for the same period of last year.

Revenues from sales of other edible fungi and other agricultural products decreased by $0.30 million, or 25.54%, to $0.88 million for the twelve months ended September 30, 2018 from $1.18 million for the same period of last year. The cause of the decrease was that the Company sold $0.44 million of Maitake mushroom in January 2017 to fill an one time sales order, and no such order took place during the twelve months ended September 30, 2018. The decrease was partially offset by the increased online sales of the products of this category by $0.14 million to $0.83 million for the fiscal year ended September 30, 2018, compared to $0.69 of the same period of last year.

Cost of Revenue

Cost of revenue increased by $2.61 million, or 11.79%, to $24.75 million for the twelve months ended September 30, 2018 from $22.14 million for the same period of last year.

Cost of revenue from sales of Shiitake increased by $0.45 million, or 3.31%, to $13.96 million for the twelve months ended September 30, 2018 from $13.51 million for the same period of last year. Cost of revenue from sales of Mu Er increased by $2.45 million, or 31.93%, to $10.13 million for the twelve months ended September 30, 2018 from $7.68 million for the same period of last year. Cost of revenue from sales of other edible fungi and other agricultural products decreased by $0.29 million, or 30.30%, to $0.66 million for the twelve months ended September 30, 2018 from $0.95 million for the same period of last year. 

Gross Profit

Overall gross profit increased by $0.54 million, or 12.00%, to $5.07 million for the twelve months ended September 30, 2018 from $4.52 million for the same period of last year. Gross profit from sales of Shiitake increased by $0.06 million, or 2.07%, to $2.80 million for the twelve months ended September 30, 2018 from $2.74 million for the same period of last year. Gross profit from sales of Mu Er increased by $0.50 million, or 31.94%, to $2.06 million for the twelve months ended September 30, 2018 from $1.56 million for the same period of last year. The increase of gross profit from sales of Shiitake and Mu Er is in line with increased sales revenue for the twelve months ended September 30, 2018. Gross profit from sales of other edible fungi and other agricultural products decreased by $0.01 million, or 5.39%, to $0.21 million for the twelve months ended September 30, 2018 from $0.22 million for the same period of last year. The decrease of gross profit from sales of other edible fungi and other agricultural products is in line with decreased sales revenue for the twelve months ended September 30, 2018.

Overall gross margin increased by 0.02 percentage points to 16.99% for the twelve months ended September 30, 2018 from 16.97% for the same period of last year. The slight increase in overall gross profit margin was primarily due to the increased proportion of online sales, with higher gross profit margin, in this reporting period.

Income from Operations

Income from operations decreased by $0.39 million, or 11.28%, to $3.08 million for the twelve months ended September 30, 2018 from $3.47 million for the same period of last year.

Selling and distribution expenses increased by $0.41 million, or 291.04%, to $0.55 million for the twelve months ended September 30, 2018 from $0.14 million for the same period of last year, primarily due to the increased shipping expenses of $0.20 million which is in line with the Company's increased sales volume. The increase was also due to the increased advertising and marketing expenses of $0.15 million as the Company focused on promotion activities in order to enhance more brand awareness and attract more clients for Farmmi Jicai (originally called Farmmi Liangpin Market) during the twelve months ended September 30, 2018.

General and administrative expenses increased by $0.53 million, or 57.53%, to $1.44 million for the twelve months ended September 30, 2018 from $0.92 million for the same period of last year. The increase was primarily attributable to the increased payroll expenses of $0.11 million and initial public offering related professional fees, such as legal fees of $0.07 million, office expenses of $0.07 million, public relation fees of $0.05 million, consulting fees of $0.05 million and audit fees of $0.04 million during the twelve months ended September 30, 2018.

Interest Expense

Interest expense decreased by $0.05 million, or 26.18%, to $0.15 million for the twelve months ended September 30, 2018 from $0.21 million for the same period of last year. The decrease in interest expense was primarily attributable to the decreased average balance of short-term bank loans. The decrease was partially offset by the higher interest rate during the twelve months ended September 30, 2018 as compared to same period of last year.

Provision for Income Taxes

Income tax expense increased by $3,270, or 56.45% to $9,063 for the twelve months ended September 30, 2018, from $5,793 for the same period of last year. The increase in income tax expense was primarily due to the increased taxable income of Hangzhou Nongyuan Network Technology Co., Ltd. during the twelve months ended September 30, 2018.

Net Income

Net income decreased by $0.04 million, or 1.26%, to $3.23 million for the twelve months ended September 30, 2018 from $3.27 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to ordinary shareholders for the twelve months ended September 30, 2018 was $3.22 million, or $0.29 per basic and diluted share. The net income attributable to ordinary shareholders was $3.27 million, or $0.33 per basic and diluted share, for the same period of last year.

Financial Condition

As of September 30, 2018, the Company had cash on hand of $4.93 million, compared with $2.59 million as of September 30, 2017. The Company had working capital of $19.12 million as of September 30, 2018, compared with $11.21 million as of September 30, 2017.

Net cash used in operating activities was $2.73 million for the twelve months ended September 30, 2018, compared to net cash provided by operating activities of $2.00 million for the same period of last year. Net cash used in investing activities was $0.06 million for the twelve months ended September 30, 2018, compared to net cash provided by investing activities of $2.13 million for the same period of last year. Net cash provided by financing activities was $5.53 million for the twelve months ended June 30, 2018, compared to net cash used in financing activities of $1.65 million for the same period of last year.

Recent Business Highlights

On July 5, 2018, the Company announced that between March and June in 2018, it had entered into various sales contracts to supply three Asian distributors of dried edible fungi products including Shiitake mushrooms and Mu Er mushrooms.

On April 26, 2018, the Company prepared a Registration Statement in accordance with the requirements of Form S-8 under the Securities Act to register its ordinary shares, par value $0.001 per share, issuable pursuant to the Farmmi, Inc. 2018 Share Incentive Plan.

On March 14, 2018, the Company was awarded "Exemplary Publicly Listed Company" by Liandu District of Lishui Government, honoring its successfully listing on NASDAQ and the Company entered into a strategic cooperation framework agreement with Lishui Agricultural Investment Development Co., Ltd.

On February 23, 2018, the Company announced that ViewTrade Securities, Inc., who acted as the sole underwriter and book-runner of the Company's IPO, exercised the full over-allotment option to purchase an additional 252,000 ordinary shares at the IPO price of $4.00 per share for a total of gross proceeds of approximately $1,008,000 from the exercise of this over-allotment option.

On February 21, 2018, the Company announced the closing of its IPO of 1,680,000 ordinary shares at a price to the public of $4.00 per share for a total of $6,720,000 in gross proceeds.

About Farmmi, Inc.

Headquartered in Lishui, Zhejiang, Farmmi, Inc. (the "Company") (Nasdaq: FAMI), is an agricultural products supplier and primarily processes and sells Shiitake mushrooms, Mu Er mushrooms, other edible fungi, and other agricultural products. In addition, Farmmi Liangpin Market, the Company's ecommerce platform, provides an opportunity for consumers to access locally sourced agricultural products. For further information regarding 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.

For more information, please contact Investor Relations at:

Tina Xiao, President
Ascent Investor Relations LLC
Phone: +1-917-609-0333
Email: tina.xiao@ascent-ir.com 

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