Farmmi(FAMI) - 2024 Q2 - Quarterly Report

Revenue and Net Income - Revenue for the six months ended March 31, 2024 was $36.44 million, a decrease of 39.8$60.55 million in the same period last year[8] - Net income for the six months ended March 31, 2024 was $630,492, a decrease of 60.1$1.58 million in the same period last year[8] - Net income for the six months ended March 31, 2024, was $630,492, compared to$1,579,859 for the same period in 2023[13] - Total revenue for the six months ended March 31, 2024, was $36,443,887, down from$60,547,274 for the same period in 2023[97] Cash and Cash Equivalents - Cash and cash equivalents decreased by $11.67 million (91.2$12.79 million as of September 30, 2023 to $1.12 million as of March 31, 2024[4] - Cash and cash equivalents at the end of the period were$1,124,448, compared to $69,356,991 at the end of the same period in 2023[13] - Cash maintained in banks within the PRC is$1.1 million as of March 31, 2024, with deposits of less than RMB 0.5 million ($69,249) per bank covered by deposit insurance regulation[25][49] - Cash maintained in banks within the PRC was$12.8 million as of September 30, 2023, with deposits of less than RMB 0.5 million ($69,249) per bank covered by deposit insurance regulation[49] Accounts Receivable and Inventory - Accounts receivable decreased by$1.66 million (6.7%) from $24.68 million as of September 30, 2023 to$23.02 million as of March 31, 2024[4] - Inventories increased significantly by $26.39 million (676.4$3.90 million as of September 30, 2023 to $30.29 million as of March 31, 2024[4] - The company's accounts receivable, net, as of March 31, 2024, were$23,016,778, compared to $24,677,445 as of September 30, 2023[65] - Inventory, net increased to$30,293,667 as of March 31, 2024, from $3,901,848 as of September 30, 2023[78] Liabilities and Equity - Total current liabilities decreased by$3.59 million (33.5%) from $10.71 million as of September 30, 2023 to$7.12 million as of March 31, 2024[5] - Total shareholders' equity increased by $2.38 million (1.5$161.98 million as of September 30, 2023 to $164.35 million as of March 31, 2024[6] - Contract liabilities are$48,299 as of March 31, 2024 and $0.4 million as of September 30, 2023, included in other current liabilities[42] Earnings Per Share - Basic earnings per share decreased to$0.10 for the six months ended March 31, 2024 compared to $0.53 in the same period last year[9] - Diluted earnings per share decreased to$0.05 for the six months ended March 31, 2024 compared to $0.33 in the same period last year[9] - Net income available for ordinary shareholders is$630,492 for the six months ended March 31, 2024, with basic EPS of $0.10 and diluted EPS of$0.05[45] Cash Flow Activities - Net cash used in operating activities for the six months ended March 31, 2024, was $14,901,185, compared to$11,304,117 for the same period in 2023[13] - Net cash provided by investing activities for the six months ended March 31, 2024, was $2,946,776, compared to$36,326,277 for the same period in 2023[13] - Net cash used in financing activities for the six months ended March 31, 2024, was $16,653, compared to$1,331,253 provided for the same period in 2023[13] Subsidiaries and Divestitures - The company divested 100% interest in three subsidiaries for a total cash consideration of RMB43.1 million ($6.0 million) on January 31, 2024[17] - Farmmi USA Inc was established under the laws of the United States of America on August 24, 2023, with Farmmi Inc owning 100$9,806,605 for the six months ended March 31, 2024[97] Advances to Suppliers and Allowances - Advances to suppliers represent prepayments made to ensure continuous high-quality supplies, with periodic reviews and allowances made for doubtful advances[27] - The company's advances to suppliers are made to secure premium quality raw materials at prices slightly higher than typical market prices for average quality raw materials[73] - The company evaluates the recoverability of advances to suppliers by monitoring suppliers' ability to deliver sufficient supplies and current crop and market conditions[75] - The company accrues for any allowance for possible loss on advances when there is doubt as to the collectability of the refund[75] - Advances to suppliers, net, as of March 31, 2024, were $100,439,974, compared to$116,343,961 as of September 30, 2023[67] Depreciation and Assets - Biological assets consist of 9.6 km² of bamboo forests, with depreciation expense of $0.1 million for the six months ended March 31, 2024 and 2023[29] - Property and equipment are depreciated on a straight-line basis over estimated useful lives, with machinery and equipment at 5-10 years, transportation equipment at 4 years, and office equipment at 3-5 years[38][39] - Depreciation expense was$5,572 for the six months ended March 31, 2024, down from $12,724 for the same period in 2023[81] Agreements and Contracts - The company signed a framework cooperation agreement with Lishui Zhelin Trading Co., Ltd., valid for four years, to ensure timely supply and delivery of edible mushroom products[68] - The company signed an agricultural product framework agreement with Zhongjin Boda (Hangzhou) Industrial Co., Ltd., for the purchase of agricultural products such as corn, cotton, and soybeans, valid for two years[69] - The company signed an agricultural product framework agreement with Ningbo Runcai Supply Chain Management Co., Ltd., for the purchase of agricultural products such as red dates and corn, valid for two years[69] - The company signed a Non-Competition Agreement with Forasen Group, restricting Forasen from engaging in competing businesses except for purchasing products from the company[106] Credit and Risk Management - The company performs ongoing credit evaluations of customers and key suppliers to reduce credit risk, with significant sales being credit sales dependent on industry economics[49] - Allowance for doubtful accounts was$2.5 million as of March 31, 2024, compared to $3,176 as of September 30, 2023[76] Exchange Rates and Expenses - The exchange rate as of March 31, 2024, was US$1 for RMB7.2203, and the average exchange rate for the six months ended March 31, 2024, was US$1 for RMB7.2064[53] - Total shipping and handling expenses for the six months ended March 31, 2024, were$40,101, compared to $37,053 for the same period in 2023[53] Related Party Transactions - Due from related parties totaled$109,755 as of March 31, 2024, compared to $110,958 as of September 30, 2023[100] - Due to related parties increased to$379,082 as of March 31, 2024, from $33,814 as of September 30, 2023, primarily due to amounts owed to Yefang Zhang and Zhejiang Tantech Bamboo Technology Co., Ltd[102] Lease and Financing Activities - The company recorded lease expenses of$50,782 for the six months ended March 31, 2024, compared to $43,910 for the same period in 2023[105] - The company entered into a note purchase agreement on July 30, 2024, issuing a$5,355,000 unsecured promissory note with a 7.0% annual interest rate and a 12-month term[108] - The note includes an original issue discount of $350,000 and$5,000 for investor fees, with prepayment options at 105% of the outstanding balance[109] - The weighted average discount rate for operating leases was 10.3% per annum as of March 31, 2024[90] - Total future minimum lease payments amounted to $685,343 as of March 31, 2024[92] Major Customers and Suppliers - Two major customers accounted for 55.9$804,000 convertible promissory notes in the six months ended March 31, 2024[84]