Bon Natural Life (BON) - 2023 Q4 - Annual Report

IPO and Financing - The company closed its initial public offering (IPO) on June 28, 2021, raising gross proceeds of $12.65 million from the sale of 2,200,000 ordinary shares at$5.00 per share[203]. - As of the date of the annual report, net proceeds of approximately $9 million from the IPO and$1 million from the over-allotment option were transferred to PRC subsidiaries as intercompany loans[209]. - On March 30, 2023, the company initiated a public offering of up to $3 million worth of ordinary shares, but the offering was terminated on August 3, 2023, due to lack of valid subscriptions[220][222]. - A private offering closed on January 17, 2023, resulting in the issuance of 2,750,000 ordinary shares at a subscription price of$0.80 per share, generating total proceeds of $2.2 million[224]. Compliance and Regulatory Issues - The company received a notification from Nasdaq on June 12, 2023, regarding non-compliance with the minimum bid price requirement of$1.00 per share for thirty consecutive days[218]. - Nasdaq granted the company an additional 180-day period until June 10, 2024, to regain compliance with the bid price requirement[219]. - The company’s ability to distribute dividends is subject to PRC regulations, which may impose restrictions on the remittance of foreign currency for dividend payments[212]. - The company must comply with extensive regulations governing the food industry, including obtaining necessary permits and licenses for production and distribution[314]. Corporate Structure and Operations - The company operates through a direct holding structure, with Bon Natural Life Limited controlling its PRC subsidiaries through its Hong Kong subsidiary, Tea Essence[207]. - The company restructured its corporate structure by terminating VIE agreements, converting Xi'an App-Chem into a Sino-foreign joint venture, and transferring 100% ownership to its subsidiaries, effective November 1, 2021[229][230]. - The company formed a new wholly foreign-owned enterprise, Xi'an Youpincui, on September 8, 2021, and incorporated Bon Natural Life U.S.A. on February 7, 2023[227]. Financial Performance - Key financial performance indicators include growth in net revenue and gross profit, with a focus on controlling costs and improving operating efficiency[232]. - For the year ended September 30, 2023, net revenue was driven by fragrance compounds (48.5%), health supplemental powder drinks (29.5%), and bioactive food ingredients (22.0%)[378]. - Total revenue decreased by 1.3% to $29,522,353 for the year ended September 30, 2023 compared to$29,908,561 in 2022[391]. - Net income decreased by 27.1% to $4,552,682 for the year ended September 30, 2023 compared to$6,242,424 in 2022[389]. Product Development and Innovation - New product developments include Bon Natural Micro-eco Hair Repair Shampoo and Tianmei Jinghao Nutrition Powder, with ongoing innovation in natural functional ingredients[241]. - The company produces ambroxide with a purity of 99.5%, exceeding the industry average of approximately 99.0%, and a yield of approximately 63% compared to the industry average of 40% to 43%[240]. - The company offers customized product development and technical support services to enhance customer loyalty and competitiveness in the marketplace[239]. Market and Competition - The company has established a strong reputation in the natural ingredients industry, particularly in the field of micro-biome health[259]. - Competitor Quantum Hi-Tech has a total market value of approximately $1 billion as of March 2020, indicating a competitive landscape[260]. - BY-HEALTH's total market value reached ¥27.2 billion as of March 2020[267]. Supply Chain and Customer Base - For the year ended September 30, 2023, three suppliers accounted for approximately 41.8%, 29.5%, and 11.19% of total purchases, indicating a significant reliance on key suppliers[255]. - For the year ended September 30, 2023, three customers accounted for 42.7%, 24.7%, and 13.2% of total revenue, highlighting a concentrated customer base[256]. - The total number of customers decreased by 11.3% from 142 in 2022 to 126 in 2023[379]. Production and Operational Challenges - The ongoing COVID-19 pandemic has affected the company's operations, with potential future impacts on revenue and cash flows still uncertain[231]. - The production challenges due to frost damage and pandemic control measures significantly impacted the procurement of key raw materials[397]. - The company shifted to producing low-concentration apple polyphenol juice due to technical challenges in extracting from larger apples[397]. Regulatory Compliance and Certifications - The company has obtained the required Food Production Licenses and Food Business Licenses, including a Food Production License expiring on August 8, 2028, and a Food Business License obtained on November 28, 2022[315]. - Xi'an App-Chem has received REACH certification for ambroxide in the European Union and GRAS certification from the FDA for clary sage[315]. - The company has kosher and halal certifications for certain products, ensuring compliance with various market regulations[315].