Press release·11/14/2024 23:37:30

Overview

We are a diversified agricultural company engaged in the research, development, production, and sale of fertilizers, agricultural products, and Bitcoin. Our operations are organized into four main business segments: fertilizer products (Jinong and Gufeng), agricultural products (Yuxing), and Bitcoin (Antaeus).

The fertilizer business is our primary revenue driver, accounting for around 85-88% of total sales in the last three months. Yuxing, our agricultural products segment, contributed 10-14% of revenue, while the Bitcoin business through Antaeus made up the remaining 0.9-1.5%.

As of September 2024, we had developed and produced a total of 405 different fertilizer products, with 69 from Jinong and 336 from Gufeng. Our fertilizer products are sold through a network of 949 distributors covering 22 provinces, 4 autonomous regions, and 4 central government-controlled municipalities in China. The top five provinces accounted for around 62% of fertilizer revenue.

Recent Developments

During the three months ended September 2024, Jinong launched 4 new fertilizer products, added 14 new distributors, and eliminated 6 outdated products. Gufeng did not launch any new products or add new distributors in the same period.

Results of Operations

Net Sales Total net sales for the three months ended September 2024 were $17,364,939, a decrease of 22.5% from the same period in 2023. This was mainly due to lower sales for Jinong and Gufeng.

Jinong’s net sales decreased 20.1% to $7,421,658, primarily due to a 47.7% drop in revenue per ton. Gufeng’s net sales declined 28.6% to $7,439,542, driven by a 28.2% decrease in sales volume. Yuxing’s net sales were relatively flat at $2,340,444, while Antaeus saw a 52.7% drop in net sales to $163,295.

Cost of Goods Sold Total cost of goods sold decreased 24.6% to $13,378,369, in line with the lower sales. Jinong’s cost of goods sold declined 28.4%, Gufeng’s decreased 27.7%, and Antaeus saw a 24.9% drop. Yuxing’s cost of goods sold increased 3.4%.

Gross Profit Total gross profit decreased 14.3% to $3,986,570, with gross margin improving from 20.8% to 23.0%. Jinong’s gross profit increased 0.4% to $2,692,771, with gross margin rising from 28.9% to 36.3%. Gufeng’s gross profit declined 34.6% to $932,409, with gross margin dropping from 13.7% to 12.5%. Yuxing’s gross profit decreased 14.1% to $399,806, with gross margin falling from 19.9% to 17.1%. Antaeus had a gross loss of $38,416, compared to a gross profit of $76,568 in the prior year period.

Operating Expenses Selling expenses increased 2.4% to $1,924,428, representing 11.1% of net sales, up from 8.4% in the prior year period. This was mainly due to higher marketing activities.

General and administrative expenses decreased 16.0% to $3,826,904, or 22.0% of net sales, down from 20.3% in the prior year period. The decrease was primarily driven by lower expenses for Jinong and Gufeng.

Other Income and Expenses Total other expenses increased significantly to $116,079, compared to $2,699 in the prior year period. This was mainly due to higher interest expenses and bank charges.

Net Loss Net loss for the three months ended September 2024 was $1,842,225, a 3.3% increase from the prior year period. Net loss as a percentage of total net sales was -10.6%, up from -8.0% in the prior year period.

Discussion of Segment Profitability Measures

For the fertilizer segments:

• Jinong’s net loss decreased 82.8% to $19,642, mainly due to lower general and administrative expenses.
• Gufeng’s net loss increased 5.8% to $1,335,699, primarily due to the decrease in net sales.

For the agricultural segment:

• Yuxing’s net income increased 44.4% to $222,823, mainly due to lower general and administrative expenses.

For the Bitcoin segment:

• Antaeus’ net loss increased 780.9% to $146,257.

Liquidity and Capital Resources

As of September 30, 2024, we had $51,477,572 in cash and cash equivalents, a decrease of 12.4% from June 30, 2024.

Net cash used in operating activities was $2,553,911, an increase of 307.6% from the prior year period, mainly due to higher advances to suppliers and accounts receivable.

Net cash used in investing activities was $8,544,101, up from $1,507,026 in the prior year period, primarily due to a long-term equity investment of $8,495,862.

Net cash provided by financing activities was $1,983,456, compared to $1,383,960 net cash used in the prior year period. This was mainly attributable to $5,726,880 in loan proceeds.

As of September 30, 2024, we had $11,684,180 in total loans payable, up from $9,322,500 as of June 30, 2024.

Accounts receivable increased 35.3% to $22,322,256, with allowance for doubtful accounts at 52.0% of the total. Inventories decreased 6.5% to $35,368,718, while advances to suppliers increased 31.6% to $15,942,668.

Discussion and Analysis

The financial results for the three months ended September 2024 show a mixed performance, with the core fertilizer business facing headwinds, the agricultural segment seeing some improvement, and the Bitcoin operations continuing to struggle.

The 22.5% decline in total net sales was primarily driven by lower sales for the Jinong and Gufeng fertilizer segments. Jinong’s revenue per ton dropped nearly 50%, while Gufeng’s sales volume declined over 28%. This led to a 14.3% decrease in total gross profit, though gross margin improved slightly to 23.0%.

The drop in sales and profitability for the fertilizer segments was likely due to a combination of factors, including increased competition, pricing pressure, and potential shifts in customer demand. The company will need to closely monitor these trends and adjust its product mix, pricing, and marketing strategies accordingly.

In contrast, the Yuxing agricultural segment saw a modest 0.1% decline in net sales, with gross profit down 14.1%. However, the segment’s net income increased 44.4%, suggesting improved cost control and operational efficiency. This segment could be an area of focus for the company to diversify its revenue streams.

The Bitcoin operations through Antaeus continued to underperform, with a significant 52.7% drop in net sales and a gross loss of $38,416, compared to a gross profit of $76,568 in the prior year period. The company will need to carefully evaluate the long-term viability of this business line and its impact on the overall financial performance.

From a liquidity and capital resources perspective, the company’s cash position declined by 12.4%, primarily due to increased cash used in operating and investing activities. The rise in accounts receivable, advances to suppliers, and inventory levels suggests potential challenges in working capital management that the company will need to address.

The increase in total loans payable, from $9.3 million to $11.7 million, indicates the company’s reliance on external financing to support its operations and growth initiatives. While this may be necessary to fund investments and expansions, the company should closely monitor its debt levels and ensure that the financing terms are favorable and sustainable.

Overall, the financial results for the three months ended September 2024 highlight the need for the company to focus on improving the performance of its core fertilizer business, while also exploring opportunities to strengthen the agricultural segment and reevaluating the Bitcoin operations. Effective working capital management, cost control, and strategic capital allocation will be crucial in navigating the current challenges and positioning the company for long-term success.