Revenue and Sales Performance - For the six months ended December 31, 2019, the fertilizer business generated approximately 84.1% of total revenues, with Jinong and Gufeng contributing 72.0% and 23.1% respectively [127]. - Jinong sold approximately 22,086 metric tons of fertilizer products for the three months ended December 31, 2019, representing an increase of 27.0% compared to 17,389 metric tons for the same period in 2018 [131]. - Gufeng sold approximately 65,483 metric tons of fertilizer products for the three months ended December 31, 2019, a slight increase of 0.2% compared to 65,351 metric tons for the same period in 2018 [131]. - Total fertilizer products sold for the six months ended December 31, 2019, reached approximately 158,643 metric tons, up 5.3% from 150,591 metric tons for the same period in 2018 [132]. - Agricultural products revenue for the three months ended December 31, 2019, was primarily generated from Shaanxi (86.4%), Beijing (3.0%), and Shanghai (2.5%), accounting for 92.0% of total agricultural products revenue [136]. - Total net sales for the three months ended December 31, 2019 were $49,565,009, a decrease of $2,689,454 or 5.1% from $52,254,463 for the same period in 2018 [152]. - Total net sales for the six months ended December 31, 2019 were $100,386,580, a decrease of $9,822,689 or 8.9% from $110,209,269 for the same period in 2018 [176]. - For the three months ended December 31, 2019, Yuxing's net sales were $2,461,510, a decrease of $161,983 or 6.2% from $2,623,493 for the same period in 2018 [155]. Profitability and Expenses - Gross profit for the three months ended December 31, 2019 was $8,820,485, a decrease of $3,423,740 or 28.0% compared to the same period in 2018 [149]. - Total operating expenses increased to $36,618,503, a rise of $28,649,032 or 359.5% from $7,969,471 in the previous year [149]. - Income from operations for the three months ended December 31, 2019 was $(27,798,018), a decrease of $32,072,772 or 750.3% compared to the same period in 2018 [149]. - Net income for the three months ended December 31, 2019 was $(27,080,880), a decrease of $29,586,615 or 1180.8% from $2,505,735 in the previous year [149]. - Comprehensive income (loss) for the three months ended December 31, 2019 was $(16,749,898), a decrease of $18,783,564 or 923.6% compared to the same period in 2018 [149]. - Gross profit for the three months ended December 31, 2019 decreased by $3,423,740 or 28.0% to $8,820,485 compared to $12,244,225 for the same period in 2018 [159]. - General and administrative expenses for the three months ended December 31, 2019 were $32,761,531, or 66.1% of net sales, an increase of $32,861,163 or 32982.5% from $(99,632) for the same period in 2018 [168]. - Total gross profit for the six months ended December 31, 2019, decreased by 23.5% to $21,979,732, compared to $28,713,865 for the same period in 2018 [184]. - Jinong's gross profit decreased by 32.8% to $12,955,879 for the six months ended December 31, 2019, from $19,285,839 for the same period in 2018 [185]. Distribution and Market Presence - As of December 31, 2019, the company had a total of 2,091 distributors across 22 provinces, with Jinong having 1,266 distributors and Gufeng having 327 distributors [135]. - During the three months ended December 31, 2019, Jinong added 27 new distributors, while Gufeng added one new distributor, although no new fertilizer products were launched [137]. - The provinces contributing to 61.2% of fertilizer revenue for the three months ended December 31, 2019, included Hebei (34.6%), Heilongjiang (12.4%), and Liaoning (9.0%) [134]. Cash Flow and Financial Position - Cash and cash equivalents increased by 8.9% to $78,706,500 as of December 31, 2019, from $72,259,804 as of June 30, 2019 [202]. - Net cash used in operating activities was $(2,074,331) for the six months ended December 31, 2019, a decrease of 92.4% from cash provided by operating activities of $27,443,062 for the same period in 2018 [204]. - Accounts receivable increased by 7.5% to $156,080,809 as of December 31, 2019, compared to $145,190,160 as of June 30, 2019 [208]. - Allowance for doubtful accounts decreased by 16.5% to $27,999,039 as of December 31, 2019, from $33,515,410 as of June 30, 2019 [209]. - Net cash provided by financing activities was $10,939,200 for the six months ended December 31, 2019, compared to $219,722 net cash used in financing activities for the same period in 2018 [207]. - As of December 31, 2019, inventories decreased to $114,448,765 from $162,013,889 as of June 30, 2019, a reduction of $47,565,124 or 29.4% [211]. - Advances to suppliers decreased to $30,944,718 as of December 31, 2019, down by $1,769,099 or 5.4% from $32,713,817 as of June 30, 2019 [212]. - Accounts payable decreased to $15,217,368 as of December 31, 2019, a decline of $3,787,180 or 19.9% from $19,004,548 as of June 30, 2019 [213]. - Customer deposits increased to $7,525,826 as of December 31, 2019, an increase of $1,011,207 or 15.5% from $6,514,619 as of June 30, 2019 [214]. Risk Factors and Strategic Initiatives - The accumulated other comprehensive loss was $27 million as of December 31, 2019, reflecting exposure to foreign exchange risk due to RMB depreciation against the U.S. dollar [227]. - Short-term debt outstanding was $3.8 million as of December 31, 2019, compared to $3.6 million as of June 30, 2019 [228]. - The company has not entered into any hedging transactions to mitigate exposure to interest rate risk [231]. - Management's estimates for inventory levels may lead to excessive inventories during slow sales periods and insufficient inventories during peak times [212]. - The company has not experienced significant credit risk, as most customers are long-term with superior payment records [232]. - Inflationary factors may adversely affect operating results, although no material impact has been observed to date [233]. - The company is developing an online platform to connect its physical distribution network, reflecting a strategic move towards e-commerce in the agriculture sector [144]. - The VIE arrangement is being utilized to navigate regulatory challenges in the agriculture and e-commerce industries in China [146].
CGA(CGA) - 2020 Q2 - Quarterly Report