Universe Pharmaceuticals(UPC) - 2024 Q2 - Quarterly Report

Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of March 31, 2024, Universe Pharmaceuticals Inc reported a decrease in total assets and shareholders' equity compared to September 30, 2023, primarily driven by a significant reduction in short-term investments and a net loss, while total liabilities increased Key Balance Sheet Figures (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Total Assets | $49,431,114 | $53,287,032 | | Total Current Assets | $33,530,133 | $36,774,354 | | Cash | $8,861,590 | $5,285,247 | | Short-term investments | $2,527,603 | $13,219,005 | | Accounts receivable, net | $14,384,228 | $10,667,603 | | Total Liabilities | $22,687,018 | $13,754,331 | | Total Shareholders' Equity | $26,744,096 | $39,532,701 | - Total assets decreased by approximately $3.86 million from September 30, 2023, to March 31, 2024, primarily due to a significant decrease in short-term investments[2] - Total liabilities increased by approximately $8.93 million, largely driven by an increase in 'Due to related parties' and the introduction of 'Long-term bank loans'[2] - Total shareholders' equity decreased by approximately $12.79 million, reflecting the net loss incurred during the period[2] Condensed Consolidated Statements of Income and Comprehensive Income For the six months ended March 31, 2024, the company reported a significant net loss and comprehensive loss, a substantial decline from the prior year, primarily due to decreased revenue, increased selling expenses, and considerable realized and unrealized losses on short-term investments Key Income Statement Figures (Six Months Ended March 31, 2024 vs. 2023) | Metric | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenue | $12,884,370 | $18,467,186 | | Gross Profit | $3,369,331 | $6,128,142 | | Selling expenses | $4,054,357 | $2,330,508 | | Research and development expenses | $86,503 | $2,268,335 | | Income (Loss) from Operations | $(1,740,137) | $149,246 | | Realized (loss) gain on short-term investments | $(3,094,084) | $166,931 | | Change in fair value of short-term investments | $(7,617,502) | $- | | Net Loss | $(13,101,457) | $(715,427) | | Comprehensive (Loss) Income | $(12,788,605) | $684,348 | | Earnings per ordinary share - basic and diluted | $(3.59) | $(0.20) | - Revenue decreased by 30.2% from $18,467,186 in 2023 to $12,884,370 in 2024[4] - The company shifted from an operating income of $149,246 in 2023 to an operating loss of $(1,740,137) in 2024[4] - A significant factor contributing to the net loss was a total of $(10,711,586) in realized and unrealized losses from short-term investments in 2024, compared to a gain of $166,931 in 2023[4] Condensed Consolidated Statements of Changes in Shareholders' Equity The company's total shareholders' equity significantly decreased from $39,532,701 as of September 30, 2023, to $26,744,096 as of March 31, 2024, primarily due to a substantial net loss of $(13,101,457) during the period, partially offset by foreign currency translation adjustments Key Shareholders' Equity Changes (Six Months Ended March 31, 2024) | Metric | September 30, 2023 | March 31, 2024 | | :--- | :--- | :--- | | Ordinary Shares (Share Amount) | $67,969 | $68,362 | | Additional Paid in Capital | $29,279,159 | $29,278,766 | | Retained Earnings | $10,159,304 | $(2,942,153) | | Accumulated Other Comprehensive Income | $(2,413,266) | $(2,100,414) | | Total Shareholders' Equity | $39,532,701 | $26,744,096 | - The net loss of $(13,101,457) was the primary driver for the decrease in retained earnings and total shareholders' equity[6] - A reverse share-split adjustment in the period resulted in a minor increase in ordinary share amount and a corresponding decrease in additional paid-in capital[6] - Foreign currency translation adjustments contributed $312,852 to comprehensive income for the six months ended March 31, 2024[6] Condensed Consolidated Statements of Cash Flows For the six months ended March 31, 2024, the company experienced a net cash outflow from operating activities of $(2,429,621), a significant reversal from the prior year's inflow, primarily due to the net loss and changes in working capital; however, cash increased due to substantial cash provided by financing activities Key Cash Flow Figures (Six Months Ended March 31, 2024 vs. 2023) | Metric | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,429,621) | $4,798,702 | | Net cash used in investing activities | $(67,656) | $(646) | | Net cash provided by financing activities | $6,067,732 | $2,080,918 | | Net increase in cash | $3,576,343 | $7,243,058 | | Cash, end of period | $8,861,590 | $12,954,516 | - Operating activities resulted in a cash outflow of $(2,429,621) in 2024, a substantial decrease from the $4,798,702 inflow in 2023, largely driven by the net loss and changes in accounts receivable[8] - Financing activities provided $6,067,732 in cash, primarily from proceeds from bank loans and related party borrowings, significantly higher than the $2,080,918 in 2023[8] - Despite the operating cash outflow, the company's cash balance increased by $3,576,343, reaching $8,861,590 at period-end, due to strong financing inflows[8] Notes to Unaudited Condensed Consolidated Financial Statements NOTE 1 — Organization and Business Description Universe Pharmaceuticals INC, a Cayman Islands entity, serves as the ultimate holding company for its subsidiaries primarily engaged in the research, development, manufacturing, and sale of modernized traditional Chinese medicines (TCMD) and third-party pharmaceutical products in the PRC - Universe Pharmaceuticals INC was incorporated in the Cayman Islands on December 11, 2019, and became the ultimate holding company after a reorganization[10][14] - The company's primary business involves the development, manufacturing, and sale of modernized traditional Chinese medicines (TCMD) and third-party products (biochemical drugs, medical instruments, dietary supplements) in China[21] - On July 27, 2023, a 6-for-1 share consolidation was effected, reducing authorized and outstanding ordinary shares and increasing par value[20] Company Structure and Reorganization - Universe INC, Universe HK, and Universe Technology are holding companies, with Jiangxi Universe and Universe Trade actively engaged in R&D, manufacturing, and sales of traditional Chinese medicines[12][13][21] - A reorganization completed on December 11, 2019, established Universe INC as the ultimate holding company controlling its PRC subsidiaries through Universe HK and Universe Technology[14] IPO and Share Capital Changes - The company closed its IPO on March 25, 2021, raising $28.75 million in gross proceeds from the sale of 5,000,000 ordinary shares at $5.00 per share, plus an over-allotment option[16] - On July 3, 2023, shareholders approved an increase in authorized share capital and a share consolidation; the board resolved to effect a 6-for-1 share consolidation on July 27, 2023[19][20] - As of March 31, 2024, there were 3,645,974 ordinary shares issued and outstanding after the share consolidation[20] Principal Activities and Subsidiaries - The company's core business is the development, manufacturing, and sale of traditional Chinese medicines derivatives (TCMD) and third-party products (biochemical drugs, medical instruments, dietary supplements) to customers across China[21] Subsidiary Details as of March 31, 2024 | Name of Entity | Incorporation Date | Incorporation Place | Ownership | Principal Activities | | :--- | :--- | :--- | :--- | :--- | | Universe INC | Dec 11, 2019 | Cayman Islands | Parent | Investment holding | | Universe HK | May 21, 2014 | Hong Kong | 100% | Investment holding | | Universe Technology | April 18, 2019 | PRC | 100% | WFOE, Investment holding | | Jiangxi Universe | March 2, 1998 | PRC | 100% | Research and development and manufacturing of modernized traditional Chinese medicines | | Universe Trade | March 10, 2010 | PRC | 100% | Sales of modernized traditional Chinese medicines | | Universe Hanhe | May 12, 2021 | PRC | 100% | Research and development of new pharmaceutical products | NOTE 2 — Summary of Significant Accounting Policies The company's unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with significant estimates made by management, and key accounting policies cover areas such as revenue recognition, inventory valuation, and fair value measurements - Financial statements are prepared under U.S. GAAP for interim information, with management making significant estimates for items like receivables, inventory, and long-lived assets[22][24] - The company's operations are primarily in the PRC, subjecting its business to political, economic, and legal environments in China, as well as competitive pressures in the pharmaceutical industry[25][26] - Revenue from TCMD and third-party products is recognized at a point in time when title and risk of loss pass to the customer, typically upon delivery, with no right of return[50] - Short-term investments, consisting of wealth management products, are measured at fair value (Level 3 inputs) with realized gains/losses and changes in fair value recognized in the income statement[33][38] - Research and development expenses, primarily employee costs and study execution, were significantly lower in the six months ended March 31, 2024 ($86,503) compared to 2023 ($2,268,335)[53] Basis of Presentation and Estimates - The unaudited condensed consolidated financial statements adhere to U.S. GAAP for interim reporting, with all inter-company balances and transactions eliminated upon consolidation[22] - Management's estimates, including allowance for doubtful accounts, inventory valuations, and useful lives of assets, are crucial in preparing the financial statements, and actual results may differ[24] Assets Accounting Policies (Cash, Receivables, Inventories, Investments, Property, Intangibles) - Accounts receivable are presented net of an allowance for doubtful accounts, determined by individual account analysis and historical collection trends[30] - Inventories are valued at net realizable value using the weighted average method, with provisions for diminution recognized for obsolete or excess items[31] - Short-term investments, primarily wealth management products, are classified as trading securities and measured at fair value, with changes recognized in the income statement[33] - Property and equipment are recorded at cost less accumulated depreciation, using the straight-line method over their estimated useful lives (e.g., buildings 20 years, machinery 5-10 years)[39] - Intangible assets, mainly land use rights (50 years) and software (3 years), are amortized using the straight-line method[41][42] Revenue and Expense Recognition - Revenue is recognized when goods are transferred to customers, with the company acting as a principal, and is reported net of VAT[50] - Cost of revenue includes raw materials, freight, direct labor, depreciation, warehousing, and production overhead[52] - Research and development costs are expensed as incurred, totaling $86,503 for the six months ended March 31, 2024[53] - Advertising expenses, included in selling expenses, increased to $2,773,300 for the six months ended March 31, 2024, from $1,340,368 in the prior year[56] Taxation and Foreign Currency - The company accounts for income taxes in accordance with PRC laws, recognizing deferred income taxes for temporary differences and establishing valuation allowances when necessary[58] - The functional currency for the company's active operations in the PRC is the Chinese Yuan (RMB), with financial statements translated into US$ for reporting[64] Currency Exchange Rates (US$:RMB) | Exchange Rate Type | March 31, 2024 | March 31, 2023 | September 30, 2023 | | :--- | :--- | :--- | :--- | | Period-end US$: RMB | 7.2203 | 6.8676 | 7.2960 | | Period average US$: RMB | 7.2064 | 6.9761 | 7.0533 | Recent Accounting Pronouncements - The company, as an emerging growth company (EGC), has elected the extended transition period for complying with new accounting standards[71] - The company is evaluating the impact of ASU 2019-12 (Simplifying the Accounting for Income Taxes), ASU 2023-07 (Segment Reporting), and ASU 2023-09 (Income Tax Disclosures) on its financial statements[72][74][75] - ASU 2021-08 (Accounting for Contract Assets and Liabilities from Contracts with Customers) is not expected to have a material effect on the company's financial statements[73] NOTE 3 — Accounts Receivable, Net Accounts receivable, net, increased to $14,384,228 as of March 31, 2024, from $10,667,603 as of September 30, 2023, and the allowance for doubtful accounts significantly decreased due to substantial bad debt recovery Accounts Receivable, Net (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Accounts receivable | $14,470,157 | $11,014,909 | | Less: allowance for doubtful accounts | $(85,929) | $(347,306) | | Accounts receivable, net | $14,384,228 | $10,667,603 | - Approximately 81.0% ($11.7 million) of the net accounts receivable balance as of March 31, 2024, has been subsequently collected[77] - The allowance for doubtful accounts decreased from $347,306 to $85,929, primarily due to $265,530 in bad debt recovery during the six months ended March 31, 2024[78] NOTE 4 — Inventories, Net Total inventory, net, slightly increased to $3,386,052 as of March 31, 2024, from $3,343,266 as of September 30, 2023, driven by an increase in finished goods, while raw materials decreased and inventory valuation allowance was reduced Inventory, Net (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Raw materials | $551,993 | $635,395 | | Finished goods | $2,870,300 | $2,777,617 | | Inventory valuation allowance | $(36,241) | $(69,746) | | Total inventory, net | $3,386,052 | $3,343,266 | - Finished goods increased by approximately $92,683, while raw materials decreased by approximately $83,402[79] - The inventory valuation allowance decreased by $33,505, indicating a recovery or lower provision for obsolete/excess inventory[79] NOTE 5 — Advance to Suppliers Advances to suppliers for raw material purchases significantly increased to $368,960 as of March 31, 2024, from $180,643 as of September 30, 2023, with no allowance for doubtful accounts recorded Advances to Suppliers (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Advances to suppliers for inventory raw material purchase | $368,960 | $180,643 | | Less: allowance for doubtful accounts | $- | $- | | Advances to suppliers | $368,960 | $180,643 | - The company recorded no allowance for doubtful accounts for advances to suppliers, believing all advances were fully realizable[80] NOTE 6 — Prepayment for Acquisition The company has a prepayment of $3,462,460 for the acquisition of a 51% ownership interest in Yunnan Faxi Pharmaceuticals Co, Ltd, with the acquisition expected to be completed by January 2025 - On September 26, 2022, the company entered a letter of intent to acquire 51% of Yunnan Faxi Pharmaceuticals Co, Ltd for approximately $10.0 million (RMB72 million)[81] - A prepayment of approximately $3.5 million (RMB25 million) was made, recorded as prepayment for acquisition[81] - The acquisition is anticipated to be completed, and the remaining balance paid, by January 2025[81] NOTE 7 — Short-term Investments Short-term investments significantly decreased to $2,527,603 as of March 31, 2024, from $13,219,005 as of September 30, 2023, primarily due to substantial realized losses and changes in fair value Short-term Investments Movement (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Beginning balance | $13,219,005 | $13,148,594 | | Realized (loss) gain on short-term investments | $(3,094,084) | $38,530 | | Change in fair value of short-term investments | $(7,617,502) | $- | | Ending balance of short-term investments | $2,527,603 | $13,219,005 | - The company incurred a realized loss of $(3,094,084) and a change in fair value loss of $(7,617,502) on short-term investments for the six months ended March 31, 2024[82] NOTE 8 — Property and Equipment, Net Property and equipment, net, decreased to $3,522,997 as of March 31, 2024, from $3,699,965 as of September 30, 2023, primarily due to accumulated depreciation Property and Equipment, Net (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Subtotal (Gross Cost) | $9,882,803 | $9,750,445 | | Less: accumulated depreciation | $(6,359,806) | $(6,050,480) | | Property and equipment, net | $3,522,997 | $3,699,965 | - Depreciation expense for the six months ended March 31, 2024, was $246,365[83] NOTE 9 — Intangible Assets, Net Intangible assets, net, remained relatively stable at $147,652 as of March 31, 2024, compared to $148,584 as of September 30, 2023, with estimated future amortization expenses provided Intangible Assets, Net (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Total (Gross Cost) | $269,922 | $267,121 | | Less: accumulated amortization | $(122,270) | $(118,537) | | Intangible assets, net | $147,652 | $148,584 | - Amortization expense for the six months ended March 31, 2024, was $2,495[85] Estimated Future Amortization Expense for Intangible Assets | Twelve months ending March 31, | Amortization expense | | :--- | :--- | | 2025 | $4,980 | | 2026 | $4,980 | | 2027 | $4,980 | | 2028 | $4,980 | | 2029 | $4,980 | | Thereafter | $122,752 | | Total | $147,652 | NOTE 10 — Prepayment for CIP Project The company has a significant prepayment of $9.2 million for a construction-in-progress (CIP) project for new manufacturing facilities, which has experienced delays due to the COVID-19 pandemic and geological survey issues - The CIP project involves constructing four manufacturing factory buildings and an office building with an estimated budget of approximately $22.9 million (RMB165 million)[87] - Construction has been delayed, with manufacturing facilities now expected by December 2025 and the office building by December 2026, due to COVID-19 and geological survey issues[87] - As of March 31, 2024, a prepayment of approximately $9.6 million (RMB69.2 million) has been made, with $9.2 million remaining as prepayment for the CIP project[87][88] - Future additional capital expenditure on this project is estimated at approximately $13.3 million (RMB95.8 million), with $3.5 million required in the next 12 months[89] NOTE 11 — Prepayment for Purchase of a Property The company has made a prepayment of $2.2 million for the purchase of residential and commercial office space from a related party, Jiangxi Yueshang, with the remaining balance expected by April 2025 and planned use for offices by June 2025 - On May 6, 2021, the company agreed to purchase 2,749.30 square meters of property for approximately $4.4 million (RMB32 million) from Jiangxi Yueshang, a former related party[91] - As of March 31, 2024, a prepayment of $2.2 million (RMB16 million) has been made, with the remaining balance due by April 2025[92] - The property is intended for office use starting June 2025[92] NOTE 12 — Short-term Bank Loans Short-term bank loans decreased to $4,431,949 as of March 31, 2024, from $5,482,456 as of September 30, 2023, with loans obtained from various PRC banks for working capital at interest rates ranging from 3.65% to 4.56% per annum Short-term Bank Loans (March 31, 2024 vs. September 30, 2023) | Bank Name | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Jiangxi Luling Rural Commercial Bank (LRC Bank) | $1,384,984 | $2,467,105 | | Bank of Communications Co, Ltd | $1,246,486 | $1,233,553 | | Zhujiang Rural Bank | $415,495 | $411,184 | | Beijing Bank | $1,384,984 | $1,370,614 | | Total short-term loans | $4,431,949 | $5,482,456 | - Loans from LRC Bank, Bank of Communications, Zhujiang Rural Bank, and Beijing Bank were primarily for working capital purposes[93][94][96][97][98] - Guarantees for these loans were provided by Mr Gang Lai (CEO), Universe Trade, Jiangxi Province Financing Guarantee Group Co, Ltd, or by pledging company patents[93][94][96][97][98] - All short-term loans mentioned were subsequently fully repaid upon maturity[94][96][97][98] NOTE 13 — Long-term Bank Loans The company secured a new long-term bank loan of $2,077,476 from LRC Bank as of March 31, 2024, for working capital, maturing in November 2025 and guaranteed by pledged buildings Long-term Bank Loans (March 31, 2024 vs. September 30, 2023) | Bank Name | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | LRC Bank | $2,077,476 | $- | - A new long-term loan of RMB15 million (approximately $2,077,476) was obtained from LRC Bank on November 23, 2023, for two years at a 3.95% annual interest rate[99] - This loan is guaranteed by pledging buildings of Jiangxi Universe[99] - Total interest expense for all loans was $148,860 for the six months ended March 31, 2024, up from $90,044 in the prior year[100] NOTE 14 — Related Party Transactions Related party transactions include advances from the CEO for working capital, loan guarantees provided by the CEO and a subsidiary, and a significant prepayment for a property purchase from a former related party Due from Related Parties (March 31, 2024 vs. September 30, 2023) | Name | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Mr Yajun Hu | $- | $61,678 | | Total due from related parties | $- | $61,678 | - Advances from Mr Yajun Hu (General Manager) were fully repaid on October 12, 2023[102] Due to Related Parties (March 31, 2024 vs. September 30, 2023) | Name | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Mr Gang Lai | $5,515,160 | $540,096 | | Total due to related parties | $5,515,160 | $540,096 | - The balance due to related parties, primarily advances from CEO Mr Gang Lai for working capital, significantly increased to $5,515,160 and is non-interest bearing and due on demand[103] - Mr Gang Lai and Universe Trade provided credit guarantees for the company's bank loans[104] - A $2.2 million prepayment for a property purchase was made to Jiangxi Yueshang, which ceased to be a related party after January 13, 2022[105][106] NOTE 15 — Concentrations The company's operations are highly concentrated in the PRC, with most transactions denominated in RMB and substantial assets located there, and while customer concentration has decreased, significant product and supplier concentration persists - A majority of the company's revenue, expenses, assets, and liabilities are denominated in RMB and located in the PRC, exposing it to PRC-specific foreign exchange and regulatory risks[108][109] - For the six months ended March 31, 2024, no single customer accounted for more than 10% of total revenue, a change from the prior year where one customer accounted for 14.1%[110] - The top 10 customers accounted for 23.0% of total revenue for the six months ended March 31, 2024, down from 32.9% in the prior year[110] - Sales of Guben Yanling Pill accounted for 33.5% of total revenue for the six months ended March 31, 2024, indicating product concentration[111] - Two suppliers accounted for 29.9% and 10.0% of total purchases, respectively, for the six months ended March 31, 2024, indicating supplier concentration[112] NOTE 16 — Shareholders' Equity Shareholders' equity details include the impact of a 6-for-1 share consolidation in July 2023, which retrospectively restated share numbers and par value, and PRC subsidiaries have restricted net assets, limiting dividend distributions to the parent company - A 6-for-1 share consolidation, effective July 27, 2023, reduced the number of authorized and outstanding ordinary shares and increased their par value to $0.01875 per share[116] - As of March 31, 2024, there were 3,645,974 ordinary shares issued and outstanding[117] - Underwriter warrants to purchase 300,000 ordinary shares at an exercise price of $5.50 per share remain outstanding but were antidilutive for EPS calculation[118] - PRC subsidiaries have restricted net assets totaling $31,786,663 as of March 31, 2024, which cannot be transferred to the parent company as loans, advances, or cash dividends without third-party consent[121] Ordinary Shares and Share Consolidation - The company's authorized share capital was increased, and a 6-for-1 share consolidation was approved and effected in July 2023[114][116] - The share consolidation retrospectively restated the financial statements, resulting in 3,645,974 ordinary shares issued and outstanding as of March 31, 2024[116][117] Statutory Reserve and Restricted Net Assets - PRC subsidiaries are required to make appropriations to statutory surplus reserves, which are not distributable as cash dividends[120] - As of March 31, 2024, the total restricted net assets of PRC subsidiaries amounted to $31,786,663[121] NOTE 17 — Commitments and Contingencies The company has significant capital expenditure commitments for its CIP project ($13.3 million) and a property purchase ($2.2 million remaining balance), with no material legal claims or litigation identified - Future minimum capital expenditures for the CIP project are estimated at approximately $13.3 million, with $3.4 million required within the next 12 months[123] - A remaining balance of approximately $2.2 million is due by April 2025 for a property purchase agreement[124] - No material legal claims or litigation that could adversely impact the company's financial position were identified for the six months ended March 31, 2024 and 2023[122] NOTE 18 — Subsequent Events Subsequent events include several new loan agreements totaling approximately $2.92 million and the closing of a self-underwritten public offering on July 15, 2024, raising $25 million - On April 23, 2024, Jiangxi Universe secured a $415,495 loan from Zhujiang Rural Bank, collateralized by trademarks[125] - On April 26, 2024, Jiangxi Universe signed a $1,384,984 loan agreement with LRC Bank, guaranteed by Mr Gang Lai and Universe Trade[126] - On June 16, 2024, Jiangxi Universe obtained a $1,121,837 loan from Bank of Communications, with guarantees from Mr Gang Lai, Universe Trade, and a third party[127] - On July 15, 2024, the company closed a self-underwritten public offering of 20,000,000 ordinary shares at $1.25 per share, raising $25 million before expenses[128] Condensed Financial Information of the Parent Company Parent Company Balance Sheets The parent company's total assets decreased significantly to $26,936,903 as of March 31, 2024, from $39,532,701 as of September 30, 2023, primarily due to a reduction in short-term investments and investment in subsidiaries Parent Company Balance Sheet Figures (March 31, 2024 vs. September 30, 2023) | Metric | March 31, 2024 (Unaudited) | September 30, 2023 | | :--- | :--- | :--- | | Total Assets | $26,936,903 | $39,532,701 | | Cash | $69,114 | $9,248 | | Short-term investments | $2,527,603 | $13,219,005 | | Investment in subsidiaries | $13,554,925 | $15,426,104 | | Total Current Liabilities | $192,807 | $- | | Total Shareholders' Equity | $26,744,096 | $39,532,701 | - The parent company's total assets decreased by approximately $12.59 million, largely driven by a decrease in short-term investments and investment in subsidiaries[134] - Current liabilities increased from nil to $192,807, primarily due to amounts due to related parties[134] - Total shareholders' equity mirrored the consolidated statements, decreasing by approximately $12.79 million[134] Parent Company Statements of Income and Comprehensive Income For the six months ended March 31, 2024, the parent company reported a net loss of $(13,101,457) and a comprehensive loss of $(12,788,605), primarily due to significant realized and unrealized losses on short-term investments and equity in loss of subsidiaries Parent Company Income Statement Figures (Six Months Ended March 31, 2024 vs. 2023) | Metric | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | | General and administrative expenses | $(232,809) | $(116,431) | | Realized (loss) gain on short-term investments | $(3,094,084) | $166,931 | | Change in fair value of short-term investments | $(7,617,502) | $- | | Equity in loss of subsidiaries | $(2,156,771) | $(765,420) | | Net Loss | $(13,101,457) | $(715,427) | | Comprehensive (loss) income attributable to the Company | $(12,788,605) | $684,348 | - The parent company's net loss significantly increased from $(715,427) in 2023 to $(13,101,457) in 2024[136] - Realized and unrealized losses on short-term investments totaled $(10,711,586) for the current period, a major contributor to the loss[136] - Equity in loss of subsidiaries also increased, contributing $(2,156,771) to the parent company's loss[136] Parent Company Statements of Cash Flows For the six months ended March 31, 2024, the parent company generated net cash from operating activities of $52,790, a positive shift from the prior year's outflow, and the overall cash balance increased Parent Company Cash Flow Figures (Six Months Ended March 31, 2024 vs. 2023) | Metric | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $52,790 | $(11,880) | | Net cash provided by investing activities | $- | $- | | Changes in cash | $59,866 | $(11,760) | | Cash, end of period | $69,114 | $17,157 | - Operating activities provided $52,790 in cash, a positive change from the $(11,880) outflow in the prior year, despite the net loss, due to non-cash adjustments and changes in working capital[137] - Investing activities had no net cash impact, as purchases and sales of short-term investments offset each other[137] - The parent company's cash balance increased by $59,866, reaching $69,114 at the end of the period[137]