Farmmi(FAMI) - 2021 Q4 - Annual Report

Financial Performance - Revenues from continuing operations for the year ended September 30, 2021, were $39,289,951, representing a 38.5% increase from $28,363,963 in 2020[11] - Gross profit from continuing operations for 2021 was $5,109,281, compared to $4,651,422 in 2020, indicating a gross profit margin improvement[11] - Net income for the year ended September 30, 2021, was $2,356,438, a significant increase from $813,455 in 2020[11] Customer and Supplier Concentration - Sales to China National Forest Products Corp. accounted for 63.8% of total revenue in 2021, slightly up from 62.83% in 2020[23] - The largest supplier, Jingning Liannong Trading Co., Ltd., represented 36.9% of total purchases in 2021, down from 42.3% in 2020[25] - The ongoing reliance on a limited number of key customers and suppliers poses a risk to revenue stability and operational continuity[20][24] Asset and Equity Growth - Current assets increased to $155,305,536 in 2021 from $37,022,171 in 2020, reflecting a substantial growth in liquidity[12] - Total assets rose to $165,686,901 in 2021, compared to $38,191,746 in 2020, indicating strong asset growth[12] - Total shareholders' equity increased to $160,792,418 in 2021 from $29,155,157 in 2020, showcasing improved financial stability[12] Risks and Challenges - The company faced risks related to health epidemics, which could impact sales and operating results, particularly due to COVID-19[17] - The company lacks product and business diversification, making future revenues and earnings more susceptible to fluctuations in the edible fungi industry[27] - Government support for the agriculture industry, including tax exemptions, may decrease or disappear, impacting the company's development[28] Financial Liabilities - The company has approximately $2,315,030 in outstanding bank loans, with specific loans due in 2022 and 2023, which could affect its financial condition if not managed properly[47] - The company has experienced negative operating cash flow in the past three years, raising concerns about its ability to refinance short-term loans in the future[49] E-commerce and Market Presence - The company closed its Farmmi Liangpin Market e-commerce platform on December 31, 2020, due to revenues not meeting expectations, and future success of Farmmi Jicai remains uncertain[43] - Approximately 23.94% of export sales in the year ended September 30, 2021, were to the U.S., with 33.71% to Canada, 13.48% to Japan, and 28.87% to other countries[54] - The company has expanded into bulk commodity trading, including corn, since June 2021[208] Regulatory and Legal Environment - The PRC legal system presents uncertainties that could materially affect the company's operations and legal protections[71] - The enforcement of labor-related regulations in the PRC may adversely affect the company's business and results of operations[75] - The PRC tax authorities may audit related party transactions, and any adverse findings could significantly reduce consolidated net income[93] Corporate Governance and Compliance - The company has not established effective internal control over financial reporting, with material weaknesses identified as of September 30, 2021, including insufficient personnel with appropriate accounting knowledge[141] - The company expects to incur annual expenses of between $500,000 and $1 million due to compliance with public company regulations[143] - The company received a notification from Nasdaq regarding non-compliance with the Minimum Bid Price Rule, with a deadline to regain compliance by May 30, 2022[150] Shareholder and Market Dynamics - The trading price of the company's Ordinary Shares has fluctuated between $0.196 and $10.3234 since listing on The Nasdaq Capital Market in February 2018, with the last reported price at $0.19 on January 24, 2022[148] - The market price of the company's shares may decline due to substantial sales of shares in the public market or the perception that such sales could occur[154] Product and Market Strategy - The company focuses on winter Shiitake mushrooms, which are noted for their superior quality and taste[202] - The company has diversified its product offerings to include other edible fungi based on client needs[206] - The global mushroom market consumption was valued at $40 billion in 2019 and is projected to reach $78 billion by 2026, with a CAGR of nearly 9.2% from 2020 to 2026[179]