Financial Performance - Total revenue for the six months ended June 30, 2023, was $8,811,287, an increase of 3.1% compared to $8,543,803 in the same period of 2022[8] - Gross profit for the same period was $4,332,571, up from $4,147,088, reflecting a gross margin improvement[8] - Net income for the six months ended June 30, 2023, was $284,760, compared to $220,793 in 2022, representing a 29% increase[8] - For the six months ended June 30, 2023, net revenue was $4,562,762, an increase of 21.4% compared to $3,754,826 for the same period in 2022[34] - Net income for the six months ended June 30, 2023, was $1,213,299, up 26.5% from $959,198 in the prior year[34] - The company reported a total comprehensive loss of $21,107 for the six months ended June 30, 2023, compared to a loss of $38,445 in 2022, showing an improvement[8] - The company expects revenue and net income to increase significantly in the second half of fiscal year 2023 compared to the same period last year[82] Assets and Liabilities - Total assets increased to $36,553,766 as of June 30, 2023, from $27,329,186 as of December 31, 2022, marking a growth of 33.8%[4] - Total liabilities decreased to $24,426,976 as of June 30, 2023, from $26,152,137 as of December 31, 2022, a reduction of 6.6%[4] - Shareholders' equity increased significantly to $12,126,790 as of June 30, 2023, from $1,177,049 as of December 31, 2022, reflecting a growth of 935%[4] - Total assets as of June 30, 2023, were $11,523,084, compared to $11,202,614 as of December 31, 2022, reflecting a growth of 2.9%[33] - Current liabilities increased to $6,173,116 as of June 30, 2023, from $5,858,647 at the end of 2022, representing a rise of 5.3%[33] - Total liabilities as of June 30, 2023, were $7,562,033, an increase from $7,307,391 as of December 31, 2022, indicating a growth of 3.5%[33] Cash Flow and Investments - Cash flows from operating activities provided $610,154, compared to a cash outflow of $(359,946) in the prior year, indicating a significant improvement[19] - Cash and cash equivalents decreased to $1,471,984 as of June 30, 2023, from $2,915,470 as of December 31, 2022, a decline of 49.6%[4] - The company reported cash provided by operating activities of $0.6 million for the six months ended June 30, 2023, compared to cash used in operating activities of $0.4 million for the same period last year[81] - The company incurred a net cash used in investing activities of $(11,252,022), primarily due to payments for long-term debt investment of $(6,000,000) and advances of loans to third parties of $(3,900,000)[19] - The company recorded interest income of $21,452 for the six months ended June 30, 2023, from the loan to the third party[93] - The company incurred an investment income of $171,616 from a $6.0 million investment with Worthy Credit, yielding a 12% annual return[111] Shareholder Information - The Company closed its initial public offering on April 3, 2023, raising funds by selling 3,390,000 Class A ordinary shares at $4.00 each[35] - As of June 30, 2023, the company had 12,390,000 shares issued and outstanding, an increase from 9,000,000 shares as of December 31, 2022, following the IPO[133] - The company has a negative working capital of approximately $5.4 million as of June 30, 2023, including deferred revenue of approximately $7.1 million[81] Revenue Recognition and Accounting Policies - The Company follows ASC 606 for revenue recognition, ensuring that revenue reflects the transfer of goods or services to customers as performance obligations are satisfied[52] - The Company recognized deferred revenue of $7,114,127 as of June 30, 2023, compared to $6,958,160 as of December 31, 2022, primarily from customer payments for membership cards and cash vouchers[57] - Revenue recognized from the opening deferred revenue for the six months ended June 30, 2023, was $3,945,400, compared to $3,899,040 for the same period in 2022[57] - Membership card breakage was immaterial for the six months ended June 30, 2023, and 2022, indicating low likelihood of redemption for inactive cards[55] Operational Developments - The company has established a bakery chain in Xinjiang, consisting of five directly-owned stores and 34 individually-owned businesses[23] - Xinjiang United Family has entered into contractual arrangements with 22 UFG entities, gaining exclusive rights to provide consulting services and absorb business risks[26] - The company has undertaken a reorganization in connection with its initial public offering, establishing a new legal structure to enhance operational efficiency[25] - The company opened three stores in PRC and two stores in the U.S. in 2023, with plans to open another ten stores in PRC later in fiscal year 2023[82] Tax and Regulatory Matters - The Company has not incurred any penalties or interest related to income taxes during the six months ended June 30, 2023, and 2022[66] - The company has a 100% valuation allowance for its deferred tax assets due to uncertainty regarding future earnings in U.S. operations[123] - The company expects tax rates for its UFG entities to potentially increase in future assessments based on past performance[118] Miscellaneous - The company incurred total operating lease expenses of $1,734,513 for the six months ended June 30, 2023, compared to $1,524,429 for the same period in 2022[100] - The company recorded an interest expense of $8,364 for a short-term bank loan of RMB3.0 million ($413,474) for the six months ended June 30, 2023[113] - The cumulative net operating loss (NOL) for U.S. operations increased to $13,088,033 as of June 30, 2023, with an additional NOL of $1,180,111 incurred during the six months[122] - The company incurred lease concessions due to COVID-19 amounting to $1,078,753, with $9,783 received during the six months ended June 30, 2023[46] - The company did not provide any financial support to the UFG entities for the six months ended June 30, 2023 and 2022[32] - The company did not experience any impairments of long-lived assets as of June 30, 2023, and December 31, 2022[51] - The company’s operations are influenced by political, economic, and legal environments in both the PRC and the United States, which may affect financial results[73]
Chanson International (CHSN) - 2023 Q2 - Quarterly Report