Full Press Release Details
CHINA SXT PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2021
CHINA SXT PHARMACEUTICALS, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Condensed Consolidated Financial Statements | |
| Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and March 31, 2021 | F-2 |
| Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the six months ended September 30, 2021 and 2020 (Unaudited) | F-3 |
| Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended September 30, 2021 and 2020 (Unaudited) | F-4 |
| Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2021 and 2020 (Unaudited) | F-5 |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | F-6 - F-27 |
CHINA SXT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS, EXCEPT FOR NUMBER OF SHARES
| September 30, 2021 (Unaudited) | March 31, 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 31,321 | $ | 13,333,028 | ||||
| Restricted cash | - | 25,947 | ||||||
| Accounts receivable, net | 3,882,839 | 4,507,115 | ||||||
| Inventories | 837,447 | 859,696 | ||||||
| Advance to suppliers | 533,895 | 519,780 | ||||||
| Loan receivable and accrued interest | 1,581,000 | 1,581,000 | ||||||
| Deferred cost | - | 547,807 | ||||||
| Amounts due from related parties | 2,978,137 | - | ||||||
| Prepayments, receivables and other current assets | 1,816,640 | 1,859,103 | ||||||
| Total Current Assets | 11,661,279 | 23,233,476 | ||||||
| Property, plant and equipment, net | 1,296,405 | 1,433,479 | ||||||
| Construction in progress | 358,569 | 355,614 | ||||||
| Intangible assets, net | 42,353 | 45,800 | ||||||
| Long-term deposit | 9,311,854 | 9,157,789 | ||||||
| Deferred tax assets, net | - | 321,444 | ||||||
| Total Non-current Assets | 11,009,181 | 11,314,126 | ||||||
| TOTAL ASSETS | $ | 22,670,460 | $ | 34,547,602 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Bank loans - current portion | $ | 24,042 | $ | 37,122 | ||||
| Accounts payable | 1,492,578 | 1,456,445 | ||||||
| Refund liabilities | 480,227 | 472,282 | ||||||
| Advance from customers | 218,644 | 257,449 | ||||||
| Amounts due to related parties | 2,117,548 | 12,148,461 | ||||||
| Accrued expenses and other liabilities | 3,360,856 | 3,046,976 | ||||||
| Income tax payable | 1,184,880 | 1,161,168 | ||||||
| Total Current Liabilities | 8,878,775 | 18,579,903 | ||||||
| Bank loans - non-current portion | - | 6,292 | ||||||
| Total Non-current Liabilities | - | 6,292 | ||||||
| TOTAL LIABILITIES | 8,878,775 | 18,586,195 | ||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Ordinary shares, unlimited shares authorized, $ 0.004 par value, 16,870,238 shares issued and outstanding as of September 30, 2021 ( 15,525,094 shares issued and outstanding as of March 31, 2021) | 67,438 | 62,057 | ||||||
| Additional paid-in capital | 26,009,434 | 25,323,747 | ||||||
| Accumulated deficits | ( 13,044,007 | ) | ( 9,952,183 | ) | ||||
| Accumulated other comprehensive income | 758,820 | 527,786 | ||||||
| Total Shareholders' Equity | 13,791,685 | 15,961,407 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 22,670,460 | $ | 34,547,602 |
The accompanying notes are an integral part of
these interim condensed consolidated financial statements.
CHINA SXT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
AND COMPREHENSIVE INCOME/(LOSS)
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
| For the six months ended September 30, | ||||||||
| 2021 (Unaudited) | 2020 (Unaudited) | |||||||
| Revenues | $ | 1,027,674 | $ | 3,860,501 | ||||
| Revenues generated from third parties | 1,011,285 | 2,670,406 | ||||||
| Revenue generated from related parties | 16,389 | 1,190,095 | ||||||
| Cost of revenues | ( 703,717 | ) | ( 1,039,565 | ) | ||||
| Gross profit | 323,957 | 2,820,936 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | ( 396,810 | ) | ( 704,558 | ) | ||||
| General and administrative | ( 2,818,674 | ) | ( 952,568 | ) | ||||
| Total operating expenses | ( 3,215,484 | ) | ( 1,657,126 | ) | ||||
| Operating Income (Loss) | ( 2,891,527 | ) | 1,163,810 | |||||
| Other income (expenses): | ||||||||
| Interest income (expense), net | 69 | ( 442,079 | ) | |||||
| Other income, net | 125,414 | 894,543 | ||||||
| Total other income, net | 125,483 | 452,464 | ||||||
| Income (Loss) before income taxes | ( 2,766,044 | ) | 1,616,274 | |||||
| Income tax provision | ( 325,780 | ) | ( 235,016 | ) | ||||
| Net income (loss) | ( 3,091,824 | ) | 1,381,258 | |||||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation adjustment | 231,034 | 638,775 | ||||||
| Comprehensive income (loss) | ( 2,860,790 | ) | 2,020,033 | |||||
| Earnings per ordinary share | ||||||||
| Basic and diluted | $ | ( 0.20 | ) | $ | 0.10 | |||
| Weighted average number of ordinary shares outstanding | ||||||||
| Basic and diluted* | 15,549,294 | 14,390,101 |
The accompanying notes are an integral part of
these interim condensed consolidated financial statements.
CHINA SXT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2021
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
| Shares* | Amount | Additional paid-in capital | Retained earnings (Accumulated deficits) | Accumulated other comprehensive income (loss) | Total equity | |||||||||||||||||||
| Balance as of March 31, 2020 | 8,666,928 | $ | 34,667 | $ | 17,161,346 | $ | ( 7,204,000 | ) | $ | ( 590,660 | ) | $ | 9,401,353 | |||||||||||
| Net income | - | - | - | 1,381,258 | - | 1,381,258 | ||||||||||||||||||
| Issuance of shares for convertible notes principal and interest partial settlement | 6,847,470 | 27,390 | 7,072,427 | - | - | 7,099,817 | ||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | 638,775 | 638,775 | ||||||||||||||||||
| Balance as of September 30, 2020 (Unaudited) | 15,514,398 | $ | 62,057 | $ | 24,233,773 | $ | ( 5,822,742 | ) | $ | 48,115 | $ | 18,521,203 | ||||||||||||
| Balance as of March 31, 2021 | 15,525,094 | $ | 62,057 | $ | 25,323,747 | $ | ( 9,952,183 | ) | $ | 527,786 | $ | 15,961,407 | ||||||||||||
| Net income | - | - | - | ( 3,091,824 | ) | - | ( 3,091,824 | ) | ||||||||||||||||
| Shares issued as employee incentives | 2,084,005 | 5,381 | 1,376,754 | - | - | 1,382,135 | ||||||||||||||||||
| Unearned employee compensation | - | - | ( 691,067 ) | - | - | ( 691,067 ) | ||||||||||||||||||
| Shares to be cancelled | ( 738,861 ) | - | - | - | - | - | ||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | 231,034 | 231,034 | ||||||||||||||||||
| Balance as of September 30, 2021 (Unaudited) | 16,870,238 | $ | 67,438 | $ | 26,009,434 | $ | ( 13,044,007 | ) | $ | 758,820 | $ | 13,791,685 |
The accompanying notes are an integral part of
these interim condensed consolidated financial statements.
CHINA SXT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the six months ended September 30, | ||||||||
| 2021 (Unaudited) | 2020 (Unaudited) | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) from operations | $ | ( 3,091,824 | ) | $ | 1,381,258 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Convertible note - Accretion of financing cost | - | 482,732 | ||||||
| Bad debt provision | ( 544,915 | ) | - | |||||
| Depreciation and amortization expenses | 186,000 | 182,925 | ||||||
| Interest accrued on loan receivable | - | ( 40,500 | ) | |||||
| Deferred tax | 325,780 | 91,482 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 697,805 | ( 1,548,400 | ) | |||||
| Note receivable | - | 17,950 | ||||||
| Inventory | 36,592 | 61,860 | ||||||
| Advance to suppliers | ( 5,353 | ) | ( 312,599 | ) | ||||
| Prepayments, receivables and other assets | 1,341,380 | ( 263,108 | ) | |||||
| Deferred cost | 504,522 | - | ||||||
| Accounts payable and accrual | 11,592 | ( 645,852 | ) | |||||
| Refund liability | - | ( 13,259 | ) | |||||
| Advance from customers | ( 42,994 | ) | ( 90,609 | ) | ||||
| Income tax payable | 4,163 | 283,509 | ||||||
| Accrued expenses and other current liabilities | 264,903 | 79,103 | ||||||
| Net cash used in operating activities | ( 312,349 | ) | ( 333,508 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property, plant and equipment | ( 21,137 | ) | ( 4,931 | ) | ||||
| Construction in process | - | ( 114,286 | ) | |||||
| Deposits for investment | ( 9,281,317 | ) | 2,857,265 | |||||
| Net cash provided by (used in) investing activities | ( 9,302,454 | ) | 2,738,048 | |||||
| Cash Flows from Financing Activities: | ||||||||
| Bank borrowings | ( 20,036 | ) | ( 22,205 | ) | ||||
| Received from (payment to) related parties | ( 3,889,409 | ) | 323,080 | |||||
| Repayment of convertible notes | - | ( 26,378 | ) | |||||
| Net cash provided by (used in) financing activities | ( 3,909,445 | ) | 274,497 | |||||
| Effect of exchange rate changes on cash and cash equivalents | 196,594 | 387,405 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( 13,327,654 | ) | 3,066,442 | |||||
| Cash, cash equivalents and restricted cash at the beginning of period | 13,358,975 | 7,287,032 | ||||||
| Cash, cash equivalents and restricted cash at the end of period | $ | 31,321 | $ | 10,353,474 | ||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for income taxes | $ | 16,612 | $ | 2,989 | ||||
| Cash paid for interest expense | $ | - | $ | 1,378 | ||||
| Non-cash transactions: | ||||||||
| Issuance of shares for equity incentive plan | $ | 691,068 | $ | - | ||||
| Issuance of shares for convertible notes principal and interest partial settlement | $ | - | $ | 27,389,877 |
The accompanying notes are an integral part of
these interim condensed consolidated financial statements.
CHINA SXT PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTITIVIES
China SXT Pharmaceutical, Inc. ("SXT"
or the "Company") is a holding company incorporated in British Virgin Islands on July 4, 2017. The Company focuses on the
research, development, manufacture, marketing and sales of traditional Chinese medicine pieces (the "TCMP"), through its variable
interest entity ("VIE"), Jiangsu Suxuantang Pharmaceutical Co., Ltd, ("Taizhou Suxuantang") in China. The Company
currently sells three types of TCMP products: Advanced TCMP, Fine TCMP and Regular TCMP, and TCM Homologous Supplements ("TCMHS")
products. We currently have a product portfolio of 19 advanced TCMPs, 10 Fine TCMPs, 235 Regular TCMPs and 4 TCMHS solid beverage products
that address a wide variety of diseases and medical indications. Most of our products are sold on a prescription basis across China. The
Company's principal executive offices are located in Taizhou, Jiangsu province, China.
Restructuring and Share Issuance
On July 4, 2017, we were incorporated in the British
Virgin Islands by issuance of 10,300,000 common stocks at 0.001 par value to Ziqun Zhou, Di Zhou and Feng Zhou Management Limited ("China
SXT Pharmaceuticals, Inc. shareholders"). Feng Zhou Management Limited is a BVI company 100% owned by Feng Zhou. Feng Zhou, Ziqun
Zhou and Di Zhou collectively hold 100% shares of Taizhou Suxuantang. Later on October 20, 2017, the 10,300,000 shares common stocks (2,575,000
shares retrospectively restated for effect of reverse stock split on February 22, 2021) were reallocated among China SXT Pharmaceuticals,
Inc. shareholders. On October 20, 2017, the Company issued 9,700,000 common stocks (2,425,000 shares retrospectively restated for effect
of reverse stock split on February 22, 2021) at 0.001 par value to ten individual shareholders ("Restructuring").
On July 21, 2017, our wholly owned subsidiary
China SXT Group Limited ("SXT HK") was incorporated in Hong Kong. China SXT Group Limited in turn holds all the capital stocks
of Taizhou Suxantang Biotechnology Co. Ltd. ("WFOE"), a wholly foreign owned enterprise incorporated in China on October 13,
2017. On the same day, Taizhou Suxuantang and its shareholders entered into such a series of contractual arrangements, also known as VIE
Taizhou Suxuantang was incorporated on June 9,
2005 by Jianping Zhou, Xiufang Yuan (the spouse of Jianping Zhou) and Jianbin Zhou, who held 83%, 11.5% and 5.5% shares in Taizhou Suxuantang
respectively. On May 8, 2017, the three shareholders transferred all shares to Feng Zhou, Ziqun Zhou and Di Zhou (collectively "Taizhou
Shareholders"), who hold 83%, 11.5% and 5.5% shares in Taizhou Suxuantang, respectively, after the transfer of shares. Feng Zhou
and Ziqun Zhou are the children of Jianping Zhou and Xiufang Yuan, and Di Zhou is the child of Jianbin Zhou.
The discussion and presentation of financial statements
herein assumes the completion of the Restructuring, which is accounted for retroactively as if the aforementioned transactions had become
effective as of the beginning of the first period presented in the accompanying condensed consolidated financial statements.
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTITIVIES (CONTINUED)
The following diagram illustrates our corporate
structure, including our subsidiary and condensed consolidated variable interest entity as of the date of the financial statements assuming
the completion of our Restructuring:
VIE Agreements with Taizhou Suxuantang
Due to PRC legal restrictions on foreign ownership
in the pharmaceutical sector, neither the Company nor our subsidiaries own any equity interest in Taizhou Suxuantang. Instead, the Company
controls and receives the economic benefits of Taizhou Suxuantang's business operations through a series of contractual arrangements.
WFOE, Taizhou Suxuantang and its shareholders entered into such a series of contractual arrangements, also known as VIE Agreements, on
October 13, 2017. The VIE agreements are designed to provide WFOE with the power, rights and obligations equivalent in all material respects
to those it would possess as the sole equity holder of Taizhou Suxuantang, including absolute control rights and the rights to the assets,
property and revenue of Taizhou Suxuantang.
According to the Exclusive Business Cooperation
Agreement between WFOE and Taizhou Suxuantang, which is one of the VIE Agreements that was also entered into on October 13, 2017, Taizhou
Suxuantang is obligated to pay service fees to WFOE approximately equal to the net income of Taizhou Suxuantang.
Each of the VIE Agreements is described in detail
Exclusive Business Cooperation Agreement
Pursuant to the Exclusive Business Cooperation
Agreement between Taizhou Suxuantang and WFOE, WFOE provides Taizhou Suxuantang with technical support, consulting services and other
management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in
technology, human resources, and information. Additionally, Taizhou Suxuantang granted an irrevocable and exclusive option to WFOE to
purchase from Taizhou Suxuantang, any or all of Taizhou Suxuantang's assets at the lowest purchase price permitted under the PRC
laws. Should WFOE exercise such option, the parties shall enter into a separate asset transfer or similar agreement. For services rendered
to Taizhou Suxuantang by WFOE under this agreement, WFOE is entitled to collect a service fee calculated based on the time of services
rendered multiplied by the corresponding rate, plus the amount of the services fees or ratio decided by the board of directors of WFOE
based on the value of services rendered by WFOE and the actual income of Taizhou Suxuantang from time to time, which is approximately
equal to the net income of Taizhou Suxuantang.
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTITIVIES (CONTINUED)
The Exclusive Business Cooperation Agreement shall
remain in effect for ten years unless it is terminated by WFOE with 30-day prior notice. Taizhou Suxuantang does not have the right to
terminate the agreement unilaterally. WFOE may unilaterally extend the term of this agreement with prior written notice.
The CEO and president of WFOE, Mr. Feng Zhou,
is currently managing Taizhou Suxuantang pursuant to the terms of the Exclusive Business Cooperation Agreement. WFOE has absolute authority
relating to the management of Taizhou Suxuantang, including but not limited to decisions with regard to expenses, salary raises and bonuses,
hiring, firing and other operational functions. The Exclusive Business Cooperation Agreement does not prohibit related party transactions.
The audit committee is required to review and approve in advance any related party transactions, including transactions involving WFOE
or Taizhou Suxuantang.