Full Press Release Details
TO FINANCIAL STATEMENTS
PHARMACEUTICALS INC. AND SUBSIDIARIES
| Consolidated Financial Statements | |
| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and September 30, 2021 | F-2 |
| Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the six months ended March 31, 2022 and 2021 | F-3 |
| Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended March 31, 2022 and 2021 | F-4 |
| Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021 | F-5 |
| Notes to Unaudited Condensed Consolidated Financial Statements | F-6 - F-32 |
UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| As of | ||||||||
| March 31, | September 30 | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 14,236,300 | $ | 8,077,908 | ||||
| Short-term investments | 14,344,092 | 13,725,204 | ||||||
| Accounts receivable, net | 18,816,406 | 15,573,742 | ||||||
| Inventories, net | 3,385,872 | 2,462,542 | ||||||
| Due from related parties | 356,290 | 236,982 | ||||||
| Advance to suppliers | 103,653 | 2,738,313 | ||||||
| Prepayment for advertising | - | 7,492,320 | ||||||
| Prepaid expenses and other current assets | 418,170 | 174,053 | ||||||
| TOTAL CURRENT ASSETS | 51,660,783 | 50,481,064 | ||||||
| Property, plant and equipment, net | 4,985,035 | 4,681,353 | ||||||
| Prepayments made to a related party for purchase of property | 2,520,000 | 2,476,800 | ||||||
| Prepayments for construction in progress | 10,448,944 | 10,712,160 | ||||||
| Intangible assets, net | 178,764 | 178,483 | ||||||
| Investment in equity securities | 586,674 | 744,924 | ||||||
| Deferred tax assets | 985,961 | 869,997 | ||||||
| TOTAL NONCURRENT ASSETS | 19,705,378 | 19,663,717 | ||||||
| TOTAL ASSETS | $ | 71,366,161 | $ | 70,144,781 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term bank loans | $ | 4,410,000 | $ | 4,334,400 | ||||
| Accounts payable | 3,645,443 | 5,310,526 | ||||||
| Taxes payable | 962,790 | 1,101,460 | ||||||
| Due to related parties | 7,293 | 19,723 | ||||||
| Accrued expenses and other current liabilities | 1,182,353 | 444,319 | ||||||
| TOTAL CURRENT LIABILITIES | 10,207,879 | 11,210,428 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Ordinary shares, $ 0.003125 par value, 100,000,000 shares authorized, 21,750,000 shares and 21,750,000 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively | 67,969 | 67,969 | ||||||
| Additional paid-in capital | 29,279,159 | 29,279,159 | ||||||
| Statutory reserves | 2,439,535 | 2,439,535 | ||||||
| Retained earnings | 26,790,666 | 25,058,931 | ||||||
| Accumulated other comprehensive income | 2,580,953 | 2,088,759 | ||||||
| TOTAL SHAREHOLDERS' EQUITY | 61,158,282 | 58,934,353 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 71,366,161 | $ | 70,144,781 |
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| REVENUE | $ | 24,202,340 | $ | 24,292,948 | ||||
| COST OF REVENUE AND RELATED TAX | 10,445,906 | 12,304,678 | ||||||
| GROSS PROFIT | 13,756,434 | 11,988,270 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | 9,079,771 | 1,109,287 | ||||||
| General and administrative expenses | 1,830,923 | 985,498 | ||||||
| Research and development expenses | 144,461 | 310,668 | ||||||
| Total operating expenses | 11,055,155 | 2,405,453 | ||||||
| INCOME FROM OPERATIONS | 2,701,279 | 9,582,817 | ||||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest expense, net | ( 88,389 | ) | ( 46,671 | ) | ||||
| Other income (expense), net | 634 | ( 8,227 | ) | |||||
| Short-term investment income | 696,430 | - | ||||||
| Equity investment income | - | 30,626 | ||||||
| Total other income (expense), net | 608,675 | ( 24,272 | ) | |||||
| INCOME BEFORE INCOME TAX PROVISION | 3,309,954 | 9,558,545 | ||||||
| PROVISION FOR INCOME TAXES | 1,578,219 | 2,410,747 | ||||||
| NET INCOME | 1,731,735 | 7,147,798 | ||||||
| OTHER COMPREHENSIVE INCOME | ||||||||
| Foreign currency translation adjustment | 492,194 | 797,643 | ||||||
| COMPREHENSIVE INCOME | $ | 2,223,929 | $ | 7,945,441 | ||||
| Earnings per common share - basic and diluted | $ | 0.08 | $ | 0.44 | ||||
| Weighted average shares - basic and diluted | $ | 21,750,000 | $ | 16,168,956 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2022 AND 2021
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Stock | Paid in | Subscription | Statutory | Retained | Comprehensive | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Reserve | Earnings | Income | Total | |||||||||||||||||||||||||
| Balance at September 30, 2020 | 16,000,000 | $ | 50,000 | $ | 3,679,000 | $ | - | $ | 2,439,535 | $ | 13,738,979 | $ | 895,390 | $ | 20,802,904 | |||||||||||||||||
| Issuance of ordinary shares in initial public offerings, net | 5,000,000 | 15,625 | 21,747,532 | - | - | - | - | 21,763,157 | ||||||||||||||||||||||||
| Issuance of additional shares under over allotment option in initial public offerings, net | 750,000 | 2,344 | 3,747,656 | ( 3,571,241 | ) | - | - | - | 178,759 | |||||||||||||||||||||||
| Net income | - | - | - | - | - | 7,147,798 | - | 7,147,798 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | - | 797,643 | 797,643 | ||||||||||||||||||||||||
| Balance at March 31, 2021 | 21,750,000 | $ | 67,969 | $ | 29,174,188 | $ | ( 3,571,241 | ) | $ | 2,439,535 | $ | 20,886,777 | $ | 1,693,033 | $ | 50,690,261 | ||||||||||||||||
| Balance at September 30, 2021 | 21,750,000 | $ | 67,969 | $ | 29,279,159 | $ | - | $ | 2,439,535 | $ | 25,058,931 | $ | 2,088,759 | $ | 58,934,353 | |||||||||||||||||
| Net income | - | - | - | - | - | 1,731,735 | - | 1,731,735 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | - | 492,194 | 492,194 | ||||||||||||||||||||||||
| Balance at March 31, 2022 | 21,750,000 | $ | 67,969 | $ | 29,279,159 | $ | - | $ | 2,439,535 | $ | 26,790,666 | $ | 2,580,953 | $ | 61,158,282 |
accompanying notes are an integral part of these consolidated financial statements.
UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,731,735 | $ | 7,147,798 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization | 292,111 | 243,466 | ||||||
| Loss from disposal of fixed assets | 1,011 | - | ||||||
| Changes in allowance for doubtful accounts | 100,406 | ( 203,253 | ) | |||||
| Changes in inventory reserve | ( 16,508 | ) | ( 76,734 | ) | ||||
| Deferred income tax provision (benefit) | ( 100,406 | ) | 71,221 | |||||
| Short-term investment income | ( 696,430 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( 3,060,116 | ) | ( 6,322,074 | ) | ||||
| Inventories | ( 860,517 | ) | ( 2,864,911 | ) | ||||
| Advance to suppliers, net | 2,664,149 | - | ||||||
| Prepayment for advertising | 7,593,960 | - | ||||||
| Advances to related parties | ( 110,241 | ) | - | |||||
| Prepaid expenses and other current assets | ( 240,164 | ) | ( 3,098,993 | ) | ||||
| Accounts payable | ( 1,751,013 | ) | 5,801,410 | |||||
| Taxes payable | ( 157,280 | ) | 55,105 | |||||
| Accrued expenses and other current liabilities | 727,506 | 305,094 | ||||||
| Net cash provided by operating activities | 6,118,203 | 1,058,129 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( 55,629 | ) | ( 50,875 | ) | ||||
| Proceeds from disposal of equipment | 538 | - | ||||||
| Net cash used in investing activities | ( 55,091 | ) | ( 50,875 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from short-term bank loans | 1,255,200 | 1,220,800 | ||||||
| Repayment of bank loans | ( 1,255,200 | ) | ( 1,220,800 | ) | ||||
| Net proceeds from initial public offerings | - | 21,941,916 | ||||||
| Proceeds from (repayment of) related party borrowings | ( 19,991 | ) | 2,194,640 | |||||
| Net cash provided by (used in) financing activities | ( 19,991 | ) | 24,136,556 | |||||
| Effect of changes of foreign exchange rates on cash | 115,271 | 797,117 | ||||||
| Net increase in cash | 6,158,392 | 25,940,927 | ||||||
| Cash, beginning of period | 8,077,908 | 10,058,202 | ||||||
| Cash, end of period | $ | 14,236,300 | $ | 35,999,129 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 103,765 | $ | 65,775 | ||||
| Cash paid for income tax | $ | 1,880,314 | $ | 3,364,769 | ||||
| Supplemental non-cash financing activity: | ||||||||
| Subscription receivable from issuance of ordinary shares under initial public offerings | $ | - | $ | 3,571,241 | ||||
| Cost of construction in progress paid in prior years | $ | 448,342 | $ | - |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PHARMACEUTICALS INC. AND SUBSIDIARIES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 - ORGANIZATION AND BUSINESS DESCRIPTION
Pharmaceuticals Inc. ("Universe INC" or the "Company") was incorporated under the laws of the Cayman Islands
on December 11, 2019 as an exempted company with limited liability.
INC. owns 100% equity interest of Universe Pharmaceuticals (International) Group ("Universe HK"), an entity incorporated
on May 21, 2014 in accordance with the laws and regulations in Hong Kong.
Universe Pharmaceuticals Technology Co., Ltd. ("Universe Technology") was formed on April 8, 2019, as a Wholly Foreign-Owned
Enterprise ("WFOE") in the People's Republic of China ("PRC" or "China"). The registered
capital of Universe Technology is approximately $4.3 million (RMB30.5 million). In December 2019, the Company made a capital
contribution of $500,000 to Universe Technology. Pursuant to the article of incorporation of Universe Technology, the remaining
capital contribution of approximately $3.8 million for Universe Technology is required to be completed before 2038.
INC, Universe HK and Universe Technology are currently not engaging in any active business operations and are merely acting as holding
Universe Pharmaceuticals Co., Ltd. ("Jiangxi Universe") was incorporated on March 2, 1998 in accordance with PRC laws
and is engaged in research and development and manufacturing of modernized traditional Chinese medicines. Jiangxi Universe owns 100%
of the equity of Jiangxi Universe Pharmaceuticals Commercial Trade Co., Ltd. ("Universe Trade") which was incorporated on
March 10, 2010 to handle the sales and distribution of the pharmaceutical products manufactured by Jiangxi Universe.
reorganization of our legal structure ("Reorganization") was completed on December 11, 2019. The Reorganization involved
the incorporation of Universe INC and Universe Technology, and the transfer of the 100% equity interest of Jiangxi Universe to Universe
Technology. Consequently, Universe INC, through its subsidiary Universe HK, directly controls Universe Technology and Jiangxi Universe,
and became the ultimate holding company of all other entities mentioned above.
Reorganization has been accounted for as a recapitalization among entities under common control, since the same controlling shareholders
controlled all these entities before and after the Reorganization. The consolidation of the Company and its subsidiaries has been accounted
for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the
first period presented in the accompanying unaudited condensed consolidated financial statements. Results of operations for the periods
presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating
the effects of intra-entity transactions.
March 25, 2021, the Company closed its initial public offering (the "IPO") of 5,000,000 ordinary shares, par value
$0.003125 per share (the "ordinary shares") at a public offering price of $5.00 per share. On March 29, 2021, the
underwriter exercised in full its over-allotment option to purchase an additional 750,000 ordinary shares. The closing
for the sale of the over-allotment shares took place on March 31, 2021. Gross proceeds from the IPO totaled $28.75 million. Net
proceeds of the IPO, including over-allotment shares, were approximately $25.6 million. In connection with the IPO, the Company's
ordinary shares began trading on the Nasdaq Global Market under the symbol "UPC" on March 23, 2021.
May 12, 2021, through the Company's PRC subsidiary, Jiangxi Universe, the Company established a wholly controlled subsidiary, Guangzhou
Universe Hanhe Medical Research Co., Ltd. ("Universe Hanhe") in Guangzhou City, China, for the business purpose of conducting
research and development of new pharmaceutical products in order to diversify the Company's product offerings in the near future.
As of March 31, 2022 and as of the date of this report, Universe Hanhe has no active business operations.
PHARMACEUTICALS INC. AND SUBSIDIARIES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 - ORGANIZATION AND BUSINESS DESCRIPTION (continued)
of the subsidiaries of the Company as of March 31, 2022 are set out below:
| Name of Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Principal Activities | ||||
| Universe INC | December 11, 2019 | Cayman Islands | Parent, 100 % | 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 |
Company, through its wholly-owned subsidiaries, is primarily engaged in the development, manufacturing and sale of traditional Chinese
medicines derivatives ("TCMD") products targeted to the elderly to address their physical conditions in the aging process
and to promote their general well-being. In addition, the Company also sells biochemical drugs, medical instruments, traditional Chinese
medicine pieces products and dietary supplements (collectively "third-party products"). All of these TCMD and third-party
products are currently sold to customers including pharmaceutical companies, hospitals, clinics and drugstore chains throughout China.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
accompanying unaudited condensed consolidated financial statements include the financial statements of Universe INC, Universe HK, Universe
Technology, Jiangxi Universe, Universe Trade and Universe Hanhe. All inter-company balances and transactions are eliminated upon consolidation.
preparing the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America ("US GAAP"), management makes estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed
consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance
for estimated uncollectible receivables, the realizability of advance to suppliers, inventory valuations, useful lives of property, plant
and equipment, intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, revenue recognition
and realization of deferred tax assets. Actual results could differ from those estimates.
PHARMACEUTICALS INC. AND SUBSIDIARIES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
main operation of the Company is located in the PRC. Accordingly, the Company's business, financial condition, and results of operations
may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The
Company's results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although
the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations
including its organization and structure disclosed in Note 1, this may not be indicative of future results.
development and commercialization of new pharmaceutical products is highly competitive, and the industry currently is characterized by
rapidly changing technologies, significant competition and a strong emphasis on intellectual property. The Company may face competition
with respect to its current and future pharmaceutical product candidates from major pharmaceutical companies in China.
Company's business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters,
extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company's
Company's operations may be further affected by the ongoing COVID-19 pandemic. Due
to the resurgence of COVID-19 pandemic in China in 2022, there had been delays in purchase of raw material supplies and deliver products
to the customers of the PRC operating entities on a timely basis as a consequence of the travel restrictions. The prices of the raw materials
also increased by about 5% from January 2022 to May 2022 as compared to the same period last year. In addition, the Company has granted
some of its customers extended payment terms of 30 days to 120 days since January 2022, as a result of the COVID-19 pandemic. However,
based on the present relationship with these customers and the evaluation of their financial health, the Company does not anticipate
any material collectability problems. Even though the Company does not expect that the COVID-19 pandemic will have a negative impact
on the business operations of the PRC operating entities and the financial results, due to the high uncertainty of the evolving situation,
the Company has limited visibility on how the COVID-19 pandemic affects the execution of customer contracts, the collection of customer