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INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
| Consolidated Financial Statements | |
| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 | F-2 |
| Unaudited Condensed Consolidated Statements of Comprehensive Income for the six months ended March 31, 2023 and 202 2 | F-3 |
| Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended March 31, 2023 and 202 2 | F-4 |
| Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2023 and 2022 | F-5 |
| Notes to Unaudited Condensed Consolidated Financial Statements | F-6 - F-30 |
MEDICAL INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31 | September 30 | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 8,684,188 | $ | 4,792,632 | ||||
| Short-term investments | 4,696,503 | 2,276,158 | ||||||
| Accounts receivable, net | 3,869,399 | 3,830,876 | ||||||
| Accounts receivable - related parties | 291,883 | 253,473 | ||||||
| Inventories | 6,509,349 | 6,724,415 | ||||||
| Due from related parties | 4,874,422 | 36,257 | ||||||
| Prepaid expenses and other current assets | 163,356 | 989,336 | ||||||
| TOTAL CURRENT ASSETS | 29,089,100 | 18,903,147 | ||||||
| Property, plant and equipment, net | 1,582,650 | 1,627,962 | ||||||
| Land use right, net | 166,476 | 163,213 | ||||||
| Deferred tax assets | 184,271 | 245,212 | ||||||
| TOTAL ASSETS | $ | 31,022,497 | $ | 20,939,534 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term bank loan | $ | 1,456,000 | $ | - | ||||
| Accounts payable | 4,614,084 | 4,113,622 | ||||||
| Accrued liabilities and other payables | 378,097 | 393,760 | ||||||
| Deferred revenue | 561,146 | 830,305 | ||||||
| Deferred revenue - a related party | 124,766 | - | ||||||
| Taxes payable | 341,885 | 248,090 | ||||||
| Due to a related party | - | 118,066 | ||||||
| TOTAL CURRENT LIABILITIES | 7,475,978 | 5,703,843 | ||||||
| TOTAL LIABILITIES | 7,475,978 | 5,703,843 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Ordinary shares, $ 0.001 par value, 50,000,000 shares authorized, 7,750,000 shares and 6,750,000 shares were issued and outstanding as of March 31, 2023 and September 30, 2022, respectively* | 7,750 | 6,750 | ||||||
| Additional paid-in capital | 6,053,131 | 79,810 | ||||||
| Statutory reserves | 1,827,972 | 1,651,422 | ||||||
| Retained earnings | 15,998,640 | 14,408,843 | ||||||
| Accumulated other comprehensive loss | ( 340,974 | ) | ( 911,134 | ) | ||||
| TOTAL SHAREHOLDERS' EQUITY | 23,546,519 | 15,235,691 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 31,022,497 | $ | 20,939,534 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MEDICAL INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| For the Six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| REVENUE | ||||||||
| Revenue - third party | $ | 9,890,292 | $ | 9,061,177 | ||||
| Revenue - related party | 362,871 | 406,444 | ||||||
| Total revenue | 10,253,163 | 9,467,621 | ||||||
| COST OF REVENUE AND RELATED TAX | ||||||||
| Cost of revenue | 6,620,447 | 6,255,785 | ||||||
| Business and sales related tax | 101,843 | 79,314 | ||||||
| Total cost of revenue and related tax | 6,722,290 | 6,335,099 | ||||||
| GROSS PROFIT | 3,530,873 | 3,132,522 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | 206,194 | 201,740 | ||||||
| General and administrative expenses | 922,188 | 1,021,717 | ||||||
| Research and development expenses | 631,034 | 892,524 | ||||||
| Total operating expenses | 1,759,416 | 2,115,981 | ||||||
| INCOME FROM OPERATIONS | 1,771,457 | 1,016,541 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income, net | 94,571 | 69,795 | ||||||
| Foreign exchange gain (loss) | ( 63,253 | ) | 60,461 | |||||
| Other income, net | 167,625 | 129,475 | ||||||
| Total other income, net | 198,943 | 259,731 | ||||||
| INCOME BEFORE INCOME TAX PROVISION | 1,970,400 | 1,276,272 | ||||||
| PROVISION FOR INCOME TAXES | 204,053 | 50,408 | ||||||
| NET INCOME | 1,766,347 | 1,225,864 | ||||||
| Foreign currency translation gain | 570,160 | 268,280 | ||||||
| TOTAL COMPREHENSIVE INCOME | $ | 2,336,507 | $ | 1,494,144 | ||||
| Earnings per common share - basic and diluted | $ | 0.26 | $ | 0.18 | ||||
| Weighted average shares - basic and diluted* | 6,760,989 | 6,750,000 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
JIN MEDICAL INTERNATIONAL LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2023 AND 2022
| Additional | Accumulated Other | |||||||||||||||||||||||||||
| Ordinary Shares* | Paid in | Statutory | Retained | Comprehensive | ||||||||||||||||||||||||
| Shares | Amount | Capital | Reserves | Earnings | Income (Loss) | Total | ||||||||||||||||||||||
| Balance at September 30, 2021 | 6,750,000 | $ | 6,750 | $ | 79,810 | $ | 1,466,920 | $ | 11,886,818 | $ | 588,587 | $ | 14,028,885 | |||||||||||||||
| Net income | - | - | - | - | 1,225,864 | - | 1,225,864 | |||||||||||||||||||||
| Statutory reserve | - | - | - | 195,417 | ( 195,417 | ) | - | - | ||||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | - | 268,280 | 268,280 | |||||||||||||||||||||
| Balance at March 31, 2022 | 6,750,000 | $ | 6,750 | $ | 79,810 | $ | 1,662,337 | $ | 12,917,265 | $ | 856,867 | $ | 15,523,029 | |||||||||||||||
| Balance at September 30, 2022 | 6,750,000 | $ | 6,750 | $ | 79,810 | $ | 1,651,422 | $ | 14,408,843 | $ | ( 911,134 | ) | $ | 15,235,691 | ||||||||||||||
| Issuance of ordinary shares in initial public offerings, gross | 1,000,000 | 1,000 | 7,999,000 | - | - | - | 8,000,000 | |||||||||||||||||||||
| Cost directly related to the initial public offering | - | - | ( 2,025,679 | ) | - | - | - | ( 2,025,679 | ) | |||||||||||||||||||
| Net income | - | - | - | - | 1,766,347 | - | 1,766,347 | |||||||||||||||||||||
| Statutory reserve | - | - | - | 176,550 | ( 176,550 | ) | - | - | ||||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | - | 570,160 | 570,160 | |||||||||||||||||||||
| Balance at March 31, 2023 | 7,750,000 | $ | 7,750 | $ | 6,053,131 | $ | 1,827,972 | $ | 15,998,640 | $ | ( 340,974 | ) | $ | 23,546,519 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
JIN MEDICAL INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,766,347 | $ | 1,225,864 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 114,465 | 145,695 | ||||||
| Loss on disposition of property and equipment | 523 | - | ||||||
| Provision for doubtful accounts | 171,522 | 27,913 | ||||||
| Deferred tax provision (benefits) | 68,561 | ( 133,896 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( 75,355 | ) | 1,020,725 | |||||
| Accounts receivable - related parties | ( 28,932 | ) | 65,931 | |||||
| Inventories | 447,024 | ( 918,838 | ) | |||||
| Advance to suppliers, net - a related party | - | ( 13,171 | ) | |||||
| Prepaid expenses and other current assets | 47,501 | 213,913 | ||||||
| Accounts payable | 348,579 | ( 1,114,051 | ) | |||||
| Accrued liabilities and other payables | ( 29,199 | ) | ( 179,547 | ) | ||||
| Deferred revenue | ( 293,968 | ) | ( 681,591 | ) | ||||
| Deferred revenue - a related party | 122,795 | - | ||||||
| Taxes payable | 83,630 | 289,779 | ||||||
| Net cash provided by (used in) operating activities | 2,743,493 | ( 51,274 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant and equipment | ( 11,014 | ) | ( 14,128 | ) | ||||
| Proceeds from disposal of property and equipment | 100 | - | ||||||
| Payments for short-term investments | ( 3,152,600 | ) | ( 4,239,000 | ) | ||||
| Redemption of short-term investments | 850,154 | 3,796,902 | ||||||
| Repayment of (payments of) advances made to related parties | ( 4,760,469 | ) | 415,410 | |||||
| Net cash used in investing activities | ( 7,073,829 | ) | ( 40,816 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Gross proceeds from initial public offerings | 8,000,000 | - | ||||||
| Direct costs disbursed from initial public offerings proceeds | ( 1,212,779 | ) | - | |||||
| Proceeds from short-term bank loan | 1,433,000 | - | ||||||
| Repayment of amount due to related parties | ( 120,333 | ) | ( 6,468 | ) | ||||
| Net cash provided by (used in) financing activities | 8,099,888 | ( 6,468 | ) | |||||
| Effect of exchange rate changes on cash | 122,004 | 68,353 | ||||||
| Net increase (decrease) in cash | 3,891,556 | ( 30,205 | ) | |||||
| Cash, beginning of period | 4,792,632 | 3,672,260 | ||||||
| Cash, end of period | $ | 8,684,188 | $ | 3,642,055 | ||||
| Supplemental disclosure information: | ||||||||
| Cash paid for income tax | $ | 13,115 | $ | 28,415 | ||||
| Deferred IPO cost offset with additional paid-in capital | $ | 812,900 | $ | - |
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION
JIN MEDICAL INTERNATIONAL LTD. ("Jin Med"
or the "Company") was established under the laws of the Cayman Islands on January 14, 2020 as a holding company.
Jin Med owns 100% equity interest of Zhongjin
International Limited ("Zhongjin HK"), an entity incorporated on February 25, 2020 in accordance with the laws and regulations
Erhua Medical Technology (Changzhou) Co., Ltd.
("Erhua Med") was formed on September 24, 2020, as a Wholly Foreign-Owned Enterprise ("WFOE") in the People's
Republic of China ("PRC"). Zhongjin HK owns 100% equity interest of Erhua Med.
Jin Med, Zhongjin HK and Erhua Med are currently
not engaging in any active business operations and merely acting as holding companies.
Changzhou Zhongjin Medical Equipment Co., Ltd.
("Changzhou Zhongjin") was incorporated on January 26, 2006 in accordance with PRC laws. Changzhou Zhongjin has two wholly-owned
subsidiaries, Zhongjin Medical Equipment Taizhou Co., Ltd. ("Taizhou Zhongjin"), incorporated on June 17, 2013, and Changzhou
Zhongjin Jing'ao Trading Co., Ltd ("Zhongjin Jing'ao"), incorporated on December 18, 2014 in accordance with PRC
laws. Changzhou Zhongjin, Taizhou Zhongjin and Zhongjin Jing'ao are collectively referred to as the "Zhongjin Operating Companies"
The Company, through its wholly-owned subsidiaries
and entities controlled through contractual arrangements, is primarily engaged in the design, development, manufacturing and sales of
wheelchair and other living aids products to be used by people with disabilities or impaired mobility. The Company's products are
sold to distributors in both China and in the overseas markets.
A reorganization of the legal structure of the
Company ("Reorganization") was completed on November 26, 2020. The Reorganization involved the incorporation of Jin Med, Zhongjin
HK and Erhua Med, and signing of certain contractual arrangements (collectively, the "VIE Agreements") between Zhongjin Technology,
the shareholders of Changzhou Zhongjin and Changzhou Zhongjin. Consequently, the Company became the ultimate holding company of Zhongjin
HK, Erhua Med, and through the contractual arrangements, WFOE, or Erhua Med, became the primary beneficiary of the Variable Interest Entity
("VIE"), Changzhou Zhongjin, and its subsidiaries. Pursuant to the VIE Agreements, Erhua Med has gained effective control
over Changzhou Zhongjin. Therefore, Changzhou Zhongjin should be treated as a VIE under the Statements of Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") 810 Consolidation. Since Taizhou Zhongjin and Zhongjin
Jing'ao are wholly-owned subsidiaries of Changzhou Zhongjin, they are further referenced as VIE's subsidiaries.
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION (continued)
The Company, together with its wholly owned subsidiaries,
the VIE and the VIE's subsidiaries, are effectively controlled by the same shareholders before and after the Reorganization and
therefore the Reorganization is considered as a recapitalization of entities under common control. The consolidation of the Company, its
subsidiaries, the VIE and the VIE's subsidiaries has been accounted for at historical cost.
The unaudited condensed consolidated financial
statements of the Company include the following entities:
| Name of Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Principal Activities | ||||
| Jin Med | January 14, 2020 | Cayman Island | Parent | Investment holding | ||||
| Zhongjin HK | February 25, 2020 | Hong Kong | 100% | Investment holding | ||||
| Erhua Med | September 24, 2020 | PRC | 100% | WFOE, Investment holding | ||||
| Changzhou Zhongjin | January 26, 2006 | PRC | VIE | Design, development, manufacturing and sales of wheelchair and other mobility products | ||||
| Taizhou Zhongjin | June 17, 2013 | PRC | 100% controlled subsidiary of the VIE | Design, development, manufacturing and sales of wheelchair and other mobility products | ||||
| Zhongjin Jing'ao | December 18, 2014 | PRC | 100% controlled subsidiary of the VIE | Design, development, manufacturing and sales of wheelchair and other mobility products |
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION (continued)
The VIE contractual arrangements
operating entities, Changzhou Zhongjin and its subsidiaries Taizhou Zhongjin and Zhongjin Jing'ao (or the "Zhongjin Operating
Companies" as referred above), are controlled through contractual arrangements in lieu of direct equity ownership by the Company.
A VIE is an entity which
has a total equity investment that is insufficient to finance its activities without additional subordinated financial support, or whose
equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected
residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has
a controlling financial interest in a VIE is deemed to be the primary beneficiary of, and must consolidate, the VIE, because it met the
condition under the accounting principles generally accepted in the United States of America ("U.S. GAAP") to consolidate
Erhua Med, is deemed to have a controlling financial
interest in and be the primary beneficiary of the Zhongjin Operating Companies because it has both of the following characteristics:
Pursuant to these contractual arrangements, the
Zhongjin Operating Companies shall pay service fees equal to all of their net profits after tax payments to Erhua Med. At the same time,
Erhua Med has the right to receive substantially all of their economic benefits for accounting purposes. Such contractual arrangements
are designed so that the operations of the Zhongjin Operating Companies are solely for the benefit of Erhua Med and ultimately, the Company,
and therefore the Company must consolidate the Zhongjin Operating Companies under U.S. GAAP.
Risks associated with the VIE structure
The Company believes that the contractual arrangements
with the VIE and the shareholders of the VIE are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties
in the PRC legal system could limit the Company's ability to enforce the contractual arrangements. If the legal structure and contractual
arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
JIN MEDICAL INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
NOTE 1 - ORGANIZATION AND BUSINESS DESCRIPTION (continued)
The Company's ability to conduct its businesses
may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. In such case, the Company may
not be able to consolidate the VIE and the VIE's subsidiaries in its consolidated financial statements as it may lose the ability
to exert effective control over the VIE and its shareholders and it may lose the ability to receive economic benefits from the VIE and
the VIE's subsidiaries for accounting purposes under U.S. GAAP. The Company, however, does not believe such actions would result
in the liquidation or dissolution of the Company, its PRC subsidiary and the VIE and the VIE's subsidiaries.
The Company, Zhongjin HK and Erhua Med are essentially
holding companies and do not have active operations as of March 31, 2023 and September 30, 2022. As a result, total assets and liabilities
presented on the unaudited condensed consolidated balance sheets and revenue, expenses, and net income presented on the unaudited condensed
consolidated statement of comprehensive income as well as the cash flows from operating, investing and financing activities presented
on the unaudited condensed consolidated statement of cash flows are substantially the financial position, operation results and cash flows
of the VIE and the VIE's subsidiaries. The Company has not provided any financial support to the VIE and the VIE's subsidiaries
during the six months ended March 31, 2023 and 2022. Additionally, pursuant to the VIE Agreements, Erhua Med has the right to receive