Document and Entity Information
Document and Entity Information | 12 Months Ended |
Sep. 30, 2020shares | |
Document and Entity Information [Abstract] | |
Document Type | 20-F/A |
Document Registration Statement | false |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Document Period End Date | Sep. 30, 2020 |
Entity Registrant Name | Qilian International Holding Group Ltd |
Title of 12(b) Security | Ordinary Shares |
Trading Symbol | QLI |
Security Exchange Name | NASDAQ |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | No |
Entity Interactive Data Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 30,000,000 |
Entity Central Index Key | 0001779578 |
Current Fiscal Year End Date | --09-30 |
Document Fiscal Year Focus | 2020 |
Document Fiscal Period Focus | FY |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
CURRENT ASSETS: | ||
Cash | $ 11,867,130 | $ 4,594,440 |
Accounts receivable, net | 1,118,476 | 603,760 |
Bank acceptance notes receivable | 11,498,075 | 5,476,707 |
Inventories, net | 11,994,471 | 12,522,884 |
Advances to suppliers, net | 491,827 | 958,005 |
Other current assets | 547,443 | 813,932 |
Total current assets | 37,517,422 | 24,969,728 |
Property and equipment, net | 7,419,028 | 7,665,322 |
Intangible assets, net | 1,881,722 | 1,834,130 |
Long term investment | 540,517 | 539,680 |
Operating lease right of use assets | 243,874 | |
Deferred tax assets | 361,250 | 259,384 |
Security deposit | 179,325 | |
Total assets | 48,143,138 | 35,268,244 |
CURRENT LIABILITIES: | ||
Bank loans | 7,349,375 | 4,903,128 |
Accounts payable | 4,377,712 | 3,570,148 |
Advance from customers | 3,511,198 | 1,911,748 |
Advance from customers - related parties | 33,152 | 2,171 |
Deferred government grants-current | 384,802 | 391,142 |
Taxes payable | 1,383,182 | 347,930 |
Operating lease liabilities, current | 82,468 | |
Accrued expenses and other payables | 1,301,882 | 531,713 |
Total current liabilities | 18,423,771 | 11,657,980 |
LONG TERM LIABILITIES | ||
Operating lease liabilities, noncurrent | 155,723 | |
Deferred government grants - noncurrent | 722,137 | 972,338 |
Total liabilities | 19,301,631 | 12,630,318 |
Commitments and contingencies | ||
EQUITY: | ||
Ordinary Shares, $0.00166667 par value, 100,000,000 shares authorized , 30,000,000 Ordinary Shares issued and outstanding as of March 31, 2020 and September 30, 2019 , respectively | 50,000 | 50,000 |
Additional paid-in capital | 12,252,077 | 12,252,077 |
Statutory Reserve | 2,200,786 | 1,773,817 |
Retained earnings | 12,197,372 | 7,560,631 |
Accumulated other comprehensive loss | (602,001) | (1,743,175) |
Total shareholders' equity attributable to Qilian International | 26,098,234 | 19,893,350 |
Noncontrolling interests | 2,743,273 | 2,744,576 |
TOTAL EQUITY | 28,841,507 | 22,637,926 |
TOTAL LIABILITIES AND EQUITY | $ 48,143,138 | $ 35,268,244 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Sep. 30, 2019 |
Consolidated Balance Sheets | ||
Ordinary shares, par value | $ 0.00166667 | $ 0.00166667 |
Ordinary shares, shares authorized | 100,000,000 | 100,000,000 |
Ordinary shares, shares issued | 30,000,000 | 30,000,000 |
Ordinary shares, shares outstanding | 30,000,000 | 30,000,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Consolidated Statements of Operations and Comprehensive Loss | |||
NET REVENUE | $ 50,033,200 | $ 46,096,684 | $ 50,369,013 |
COST OF REVENUE | 42,494,047 | 36,416,772 | 42,236,773 |
GROSS PROFIT | 7,539,153 | 9,679,912 | 8,132,240 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 2,728,009 | 3,501,374 | 2,160,873 |
INCOME FROM OPERATIONS | 4,811,144 | 6,178,538 | 5,971,367 |
Other Income (Expenses) | |||
Interest expense | (242,877) | (223,657) | (216,187) |
Other income | 1,237,082 | 987,038 | 390,792 |
Total Other income (expense) | 994,205 | 763,381 | 174,605 |
INCOME BEFORE INCOME TAX PROVISION | 5,805,349 | 6,941,919 | 6,145,972 |
PROVISION FOR INCOME TAXES | 864,908 | 1,033,440 | 943,363 |
NET INCOME | 4,940,441 | 5,908,479 | 5,202,609 |
Less: net income attributable to non-controlling interest | (123,269) | 576,161 | 33,102 |
NET INCOME ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED | 5,063,710 | 5,332,318 | 5,169,507 |
OTHER COMPREHENSIVE INCOME | |||
Foreign currency translation adjustment | 1,263,140 | (858,337) | (652,232) |
COMPREHENSIVE INCOME | 6,203,581 | 5,050,142 | 4,550,377 |
Less: comprehensive income attributable to non - controlling interests | (1,303) | 478,722 | (35,398) |
COMPREHENSIVE INCOME ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED | $ 6,204,884 | $ 4,571,420 | $ 4,585,775 |
Earnings per common share - basic and diluted | $ 0.17 | $ 0.18 | $ 0.17 |
Weighted average shares - basic and diluted | 30,000,000 | 30,000,000 | 30,000,000 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - USD ($) | Ordinary Shares | Additional Paid-In Capital | Retained Earnings | Statutory Reserve | Accumulated Other Comprehensive Income | Shareholders' Equity | Non-controlling Interests | Total |
Balance at beginning at Sep. 30, 2017 | $ 7,696,956 | $ 3,055,904 | $ 838,873 | $ (398,546) | $ 11,243,187 | $ 2,414,016 | $ 13,657,203 | |
Balance at beginning (in shares) at Sep. 30, 2017 | 50,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Capital contribution from shareholders | 216,132 | 216,132 | 31,568 | 247,700 | ||||
Net income for the year | 5,169,507 | 5,169,507 | 33,102 | 5,202,609 | ||||
Appropriation for statutory reserve | (293,763) | 293,763 | ||||||
Stock dividend appropriation to shareholders | 4,338,989 | (4,338,989) | ||||||
Cash dividend paid to shareholders | (723,165) | (723,165) | (10,779) | (733,944) | ||||
Foreign currency translation adjustment | (583,731) | (583,731) | (68,501) | (652,232) | ||||
Balance at ending at Sep. 30, 2018 | 12,252,077 | 2,869,494 | 1,132,636 | (982,277) | 15,321,930 | 2,399,406 | 17,721,336 | |
Balance at ending (in shares) at Sep. 30, 2018 | 50,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income for the year | 5,332,318 | 5,332,318 | 576,161 | 5,908,479 | ||||
Acquisition of Noncontrolling interest | (133,552) | (133,552) | ||||||
Appropriation for statutory reserve | (641,181) | 641,181 | ||||||
Foreign currency translation adjustment | (760,898) | (760,898) | (97,439) | (858,337) | ||||
Balance at ending at Sep. 30, 2019 | 12,252,077 | 7,560,631 | 1,773,817 | (1,743,175) | 19,893,350 | 2,744,576 | $ 22,637,926 | |
Balance at ending (in shares) at Sep. 30, 2019 | 50,000 | 30,000,000 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income for the year | 5,063,710 | 5,063,710 | (123,269) | $ 4,940,441 | ||||
Appropriation for statutory reserve | (426,969) | 426,969 | ||||||
Foreign currency translation adjustment | 1,141,174 | 1,141,174 | 121,966 | 1,263,140 | ||||
Balance at ending at Sep. 30, 2020 | $ 12,252,077 | $ 12,197,372 | $ 2,200,786 | $ (602,001) | $ 26,098,234 | $ 2,743,273 | $ 28,841,507 | |
Balance at ending (in shares) at Sep. 30, 2020 | 50,000 | 30,000,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | |||
Net Income | $ 4,940,441 | $ 5,908,479 | $ 5,202,609 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||
Amortization of the Right-of-use assets | 62,410 | ||
Depreciation and amortization | 1,105,588 | 1,188,173 | 1,254,098 |
Loss from disposal of property and equipment | 4,389 | ||
Provision of doubtful accounts | 188,095 | (9,301) | 8,329 |
Inventory reserve | (290,968) | 67,719 | 201,053 |
Deferred tax expense | (86,495) | 48,656 | 15,799 |
Investment income | (57,984) | (89,197) | (8,303) |
Changes in operating assets and liabilities: | |||
Accounts receivable | (660,667) | 706,582 | (1,072,933) |
Bank acceptance notes receivable | (5,583,925) | (2,171,300) | (2,989,921) |
Inventories | 1,402,620 | (3,492,342) | 2,812,032 |
Advances to suppliers | 498,378 | 653,028 | (156,114) |
Advances to suppliers - related parties, net | 239,250 | ||
Other current assets | 125,261 | (29,853) | (32,169) |
Accounts payable | 613,339 | (46,999) | (822,019) |
Accounts payable - related parties | (3,042) | (2,526) | |
Advance from customers | 1,461,407 | (2,232,858) | (267,520) |
Advance from customers - related parties | 29,973 | 2,254 | (11,694) |
Deferred revenue | (314,238) | (319,982) | (385,118) |
Tax payables | 988,423 | (834,183) | 648,173 |
Accrued expenses and other payables | 722,284 | 73,969 | (199,400) |
Operating lease liabilities | (67,928) | ||
Net cash provided by (used in) operating activities | 5,076,014 | (580,197) | 4,438,015 |
Cash flows from investing activities: | |||
Purchase of property and equipment | (449,766) | (616,388) | (1,117,175) |
Purchase of intangible assets | (8,798) | (635) | |
Proceeds from (Payment made for) long term investment | 82,972 | (64,165) | (253,596) |
Investments made for marketable securities | 14,559 | (15,309) | |
Net cash used in investing activities | (375,592) | (666,629) | (1,386,080) |
Cash flows from financing activities: | |||
Proceeds from bank loan | 7,135,009 | 5,089,651 | (1,529,052) |
Repayment of bank loans | (4,994,506) | (3,635,465) | |
Repayment of bank notes payable | (581,674) | (1,100,917) | |
Capital contribution from shareholders | 247,700 | ||
Cash dividend paid | (733,944) | ||
Payment for deferred offering costs | (365,310) | ||
Acquisition of non-controlling interest | (133,552) | ||
Net cash provided by financing activities | 2,140,503 | 373,650 | (3,116,213) |
Effect of exchange rate change on Cash | 431,765 | (157,163) | (181,798) |
Net increase (decrease) in cash and cash equivalents | 7,272,690 | (1,030,339) | (246,076) |
Cash and cash equivalents at beginning of year | 4,594,440 | 5,624,779 | 5,870,855 |
Cash and cash equivalents at end of year | 11,867,130 | 4,594,440 | 5,624,779 |
Supplemental cash flow information | |||
Cash paid for interest | 280,169 | 210,588 | 223,773 |
Cash paid for income taxes | 275,607 | $ 1,109,655 | 658,409 |
Operating lease right of use assets obtained in exchange of lease liabilities | $ 143,443 | ||
Stock dividend appropriation to shareholders | $ 4,403,670 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
Sep. 30, 2020 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS Qilian International Holding Group Limited (“Qilian International”, or “the Company”) is a Cayman Islands exempted company incorporated on February 7, 2019 as a holding company to develop business opportunities in the People’s Republic of China (“PRC” or “China”). Qilian International (Hong Kong) Holdings Ltd (“Qilian HK”) is a wholly-owned subsidiary of Qilian International formed in accordance with the laws and regulations of Hong Kong on January 30, 2019. Qilian International is a holding company whose only asset is 100% of the equity interest in Qilian HK. Qilian HK is a holding company whose only asset is 100% of the equity interest in Chengdu Qilian Trading Co., Ltd (“Qilian Chengdu”), a wholly foreign-owned entity (“WFOE”) organized under the laws of the PRC. Qilian International and Qilian HK do not have any substantive operations of their own but conduct their primary business operations through Qilian Chengdu’s variable interest entity (“VIE”), Gansu Qilianshan Pharmaceutical Co., Ltd (“Gansu QLS”). Gansu QLS was established in August 2006 under the laws of the PRC with initial capital of approximately $0.27 million. After several registered capital increases and capital contributions, the registered capital of Gansu QLS was approximately $12.2 million as of September 30, 2020 and 2019. Over the years, Gansu QLS has established six subsidiaries: Ownership as of September September 30, 2020 30, 2019 Jiuquan Qiming Biotechnology Co., Ltd (“Qiming”) % % Chengdu Qilianshan Biotechnology Co., Ltd (“Chengdu QLS”) 71.75 % 71.75 % Jiuquan Ahan Biotechnology Co., Ltd. (“Ahan”) 100 % 75 % Tibet Samen Trading Co., Ltd (“Samen”) 100 % 100 % Tibet Cangmen Trading Co., Ltd (“Cangmen”) 100 % 100 % Rugao Tianlu Animal Products Co., Ltd (“Rugao”)* 71.75 % N/A *Rugao Tianlu Animal Products Co., Ltd was incorporated in 2020 as a wholly owned subsidiary of Chengdu QLS. On May 20, 2019, Qilian International, through its WFOE, Qilian Chengdu, entered into a series of agreements with Gansu QLS and its shareholders, including an Exclusive Services Agreement, Call Option Agreement, Shareholders’ Voting Rights Proxy and Equity Pledge Agreement, Powers of Attorney, and the Spousal Consents (collectively “VIE agreements”). These contractual agreements oblige Qilian Chengdu to absorb a majority of the risk of loss from Gansu QLS’s activities and entitle Qilian Chengdu to receive a majority of their residual returns. In essence, Qilian Chengdu has gained effective control over Gansu QLS. In addition, 98.297% of Gansu QLS’s shareholders have pledged their equity interest in Gansu QLS to Qilian Chengdu, irrevocably granted Qilian Chengdu an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Gansu QLS, and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Qilian Chengdu. Through these contractual arrangements, Qilian Chengdu holds 98.297% of the variable interests of Gansu QLS. Based on these contractual arrangements, Gansu QLS is considered as a VIE of Qilian Chengdu under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810 (“ASC 810”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No.51”, because the equity investors in Gansu QLS do not have the characteristics of a controlling financial interest. In addition, Qilian Chengdu is the primary beneficiary of Gansu QLS, and, as such, Gansu QLS’s books and records are consolidated into those of Qilian Chengdu. QILIAN INTERNATIONAL HOLDING GROUP LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued) As the above entities were under common control before and after the consummation of the VIE agreements, the restructuring was accounted for as a reorganization of entities under common control and the consolidation of Qilian International and its subsidiaries, the VIE 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 consolidated financial statements. Qilian International, its subsidiaries and its VIE and its subsidiaries (collectively the “Group”) are principally engaged in the development, manufacture, marketing, and sale of licorice products, oxytetracycline products, traditional Chinese medicine derivatives (“TCMD”) product, heparin product, sausage casings, and fertilizers. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the financial statements of Qilian International, and its subsidiaries, its VIE and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The ownership structure of the Company, its subsidiaries, VIE and its subsidiaries are in compliance with existing PRC laws and regulations and the contractual arrangements with the VIE and its shareholders are valid and binding. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Group and its contractual arrangements with its VIE are found to be in violation of any existing or future PRC laws and regulations, the Group may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. Further we rely on the contractual agreements with Gansu QLS. Under the current contractual agreements, as a legal matter, if Gansu QLS or any of its shareholders fails to perform their respective obligations, we may have to rely on PRC law. In the opinion of management, the likelihood of loss in respect of the Group’s current ownership structure or the contractual arrangements with its VIE is remote based on current facts and circumstances. The carrying amounts of the assets, liabilities, the results of operations and cash flows of the VIE and its subsidiaries included in the Group’s consolidated financial statements after the elimination of intercompany balances and transactions among the VIE and its subsidiaries, and other entities within the Group are as follows: September 30, September 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 5,493,215 $ 4,594,440 Accounts receivable, net 660,398 603,760 Bank acceptance receivable 11,460,512 5,476,707 Inventories, net 11,994,471 12,522,884 Advances to suppliers, net 465,755 958,005 Other current assets 535,981 813,932 Total current assets 30,610,332 24,969,728 Property and equipment, net 7,395,965 7,665,322 Intangible assets, net 1,881,722 1,834,130 Long-term investment 540,517 539,680 Long term security deposits 179,325 — Right of use assets-lease 134,511 — Deferred tax assets 361,250 259,384 Total assets $ 41,103,622 $ 35,268,244 LIABILITIES Current liabilities: Bank loans $ 7,349,375 $ 4,903,128 Accounts payable 3,958,804 3,570,148 Advance from customers 3,511,198 1,911,748 Advance from customers - related parties 33,152 2,171 Deferred government grants - current 384,802 391,142 Taxes payable 1,322,354 347,930 Operating lease liabilities, current 22,354 — Accrued expenses and other payables 1,301,881 531,713 Total current liabilities 17,883,920 11,657,980 Operating lease liabilities, long term 124,406 — Deferred government grants - noncurrent 722,137 972,338 Total liabilities 18,730,463 12,630,318 For the year ended September 30, 2020 2019 2018 Net revenue $ 46,731,913 $ 46,096,684 $ 50,369,013 Net income $ 4,936,357 $ 5,908,479 $ 5,202,609 For the Year Ended September 30, 2020 2019 2018 Net cash provided by (used in) operating activities $ 4,131,468 $ (580,197) $ 4,438,015 Net cash used in investing activities (5,648,762) (666,629) (1,386,080) Net cash provided by financing activities 2,140,503 373,650 (3,116,213) Effect of exchange rate on cash 275,566 (157,163) (181,798) Net increase (decrease) in cash and cash equivalents $ 898,775 $ (1,030,339) $ (246,076) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and the 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. The Company’s critical accounting estimates included, but are not limited to: allowance for estimated uncollectible receivables, inventory valuations, impairment of long-lived assets, impairment of intangible assets, and income taxes. Actual results could differ from those estimates. Risks and Uncertainties Risk of Operation in China The 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. Technology Innovation and Commodity Risks The Company’s business faces rapid technological change, and there is a possibility that our competitors may achieve regulatory approval and develop new product candidates before us, which may harm our financial condition and our ability to successfully market or commercialize any of our product candidates. The development and commercialization of new pharmaceutical products and fertilizers is highly competitive, and both industries currently are characterized by rapidly changing technologies, significant competition and a strong emphasis on intellectual property. We will face competition with respect to our current and future pharmaceutical and fertilizer product candidates from major pharmaceutical and chemical companies in China. Our Heparin and sausage casing products are made from livestock products, which are subject significant risks of the market supply of the raw materials. Exchange Rate Risks The Company operates in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the US$ and the RMB. As at September 30, 2020 and September 30, 2019, cash of $10,847,959 (RMB 73,801,918) and $3,623,523 (RMB 25,865,791), respectively, is denominated in RMB and is held in PRC. Currency Convertibility Risks Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts. Other Uncertainties In early January of 2020, the outbreak of the novel coronavirus, commonly referred to as “COVID‑19”, first found in mainland China, then in Asia and eventually throughout the world, has significantly affected business and other activities within China. China has experienced widespread economic disruption owing to the outbreak of the COVID‑19 coronavirus and stringent government measures to contain it, including nationwide restricting access to provinces and cities, reducing agglomeration activities, and postponing non-essential business activates. The Company shut down the manufacturing of all products, except Oxytetracycline, and stopped all distribution during February 2020. Almost all of our suppliers and customers had different levels of business disruptions as well, therefore we have experienced substantive diminutions in raw material supplies and such prices have increased significantly. As of the date of issuance of these financial statements, the COVID‑19 coronavirus outbreak in China appears to be under control and majority of business activities have resumed under the guidance and support of the government. The Company has resumed manufacturing activities since February 27 2020. Most production lines of the Company have been restored to normal production capacity. However, the extent of future impact to which our operations or those of our third-party vendors and customers, including those customers that distribute to Europe and other jurisdictions outside of mainland China is still considered uncertain as COVID‑ 19 continues to adversely affect the global economy and the potential for resurgences remain. Cash and Cash Equivalents The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. Accounts Receivable, net Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Inventories, net Inventories are stated at the lower of cost or net realizable value . Costs include the cost of raw materials, freight, direct labor and related production overhead. The cost of inventories is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Allowances for obsolescence are also assessed based on expiration dates, as applicable, taking into consideration historical and expected future product sales. Property, Plant and Equipment Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows: Items Useful life Property and buildings 20–25 years Leasehold improvement Lesser of useful life and lease term Machinery and equipment 5–10 years Automobiles 3–5 years Office and electric equipment 3–5 years Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statement of income in other income and expenses. Intangible Assets Intangible assets consist primarily of land use rights, software and license for drug manufacturing (See Note 7). Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. Land use rights are stated at cost less accumulated amortization. Intangible assets are amortized using the straight-line method with the following estimated useful lives: Items Useful life Land use rights 50 years Software 10 years License for drug manufacturing 10 years Leases On October 1, 2019 the Company adopted Accounting Standards Update (“ASU”) 2016‑02. For all leases that were entered into prior to the effective date of ASC 842, we elected to apply the package of practical expedients. Based on this guidance we will not reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases. The adoption of Topic 842 resulted in the presentation of approximately $163,000 of operating lease assets and $142,000 operating lease liabilities on the consolidated balance sheet as of October 1, 2019. See Note 12 for additional information. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of obligations under capital leases, and obligations under capital leases, non-current on our consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. Long-Term Investment Investments in entity in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting. Under the equity method, the Company initially records its investment at cost and the difference between the cost and the fair value of the underlying equity in the net assets of the equity investee is recognized as equity method goodwill, which is included in the equity method investment on the consolidated balance sheets. The Company evaluates the equity method investments for impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be other-than-temporary. The Company subsequently adjusts the carrying amount of the investment to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. Impairment of Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no indicators of impairment of long lived assets as of September 30, 2020 and September 30, 2019. Non-controlling interests Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. For the Company’s consolidated subsidiaries, VIE and VIE’s subsidiaries, non-controlling interests represent a minority shareholder’s 1.703% ownership interest in Gansu QLS, 28.25% ownership interest in Chengdu QLS as of September 30, 2020, and 1.703% ownership interest in Gansu QLS, 28.25% ownership interest in Chengdu QLS and 25% ownership interest in Ahan as of September 30, 2019. In November 2018, the Company subscribed 25% of Ahan’s registered capital, RMB 250,000, which were transferred from one of its non-controlling interest holders. The transaction resulted that the ownership interest of minority shareholders in Ahan reduced from 50% as of September 30, 2018 to 25% of as of September 30, 2019. In November 2019, the Company subscribed the remaining 25% of Ahan’s registered capital, RMB 250,000, which were transferred from its non-controlling interest holder. The transaction resulted that Ahan became a wholly owned subsidiary of the Company. The fair value of non controlling interest acquired is immaterial to the financial statements. The following table summarizes the shareholders’ equity for the non-controlling interest from each subsidiary that is not 100% owned by the Company: As of September 30, September 30, 2020 2019 Gansu QLS $ 387,420 $ 298,322 Chengdu QLS 2,355,853 2,448,765 Ahan — (2,511) Total $ 2,743,273 $ 2,744,576 Non-controlling interest in the equity of a subsidiary is reported in equity in the consolidated balance sheets. Net income and losses attributable to the non-controlling interest is reported as described above in the consolidated statement of income and comprehensive income. Revenue Recognition The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To perform revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. The majority of our contracts have one single performance obligation as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and are, therefore, not distinct. The Company’s revenue streams are recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at delivery. Our products are sold with no right of return and we do not provide other credits or sales incentives, which are accounted for as variable consideration. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales. The contract assets and contract liabilities are recorded on the consolidated balance sheets as accounts receivable and advance from customers as of September 30, 2020 and September 30, 2019. Refer to Note 15 for disaggregated revenue information. Government grants Government grants are recognized when there is reasonable assurance that the attached conditions will be complied with. When the grant relates to an expense item, it is recognized in the consolidated statements of income and comprehensive income over the period necessary to match the grant on a systematic basis to the related costs. Where the grant relates to an asset acquisition, it is recognized in the consolidated statements of income and comprehensive income in proportion to the depreciation of the related assets. Government grants received for the year ended September 30, 2020 and 2019 were $764,962 and $360,169, respectively. Grant income recognized for the year ended September 30, 2020 and 2019 were $1,079,200 and $680,151, respectively, included in other income within the consolidated statement of income and comprehensive income. As of September 30, 2020 and 2019, the deferred government grants were $1,106,939 and $1,363,480, respectively. The weighted average remaining periods for the government grant to be recognized were 4.36 years and 4.49 years, respectively. Research and development expenses The Company expenses all internal research costs as incurred, which primarily comprise employee costs, internal and external costs related to execution of studies, including manufacturing costs, facility costs of the research center, and amortization, depreciation of intangible assets and property, plant and equipment used in the research and development activities. For the year ended September 30, 2020 and 2019, total research and development expense were approximately $54,000 and $44,000, respectively, which were recorded in general and administrative expenses in the consolidated statement of income and comprehensive income. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company does not believe that there were any uncertain tax positions at September 30, 2020 and 2019. Foreign Currency Translation The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. Our financial statements are reported using U.S. Dollars. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income included in statement of changes in equity. Gains and losses from foreign currency transactions are included in the consolidated statement of income and comprehensive income. The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: September 30, 2020 September 30, 2019 September 30, 2028 Year-end spot rate US$1=RMB 6.8033 US$1=RMB 7.1383 US$1=RMB 6.8683 Average rate US$1=RMB 7.0077 US$1=RMB 6.8767 US$1=RMB 6.5400 Fair Value of Financial Instruments The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets. Cash and cash equivalents, restricted cash, accounts receivable, bank notes receivable, advances to suppliers, other current assets, accounts payable, deferred revenue, advances from customers and accrued expenses and other payables approximate fair value because of the short maturity of those instruments. Based on comparable open market transactions, the fair value of the bank loans, bank notes payable and other liabilities, including current maturities, approximated their carrying value as of September 30, 2020 and September 30, 2019, respectively. The Company’s estimates of the fair value of bank loans and notes payable and other liabilities (including current maturities) were classified as Level 2 in the fair value hierarchy. Concentrations and Credit Risk A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance. As of September 30, 2020 and 2019, $10,847,959 and $3,623,348 of the Company’s cash and cash equivalents, certificates of deposit and restricted cash were on deposit at financial institutions in the PRC where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. Cash and cash equivalent of $1,018,726 and nil were deposited at financial institutions in Hong Kong as of September 30, 2020 and 2019, which are insured by Hong Kong Deposit Board and subject to a certain limitation of HKD 500,000 (approximately $ 65,000). Substantially all of the Company’s sales are made to customers that are located in China. The Company has a concentration of its revenues and receivables with specific customers. For the year ended September 30, 2020, three customer accounted for 18%, 11% and 10% of the Company’s total revenue, respectively and two vendors accounted for 11% and 10% of the Company’s total purchase, respectively As of September 30, 2020, three major customers’ account receivable accounted for 35%, 16% and 14% of the total account receivable, respectively. For the year ended September 30, 2019, one customer accounted for 15% of the Company’s total revenue. and two vendors accounted for 13% and 10% of the Company’s total purchase, respectively. As of September 30, 2019, two major customers’ account receivable accounted for 46% and 30% of the total account receivable, respectively. For the year ended September 30, 2018, two vendors accounted for 19% and 14% of the Company’s total purchase, respectively. As of September 30, 2019, two major customers’ account receivable accounted for 46% and 30% of the total account receivable and two customers’ account receivable accounted for 45% and 24% of the total outstanding accounts receivable balance as of September 30, 2018. A loss of any of these customers or suppliers could adversely affect the operating results or cash flows of the Company. Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016‑13, Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016‑13”). ASU 2016‑13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016‑13 is effective for fiscal years beginning after December 15, 2019, including those interim periods within those fiscal years. The Company is currently assessing the impact of adopting this standard, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018‑13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, policies for timing of transfers between different levels for fair value measurements, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect that the adoption of this ASU will have a material impact on its financial statements. The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of income and cash flows. |
ACCOUNTS RECEIVABLE, NET
ACCOUNTS RECEIVABLE, NET | 12 Months Ended |
Sep. 30, 2020 | |
ACCOUNTS RECEIVABLE, NET | |
ACCOUNTS RECEIVABLE, NET | NOTE 3 – ACCOUNTS RECEIVABLE, NET Accounts receivable consisted of the following: As of As of September 30, 2020 September 30, 2019 Trade accounts receivable $ 1,325,333 $ 614,556 Less: allowances for doubtful accounts (206,857) (10,796) Accounts receivable, net $ 1,118,476 $ 603,760 |
INVENTORY, NET
INVENTORY, NET | 12 Months Ended |
Sep. 30, 2020 | |
INVENTORY, NET | |
INVENTORY, NET | NOTE 4 – INVENTORY, NET Inventories consisted of the following: As of As of September 30, 2020 September 30, 2019 Raw materials $ 3,241,903 $ 2,933,891 Work-in-progress 704,991 1,153,558 Finished goods 8,078,288 8,750,350 Inventory valuation allowance (30,711) (314,915) Total inventory $ 11,994,471 $ 12,522,884 |
OTHER CURRENT ASSETS
OTHER CURRENT ASSETS | 12 Months Ended |
Sep. 30, 2020 | |
OTHER CURRENT ASSETS | |
OTHER CURRENT ASSETS | NOTE 5 – OTHER CURRENT ASSETS Other current assets consisted of the following: As of As of September 30, 2020 September 30, 2019 Deferred offering costs $ 384,847 $ 351,922 Security deposits 150,093 402,057 Other receivables 12,503 59,953 Total other current assets $ 547,443 $ 813,932 |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Sep. 30, 2020 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
PROPERTY, PLANT AND EQUIPMENT, NET | NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consisted of the following: As of As of September 30, 2020 September 30, 2019 Property and Buildings $ 9,114,893 $ 8,429,891 Machinery and equipment 18,175,739 17,179,561 Automobiles 611,923 575,080 Office and electric equipment 137,588 101,469 Subtotal 28,040,143 26,286,001 Construction in progress 158,975 148,197 Less: accumulated depreciation (20,780,090) (18,768,876) Property and equipment, net $ 7,419,028 $ 7,665,322 Depreciation expense was $1,055,314, $1,137,822 and $1,198,142 for the years ended September 30, 2020, 2019 and 2018 respectively. Construction in progress represents costs of construction incurred for the Company’s upgrading its manufacturing facilities. |
INTANGIBLE ASSETS, NET
INTANGIBLE ASSETS, NET | 12 Months Ended |
Sep. 30, 2020 | |
INTANGIBLE ASSETS, NET | |
INTANGIBLE ASSETS, NET | NOTE 7 – INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: As of As of September 30, 2020 September 30, 2019 Land use rights $ 2,393,660 $ 2,281,326 Software 39,916 28,794 License for drug manufacturing 58,796 56,648 Total 2,492,372 2,366,768 Less: accumulated amortization (610,650) (532,638) Intangible assets, net $ 1,881,722 $ 1,834,130 Amortization expense was $50,274, $50,351 and $55,956 for the years ended September 30, 2020, 2019 and 2018, respectively. Estimated future amortization expense for intangible assets is as follows: Amortization Year ending September 30, expense 2021 $ 58,554 2022 56,942 2023 54,721 2024 52,326 2025 52,326 Thereafter 1,606,853 $ 1,881,722 |
LONG-TERM INVESTMENT
LONG-TERM INVESTMENT | 12 Months Ended |
Sep. 30, 2020 | |
LONG-TERM INVESTMENT | |
LONG-TERM INVESTMENT | NOTE 8 – LONG-TERM INVESTMENT In July 2017, Gansu QLS acquired 40% ownership interest of JiuQuan Funong Biotech Co., Ltd (“Funong”) with a total investment amount of RMB3,300,000, which have been paid in the amount of RMB1,200,000 ($176,121 equivalent) in 2017, RMB1,658,750 ($253,596 equivalent) in 2018, and RMB441,250 ($64,165 equivalent) in 2019, respectively. The investment was accounted for using equity method. Equity method investment consisted of the following: As of As of September 30, 2020 September 30, 2019 Equity method investment: Cost of equity method investment 485,059 462,295 Profit (loss) from equity method investment 112,538 77,385 Dividend Distribution received (57,080) — Total long-term investment $ 540,517 $ 539,680 The investment income attributable to the equity investment of $32,093, $89,197 and $8,309 for the years ended September 30, 2020, 2019 and 2018, respectively, were included in other income (expense) on the statement of income and comprehensive income. |
BANK LOANS
BANK LOANS | 12 Months Ended |
Sep. 30, 2020 | |
BANK LOANS. | |
BANK LOANS | NOTE 9 – BANK LOANS Bank loans represent amounts due to various banks normally due within one year. The principals of the loans are due at maturity. Accrued interest is due either monthly or quarterly. As of September 30, 2020 and 2019, the bank loans consist the following: As of As of September 30, 2020 September 30, 2019 Agricultural Bank of China (“ABC”) (1) $ 2,939,750 $ 4,903,128 Agricultural Development Bank of China (“ADBC”) (2) 2,939,750 — Lanzhou Bank (3) 1,469,875 — Total 7,349,375 4,903,128 (1) In 2019 and 2020, Gansu QLS entered into a series of short-term bank loan agreements with ABC with a loan period of twelve months. The Company pledged its property and buildings as collateral for the loans. The loans bear fixed interest rates ranging from 4.05% to 5.44% per annum. The loans are guaranteed by Mr. Zhanchang Xin, principal shareholder of the Company and pledged by the Company’s building and land use right. The loans outstanding as of September 30, 2020 will mature in February 2021 to March of 2021. The terms of the loan agreements contain certain restrictive financial covenants which, among other things, require the Company to maintain specified debt ratio and contingent liability ratio. As of September 30, 2020 and before the issuance of the financial statements, the Company was in compliance with such covenants. (2) In February and April 2020, Gansu QLS entered into two short-term bank loan agreements with ADBC for twelve months. The loans bear fixed interest rates ranging of 4.15% per annum. the Company’s building and land use right were pledged for the loans. One loan of RMB10,000,000 (approximately $1.5 million) matured in February 2021 and was fully repaid upon maturity. The other loan outstanding as of September 30, 2020 will mature in April of 2021. (3) In April 2020, Gansu QLS entered into one short-term bank loan agreements with Lanzhou Bank for twelve months. The loan bears fixed interest rates ranging of 4.55% per annum. the Company’s building and land use right were pledged for the loans. The loans outstanding as of September 30, 2020 will mature in April of 2021. |
TAXES
TAXES | 12 Months Ended |
Sep. 30, 2020 | |
TAXES. | |
TAXES | NOTE 10 –TAXES (a) The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. Cayman Islands Under the current tax laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, no Cayman Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders. Hong Kong In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2018/2019 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits arising in or derived from Hong Kong for the fiscal years ended September 30, 2020 and 2019, and accordingly no provision for Hong Kong profits tax has been made in these periods. China The Company’s operating subsidiaries are all incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the Corporate Income Tax Law of PRC, current corporate income tax rate of 25% is applicable to all companies, including both domestic and foreign-invested companies. However, according to Tax Preferential Policies for the Development of the Western Region which is effective until December 31, 2020, Gansu QLS and its subsidiary Chengdu QLS are eligible for a favorable income tax rate of 15% for the years ended September 30, 2020, 2019 and 2018. In accordance with the notice on the small-scale and low-profit corporate income tax preferential policies of the Ministry of Finance and the State Administration of Taxation, [2018] No. 77 and [2019] No. 13, Qiming is eligible for a favorable income tax of 10% for the years ended September 30, 2020 ,2019 and 2018. The qualifications of small-scale and low-profit enterprises were examined annually by the Tax Bureau. Significant components of the provision for income taxes were as follows: For the year ended September 30, 2020 2019 2018 Current income taxes $ 951,403 $ 984,785 $ 927,564 Deferred income taxes (86,495) 48,645 15,799 Total $ 864,908 $ 1,033,440 $ 943,363 The impact of these tax holidays decreased our taxes by $603,091 $710,083 and $623,455 for the years ended September 30, 2020, 2019 and 2018, respectively. The benefit of the tax holidays on net income per share was $0.020, $0.024 and $0.021 for the years ended September 30, 2020, 2019 and 2018, respectively. Deferred income taxes reflect the net effects of temporary difference between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Temporary differences and carryforwards of the Company that created significant deferred tax assets and liabilities are as follows: As of As of September 30, 2020 September 30, 2019 Deferred tax assets: Allowance for doubtful accounts and inventory provision $ 36,451 $ 49,660 NOL Carryforwards 158,758 5,202 Deferred government grants 166,041 204,522 Total deferred tax assets $ 361,250 $ 259,384 The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Based upon management’s assessment of all available evidence, there was no valuation allowance provided as of September 30, 2020 and 2019. All of the tax returns of the Company’s PRC entities remain open for statutory examination by PRC tax authorities for five years from the date of filing. The following table reconciles the statutory rates to the Company’s effective tax rate: For the year ended September 30, 2020 2019 2018 China Statutory income tax rate 25 % 25.0 % 25.0 % Effect of favorable income tax rate in the PRC (10.5) % (10.2) % (10.1) % Non-deductible permanent difference 0.4 % 0.1 % 0.4 % Effective tax rate 14.9 % 14.9 % 15.3 % (b) The Company’s taxes payable consists of the following: September 30, September 30, 2020 2019 VAT tax payable $ 644,244 $ 45,571 Corporate income tax payable 631,590 277,132 Business and other taxes payable 107,348 25,227 Total $ 1,383,182 $ 347,930 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Sep. 30, 2020 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS During the normal course of business, the Company may make purchase and sales to affiliated companies controlled by its major shareholders or subsidiaries. For the years ended September 30, 2020, 2019 and 2018, the Company made sales to affiliated companies in the amount of $10,134, $94,316, $148,417 , respectively. There were no purchases in the respective periods. For the year ended September 30, 2018, the Company purchased from affiliated companies in the amount of $27,260. As of September 30, 2020, the Company had advances from affiliated company for $33,152. |
Lease
Lease | 12 Months Ended |
Sep. 30, 2020 | |
Lease | |
Lease | NOTE 12 – Lease As of September 30, 2020, the Company has two office leases with expiration dates through July 2022 and December 2025. For the years ended September 30, 2020, 2019 and 2018, the lease expenses were $71,826, $10,470 and $6,172, respectively. Balance sheet information related to the Company’s operating leases as of September 30, 2020 was as follows: As of September 30, 2020 Operating Lease Assets: Operating Lease $ 243,874 Total operating lease assets 243,874 Operating lease obligations: Current operating lease liabilities 82,468 Non-current operating lease liabilities 155,723 Total Lease liabilities $ 238,191 Remaining Lease Term Operating Lease 3.07 years Discount rate 5.5 % Lease liability maturities as of September 30, 2020, are as follows: Operating, lease 2021 61,147 2022 61,147 2023 61,147 2024 29,397 2025 29,397 Thereafter 22,049 Total minimum lease payments $ 264,284 Less: Amount representing interest (26,093) Total $ 238,191 |
EQUITY
EQUITY | 12 Months Ended |
Sep. 30, 2020 | |
EQUITY | |
EQUITY | NOTE 13 –EQUITY Ordinary Shares Qilian International was incorporated on February 7, 2019, with 50,000,000 ordinary shares, $0.001 par value, authorized and issued. On October 16, 2019, our shareholders approved a reverse split of our outstanding ordinary shares at a ratio of 1‑for‑1.66667 shares, which resulted in 30,000,000 ordinary shares issued and outstanding. In addition, on the same day, our shareholders approved an increase of the Company’s authorized shares from 50,000,000 ordinary shares at par value of $0.001 per share to 100,000,000 ordinary shares at par value of $0.00166667 per share. The above actions are collectively referred to as the “reserve split.” As a result of this reverse split, the maximum number of shares that the Company is authorized to issue is 100,000,000 ordinary shares, of $0.00166667 par value per share, of which 30,000,000 ordinary shares are issued and outstanding. All share information included in the consolidated financial statements and notes thereto have been retroactively adjusted as if the stock reserve split occurred on the first day of the first period presented. Statutory reserve The Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the surplus reserve are made at the discretion of the Board of Directors. As of September 30, 2020 and September 30, 2019, the balance of statutory reserve was $2,200,786 and $1,773,817, respectively. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Sep. 30, 2020 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | NOTE 14 – SEGMENT REPORTING ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different products. Based on management’s assessment, the Company has determined that it has three operating segments as defined by ASC 280. The Company mainly manufactures and distributes active pharmaceutical ingredients and TCMD products as well as other by-products in China. Currently no revenue is derived from international markets. The following table presents segment information for years ended September 30, 2020, 2019 and 2018, respectively: For the year ended September 30, 2020 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 32,602,384 $ 701,701 $ 16,729,115 $ 50,033,200 Cost of revenue 25,004,712 304,670 17,184,665 42,494,047 Gross profit $ 7,597,672 $ 397,031 $ (455,550) $ 7,539,153 Depreciation and amortization $ 886,322 $ 38,792 $ 180,473 $ 1,105,587 Capital expenditures $ 377,953 $ 33,914 $ 37,898 $ 449,765 For the year ended September 30, 2019 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 30,149,950 $ 549,231 $ 15,397,503 $ 46,096,684 Cost of revenue 22,324,422 186,504 13,905,846 36,416,772 Gross profit $ 7,825,528 $ 362,727 $ 1,491,657 $ 9,679,912 Depreciation and amortization $ 985,212 $ 38,525 $ 164,436 $ 1,188,173 Capital expenditures $ 331,917 $ 5,598 $ 278,873 $ 616,388 For the year ended September 30, 2018 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 33,429,330 $ 713,896 $ 16,225,787 $ 50,369,013 Cost of revenue 26,159,584 235,319 15,841,870 42,236,773 Gross profit $ 7,269,746 $ 478,577 $ 383,917 $ 8,132,240 Depreciation and amortization $ 1,070,824 $ 38,057 $ 145,177 $ 1,254,098 Capital expenditures $ 628,604 $ 486,501 $ 16,225,787 $ 1,117,175 September 30, September 30, 2020 2019 Total Assets Oxytetracycline & Licorice products and TCMD $ 34,370,665 $ 23,251,452 Fertilizer $ 2,438,442 $ 2,149,680 Heparin products and Sausage casing $ 11,334,031 $ 9,867,112 Total $ 48,143,138 $ 35,268,244 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Sep. 30, 2020 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS On January 14, 2021, the Company closed its initial public offering (“IPO”) of 5,000,000 ordinary shares, par value $0.00166667 per share, priced at $5.00 per share. The Company completed the IPO pursuant to its registration statement on Form F‑1 (File No. 333‑234460), originally filed with the Securities and Exchange Commission (the “SEC”) on November 4, 2019 (as amended, the “Registration Statement”). The Registration Statement was declared effective by the SEC on December 30, 2020. On January 15, 2021, the underwriter exercised its over-allotment option to purchase additional 750,000 Ordinary Shares at the price of $5 per share. Total net proceeds the Company received from the IPO were $25,728,401.50. The Ordinary Shares were previously approved for listing on The Nasdaq Global Market and commenced trading under the ticker symbol “QLI” on January 12, 2021. In February 2021, the Company repaid the loan of RMB10,000,000 (approximately $1.5 million) to Agricultural Development Bank of China upon maturity. The Company’s management reviewed all material events that have occurred after the balance sheet date through February 11, 2021 on which these financial statements were issued. Based upon this review, the Company did not identify any subsequent events except disclosed in above that would have required adjustment or disclosure in the financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the financial statements of Qilian International, and its subsidiaries, its VIE and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The ownership structure of the Company, its subsidiaries, VIE and its subsidiaries are in compliance with existing PRC laws and regulations and the contractual arrangements with the VIE and its shareholders are valid and binding. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Group and its contractual arrangements with its VIE are found to be in violation of any existing or future PRC laws and regulations, the Group may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. Further we rely on the contractual agreements with Gansu QLS. Under the current contractual agreements, as a legal matter, if Gansu QLS or any of its shareholders fails to perform their respective obligations, we may have to rely on PRC law. In the opinion of management, the likelihood of loss in respect of the Group’s current ownership structure or the contractual arrangements with its VIE is remote based on current facts and circumstances. The carrying amounts of the assets, liabilities, the results of operations and cash flows of the VIE and its subsidiaries included in the Group’s consolidated financial statements after the elimination of intercompany balances and transactions among the VIE and its subsidiaries, and other entities within the Group are as follows: September 30, September 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 5,493,215 $ 4,594,440 Accounts receivable, net 660,398 603,760 Bank acceptance receivable 11,460,512 5,476,707 Inventories, net 11,994,471 12,522,884 Advances to suppliers, net 465,755 958,005 Other current assets 535,981 813,932 Total current assets 30,610,332 24,969,728 Property and equipment, net 7,395,965 7,665,322 Intangible assets, net 1,881,722 1,834,130 Long-term investment 540,517 539,680 Long term security deposits 179,325 — Right of use assets-lease 134,511 — Deferred tax assets 361,250 259,384 Total assets $ 41,103,622 $ 35,268,244 LIABILITIES Current liabilities: Bank loans $ 7,349,375 $ 4,903,128 Accounts payable 3,958,804 3,570,148 Advance from customers 3,511,198 1,911,748 Advance from customers - related parties 33,152 2,171 Deferred government grants - current 384,802 391,142 Taxes payable 1,322,354 347,930 Operating lease liabilities, current 22,354 — Accrued expenses and other payables 1,301,881 531,713 Total current liabilities 17,883,920 11,657,980 Operating lease liabilities, long term 124,406 — Deferred government grants - noncurrent 722,137 972,338 Total liabilities 18,730,463 12,630,318 For the year ended September 30, 2020 2019 2018 Net revenue $ 46,731,913 $ 46,096,684 $ 50,369,013 Net income $ 4,936,357 $ 5,908,479 $ 5,202,609 For the Year Ended September 30, 2020 2019 2018 Net cash provided by (used in) operating activities $ 4,131,468 $ (580,197) $ 4,438,015 Net cash used in investing activities (5,648,762) (666,629) (1,386,080) Net cash provided by financing activities 2,140,503 373,650 (3,116,213) Effect of exchange rate on cash 275,566 (157,163) (181,798) Net increase (decrease) in cash and cash equivalents $ 898,775 $ (1,030,339) $ (246,076) |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and the 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. The Company’s critical accounting estimates included, but are not limited to: allowance for estimated uncollectible receivables, inventory valuations, impairment of long-lived assets, impairment of intangible assets, and income taxes. Actual results could differ from those estimates. |
Risks and Uncertainties | Risks and Uncertainties Risk of Operation in China The 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. Technology Innovation and Commodity Risks The Company’s business faces rapid technological change, and there is a possibility that our competitors may achieve regulatory approval and develop new product candidates before us, which may harm our financial condition and our ability to successfully market or commercialize any of our product candidates. The development and commercialization of new pharmaceutical products and fertilizers is highly competitive, and both industries currently are characterized by rapidly changing technologies, significant competition and a strong emphasis on intellectual property. We will face competition with respect to our current and future pharmaceutical and fertilizer product candidates from major pharmaceutical and chemical companies in China. Our Heparin and sausage casing products are made from livestock products, which are subject significant risks of the market supply of the raw materials. Exchange Rate Risks The Company operates in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the US$ and the RMB. As at September 30, 2020 and September 30, 2019, cash of $10,847,959 (RMB 73,801,918) and $3,623,523 (RMB 25,865,791), respectively, is denominated in RMB and is held in PRC. Currency Convertibility Risks Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts. Other Uncertainties In early January of 2020, the outbreak of the novel coronavirus, commonly referred to as “COVID‑19”, first found in mainland China, then in Asia and eventually throughout the world, has significantly affected business and other activities within China. China has experienced widespread economic disruption owing to the outbreak of the COVID‑19 coronavirus and stringent government measures to contain it, including nationwide restricting access to provinces and cities, reducing agglomeration activities, and postponing non-essential business activates. The Company shut down the manufacturing of all products, except Oxytetracycline, and stopped all distribution during February 2020. Almost all of our suppliers and customers had different levels of business disruptions as well, therefore we have experienced substantive diminutions in raw material supplies and such prices have increased significantly. As of the date of issuance of these financial statements, the COVID‑19 coronavirus outbreak in China appears to be under control and majority of business activities have resumed under the guidance and support of the government. The Company has resumed manufacturing activities since February 27 2020. Most production lines of the Company have been restored to normal production capacity. However, the extent of future impact to which our operations or those of our third-party vendors and customers, including those customers that distribute to Europe and other jurisdictions outside of mainland China is still considered uncertain as COVID‑ 19 continues to adversely affect the global economy and the potential for resurgences remain. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. |
Accounts Receivable, net | Accounts Receivable, net Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. |
Inventories, net | Inventories, net Inventories are stated at the lower of cost or net realizable value . Costs include the cost of raw materials, freight, direct labor and related production overhead. The cost of inventories is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Allowances for obsolescence are also assessed based on expiration dates, as applicable, taking into consideration historical and expected future product sales. |
Property, Plant and Equipment | Property, Plant and Equipment Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows: Items Useful life Property and buildings 20–25 years Leasehold improvement Lesser of useful life and lease term Machinery and equipment 5–10 years Automobiles 3–5 years Office and electric equipment 3–5 years Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the statement of income in other income and expenses. |
Intangible Assets | Intangible Assets Intangible assets consist primarily of land use rights, software and license for drug manufacturing (See Note 7). Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. Land use rights are stated at cost less accumulated amortization. Intangible assets are amortized using the straight-line method with the following estimated useful lives: Items Useful life Land use rights 50 years Software 10 years License for drug manufacturing 10 years |
Leases | Leases On October 1, 2019 the Company adopted Accounting Standards Update (“ASU”) 2016‑02. For all leases that were entered into prior to the effective date of ASC 842, we elected to apply the package of practical expedients. Based on this guidance we will not reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases. The adoption of Topic 842 resulted in the presentation of approximately $163,000 of operating lease assets and $142,000 operating lease liabilities on the consolidated balance sheet as of October 1, 2019. See Note 12 for additional information. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of obligations under capital leases, and obligations under capital leases, non-current on our consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. |
Long-Term Investment | Long-Term Investment Investments in entity in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting. Under the equity method, the Company initially records its investment at cost and the difference between the cost and the fair value of the underlying equity in the net assets of the equity investee is recognized as equity method goodwill, which is included in the equity method investment on the consolidated balance sheets. The Company evaluates the equity method investments for impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be other-than-temporary. The Company subsequently adjusts the carrying amount of the investment to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no indicators of impairment of long lived assets as of September 30, 2020 and September 30, 2019. |
Non-controlling interests | Non-controlling interests Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. For the Company’s consolidated subsidiaries, VIE and VIE’s subsidiaries, non-controlling interests represent a minority shareholder’s 1.703% ownership interest in Gansu QLS, 28.25% ownership interest in Chengdu QLS as of September 30, 2020, and 1.703% ownership interest in Gansu QLS, 28.25% ownership interest in Chengdu QLS and 25% ownership interest in Ahan as of September 30, 2019. In November 2018, the Company subscribed 25% of Ahan’s registered capital, RMB 250,000, which were transferred from one of its non-controlling interest holders. The transaction resulted that the ownership interest of minority shareholders in Ahan reduced from 50% as of September 30, 2018 to 25% of as of September 30, 2019. In November 2019, the Company subscribed the remaining 25% of Ahan’s registered capital, RMB 250,000, which were transferred from its non-controlling interest holder. The transaction resulted that Ahan became a wholly owned subsidiary of the Company. The fair value of non controlling interest acquired is immaterial to the financial statements. The following table summarizes the shareholders’ equity for the non-controlling interest from each subsidiary that is not 100% owned by the Company: As of September 30, September 30, 2020 2019 Gansu QLS $ 387,420 $ 298,322 Chengdu QLS 2,355,853 2,448,765 Ahan — (2,511) Total $ 2,743,273 $ 2,744,576 Non-controlling interest in the equity of a subsidiary is reported in equity in the consolidated balance sheets. Net income and losses attributable to the non-controlling interest is reported as described above in the consolidated statement of income and comprehensive income. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To perform revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. The majority of our contracts have one single performance obligation as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and are, therefore, not distinct. The Company’s revenue streams are recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at delivery. Our products are sold with no right of return and we do not provide other credits or sales incentives, which are accounted for as variable consideration. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales. The contract assets and contract liabilities are recorded on the consolidated balance sheets as accounts receivable and advance from customers as of September 30, 2020 and September 30, 2019. Refer to Note 15 for disaggregated revenue information. |
Government grants | Government grants Government grants are recognized when there is reasonable assurance that the attached conditions will be complied with. When the grant relates to an expense item, it is recognized in the consolidated statements of income and comprehensive income over the period necessary to match the grant on a systematic basis to the related costs. Where the grant relates to an asset acquisition, it is recognized in the consolidated statements of income and comprehensive income in proportion to the depreciation of the related assets. Government grants received for the year ended September 30, 2020 and 2019 were $764,962 and $360,169, respectively. Grant income recognized for the year ended September 30, 2020 and 2019 were $1,079,200 and $680,151, respectively, included in other income within the consolidated statement of income and comprehensive income. As of September 30, 2020 and 2019, the deferred government grants were $1,106,939 and $1,363,480, respectively. The weighted average remaining periods for the government grant to be recognized were 4.36 years and 4.49 years, respectively. |
Research and development expenses | Research and development expenses The Company expenses all internal research costs as incurred, which primarily comprise employee costs, internal and external costs related to execution of studies, including manufacturing costs, facility costs of the research center, and amortization, depreciation of intangible assets and property, plant and equipment used in the research and development activities. For the year ended September 30, 2020 and 2019, total research and development expense were approximately $54,000 and $44,000, respectively, which were recorded in general and administrative expenses in the consolidated statement of income and comprehensive income. |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company does not believe that there were any uncertain tax positions at September 30, 2020 and 2019. |
Foreign Currency Translation | Foreign Currency Translation The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. Our financial statements are reported using U.S. Dollars. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income included in statement of changes in equity. Gains and losses from foreign currency transactions are included in the consolidated statement of income and comprehensive income. The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: September 30, 2020 September 30, 2019 September 30, 2028 Year-end spot rate US$1=RMB 6.8033 US$1=RMB 7.1383 US$1=RMB 6.8683 Average rate US$1=RMB 7.0077 US$1=RMB 6.8767 US$1=RMB 6.5400 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company records its financial assets and liabilities in accordance with the framework for measuring fair value in accordance with U.S GAAP. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value: Level 1: Quoted prices for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in the impairment analysis of intangible assets and long-lived assets. Cash and cash equivalents, restricted cash, accounts receivable, bank notes receivable, advances to suppliers, other current assets, accounts payable, deferred revenue, advances from customers and accrued expenses and other payables approximate fair value because of the short maturity of those instruments. Based on comparable open market transactions, the fair value of the bank loans, bank notes payable and other liabilities, including current maturities, approximated their carrying value as of September 30, 2020 and September 30, 2019, respectively. The Company’s estimates of the fair value of bank loans and notes payable and other liabilities (including current maturities) were classified as Level 2 in the fair value hierarchy. |
Concentrations and Credit Risk | Concentrations and Credit Risk A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance. As of September 30, 2020 and 2019, $10,847,959 and $3,623,348 of the Company’s cash and cash equivalents, certificates of deposit and restricted cash were on deposit at financial institutions in the PRC where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. Cash and cash equivalent of $1,018,726 and nil were deposited at financial institutions in Hong Kong as of September 30, 2020 and 2019, which are insured by Hong Kong Deposit Board and subject to a certain limitation of HKD 500,000 (approximately $ 65,000). Substantially all of the Company’s sales are made to customers that are located in China. The Company has a concentration of its revenues and receivables with specific customers. For the year ended September 30, 2020, three customer accounted for 18%, 11% and 10% of the Company’s total revenue, respectively and two vendors accounted for 11% and 10% of the Company’s total purchase, respectively As of September 30, 2020, three major customers’ account receivable accounted for 35%, 16% and 14% of the total account receivable, respectively. For the year ended September 30, 2019, one customer accounted for 15% of the Company’s total revenue. and two vendors accounted for 13% and 10% of the Company’s total purchase, respectively. As of September 30, 2019, two major customers’ account receivable accounted for 46% and 30% of the total account receivable, respectively. For the year ended September 30, 2018, two vendors accounted for 19% and 14% of the Company’s total purchase, respectively. As of September 30, 2019, two major customers’ account receivable accounted for 46% and 30% of the total account receivable and two customers’ account receivable accounted for 45% and 24% of the total outstanding accounts receivable balance as of September 30, 2018. A loss of any of these customers or suppliers could adversely affect the operating results or cash flows of the Company. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016‑13, Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016‑13”). ASU 2016‑13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016‑13 is effective for fiscal years beginning after December 15, 2019, including those interim periods within those fiscal years. The Company is currently assessing the impact of adopting this standard, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018‑13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, policies for timing of transfers between different levels for fair value measurements, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect that the adoption of this ASU will have a material impact on its financial statements. The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of income and cash flows. |
ORGANIZATION AND DESCRIPTION _2
ORGANIZATION AND DESCRIPTION OF BUSINESS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Gansu QLS | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Schedule of subsidiaries | Ownership as of September September 30, 2020 30, 2019 Jiuquan Qiming Biotechnology Co., Ltd (“Qiming”) % % Chengdu Qilianshan Biotechnology Co., Ltd (“Chengdu QLS”) 71.75 % 71.75 % Jiuquan Ahan Biotechnology Co., Ltd. (“Ahan”) 100 % 75 % Tibet Samen Trading Co., Ltd (“Samen”) 100 % 100 % Tibet Cangmen Trading Co., Ltd (“Cangmen”) 100 % 100 % Rugao Tianlu Animal Products Co., Ltd (“Rugao”)* 71.75 % N/A *Rugao Tianlu Animal Products Co., Ltd was incorporated in 2020 as a wholly owned subsidiary of Chengdu QLS. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of carrying amounts of the assets, liabilities, the results of operations and cash flows of the VIE and its subsidiaries | The carrying amounts of the assets, liabilities, the results of operations and cash flows of the VIE and its subsidiaries included in the Group’s consolidated financial statements after the elimination of intercompany balances and transactions among the VIE and its subsidiaries, and other entities within the Group are as follows: September 30, September 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 5,493,215 $ 4,594,440 Accounts receivable, net 660,398 603,760 Bank acceptance receivable 11,460,512 5,476,707 Inventories, net 11,994,471 12,522,884 Advances to suppliers, net 465,755 958,005 Other current assets 535,981 813,932 Total current assets 30,610,332 24,969,728 Property and equipment, net 7,395,965 7,665,322 Intangible assets, net 1,881,722 1,834,130 Long-term investment 540,517 539,680 Long term security deposits 179,325 — Right of use assets-lease 134,511 — Deferred tax assets 361,250 259,384 Total assets $ 41,103,622 $ 35,268,244 LIABILITIES Current liabilities: Bank loans $ 7,349,375 $ 4,903,128 Accounts payable 3,958,804 3,570,148 Advance from customers 3,511,198 1,911,748 Advance from customers - related parties 33,152 2,171 Deferred government grants - current 384,802 391,142 Taxes payable 1,322,354 347,930 Operating lease liabilities, current 22,354 — Accrued expenses and other payables 1,301,881 531,713 Total current liabilities 17,883,920 11,657,980 Operating lease liabilities, long term 124,406 — Deferred government grants - noncurrent 722,137 972,338 Total liabilities 18,730,463 12,630,318 For the year ended September 30, 2020 2019 2018 Net revenue $ 46,731,913 $ 46,096,684 $ 50,369,013 Net income $ 4,936,357 $ 5,908,479 $ 5,202,609 For the Year Ended September 30, 2020 2019 2018 Net cash provided by (used in) operating activities $ 4,131,468 $ (580,197) $ 4,438,015 Net cash used in investing activities (5,648,762) (666,629) (1,386,080) Net cash provided by financing activities 2,140,503 373,650 (3,116,213) Effect of exchange rate on cash 275,566 (157,163) (181,798) Net increase (decrease) in cash and cash equivalents $ 898,775 $ (1,030,339) $ (246,076) |
Schedule of estimated useful lives of the assets | The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows: Items Useful life Property and buildings 20–25 years Leasehold improvement Lesser of useful life and lease term Machinery and equipment 5–10 years Automobiles 3–5 years Office and electric equipment 3–5 years |
Schedule of estimated useful lives of intangible assets | Intangible assets are amortized using the straight-line method with the following estimated useful lives: Items Useful life Land use rights 50 years Software 10 years License for drug manufacturing 10 years |
Schedule of shareholders' equity for the non-controlling interest from each subsidiary that is not 100% owned | The following table summarizes the shareholders’ equity for the non-controlling interest from each subsidiary that is not 100% owned by the Company: As of September 30, September 30, 2020 2019 Gansu QLS $ 387,420 $ 298,322 Chengdu QLS 2,355,853 2,448,765 Ahan — (2,511) Total $ 2,743,273 $ 2,744,576 |
Schedule of currency exchange rates | The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: September 30, 2020 September 30, 2019 September 30, 2028 Year-end spot rate US$1=RMB 6.8033 US$1=RMB 7.1383 US$1=RMB 6.8683 Average rate US$1=RMB 7.0077 US$1=RMB 6.8767 US$1=RMB 6.5400 |
ACCOUNTS RECEIVABLE, NET (Table
ACCOUNTS RECEIVABLE, NET (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
ACCOUNTS RECEIVABLE, NET | |
Schedule of accounts receivable | Accounts receivable consisted of the following: As of As of September 30, 2020 September 30, 2019 Trade accounts receivable $ 1,325,333 $ 614,556 Less: allowances for doubtful accounts (206,857) (10,796) Accounts receivable, net $ 1,118,476 $ 603,760 |
INVENTORY, NET (Tables)
INVENTORY, NET (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
INVENTORY, NET | |
Schedule of inventories | Inventories consisted of the following: As of As of September 30, 2020 September 30, 2019 Raw materials $ 3,241,903 $ 2,933,891 Work-in-progress 704,991 1,153,558 Finished goods 8,078,288 8,750,350 Inventory valuation allowance (30,711) (314,915) Total inventory $ 11,994,471 $ 12,522,884 |
OTHER CURRENT ASSETS (Tables)
OTHER CURRENT ASSETS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
OTHER CURRENT ASSETS | |
Schedule of other current assets | Other current assets consisted of the following: As of As of September 30, 2020 September 30, 2019 Deferred offering costs $ 384,847 $ 351,922 Security deposits 150,093 402,057 Other receivables 12,503 59,953 Total other current assets $ 547,443 $ 813,932 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
Schedule of property and equipment | Property, plant and equipment, net consisted of the following: As of As of September 30, 2020 September 30, 2019 Property and Buildings $ 9,114,893 $ 8,429,891 Machinery and equipment 18,175,739 17,179,561 Automobiles 611,923 575,080 Office and electric equipment 137,588 101,469 Subtotal 28,040,143 26,286,001 Construction in progress 158,975 148,197 Less: accumulated depreciation (20,780,090) (18,768,876) Property and equipment, net $ 7,419,028 $ 7,665,322 |
INTANGIBLE ASSETS, NET (Tables)
INTANGIBLE ASSETS, NET (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
INTANGIBLE ASSETS, NET | |
Schedule of intangible assets, net | Intangible assets, net consisted of the following: As of As of September 30, 2020 September 30, 2019 Land use rights $ 2,393,660 $ 2,281,326 Software 39,916 28,794 License for drug manufacturing 58,796 56,648 Total 2,492,372 2,366,768 Less: accumulated amortization (610,650) (532,638) Intangible assets, net $ 1,881,722 $ 1,834,130 |
Schedule of estimated future amortization expense for intangible assets | Estimated future amortization expense for intangible assets is as follows: Amortization Year ending September 30, expense 2021 $ 58,554 2022 56,942 2023 54,721 2024 52,326 2025 52,326 Thereafter 1,606,853 $ 1,881,722 |
LONG-TERM INVESTMENT (Tables)
LONG-TERM INVESTMENT (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
LONG-TERM INVESTMENT | |
Schedule of equity method investment | Equity method investment consisted of the following: As of As of September 30, 2020 September 30, 2019 Equity method investment: Cost of equity method investment 485,059 462,295 Profit (loss) from equity method investment 112,538 77,385 Dividend Distribution received (57,080) — Total long-term investment $ 540,517 $ 539,680 |
BANK LOANS (Tables)
BANK LOANS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
BANK LOANS. | |
Schedule of bank loans | As of September 30, 2020 and 2019, the bank loans consist the following: As of As of September 30, 2020 September 30, 2019 Agricultural Bank of China (“ABC”) (1) $ 2,939,750 $ 4,903,128 Agricultural Development Bank of China (“ADBC”) (2) 2,939,750 — Lanzhou Bank (3) 1,469,875 — Total 7,349,375 4,903,128 (1) In 2019 and 2020, Gansu QLS entered into a series of short-term bank loan agreements with ABC with a loan period of twelve months. The Company pledged its property and buildings as collateral for the loans. The loans bear fixed interest rates ranging from 4.05% to 5.44% per annum. The loans are guaranteed by Mr. Zhanchang Xin, principal shareholder of the Company and pledged by the Company’s building and land use right. The loans outstanding as of September 30, 2020 will mature in February 2021 to March of 2021. The terms of the loan agreements contain certain restrictive financial covenants which, among other things, require the Company to maintain specified debt ratio and contingent liability ratio. As of September 30, 2020 and before the issuance of the financial statements, the Company was in compliance with such covenants. (2) In February and April 2020, Gansu QLS entered into two short-term bank loan agreements with ADBC for twelve months. The loans bear fixed interest rates ranging of 4.15% per annum. the Company’s building and land use right were pledged for the loans. One loan of RMB10,000,000 (approximately $1.5 million) matured in February 2021 and was fully repaid upon maturity. The other loan outstanding as of September 30, 2020 will mature in April of 2021. (3) In April 2020, Gansu QLS entered into one short-term bank loan agreements with Lanzhou Bank for twelve months. The loan bears fixed interest rates ranging of 4.55% per annum. the Company’s building and land use right were pledged for the loans. The loans outstanding as of September 30, 2020 will mature in April of 2021. |
TAXES (Tables)
TAXES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
TAXES. | |
Schedule of significant components of the provision for income taxes | Significant components of the provision for income taxes were as follows: For the year ended September 30, 2020 2019 2018 Current income taxes $ 951,403 $ 984,785 $ 927,564 Deferred income taxes (86,495) 48,645 15,799 Total $ 864,908 $ 1,033,440 $ 943,363 |
Schedule of significant deferred tax assets and liabilities | Temporary differences and carryforwards of the Company that created significant deferred tax assets and liabilities are as follows: As of As of September 30, 2020 September 30, 2019 Deferred tax assets: Allowance for doubtful accounts and inventory provision $ 36,451 $ 49,660 NOL Carryforwards 158,758 5,202 Deferred government grants 166,041 204,522 Total deferred tax assets $ 361,250 $ 259,384 |
Schedule of reconciliation of the statutory rates to the effective tax rate | The following table reconciles the statutory rates to the Company’s effective tax rate: For the year ended September 30, 2020 2019 2018 China Statutory income tax rate 25 % 25.0 % 25.0 % Effect of favorable income tax rate in the PRC (10.5) % (10.2) % (10.1) % Non-deductible permanent difference 0.4 % 0.1 % 0.4 % Effective tax rate 14.9 % 14.9 % 15.3 % |
Schedule of taxes payable | The Company’s taxes payable consists of the following: September 30, September 30, 2020 2019 VAT tax payable $ 644,244 $ 45,571 Corporate income tax payable 631,590 277,132 Business and other taxes payable 107,348 25,227 Total $ 1,383,182 $ 347,930 |
Lease (Tables)
Lease (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Lease | |
Schedule of balance sheet information related to the operating leases | Balance sheet information related to the Company’s operating leases as of September 30, 2020 was as follows: As of September 30, 2020 Operating Lease Assets: Operating Lease $ 243,874 Total operating lease assets 243,874 Operating lease obligations: Current operating lease liabilities 82,468 Non-current operating lease liabilities 155,723 Total Lease liabilities $ 238,191 |
Schedule of weighted average remaining lease term and discount rate | Remaining Lease Term Operating Lease 3.07 years Discount rate 5.5 % |
Schedule of lease liability maturities | Lease liability maturities as of September 30, 2020, are as follows: Operating, lease 2021 61,147 2022 61,147 2023 61,147 2024 29,397 2025 29,397 Thereafter 22,049 Total minimum lease payments $ 264,284 Less: Amount representing interest (26,093) Total $ 238,191 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
SEGMENT REPORTING | |
Schedule of segment information | The following table presents segment information for years ended September 30, 2020, 2019 and 2018, respectively: For the year ended September 30, 2020 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 32,602,384 $ 701,701 $ 16,729,115 $ 50,033,200 Cost of revenue 25,004,712 304,670 17,184,665 42,494,047 Gross profit $ 7,597,672 $ 397,031 $ (455,550) $ 7,539,153 Depreciation and amortization $ 886,322 $ 38,792 $ 180,473 $ 1,105,587 Capital expenditures $ 377,953 $ 33,914 $ 37,898 $ 449,765 For the year ended September 30, 2019 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 30,149,950 $ 549,231 $ 15,397,503 $ 46,096,684 Cost of revenue 22,324,422 186,504 13,905,846 36,416,772 Gross profit $ 7,825,528 $ 362,727 $ 1,491,657 $ 9,679,912 Depreciation and amortization $ 985,212 $ 38,525 $ 164,436 $ 1,188,173 Capital expenditures $ 331,917 $ 5,598 $ 278,873 $ 616,388 For the year ended September 30, 2018 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 33,429,330 $ 713,896 $ 16,225,787 $ 50,369,013 Cost of revenue 26,159,584 235,319 15,841,870 42,236,773 Gross profit $ 7,269,746 $ 478,577 $ 383,917 $ 8,132,240 Depreciation and amortization $ 1,070,824 $ 38,057 $ 145,177 $ 1,254,098 Capital expenditures $ 628,604 $ 486,501 $ 16,225,787 $ 1,117,175 September 30, September 30, 2020 2019 Total Assets Oxytetracycline & Licorice products and TCMD $ 34,370,665 $ 23,251,452 Fertilizer $ 2,438,442 $ 2,149,680 Heparin products and Sausage casing $ 11,334,031 $ 9,867,112 Total $ 48,143,138 $ 35,268,244 |
ORGANIZATION AND DESCRIPTION _3
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) $ in Thousands | May 20, 2019 | Sep. 30, 2020USD ($)subsidiary | Sep. 30, 2019USD ($) | Aug. 31, 2006USD ($) |
Qilian HK | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 100.00% | |||
Qilian HK | Qilian Chengdu | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 100.00% | |||
Gansu QLS | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Initial capital | $ 270 | |||
registered capital | $ 12,200 | $ 12,200 | ||
Number of subsidiaries | subsidiary | 6 | |||
Amount of pledged equity interest (in percent) | 98.297% | |||
Gansu QLS | Jiuquan Qiming Biotechnology Co., Ltd ("Qiming") | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 100.00% | 100.00% | ||
Gansu QLS | Chengdu QLS | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 71.75% | 71.75% | ||
Gansu QLS | Ahan | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 100.00% | 75.00% | ||
Gansu QLS | Tibet Samen Trading Co., Ltd ("Samen") | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 100.00% | 100.00% | ||
Gansu QLS | Tibet Cangmen Trading Co., Ltd ("Cangmen") | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 100.00% | 100.00% | ||
Gansu QLS | Rugao Tianlu Animal Products Co., Ltd ("Rugao")* | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest (in percent) | 71.75% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basis of Presentation and Principles of Consolidation (Details) - USD ($) | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | Oct. 01, 2019 | |
Current assets: | ||||
Cash and cash equivalents | $ 11,867,130 | $ 4,594,440 | ||
Accounts receivable, net | 1,118,476 | 603,760 | ||
Bank acceptance receivable | 11,498,075 | 5,476,707 | ||
Inventories, net | 11,994,471 | 12,522,884 | ||
Advances to suppliers, net | 491,827 | 958,005 | ||
Other current assets | 547,443 | 813,932 | ||
Total current assets | 37,517,422 | 24,969,728 | ||
Property and equipment, net | 7,419,028 | 7,665,322 | ||
Intangible assets, net | 1,881,722 | 1,834,130 | ||
Long term investment | 540,517 | 539,680 | ||
Long term security deposits | 179,325 | |||
Right of use assets-lease | 243,874 | $ 163,000 | ||
Deferred tax assets | 361,250 | 259,384 | ||
Total assets | 48,143,138 | 35,268,244 | ||
Current liabilities: | ||||
Bank loans | 7,349,375 | 4,903,128 | ||
Accounts payable | 4,377,712 | 3,570,148 | ||
Advance from customers | 3,511,198 | 1,911,748 | ||
Advance from customers - related parties | 33,152 | 2,171 | ||
Deferred government grants - current | 384,802 | 391,142 | ||
Taxes payable | 1,383,182 | 347,930 | ||
Operating lease liabilities, current | 82,468 | |||
Accrued expenses and other payables | 1,301,882 | 531,713 | ||
Total current liabilities | 18,423,771 | 11,657,980 | ||
Operating lease liabilities, long term | 155,723 | |||
Deferred government grants - noncurrent | 722,137 | 972,338 | ||
Total liabilities | 19,301,631 | 12,630,318 | ||
Net revenue | 50,033,200 | 46,096,684 | $ 50,369,013 | |
Net income | 4,940,441 | 5,908,479 | 5,202,609 | |
Net cash provided by (used in) operating activities | 5,076,014 | (580,197) | 4,438,015 | |
Net cash used in investing activities | (375,592) | (666,629) | (1,386,080) | |
Net cash provided by financing activities | 2,140,503 | 373,650 | (3,116,213) | |
Effect of exchange rate on cash | 431,765 | (157,163) | (181,798) | |
Net increase (decrease) in cash and cash equivalents | 7,272,690 | (1,030,339) | (246,076) | |
VIE and its subsidiaries | ||||
Current assets: | ||||
Cash and cash equivalents | 5,493,215 | 4,594,440 | ||
Accounts receivable, net | 660,398 | 603,760 | ||
Bank acceptance receivable | 11,460,512 | 5,476,707 | ||
Inventories, net | 11,994,471 | 12,522,884 | ||
Advances to suppliers, net | 465,755 | 958,005 | ||
Other current assets | 535,981 | 813,932 | ||
Total current assets | 30,610,332 | 24,969,728 | ||
Property and equipment, net | 7,395,965 | 7,665,322 | ||
Intangible assets, net | 1,881,722 | 1,834,130 | ||
Long term investment | 540,517 | 539,680 | ||
Long term security deposits | 179,325 | |||
Right of use assets-lease | 134,511 | |||
Deferred tax assets | 361,250 | 259,384 | ||
Total assets | 41,103,622 | 35,268,244 | ||
Current liabilities: | ||||
Bank loans | 7,349,375 | 4,903,128 | ||
Accounts payable | 3,958,804 | 3,570,148 | ||
Advance from customers | 3,511,198 | 1,911,748 | ||
Advance from customers - related parties | 33,152 | 2,171 | ||
Deferred government grants - current | 384,802 | 391,142 | ||
Taxes payable | 1,322,354 | 347,930 | ||
Operating lease liabilities, current | 22,354 | |||
Accrued expenses and other payables | 1,301,881 | 531,713 | ||
Total current liabilities | 17,883,920 | 11,657,980 | ||
Operating lease liabilities, long term | 124,406 | |||
Deferred government grants - noncurrent | 722,137 | 972,338 | ||
Total liabilities | 18,730,463 | 12,630,318 | ||
Net revenue | 46,731,913 | 46,096,684 | 50,369,013 | |
Net income | 4,936,357 | 5,908,479 | 5,202,609 | |
Net cash provided by (used in) operating activities | 4,131,468 | (580,197) | 4,438,015 | |
Net cash used in investing activities | (5,648,762) | (666,629) | (1,386,080) | |
Net cash provided by financing activities | 2,140,503 | 373,650 | (3,116,213) | |
Effect of exchange rate on cash | 275,566 | (157,163) | (181,798) | |
Net increase (decrease) in cash and cash equivalents | $ 898,775 | $ (1,030,339) | $ (246,076) |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) | 12 Months Ended |
Sep. 30, 2020 | |
Maximum | Property and buildings | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 25 years |
Maximum | Machinery and equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 10 years |
Maximum | Automobiles | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 5 years |
Maximum | Office and electric equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 5 years |
Minimum | Property and buildings | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 20 years |
Minimum | Machinery and equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 5 years |
Minimum | Automobiles | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 3 years |
Minimum | Office and electric equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives (in years) | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets (Details) | 12 Months Ended |
Sep. 30, 2020 | |
Land use rights | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful lives (in years) | 50 years |
Software | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful lives (in years) | 10 years |
License for drug manufacturing | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful lives (in years) | 10 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Non-controlling interests (Details) | 1 Months Ended | 12 Months Ended | |||
Nov. 30, 2019CNY (¥) | Nov. 30, 2018CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2018 | |
Noncontrolling Interest [Line Items] | |||||
Acquisition of Noncontrolling interest | $ 133,552 | ||||
Noncontrolling interests | $ 2,744,576 | $ 2,743,273 | |||
Gansu QLS | |||||
Noncontrolling Interest [Line Items] | |||||
Ownership interest (in percent) | 1.703% | 1.703% | |||
Noncontrolling interests | $ 298,322 | $ 387,420 | |||
Chengdu QLS | |||||
Noncontrolling Interest [Line Items] | |||||
Ownership interest (in percent) | 28.25% | 28.25% | |||
Noncontrolling interests | $ 2,448,765 | $ 2,355,853 | |||
Ahan | |||||
Noncontrolling Interest [Line Items] | |||||
Ownership interest (in percent) | 25.00% | 50.00% | |||
Ownership interest acquired (in percent) | 25.00% | 25.00% | |||
Acquisition of Noncontrolling interest | ¥ | ¥ 250,000 | ¥ 250,000 | |||
Noncontrolling interests | $ (2,511) |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign Currency Translation (Details) - ¥ / $ | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Year-end spot rate | 6.8033 | 7.1383 | 6.8683 |
Average rate | 7.0077 | 6.8767 | 6.5400 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) | Oct. 01, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020CNY (¥) | Sep. 30, 2020USD ($) | Sep. 30, 2019CNY (¥) | Sep. 30, 2019USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
Cash held in PRC | ¥ 73,801,918 | $ 10,847,959 | ¥ 25,865,791 | $ 3,623,523 | |||
Lease, Practical expedients | true | ||||||
Operating lease right of use assets | $ 163,000 | 243,874 | |||||
Operating lease liabilities | $ 142,000 | 238,191 | |||||
Government grants | $ 764,962 | $ 360,169 | |||||
Grant income | $ 1,079,200 | $ 680,151 | |||||
Deferred government grants | $ 1,106,939 | $ 1,363,480 | |||||
Weighted average remaining periods for the government grant to be recognized | 4 years 4 months 10 days | 4 years 5 months 27 days | |||||
Research and development expense | $ 54,000 | $ 44,000 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations and Credit Risk (Details) | Sep. 30, 2020HKD ($) | Sep. 30, 2018 | Sep. 30, 2020HKD ($) | Sep. 30, 2019HKD ($) | Sep. 30, 2018 | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) |
Concentration Risk [Line Items] | |||||||
Cash and cash equivalents, certificates of deposit and restricted cash were on deposit at financial institutions not subject to insured | $ 10,847,959 | $ 3,623,348 | |||||
Cash and cash equivalents deposited in financial institutions | 1,018,726 | 0 | |||||
Cash and cash equivalents deposited in financial institutions annual limit | $ 500,000 | $ 500,000 | $ 500,000 | $ 65,000 | $ 65,000 | ||
Customer | Customer One | Revenue | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 18.00% | 15.00% | |||||
Customer | Customer One | Accounts Receivable | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 35.00% | 45.00% | 46.00% | ||||
Customer | Customer Two | Revenue | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 11.00% | ||||||
Customer | Customer Two | Accounts Receivable | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 16.00% | 24.00% | 30.00% | ||||
Customer | Customer Three | Revenue | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 10.00% | ||||||
Customer | Customer Three | Accounts Receivable | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 14.00% | ||||||
Supplier | Supplier One | Purchases | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 11.00% | 13.00% | 19.00% | ||||
Supplier | Supplier Two | Purchases | |||||||
Concentration Risk [Line Items] | |||||||
Concentration risk (in percent) | 10.00% | 10.00% | 14.00% |
ACCOUNTS RECEIVABLE, NET (Detai
ACCOUNTS RECEIVABLE, NET (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
ACCOUNTS RECEIVABLE, NET | ||
Trade accounts receivable | $ 1,325,333 | $ 614,556 |
Less: allowances for doubtful accounts | (206,857) | (10,796) |
Accounts receivable, net | $ 1,118,476 | $ 603,760 |
INVENTORY, NET (Details)
INVENTORY, NET (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
INVENTORY, NET | ||
Raw materials | $ 3,241,903 | $ 2,933,891 |
Work-in-progress | 704,991 | 1,153,558 |
Finished goods | 8,078,288 | 8,750,350 |
Inventory Valuation Reserves, Ending Balance | (30,711) | (314,915) |
Total inventory | $ 11,994,471 | $ 12,522,884 |
OTHER CURRENT ASSETS (Details)
OTHER CURRENT ASSETS (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
OTHER CURRENT ASSETS | ||
Deferred offering costs | $ 384,847 | $ 351,922 |
Security deposits | 150,093 | 402,057 |
Other receivables | 12,503 | 59,953 |
Total other current assets | $ 547,443 | $ 813,932 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Line Items] | |||
Subtotal | $ 28,040,143 | $ 26,286,001 | |
Construction in progress | 158,975 | 148,197 | |
Less: accumulated depreciation | (20,780,090) | (18,768,876) | |
Property and equipment, net | 7,419,028 | 7,665,322 | |
Depreciation expense | 1,055,314 | 1,137,822 | $ 1,198,142 |
Property and buildings | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | 9,114,893 | 8,429,891 | |
Machinery and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | 18,175,739 | 17,179,561 | |
Automobiles | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | 611,923 | 575,080 | |
Office and electric equipment | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | $ 137,588 | $ 101,469 |
INTANGIBLE ASSETS, NET (Details
INTANGIBLE ASSETS, NET (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Finite-Lived Intangible Assets [Line Items] | |||
Total | $ 2,492,372 | $ 2,366,768 | |
Less: accumulated amortization | (610,650) | (532,638) | |
Intangible assets, net | 1,881,722 | 1,834,130 | |
Amortization expense | 50,274 | 50,351 | $ 55,956 |
Land use rights | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total | 2,393,660 | 2,281,326 | |
Software | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total | 39,916 | 28,794 | |
License for drug manufacturing | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total | $ 58,796 | $ 56,648 |
INTANGIBLE ASSETS, NET - Estima
INTANGIBLE ASSETS, NET - Estimated future amortization expense (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2021 | $ 58,554 | |
2022 | 56,942 | |
2023 | 54,721 | |
2024 | 52,326 | |
2025 | 52,326 | |
Thereafter | 1,606,853 | |
Intangible assets, net | $ 1,881,722 | $ 1,834,130 |
LONG-TERM INVESTMENT (Details)
LONG-TERM INVESTMENT (Details) | 12 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Jul. 31, 2017CNY (¥) | |
Schedule of Equity Method Investments [Line Items] | |||
Cost of equity method investment | $ 485,059 | $ 462,295 | |
Profit (loss) from equity method investment | 112,538 | 77,385 | |
Dividend Distribution received | (57,080) | ||
Total long-term investment | $ 540,517 | $ 539,680 | |
Funong | Gansu QLS | |||
Schedule of Equity Method Investments [Line Items] | |||
Cost of equity method investment | ¥ | ¥ 3,300,000 |
LONG-TERM INVESTMENT- Additiona
LONG-TERM INVESTMENT- Additional Information (Details) | 12 Months Ended | |||||||
Sep. 30, 2020USD ($) | Sep. 30, 2019CNY (¥) | Sep. 30, 2019USD ($) | Sep. 30, 2018CNY (¥) | Sep. 30, 2018USD ($) | Sep. 30, 2017CNY (¥) | Sep. 30, 2017USD ($) | Jul. 31, 2017CNY (¥) | |
Schedule of Equity Method Investments [Line Items] | ||||||||
Total investment | $ 485,059 | $ 462,295 | ||||||
Investment income attributable to the equity investment | $ 32,093 | 89,197 | $ 8,309 | |||||
Gansu QLS | ||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||
Ownership interest acquired (in percent) | 40.00% | |||||||
Funong | Gansu QLS | ||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||
Total investment | ¥ | ¥ 3,300,000 | |||||||
Payments to acquire investments | ¥ 441,250 | $ 64,165 | ¥ 1,658,750 | $ 253,596 | ¥ 1,200,000 | $ 176,121 |
BANK LOANS (Details)
BANK LOANS (Details) | 1 Months Ended | 12 Months Ended | |||
Apr. 30, 2020agreement | Feb. 29, 2020agreement | Sep. 30, 2020CNY (¥) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | |
Short-term Debt [Line Items] | |||||
Bank loans | $ 7,349,375 | $ 4,903,128 | |||
Repayment of loan | 4,994,506 | 3,635,465 | |||
Agricultural Bank of China ("ABC") | |||||
Short-term Debt [Line Items] | |||||
Bank loans | $ 2,939,750 | $ 4,903,128 | |||
Loan term | 12 months | 12 months | 12 months | ||
Agricultural Development Bank of China ("ADBC") | |||||
Short-term Debt [Line Items] | |||||
Bank loans | $ 2,939,750 | ||||
Loan term | 12 months | 12 months | |||
Fixed interest rate (in percent) | 4.15% | 4.15% | |||
Number of short-term loan agreements | agreement | 2 | 2 | |||
Repayment of loan | ¥ 10,000,000 | 1,500,000 | |||
Lanzhou Bank | |||||
Short-term Debt [Line Items] | |||||
Bank loans | $ 1,469,875 | ||||
Loan term | 12 months | ||||
Fixed interest rate (in percent) | 4.55% | ||||
Number of short-term loan agreements | agreement | 1 | ||||
Maximum | Agricultural Bank of China ("ABC") | |||||
Short-term Debt [Line Items] | |||||
Fixed interest rate (in percent) | 5.44% | ||||
Minimum | Agricultural Bank of China ("ABC") | |||||
Short-term Debt [Line Items] | |||||
Fixed interest rate (in percent) | 4.05% |
TAXES - Provision for Income Ta
TAXES - Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
TAXES. | |||
Current income taxes | $ 951,403 | $ 984,785 | $ 927,564 |
Deferred income taxes | (86,495) | 48,645 | 15,799 |
Total | $ 864,908 | $ 1,033,440 | $ 943,363 |
TAXES - Temporary Differences a
TAXES - Temporary Differences and Carryforwards (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Deferred tax assets: | ||
Allowance for doubtful accounts and inventory provision | $ 36,451 | $ 49,660 |
NOL Carryforwards | 158,758 | 5,202 |
Deferred government grants | 166,041 | 204,522 |
Total deferred tax assets | $ 361,250 | $ 259,384 |
TAXES - Company's Effective Tax
TAXES - Company's Effective Tax Rate (Details) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Reconciles the statutory rates, Percent | |||
China Statutory income tax rate | 25.00% | 25.00% | 25.00% |
Effect of favorable income tax rate in the PRC | (10.50%) | (10.20%) | (10.10%) |
Non-deductible permanent difference | 0.40% | 0.10% | 0.40% |
Effective tax rate | 14.90% | 14.90% | 15.30% |
TAXES - Taxes Payable (Details)
TAXES - Taxes Payable (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
TAXES. | ||
VAT tax payable | $ 644,244 | $ 45,571 |
Corporate income tax payable | 631,590 | 277,132 |
Business and other taxes payable | 107,348 | 25,227 |
Total | $ 1,383,182 | $ 347,930 |
TAXES - Additional Information
TAXES - Additional Information (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Corporate income tax rate (in percent) | 14.90% | 14.90% | 15.30% |
Decrease in taxes due to tax holiday | $ 603,091 | $ 710,083 | $ 623,455 |
Benefit of the tax holidays on net income per share | $ 0.020 | $ 0.024 | $ 0.021 |
Gansu QLS | |||
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Favorable tax rate (as a percent) | 15.00% | 15.00% | 15.00% |
Chengdu QLS | |||
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Favorable tax rate (as a percent) | 15.00% | 15.00% | 15.00% |
Jiuquan Qiming Biotechnology Co., Ltd ("Qiming") | |||
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Favorable tax rate (as a percent) | 10.00% | 10.00% | 10.00% |
Hong Kong | Scenario One | |||
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Favorable tax rate (as a percent) | 8.25% | ||
Base profit for calculating tax rate | $ 2,000,000 | ||
Hong Kong | Scenario Two | |||
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Favorable tax rate (as a percent) | 16.50% | ||
Base profit for calculating tax rate | $ 2,000,000 | ||
China | |||
Investments, Owned, Federal Income Tax Note [Line Items] | |||
Corporate income tax rate (in percent) | 25.00% |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
RELATED PARTY TRANSACTIONS | |||
Sales to affiliated companies | $ 10,134 | $ 94,316 | $ 148,417 |
Purchases from affiliated companies | 27,260 | ||
Advances from affiliated company | $ 33,152 | $ 2,171 |
Lease (Details)
Lease (Details) | 12 Months Ended | |||
Sep. 30, 2020USD ($)lease | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Oct. 01, 2019USD ($) | |
Lease | ||||
Operating Lease Expenses | $ 71,826 | $ 10,470 | $ 6,172 | |
Number of Operating Leases | lease | 2 | |||
Operating Lease Assets: | ||||
Right of use assets-lease | $ 243,874 | $ 163,000 | ||
Operating lease obligations: | ||||
Current operating lease liabilities | 82,468 | |||
Operating lease liabilities, long term | 155,723 | |||
Total Lease liabilities | $ 238,191 | $ 142,000 |
Lease - Weighted Average Remain
Lease - Weighted Average Remaining Lease Term and Discount Rate (Details) | Sep. 30, 2020 |
Lease | |
Remaining Lease Term Operating Lease | 3 years 26 days |
Discount rate | 5.50% |
Lease - Lease Liability Maturit
Lease - Lease Liability Maturities (Details) - USD ($) | Sep. 30, 2020 | Oct. 01, 2019 |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
2021 | $ 61,147 | |
2022 | 61,147 | |
2023 | 61,147 | |
2024 | 29,397 | |
2025 | 29,397 | |
Thereafter | 22,049 | |
Total minimum lease payments | 264,284 | |
Less: Amount representing interest | (26,093) | |
Total Lease liabilities | $ 238,191 | $ 142,000 |
EQUITY (Details)
EQUITY (Details) | Oct. 16, 2019$ / sharesshares | Sep. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | Feb. 07, 2019$ / sharesshares | Sep. 30, 2018shares | Sep. 30, 2017shares |
Class of Stock [Line Items] | ||||||
Ordinary shares, par value | $ / shares | $ 0.00166667 | $ 0.00166667 | ||||
Ordinary shares, shares authorized | 100,000,000 | 100,000,000 | ||||
Ordinary shares, shares issued | 30,000,000 | 30,000,000 | ||||
Ordinary shares, shares outstanding | 30,000,000 | 30,000,000 | ||||
Statutory Reserve | $ | $ 2,200,786 | $ 1,773,817 | ||||
Ordinary Shares | ||||||
Class of Stock [Line Items] | ||||||
Ordinary shares, par value | $ / shares | $ 0.001 | $ 0.001 | ||||
Ordinary shares, shares authorized | 50,000,000 | 50,000,000 | ||||
Ordinary shares, shares issued | 30,000,000 | 50,000,000 | ||||
Stock split ratio | 0.59 | |||||
Ordinary shares, shares outstanding | 30,000,000 | 50,000 | 50,000 | 50,000 | 50,000 | |
Ordinary Shares | Maximum | ||||||
Class of Stock [Line Items] | ||||||
Ordinary shares, par value | $ / shares | $ 0.00166667 | |||||
Ordinary shares, shares authorized | 100,000,000 | |||||
Ordinary shares, shares issued | 30,000,000 | |||||
Ordinary shares, shares outstanding | 30,000,000 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) | 12 Months Ended | ||
Sep. 30, 2020USD ($)segment | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | |
Segment Reporting Information [Line Items] | |||
Number of operating segments | segment | 3 | ||
Net revenue | $ 50,033,200 | $ 46,096,684 | $ 50,369,013 |
Cost of revenue | 42,494,047 | 36,416,772 | 42,236,773 |
GROSS PROFIT | 7,539,153 | 9,679,912 | 8,132,240 |
Depreciation and amortization | 1,105,587 | 1,188,173 | 1,254,098 |
Capital Expenditures | 449,765 | 616,388 | 1,117,175 |
Total assets | 48,143,138 | 35,268,244 | |
Oxytetracycline & Licorice products and TCMD | |||
Segment Reporting Information [Line Items] | |||
Net revenue | 32,602,384 | 30,149,950 | 33,429,330 |
Cost of revenue | 25,004,712 | 22,324,422 | 26,159,584 |
GROSS PROFIT | 7,597,672 | 7,825,528 | 7,269,746 |
Depreciation and amortization | 886,322 | 985,212 | 1,070,824 |
Capital Expenditures | 377,953 | 331,917 | 628,604 |
Total assets | 34,370,665 | 23,251,452 | |
Fertilizer | |||
Segment Reporting Information [Line Items] | |||
Net revenue | 701,701 | 549,231 | 713,896 |
Cost of revenue | 304,670 | 186,504 | 235,319 |
GROSS PROFIT | 397,031 | 362,727 | 478,577 |
Depreciation and amortization | 38,792 | 38,525 | 38,057 |
Capital Expenditures | 33,914 | 5,598 | 486,501 |
Total assets | 2,438,442 | 2,149,680 | |
Heparin products and Sausage casing | |||
Segment Reporting Information [Line Items] | |||
Net revenue | 16,729,115 | 15,397,503 | 16,225,787 |
Cost of revenue | 17,184,665 | 13,905,846 | 15,841,870 |
GROSS PROFIT | (455,550) | 1,491,657 | 383,917 |
Depreciation and amortization | 180,473 | 164,436 | 145,177 |
Capital Expenditures | 37,898 | 278,873 | $ 16,225,787 |
Total assets | $ 11,334,031 | $ 9,867,112 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | Jan. 15, 2021USD ($)$ / sharesshares | Jan. 14, 2021$ / sharesshares | Feb. 28, 2021CNY (¥) | Feb. 28, 2021USD ($) | Sep. 30, 2020CNY (¥) | Sep. 30, 2020USD ($)$ / shares | Sep. 30, 2019USD ($)$ / shares |
Subsequent Event [Line Items] | |||||||
Ordinary shares, par value | $ 0.00166667 | $ 0.00166667 | |||||
Repayment of loan | $ | $ 4,994,506 | $ 3,635,465 | |||||
Agricultural Development Bank of China ("ADBC") | |||||||
Subsequent Event [Line Items] | |||||||
Repayment of loan | ¥ 10,000,000 | $ 1,500,000 | |||||
Agricultural Development Bank of China ("ADBC") | Subsequent events | |||||||
Subsequent Event [Line Items] | |||||||
Repayment of loan | ¥ 10,000,000 | $ 1,500,000 | |||||
IPO | Subsequent events | |||||||
Subsequent Event [Line Items] | |||||||
Ordinary shares issued | shares | 5,000,000 | ||||||
Ordinary shares, par value | $ 0.00166667 | ||||||
Ordinary shares, price per share | $ 5 | ||||||
Net proceeds from IPO | $ | $ 25,728,401.50 | ||||||
Over-allotment option | Subsequent events | |||||||
Subsequent Event [Line Items] | |||||||
Ordinary shares issued | shares | 750,000 | ||||||
Ordinary shares, par value | $ 5 |