Document and Entity Information
Document and Entity Information | 6 Months Ended |
Mar. 31, 2024 | |
Document and Entity Information [Abstract] | |
Document Type | 6-K |
Document Period End Date | Mar. 31, 2024 |
Entity Registrant Name | QILIAN INTERNATIONAL HOLDING GROUP LIMITED |
Entity Central Index Key | 0001779578 |
Current Fiscal Year End Date | --09-30 |
Document Fiscal Year Focus | 2024 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2024 | Sep. 30, 2023 |
CURRENT ASSETS: | ||
Cash and cash equivalent | $ 10,345,332 | $ 7,476,247 |
Short term investment | 1,000,000 | |
Accounts receivable, net | 717,404 | 1,975,716 |
Bank acceptance notes receivable | 1,876,510 | 4,131,392 |
Inventories, net | 4,650,721 | 4,991,435 |
Prepayment to suppliers, net | 270,002 | 708,248 |
Investment in trading securities | 15,009,946 | 13,943,019 |
Other current assets | 456,505 | 286,564 |
TOTAL CURRENT ASSETS | 33,326,420 | 34,512,621 |
Property, plant and equipment, net | 8,761,074 | 9,143,583 |
Construction in progress | 3,646,219 | 2,867,683 |
Intangible assets, net | 3,418,483 | 3,423,582 |
Long term investment | 606,005 | |
Right-of-use assets | 47,672 | 59,300 |
Deferred tax assets | 11,488 | 10,778 |
Prepayments for property and equipment | 641,014 | 634,442 |
TOTAL ASSETS | 49,852,370 | 51,257,994 |
CURRENT LIABILITIES: | ||
Bank loans | 479,715 | |
Accounts payable | 2,672,052 | 3,592,687 |
Contract liabilities | 392,518 | 1,028,318 |
Deferred government grants-current | 77,608 | 76,812 |
Taxes payable | 302,345 | 203,498 |
Lease liabilities, current | 83,089 | 73,560 |
Accrued expenses and other payables | 1,201,789 | 1,205,549 |
TOTAL CURRENT LIABILITIES | 4,729,401 | 6,660,139 |
LONG TERM LIABILITIES | ||
Non-current lease liabilities, noncurrent | 17,667 | 24,575 |
Deferred government grants - noncurrent | 184,328 | 221,879 |
TOTAL LIABILITIES | 4,931,396 | 6,906,593 |
Commitments and contingencies | ||
EQUITY: | ||
Ordinary Shares, $0.00166667 par value, 100,000,000 shares authorized, 35,750,000 and 35,750,000 Ordinary Shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively | 59,583 | 59,583 |
Additional paid-in capital | 36,410,931 | 36,410,931 |
Statutory Reserve | 3,212,308 | 3,162,333 |
Retained earnings | 6,260,866 | 5,896,373 |
Accumulated other comprehensive loss | (2,511,829) | (2,737,087) |
Total shareholders' equity attributable to Qilian International | 43,431,859 | 42,792,133 |
Noncontrolling interests | 1,489,115 | 1,559,268 |
TOTAL EQUITY | 44,920,974 | 44,351,401 |
TOTAL LIABILITIES AND EQUITY | $ 49,852,370 | $ 51,257,994 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2024 | Sep. 30, 2023 |
Condensed 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 | 35,750,000 | 35,750,000 |
Ordinary Shares, shares outstanding | 35,750,000 | 35,750,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) | 6 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | |
Condensed Consolidated Statements of Operations and Comprehensive Income | |||
NET REVENUE | $ 12,562,599 | $ 29,163,616 | $ 32,086,522 |
COST OF REVENUE | 11,148,577 | 26,868,870 | 28,584,031 |
GROSS PROFIT | 1,414,022 | 2,294,746 | 3,502,491 |
SELLING, GENERAL AND ADMINISTRATIVE, RESEARCH AND DEVELOPMENT EXPENSES | 2,093,110 | 2,084,115 | 2,275,246 |
INCOME (LOSS) FROM OPERATIONS | (679,088) | 210,631 | 1,227,245 |
Other income (expenses) | |||
Interest income (expense), net | 57,782 | 32,701 | 18,772 |
Investment income (loss) | 966,711 | 217,593 | (958,167) |
Grant income | 39,975 | 96,259 | 59,225 |
Other income (expenses) | (44,664) | 130,450 | 22,759 |
Total Other income (expense) | 1,019,804 | 477,003 | (857,411) |
INCOME BEFORE INCOME TAX PROVISION | 340,716 | 687,634 | 369,834 |
PROVISION FOR INCOME TAXES | 11,936 | 248,254 | 120,153 |
NET INCOME | 328,780 | 439,380 | 249,681 |
Less: net income (loss) attributable to non-controlling interest | (85,688) | (56,141) | 161,819 |
NET INCOME (LOSS) ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED | 414,468 | 495,521 | 87,862 |
OTHER COMPREHENSIVE INCOME | |||
Foreign currency translation adjustment | 240,793 | 1,148,573 | 589,156 |
COMPREHENSIVE INCOME | 569,573 | 1,587,953 | 838,837 |
Less: comprehensive income (loss) attributable to non - controlling interests | (70,153) | 6,741 | 219,732 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO QILIAN INTERNATIONAL HOLDING GROUP LIMITED | $ 639,726 | $ 1,581,212 | $ 619,105 |
Earnings (loss) per common share - basic | $ 0.01 | $ 0.01 | $ 0 |
Earnings (loss) per common share - diluted | $ 0.01 | $ 0.01 | $ 0 |
Weighted average shares - basic | 35,750,000 | 35,750,000 | 35,750,000 |
Weighted average shares - diluted | 35,750,000 | 35,750,000 | 35,750,000 |
Condensed Consolidated Statem_2
Condensed 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, 2021 | $ 59,583 | $ 36,390,931 | $ 14,693,905 | $ 2,857,121 | $ 857,066 | $ 54,858,606 | $ 1,809,852 | $ 56,668,458 |
Balance at beginning (in shares) at Sep. 30, 2021 | 35,750,000 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income for the period | 87,862 | 87,862 | 161,819 | 249,681 | ||||
Appropriation for statutory reserve | (217,386) | 217,386 | ||||||
Foreign currency translation adjustment | 531,243 | 531,243 | 57,913 | 589,156 | ||||
Balance at ending at Mar. 31, 2022 | $ 59,583 | 36,410,931 | 14,564,381 | 3,074,507 | 1,388,309 | 55,477,911 | 2,029,584 | 57,507,295 |
Balance at ending (in shares) at Mar. 31, 2022 | 35,750,000 | |||||||
Balance at beginning at Sep. 30, 2022 | $ 59,583 | 36,410,931 | 15,509,177 | 3,118,542 | (2,046,091) | 53,052,142 | 1,911,394 | 54,963,536 |
Balance at beginning (in shares) at Sep. 30, 2022 | 35,750,000 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income for the period | 495,521 | 495,521 | (56,141) | 439,380 | ||||
Acquisition of equity interest from unrelated third party shareholders | (28,669) | (28,669) | ||||||
Appropriation for statutory reserve | (130,774) | 130,774 | ||||||
Dividend | (1,787,517) | (1,787,517) | (1,787,517) | |||||
Foreign currency translation adjustment | 1,085,690 | 1,085,690 | 62,883 | 1,148,573 | ||||
Balance at ending at Mar. 31, 2023 | $ 59,583 | 36,410,931 | 14,086,407 | 3,249,316 | (960,401) | 52,845,836 | 1,889,467 | 54,735,303 |
Balance at ending (in shares) at Mar. 31, 2023 | 35,750,000 | |||||||
Balance at beginning at Sep. 30, 2023 | $ 59,583 | 36,410,931 | 5,896,373 | 3,162,333 | (2,737,087) | 42,792,133 | 1,559,268 | $ 44,351,401 |
Balance at beginning (in shares) at Sep. 30, 2023 | 35,750,000 | 35,750,000 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income for the period | 414,468 | 414,468 | (85,688) | $ 328,780 | ||||
Appropriation for statutory reserve | (49,975) | 49,975 | ||||||
Foreign currency translation adjustment | 225,258 | 225,258 | 15,535 | 240,793 | ||||
Balance at ending at Mar. 31, 2024 | $ 59,583 | $ 36,410,931 | $ 6,260,866 | $ 3,212,308 | $ (2,511,829) | $ 43,431,859 | $ 1,489,115 | $ 44,920,974 |
Balance at ending (in shares) at Mar. 31, 2024 | 35,750,000 | 35,750,000 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash flows - USD ($) | 6 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | |||
Net Income | $ 328,780 | $ 439,380 | $ 249,681 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||
Non-cash operating lease expenses | 12,281 | 13,937 | 25,217 |
Depreciation and amortization | 554,772 | 571,441 | 542,214 |
Provision of doubtful accounts | 62,422 | 1,281 | (25,688) |
Inventory reserve | (785,426) | 397,039 | (108,861) |
Deferred tax expense | (600) | 135,274 | 82,257 |
Unrealized loss (gain) from investment in securities | (1,066,927) | (245,800) | 988,800 |
investment income | 100,216 | 28,207 | (30,633) |
Changes in operating assets and liabilities: | |||
Accounts receivable | 1,220,376 | (728,868) | 1,487,728 |
Bank acceptance notes receivable | 2,304,899 | (1,096,994) | 224,657 |
Bank acceptance notes payable | 1,657,977 | ||
Inventories | 1,179,076 | (2,069,096) | (535,184) |
Prepayment to suppliers | 446,983 | 305,403 | 654,668 |
Other current assets | (229,212) | 1,450,828 | 287,351 |
Accounts payable | (960,861) | (1,069,672) | (1,851,881) |
Contract liabilities | (648,484) | 1,877,996 | 712,649 |
Contract liabilities - related parties | (7,795) | ||
Deferred government grants | (39,975) | (96,259) | (136,176) |
Tax payables | 97,043 | 22,210 | 6,646 |
Accrued expenses and other payables | (16,298) | 7,009 | 4,416 |
Lease liabilities | 1,610 | (26,331) | (40,913) |
Net cash provided by (used in) operating activities | 2,560,675 | (83,015) | 4,187,130 |
Cash flows from investing activities: | |||
Purchase of property and equipment | (786,547) | (716,251) | (1,748,429) |
Purchase of intangible assets | (1,885,870) | ||
Cash received from disposal of long term investment | 1,458,424 | ||
Dividend received | 55,566 | ||
Prepayment for peroty and equipment purchase | (1,689,933) | ||
Purchase of non controlling interest | (28,669) | ||
Net cash provided by (used in) investing activities | 727,443 | (2,630,790) | (3,438,362) |
Cash flows from financing activities: | |||
Proceeds from bank loans | 3,139,126 | ||
Repayment of bank loans | (486,208) | (143,347) | |
Proceeds from (Repayment of) bank notes payable | (972,291) | ||
Dividend paid | (1,787,517) | ||
Net cash provided by (used in) financing activities | (486,208) | (2,903,155) | 3,139,126 |
Effect of exchange rate change on Cash, cash equivalents and restricted cash | 67,175 | 352,153 | 170,904 |
Net increase (decrease) in Cash, cash equivalents and restricted cash | 2,869,085 | (5,264,807) | 4,058,798 |
Cash, cash equivalents and restricted cash at beginning of period | 7,476,247 | 14,979,013 | 12,607,373 |
Cash, cash equivalents and restricted cash at end of period | $ 10,345,332 | 9,714,206 | 16,666,171 |
Supplemental cash flow information | |||
Cash paid for interest | 151,456 | ||
Cash paid for income taxes | $ 26,990 | $ 140,331 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 6 Months Ended |
Mar. 31, 2024 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS Qilian International, its subsidiaries, the VIE and VIE’s subsidiaries (the “Company,” “we,” “us,” “our,” and “QLS”) 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 | 6 Months Ended |
Mar. 31, 2024 | |
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, its subsidiaries, the VIE and VIE’s subsidiaries condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The condensed consolidated financial statements include the financial statements of Qilian International, and its subsidiaries, the VIE and VIE’s subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. See Risks and Uncertainties disclosure for VIE structures in China. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2023 Annual Report on Form 20-F. These interim results are not necessarily indicative of results for the full year. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. The reclassification has no impact on the total assets and total liabilities as of September 30, 2023or on the total cash flows and the consolidated statements of operations and comprehensive income (loss) and change in shareholders' equity for the six months ended March 31, 2024, 2023 and 2022. 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, its subsidiaries, the VIE and VIE’s subsidiaries’ accounting estimates included, but are not limited to: allowance for estimated uncollectible receivables, inventory valuations, impairment of long-lived assets, useful lives of property and equipment and intangible assets, fair value of investment in trading securities, impairment of intangible assets, realization of deferred tax assets and uncertain tax position, and income taxes. Actual results could differ from those estimates. 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. The cash and cash equivalent don’t have withdrawal restrictions. Short-term Investment The Company’s short-term investment include a time deposit which has maturity less than 12 months. Accounts Receivable, net Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The WFOE, the VIE and VIE’s subsidiaries usually grant 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 Company evaluates the creditworthiness of its customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Bank acceptance notes receivable Bank acceptance notes receivable generally due within six months and with specific payment terms and definitive due dates, are comprised of the notes issued by some customers to pay certain outstanding receivable balances to the Company. Bank acceptance notes do not bear interest. From time to time, the Company endorse bank notes receivable to its suppliers as the payment of material purchase. The bank notes receivable is considered sold and derecognized from balance sheets when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the note receivables, and the Company has surrendered control over the transferred note receivable. If the Company does not surrender control, the cash received from the purchaser is account for as a secured borrowing. As of March 31, 2024 and September 30, 2023, bank acceptance notes receivable from customers were $1,876,510 and $4,131,392, respectively. There was $3,003,223 bank acceptance notes receivable endorsed by the companies to make payments that were unmatured as of March 31, 2024 and derecognized from balance sheet. 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 less accumulated depreciation and impairment charge. 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 20–40 years Leasehold improvement Lesser of useful life and lease term Machinery and equipment 3–10 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 statements of operations in other income and expenses. Construction in Progress Construction in progress is comprised of costs related to the capital projects that are not completed and is not depreciated until such time as the subject asset is ready for its intended use. Construction in progress as of March 31, 2024 and September 30, 2023 represents costs of construction incurred for Chongqing’s new manufacturing facilities for heparin products. 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 Operating lease ROU assets and 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. 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. We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheets and the short term lease expense recognized for the years presented are immaterial. Investment in Securities The Company entered into an investment with a iFactors SPC related to shares participating in the Golden Bridge Global Income Opportunities SP (the Fund), an exempted segregated Portfolio Company incorporated in the Cayman Islands and managed by Golden Bridge Capital Management Limited. The Fund primarily invests in bonds offered by private entities (debt securities), globally and also invests in convertible debt securities, publicly traded debt and stock, and governmental fixed income securities. The redemption of such shares for cash can be made with ninety days advance written notice (such written notice period can be extended by the investment manager), except during the lock up period which is initially 24 months and then extended to 36 months, from the initial investment date. The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are recorded as either short term or long term on the Balance Sheet, based on contractual maturity date and are stated at amortized cost. Investment securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value. Investment securities not classified as trading securities or as held-to-maturity securities shall be classified as available-for-sale securities. As of March 31, 2024 and September 30, 2023, the investment consisted of 20,000 units of the Fund. Such securities have been classified as trading securities. The private equity fund is measured at fair value with gains and losses recognized in earnings. For the years ended September 30, 2022 and 2021, as a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of the Fund. NAV is primarily determined based on information provided by external fund administrators. As of September 30, 2023, the management had intention to redeem the investment and it is probable that the investment will be redeemed for an amount different from the NAV. Thus, the fair value of the investment was measured using discounted cash flow method. The fair value of the Fund was $15,009,946 and $13,943,019 as of March 31, 2024 and September 30, 2023, respectively. See Fair Value of Financial Instruments disclosure in this footnote. Long-Term Investment Investments in entity in which the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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, its subsidiaries, the VIE and VIE’s subsidiaries initially record its investment at cost. The Company’s share of investee earnings or losses is recorded in our Consolidated Statements of Operations within Other income (expense). The Company’s interest in the net assets of the investees is included in the equity method investment on the consolidated balance sheets. The Company, its subsidiaries, the VIE and VIE’s subsidiaries evaluate 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, its subsidiaries, the VIE and VIE’s subsidiaries subsequently adjust the carrying amount of the investment to recognize their proportionate share of each equity investee’s net income or loss into earnings after the date of investment, the adjustment of basis difference initially recognized and the other comprehensive income allocated to the Company from the investees. Impairment of Long-lived Assets The Company, its subsidiaries, the VIE and VIE’s subsidiaries review 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 undiscounted 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 March 31, 2024 and September 30, 2023. Transactions with Non-controlling Interests of Subsidiaries The Company, its subsidiaries, the VIE and VIE’s subsidiaries account for a change in ownership interests in its subsidiaries that does not result in a change of control of the subsidiary under the provisions of ASC 810-10-45-23, Consolidation – Other Presentation Matters, which prescribes the accounting for changes in ownership interest that do not result in a change in control of the subsidiary, as defined by GAAP, before and after the transaction. Under this guidance, changes in a controlling shareholder’s ownership interest that do not result in a change of control, as defined by GAAP, in the subsidiary are accounted for as equity transactions. Accordingly, if the controlling shareholder retains control, no gain or loss is recognized in the statements of operations of the controlling shareholder. Similarly, the controlling shareholder will not record any additional acquisition adjustments to reflect its subsequent purchases of additional shares in the subsidiary if there is no change of control. Only a proportional and immediate transfer of carrying value between the controlling and the noncontrolling shareholders occurs based on the respective ownership percentages. For the year ended September 30, 2021, the VIE, Gansu QLS acquired 7.76% of equity interest in Chengdu QLS and its subsidiaries from its shareholders. The equity interest Gansu QLS has in Chengdu QLS increased from 71.75% as of September 30, 2020 to 79.51% as of September 30, 2021. In the year ended September 30, 2023, the Company made 200,000 RMB (equivalent to $28,356) additional investment to acquire 0.2% ownership of Gansu QLS from third party shareholders and the Company’s ownership in VIE increased to 79.71% as of March 31, 2024 and September 30, 2023. 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 49% ownership interest in Zhongqiao E Commerce Limited (“Zhongqiao”), as well as 0.786% ownership interest in Gansu QLS, 20.29% ownership interest in Chengdu QLS and in subsidiaries including Rugao and Chongqing. 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 March 31 September 30, 2024 2023 Gansu QLS $ 202,376 $ 169,574 Chengdu QLS and subsidiaries 1,266,529 1,332,983 Zhongqiao 20,210 56,711 Total $ 1,489,115 $ 1,559,268 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 statements of operations and comprehensive income. Revenue Recognition The Company, its subsidiaries, the VIE and VIE’s subsidiaries recognize 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, its subsidiaries, the VIE and VIE’s subsidiaries perform 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 the WFOE, the VIE and VIE’s subsidiaries’ 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 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. The WFOE, the VIE and VIE’s subsidiaries’ products are sold with no right of return and the WFOE, the VIE and VIE’s subsidiaries do not provide other credits or sales incentives, which would be accounted for as variable consideration. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales. The contract liabilities of the Company consist of advance payments from customers. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities were recognized when the Company receives prepayment from customers resulting from sales contracts. Contract liabilities will be recognized as revenue when the products are delivered. As of March 31, 2024 and September 30, 2023, the Company record advance from customers of $392,518 and $1,028,318, respectively, which will be recognized as revenue upon delivery of the products sold. For the six months ended March 31, 2024 , 2023 and 2022, the beginning balance of contract liabilities of $995,468 and $565,223 were recognized as revenue when the products are delivered. 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 net against the expense and recognized in the consolidated statements of operations 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 operations and comprehensive income in proportion to the useful life of the related assets. Government grants received for the six months ended March 31 2024, 2023 and 2022 were $14,002, $59,360, and $125,724, respectively. Grant income recognized for the six months ended March 31 2024, 2023, and 2022 were $39,975, $96,259 and $59,225, respectively, included in other income within the consolidated statements of operations and comprehensive income. As of March 31, 2024 and September 30, 2023, the deferred government grants were $261,936 and $298,691, respectively. The weighted average remaining periods for the government grant to be recognized were 6.61 years and 6.33 years, respectively. Selling, General and Administrative, Research and Development Expenses Selling, general and administrative, research and development expenses primarily consist of salaries and benefits for employees, shipping expense, utilities, maintenance and repairs expenses, insurance expense, depreciation and amortization expenses, research and development expense, selling and marketing expenses, professional fees, and other operating expenses. The Company, its subsidiaries, the VIE and VIE’s subsidiaries expense 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 six months ended March 31, 2024, 2023 and 2022, total selling, general and administrative, research and development expense were as follows: For the six months ended March 31, 2024 2023 2022 Selling expense $ 229,092 $ 445,154 $ 306,574 General and administrative expense 1,396,655 1,366,888 1,968,672 Research and development expense 467,363 272,073 — Total $ 2,093,110 $ 2,084,115 $ 2,275,246 Advertising Cost Advertising costs are expensed when incurred and are included in selling, general and administrative, research and development expense on the accompanying consolidated statements of operations. The Company incurred $55,240, $48,820 and $13,455 of advertising costs during the six months ended March 31, 2024, 2023 and 2022, respectively. Advertising costs consist primarily of online marketing costs, such as advertising on social networking sites and e-mail marketing campaigns. Income Taxes The Company, its subsidiaries, the VIE and VIE’s subsidiaries account 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, the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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, its subsidiaries, the VIE and VIE’s subsidiaries recognize 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, the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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 the Company, its subsidiaries, the VIE and VIE’s subsidiaries determine that they would be able to realize the deferred tax assets in the future in excess of their net recorded amount, they would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company, its subsidiaries, the VIE and VIE’s subsidiaries record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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, the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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 March 31, 2024 and September 30, 2023. Earnings per Share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the six months ended March 31, 2024, 2023 and 2022, 300,000 underwriter warrants were considered in the diluted EPS calculation using treasury stock method. There were no diluted shares for the six months ended March 31, 2024, 2023 and 2022. The following table sets forth the computation of basic and diluted earnings (loss) per share for the six months ended March 31, 2024, 2023 and 2022: For the six months ended March 31, 2024 2023 2022 Numerator: Net income attributable to ordinary shareholders $ 414,468 $ 495,521 $ 87,862 Denominator: Weighted-average number of ordinary shares outstanding – basic 35,750,000 35,750,000 35,750,000 Weighted-average number of ordinary shares outstanding – diluted 35,750,000 35,750,000 35,750,000 Earnings per share – basic $ 0.01 $ 0.01 $ 0.00 Earnings per share – diluted $ 0.01 $ 0.01 $ 0.00 Stock Based Compensation The Company issued shares for its independent director for the service rendered. Stock-based compensation is estimated at the grant date based on the fair value of the shares and is recognized as expense over the requisite service period of the award. The Company recognizes compensation cost on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. The Company has elected to recognize forfeitures as incurred. 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 currency other than U.S. Dollars 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 statements of operations 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 condensed consolidated financial statements in this report: March 31, 2024 September 30, 2023 Year-end spot rate US$1=RMB 7.2212 US$1=RMB 7.2960 Average rate US$1=RMB 7.1986 US$1=RMB 7.0533 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. For the year ended September 30, 2022, as a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. NAV is primarily determined based on information provided by external fund administrators. The Company’s investments valued at NAV as a practical expedient are private equity funds, which represent the investment in trading securities on the balance sheet. For the year ended September 30, 2023 and six months ended March 31 2024, the Company planned to sell the investment and fair value measurement using NAV as practical expedient is not permitted. The investment is measured using discounted cash flow method and classified as Level 3 in the fair value hierarchy. The discount rate used for the valuation of trading securities was 28% as of September 30, 2023 and March 31, 2024. Cash and cash equivalents, restricted cash, accounts receivable, bank notes receivable, short term investment, advances to suppliers, other current assets, accounts payable, 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, lease liabilities, bank notes payable and other liabilities, including current maturities, approximated their carrying value as of March 31, 2024 and September 30, 2023, respectively. The Company noted no transfers The following is a reconciliation of the beginning and ending balance of the investment in securities measured at fair value on a recurring basis for the six months ended March 31, 2024, 2023 and 2022: As of As of As of March 31, March 31, March 31, 2024 2023 2022 Beginning balance $ 13,943,019 $ 19,470,400 20,323,400 Change in fair value 1,066,927 245,800 (988,800) Ending balance $ 15,009,946 $ 19,716,200 19,334,600 Concentrations and Credit Risk A majority of the Company, its subsidiaries, the VIE and VIE’s subsidiaries’ expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries, the VIE and VIE’s 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, its subsidiaries, the VIE and VIE’s subsidiaries 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 March 31, 2024 and September 30, 2023, $8,660,473 and $6,197,461 of the Company’s cash and cash equivalents and restricted cash were on deposit at financial institutions in the PRC which are protected under Deposit Protection Scheme in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up to RMB500,000 per depositor per Scheme member, including both principal and interest. Cash and cash equivalent of $959,771 and $1,001,568 were deposited at financial institutions in Hong Kong as of March 31, 2024 and September 30, 2023, which are insured by Hong Kong Deposit Board and subject to a certain limitation of HKD 500,000 (approximately $ 65,000). As of March 31, 2024 and September 30, 2023, $725,062 and $277,218 of the Company’s cash were on deposit at financial institutions in the U.S. which were insured by the FDIC subject to certain limitations. The C |
ACCOUNTS RECEIVABLE, NET
ACCOUNTS RECEIVABLE, NET | 6 Months Ended |
Mar. 31, 2024 | |
ACCOUNTS RECEIVABLE, NET | |
ACCOUNTS RECEIVABLE, NET | NOTE 3 – ACCOUNTS RECEIVABLE, NET Accounts receivable consisted of the following: As of As of March 31, 2024 September 30, 2023 Trade accounts receivable $ 785,519 $ 1,981,545 Less: allowances for doubtful accounts (68,115) (5,829) Accounts receivable, net $ 717,404 $ 1,975,716 The change of the allowance for doubtful accounts are as follow: As of As of March 31, 2024 March 31, 2023 Beginning balance $ 5,829 $ 4,373 Addition 62,422 1,281 Exchange rate difference (136) 26 Ending balance $ 68,115 $ 5,680 |
INVENTORY, NET
INVENTORY, NET | 6 Months Ended |
Mar. 31, 2024 | |
INVENTORY, NET | |
INVENTORY, NET | NOTE 4 – INVENTORY, NET Inventories consisted of the following: As of As of March 31, 2024 September 30, 2023 Raw materials $ 2,165,269 $ 2,497,298 Low value consumables 3,577 254,828 Work-in-progress 343,898 237,987 Finished goods 2,249,897 2,887,031 Inventory provision (111,920) (885,709) Total inventory $ 4,650,721 $ 4,991,435 For the six months ended March 31, 2024, 2023 and 2022, the inventory provision expenses (reversal) were $(785,426), $397,039 and (108,861), respectively. |
OTHER CURRENT ASSETS
OTHER CURRENT ASSETS | 6 Months Ended |
Mar. 31, 2024 | |
OTHER CURRENT ASSETS | |
OTHER CURRENT ASSETS | NOTE 5 – OTHER CURRENT ASSETS Other current assets consisted of the following: As of As of March 31, 2024 September 30, 2023 Prepaid expense $ 326,893 $ 39,083 Other receivables 129,612 247,481 Total other current assets $ 456,505 $ 286,564 |
PROPERTY, PLANT AND EQUIPMENT,
PROPERTY, PLANT AND EQUIPMENT, NET | 6 Months Ended |
Mar. 31, 2024 | |
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 March 31, 2024 September 30, 2023 Property and Buildings $ 13,022,964 $ 12,889,450 Machinery and equipment 18,053,537 17,833,560 Automobiles 288,707 285,747 Office and electric equipment 197,196 195,174 Subtotal 31,562,404 31,203,931 Less: accumulated depreciation (22,801,330) (22,060,348) Property and equipment, net $ 8,761,074 $ 9,143,583 Depreciation expense was $514,083, $547,192 and $478,819 for the six months ended March 31, 2024, 2023 and 2022 respectively. Certain properties and equipment have been pledged as collateral under the bank loan agreement as discussed in Note 9. As of March 31, 2024 and September, 30, 2023, Qilian Chengdu made advance payments for property and buildings acquisition for $641,014 and $634,442, respectively, which was recorded in prepayments for property and equipment on the consolidated balance sheets. |
INTANGIBLE ASSETS, NET
INTANGIBLE ASSETS, NET | 6 Months Ended |
Mar. 31, 2024 | |
INTANGIBLE ASSETS, NET | |
INTANGIBLE ASSETS, NET | NOTE 7 – INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: As of As of March 31, 2024 September 30, 2023 Land use rights $ 4,101,384 $ 4,059,336 Software 39,238 38,836 License for drug manufacturing 55,393 54,825 Total 4,196,015 4,152,997 Less: accumulated amortization (777,532) (729,415) Intangible assets, net $ 3,418,483 $ 3,423,582 Amortization expense was $40,689, $24,249, and $63,395 for the six months ended March 31, 2024, 2023 and 2022 respectively. The land use right was pledged for the bank loans as of September 30, 2023. Refer to Note 9. Estimated future amortization expense for intangible assets is as follows: Amortization Year ending September 30, expense 2024 $ 44,822 2025 85,382 2026 85,382 2027 84,990 2028 84,710 Thereafter 3,033,197 $ 3,418,483 |
LONG-TERM INVESTMENT
LONG-TERM INVESTMENT | 6 Months Ended |
Mar. 31, 2024 | |
LONG-TERM INVESTMENT | |
LONG-TERM INVESTMENT | NOTE 8 – LONG-TERM INVESTMENT In July 2017, Moshangfa 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 March 31, 2024 September 30, 2023 Equity method investment: Cost of equity method investment 456,988 452,303 Profit from equity method investment 210,687 208,527 Dividend Distribution received (110,786) (54,825) Investment disposed (456,988) — Loss recognized from disposal (99,901) — Total long-term investment $ — $ 606,005 |
BANK LOANS
BANK LOANS | 6 Months Ended |
Mar. 31, 2024 | |
BANK LOANS. | |
BANK LOANS | NOTE 9 – BANK LOANS In June 2023, Chengdu QLS entered into loan agreement with Chengdu Agriculture and Commercial Bank for RMB 3,500,000 (approximately $ 0.5 million). The loans bear fixed interest rates of 3.9% per annum and matured and paid off in October 2023. The credit was secured by Chengdu QLS’s land use right of approximately $637,000. |
TAXES
TAXES | 6 Months Ended |
Mar. 31, 2024 | |
TAXES | |
TAXES | NOTE 10 –TAXES (a) The Company, its subsidiaries, the VIE and VIE’s subsidiaries are 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 six months ended March 31, 2024, 2023, and 2022, and accordingly no provision for Hong Kong profits tax has been made in these periods. China The WFOE, the VIE and VIE’s 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 and Chengdu QLS are eligible for a favorable income tax rate of 15% for the six months ended March 31, 2024, 2023, and 2022. In accordance with the implementation rules of Corporate Income Tax Law of PRC, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15% with HNTE certificate, subject to a requirement that they re-apply for HNTE status every three years. Gansu QLS is eligible for a favorable income tax rate of 15% for the six months ended March 31, 2024, 2023, and 2022. On January 17, 2019, the State Taxation Administration issued the notice on the scope of small-scale and low-profit corporate income tax preferential policies of the Ministry of Finance and the State Administration of Taxation, [2019] No. 13 for small-scale and low-profit enterprises whose annual taxable income is less than RMB1,000,000 (including RMB1,000,000), approximately $154,000, for the period from January 1, 2019 to December 31, 2020, the income before tax is reduced to 25% as their taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 5%. While for the portion of annual taxable income exceeding RMB1,000,000, approximately $154,000, but not more than RMB3,000,000, approximately $465,000, the income is reduced to 50% as their taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 10%. On April 2, 2021, the State Taxation Administration further reduced the tax for small-scale and low-profit enterprises for the periods from Jan 1, 2021 to December 31, 2023 as following: for entities whose annual taxable income is less than RMB1,000,000 (including RMB1,000,000), approximately $154,000, the income before tax is reduced to 12.5% as its taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 2.5%. While for the portion of annual taxable income exceeding RMB1,000,000, approximately $154,000, but not more than RMB3,000,000, approximately $465,000, the income is reduced to 50% as their taxable income, which is further reduced to 25% starting from January 2022 and enterprise income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 10%, or 5% under the further reduced rate starting from January 2022. The qualifications of small-scale and low-profit enterprises were examined annually by the Tax Bureau. All of the Company’s affiliated entities other than Gansu QLS and Chengdu QLS met the criteria of small-scale and low-profit enterprises. Interim income tax expenses or benefit is recognized based on the Company’s estimated annual effective tax rate, which is based upon the tax rate expected for the full fiscal year applied to the pretax income or loss of the interim period. The Company’s consolidated effective tax rate for the six months ended March 31, 2024 was 3.5%, and differed from the effective China statutory income tax rate of 25.0%, favorable tax rate, tax rate differentials in jurisdictions other than China, and valuation allowance adjustments. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Mar. 31, 2024 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS During the normal course of business, the VIE and VIE’s subsidiaries may make sales to affiliated companies controlled by its major shareholders or subsidiaries. For the six months ended March 31, 2024, 2023 and 2022, the VIE and VIE’s subsidiaries made sales to affiliated companies in the amount of $12,172, Nil, and $117,213 respectively. |
LEASE
LEASE | 6 Months Ended |
Mar. 31, 2024 | |
LEASE | |
LEASE | NOTE 12 – LEASE As of September 30, 2023, the VIE and VIE’s subsidiaries have one factory lease with expiration date through December 2025. For the years ended September 30, 2023, 2022 and 2021, the lease expenses were $30,275, $63,480 and $109,346, respectively. Balance sheet information related to the VIE and VIE’s subsidiaries’ operating leases as of March 31, 2024 and September 30, 2023 was as follows: As of As of March 31, September 30, 2024 2023 Operating Lease Assets: Right-of-use asset $ 47,672 $ 59,300 Total right-of-use asset 47,672 59,300 Lease obligations: Current lease liabilities 83,089 73,560 Non-current lease liabilities 17,667 24,575 Total Lease liabilities $ 100,756 $ 98,135 Remaining Lease Term Operating Lease 1.75 years 2.25 years Discount rate 5.5 % 5.5 % Lease liability maturities as of March 31, 2024, are as follows: Operating, lease For the six months ending September 30, 2024 55,393 For the year ending March 31, 2025 27,696 For the year ending March 31, 2026 20,772 Total minimum lease payments $ 103,861 Less: Imputed interest (3,105) Total $ 100,756 |
SEGMENT REPORTING
SEGMENT REPORTING | 6 Months Ended |
Mar. 31, 2024 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | NOTE 13 – SEGMENT REPORTING The Company, its subsidiaries, the VIE and VIE’s subsidiaries 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 the six months ended March 31, 2024, 2023 and 2022, respectively: For the six months ended March 31, 2024 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 10,755,535 $ 159,199 $ 1,647,865 $ 12,562,599 Cost of revenue 9,501,675 104,591 1,542,311 11,148,577 Gross profit $ 1,253,860 $ 54,608 $ 105,554 $ 1,414,022 Depreciation and amortization $ 444,832 $ 22,857 $ 87,083 $ 554,772 Capital expenditures $ 685,827 $ 23,771 $ 76,949 $ 786,547 For six months ended March 31, 2023 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 18,521,112 $ 752,672 $ 9,889,832 $ 29,163,616 Cost of revenue 16,622,793 365,813 9,880,264 26,868,870 Gross profit $ 1,898,319 $ 386,859 $ 9,568 $ 2,294,746 Depreciation and amortization $ 452,036 $ 22,123 $ 97,282 $ 571,441 Capital expenditures $ 2,570,090 $ 28,098 $ 3,933 $ 2,602,121 For the six months ended March 31, 2022 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 20,150,899 $ 677,274 $ 11,258,349 $ 32,086,522 Cost of revenue 17,531,280 537,227 10,515,524 28,584,031 Gross profit $ 2,619,619 $ 140,047 $ 742,825 $ 3,502,491 Depreciation and amortization $ 473,219 $ 23,597 $ 45,398 $ 542,214 Capital expenditures $ 1,678,558 $ 18,520 $ 51,351 $ 1,748,429 March 31, September 30, 2024 2023 Total Assets Oxytetracycline & Licorice products and TCMD $ 37,965,308 $ 38,382,322 Fertilizer $ 2,948,492 $ 3,291,960 Heparin products and Sausage casing $ 8,938,570 $ 9,583,712 Total $ 49,852,370 $ 51,257,994 |
COMMITMENTS
COMMITMENTS | 6 Months Ended |
Mar. 31, 2024 | |
COMMITMENTS | |
COMMITMENTS | NOTE 14 – COMMITMENTS On July 5, 2021, The Company entered into an investment agreement with Chongqing Jintong Industrial Construction Investment Co., Ltd (“Chongqing Jintong”). The Company agreed to invest for the construction of a factory for manufacturing pig by-products in Chongqing Tongnan High Tech Industrial Zone. As of September 30, 2023, a total of $8.5 million (RMB 60 million) construction contracts has been signed for this project, the Company’s obligation shall be satisfied during the process of construction. As of March 31, 2024, the Company has commitment to pay $2.7 million (RMB 19.6 million) under the investment agreement. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Mar. 31, 2024 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS On April 19, 2024 , the Company’s shareholders approved the increase of the Company’s authorized share capital, with effect from such date as the board of directors of the Company may determine in its sole discretion, from US$166,667 divided into 100,000,000 ordinary shares of par value US$0.00166667 each (each being an “ Ordinary Share Share Capital Increase Class A Ordinary Share (a) 50,000,000 Ordinary Shares be re-designated and re-classified into 50,000,000 preferred shares of par value US$0.00166667 each (each being a “Preferred Share”); (b) 100,000,000 Ordinary Shares be re-designated and re-classified into 100,000,000 Class B Ordinary Shares of par value US$0.00166667 each; and (c) each of the remaining authorized but unissued Ordinary Shares, which is expected to be 314,250,000 be re-designated and re-classified into Class A Ordinary Shares of par value US$0.00166667 each, (the “ Share Capital Reorganization The Company’s management reviewed all material events that have occurred after the balance sheet date through September 15, 2024 on which these financial statements were available to be 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 condensed consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Mar. 31, 2024 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The Company, its subsidiaries, the VIE and VIE’s subsidiaries condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The condensed consolidated financial statements include the financial statements of Qilian International, and its subsidiaries, the VIE and VIE’s subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. See Risks and Uncertainties disclosure for VIE structures in China. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2023 Annual Report on Form 20-F. These interim results are not necessarily indicative of results for the full year. |
Reclassification of Prior Year Presentation | Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. The reclassification has no impact on the total assets and total liabilities as of September 30, 2023or on the total cash flows and the consolidated statements of operations and comprehensive income (loss) and change in shareholders' equity for the six months ended March 31, 2024, 2023 and 2022. |
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, its subsidiaries, the VIE and VIE’s subsidiaries’ accounting estimates included, but are not limited to: allowance for estimated uncollectible receivables, inventory valuations, impairment of long-lived assets, useful lives of property and equipment and intangible assets, fair value of investment in trading securities, impairment of intangible assets, realization of deferred tax assets and uncertain tax position, and income taxes. Actual results could differ from those estimates. |
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. The cash and cash equivalent don’t have withdrawal restrictions. |
Short-term Investment | Short-term Investment The Company’s short-term investment include a time deposit which has maturity less than 12 months. |
Accounts Receivable, net | Accounts Receivable, net Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The WFOE, the VIE and VIE’s subsidiaries usually grant 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 Company evaluates the creditworthiness of its customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. |
Bank acceptance notes receivable | Bank acceptance notes receivable Bank acceptance notes receivable generally due within six months and with specific payment terms and definitive due dates, are comprised of the notes issued by some customers to pay certain outstanding receivable balances to the Company. Bank acceptance notes do not bear interest. From time to time, the Company endorse bank notes receivable to its suppliers as the payment of material purchase. The bank notes receivable is considered sold and derecognized from balance sheets when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the note receivables, and the Company has surrendered control over the transferred note receivable. If the Company does not surrender control, the cash received from the purchaser is account for as a secured borrowing. As of March 31, 2024 and September 30, 2023, bank acceptance notes receivable from customers were $1,876,510 and $4,131,392, respectively. There was $3,003,223 bank acceptance notes receivable endorsed by the companies to make payments that were unmatured as of March 31, 2024 and derecognized from balance sheet. |
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 less accumulated depreciation and impairment charge. 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 20–40 years Leasehold improvement Lesser of useful life and lease term Machinery and equipment 3–10 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 statements of operations in other income and expenses. |
Construction in Progress | Construction in Progress Construction in progress is comprised of costs related to the capital projects that are not completed and is not depreciated until such time as the subject asset is ready for its intended use. Construction in progress as of March 31, 2024 and September 30, 2023 represents costs of construction incurred for Chongqing’s new manufacturing facilities for heparin products. |
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 Operating lease ROU assets and 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. 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. We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheets and the short term lease expense recognized for the years presented are immaterial. |
Investment in Securities | Investment in Securities The Company entered into an investment with a iFactors SPC related to shares participating in the Golden Bridge Global Income Opportunities SP (the Fund), an exempted segregated Portfolio Company incorporated in the Cayman Islands and managed by Golden Bridge Capital Management Limited. The Fund primarily invests in bonds offered by private entities (debt securities), globally and also invests in convertible debt securities, publicly traded debt and stock, and governmental fixed income securities. The redemption of such shares for cash can be made with ninety days advance written notice (such written notice period can be extended by the investment manager), except during the lock up period which is initially 24 months and then extended to 36 months, from the initial investment date. The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are recorded as either short term or long term on the Balance Sheet, based on contractual maturity date and are stated at amortized cost. Investment securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value. Investment securities not classified as trading securities or as held-to-maturity securities shall be classified as available-for-sale securities. As of March 31, 2024 and September 30, 2023, the investment consisted of 20,000 units of the Fund. Such securities have been classified as trading securities. The private equity fund is measured at fair value with gains and losses recognized in earnings. For the years ended September 30, 2022 and 2021, as a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of the Fund. NAV is primarily determined based on information provided by external fund administrators. As of September 30, 2023, the management had intention to redeem the investment and it is probable that the investment will be redeemed for an amount different from the NAV. Thus, the fair value of the investment was measured using discounted cash flow method. The fair value of the Fund was $15,009,946 and $13,943,019 as of March 31, 2024 and September 30, 2023, respectively. See Fair Value of Financial Instruments disclosure in this footnote. |
Long-Term Investment | Long-Term Investment Investments in entity in which the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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, its subsidiaries, the VIE and VIE’s subsidiaries initially record its investment at cost. The Company’s share of investee earnings or losses is recorded in our Consolidated Statements of Operations within Other income (expense). The Company’s interest in the net assets of the investees is included in the equity method investment on the consolidated balance sheets. The Company, its subsidiaries, the VIE and VIE’s subsidiaries evaluate 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, its subsidiaries, the VIE and VIE’s subsidiaries subsequently adjust the carrying amount of the investment to recognize their proportionate share of each equity investee’s net income or loss into earnings after the date of investment, the adjustment of basis difference initially recognized and the other comprehensive income allocated to the Company from the investees. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company, its subsidiaries, the VIE and VIE’s subsidiaries review 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 undiscounted 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 March 31, 2024 and September 30, 2023. |
Transactions with Non-controlling Interests of Subsidiaries | Transactions with Non-controlling Interests of Subsidiaries The Company, its subsidiaries, the VIE and VIE’s subsidiaries account for a change in ownership interests in its subsidiaries that does not result in a change of control of the subsidiary under the provisions of ASC 810-10-45-23, Consolidation – Other Presentation Matters, which prescribes the accounting for changes in ownership interest that do not result in a change in control of the subsidiary, as defined by GAAP, before and after the transaction. Under this guidance, changes in a controlling shareholder’s ownership interest that do not result in a change of control, as defined by GAAP, in the subsidiary are accounted for as equity transactions. Accordingly, if the controlling shareholder retains control, no gain or loss is recognized in the statements of operations of the controlling shareholder. Similarly, the controlling shareholder will not record any additional acquisition adjustments to reflect its subsequent purchases of additional shares in the subsidiary if there is no change of control. Only a proportional and immediate transfer of carrying value between the controlling and the noncontrolling shareholders occurs based on the respective ownership percentages. For the year ended September 30, 2021, the VIE, Gansu QLS acquired 7.76% of equity interest in Chengdu QLS and its subsidiaries from its shareholders. The equity interest Gansu QLS has in Chengdu QLS increased from 71.75% as of September 30, 2020 to 79.51% as of September 30, 2021. In the year ended September 30, 2023, the Company made 200,000 RMB (equivalent to $28,356) additional investment to acquire 0.2% ownership of Gansu QLS from third party shareholders and the Company’s ownership in VIE increased to 79.71% as of March 31, 2024 and September 30, 2023. |
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 49% ownership interest in Zhongqiao E Commerce Limited (“Zhongqiao”), as well as 0.786% ownership interest in Gansu QLS, 20.29% ownership interest in Chengdu QLS and in subsidiaries including Rugao and Chongqing. 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 March 31 September 30, 2024 2023 Gansu QLS $ 202,376 $ 169,574 Chengdu QLS and subsidiaries 1,266,529 1,332,983 Zhongqiao 20,210 56,711 Total $ 1,489,115 $ 1,559,268 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 statements of operations and comprehensive income. |
Revenue Recognition | Revenue Recognition The Company, its subsidiaries, the VIE and VIE’s subsidiaries recognize 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, its subsidiaries, the VIE and VIE’s subsidiaries perform 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 the WFOE, the VIE and VIE’s subsidiaries’ 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 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. The WFOE, the VIE and VIE’s subsidiaries’ products are sold with no right of return and the WFOE, the VIE and VIE’s subsidiaries do not provide other credits or sales incentives, which would be accounted for as variable consideration. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales. The contract liabilities of the Company consist of advance payments from customers. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities were recognized when the Company receives prepayment from customers resulting from sales contracts. Contract liabilities will be recognized as revenue when the products are delivered. As of March 31, 2024 and September 30, 2023, the Company record advance from customers of $392,518 and $1,028,318, respectively, which will be recognized as revenue upon delivery of the products sold. For the six months ended March 31, 2024 , 2023 and 2022, the beginning balance of contract liabilities of $995,468 and $565,223 were recognized as revenue when the products are delivered. 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 net against the expense and recognized in the consolidated statements of operations 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 operations and comprehensive income in proportion to the useful life of the related assets. Government grants received for the six months ended March 31 2024, 2023 and 2022 were $14,002, $59,360, and $125,724, respectively. Grant income recognized for the six months ended March 31 2024, 2023, and 2022 were $39,975, $96,259 and $59,225, respectively, included in other income within the consolidated statements of operations and comprehensive income. As of March 31, 2024 and September 30, 2023, the deferred government grants were $261,936 and $298,691, respectively. The weighted average remaining periods for the government grant to be recognized were 6.61 years and 6.33 years, respectively. |
Selling, General and Administrative, Research and Development Expenses | Selling, General and Administrative, Research and Development Expenses Selling, general and administrative, research and development expenses primarily consist of salaries and benefits for employees, shipping expense, utilities, maintenance and repairs expenses, insurance expense, depreciation and amortization expenses, research and development expense, selling and marketing expenses, professional fees, and other operating expenses. The Company, its subsidiaries, the VIE and VIE’s subsidiaries expense 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 six months ended March 31, 2024, 2023 and 2022, total selling, general and administrative, research and development expense were as follows: For the six months ended March 31, 2024 2023 2022 Selling expense $ 229,092 $ 445,154 $ 306,574 General and administrative expense 1,396,655 1,366,888 1,968,672 Research and development expense 467,363 272,073 — Total $ 2,093,110 $ 2,084,115 $ 2,275,246 |
Advertising Cost | Advertising Cost Advertising costs are expensed when incurred and are included in selling, general and administrative, research and development expense on the accompanying consolidated statements of operations. The Company incurred $55,240, $48,820 and $13,455 of advertising costs during the six months ended March 31, 2024, 2023 and 2022, respectively. Advertising costs consist primarily of online marketing costs, such as advertising on social networking sites and e-mail marketing campaigns. |
Income Taxes | Income Taxes The Company, its subsidiaries, the VIE and VIE’s subsidiaries account 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, the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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, its subsidiaries, the VIE and VIE’s subsidiaries recognize 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, the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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 the Company, its subsidiaries, the VIE and VIE’s subsidiaries determine that they would be able to realize the deferred tax assets in the future in excess of their net recorded amount, they would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company, its subsidiaries, the VIE and VIE’s subsidiaries record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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, the Company, its subsidiaries, the VIE and VIE’s subsidiaries 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 March 31, 2024 and September 30, 2023. |
Earnings per Share | Earnings per Share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the six months ended March 31, 2024, 2023 and 2022, 300,000 underwriter warrants were considered in the diluted EPS calculation using treasury stock method. There were no diluted shares for the six months ended March 31, 2024, 2023 and 2022. The following table sets forth the computation of basic and diluted earnings (loss) per share for the six months ended March 31, 2024, 2023 and 2022: For the six months ended March 31, 2024 2023 2022 Numerator: Net income attributable to ordinary shareholders $ 414,468 $ 495,521 $ 87,862 Denominator: Weighted-average number of ordinary shares outstanding – basic 35,750,000 35,750,000 35,750,000 Weighted-average number of ordinary shares outstanding – diluted 35,750,000 35,750,000 35,750,000 Earnings per share – basic $ 0.01 $ 0.01 $ 0.00 Earnings per share – diluted $ 0.01 $ 0.01 $ 0.00 |
Stock Based Compensation | Stock Based Compensation The Company issued shares for its independent director for the service rendered. Stock-based compensation is estimated at the grant date based on the fair value of the shares and is recognized as expense over the requisite service period of the award. The Company recognizes compensation cost on a straight-line basis over the requisite service period of the award, which is generally the award vesting term. The Company has elected to recognize forfeitures as incurred. |
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 currency other than U.S. Dollars 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 statements of operations 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 condensed consolidated financial statements in this report: March 31, 2024 September 30, 2023 Year-end spot rate US$1=RMB 7.2212 US$1=RMB 7.2960 Average rate US$1=RMB 7.1986 US$1=RMB 7.0533 |
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. For the year ended September 30, 2022, as a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. NAV is primarily determined based on information provided by external fund administrators. The Company’s investments valued at NAV as a practical expedient are private equity funds, which represent the investment in trading securities on the balance sheet. For the year ended September 30, 2023 and six months ended March 31 2024, the Company planned to sell the investment and fair value measurement using NAV as practical expedient is not permitted. The investment is measured using discounted cash flow method and classified as Level 3 in the fair value hierarchy. The discount rate used for the valuation of trading securities was 28% as of September 30, 2023 and March 31, 2024. Cash and cash equivalents, restricted cash, accounts receivable, bank notes receivable, short term investment, advances to suppliers, other current assets, accounts payable, 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, lease liabilities, bank notes payable and other liabilities, including current maturities, approximated their carrying value as of March 31, 2024 and September 30, 2023, respectively. The Company noted no transfers The following is a reconciliation of the beginning and ending balance of the investment in securities measured at fair value on a recurring basis for the six months ended March 31, 2024, 2023 and 2022: As of As of As of March 31, March 31, March 31, 2024 2023 2022 Beginning balance $ 13,943,019 $ 19,470,400 20,323,400 Change in fair value 1,066,927 245,800 (988,800) Ending balance $ 15,009,946 $ 19,716,200 19,334,600 |
Concentrations and Credit Risk | Concentrations and Credit Risk A majority of the Company, its subsidiaries, the VIE and VIE’s subsidiaries’ expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries, the VIE and VIE’s 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, its subsidiaries, the VIE and VIE’s subsidiaries 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 March 31, 2024 and September 30, 2023, $8,660,473 and $6,197,461 of the Company’s cash and cash equivalents and restricted cash were on deposit at financial institutions in the PRC which are protected under Deposit Protection Scheme in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up to RMB500,000 per depositor per Scheme member, including both principal and interest. Cash and cash equivalent of $959,771 and $1,001,568 were deposited at financial institutions in Hong Kong as of March 31, 2024 and September 30, 2023, which are insured by Hong Kong Deposit Board and subject to a certain limitation of HKD 500,000 (approximately $ 65,000). As of March 31, 2024 and September 30, 2023, $725,062 and $277,218 of the Company’s cash were on deposit at financial institutions in the U.S. which were insured by the FDIC subject to certain limitations. The Company has not experienced any losses in such accounts. 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 six months ended March 31, 2024, two customers accounted for 16% and 14% of total revenue, respectively and two vendors accounted for 13% and 13% of total purchase. As of March 31, 2024, two major customer’s account receivable accounted for 58% and 15% of the total account receivable, respectively, and no vendor accounted for more than 10% of the total accounts payable outstanding. For the six months ended March 31, 2023, two customers accounted for 16% and 15% of total revenue, respectively and no vendor accounted more than 10% of total purchase. For the six months ended March 31, 2022, two customers accounted for 17% and 11% of total revenue, respectively and two vendors accounted for $25% and 19% of total purchase, respectively. 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 There were no new accounting standards or updates during the three months ended March 31, 2024 that would have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of estimated useful lives of the assets | Items Useful life Property and buildings 20–40 years Leasehold improvement Lesser of useful life and lease term Machinery and equipment 3–10 years Automobiles 3–5 years Office and electric equipment 3–5 years |
Schedule of estimated useful lives of intangible assets | 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 March 31 September 30, 2024 2023 Gansu QLS $ 202,376 $ 169,574 Chengdu QLS and subsidiaries 1,266,529 1,332,983 Zhongqiao 20,210 56,711 Total $ 1,489,115 $ 1,559,268 |
Schedule of selling, general and administrative, research and development expense | For the six months ended March 31, 2024 2023 2022 Selling expense $ 229,092 $ 445,154 $ 306,574 General and administrative expense 1,396,655 1,366,888 1,968,672 Research and development expense 467,363 272,073 — Total $ 2,093,110 $ 2,084,115 $ 2,275,246 |
Schedule of computation of basic and diluted earnings (loss) per share | The following table sets forth the computation of basic and diluted earnings (loss) per share for the six months ended March 31, 2024, 2023 and 2022: For the six months ended March 31, 2024 2023 2022 Numerator: Net income attributable to ordinary shareholders $ 414,468 $ 495,521 $ 87,862 Denominator: Weighted-average number of ordinary shares outstanding – basic 35,750,000 35,750,000 35,750,000 Weighted-average number of ordinary shares outstanding – diluted 35,750,000 35,750,000 35,750,000 Earnings per share – basic $ 0.01 $ 0.01 $ 0.00 Earnings per share – diluted $ 0.01 $ 0.01 $ 0.00 |
Schedule of currency exchange rates | March 31, 2024 September 30, 2023 Year-end spot rate US$1=RMB 7.2212 US$1=RMB 7.2960 Average rate US$1=RMB 7.1986 US$1=RMB 7.0533 |
Schedule of reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on recurring basis | The following is a reconciliation of the beginning and ending balance of the investment in securities measured at fair value on a recurring basis for the six months ended March 31, 2024, 2023 and 2022: As of As of As of March 31, March 31, March 31, 2024 2023 2022 Beginning balance $ 13,943,019 $ 19,470,400 20,323,400 Change in fair value 1,066,927 245,800 (988,800) Ending balance $ 15,009,946 $ 19,716,200 19,334,600 |
ACCOUNTS RECEIVABLE, NET (Table
ACCOUNTS RECEIVABLE, NET (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
ACCOUNTS RECEIVABLE, NET | |
Schedule of accounts receivable | As of As of March 31, 2024 September 30, 2023 Trade accounts receivable $ 785,519 $ 1,981,545 Less: allowances for doubtful accounts (68,115) (5,829) Accounts receivable, net $ 717,404 $ 1,975,716 |
Schedule of allowance for doubtful accounts | As of As of March 31, 2024 March 31, 2023 Beginning balance $ 5,829 $ 4,373 Addition 62,422 1,281 Exchange rate difference (136) 26 Ending balance $ 68,115 $ 5,680 |
INVENTORY, NET (Tables)
INVENTORY, NET (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
INVENTORY, NET | |
Schedule of inventories | As of As of March 31, 2024 September 30, 2023 Raw materials $ 2,165,269 $ 2,497,298 Low value consumables 3,577 254,828 Work-in-progress 343,898 237,987 Finished goods 2,249,897 2,887,031 Inventory provision (111,920) (885,709) Total inventory $ 4,650,721 $ 4,991,435 |
OTHER CURRENT ASSETS (Tables)
OTHER CURRENT ASSETS (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
OTHER CURRENT ASSETS | |
Schedule of other current assets | As of As of March 31, 2024 September 30, 2023 Prepaid expense $ 326,893 $ 39,083 Other receivables 129,612 247,481 Total other current assets $ 456,505 $ 286,564 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
PROPERTY, PLANT AND EQUIPMENT, NET | |
Schedule of property and equipment | As of As of March 31, 2024 September 30, 2023 Property and Buildings $ 13,022,964 $ 12,889,450 Machinery and equipment 18,053,537 17,833,560 Automobiles 288,707 285,747 Office and electric equipment 197,196 195,174 Subtotal 31,562,404 31,203,931 Less: accumulated depreciation (22,801,330) (22,060,348) Property and equipment, net $ 8,761,074 $ 9,143,583 |
INTANGIBLE ASSETS, NET (Tables)
INTANGIBLE ASSETS, NET (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
INTANGIBLE ASSETS, NET | |
Schedule of intangible assets, net | As of As of March 31, 2024 September 30, 2023 Land use rights $ 4,101,384 $ 4,059,336 Software 39,238 38,836 License for drug manufacturing 55,393 54,825 Total 4,196,015 4,152,997 Less: accumulated amortization (777,532) (729,415) Intangible assets, net $ 3,418,483 $ 3,423,582 |
Schedule of estimated future amortization expense for intangible assets | Amortization Year ending September 30, expense 2024 $ 44,822 2025 85,382 2026 85,382 2027 84,990 2028 84,710 Thereafter 3,033,197 $ 3,418,483 |
LONG-TERM INVESTMENT (Tables)
LONG-TERM INVESTMENT (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
LONG-TERM INVESTMENT | |
Schedule of equity method investment | As of As of March 31, 2024 September 30, 2023 Equity method investment: Cost of equity method investment 456,988 452,303 Profit from equity method investment 210,687 208,527 Dividend Distribution received (110,786) (54,825) Investment disposed (456,988) — Loss recognized from disposal (99,901) — Total long-term investment $ — $ 606,005 |
LEASE (Tables)
LEASE (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
LEASE | |
Schedule of weighted average remaining lease term and discount rate | As of As of March 31, September 30, 2024 2023 Operating Lease Assets: Right-of-use asset $ 47,672 $ 59,300 Total right-of-use asset 47,672 59,300 Lease obligations: Current lease liabilities 83,089 73,560 Non-current lease liabilities 17,667 24,575 Total Lease liabilities $ 100,756 $ 98,135 Remaining Lease Term Operating Lease 1.75 years 2.25 years Discount rate 5.5 % 5.5 % |
Schedule of lease liability maturities | Lease liability maturities as of March 31, 2024, are as follows: Operating, lease For the six months ending September 30, 2024 55,393 For the year ending March 31, 2025 27,696 For the year ending March 31, 2026 20,772 Total minimum lease payments $ 103,861 Less: Imputed interest (3,105) Total $ 100,756 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 6 Months Ended |
Mar. 31, 2024 | |
SEGMENT REPORTING | |
Schedule of segment information | For the six months ended March 31, 2024 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 10,755,535 $ 159,199 $ 1,647,865 $ 12,562,599 Cost of revenue 9,501,675 104,591 1,542,311 11,148,577 Gross profit $ 1,253,860 $ 54,608 $ 105,554 $ 1,414,022 Depreciation and amortization $ 444,832 $ 22,857 $ 87,083 $ 554,772 Capital expenditures $ 685,827 $ 23,771 $ 76,949 $ 786,547 For six months ended March 31, 2023 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 18,521,112 $ 752,672 $ 9,889,832 $ 29,163,616 Cost of revenue 16,622,793 365,813 9,880,264 26,868,870 Gross profit $ 1,898,319 $ 386,859 $ 9,568 $ 2,294,746 Depreciation and amortization $ 452,036 $ 22,123 $ 97,282 $ 571,441 Capital expenditures $ 2,570,090 $ 28,098 $ 3,933 $ 2,602,121 For the six months ended March 31, 2022 Oxytetracycline & Licorice Heparin products and products and TCMD Fertilizer Sausage casing Total Revenue $ 20,150,899 $ 677,274 $ 11,258,349 $ 32,086,522 Cost of revenue 17,531,280 537,227 10,515,524 28,584,031 Gross profit $ 2,619,619 $ 140,047 $ 742,825 $ 3,502,491 Depreciation and amortization $ 473,219 $ 23,597 $ 45,398 $ 542,214 Capital expenditures $ 1,678,558 $ 18,520 $ 51,351 $ 1,748,429 March 31, September 30, 2024 2023 Total Assets Oxytetracycline & Licorice products and TCMD $ 37,965,308 $ 38,382,322 Fertilizer $ 2,948,492 $ 3,291,960 Heparin products and Sausage casing $ 8,938,570 $ 9,583,712 Total $ 49,852,370 $ 51,257,994 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Bank acceptance notes receivable (Details) - USD ($) | Mar. 31, 2024 | Sep. 30, 2023 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Bank acceptance notes receivable | $ 1,876,510 | $ 4,131,392 |
Unmatured Bank Acceptance Notes Receivables | $ 3,003,223 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) | Mar. 31, 2024 |
Minimum | Property and buildings | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 20 years |
Minimum | Machinery and equipment | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 3 years |
Minimum | Automobiles | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 3 years |
Minimum | Office and electric equipment | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 3 years |
Maximum | Property and buildings | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 40 years |
Maximum | Machinery and equipment | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 10 years |
Maximum | Automobiles | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 5 years |
Maximum | Office and electric equipment | |
Property, Plant and Equipment | |
Estimated useful lives (in years) | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets (Details) | Mar. 31, 2024 |
Land use rights | |
Intangible Assets, Net | |
Estimated useful lives (in years) | 50 years |
Software | |
Intangible Assets, Net | |
Estimated useful lives (in years) | 10 years |
License for drug manufacturing | |
Intangible Assets, Net | |
Estimated useful lives (in years) | 10 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) | 6 Months Ended | 12 Months Ended | |||
Oct. 01, 2019 | Mar. 31, 2024 USD ($) item | Mar. 31, 2023 USD ($) | Mar. 31, 2022 USD ($) | Sep. 30, 2023 USD ($) item | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||
Lease, Practical expedients | true | ||||
Government grants | $ 14,002 | $ 59,360 | $ 125,724 | ||
Grant income | 39,975 | 96,259 | 59,225 | ||
Deferred government grants | $ 261,936 | $ 298,691 | |||
Weighted average remaining periods for the government grant to be recognized | 6 years 7 months 9 days | 6 years 3 months 29 days | |||
Research and development expense | $ 467,363 | 272,073 | |||
Advertising costs | $ 55,240 | $ 48,820 | $ 13,455 | ||
Short term investment | $ 1,000,000 | ||||
Number of units in the fund | item | 20,000 | 20,000 | |||
Fair value of fund | $ 15,009,946 | $ 13,943,019 | |||
Impairment of long-lived assets | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Non-controlling interests (Details) | 12 Months Ended | ||||
Sep. 30, 2023 USD ($) | Sep. 30, 2023 CNY (¥) | Mar. 31, 2024 USD ($) | Sep. 30, 2021 | Sep. 30, 2020 | |
Noncontrolling Interest | |||||
Noncontrolling interests | $ 1,559,268 | $ 1,489,115 | |||
Payments to acquire businesses and interest in affiliates | $ 28,356 | ¥ 200,000 | |||
Percentage of additional equity interest acquired | 0.20% | 0.20% | |||
Chengdu QLS and subsidiaries | |||||
Noncontrolling Interest | |||||
Acquired equity interest, subsidiaries, percentage | 7.76% | ||||
Chengdu QLS and subsidiaries | |||||
Noncontrolling Interest | |||||
Ownership interest acquired (in percent) | 79.51% | 71.75% | |||
Gansu QLS | |||||
Noncontrolling Interest | |||||
Ownership interest acquired (in percent) | 79.71% | 79.71% | |||
Gansu QLS | |||||
Noncontrolling Interest | |||||
Ownership interest (in percent) | 0.786% | ||||
Noncontrolling interests | $ 169,574 | $ 202,376 | |||
Chengdu QLS and subsidiaries | |||||
Noncontrolling Interest | |||||
Ownership interest (in percent) | 20.29% | ||||
Noncontrolling interests | 1,332,983 | $ 1,266,529 | |||
Zhongqiao Youguan E Commerce Service Co. Ltd | |||||
Noncontrolling Interest | |||||
Ownership interest (in percent) | 49% | ||||
Noncontrolling interests | $ 56,711 | $ 20,210 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | 6 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Sep. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Contract liabilities | $ 392,518 | $ 1,028,318 | |
Contract liabilities, Revenue recognized | $ 995,468 | $ 565,223 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Selling, general and administrative, research and development expense (Details) - USD ($) | 6 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Selling expense | $ 229,092 | $ 445,154 | $ 306,574 |
General and administrative expense | 1,396,655 | 1,366,888 | 1,968,672 |
Research and development expense | 467,363 | 272,073 | |
Total | $ 2,093,110 | $ 2,084,115 | $ 2,275,246 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Computation of basic and diluted earnings (loss) per share (Details) - USD ($) | 6 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | |
Numerator: | |||
Net income attributable to ordinary shareholders | $ 414,468 | $ 495,521 | $ 87,862 |
Denominator: | |||
Weighted-average number of ordinary shares outstanding - basic | 35,750,000 | 35,750,000 | 35,750,000 |
Weighted-average number of ordinary shares outstanding - diluted | 35,750,000 | 35,750,000 | 35,750,000 |
Earnings per share - basic | $ 0.01 | $ 0.01 | $ 0 |
Earnings per share - diluted | $ 0.01 | $ 0.01 | $ 0 |
Underwriter warrants considered in diluted EPS calculation using treasury stock method | 300,000 | 300,000 | 300,000 |
Diluted shares | 0 | 0 | 0 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign Currency Translation (Details) - ¥ / $ | Mar. 31, 2024 | Sep. 30, 2023 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Year-end spot rate | 7.2212 | 7.2960 |
Average rate | 7.1986 | 7.0533 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on recurring basis (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2023 | |
Fair Value Disclosures | ||||
Beginning balance | $ 13,943,019 | $ 19,470,400 | $ 20,323,400 | $ 19,470,400 |
Change in fair value | 1,066,927 | 245,800 | (988,800) | |
Ending balance | $ 15,009,946 | $ 19,716,200 | $ 19,334,600 | $ 13,943,019 |
Fair value discount rate valuation of trading securities | 28% | 28% | ||
Transfer between level 1and level 2 | $ 0 | |||
Asset, transfer into (out of) of level 3 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations and Credit Risk (Details) | 6 Months Ended | 12 Months Ended | |||||
Mar. 31, 2024 USD ($) customer item | Mar. 31, 2023 item customer | Mar. 31, 2022 customer item | Sep. 30, 2020 | Mar. 31, 2024 CNY (¥) customer item | Mar. 31, 2024 HKD ($) customer item | Sep. 30, 2023 USD ($) | |
Concentration Risk | |||||||
Cash and cash equivalents, certificates of deposit and restricted cash were on deposit at financial institutions not subject to insured | $ 8,660,473 | $ 6,197,461 | |||||
Cash and cash equivalents deposited in financial institutions | 959,771 | 1,001,568 | |||||
Cash and cash equivalents deposited in financial institutions annual limit | 65,000 | $ 500,000 | |||||
Cash deposited in FI insured by FDIC | $ 725,062 | $ 277,218 | |||||
Cash equivalents and restricted cash protection | ¥ | ¥ 500,000 | ||||||
Customer | Revenue | |||||||
Concentration Risk | |||||||
Number of customers | customer | 2 | 2 | 2 | 2 | 2 | ||
Customer | Accounts Receivable | |||||||
Concentration Risk | |||||||
Number of customers | customer | 2 | 2 | 2 | ||||
Customer | Customer One | Revenue | |||||||
Concentration Risk | |||||||
Concentration risk (in percent) | 16% | 16% | 17% | ||||
Customer | Customer One | Accounts Receivable | |||||||
Concentration Risk | |||||||
Concentration risk (in percent) | 58% | 19% | |||||
Customer | Customer Two | Revenue | |||||||
Concentration Risk | |||||||
Concentration risk (in percent) | 14% | 15% | 11% | ||||
Customer | Customer Two | Accounts Receivable | |||||||
Concentration Risk | |||||||
Concentration risk (in percent) | 15% | 10% | |||||
Supplier | Purchases | |||||||
Concentration Risk | |||||||
Number of vendors | item | 2 | 0 | 2 | 2 | 2 | ||
Supplier | Supplier One | Purchases | |||||||
Concentration Risk | |||||||
Concentration risk (in percent) | 13% | 10% | 25% | ||||
Supplier | Supplier Two | Purchases | |||||||
Concentration Risk | |||||||
Concentration risk (in percent) | 13% |
ACCOUNTS RECEIVABLE, NET (Detai
ACCOUNTS RECEIVABLE, NET (Details) - USD ($) | Mar. 31, 2024 | Sep. 30, 2023 |
ACCOUNTS RECEIVABLE, NET | ||
Trade accounts receivable | $ 785,519 | $ 1,981,545 |
Less: allowances for doubtful accounts | (68,115) | (5,829) |
Accounts receivable, net | $ 717,404 | $ 1,975,716 |
ACCOUNTS RECEIVABLE, NET - Sche
ACCOUNTS RECEIVABLE, NET - Schedule of changes in allowances for doubtful accounts (Details) - USD ($) | 6 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
ACCOUNTS RECEIVABLE, NET | ||
Beginning balance | $ 5,829 | $ 4,373 |
Addition | 62,422 | 1,281 |
Exchange rate difference | (136) | 26 |
Ending balance | $ 68,115 | $ 5,680 |
INVENTORY, NET (Details)
INVENTORY, NET (Details) - USD ($) | 6 Months Ended | |||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2023 | |
INVENTORY, NET | ||||
Raw materials | $ 2,165,269 | $ 2,497,298 | ||
Low value consumables | 3,577 | 254,828 | ||
Work-in-progress | 343,898 | 237,987 | ||
Finished goods | 2,249,897 | 2,887,031 | ||
Inventory provision | (111,920) | (885,709) | ||
Total inventory | 4,650,721 | $ 4,991,435 | ||
inventory provision expenses | $ (785,426) | $ 397,039 | $ (108,861) |
OTHER CURRENT ASSETS (Details)
OTHER CURRENT ASSETS (Details) - USD ($) | Mar. 31, 2024 | Sep. 30, 2023 |
OTHER CURRENT ASSETS | ||
Prepaid expense | $ 326,893 | $ 39,083 |
Other receivables | 129,612 | 247,481 |
Total other current assets | $ 456,505 | $ 286,564 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) | 6 Months Ended | |||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2023 | |
Property, Plant and Equipment | ||||
Subtotal | $ 31,562,404 | $ 31,203,931 | ||
Less: accumulated depreciation | (22,801,330) | (22,060,348) | ||
Property and equipment, net | 8,761,074 | 9,143,583 | ||
Depreciation expense | 514,083 | $ 547,192 | $ 478,819 | |
Prepayments for property and equipment | 641,014 | 634,442 | ||
Property received and accepted out of Prepayments | 641,014 | 634,442 | ||
Property and Buildings | ||||
Property, Plant and Equipment | ||||
Subtotal | 13,022,964 | 12,889,450 | ||
Machinery and equipment | ||||
Property, Plant and Equipment | ||||
Subtotal | 18,053,537 | 17,833,560 | ||
Automobiles | ||||
Property, Plant and Equipment | ||||
Subtotal | 288,707 | 285,747 | ||
Office and electric equipment | ||||
Property, Plant and Equipment | ||||
Subtotal | $ 197,196 | $ 195,174 |
INTANGIBLE ASSETS, NET (Details
INTANGIBLE ASSETS, NET (Details) - USD ($) | 6 Months Ended | |||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2023 | |
Intangible Assets, Net | ||||
Total | $ 4,196,015 | $ 4,152,997 | ||
Less: accumulated amortization | (777,532) | (729,415) | ||
Intangible assets, net | 3,418,483 | 3,423,582 | ||
Amortization expense | 40,689 | $ 24,249 | $ 63,395 | |
Land use rights | ||||
Intangible Assets, Net | ||||
Total | 4,101,384 | 4,059,336 | ||
Software | ||||
Intangible Assets, Net | ||||
Total | 39,238 | 38,836 | ||
License for drug manufacturing | ||||
Intangible Assets, Net | ||||
Total | $ 55,393 | $ 54,825 |
INTANGIBLE ASSETS, NET - Estima
INTANGIBLE ASSETS, NET - Estimated future amortization expense (Details) - USD ($) | Mar. 31, 2024 | Sep. 30, 2023 |
Future Amortization Expense | ||
2024 | $ 44,822 | |
2025 | 85,382 | |
2026 | 85,382 | |
2027 | 84,990 | |
2028 | 84,710 | |
Thereafter | 3,033,197 | |
Intangible assets, net | $ 3,418,483 | $ 3,423,582 |
LONG-TERM INVESTMENT (Details)
LONG-TERM INVESTMENT (Details) | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2024 USD ($) | Sep. 30, 2023 USD ($) | Jul. 31, 2017 CNY (¥) | |
Equity method investment | |||
Cost of equity method investment | $ 456,988 | $ 452,303 | |
Profit from equity method investment | 210,687 | 208,527 | |
Dividend Distribution received | (110,786) | (54,825) | |
Investment disposed | (456,988) | ||
Loss recognized from disposal | $ (99,901) | ||
Total long-term investment | $ 606,005 | ||
Moshangfa | |||
Equity method investment | |||
Cost of equity method investment | ¥ | ¥ 3,300,000 |
LONG-TERM INVESTMENT- Additiona
LONG-TERM INVESTMENT- Additional Information (Details) | 12 Months Ended | ||||||||
Sep. 30, 2019 CNY (¥) | Sep. 30, 2019 USD ($) | Sep. 30, 2018 CNY (¥) | Sep. 30, 2018 USD ($) | Sep. 30, 2017 CNY (¥) | Sep. 30, 2017 USD ($) | Mar. 31, 2024 USD ($) | Sep. 30, 2023 USD ($) | Jul. 31, 2017 CNY (¥) | |
Equity method investment | |||||||||
Total investment | $ | $ 456,988 | $ 452,303 | |||||||
Gansu QLS | |||||||||
Equity method investment | |||||||||
Ownership interest acquired (in percent) | 79.71% | 79.71% | |||||||
Moshangfa (Gansu) Fertilizer Industry Co., Ltd [Member] | |||||||||
Equity method investment | |||||||||
Ownership interest acquired (in percent) | 40% | ||||||||
Total investment | ¥ | ¥ 3,300,000 | ||||||||
Moshangfa (Gansu) Fertilizer Industry Co., Ltd [Member] | |||||||||
Equity method investment | |||||||||
Payments to acquire investments | ¥ 441,250 | $ 64,165 | ¥ 1,658,750 | $ 253,596 | ¥ 1,200,000 | $ 176,121 |
BANK LOANS (Details)
BANK LOANS (Details) - Loan Agreement With Chengdu Agriculture And Commercial Bank - Chengdu QLS and subsidiaries | Mar. 31, 2024 USD ($) | Jun. 30, 2023 CNY (¥) | Jun. 30, 2023 USD ($) |
Bank Loans | |||
Loan agreement amount | ¥ 3,500,000 | $ 500,000 | |
Fixed interest rate (in percent) | 3.90% | 3.90% | |
Land use for credit | $ 637,000 |
TAXES (Details)
TAXES (Details) | 6 Months Ended | 12 Months Ended | 24 Months Ended | 36 Months Ended | ||||||
Mar. 31, 2024 USD ($) | Mar. 31, 2023 USD ($) | Mar. 31, 2022 USD ($) | Dec. 31, 2021 | Sep. 30, 2019 USD ($) | Dec. 31, 2023 | Dec. 31, 2020 USD ($) | Dec. 31, 2020 CNY (¥) | Dec. 31, 2023 USD ($) | Dec. 31, 2023 CNY (¥) | |
TAXES | ||||||||||
Corporate income tax rate (in percent) | 3.50% | |||||||||
China Statutory income tax rate | 25% | |||||||||
Taxable income (in percent) | 12.50% | 12.50% | ||||||||
Gansu QLS | ||||||||||
TAXES | ||||||||||
Favorable tax rate (in percent) | 15% | 15% | 15% | |||||||
Annual taxable income less than or equal to RMB one million, approximately USD one hundred fifty four thousand | ||||||||||
TAXES | ||||||||||
Enterprise taxable income (in percent) | 20% | 20% | ||||||||
Favorable income tax (in percent) | 2.50% | 2.50% | ||||||||
Annual taxable income | $ 154,000 | ¥ 1,000,000 | ||||||||
Annual taxable income exceeding RMB one million, approximately USD one hundred fifty four thousand, but not more than RMB three million, approximately USD four hundred sixty five thousand | ||||||||||
TAXES | ||||||||||
Taxable income (in percent) | 50% | 25% | ||||||||
Enterprise taxable income (in percent) | 20% | 20% | ||||||||
Favorable income tax (in percent) | 10% | 5% | ||||||||
Annual taxable income exceeding RMB one million, approximately USD one hundred fifty four thousand, but not more than RMB three million, approximately USD four hundred sixty five thousand | Maximum | ||||||||||
TAXES | ||||||||||
Annual taxable income | $ 465,000 | ¥ 3,000,000 | ||||||||
Annual taxable income exceeding RMB one million, approximately USD one hundred fifty four thousand, but not more than RMB three million, approximately USD four hundred sixty five thousand | Minimum | ||||||||||
TAXES | ||||||||||
Annual taxable income | $ 154,000 | ¥ 1,000,000 | ||||||||
Hong Kong | ||||||||||
TAXES | ||||||||||
Base profit for calculating tax rate | $ 0 | $ 0 | $ 0 | |||||||
Hong Kong | Scenario One | ||||||||||
TAXES | ||||||||||
Favorable tax rate (as a percent) | 8.25% | |||||||||
Base profit for calculating tax rate | $ 2,000,000 | |||||||||
Hong Kong | Scenario Two | ||||||||||
TAXES | ||||||||||
Favorable tax rate (as a percent) | 16.50% | |||||||||
Base profit for calculating tax rate | $ 2,000,000 | |||||||||
China | ||||||||||
TAXES | ||||||||||
Corporate income tax rate (in percent) | 25% | |||||||||
Preferential tax rate (in percent) | 15% | |||||||||
China | All of the company's affiliated entities other than Gansu QLS and Chengdu QLS Gansu QLS and Chengdu QLS | ||||||||||
TAXES | ||||||||||
Enterprise taxable income (in percent) | 20% | 20% | ||||||||
Annual taxable income | $ 154,000 | ¥ 1,000,000 | ||||||||
China | All of the company's affiliated entities other than Gansu QLS and Chengdu QLS Gansu QLS and Chengdu QLS | Maximum | ||||||||||
TAXES | ||||||||||
Taxable income (in percent) | 50% | 50% | ||||||||
Favorable income tax (in percent) | 10% | 10% | ||||||||
Annual taxable income | $ 465,000 | ¥ 3,000,000 | ||||||||
China | All of the company's affiliated entities other than Gansu QLS and Chengdu QLS Gansu QLS and Chengdu QLS | Minimum | ||||||||||
TAXES | ||||||||||
Taxable income (in percent) | 25% | 25% | ||||||||
Favorable income tax (in percent) | 5% | 5% | ||||||||
Annual taxable income | $ 154,000 | ¥ 1,000,000 | ||||||||
Western Region | ||||||||||
TAXES | ||||||||||
Favorable tax rate (in percent) | 15% | 15% | 15% |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 6 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | |
Affiliated Entity | VIE and its subsidiaries | |||
RELATED PARTY TRANSACTIONS | |||
Sales to affiliated companies | $ 12,172 | $ 0 | $ 117,213 |
LEASE (Details)
LEASE (Details) | 12 Months Ended | |||
Sep. 30, 2023 USD ($) lease | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Mar. 31, 2024 USD ($) | |
LEASE | ||||
Operating Lease Expenses | $ 30,275 | $ 63,480 | $ 109,346 | |
Number of Operating Leases | lease | 1 | |||
Operating Lease Assets: | ||||
Total right-of-use asset | $ 59,300 | $ 47,672 | ||
Lease obligations: | ||||
Current lease liabilities | 73,560 | 83,089 | ||
Non-current lease liabilities | 24,575 | 17,667 | ||
Total Lease liabilities | $ 98,135 | $ 100,756 |
LEASE - Weighted Average Remain
LEASE - Weighted Average Remaining Lease Term and Discount Rate (Details) | Mar. 31, 2024 | Sep. 30, 2023 |
LEASE | ||
Remaining Lease Term Operating Lease | 1 year 9 months | 2 years 3 months |
Discount rate | 5.50% | 5.50% |
LEASE - Lease Liability Maturit
LEASE - Lease Liability Maturities (Details) - USD ($) | Mar. 31, 2024 | Sep. 30, 2023 |
LEASE | ||
For the six months ending September 30, 2024 | $ 55,393 | |
For the year ending March 31, 2025 | 27,696 | |
For the year ending March 31, 2026 | 20,772 | |
Total minimum lease payments | 103,861 | |
Less: Imputed interest | (3,105) | |
Total Lease liabilities | $ 100,756 | $ 98,135 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 6 Months Ended | |||
Mar. 31, 2024 | Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2023 | |
Segment Reporting Information | ||||
Net revenue | $ 12,562,599 | $ 29,163,616 | $ 32,086,522 | |
Cost of revenues | 11,148,577 | 26,868,870 | 28,584,031 | |
GROSS PROFIT | 1,414,022 | 2,294,746 | 3,502,491 | |
Depreciation and amortization | 554,772 | 571,441 | 542,214 | |
Capital Expenditures | 786,547 | 2,602,121 | 1,748,429 | |
TOTAL ASSETS | 49,852,370 | $ 51,257,994 | ||
Oxytetracycline & Licorice products and TCMD | ||||
Segment Reporting Information | ||||
Net revenue | 10,755,535 | 18,521,112 | 20,150,899 | |
Cost of revenues | 9,501,675 | 16,622,793 | 17,531,280 | |
GROSS PROFIT | 1,253,860 | 1,898,319 | 2,619,619 | |
Depreciation and amortization | 444,832 | 452,036 | 473,219 | |
Capital Expenditures | 685,827 | 2,570,090 | 1,678,558 | |
TOTAL ASSETS | 37,965,308 | 38,382,322 | ||
Fertilizer | ||||
Segment Reporting Information | ||||
Net revenue | 159,199 | 752,672 | 677,274 | |
Cost of revenues | 104,591 | 365,813 | 537,227 | |
GROSS PROFIT | 54,608 | 386,859 | 140,047 | |
Depreciation and amortization | 22,857 | 22,123 | 23,597 | |
Capital Expenditures | 23,771 | 28,098 | 18,520 | |
TOTAL ASSETS | 2,948,492 | 3,291,960 | ||
Heparin products and Sausage casing | ||||
Segment Reporting Information | ||||
Net revenue | 1,647,865 | 9,889,832 | 11,258,349 | |
Cost of revenues | 1,542,311 | 9,880,264 | 10,515,524 | |
GROSS PROFIT | 105,554 | 9,568 | 742,825 | |
Depreciation and amortization | 87,083 | 97,282 | 45,398 | |
Capital Expenditures | 76,949 | $ 3,933 | $ 51,351 | |
TOTAL ASSETS | 8,938,570 | $ 9,583,712 | ||
International markets | ||||
Segment Reporting Information | ||||
Net revenue | $ 0 |
COMMITMENTS (Details)
COMMITMENTS (Details) ¥ in Millions, $ in Millions | Mar. 31, 2024 USD ($) | Mar. 31, 2024 CNY (¥) | Sep. 30, 2023 USD ($) | Sep. 30, 2023 CNY (¥) |
COMMITMENTS | ||||
Commitments paid | $ 2.7 | ¥ 19.6 | ||
Chongqing Jintong Industrial Construction Investment Co., Ltd ("Chongqing Jintong") | ||||
COMMITMENTS | ||||
Commitments paid | $ 8.5 | ¥ 60 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | Apr. 19, 2024 | Apr. 18, 2024 | Mar. 31, 2024 | Sep. 30, 2023 |
SUBSEQUENT EVENTS | ||||
Ordinary Shares, shares authorized | 100,000,000 | 100,000,000 | ||
Ordinary Shares, par value | $ 0.00166667 | $ 0.00166667 | ||
Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Ordinary shares, authorized value | $ 833,335 | $ 166,667 | ||
Ordinary Shares, shares authorized | 500,000,000 | 100,000,000 | ||
Ordinary Shares, par value | $ 0.00166667 | $ 0.00166667 | ||
Preferred shares, shares authorized | 50,000,000 | |||
Preferred shares, par value | $ 0.00166667 | |||
Issued and Outstanding ordinary shares into Class A ordinary share | Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Number of shares to be re-designated and re-classified | 35,750,000 | |||
Authorized but unissued Ordinary Shares into preferred shares | Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Number of shares to be re-designated and re-classified | 50,000,000 | |||
Authorized but unissued Ordinary Shares into Class B Ordinary Shares | Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Number of shares to be re-designated and re-classified | 100,000,000 | |||
Authorized but unissued Ordinary Shares into Class A Ordinary Shares | Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Number of shares to be re-designated and re-classified | 314,250,000 | |||
Common Class A | Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Ordinary Shares, shares authorized | 350,000,000 | |||
Number of shares for each re-designated and re-classified issued and outstanding share | 1 | |||
Ordinary Shares, par value | $ 0.00166667 | |||
Common Class B | Subsequent events | ||||
SUBSEQUENT EVENTS | ||||
Ordinary Shares, shares authorized | 100,000,000 | |||
Ordinary Shares, par value | $ 0.00166667 |