GlobeNewswire Inc | Jan 31, 2022 08:00AM EST

January 31, 2022

Jian, Jiangxi, China, Jan. 31, 2022 (GLOBE NEWSWIRE) -- Universe Pharmaceuticals INC (the Company) (Nasdaq: UPC), a pharmaceutical producer and distributor in China, today announced its financial results for the fiscal year ended September 30, 2021.

Mr. Gang Lai, Chairman and CEO of Universe Pharmaceuticals INC, commented, We are excited to share our financial results for the fiscal year 2021, and flattered to see that we have achieved significant growth in financial results. Although we encountered continuous challenges and uncertainties given the regional resurgence of the COVID-19 pandemic, we have reached record revenues of $48.0 million and net income of $11.3 million for the fiscal year 2021, respectively, representing increases of 56.3% and 49.8% from the revenues and net income for the fiscal year 2020. Our strong financial performance reflects our significant business growth. In fiscal year 2021, our focus remained on sales network expansion, product quality improvement, and investment in the research and development of products. We also established cooperation relationships with several well-known companies and research institutes in the pharmaceutical industry in the fiscal year 2021, including an international cooperation with Kitanihon Pharmaceutical Co., Ltd., a Japanese company engaged in the research, development, manufacturing, and distribution of Kampo (a traditional Japanese herbal medicine) pharmaceutical and medical products, to address market demand for Kampo medicine and high-end traditional Chinese medicine. Looking forward, we will keep eyeing long-term growth by leveraging our tactical business operations and strong supply channels to grow our business further and continue to improve our financial metrics. Our commitments to providing high-quality products and contributing to our society remain intact.

Fiscal Year 2021Financial Highlights

For the Fiscal Year Ended September 30,($ millions, except per share data) 2021 2020 % ChangeRevenues 48.0 30.7 56.3 %Income from operations 13.6 10.3 32.6 %Net income 11.3 7.6 49.8 %Earnings per share 0.70 0.47 48.9 %

-- Revenues increased by 56.3% to $48.0 million for the fiscal year ended September 30, 2021 from $30.7 million for the fiscal year ended September 30, 2020, primarily attributable to an increased number of customers by 22.6%, or 499 customers, increased sales volume of the Companys TCMD products by 9.9%, or 1,553,151 units, increased average selling price of the Companys TCMD products by 46.3%, and increased average selling price of third-party products by 79.6%, in response to increased raw material costs and third-party products purchase costs as affected by the COVID-19 pandemic and general inflation, and the appreciation of RMB against US$. -- Income from operations was $13.6 million for the fiscal year ended September 30, 2021, representing an increase of 32.6% from $10.3 million for the fiscal year ended September 30, 2020. -- Net income was $11.3 million for the fiscal year ended September 30, 2021, representing an increase of 49.8% from $7.6 millionfor the fiscal year ended September 30, 2020. -- Basic and diluted earnings per share were $0.70 for the fiscal year ended September 30, 2021, representing an increase of 48.9% from $0.47 for the fiscal year ended September 30, 2020.

Fiscal Year2021 Financial Results

Revenues

Total revenues increased by $17.3 million, or 56.3%, to $48.0 million for the fiscal year ended September 30, 2021 from $30.7 million for the fiscal year ended September 30, 2020.

For the Fiscal year Ended September 30, 2021 2020 ($ millions) Revenue Cost of Gross Revenue Cost of Gross revenue margin revenue marginTCMD products 29.6 11.2 62.2 % 18.4 8.6 53.3 %salesThird-partyproducts 18.4 11.5 37.6 % 12.3 8.0 34.9 %salesTotal 48.0 22.7 52.8 % 30.7 16.6 45.9 %

Sales of TCMD products increased by $11.2 million, or 60.9%, to $29.6 million for the fiscal year ended September 30, 2021, from $18.4 million for the fiscal year ended September 30, 2020. The increase was due to an increase in the sales volume of the Companys TCMD products by 9.9%, to 17,206,150 units sold for the fiscal year ended September 30, 2021 from 15,652,999 units sold for the fiscal year ended September 30, 2020, and an increase in the average selling price of the Companys TCMD products by 46.3%, to $1.72 per unit for the fiscal year ended September 30, 2021 from $1.17 per unit for the fiscal year ended September 30, 2020.

Sales of third-party products increased by $6.1 million, or 49.4%, to $18.4 million for the fiscal year ended September 30, 2021 from $12.3 million for the fiscal year ended September 30, 2020. Sales volume of third-party products slightly decreased by 4.6%, to 8,364,391 units sold for the fiscal year ended September 30, 2021 from 8,763,577 units sold for the fiscal year ended September 30, 2020. In the fiscal year ended September 30, 2021, due to an overall increase in the market prices of raw materials used in the manufacturing of third-party products, the Company paid higher purchase prices for products from third-party pharmaceutical companies and accordingly, the average selling price of the Companys third-party products in the fiscal year ended September 30, 2021 was higher than that in the fiscal year ended September 30, 2020. The average selling price of the Companys third-party products increased by 79.6%, to $2.20 per unit in fiscal year ended September 30, 2021 from $1.41 per unit in the fiscal year ended September 30, 2020.

Cost of revenues and Gross profit

Cost of revenues increased by $6.1 million, or 36.4%, to $22.7 million for the fiscal year ended September 30, 2021 from $16.6 million for the fiscal year ended September 30, 2020.

Gross profit increased by $11.2 million to $25.3 million for the fiscal year ended September 30, 2021, from $14.1 million for the fiscal year ended September 30, 2020. Gross margin increased by 6.9%, to 52.8% for the fiscal year ended September 30, 2021 from 45.9% for the fiscal year ended September 30, 2020.

Operating expenses

Selling expenses increased by $1,417,985, or 91.2%, to $2,973,531 for the fiscal year ended September 30, 2021 from $1,555,546 for the fiscal year September 30, 2020. Such increase was primarily attributable to (i) an increase in advertising expenses by $972,692, or 282.8%, to $1,316,654 in fiscal year 2021 from $343,962 in fiscal year 2020. In fiscal year 2020, the Company used outdoor billboards, magazines, and social media, such as WeChat and Weibo, to advertise its brand and products in order to increase customer awareness. In fiscal year 2021, in connection with the sales and promotion of the Companys TCMD products to targeted customers, the Company engaged a local advertising agency to develop and produce a TV advertisement for promoting its major TCMD products, Bai Nian Dan and Guben Yanling Pill, and coordinate with a TV channel to broadcast the advertisement to targeted geographic market areas. As a result of the Companys advertising efforts in fiscal year 2021, it spent more on advertising than it did in fiscal year 2020, which led to higher advertising expenses in fiscal year 2021; In addition, the Company expects that its future advertising expenses will increase as its capitalized advertising costs will be expensed in subsequent period, starting from when the advertisement was first broadcasted; (ii) an increase in salary and benefit expenses paid to the Companys sales employees by $272,804, or 46.5%, to $859,436 in fiscal year 2021 from $586,632 in fiscal year 2020, and an increase in business travel and meals expense by $47,155 or 150.1%, to $78,565 in fiscal year 2021 from $31,410 in fiscal year 2020, primarily due to increased sales activities in fiscal year 2021; and (iii) an increase in shipping and delivery expenses by $125,201, or 21.7%, to $701,997 in fiscal year 2021 from $576,796 in fiscal year 2020, due to increased sales volume and an increase in the number of sales orders fulfilled in fiscal year 2021.

General and administrative expenses increased by $1,593,420, or 93.5% to $3,296,844 for the fiscal year ended September 30, 2021 from $1,703,424 for the fiscal year ended September 30, 2020, primarily attributable to (i) an increase in professional service fees by $1,350,876 in fiscal year 2021 as compared to fiscal year 2020, primarily due to increased audit fees, legal fees, business consulting fees in connection with the Companys public offering; (ii) an increase in office supply and utility expenses by $260,313, or 224.6%, to support the Companys administration activities; and (iii) an increase in salaries, welfare expenses and insurance expenses paid to administration employees by $193,013, or 41.6%, because higher amount of annual bonus was distributed to administrative staffs in fiscal year 2021 as compared to fiscal year 2020, offset by a decrease in bad debt expense by $328,276 because the Company accrued more bad debt expenses in fiscal year 2020 based on estimated accounts receivable collection trend, and approximately $0.2 million bad debt accrual in prior periods was collected in fiscal year 2021, which led to a bad debt recovery in fiscal year 2021.

Research and development expenses increased by $4,882,537, or 837.3%, to $5,465,662 for the fiscal year ended September 30, 2021 from $583,125 for the fiscal year ended September 30, 2020, primarily attributable to (i) an increase in research and development expense of $4,454,400 in order to develop and test eight new Chinese medicine products in order to diversify the Companys future product portfolio. In fiscal year 2021, the Company entered into several cooperative agreements with external academic and research institutions to jointly develop new products and accordingly, the Company incurred significant amount of R&D expense in connection with such efforts; and (ii) an increase in the materials used in the research and development (R&D) activities by $366,922. In fiscal year 2021, in order to develop new products and improve the formulation of several existing products, the Company conducted more testing on product stability and safety, and as a result, more materials were used in R&D activities in fiscal year 2021 than in fiscal year 2020.

Other income (expenses), net

Total other income, net, increased by $239,630, or 158.4%, to net other income of $88,338 for the fiscal year ended September 30, 2021 from net other expenses of $151,292 for the fiscal year ended September 30, 2020.

Provision for income taxes

Provision for income taxes was $2.4 million for the fiscal year ended September 30, 2021, a decrease of $0.1 million, or 7.2%, from $2.5 million for the fiscal year ended September 30, 2020.

Net income

Net income was $11.3 million for the fiscal year ended September 30, 2021, representing a $3.7 million increase from $7.6 million for the fiscal year ended September 30, 2020.

Basic and diluted earnings per share were $0.70 for the fiscal year ended September 30, 2021, representing an increase of 48.9% from $0.47for the fiscal year ended September 30, 2020.

Balance Sheet

As of September 30, 2021, the Company had cash of $8.1 million, compared to $10.1 million as of September 30, 2020.

Cash Flow

Net cash used in operating activities was$2.1 million for the fiscal year ended September 30, 2021, compared withnet cash provided by operating activities of $6.1 millionfor the fiscal year ended September 30, 2020.

Net cash used in investing activities was $27,059,958 for the fiscal year ended September 30, 2021, compared with$51,798for the fiscal year ended September 30, 2020.

Net cash provided by financing activities was $26.6 million for the fiscal year ended September 30, 2021, compared with$0.5 millionfor the fiscal year ended September 30, 2020.

About Universe Pharmaceuticals INC

Universe Pharmaceuticals INC, headquartered in Jian, Jiangxi, China, is a pharmaceutical producer and distributor in China. The Company specializes in the manufacturing, marketing, sales and distribution of traditional Chinese medicine derivatives products targeting the elderly with the goal of addressing their physical conditions in the aging process and to promote their general well-being. The Company also distributes and sells biomedical drugs, medical instruments, Traditional Chinese Medicine Pieces, and dietary supplements manufactured by third-party pharmaceutical companies. Currently, the Companys products are sold in 30 provinces of China. For more information, visit the companys website at http://www.universe-pharmacy.com/.

Forward-Looking Statements

All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Companys registration statement and in its other filings with the SEC.

For more information, please contact:

Ascent Investors Relations LLCTina XiaoPresidentPhone: 917-609-0333Email:tina.xiao@ascent-ir.com

UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of September 30, 2021 2020 ASSETSCURRENT ASSETS Cash $ 8,077,908 $ 10,058,202 Held-to-maturity investments 13,725,204 - Accounts receivable, net 15,573,742 10,871,778 Inventories, net 2,462,542 1,906,232 Due from related parties 236,982 - Advance to suppliers 2,738,313 - Prepayment for advertising 7,492,320 - Deferred initial public offering costs - 443,709 Prepaid expenses and other current assets 174,053 - TOTAL CURRENT ASSETS 50,481,064 23,279,921 Property, plant and equipment, net 4,681,353 4,428,064 Prepayments made to a related party for 2,476,800 - purchase of propertyPrepayments for construction in progress 10,712,160 - Intangible assets, net 178,483 174,776 Investment in equity securities 744,924 735,000 Deferred tax assets 869,997 186,537 TOTAL NONCURRENT ASSETS 19,663,717 5,524,377 TOTAL ASSETS $ 70,144,781 $ 28,804,298 LIABILITIES AND SHAREHOLDERS? EQUITY CURRENT LIABILITIES Short-term bank loans $ 4,334,400 $ 2,646,000 Accounts payable 5,310,526 2,691,193 Taxes payable 1,101,460 1,331,749 Due to related parties 19,723 956,492 Accrued expenses and other current 444,319 375,960 liabilitiesTOTAL CURRENT LIABILITIES 11,210,428 8,001,394 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS? EQUITY Ordinary shares, $0.003125 par value,100,000,000 shares authorized, 21,750,000shares and 16,000,000 shares issued and 67,969 50,000 outstanding as of September 30, 2021 and2020, respectivelyAdditional paid in capital 29,279,159 3,679,000 Statutory reserve 2,439,535 2,439,535 Retained earnings 25,058,931 13,738,979 Accumulated other comprehensive income 2,088,759 895,390 TOTAL SHAREHOLDERS? EQUITY 58,934,353 20,802,904 TOTAL LIABILITIES AND SHAREHOLDERS? EQUITY $ 70,144,781 $ 28,804,298

UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the years ended September 30, 2021 2020 2019 Revenue $ 47,982,031 $ 30,703,960 $ 33,229,316 Cost of revenue 22,655,854 16,610,140 19,821,831 Gross profit 25,326,177 14,093,820 13,407,485 Operating expenses Selling expenses 2,973,531 1,555,546 1,578,826 General andadministrative 3,296,844 1,703,424 1,457,393 expensesResearch anddevelopment 5,465,662 583,125 618,437 expensesTotal operating 11,736,037 3,842,095 3,654,656 expenses Income from 13,590,140 10,251,725 9,752,829 operations Other income (expenses)Interest expense, (101,604 ) (123,760 ) (129,268 )netOther income (80,434 ) (49,352 ) 2,760 (expenses), netHeld-to-maturity 239,549 - - investment incomeEquity investment 30,827 21,820 26,741 incomeTotal other income 88,338 (151,292 ) (99,767 )(expense), net Income beforeincome tax 13,678,478 10,100,433 9,653,062 provision Income tax 2,358,526 2,542,211 2,101,597 provision Net income 11,319,952 7,558,222 7,551,465 Other comprehensive income (loss)Foreign currencytranslation 1,193,369 860,623 (645,978 )adjustmentComprehensive $ 12,513,321 $ 8,418,845 $ 6,905,487 income Earnings per share Basic and diluted $ 0.70 $ 0.47 $ 0.47 Weighted averagenumber of shares outstandingBasic and diluted 16,168,956 16,000,000 16,000,000

UNIVERSE PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FortheyearsendedSeptember30, 2021 2020 2019 Cash flows fromoperating activitiesNet income $ 11,319,952 $ 7,558,222 $ 7,551,465 Adjustments toreconcile netincome to netcash provided by (used in)operatingactivities:Depreciation and 446,878 410,079 418,431 amortizationLoss fromdisposal of fixed 1,559 - 2,085 assetsAllowance for (230,175 ) 98,102 297,972 doubtful accountsInventory reserve - (75,391 ) (187,271 )Deferred income (668,341 ) (9,886 ) (39,625 )tax benefitHeld-to-maturity (239,549 ) - - investment incomeChanges inoperating assets and liabilities:Accounts (3,867,457 ) (4,107,520 ) 665,485 receivablesInventory, net (451,634 ) 888,607 5,586,177 Advance to (2,717,085 ) - - suppliers, netPrepayment for (7,434,240 ) - - advertisingAdvances to (237,720 ) - - related partiesPrepaid expensesand other current (168,188 ) 12,407 (8,449 )assetsAccounts payable 2,457,337 639,427 (924,444 )Taxes payable (298,620 ) 731,518 (320,611 )Accrued expensesand other current 31,436 (30,408 ) 162,540 liabilitiesNet cash providedby (used in) (2,055,847 ) 6,115,157 13,203,755 operatingactivities Cash flows frominvesting activitiesPurchases ofproperty and (444,505 ) (51,798 ) (86,324 )equipmentProceeds fromdisposal of fixed - - 291 assetsPrepayments madeto a relatedparty for (2,457,600 ) - - purchase ofpropertyPrepayments forconstruction in (10,629,120 ) - - progressPayments forheld-to-maturity (15,330,660 ) - - investmentsRedemption ofheld-to-maturity 1,801,927 - - investmentsNet cash used ininvesting (27,059,958 ) (51,798 ) (86,033 )activities Cash flows fromfinancing activitiesProceeds fromshort-term bank 4,300,800 1,427,000 3,055,500 loansRepayment of bank (2,764,800 ) (1,427,000 ) (3,055,500 )loansDividend payment - - (16,005,000 )Gross proceedsfrom initial 28,750,000 - - public offeringsPayment fordeferred initial (2,792,543 ) (441,064 ) - public offeringcostsProceeds from(prepayments for) (911,648 ) 911,200 1,143 related partiesborrowingsNet cash providedby (used in) 26,581,809 470,136 (16,003,857 )financingactivities Effect ofexchange rate 553,702 347,386 (126,720 )changes on cashNet increase(decrease) in (1,980,294 ) 6,880,881 (3,012,855 )cashCash, beginning 10,058,202 3,177,321 6,190,176 of yearCash, end of year $ 8,077,908 $ 10,058,202 $ 3,177,321 Supplementaldisclosure information:Cash paid for $ 149,303 $ 157,528 $ 135,717 interest expensesCash paid for $ 3,271,219 $ 2,167,963 $ 2,257,893 income tax