20-F: Farmmi Reports Steep FY2025 Loss Amid Revenue Decline, Strategic Shifts

Farmmi, Inc. reported a significant net loss of $53.4 million for fiscal year 2025, a sharp decline from the previous year, driven by reduced agricultural product sales and substantial impairment and credit loss allowances, despite new logistics revenue.

Summary

• Farmmi, Inc. reported a net loss of $53.4 million for the fiscal year ended September 30, 2025, a substantial increase from the $4.6 million net loss in FY2024.
• Total revenues decreased by 56.4% to $28.0 million in FY2025 from $64.1 million in FY2024.
• Gross profit plummeted by 79.3% to $0.8 million in FY2025 from $3.9 million in FY2024.
• Operating expenses surged to $56.9 million in FY2025, primarily due to an $8.9 million impairment loss for biological assets and a $45.1 million allowance for credit losses.
• Revenue from Shiitake sales decreased by 40.0% to $10.7 million, and Mu Er sales decreased by 38.1% to $9.2 million in FY2025, both attributed to reduced customer orders and market demand.
• Revenue from corn sales decreased by 97.5% to $0.8 million in FY2025 due to decreased trading volume.
• The company launched warehousing and logistics services in the U.S. in FY2025, generating $7.3 million in revenue, accounting for 26.2% of total revenue.
• The acquisition of 45% equity in EWAYFOREST GROUP LIMITED for $99.1 million was terminated, resulting in a $59.6 million note receivable for cash refund and $35.0 million in accounts receivable to be refunded.
• Several subsidiaries were divested in FY2025 and FY2024 as cost reduction measures, including Farmmi Food, Farmmi Supply Chain, Farmmi Biotech, Guoning Zhonghao, Ningbo Farmmi Trade, Farmmi Ecology, and Farmmi Technology.
• A private placement in August 2025 raised approximately $10.0 million through the sale of 4,166,667 ordinary shares and Series C warrants.
• The company identified material weaknesses in its internal control over financial reporting as of September 30, 2025, citing insufficient accounting personnel, lack of an internal control department, and inadequate risk assessment.
• A share consolidation (one-for-twelve) was approved in February 2025, and the authorized share capital was increased to 5 billion ordinary shares of $2.40 par value each.
• The company adopted a dual-class share structure in December 2025, with Class A Ordinary Shares having one vote and Class B Ordinary Shares having fifty votes, concentrating voting power with CEO Yefang Zhang.
• Cash and restricted cash decreased to $0.8 million as of September 30, 2025, from $12.8 million in FY2023.
• Net cash provided by operating activities was $52.5 million in FY2025, a significant improvement from negative cash flows in prior years, primarily due to a decrease in advances to suppliers and allowances for credit losses.
• Net cash used in investing activities was $59.7 million in FY2025, largely due to the purchase of long-term investments and cash paid for the terminated EWAYFOREST acquisition.
• Net cash provided by financing activities was $7.6 million in FY2025, mainly from share issuance and promissory notes, partially offset by loan repayments.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a highly negative report, primarily due to the substantial net loss, sharp revenue decline, significant impairment and credit loss allowances, and identified material weaknesses in internal controls. While new logistics revenue and a capital raise offer some positives, they are overshadowed by the overall poor financial performance and operational challenges.

Positives

• Net cash provided by operating activities significantly improved to $52.5 million in FY2025, compared to negative cash flows in the prior two years, driven by a decrease in advances to suppliers and credit loss allowances.
• The company successfully launched warehousing and logistics services in the U.S., generating $7.3 million in revenue in its first year of operation, indicating a new growth area.
• Strategic divestitures of several non-core subsidiaries (Farmmi Food, Farmmi Supply Chain, Farmmi Biotech, Guoning Zhonghao, Ningbo Farmmi Trade, Farmmi Ecology, Farmmi Technology) were completed to reduce operational costs.
• A private placement in August 2025 raised $10.0 million, providing additional capital.
• The company's long-term loans decreased from $2.18 million in FY2024 to $1.81 million in FY2025, and promissory notes decreased from $5.26 million to $2.52 million.
• The company maintains strong relationships with significant suppliers and has a sophisticated quality control system for its edible fungi products.
• The company has established a food quality traceability system and holds international food certifications (BRC, ISO22000).

Negatives

• The company reported a substantial net loss of $53.4 million in FY2025, a significant deterioration from the $4.6 million net loss in FY2024 and $2.5 million net income in FY2023.
• Total revenues decreased sharply by 56.4% to $28.0 million in FY2025, indicating a significant contraction in core business activities.
• Gross profit declined by 79.3% to $0.8 million in FY2025, reflecting reduced sales and potentially lower margins.
• Operating expenses increased dramatically to $56.9 million in FY2025, primarily due to an $8.9 million impairment loss for biological assets and a $45.1 million allowance for credit losses, indicating significant asset value erosion and collection issues.
• Sales volumes for key products like Shiitake and Mu Er decreased significantly (40% and 38.1% respectively) due to reduced market demand and customer orders.
• The termination of the EWAYFOREST acquisition, despite a refund agreement, indicates a failed strategic investment and ties up significant capital in a note receivable.
• Cash and restricted cash balances are critically low at $0.8 million as of September 30, 2025, raising liquidity concerns.
• The company has identified material weaknesses in its internal control over financial reporting, which could affect the accuracy and reliability of financial reports and potentially lead to regulatory scrutiny.
• The company's lack of product and business diversification makes it highly susceptible to fluctuations in the edible fungi industry.
• The company has a relatively small number of key customers, with one customer (Yunmihui) accounting for 68.1% of total revenue in FY2025, posing significant concentration risk.
• The company is highly dependent on its senior management, particularly CEO Yefang Zhang, and lacks key person life insurance on them.
• The company's e-commerce platforms were closed due to unsuccessful operation, indicating a failure in a previously pursued growth strategy.

Risks

• The PRC government may intervene in or influence operations at any time, potentially impacting business, financial condition, and share value.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit legal protections.
• The company is required to submit filings with the CSRC for securities issuance and may be subject to additional approvals or procedures from Chinese regulatory authorities.
• Trading in the company's securities may be prohibited under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect its auditors for two consecutive years.
• The loss of any key customers, particularly Yunmihui (68.1% of FY2025 revenue), could significantly reduce revenues and profitability.
• Reliance on a limited number of suppliers for raw materials could lead to increased expenses or supply disruptions.
• Health epidemics could impact sales and operating results, as experienced with COVID-19 shutdowns.
• Failure to comply with PRC food safety laws could result in significant costs, fines, or loss of licenses.
• Lack of product and business diversification makes the company vulnerable to industry-specific risks.
• Governmental support to the agriculture industry and/or the company's business may decrease or disappear, impacting development.
• Beneficial tax incentives may disappear, leading to higher tax payments and reduced profit margins.
• Cyber-attacks, computer viruses, or failure to maintain security could result in data breaches, affecting reputation, financial condition, and operating results.
• Failure to make adequate contributions to the Housing Provident Fund for certain employees could lead to labor disputes or penalties.
• Changes in trade policies may make products more expensive to export, negatively affecting sales.
• Edible fungi cultivation is subject to risks related to diseases, pests, abnormal temperature changes, and extreme weather events.
• Supplier farms may fail to comply with legal requirements and quality standards, affecting raw material quality and supply.
• Increases in edible fungi costs, which are based on local market prices, may negatively affect operating results and profit margins.
• Low barriers to entry in the edible fungi processing industry could lead to increased competition and reduced market share/profit margins.
• Directors' and executive officers' other business activities may pose conflicts of time commitment and conflicts of interest.
• Outstanding bank loans and promissory notes, while currently manageable, could pose risks if the company is unable to repay or refinance them.
• Past guarantees of third-party debt, and potential future guarantees, could expose the company to liabilities.
• Fluctuations in exchange rates (RMB against USD) could adversely affect results of operations and investment value.
• The company may require additional financing in the future, and inability to obtain it could curtail operations.
• Bank accounts are not fully insured or protected against loss, particularly in mainland China.
• Failure to manage growth could strain management, operational, and other resources.
• Insufficient insurance coverage could expose the company to significant costs and business disruption.
• Failure to protect intellectual property rights could harm business and competitive position.
• Exposure to trademark infringement and other claims by third parties could disrupt business and affect financial condition.
• Investments in other businesses may not be successful, as seen with the terminated Jiaoda Onlly investment.
• An increase in prepaid expenses and accounts receivable may adversely affect financial condition if not recovered.
• The company's dual-class share structure may limit the ability of Class A shareholders to influence corporate matters and could discourage change of control transactions.
• The market price of ordinary shares has been, and may continue to be, highly volatile.
• The company may be unable to comply with Nasdaq continued listing requirements, leading to delisting.
• Shareholders may face difficulties in protecting their interests due to the company being a Cayman Islands exempted company.
• United States civil liabilities and certain judgments obtained against the company by shareholders may not be enforceable.
• The Board of Directors may decline to register transfers of Ordinary Shares in certain circumstances.

Future Outlook

The company expects sales of edible fungi products to grow in the coming years due to increasing consumer awareness of healthy diets and rising consumption in China. It plans to expand its international market presence, enhance stable supplier relationships, increase processing capability, upgrade production facilities, and invest in online stores and supply chain systems. The company also intends to continue its strategy of purchasing edible fungi when prices are favorable and storing them to control costs. The logistics services segment is expected to continue expanding to support growing customer demand and improve supply chain efficiency.

Management Comments

• "Management believes that our current cash, cash flows provided by operating activities, and access to loans will be sufficient to meet our working capital needs for at least the next 12 months."
• "We intend to continue to carefully execute our growth plans and manage market risk."
• "We expect our sales of edible fungi products will grow in the coming years, as the consumption of fungi products in China has been rising significantly, and edible fungi has become one of the most important parts of planting industry."
• "We believe our sales will grow in the future with our increased brand awareness, which will grow along with the demand for edible fungi products."
• "Our development plan mainly focuses on developing high-quality agricultural products market."
• "Through our expansion to international market and enhancing stable relationship with suppliers, we expect to expand our product lines and improve our brand awareness and customer loyalty, to meet the demands of market and customers, and improve our sales performance."
• "We intend to invest more in our online stores, continue to train our employees, and upgrade information technology and supply chain system, with the goal of making an integrated sales network with an international approach."
• "With our deep understanding of the edible fungi market, we have been able to purchase raw materials of premium quality at favorable prices."
• "This strategy [purchasing edible fungi when prices are favorable and storing them] has been proven effective and will continue to be used by us as a cost control method."
• "We expect to continue expanding our service capacities to support growing customer demand and facilitate improvement of supply chain efficiency and cost controls for our customers."

Industry Context

StockSavvy.ai notes that Farmmi's significant revenue decline in traditional edible fungi products contrasts with the broader global mushroom market, which is projected to grow at an 8% CAGR to reach $100.31 billion by 2032. While China remains the largest producer, per capita consumption is lower than in some other countries, suggesting untapped domestic growth potential that Farmmi has struggled to capture. The company's pivot to U.S. warehousing and logistics services aligns with broader trends in global supply chain optimization and e-commerce fulfillment, potentially diversifying its revenue streams away from its contracting core business. However, the substantial impairment losses and credit allowances indicate significant operational challenges and asset quality issues that may hinder its ability to capitalize on these industry trends effectively.

Comparison to Industry Standards

• The global mushroom market is projected to grow at an 8% CAGR to reach $100.31 billion by 2032, while Farmmi's edible fungi sales declined significantly in FY2025, indicating underperformance relative to industry growth trends.
• China's edible fungi consumption volume increased from 14.14 million metric tons in 2006 to 40.61 million metric tons in 2020, suggesting a robust domestic market that Farmmi's declining sales volumes (e.g., Shiitake down 40%, Mu Er down 38.1%) are not fully leveraging.
• The company's expansion into warehousing and logistics services in the U.S. (generating $7.3 million in FY2025) positions it in a growing sector, but its initial gross loss in this segment (-184.5%) suggests it is still in a gestation period and not yet achieving profitability comparable to established logistics providers like FedEx or UPS, which operate with high-volume, optimized networks.
• Farmmi's reliance on a few major customers (Yunmihui accounted for 68.1% of FY2025 revenue) is a concentration risk that is higher than diversified agricultural product suppliers or logistics companies, which typically serve a broader customer base to mitigate revenue volatility.
• The company's reported material weaknesses in internal control over financial reporting are below the standards expected of publicly traded companies, especially when compared to global benchmarks for corporate governance and financial reporting integrity.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently a party to any material legal or administrative proceedings.

Related Party Transactions

• The company recorded sales to related parties of $138 in FY2025, $2,785 in FY2024, and nil in FY2023.
• Amounts due to Yefang Zhang (CEO) were $241,773 in FY2025 and $356,975 in FY2024, related to payment of expenses by related parties for the company.
• Amounts due to Zhejiang Tantech Bamboo Technology Co., Ltd (under common control of CEO and former director) were $52,146 in FY2025 and $144,525 in FY2024, related to water and electricity expenses for leased offices.
• The company rents offices in Lishui from Zhejiang Tantech Bamboo Technology Co., Ltd, with an annual rent of $18,279 for FY2025.
• The company and Forasen Group (owned by CEO's husband) signed a Non-Competition Agreement, restricting Forasen Group from engaging in the company's business except for purchasing products.
• CEO Yefang Zhang and former director Zhengyu Wang signed a Non-Competition Agreement with the company and Tantech, restricting them from causing Tantech to compete with the company.

Stakeholder Impact

• **Shareholders**: Experience significant dilution from recent share issuances and face substantial losses due to the company's poor financial performance. The dual-class share structure limits the voting influence of Class A shareholders. The identified material weaknesses in internal controls could erode confidence and impact share price.
• **Employees**: The company has reduced its total number of employees from 70 in FY2023 to 15 in FY2025, indicating significant workforce reductions. Failure to make adequate Housing Provident Fund contributions for some employees could lead to disputes.
• **Customers**: Reduced sales volumes for core products suggest declining customer demand or market share. The expansion into logistics services aims to meet growing customer demand in that sector.
• **Suppliers**: The company's significant advances to suppliers and subsequent allowances for credit losses indicate potential issues with supplier reliability or financial health, which could impact future supply chain stability.
• **Creditors**: The company has outstanding promissory notes and long-term loans. The ability to repay these debts is crucial, and the current financial losses could raise concerns for creditors, although operating cash flow improved in FY2025.

Next Steps

• The company plans to continue expanding its service capacities in warehousing and logistics to support growing customer demand.
• It intends to further invest resources in promoting overseas markets, including attending more export fairs and developing cross-border e-commerce.
• The company will continue to train employees and upgrade its information technology and supply chain system to create an integrated sales network.
• Management plans to hire experts to improve and test internal controls and establish standard internal audit work procedures before September 2025.
• The company will perform self-assessment of internal control effectiveness on a continuous basis, led by its accounting and risk management department within fiscal year 2025.
• The company plans to hire more competent personnel and involve professional service companies to help implement SOX 404 compliance.
• The remaining 60% of the cash consideration from the terminated EWAYFOREST acquisition ($35,775,300) is to be repaid in installments from February 1, 2026, to January 30, 2028, with interest.

Key Dates

Recommendation

The company's financial performance is severely distressed, marked by a substantial net loss of $53.4 million and a 56.4% revenue decline in FY2025. The massive impairment losses and credit loss allowances indicate significant asset quality issues and operational mismanagement. While the new logistics business shows potential, it is currently unprofitable and cannot offset the core business's decline. The identified material weaknesses in internal controls raise serious governance concerns. The dual-class share structure further concentrates power, limiting minority shareholder influence. Given the severe financial deterioration, significant operational risks, and governance issues, a seasoned investor would likely recommend a strong sell to mitigate further losses.

Keywords

Farmmi, FAMI, SEC Filing, 20-F, Annual Report, Financial Results, Net Loss, Revenue Decline, Agricultural Products, Edible Fungi, Shiitake, Mu Er, Logistics Services, Warehousing, China Business, PRC Regulations, Cybersecurity, Data Security, HFCAA, Internal Controls, Material Weakness, Credit Losses, Impairment Loss, Subsidiary Divestiture, Capital Raise, Private Placement, Dual Class Shares, Corporate Governance, Related Party Transactions, Nasdaq Listing, Cayman Islands Company