Millennium International (MGIH) - 2024 Q4 - Annual Report

PART I ITEM 3. KEY INFORMATION This section provides selected financial data, revealing a decline in assets and a shift to net loss in FY2024, alongside a comprehensive overview of operational and financial risks Selected Financial Data The company's financial position deteriorated in FY2024, marked by decreased total assets, reduced liabilities, a significant net loss, and negative operating cash flow Consolidated Balance Sheet Summary (as of June 30) | Financial Metric | 2024 (USD) | 2023 (USD) | | :--- | :--- | :--- | | Total Current Assets | 27,765,697 | 44,450,969 | | Total Assets | 43,637,106 | 59,043,137 | | Total Current Liabilities | 12,134,130 | 19,086,343 | | Total Liabilities | 12,591,063 | 19,124,335 | | Total Shareholders' Equity | 31,046,043 | 39,918,802 | Consolidated Statement of Operations Summary (for the year ended June 30) | Financial Metric | 2024 (USD) | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | :--- | | Revenues | 38,530,773 | 45,598,620 | 66,232,757 | | Gross Profit | 8,304,581 | 9,064,262 | 16,270,964 | | (Loss) Income from Operations | (6,927,954) | (1,082,354) | 5,535,582 | | Net (Loss) Income | (8,770,044) | (354,111) | 4,077,371 | Consolidated Cash Flow Summary (for the year ended June 30) | Cash Flow Activity | 2024 (USD) | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | (4,106,011) | 8,109,777 | 2,039,600 | | Net Cash (Used in) Provided by Investing Activities | (2,243,523) | (216,520) | 2,068,244 | | Net Cash Provided by (Used in) Financing Activities | (7,860,347) | 1,799,269 | (5,585,110) | | Net (Decrease) Increase in Cash and Cash Equivalents | (14,230,038) | 8,129,171 | (1,822,626) | Risk Factors The company faces significant operational and financial risks, primarily stemming from regulatory uncertainties in China and Vietnam, customer concentration, and stock volatility - The company faces substantial risks from Chinese regulations, including the CSRC's "Overseas Listing Trial Measures" effective March 31, 2023, which require filings for overseas listings and offerings[29][30][31] - The Chinese government may intervene in or influence the company's operations at any time, potentially leading to material changes in business, fines, or suspension of operations, which could significantly devalue the company's shares[35][36][37] - The company is dependent on a few major customers; for the fiscal year ended June 30, 2024, one significant customer accounted for 18.8% of total revenues[161][162] - The company's operations are exposed to geopolitical risks and economic instability in Vietnam, including potential social unrest, high inflation, and an underdeveloped legal system, which could adversely impact business and financial results[231][232][233] - As a holding company, its ability to fund operations and pay dividends relies on distributions from its PRC subsidiaries, which are subject to PRC regulations on currency conversion, capital controls, and withholding taxes[70][71][73] ITEM 4. INFORMATION ON THE COMPANY This section outlines the company's history as a paper-based packaging solutions provider, detailing its integrated business model, product offerings, organizational structure, and property holdings History and development of the company The company, incorporated in 2021, is a third-generation family business with roots in Hong Kong since 1978, now operating globally across Hong Kong, PRC, and Vietnam - The company is a third-generation family-owned business with a history dating back to 1978, starting with the sale of Corrugated Paper in Hong Kong[285] - The business has expanded its operations to Hong Kong, the PRC, and Vietnam, with a global product delivery footprint[286] Business overview The company provides integrated paper-based packaging solutions, operating production facilities in PRC and supply chain management in Vietnam, leveraging R&D and holding 48 patents - The company operates a one-stop integrated service model for paper-based packaging, covering market research, R&D, design, procurement, production, quality control, and delivery[292][298] - Operations are divided into three main groups: MP Group (offset and flexo printing in PRC), Yee Woo Group (corrugated products in PRC), and MPG Group (supply chain management in PRC, HK, and Vietnam)[301][302][303] - The company's key operating subsidiary, Millennium Shenzhen, is accredited as a High-tech enterprise, entitling it to a preferential tax rate of 15%, and holds 48 registered patents as of the report date[296][368][369] - The company has significant customer and supplier concentration; in FY2024, one customer accounted for 18.8% of total revenues, and two vendors accounted for 19.7% and 13.3% of total purchases[377][378] Organizational structure The company is a Cayman Islands-incorporated holding company operating through a multi-layered structure of wholly-owned subsidiaries in BVI, Hong Kong, PRC, and Vietnam - The company is a holding company incorporated in the Cayman Islands, with a complex structure of subsidiaries in the BVI, Hong Kong, PRC, and Vietnam[544] Property, plants and equipment The company owns three properties in China totaling over 54,600 sq.m. and leases eleven additional properties across Shenzhen, China, and Hung Yen Province, Vietnam Owned Properties | Location | Area (sq.m.) | | :--- | :--- | | Shiyan Street, Baoan District, Shenzhen | 4,042 | | Shiyan Street, Baoan District, Shenzhen | 21,072 | | Yonghu Town, Huiyang District | 29,508 | - The company leases multiple properties for its operations, including industrial parks, dormitories, and canteens in Shenzhen, China, and an industrial park in Hung Yen Province, Vietnam[547] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section analyzes the company's financial performance, highlighting a 15.5% revenue decrease and a significant net loss in FY2024, driven by lower sales volume and increased operating expenses Key Financial Performance (FY2024 vs. FY2023) | Metric | FY 2024 (USD) | FY 2023 (USD) | Change | | :--- | :--- | :--- | :--- | | Revenues | 38,530,773 | 45,598,620 | -15.5% | | Gross Profit | 8,304,581 | 9,064,262 | -8.4% | | Net (Loss) Income | (8,770,044) | (354,111) | Increased Loss | | Gross Profit Margin | 21.6% | 19.9% | +1.7 p.p. | - The decrease in FY2024 revenue was primarily due to a drop in sales volume from 30,189 tons to 23,736 tons, attributed to economic downturns in Mainland China, partially offset by an increase in the average selling price from $1,510 to $1,623 per ton[565] - General and administrative expenses increased significantly to $9.6 million in FY2024 from $5.3 million in FY2023, mainly due to staff compensation related to the winding down of Yee Woo Paper Industry (Shenzhen) Co., Ltd. (YWSZ) and higher professional fees[576] - Net cash used in operating activities was approximately $4.1 million in FY2024, a reversal from $8.1 million generated in FY2023, primarily driven by the net loss of $8.8 million[582][585] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section details the company's leadership, board composition, executive compensation, significant employee reduction, and highly concentrated share ownership by YC 1926 (BVI) Limited - The board of directors consists of five members, three of whom are independent, and the company has established Audit, Compensation, and Nominating committees[634][638] Executive Compensation Summary (FY2024) | Name and Principal Position | Salary ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | | Ming Yan "Ray" Lai, CEO | 121,361 | 10,625 | 131,986 | | Wing Wai "John" Au, CFO | 143,418 | 12,122 | 155,540 | Employee Headcount by Function | Function | As of June 30, 2024 | As of June 30, 2023 | | :--- | :--- | :--- | | Administration and Management | 2 | 8 | | Engineering | 8 | 6 | | Research and Development | 64 | 63 | | Sales and Marketing | 30 | 51 | | Business Operations | 394 | 664 | | Total | 498 | 792 | - Share ownership is highly concentrated, with YC 1926 (BVI) Limited beneficially owning 10,000,000 shares, representing an 88.89% stake, controlled by six shareholders with a voting concert agreement[662] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section details the company's major shareholder, YC 1926 (BVI) Limited, holding 88.89% of shares, and outlines significant related party transactions, primarily from FY2022, including recurring rental expenses - The company's major shareholder, YC 1926 (BVI) Limited, holds 88.89% of the ordinary shares[663] - Significant related party transactions primarily occurred in FY2022, involving repayments to/from entities under common control and dividend waivers by controlling shareholders which were capitalized as additional paid-in capital[664][666][667] - For FY2024, the main related party transaction was rental expenses of $659,678 incurred with Yee Woo Paper Packaging (China) Company Limited, an entity under common control by the shareholders[665] ITEM 8. FINANCIAL INFORMATION This section refers to the full financial statements and details the company's dividend policy, indicating no dividends for FY2023-2024, with past declarations being part of recapitalization efforts - The company has not declared dividends for the fiscal years ended June 30, 2024, and 2023, and does not expect to pay cash dividends in the foreseeable future, intending to retain earnings for business growth[670] - Previous dividend declarations in 2020 (by Yee Woo Shenzhen) and 2022 (by Millennium Printing) were part of recapitalization exercises where the dividends payable to Controlling Shareholders were waived and capitalized as additional paid-in capital to enhance the company's capital structure[668][669][671] ITEM 10. ADDITIONAL INFORMATION This section provides supplementary details on corporate structure, governance, shareholder rights, foreign exchange controls in China, and tax implications across various jurisdictions, including PFIC rules - The company is an exempted company incorporated under the laws of the Cayman Islands, which provides certain advantages such as no requirement to file an annual shareholder return or hold an annual general meeting[710] - Under its articles, each ordinary share confers one vote; an ordinary resolution requires a simple majority, while a special resolution requires a two-thirds majority[686][690] - The company discusses its potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, acknowledging that its status could change based on the market price of its shares and the composition of its assets and income[759][788] - The company is subject to PRC foreign exchange controls, which regulate the conversion of RMB and remittance of funds out of China for both current account items and capital account items[726] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section refers the reader to Item 5 for disclosures about market risk - This section directs to "Item 5. Operating and Financial Review and Prospects" for information on quantitative and qualitative disclosures about market risk[804] PART II ITEM 15. CONTROLS AND PROCEDURES Management concluded that disclosure controls were ineffective as of June 30, 2024, due to a material weakness in internal control over financial reporting, which the company plans to remediate - As of June 30, 2024, management concluded that the company's disclosure controls and procedures were ineffective[808] - A material weakness was identified in internal control over financial reporting: the company does not have sufficient accounting and finance personnel with U.S. GAAP experience[810] - To remediate the material weakness, the company plans to hire additional personnel with experience in U.S. GAAP financial reporting and control procedures[811] ITEM 16. OTHER INFORMATION This section covers governance, auditor changes, fees, and policies on insider trading and cybersecurity risk management, including the appointment of Wei, Wei & Co., LLP - On January 5, 2024, the company dismissed its independent auditor, WWC, P.C., and appointed Wei, Wei & Co., LLP as its new independent registered public accounting firm[822] Principal Accountant Fees (Audit Fees) | Auditor | Fiscal Year | Fee (USD) | | :--- | :--- | :--- | | Wei, Wei & Co., LLP | 2024 | 250,000 | | WWC, P.C. | 2023 | 210,000 | | WWC, P.C. | 2022 | 128,000 | - The company has adopted an insider trading policy that establishes guidelines for trading by affiliates, including defined trading windows and prohibitions on trading while in possession of material non-public information[828][829] - The Board of Directors is responsible for overseeing cybersecurity risk management; the company has a process to assess, identify, and manage material cybersecurity threats, categorized as a "high relevance" risk[834] PART III ITEM 18. FINANCIAL STATEMENTS This section presents the company's audited consolidated financial statements for FY2022-2024, prepared under U.S. GAAP, including reports from independent auditors and detailed notes - The financial statements for the fiscal year ended June 30, 2024, were audited by Wei, Wei & Co., LLP[845] - The financial statements for the fiscal years ended June 30, 2023, and 2022 were audited by WWC, P.C.[846] - The notes to the financial statements provide detailed information on significant accounting policies, including revenue recognition (ASC 606), leases (ASC 842), and segment reporting, where the company has determined it has only one reportable segment[867][880][915] ITEM 19. EXHIBITS This section lists all exhibits filed with the annual report, including corporate governance documents, securities descriptions, employment agreements, and required SEC certifications - The report includes key corporate governance documents such as the Second Amended and Restated Articles of Association and the Code of Business Conduct and Ethics[839] - Employment agreements for key executives and offer letters for directors are filed as exhibits[839]