Nature's Miracle Holding Inc.(NMHI) - 2024 Q4 - Annual Report

Part I Business Nature's Miracle is an agriculture technology company providing CEA hardware, with FY2024 revenue of ~$9.3 million and a gross loss of ~$2.8 million, planning expansion into EV, data centers, and Bitcoin mining Fiscal Year 2024 vs. 2023 Financial Highlights | Metric | FY 2024 ($) | FY 2023 ($) | | :--- | :--- | :--- | | Revenues | ~$9.3 million | ~$8.9 million | | Gross Loss | ~$2.8 million | ~$0.9 million | - The company plans to expand its business into electric vehicle (EV) distribution in Latin America and into the data center and Bitcoin mining business through an agreement to acquire 51% of Future Tech Inc[23] Top 5 Customer Concentration (2024 vs. 2023) | Year | Top 5 Customer Revenue ($) | % of Total Revenue | | :--- | :--- | :--- | | 2024 | $4,735,824 | 51.13% | | 2023 | $4,074,909 | 45.64% | Top 5 Supplier Concentration (2024 vs. 2023) | Year | Top 5 Supplier Purchases ($) | % of Total Purchases | | :--- | :--- | :--- | | 2024 | $6,763,418 | 90.94% | | 2023 | $4,039,144 | 90.56% | - The company was formed through a business combination with Lakeshore Acquisition II Corp., which closed on March 11, 2024, and subsequently changed its name to Nature's Miracle Holding Inc[87] - On January 13, 2025, the company received notice of delisting from The Nasdaq Stock Market Its securities began trading on the OTC Markets Group on January 15, 2025[97][98] Risk Factors The company faces critical risks including recurring losses, negative cash flows, significant revenue forecast discrepancies, high customer/supplier dependency, ongoing litigation, and material weaknesses in internal controls - The company has experienced recurring losses and negative cash flows since 2022, leading management to determine there is substantial doubt about its ability to continue as a going concern[102] - Actual revenue for 2023 and 2024 was approximately $8.9 million and $9.3 million, respectively, a significant miss from the $126.9 million projection provided to Lakeshore's board for the 2023 evaluation of the Business Combination[103] - The company is highly dependent on a few key customers, with the top five accounting for 51.13% of revenue in 2024, and typically does not have long-term contracts, posing a risk to revenue stability[120] - There is a significant reliance on a limited number of suppliers, with the top five accounting for 90.94% of total purchases in 2024, which could lead to business disruptions[138] - The company is involved in a lawsuit with Megaphoton, which claims a breach of contract for failure to pay $6,857,167 The company believes the complaint has no merit and has filed a counter-suit[147] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[187] Cybersecurity As a smaller reporting company, Nature's Miracle lacks a formalized cybersecurity program but is evaluating needs to develop a framework - The company currently does not have formalized cybersecurity measures, a dedicated cybersecurity team, or specific protocols in place[189] - The company's approach to cybersecurity is in the developmental stage, and it is in the process of evaluating its needs to establish a suitable framework[191] - To date, the company has not experienced any significant cybersecurity incidents[190] Properties The company leases over 36,599 square feet of warehouse space across two U.S. locations, with plans for future distribution centers - The company leases over 36,599 square feet of warehouse space in two U.S. locations, with its headquarters in California[194] Legal Proceedings The company is involved in several legal disputes, including lawsuits from Megaphoton, Beverly Hills View, Inc., and Growterra, LLC - A lawsuit from Megaphoton for unpaid invoices was dismissed in state court and subsequently refiled in federal court[196] - Beverly Hills View, Inc. filed a lawsuit claiming $2,500,000 in damages for unsuitable lighting products; the company's subsidiary, Visiontech, has cross-complained for $720,000[199] - Growterra, LLC filed a complaint alleging breach of contract, fraud, and misappropriation of trade secrets[200] - Vien Le, a former CFO employed for approximately 4 weeks, filed a wrongful termination case with $30,000 in dispute[198] Mine Safety Disclosures This section is not applicable to the company's business operations - Not applicable[201] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants were delisted from Nasdaq on January 15, 2025, now trading on the OTC market, with no plans for future cash dividends - The company's common stock (NMHI) and warrants (NMHIW) were delisted from Nasdaq and began trading on the OTC market on January 15, 2025[204] - As of April 10, 2025, the company had 445 holders of its common stock[205] - The company has not paid any cash dividends and does not anticipate declaring any in the foreseeable future[206] - In September 2024, a trade payable of $2,135,573 owed by the company's subsidiary Visiontech to Uninet Global Inc. (owned by the company's President) was forgiven[208][209] Reserved This item is reserved and contains no information - None[227] Management's Discussion and Analysis of Financial Condition and Results of Operation In FY2024, revenue increased modestly to $9.3 million, but gross loss widened to $2.8 million due to inventory impairment, leading to a $13.7 million net loss and substantial doubt about going concern Results of Operations (2024 vs. 2023) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Revenue | $9,261,583 | $8,932,751 | | Gross Loss | $(2,805,195) | $(948,871) | | Loss from Operations | $(10,347,884) | $(6,038,420) | | Net Loss | $(13,653,340) | $(7,338,171) | - The increase in gross loss was primarily driven by a rise in inventory impairment, which grew to $2,315,209 in 2024 from $1,269,469 in 2023 due to slow-moving and obsolete inventory[254][255] - Selling, general and administrative expenses increased by 125.8%, mainly due to higher compensation, professional fees ($1.46 million increase), and new stock compensation expenses ($1.41 million) following the Nasdaq listing[257] - Management has determined that recurring losses, negative cash flow, and a working capital deficit of $14.6 million raise substantial doubt about the company's ability to continue as a going concern[267][273] Consolidated Cash Flow Data (2024 vs. 2023) | Cash Flow Activity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,934,771) | $(1,680,128) | | Net cash used in investing activities | $(40,000) | $(437,087) | | Net cash provided by financing activities | $6,173,048 | $1,527,817 | Quantitative and Qualitative Disclosures about Market Risk The company reports limited exposure to foreign exchange and interest rate risks, but faces significant liquidity risk requiring future financing - The company does not currently have exposure to foreign exchange risk[302] - Interest rate risk is low as all borrowings are subject to fixed interest rates[303] - The company faces liquidity risk and will need to raise additional financing as operating cash flows are insufficient to fund operations[305] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for FY2024 and FY2023, highlighting substantial doubt about its ability to continue as a going concern - The Report of Independent Registered Public Accounting Firm explicitly states that the company's recurring losses and negative cash flows raise substantial doubt about its ability to continue as a going concern[318] Consolidated Balance Sheet Highlights (As of Dec 31) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Total Assets | $11,311,819 | $14,200,421 | | Total Liabilities | $25,650,969 | $20,920,358 | | Total Stockholders' Deficit | $(14,339,150) | $(6,719,937) | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Revenue | $9,261,583 | $8,932,751 | | Gross Loss | $(2,805,195) | $(948,871) | | Net Loss | $(13,653,340) | $(7,338,171) | | Loss Per Share (Basic & Diluted) | $(11.88) | $(9.88) | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure The company reports that there have been no changes in or disagreements with its accountants regarding accounting principles or financial disclosures - None reported[306] Controls and Procedures Management concluded that disclosure controls were ineffective as of December 31, 2024, due to material weaknesses in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2024[307] - Multiple material weaknesses were identified, including: lack of effective risk assessment, inadequate control environment, lack of segregation of duties, poor IT controls, and inadequate controls over revenue recognition and income tax[310] - The company plans remedial measures, including hiring more qualified accounting personnel, implementing training programs, and engaging an external consulting firm to assist with Sarbanes-Oxley compliance[309] Other Information The company reports no other information in this section - None[312] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable[313] Part III Directors, Executive Officers and Corporate Governance The company's leadership includes Tie (James) Li as Chairman and CEO, with a five-member Board of Directors, three of whom are independent, structured into staggered classes - The executive team is led by Tie (James) Li (Chairman & CEO), George Yutuc (CFO & COO), and Zhiyi (Jonathan) Zhang (President)[557] - The Board of Directors is composed of five members, with a majority (three members) determined to be independent: Charles Jourdan Hausman, H. David Sherman, and Jon M. Montgomery[568][572] - The Board is divided into three staggered classes, with directors serving three-year terms[569] - The company has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each chaired by an independent director[574] Executive Compensation This section details executive compensation for FY2024 and FY2023, including base salaries set at $300,000 for CEO and $250,000 for President/CFO, accrued amounts, and the adoption of a 2024 Equity Incentive Plan 2024 Executive Officer Annual Salaries | Name | Position | Salary ($) | | :--- | :--- | :--- | | Ti "James" Li | Chairman and CEO | 300,000 | | Zhiyi "Jonathan" Zhang | President | 250,000 | | George Yutuc | CFO, COO | 250,000 | | Varto Levon Doudakian | Vice President | 175,000 | - Actual salary payments to CEO Tie (James) Li and President Zhiyi (Jonathan) Zhang in 2024 were $50,000 and $112,000, respectively, with the remaining amounts accrued as liabilities[597] - The company adopted the 2024 Equity Incentive Plan, reserving 10% of outstanding shares post-Business Combination for future awards to employees, directors, and consultants[610] - Independent directors were paid $25,000 each in 2024 Board fees for executive directors were accrued but not paid out during the year[598][608] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of April 11, 2024, directors and executive officers beneficially owned approximately 17.41% of outstanding common stock Beneficial Ownership of Key Insiders (as of April 11, 2024) | Name | Position | Shares Beneficially Owned | Percentage of Shares (%) | | :--- | :--- | :--- | :--- | | Tie (James) Li | Chairman, CEO, Director | 431,842 | 8.2% | | Zhiyi (Jonathan) Zhang | President, Director | 405,130 | 7.7% | | All Directors & Executive Officers (7 individuals) | - | 911,969 | 17.41% | Certain Relationships and Related Transactions, and Director Independence The company has engaged in numerous related party transactions, including loans and a significant debt forgiveness of $2.1 million, with a policy for review and approval - In September 2024, Uninet Global Inc., a company owned by President Zhiyi (Jonathan) Zhang, forgave a $2,135,573 trade payable owed by the company's subsidiary, Visiontech[656][657] - Throughout 2023 and early 2024, the company's predecessor, Lakeshore, entered into multiple promissory note agreements with CEO Tie (James) Li and Nature's Miracle itself to fund operations[632][634][637] - As consideration for guaranteeing a $3.7 million loan, CEO Tie (James) Li and President Zhiyi Zhang each received 50,000 shares of Nature's Miracle[636] Principal Accountant Fees and Services For FY2024, the company incurred total audit fees of $425,928 from WWC, P.C., with all services pre-approved by the audit committee Accountant Fees (2024 vs. 2023) | Fee Type | Fiscal Year 2024 ($) | Fiscal Year 2023 ($) | | :--- | :--- | :--- | | Audit Fees | $425,928 | $403,751 | | Audit-Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | Total | $425,928 | $403,751 | - The audit committee pre-approves all auditing services and permitted non-audit services performed by the company's auditors[671] Part IV Exhibit and Financial Statement Schedules This section lists the financial statements and all exhibits filed as part of the Form 10-K, including key corporate and loan documents - This item lists the financial statements and exhibits filed with the Annual Report, including the Merger Agreement, Amended Certificate of Incorporation, and various material contracts[673][674] Form 10-K Summary This section is intentionally left blank, as the company has not provided a summary of the Form 10-K - None[676]