Meiwu Technology(WNW) - 2024 Q4 - Annual Report

PART I Item 3. Key Information This section outlines the company's offshore holding structure, the termination of its VIE in December 2024, associated China operational risks, and presents condensed consolidated financial data and a comprehensive list of risk factors - The company is a British Virgin Islands holding company, not a direct Chinese operating company, conducting business through its PRC subsidiaries[38] - In December 2024, the company terminated its Variable Interest Entity (VIE) structure due to continued losses and a strategic shift to the functional skincare business, and currently has no VIE structure in China[40][57] - The company's auditor, Enrome LLP, is headquartered in Singapore and is subject to PCAOB inspection, therefore the company does not expect to be identified as a Commission-Identified Issuer under the HFCAA for the fiscal year ended December 31, 2024[45] - As of the report date, the company's subsidiaries have not made any dividend distributions to the parent company, and the company has not paid any dividends to its shareholders, with future earnings intended for reinvestment[52] Financial Information Relating to the Former VIEs This subsection presents selected condensed consolidated financial data for Meiwu Technology, its subsidiaries, and the former VIE for fiscal years 2022-2024, detailing financial performance and position Selected Condensed Consolidated Statements of Operations (USD) | Indicator | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenue | $158,485 | $10,977,429 | $10,978,571 | | Total Cost of revenue | $91,354 | $8,394,364 | $9,803,883 | | Net (Loss) Income | $5,114,684 | $(16,312,705) | $(11,219,851) | Selected Condensed Consolidated Balance Sheet Data (USD) | Indicator | As of Dec 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $60,945,135 | $20,584,279 | | Total Liabilities | $1,967,772 | $11,568,372 | | Total Shareholders' Equity | $58,977,363 | $9,015,907 | Selected Condensed Consolidated Statements of Cash Flows (USD) | Indicator | For the year ended Dec 31, 2024 | For the year ended Dec 31, 2023 | For the year ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $(14,064,609) | $(7,422,839) | $(5,522,340) | | Net cash from investing activities | $(943,376) | $(5,539) | $(25,916) | | Net cash from financing activities | $45,968,149 | $276,794 | $2,877,500 | Risk Factors This subsection outlines the principal risks faced by the company, categorized into those related to the new functional skincare business, operating in China, and ownership of its ordinary shares - The company has a limited operating history in the dynamic functional skincare industry and relies on formulas provided by third parties, which poses a risk if competitors use similar formulas[75][77] - The PRC government has significant authority to regulate operations, and uncertainties in the interpretation and enforcement of Chinese laws, including those related to overseas listings (CSRC filings) and data security (CAC review), could materially impact the business and share value[44][135][173] - As a holding company, Meiwu relies on dividends from its PRC subsidiaries, with PRC regulations restricting their ability to transfer funds, requiring statutory reserves and currency conversion controls, which could limit the company's ability to fund operations or pay dividends to its own shareholders[180][182][193] - The company has identified a material weakness in its internal control over financial reporting as of December 31, 2024, specifically a lack of in-house accounting personnel with sufficient knowledge of U.S. GAAP and SEC reporting requirements[230] Item 4. Information on the Company This section provides a detailed overview of the company's history, strategic business transition to functional skincare, and operational structure, including intellectual property and cybersecurity measures - The company was incorporated in the British Virgin Islands on December 4, 2018, and its ordinary shares began trading on the Nasdaq on December 15, 2020, under the symbol "WNW"[246][257] - In the last quarter of 2024, the company implemented a strategic transition to expand into the functional skincare business, which accounted for 38% of total revenue for the year ended December 31, 2024[287] - Prior to December 2024, the company operated an SMS business (suspended in Dec 2023) and an e-commerce business for food products, with the SMS business generating 77.1% of revenue for FY2023, while for FY2024, the food e-commerce business generated 54.6% of revenue[309][312] - On April 1, 2025, the company effectuated a one-for-twenty reverse stock split of its Ordinary Shares[272] History and Development of the Company This subsection outlines the company's corporate evolution from 2018, including its IPO, name changes, acquisitions, VIE termination, a reverse stock split, and recent financing activities - On December 10, 2024, the company terminated its VIE agreements with Meiwu Zhishi Technology (Shenzhen) Co., Ltd[269] - On December 24, 2024, the company disposed of its subsidiaries Magnum International Holdings Limited and Xinfuxin International Holdings Limited for $10 each to an unaffiliated purchaser[270][271] 2024 Financing Activities | Date | Transaction | Gross Proceeds/Amount | Details | | :--- | :--- | :--- | :--- | | May 17, 2024 | Convertible Notes Offering | $1,000,000 | Issued to three unaffiliated investors with 10% OID and 10% interest | | Dec 2, 2024 | Primary Public Offering | $24,000,000 | Sale of 30,000,000 Ordinary Shares at $0.80 per share | | Oct 22, 2024 | Private SPA | $24,000,000 | Sale of 30,000,000 Resale Shares to Chairman Mr. Changbin Xia at $0.80 per share (no proceeds to company) | Business Overview This subsection details the company's business operations, focusing on the strategic shift to functional skincare, its products, R&D, and sales channels, alongside legacy businesses and market outlook - The company's new functional skincare business, launched in Q4 2024, offers products like essence, serum, and collagen beverages, aiming to build an ecosystem including R&D, distributor support, and franchisee partnerships[287][288][289] - The company entered into an agreement with Meixing Biology Research Institute to jointly develop a light therapy anti-aging skincare product, with the company providing RMB 15 million (US$2.1 million) for R&D expenses[293] - The SMS service business, operated by Code Beating, was suspended in December 2023 due to declining competitiveness and profit margins[312] Revenue by Business Line (FY 2022-2024) | Business Line | % of Total Revenue (2024) | % of Total Revenue (2023) | % of Total Revenue (2022) | | :--- | :--- | :--- | :--- | | Functional Skincare | 38.0% | 0% | 0% | | E-Commerce (Food) | 54.6% | 22.9% | 19.5% | | SMS Business | 0% | 77.1% | 80.5% | Regulations This subsection summarizes significant PRC rules and regulations affecting the company's business, covering foreign investment, functional skincare, intellectual property, tax, foreign exchange, overseas listings, and cybersecurity - The company's operations are subject to PRC laws on foreign investment, which use a "negative list" to define prohibited or restricted industries, with value-added telecommunication services (excluding e-commerce) remaining restricted[334][341][344] - Under PRC law, dividends paid by a PRC subsidiary to a foreign investor are subject to a 10% withholding tax, which may be reduced to 5% for a Hong Kong resident enterprise under the Double Tax Avoidance Arrangement, provided certain conditions are met[355] - The CSRC's Overseas Listings Rules, effective March 31, 2023, require domestic companies to complete filing procedures for overseas offerings, with already listed companies like Meiwu needing to file for subsequent offerings[363] - The PRC Cybersecurity Law and the Personal Information Protection Law (PIPL) impose strict requirements on data collection, storage, and use, with the CAC Revised Measures requiring network platform operators with over one million users seeking foreign listing to undergo a cybersecurity review[368][370] Item 5. Operating and Financial Review and Prospects This section provides management's discussion and analysis of the company's financial condition and results of operations, detailing the 2024 business transition, revenue, profitability, liquidity, and critical accounting estimates - The company's business model shifted significantly in 2024, with the SMS business was discontinued, and a new functional skincare business launched, which generated 45.4% of total revenue in its first year of operation[406] - Net revenue plummeted by 99% from $11.0 million in 2023 to $158,485 in 2024, primarily due to the cessation of the SMS business[417] - Despite the revenue drop, the company reported a net income of $5.1 million in 2024, a stark contrast to the $16.3 million net loss in 2023, driven by an $8.2 million gain from the disposal of subsidiaries and a significant decrease in asset impairment losses[415][431] - Cash and cash equivalents increased substantially to $43.4 million as of December 31, 2024, from $16.1 million in 2023, primarily funded by $47.7 million from the issuance of common stock[458][465] Operating Results This subsection provides a detailed comparative analysis of the company's operational results for fiscal years 2024 vs. 2023 and 2023 vs. 2022, highlighting revenue, gross margin, net income/loss, and the impact of disposals and impairment Financial Performance Summary (2024 vs. 2023) | Metric | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenues | $158,485 | $10,977,429 | (99)% | | Gross Profit | $67,131 | $2,583,065 | (97)% | | Gross Margin | 42.4% | 23.5% | +18.9 p.p. | | Loss from Operations | $(2,047,017) | $(1,516,786) | (6)% | | Net Income (Loss) | $5,114,684 | $(16,312,705) | 131% | - The significant increase in net income for 2024 was primarily due to an $8.2 million gain on the disposal of subsidiaries (Meiwu Zhishi, Magnum, and Xinfuxin) and a $13.2 million decrease in asset impairment losses compared to 2023[430][431] Financial Performance Summary (2023 vs. 2022) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenues | $10,977,429 | $10,978,571 | 0% | | Gross Profit | $2,583,065 | $1,174,688 | 120% | | Loss from Operations | $(1,516,786) | $(3,739,370) | 65% | | Net Loss | $(16,312,705) | $(11,219,851) | (45)% | - The net loss in 2023 widened significantly compared to 2022, primarily due to a $14.7 million asset impairment loss related to the software development of Yundian and goodwill of Yuanxing[436][453] Liquidity and Capital Resources This subsection analyzes the company's liquidity, capital resources, and cash flows, noting a significant increase in cash and working capital in 2024 primarily due to equity contributions from shareholders Cash Flow Summary (USD) | Cash Flow Activity | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(13,621,906) | $(7,422,839) | $(5,522,340) | | Net cash used in investing activities | $(943,376) | $(5,539) | $(25,916) | | Net cash provided by financing activities | $45,525,266 | $276,794 | $2,877,500 | - Net cash from financing activities in 2024 was $45.5 million, primarily consisting of $47.7 million from the issuance of common stock[465] - Net cash used in operating activities in 2024 was approximately $13.6 million, mainly driven by a $16.8 million increase in advances to suppliers and a $12.0 million increase in accrued liabilities, offset by net income and other non-cash adjustments[461] Critical Accounting Estimates This subsection details significant accounting policies requiring critical judgments and estimates, including historical VIE consolidation, revenue recognition under ASC 606, inventory valuation, and income tax accounting - The company historically consolidated its former VIE, Meiwu Shenzhen, based on contractual arrangements that gave it effective control and economic benefits, with this VIE structure terminated on December 10, 2024[471][472][474] - Revenue is recognized under ASC 606 when control of goods or services transfers to the customer, with the company acting as a principal in its sales transactions, recognizing revenue on a gross basis, as it controls the goods, bears inventory risk, and sets prices[478][481] - The company maintains a full valuation allowance against its deferred tax assets, as management has determined it is more likely than not that these assets will not be realized due to uncertainties surrounding future profitability[489][847] Item 6. Directors, Senior Management and Employees This section provides information on the company's governance, human resources, executive compensation, board structure, employee numbers, and share ownership details for major shareholders and management - The board of directors consists of seven members, including a Chairman, CEO, COO, and three independent directors[491][512] - The company has adopted a 2022 Equity Incentive Plan and a 2024 Equity Incentive Plan to attract and retain personnel, with a total of 7,065 and 21,925 post-split shares issued under the respective plans as of the report date[510][511] - As of the report date, the company employed a total of 40 employees, primarily in general management, operations, and product departments[542] - Chairman Changbin Xia is the largest beneficial owner, holding 1,507,285 ordinary shares, which represents 47.58% of the outstanding shares[547] Item 7. Major Shareholders and Related Party Transactions This section discloses the company's major shareholders and details related party transactions for fiscal year 2024, primarily an interest-free loan from the Chairman of the Board - The company has an outstanding loan from its Chairman, Changbin Xia, which serves as working capital, with the balance due to Mr. Xia being $1,287,629 as of December 31, 2024, and the loan is interest-free and due on demand[552] - During the year ended December 31, 2023, the company purchased $18,310 in food products from and had sales of $21,215 to related parties, with no such transactions occurring in 2024[553] Item 8. Financial Information This section confirms the location of full financial statements, states no material legal proceedings, and outlines the company's dividend policy, including restrictions on PRC subsidiary distributions - The company is not currently a party to any legal proceedings that are expected to have a material impact on its business or financial condition[555] - The company has never declared a dividend and does not plan to in the foreseeable future, with its ability to pay dividends dependent on receiving funds from its PRC subsidiaries, which is subject to PRC regulations on profit distribution and currency controls[556][560] Item 10. Additional Information This section provides supplementary information, primarily focusing on taxation, including U.S. tax consequences for shareholders, British Virgin Islands and PRC tax regimes, and the company's Passive Foreign Investment Company (PFIC) status - The company is incorporated in the British Virgin Islands and is not subject to income or capital gains tax there, with no withholding tax on dividends paid by the company[584][585] - The company's PRC subsidiaries are subject to a 25% Enterprise Income Tax (EIT), and dividends paid from PRC subsidiaries to foreign parent companies are generally subject to a 10% withholding tax[576][842] - The company does not believe it was a Passive Foreign Investment Company (PFIC) for the taxable year ended December 31, 2024, and does not anticipate becoming one, though PFIC status is an annual determination dependent on income, assets, and share market price[599] Item 11. Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risks, primarily interest rate risk, noting no material exposure due to the absence of outstanding bank borrowings or loans - The company believes it is not currently exposed to material risks from interest rate fluctuations as it has no outstanding bank borrowings or loans[620] PART II Item 15. Controls and Procedures This section contains management's assessment of the company's internal controls, concluding that both disclosure controls and internal control over financial reporting were ineffective as of December 31, 2024, due to a material weakness - Management concluded that the company's disclosure controls and procedures were ineffective as of December 31, 2024[631] - Management's assessment concluded that the company's internal control over financial reporting was not effective as of December 31, 2024, based on the COSO 2013 framework[635] - A material weakness was identified due to a lack of in-house accounting personnel with sufficient knowledge of U.S. GAAP and SEC reporting experience, with the company taking steps to remediate this by hiring outside financial personnel[636][637] Item 16. Corporate Governance and Other Disclosures This section covers corporate governance and disclosure topics, including the audit committee financial expert, accountant fees, foreign private issuer exemptions, cybersecurity risk management, and adopted policies - The Board of Directors has determined that Ms. Aiwei Luo qualifies as the audit committee financial expert[639] Principal Accountant Fees (USD) | Fee Type | Fiscal 2024 | Fiscal 2023 | | :--- | :--- | :--- | | Audit Fees | $200,000 | $190,000 | | Audit-Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | Total | $200,000 | $190,000 | - As a foreign private issuer, the company follows certain home country (British Virgin Islands) practices in lieu of Nasdaq rules, such as not requiring shareholder approval for all equity compensation plans[652][660] - The company has a cybersecurity risk management program with board oversight, and No cybersecurity incidents that materially affected the company were detected in the year ended December 31, 2024[658][661] PART III Item 18. Financial Statements This section contains the company's audited consolidated financial statements for fiscal years 2022-2024, prepared under U.S. GAAP, including the independent auditor's report, primary financial statements, and detailed accompanying notes Consolidated Balance Sheets The consolidated balance sheets present the company's financial position as of December 31, 2024 and 2023, showing significant increases in total assets and stockholders' equity, and a substantial decrease in total liabilities Consolidated Balance Sheet Highlights (in USD) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $43,396,977 | $16,060,686 | | Advances to suppliers, net | $16,546,521 | $774,467 | | Total Assets | $60,945,135 | $20,584,279 | | Current Liabilities | | | | Accounts payable | $17,532 | $2,547,805 | | Total Liabilities | $1,967,772 | $11,568,372 | | Total Stockholders' Equity | $58,977,363 | $9,015,907 | Consolidated Statements of Operations and Comprehensive Income/(Loss) The consolidated statements of operations show a dramatic shift in performance, with a 99% revenue fall in 2024 but a net income of $5.1 million, primarily due to gains on subsidiary disposals and reduced impairment losses Consolidated Statement of Operations Highlights (in USD) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total revenue | $158,485 | $10,977,429 | $10,978,571 | | Gross Profit | $67,131 | $2,583,065 | $1,174,688 | | Loss from Operations | $(2,047,017) | $(1,516,786) | $(3,739,370) | | Gain (loss) on disposal of subsidiaries | $8,220,215 | $(28,648) | $14,002 | | Assets impairment loss | $(1,449,371) | $(14,698,853) | $(6,736,684) | | Net Income (Loss) | $5,114,684 | $(16,312,705) | $(11,219,851) | | Loss Per Share (Basic & Diluted) | $0.16 | $(6.54) | $(10.04) | Consolidated Statements of Changes in Shareholders' Equity This statement details changes in shareholders' equity over the past three years, showing a significant increase in 2024 driven by capital contributions from share issuances and net income, offset by foreign currency translation loss - Total shareholders' equity increased from $9.0 million at year-end 2023 to $59.0 million at year-end 2024[673] - The main drivers for the equity increase in 2024 were capital contributions of $47.7 million from issuing 60 million shares and a net income of $5.1 million[673] Consolidated Statements of Cash Flows The consolidated statements of cash flows show increased net cash used in operating activities in 2024, offset by significant cash provided by financing activities, resulting in a substantial year-end cash balance increase Consolidated Statement of Cash Flows Highlights (in USD) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(14,064,609) | $(7,422,839) | $(5,522,340) | | Net cash used in investing activities | $(943,376) | $(5,539) | $(25,916) | | Net cash provided by financing activities | $45,968,149 | $276,794 | $2,877,500 | | Net increase (decrease) in Cash | $27,334,930 | $(7,654,721) | $(2,917,564) | | Cash at end of year | $43,396,977 | $16,062,047 | $23,716,768 | Notes to Consolidated Financial Statements The notes provide detailed information supporting the consolidated financial statements, including business background, VIE termination, strategic shift, accounting policies, acquisitions, related party balances, segment reporting, tax, and subsequent events - On December 10, 2024, the company terminated its VIE agreements, and on December 24, 2024, it disposed of its subsidiaries Magnum (Yundian) and Xinfuxin (Yuanxing)[701][702][703] - The company reports three operating segments for 2024: Skincare Products & Service, Clean Food Platform, and Technical Service, with the Skincare segment generating $86,390 in revenue and having segment assets of $59.0 million[850][851] - As of December 31, 2024, the company had a loan payable of $1,287,629 to its chairman, Changbin Xia, which is interest-free and due on demand[835][836] - Subsequent to year-end, on March 5, 2025, shareholders approved a 1-for-20 share consolidation, with all share and per-share data in the report retroactively restated to reflect this[856]