Meiwu Technology(WNW) - 2024 Q2 - Quarterly Report

Consolidated Financial Statements Unaudited Consolidated Balance Sheets The company's total assets slightly decreased to $20.1 million by June 30, 2024, primarily due to a sharp decline in cash offset by a substantial increase in advances to suppliers Key Balance Sheet Figures | Balance Sheet Items | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $19,953,040 | $20,388,753 | | Cash and cash equivalents | $3,092,759 | $16,060,686 | | Advances to suppliers, net | $13,841,526 | $774,467 | | Total Assets | $20,077,618 | $20,584,279 | | Total Current Liabilities | $7,549,029 | $7,635,153 | | Total Liabilities | $11,364,211 | $11,568,372 | | Total Stockholders' Equity | $8,713,407 | $9,015,907 | - Cash and cash equivalents decreased sharply by approximately 80.7% from $16.1 million to $3.1 million[4] - Advances to suppliers increased dramatically by over 1680%, from $0.77 million to $13.84 million, becoming the largest current asset[4] Unaudited Consolidated Statements of Operations and Comprehensive Loss The company experienced a dramatic 99.2% decline in net revenue to $86,159 for the six months ended June 30, 2024, resulting in a significant operating loss and widened net loss Key Operating Results | Statement of Operations | For the Six Months Ended June 30, 2024 | For the Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Revenue | $86,159 | $10,683,243 | | Gross Profit | $44,070 | $2,454,866 | | (Loss) Income from Operations | ($728,493) | $41,212 | | Net Loss | ($345,611) | ($278,626) | | Loss Per Share – Basic and Diluted | ($0.10) | ($0.01) | - Net revenue plummeted by 99.2% year-over-year, from $10.7 million to just $86,159[5] - The company swung from an operating income of $41,212 in H1 2023 to an operating loss of $728,493 in H1 2024[5] Unaudited Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $8.7 million by June 30, 2024, primarily due to the net loss, while outstanding ordinary shares increased due to share-based compensation Key Equity Changes | Equity Changes (Six Months Ended June 30, 2024) | Amount | | :--- | :--- | | Balance as of December 31, 2023 | $9,015,907 | | Net Loss | ($345,611) | | Foreign Currency Translation Adjustment | $43,111 | | Balance as of June 30, 2024 | $8,713,407 | - The number of ordinary shares outstanding increased by 438,498 during the first six months of 2024 due to share-based compensation granted to employees[7] Unaudited Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $12.9 million for the six months ended June 30, 2024, primarily driven by advances to suppliers, leading to a substantial decrease in cash and cash equivalents Key Cash Flow Figures | Cash Flow Statement | For the Six Months Ended June 30, 2024 | For the Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($12,853,862) | ($333,642) | | Net cash used in investing activities | $0 | ($6,762,905) | | Net cash provided by financing activities | $27,665 | $277,229 | | Net decrease in cash | ($12,967,959) | ($7,933,037) | | Cash and cash equivalents at end of period | $3,094,088 | $15,783,731 | - A significant cash outflow of $13,067,059 was used for 'Advances to suppliers, net', which was the primary driver for the negative operating cash flow[10] Notes to Consolidated Financial Statements This section provides detailed explanations of the company's organization, significant accounting policies, liquidity, acquisitions, related party transactions, segment performance, and subsequent events Note 1: Organization and Business Background Meiwu Technology operates an online 'Clean Food' platform in China via a VIE structure, detailing its 2020 IPO, subsidiary formations, and 2022 strategic acquisitions to expand services - The company operates an online platform for Clean Food in China through a VIE structure, which allows it to exercise effective control and receive economic benefits from its PRC operating entity, Meiwu Shenzhen[13][15] - Completed its Initial Public Offering (IPO) on December 15, 2020, trading on the Nasdaq Capital Market under the symbol 'WNW'[23] - In 2022, the company made several acquisitions, including Yundian (information technology), Code Beating (internet services), and Yuanxing (technology service and food sales), paying for them with company shares[28][30][32] Note 2: Liquidity The company's cash position significantly deteriorated to $3.1 million by June 30, 2024, despite stable working capital, necessitating continued reliance on shareholder contributions Key Liquidity Metrics | Liquidity Metrics | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash | $3,094,088 | $16,062,047 | | Working Capital | $12.40 million | $12.75 million | | Net Loss (H1) | ($0.35 million) | ($0.28 million - H1 2023) | - To support liquidity, major shareholders contributed approximately $204,475 to the Company during the six months ended June 30, 2024[42] Note 3: Summary of Significant Accounting Policies This note outlines the company's core accounting principles under U.S. GAAP, including VIE consolidation, revenue recognition, and foreign currency translation, highlighting a significant shift in revenue sources - The company consolidates its Variable Interest Entity (VIE), Meiwu Shenzhen, as it is deemed the primary beneficiary with power to direct its activities and receive its economic benefits[44][45] Net Revenue Breakdown | Net Revenue Breakdown | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Food & Beverage Categories | $86,159 (100%) | $2,326,966 (21.8%) | | SMS service | $0 (0.0%) | $8,356,277 (78.2%) | | Total | $86,159 | $10,683,243 | - The company's functional currency is the Renminbi (RMB), and the reporting currency is the U.S. Dollar (USD)[92] Note 4: Acquisitions This note details three 2022 acquisitions—Yundian, Code Beating, and Yuanxing—all paid with ordinary shares and resulting in significant goodwill recognition - Acquired Yundian on April 19, 2022, for 9,000,000 Ordinary Shares valued at $6.37 million, resulting in $6.6 million of goodwill[110][112] - Acquired Code Beating on June 23, 2022, for 10,000,000 Ordinary Shares valued at $6.12 million, resulting in $5.96 million of goodwill[115][117] - Acquired Yuanxing on December 23, 2022, for 12,000,000 Ordinary Shares valued at $2.64 million, resulting in $1.74 million of goodwill[120][122] Note 9: Bank Loans As of June 30, 2024, the company had $408,685 in short-term bank loans, classified as current liabilities due to a covenant breach, with renegotiations underway Bank Loan Balances | Bank Loans | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Short-term bank loans | $408,685 | $418,315 | - Due to a breach of covenant, the banks are contractually entitled to request immediate repayment of the outstanding $408,685 loan amount[135] Note 12: Equity This note details significant equity changes, including a 1-for-35 reverse share consolidation in November 2023 and the issuance of 438,498 shares under an incentive plan in February 2024 - On November 27, 2023, the company executed a 1-for-35 reverse share consolidation, with all share and per-share data retroactively restated[154] - On February 21, 2024, the company issued 438,498 Ordinary Shares under its incentive plan[153] - As of June 30, 2024, there were 3,361,823 ordinary shares issued and outstanding[153] Note 13: Related Party Balances and Transactions The company reported significant non-interest-bearing balances due to related parties, totaling $3.82 million as of June 30, 2024, primarily from a shareholder and a former shareholder Related Party Balances | Due to Related Parties | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Eternal Horizon International Company Limited | $2,200,194 | $2,257,397 | | Changbin Xia | $1,378,147 | $1,410,621 | | Other | $236,841 | $244,588 | | Total | $3,815,182 | $3,912,606 | - The balances due to related parties are interest-free and due on demand[159] Note 14: Taxation The company's PRC entities are subject to a 25% Enterprise Income Tax (EIT) rate but incurred no EIT due to net losses, maintaining a full valuation allowance against deferred tax assets - The company's PRC operating subsidiaries and VIE are subject to a 25% PRC enterprise income tax (EIT) rate[164] - Due to net losses of approximately $0.3 million in both H1 2024 and H1 2023, the company did not incur any EIT[165] - The company maintains a full valuation allowance against its deferred tax assets due to uncertainties surrounding future utilization[170][172] Note 15: Segment Reporting The company operates two segments, Clean Food Platform and Technical Service, with the latter generating zero revenue in H1 2024, a significant shift from its $8.4 million contribution in H1 2023 Segment Performance Overview | Segment Performance (H1 2024 vs H1 2023) | Clean Food Platform | Technical Service | | :--- | :--- | :--- | | Revenues (H1 2024) | $86,159 | $0 | | Loss from operations (H1 2024) | ($715,437) | ($13,056) | | Revenues (H1 2023) | $2,326,966 | $8,356,277 | | (Loss) Income from operations (H1 2023) | ($696,346) | $737,558 | - The Technical Service segment, which was the primary revenue driver in H1 2023, generated no revenue in H1 2024[174] Note 17: Subsequent Events Significant subsequent events in October 2024 include the chairman's agreement to purchase 30 million ordinary shares at $0.80 per share, followed by the company's issuance of up to 30 million ordinary shares - On October 22, 2024, the company's chairman, Changbin Xia, agreed to purchase 30,000,000 Ordinary Shares at a price of $0.80 per share[178] - On October 24, 2024, the Company issued up to 30,000,000 ordinary shares[179]