Meihua International Medical(MHUA) - 2022 Q4 - Annual Report

IPO and Financial Overview - The company completed its initial public offering (IPO) on February 18, 2022, selling 3,940,000 Ordinary Shares at a public offering price of $10.00 per share, raising approximately $34.58 million in net proceeds[209][210]. - The company intends to use earnings for research and development, new product development, and expanding production capacity, with no expectation of paying cash dividends in the foreseeable future[204]. - For the fiscal year ended December 31, 2022, the company recognized revenues of $103,346,341, with own brand sales accounting for 48.88% and resales for 51.12%[219]. - Domestic direct end users and distributor customers contributed 99.52% of total revenues in 2022, while overseas distributing customers accounted for only 0.48%[220]. - Revenues from direct end user and domestic distributor customers for the fiscal year ended December 31, 2022, amounted to $102,845,751, constituting approximately 99.52% of total revenues[243]. Corporate Structure and Shareholding - The company has a direct holding structure, with Meihua International controlling its subsidiaries, including Yangzhou Huada, Jiangsu Yada, Jiangsu Huadong, and Guanghui[202][216]. - The company’s controlling shareholder, Bright Accomplish Limited, holds approximately 66.56% of the Ordinary Shares as of the date of the report[193]. - The company’s corporate structure includes multiple subsidiaries focused on manufacturing and selling various classes of disposable medical devices[199][216]. Product Portfolio and Sales - The company has a total of 1,063 products in its portfolio, with 937 for domestic sales and 126 for overseas sales[223]. - The company’s top product, the disposable ID bracelet, accounted for 14.40% of sales in 2022, up from 13.07% in 2021[226]. - The company’s sales through direct channels accounted for 9.16% of revenues in 2022, while distributor sales accounted for 90.84%[221]. - The company has established sound relationships with customers, distributors, and suppliers, contributing to its sustainable growth[218]. Research and Development - The company’s R&D expenses totaled approximately $3.0 million for the fiscal year ended December 31, 2022, reflecting an increase from $2.7 million in 2021 and $2.5 million in 2020[260]. - The company expects R&D expenses to increase in absolute dollars as it continues to develop new products and enhance existing technologies[260]. - The company has a dedicated R&D team of 78 people, accounting for 12.46% of total employees, focusing on market-driven product development[278]. - The company holds 27 registered patents and continues to invest in acquiring new patents to meet changing market demands[265]. Production and Quality Control - The company completed the construction of a new factory for expanding production, with a total cost of approximately $1.2 million, and placed an order for 12 production lines costing an estimated $3.71 million[237]. - The company operates 12 purification plants covering approximately 110,352 square feet (10,252 square meters), enhancing production efficiency through automation[276]. - The company has implemented strict quality control policies and inspection protocols to maintain high product quality standards[312]. - The inspection team has conducted several on-site inspections, with recommended conclusions of "Passed" or "Rectification within the prescribed period" for the company's production and quality management standards[383]. Regulatory Environment - The company operates under the Company Law of the People's Republic of China, which was amended in October 2018, and the Foreign Investment Law effective from January 1, 2020[334][335]. - The PRC does not impose expropriation on foreign investments, ensuring fair compensation under legal procedures if expropriation is necessary for public interest[338]. - The PRC Enterprise Income Tax Law applies a uniform 25% enterprise income tax rate to both foreign-invested and domestic enterprises[369]. - The company is in compliance with the requirements of the standards on production and quality management of medical devices as confirmed by competent authorities[383]. Market and Distribution - The company has established a massive distribution network with 3,004 domestic distributors and 324 exporting distributors, supported by 5,000 independent sales agents[273]. - The company’s products are sold in over 70 countries and regions, showcasing its international market reach[268]. - The company anticipates continued high demand for virus prevention products due to ongoing public awareness and international demand[237]. Legal and Compliance Issues - The company is subject to various legal claims and proceedings, with one ongoing case regarding past-due professional fees from a former accounting firm[332]. - No investigations or quality-related penalties have been reported for the fiscal year 2022, indicating a stable regulatory environment[288]. - The company has not purchased key-man life insurance, product liability, or professional liability insurance, considering its current insurance coverage sufficient for operations in China[329].