Financial Performance - Total revenue for the year ended December 31, 2021, decreased by 48% to $4.96 million from $9.54 million in 2020[413]. - For the year ended December 31, 2021, total revenue increased by 446% to $59.01 million from $10.88 million in 2020[412]. - The menswear business revenue decreased by 44% to $4.96 million in 2021 from $9.54 million in 2020[412]. - Revenue from the distributor network decreased by 45% to $4.59 million in 2021, accounting for 92.6% of total revenue[414]. - Gross profit for the year ended December 31, 2021, was $1.58 million, resulting in a gross margin of 3%[411]. - The gross profit rate for the non-menswear segment was 1% in 2021, significantly lower than the previous year's 9.7%[422]. - The company reported a loss for the year of $37.22 million, representing a 29% loss margin[411]. - Administrative expenses for 2021 were $9.17 million, accounting for 15% of total sales[411]. - Administrative expenses increased by 60% to $9.17 million in 2021 from $3.44 million in 2020, largely due to increased share-based compensation[427]. - Selling and distribution expenses decreased by 20% to $3.40 million in 2021 from $4.26 million in 2020[428]. - Cost of sales increased from $8.37 million in 2020 to $57.42 million in 2021, driven by the growth in the travel segment's revenue[424]. Business Operations - The company completed a Share Exchange Agreement with Flower Crown Holding, acquiring all issued and outstanding shares in exchange for 259,130 shares of its Common Stock[232]. - The company reorganized its corporate subsidiary structure in the PRC, divesting Flower Crown (Hainan) Cross-Border E-Commerce Co., Ltd., which represented less than 5% of total revenues[238]. - The company adopted the 2022 JX Luxventure Equity Incentive Plan, allowing for the issuance of up to 10,000,000 shares of Common Stock[241]. - The company’s operating cash flow primarily funded its capital expenditures, indicating a reliance on internal cash generation for growth[250]. - The acquisition of Flower Crown on December 21, 2020, expanded the company's menswear business to include Cross Border Merchandise and Tourism[257]. - JX Hainan signed a strategic cooperation agreement with XHFC to introduce high-end Japanese medical and beauty services to the China market[259]. - JX Hainan secured exclusive rights to distribute cross-border products from Japan in Hainan, valued at up to RMB 1,000,000,000[260]. - JX Hainan entered agreements with Chongqing E-Pet and Ragdoll for cross-border pet food purchases, amounting to USD 60,000,000 and USD 30,000,000 respectively[261][262]. - The company has been building its menswear distributor network since 2007, with 11 distributors operating 29 franchised stores as of December 31, 2020, consistent with 2019 figures[333]. - The company has implemented a centralized system for procurement and inspection of raw materials to ensure a stable and high-quality supply[315]. Market and Customer Insights - The target menswear customer base consists of over 200 million male middle-class consumers aged 20-40 in China, driven by increasing affluence and brand consciousness[330]. - The menswear brand was developed in 2006, with a marketing concept of "French origin, Korean design and made for Chinese," appealing to middle-class consumers aged 20-40[332]. - Brand recognition and market acceptance of the KBS brand are critical for revenue generation and profit margins[399]. - The menswear industry in China is fragmented, with competition from local players such as Exceed, Xiniya, Zuoan, and Cabbeen[319]. - The company differentiates itself through fashionable designs, competitive pricing, and operational efficiency[319]. Store and Distribution Network - As of December 31, 2021, the company had 1 corporate store and 29 franchised stores, with corporate store sales accounting for 7.4% of total revenues in 2021[254]. - The number of franchised stores increased from 7 in 2006 to 29 in 2021, indicating a growth in distribution network[254]. - Sales through distributors and wholesalers accounted for 92.6% of total revenues in 2021, up from 62.6% in 2019[254]. - The average capital required to open a new store is approximately $207,000, with renovation costs averaging $67,000 and first-year rent payments around $140,000[286]. - New stores typically break even after one to three months of operation, and are opened strategically before peak seasons[286]. - The average floor area of each retail store was approximately 80 square meters as of December 31, 2021[290]. - The ratio of franchised stores to corporate stores significantly impacts the company's gross profit margin and overall sales performance[400]. Technology and Innovation - The company utilizes AI-based analysis and warehouse management software to optimize inventory and reduce excess stock risks[268]. - The company developed "Little L," a virtual influencer technology, enhancing customer experience and received the "Best Virtual Human Software Technology Service Provider" award[335]. - The company is exploring the incorporation of blockchain technology into its business operations under the guidance of its Chief Technology Officer[340]. - The company relies on its technology infrastructure to support business operations and market trend identification[404]. Regulatory and Financial Considerations - A 10% withholding tax applies to dividends paid by foreign-invested enterprises in China to foreign investors, with potential reductions to 5% under certain conditions[370]. - The Enterprise Income Tax Law imposes a uniform 25% tax rate on both foreign-invested and domestic enterprises[372]. - PRC residents must register with qualified banks for foreign exchange matters related to overseas investments, simplifying previous requirements[363]. - The regulations require that no less than 10% of accumulated profits be allocated to reserve funds each year unless reserves reach 50% of registered capital[368]. - The Circular on Simplifying Foreign Currency Management cancels the requirement for approvals of foreign exchange registration for foreign direct investment[359]. - Domestic entities must retain income to offset previous years' losses before remitting profits to offshore entities[361]. - The approval from the Ministry of Commerce is required for PRC entities intending to establish special purpose vehicles for acquiring equity interests in PRC companies[369].
JX Luxventure(JXJT) - 2021 Q4 - Annual Report