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Meiwu Technology(WNW) - 2023 Q4 - Annual Report
WNWMeiwu Technology(WNW)2024-07-05 20:15

IPO and Share Issuance - The company's initial public offering (IPO) on December 15, 2020, priced 5,000,000 Ordinary Shares at 5.00pershare,raisingatotalof5.00 per share, raising a total of 25,000,000 in gross proceeds[108] - The underwriters purchased an additional 999,910 ordinary shares for 4,999,550,bringingthetotalgrossproceedsfromtheofferingto4,999,550, bringing the total gross proceeds from the offering to 29,999,550[108] - The company's initial public offering on December 15, 2020, raised 25millionfromthesaleof5,000,000OrdinarySharesat25 million from the sale of 5,000,000 Ordinary Shares at 5.00 per share[208] Acquisitions and Equity Transactions - On March 31, 2022, the company entered into a Share Purchase Agreement to acquire 100% of Yundian BVI for 8.1million,payablein9,000,000OrdinarySharesat8.1 million, payable in 9,000,000 Ordinary Shares at 0.9 per share[109] - On June 23, 2022, the company acquired 100% of Mahao BVI for 6million,payablein10,000,000OrdinarySharesat6 million, payable in 10,000,000 Ordinary Shares at 0.6 per share[110] - On December 12, 2022, the company agreed to acquire 100% of Yuanxing BVI for 9.6million,payablein12,000,000OrdinarySharesat9.6 million, payable in 12,000,000 Ordinary Shares at 0.8 per share[110] - Meiwu Technology acquired 100% of Yundian BVI for US8.1million,paidin9,000,000OrdinarySharesatUS8.1 million, paid in 9,000,000 Ordinary Shares at US0.9 per share[209] - Meiwu Technology acquired 100% of Mahao BVI for US6million,paidin10,000,000OrdinarySharesatUS6 million, paid in 10,000,000 Ordinary Shares at US0.6 per share[209] - Meiwu Technology acquired 100% of Yuanxing BVI for US9.6million,paidin12,000,000OrdinarySharesatUS9.6 million, paid in 12,000,000 Ordinary Shares at US0.8 per share[209] Subsidiary Establishments and Equity Interests - Meiwu Shenzhen established Wude Shanghai with a registered capital of RMB 20 million (approximately 3.106million)onSeptember29,2020[108]−MeiwuShenzhenacquired513.106 million) on September 29, 2020[108] - Meiwu Shenzhen acquired 51% equity interests in Baode Supply Chain (Shenzhen) Co., Ltd with a registered capital of RMB 5 million (approximately 781,466) on October 20, 2020[108] - Meiwu Shenzhen incorporated Wunong Shaanxi with a registered capital of RMB 8.8 million (approximately 1,375,670)onDecember10,2020[108]−HemeShenzhenwasestablishedwitharegisteredcapitalofRMB10million(approximately1,375,670) on December 10, 2020[108] - Heme Shenzhen was established with a registered capital of RMB 10 million (approximately 1.5 million) on May 12, 2022[109] - Jiayuan Liquor was established with a registered capital of RMB 1.8 million (approximately 252,180)onMay4,2023[110]−MeiwuShenzhenestablishedShenzhenJiayuanLiquorSalesCo.,LtdwitharegisteredcapitalofRMB1.8million(approximately252,180) on May 4, 2023[110] - Meiwu Shenzhen established Shenzhen Jiayuan Liquor Sales Co., Ltd with a registered capital of RMB 1.8 million (approximately 252,180), holding 70% equity interests[209] Financial Performance and Losses - Meiwu Shenzhen recorded a monthly loss from January 2021 through December 2023, with no service fees paid to WFOE due to negative after-tax monthly balances[113] - Cumulative income for Meiwu Shenzhen in December 2023 was RMB 747.53 million, with a cumulative loss of RMB 796.47 million[114] - Meiwu Technology Company Limited's consolidated revenue for 2021 was USD 12,258,451, with a net loss of USD 1,117,586[119] - Consolidated revenue for 2022 was USD 10,978,571, with a net loss of USD 11,219,851[119] - Consolidated revenue for 2023 was USD 10,977,429, with a net loss of USD 16,312,705[120] - Net revenues for 2023 were 10,977,429,aslightdecreaseof10,977,429, a slight decrease of 1,142 (0%) compared to 2022[217] - Net product revenue increased by 17% to 2,513,483in2023,whilenetservicerevenuedecreasedby42,513,483 in 2023, while net service revenue decreased by 4% to 8,463,946[217] - Gross profit increased by 120% to 2,583,065in2023,drivenbya142,583,065 in 2023, driven by a 14% decrease in cost of revenues to 8,394,364[217] - The company's net loss attributable to owners decreased by 12% to 16,066,384in2023[217]−NetrevenuefortheyearendedDecember31,2022decreasedby1016,066,384 in 2023[217] - Net revenue for the year ended December 31, 2022 decreased by 10% to 10.98 million from 12.2millionin2021,primarilyduetoadeclineinonlineandofflineretailsalesimpactedbyCOVID−19[223]−Netlossattributabletotheowners′companyincreasedby92312.2 million in 2021, primarily due to a decline in online and offline retail sales impacted by COVID-19[223] - Net loss attributable to the owners' company increased by 923% to 11.07 million in 2022 from 1.08millionin2021[224]−NetrevenuefortheyearendedDecember31,2022was1.08 million in 2021[224] - Net revenue for the year ended December 31, 2022 was 10,978,571, with a gross profit of 1,174,687andagrossmarginof10.71,174,687 and a gross margin of 10.7%[227] Revenue Breakdown and Business Segments - SMS business contributed 77.1% of total revenue in 2023, while online and mobile commerce contributed 22.9%[127] - In 2022, SMS business contributed 80.5% of total revenue, while online and mobile commerce contributed 19.5%[127] - SMS service accounted for 77% of total revenue in 2023, down from 80.5% in 2022[219] - SMS service accounted for 80.5% of total revenue in 2022, generating 8.83 million, compared to only 1% in 2021[224][226] - Beverages, alcohol, and tea revenue increased significantly to 1,527,256(13.91,527,256 (13.9% of total revenue) in 2023, with a gross margin of 72.7%[221] - Fresh fruits and vegetables had the highest gross margin at 81.0% in 2023, while dried seafood had a negative gross margin of -2.7%[221] - Dried seafood had the highest gross margin of 34.6%, while other food had the lowest gross margin of -3.7% in 2022[227] - Grains, oil, and spices had an average selling price of 11.16 in 2022, up from 10.57in2021,butrevenuedecreasedby8210.57 in 2021, but revenue decreased by 82% to 2.14 million[224][226] - Beverages, alcohol, and tea accounted for 2.6% of total revenue in 2022 with an average selling price of 26.72,downfrom14.726.72, down from 14.7% and 43.40 in 2021[226] Operational and Financial Metrics - Cash and cash equivalents decreased from 23,716,768in2022to23,716,768 in 2022 to 16,062,047 in 2023, a decline of 32.3%[121] - Total current assets decreased from 29,874,190in2022to29,874,190 in 2022 to 20,388,753 in 2023, a decline of 31.8%[121] - Total liabilities decreased from 17,939,426in2022to17,939,426 in 2022 to 11,568,372 in 2023, a decline of 35.5%[121] - Net cash used in operating activities increased from 5,522,340in2022to5,522,340 in 2022 to 7,422,839 in 2023, a rise of 34.4%[122] - Net cash used in operating activities was 7.2millionin2023,primarilyduetoanetlossof7.2 million in 2023, primarily due to a net loss of 9.9 million and adjustments of 1.9millioninnon−cashitems[231]−Capitalexpenditureswere1.9 million in non-cash items[231] - Capital expenditures were 5,539 in 2023, a significant decrease from 25,916in2022and25,916 in 2022 and 81,197 in 2021[233] - Major shareholders contributed approximately 171,874 to the company in 2023 to support liquidity[230] Corporate Governance and Compliance - The VIE Agreements allow WFOE to receive substantially all economic benefits from Meiwu Shenzhen through exclusive technology consulting services[113] - Shareholders of Meiwu Shenzhen pledged all equity interests to WFOE as collateral under the Equity Pledge Agreement[115] - WFOE has exclusive purchase rights to acquire equity interests in Meiwu Shenzhen under the Exclusive Purchase Rights Agreement[116] - WFOE is authorized to exercise all shareholder rights of Meiwu Shenzhen under the Proxy Agreement[117] - The company implemented a 1-for-35 reverse stock split on December 20, 2023, to regain compliance with Nasdaq's Bid Price Rule[125] - The company's disclosure controls and procedures were ineffective as of December 31, 2022, failing to ensure timely and accurate reporting of required information[291] - The company's internal control over financial reporting was not effective as of December 31, 2022, due to a lack of in-house accounting personnel with sufficient knowledge of US GAAP and SEC reporting experience[293] - The company has identified material weaknesses in internal control over financial reporting, which could lead to significant misstatements in future financial statements if not remedied[293] - The company has begun implementing measures to improve internal control over financial reporting, including hiring outside financial personnel with requisite training and experience[293] Legal and Regulatory Matters - The company operates its website through Meiwu Shenzhen, a consolidated variable interest entity, to comply with Chinese regulations on foreign investment in value-added telecommunications services[191] - The company's contractual arrangements are believed to comply with the M&A Rules, but uncertainty remains due to lack of official interpretation or clarification[203] - The CSRC's Overseas Listings Rules require domestic companies to complete filing procedures within three working days of submitting IPO or listing applications, effective March 31, 2023[203] - The company has not received any regulatory objections from the CSRC regarding its initial listing or subsequent offerings as of the report date[203] - The company may face challenges in timely compliance with the Overseas Listings Rules, potentially leading to penalties or hindering future securities offerings[203] - The company must comply with the PRC Cybersecurity Law, which mandates data storage in China for critical information infrastructure operators[205] - Network platform operators with over one million users seeking foreign listings must apply for cybersecurity review under the CAC Revised Measures[205] - The company has adopted security policies to comply with the PRC Data Security Law and Personal Information Protection Law (PIPL)[205] Executive Compensation and Employment Agreements - CEO Xinliang Zhang's annual base salary is 300,000, with additional remuneration including post allowance, performance-related pay, and subsidies for work meals, transportation, and housing[254] - CFO Zihao Liu's annual base salary is 1,000,paidinperiodicinstallments,subjecttoannualreviewandadjustmentbytheBoard[254]−Thecompanyissued141,295OrdinarySharesunderthe2022EquityIncentivePlanand438,498OrdinarySharesunderthe2024EquityIncentivePlantoemployees[254]−EmploymentAgreementwithMr.XinliangZhangdatedJuly16,2021[10.19]−OfferLetterissuedtoChangbinXiadatedDecember14,2021[10.20]−EmploymentAgreementwithZihaoLiudatedMarch9,2023[10.21]−EmploymentAgreementswithQiulanLiandQiufeiChendatedMay7,2024[10.24][10.25]−OfferLettersissuedtoQiulanLiandQiufeiChendatedMay7,2024[10.26][10.27]TaxandRegulatoryCompliance−MeiwuShenzhenobtainedanICPlicenseonDecember21,2018,allowingittoprovidevalue−addedInternetinformationservices,althoughitisnotlegallyrequiredforitscurrentbusinessmodel[191]−Foreigninvestorsarerestrictedfromowningmorethan501,000, paid in periodic installments, subject to annual review and adjustment by the Board[254] - The company issued 141,295 Ordinary Shares under the 2022 Equity Incentive Plan and 438,498 Ordinary Shares under the 2024 Equity Incentive Plan to employees[254] - Employment Agreement with Mr. Xinliang Zhang dated July 16, 2021[10.19] - Offer Letter issued to Changbin Xia dated December 14, 2021[10.20] - Employment Agreement with Zihao Liu dated March 9, 2023[10.21] - Employment Agreements with Qiulan Li and Qiufei Chen dated May 7, 2024[10.24][10.25] - Offer Letters issued to Qiulan Li and Qiufei Chen dated May 7, 2024[10.26][10.27] Tax and Regulatory Compliance - Meiwu Shenzhen obtained an ICP license on December 21, 2018, allowing it to provide value-added Internet information services, although it is not legally required for its current business model[191] - Foreign investors are restricted from owning more than 50% of equity in value-added telecommunications service businesses in China, except for e-commerce businesses where ownership can exceed 50%[189] - The company's Hong Kong subsidiary, Vande, may qualify for a reduced 5% withholding tax rate on dividends received from Meiwu Shenzhen, subject to compliance with Circular 81 and other tax regulations[197] - Foreign-invested enterprises in China can use RMB converted from foreign exchange capital for equity investments, subject to restrictions under SAFE Circular 19[200] - Wholly foreign-owned enterprises in China must allocate at least 10% of accumulated profits to reserve funds until reserves reach 50% of registered capital, limiting distributable dividends[201] - Offshore special purpose vehicles (SPVs) formed for overseas listings through acquisitions of PRC domestic companies require CSRC approval prior to listing[202] - The company has not applied for a tax resident certificate from the Hong Kong tax authority, which could affect the withholding tax rate on dividends[273] - Meiwu Shenzhen is subject to a 25% Enterprise Income Tax (EIT) rate based on its global income under PRC tax laws[279] - Non-resident enterprise shareholders may face a 10% withholding tax on dividends and gains from the sale of Ordinary Shares if treated as sourced within the PRC[279] - Non-PRC individual shareholders could be subject to a 20% PRC tax on dividends or gains unless a reduced rate is available under a tax treaty[279] - British Virgin Islands does not impose taxes on dividends, capital gains, or inheritance for non-resident holders of Ordinary Shares[280] - U.S. Holders of Ordinary Shares may be subject to U.S. federal income tax on dividends and capital gains, with potential eligibility for lower capital gains rates[283] - Dividends paid to U.S. Holders are generally treated as foreign source income for foreign tax credit purposes[283] - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes[284] - Fluctuations in the market price of Ordinary Shares could impact the company's PFIC status[286] - U.S. Holders may make a mark-to-market election to avoid adverse PFIC tax treatment if the Ordinary Shares are regularly traded on Nasdaq[286] Corporate Structure and Shareholder Information - The company's Ordinary Shares began trading on the NASDAQ Capital Market on December 15, 2020 under the symbol "WNW"[274] - The company has not declared any dividends and does not anticipate declaring dividends in the foreseeable future[272] - PRC subsidiaries are required to set aside at least 10% of after-tax profits annually for statutory reserve funds until the accumulative amount reaches 50% of registered capital[273] - Dividends paid by PRC subsidiaries to non-resident enterprises are subject to PRC withholding tax at a rate of up to 10%[273] - The company may face difficulties in converting RMB into foreign currencies and remitting currencies out of the PRC, potentially impacting dividend payments[273] - The company has not experienced any significant changes since the date of its audited consolidated financial statements[274] - The company is not currently involved in any legal or administrative proceedings that would materially impact its business operations or financial condition[271] - The company's ability to pay dividends depends on the receipt of funds from its operating subsidiaries, which may be subject to restrictions[272] - The company's PRC subsidiaries are required to set aside a portion of after-tax profits for employee welfare funds, determined at the discretion of the entity[273] - The company has a total of 20 shareholders of record as of the date of the annual report[263] - The company's directors and executive officers as a group beneficially own 0.00024% of the company's Ordinary Shares[265] Audit and Financial Reporting - The company paid 190,000 in audit fees for both fiscal years 2023 and 2022 to its independent registered public accounting firms[299] - The company has no outstanding bank borrowings or loans, reducing exposure to material risks from changes in market interest rates[289] - The company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by the Exchange Act[292] - The company's board of directors has determined that two members, Ms. Xiaoying Mu and Ms. Jinfeng He, qualify as audit committee financial experts[296] - The company has adopted a Code of Business Conduct and Ethics applicable to its principal executive and financial officers, available on its corporate website[298] - The company changed its independent registered public accounting firm from Audit Alliance LLP to Enrome LLP on November 2, 2022[298] - Audit fees for the fiscal years ended December 31, 2021 and 2020 were not disclosed, but no adverse opinions or disagreements with the former auditor, Audit Alliance, were reported[300] - The company appointed Enrome LLP as its new independent registered public accounting firm on November 2, 2022, replacing Audit Alliance[300] - The company does not intend to follow Nasdaq's requirements for shareholder approval on equity compensation plans and certain issuances of securities, opting instead to follow British Virgin Islands corporate governance practices[301] - The company's board of directors has adopted insider trading policies and a compensation recovery policy in compliance with Nasdaq Listing Rule 5608[302] - No cybersecurity incidents were detected in the year ended December 31, 2023 that materially affected the company's business strategy, results of operations, or financial condition[303] - The company's board of directors has general oversight over cybersecurity issues, with daily supervision delegated to the CEO, Mr. Xinliang Zhang[304] Product Portfolio and Market Strategy - The portfolio of food products sold on the Website as of December 31, 2023 comprises 17.4% Organic Food (510 products), 6.1% Green Food (179 products), 8.8% Agri GI Products (259 products), and 67.7% other food products (1,987 products)[130][134] - As of December 31, 2023, the company had over 739,208 registered users on its online sales platform, with approximately 7,891 monthly active users[133] - The company launched 19 Zhishigu experience stores and 6 Zhishigu community health service stations as of December 31, 2023[132] - For the fiscal year ended December 31, 2022, total revenue was 10,978,571,comprising10,978,571, comprising 2,144,218 from online sales of food products and $8,834,353 from SMS[132] - Approximately 11% of the company's products are exclusive to its Website, while 89% are available on other e-commerce platforms[137] - The company's pre-ordering service allows customers to monitor the growth stages of crops through the Website and view them in real-time via cameras installed by farmers[138] - No single supplier accounted for more than 10% of the company