Scientific Energy, Inc., a diversified company operating in food delivery, graphite product sales, and gold trading, has released its annual 10-K report. The report highlights significant financial improvements, strategic initiatives, and operational achievements for the fiscal year 2024, alongside addressing key challenges and risks.
Financial Highlights
Total Revenue: $68.6 million, an increase of $29.7 million compared to the previous year, driven by growth in the food delivery and graphite trading businesses.
Gross Profit: $21.1 million, up by $3.2 million from the previous year, reflecting improved cost management and higher sales volume.
Operating Loss: $(1.1) million, a significant improvement from the $(33.4) million loss in the previous year, primarily due to a decrease in operating expenses.
Net Income: $69,847, a turnaround from a net loss of $(32.7) million in the previous year, attributed to increased revenue and reduced impairment losses.
Net Income Per Share: $0.0003, compared to a loss of $(0.12) per share in the previous year, indicating a positive shift in profitability.
Business Highlights
Revenue Segments: The company's business is divided into three main segments: food ordering & delivery, graphite product sales, and a physical gold trading platform. The food delivery segment, primarily through Macao E-Media Development Company Limited (MED), accounts for approximately 64% of total revenue, while graphite sales, through Graphite Energy, Inc. (GEI), contribute around 36%.
Geographical Performance: The company operates mainly in Macau for its food delivery services, with a significant market share of approximately 70%. The graphite sales business is conducted through its subsidiary in Florida, USA, with a focus on international markets.
Sales Units: In 2024, the food delivery platform generated over 10,017,000 transactions, totaling MOP1,135,530,000 (approximately $141,400,000) in Gross Merchandise Volume.
New Product Launches: The company expanded its service offerings in 2024 by launching group dining services in Hong Kong, addressing corporate employees' lunch and dinner needs.
New Production Launches: In December 2023, the company established Graphite Energy, Inc. to enter the graphite sales business, ensuring a stable supply of graphite ore through an agreement with Madagascar Graphite Limited.
Future Outlook: The company plans to continue expanding its merchant network and consumer reach, improve delivery driver experience, and enhance service offerings to become a full-category service e-commerce company. In the graphite segment, the focus will be on maintaining product quality, expanding distribution channels, and deepening cooperation with partners.
Strategic Initiatives
Strategic Initiatives: The company has been actively expanding its business operations through strategic acquisitions and the establishment of new subsidiaries. In 2023 and 2024, the company acquired Fresh Life Technology Company Limited and Citysearch Technology (HK) Company Limited to enhance its logistics and group dining service capabilities. Additionally, the company established Graphite Energy, Inc. to enter the graphite sales business, and set up Zhuhai Aomi E-commerce Company Limited and Zhuhai Wanmi Technology Company Limited to expand its presence in mainland China.
Capital Management: The company has been managing its capital through a combination of debt and equity. As of December 31, 2024, the company had cash and cash equivalents of $4.9 million and a working capital deficit of $7.3 million. The company has utilized bank loans to support its operations, with loans from various banks including Ant Bank (Macau) Limited and Bank of China. The company has also maintained its common stock structure with 263,337,500 shares issued and outstanding, and no preferred shares issued. The company has not engaged in any equity repurchase programs or declared dividends during the reported period.
Future Outlook: The company plans to continue its strategic expansion through acquisitions and the establishment of new subsidiaries to enhance its service offerings and market presence. The company aims to improve its liquidity position by generating sufficient cash flows from operations and exploring additional financing options. The management is focused on achieving sustainable growth and profitability, while addressing the working capital deficit and ensuring the company's ability to continue as a going concern.
Challenges and Risks
Regulatory Risks: The company faces significant regulatory risks related to its operations in China and Macau. The Chinese government may exercise significant oversight and discretion over business operations, potentially leading to material changes in business or the value of common stock. Increased government oversight of overseas offerings or foreign investment in China-based issuers could restrict or prevent the ability to offer securities, causing their value to decline significantly or become worthless. Additionally, the enforcement of laws, rules, and regulations in China can change quickly with little advance notice, creating uncertainties that could limit legal protections and lead to material changes in operations.
Operational Risks: The company is also exposed to risks related to the Holding Foreign Companies Accountable Act (HFCAA), which could lead to the delisting of its common stock if the PCAOB is unable to inspect or investigate auditors in Mainland China and Hong Kong. This could significantly impact the value of the company's common stock.
Market Risks: The company is exposed to foreign currency exchange rate fluctuations, particularly between the U.S. dollar and the Macau Pataca and Hong Kong dollar, which may impact revenues and financial performance. Additionally, the company is subject to market changes in the availability and cost of electricity and fuel, which could adversely affect its business operations.
Management Strategies: Management has identified the need to retain existing merchants and consumers and acquire new ones in a cost-effective manner as critical to revenue growth. The company plans to expand its operations into new markets, but this may involve significant resources with uncertain returns.
SEC Filing: