20-F: Millennium Group Reports Steep Revenue Decline, Widening Losses

Millennium Group International Holdings Limited reported a significant drop in revenue and continued net losses for the fiscal year ended June 30, 2025, amidst challenging economic conditions and operational restructuring.

Summary

• Total revenue for the fiscal year ended June 30, 2025, decreased by 34.2% to $25,334,149 from $38,530,773 in the prior year.
• The company reported a net loss of $6,315,385 for FY2025, an improvement from the $8,770,044 net loss in FY2024, but still a substantial loss.
• Gross profit declined by 43.6% to $4,685,118 in FY2025 from $8,304,581 in FY2024, with gross profit margin falling from 21.6% to 18.5%.
• Sales volume decreased from 23,736 tons in FY2024 to 11,128 tons in FY2025, while the average selling price increased from $1,623 per ton to $2,277 per ton, reflecting a strategic shift to higher-quality customers.
• Cash and cash equivalents decreased to $10,689,219 as of June 30, 2025, from $13,346,584 in the previous year.
• The voluntary liquidation of Yee Woo Paper Industry (Shenzhen) Co., Ltd. (YWSZ) commenced on April 22, 2024, and is expected to continue for another six to nine months, with operations being consolidated into Millennium Printing (Shenzhen) Company Ltd (MPSZ).
• A material weakness in internal control over financial reporting was identified due to insufficient accounting and finance personnel with U.S.-GAAP experience.
• The MP Vietnam factory commenced operation from July 2025, indicating ongoing business expansion efforts.

Sentiment

Score: 3

Explanation: The company experienced significant declines in revenue and gross profit, continued net losses, and identified a material weakness in internal controls. While there are strategic adjustments and new factory operations, the overall financial performance and operational challenges present a negative outlook.

Positives

• Net loss decreased from $8,770,044 in FY2024 to $6,315,385 in FY2025.
• Average selling price per ton increased from $1,623 in FY2024 to $2,277 in FY2025, indicating a strategic focus on higher-quality and more creditworthy customers.
• The MP Vietnam factory commenced operations in July 2025, expanding the company's production capabilities and geographical presence.
• Millennium Shenzhen maintains its 'High-tech enterprise' accreditation, entitling it to a preferential tax rate of 15% until December 2026.
• The company has a dedicated R&D department with 40 staff and 48 registered patents, demonstrating innovation capacity.
• An ISTA certified testing laboratory with Amazon recognition enhances product quality and market access for packaging.

Negatives

• Total revenue decreased significantly by 34.2% from $38,530,773 in FY2024 to $25,334,149 in FY2025.
• Gross profit declined by 43.6% from $8,304,581 in FY2024 to $4,685,118 in FY2025.
• Gross profit margin decreased from 21.6% in FY2024 to 18.5% in FY2025, primarily due to higher raw material costs and lower production utilization.
• Sales volume decreased from 23,736 tons in FY2024 to 11,128 tons in FY2025, mainly due to the economic slowdown in Mainland China.
• Cash and cash equivalents decreased from $13,346,584 in FY2024 to $10,689,219 in FY2025.
• Net cash used in operating activities was $1,719,389 in FY2025, continuing a negative trend from $4,106,011 used in FY2024.
• The company identified a material weakness in internal control over financial reporting due to insufficient accounting and finance personnel with U.S.-GAAP experience.
• Corrugated products gross profit decreased significantly in FY2024 due to the voluntary liquidation of YWSZ and consolidation, with products sold at a lower price to facilitate the process.

Risks

• Uncertainties in PRC regulatory requirements, including CSRC approvals for offshore offerings, cybersecurity reviews, and the interpretation of the Foreign Investment Law, could impact operations and the value of ordinary shares.
• The company, as a holding company, relies on dividends from PRC subsidiaries, which are subject to PRC laws, capital controls, and potential withholding taxes, limiting cash availability.
• Fluctuations in exchange rates between the U.S. dollar, RMB, and VND could materially affect financial results and the value of ordinary shares.
• Adverse changes in political and economic policies of the PRC government could reduce demand for products and services and affect competitive position.
• Potential liability for improper use or disclosure of personal information due to evolving PRC data security and privacy laws.
• Inability to achieve or maintain profitability due to factors like failure to grow revenue, improve margins, or control expenses.
• Competitive pricing pressure from major customers, especially during economic downturns, could adversely affect financial condition.
• Raw materials shortages or significant price fluctuations could impair operating results, as the company does not have long-term supply contracts with fixed quantities.
• Dependence on a few major customers without long-term contracts poses a risk of significant revenue decline if any major customer is lost or reduces orders.
• Disruptions in supply chains due to political instability, financial instability of suppliers, trade restrictions, or natural disasters could lead to increased costs or delivery delays.
• Substantial fixed costs make operating income sensitive to changes in net sales, meaning a decline in sales could disproportionately affect profitability.
• The company will require substantial additional funding in the future for expansion and operations, with no assurance that financing will be available on reasonable terms.
• Failure to appropriately evaluate customer credit profiles or delays in accounts receivable settlement could materially impact operating cash flow and financial condition.
• Issues or defects with products may lead to product liability claims, recalls, or regulatory actions, harming reputation and financial condition.
• Operational risks at production facilities and warehouses, such as machinery failure, power disruption, or industrial accidents, could materially affect operations.
• A severe or prolonged downturn in the global or Chinese economy, including impacts from geopolitical conflicts like the war in Ukraine, could adversely affect business.
• Failure to successfully manage business expansion, including into new areas like Vietnam, could adversely affect results and prospects.
• Inability to attract, train, and retain an experienced workforce and key personnel could restrict business growth and profitability.
• Lack of business insurance coverage in China means the company is exposed to substantial costs from business disruptions, litigation, or natural disasters.
• The sale of additional equity securities could result in dilution to existing shareholders.
• Inability to implement and maintain effective internal control over financial reporting could lead to inaccuracies in financial statements and loss of investor confidence.
• Management's lack of experience in managing a U.S.-listed public company could adversely affect business and compliance.
• Increased costs associated with being a public company and complying with regulatory requirements.
• Increased labor costs in the PRC could adversely affect profitability if not passed on to customers.
• Concentration of voting power by a director and his family members (88.89%) could delay or prevent changes of control.
• Risks related to doing business in Vietnam, including geopolitical risks, high inflation, less developed legal systems, and foreign exchange controls.
• Risk of not maintaining the listing of ordinary shares on the Nasdaq Capital Market, which could limit liquidity and trading.
• The trading price of ordinary shares may be volatile, subject to extreme price run-ups and declines unrelated to actual performance, making it difficult for investors to assess value.
• No expectation of paying dividends in the foreseeable future means investors must rely on price appreciation for returns.
• Short selling may drive down the market price of ordinary shares.
• Inaccurate or unfavorable research by securities or industry analysts could cause the market price and trading volume to decline.
• Following Cayman Islands home country corporate governance practices may afford less protection to shareholders than Nasdaq standards.
• Difficulties in protecting interests or enforcing judgments due to Cayman Islands incorporation and non-U.S. directors/officers.
• Potential loss of foreign private issuer status could result in significant additional costs and expenses.
• Classification as a Passive Foreign Investment Company (PFIC) could have adverse U.S. federal income tax consequences for U.S. taxpayers.
• Increased costs after ceasing to qualify as an emerging growth company.
• Reduced disclosure requirements applicable to emerging growth companies may make ordinary shares less attractive to investors.

Future Outlook

The company anticipates retaining any future earnings to support operations and finance business growth and development, therefore not expecting to pay cash dividends in the foreseeable future. Management believes current working capital, cash on hand, and available credit will be adequate for the next 12 months, but acknowledges potential needs for additional cash resources for investments, acquisitions, or capital expenditures. The company is evaluating the impact of new accounting standards (ASU 2023-09 and ASU 2024-03/2025-01) on future financial statements.

Management Comments

• Management decided to consolidate part of YWSZ operations into MPSZ by installing similar manufacturing production lines in MPSZ, while proceeding with the voluntary liquidation of YWSZ, to maximize production efficiency and minimize production cost.
• Management believes current working capital is sufficient to support operations for the next 12 months.
• Management believes the recapitalization exercises (involving dividend waivers and capitalization as additional paid-in capital) will attract more good standing customers and suppliers, better trading terms, and more favorable support from financial institutions with competitive financing terms.
• Our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2025, our disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting.
• Management plans to develop remedial actions to strengthen accounting and financial reporting functions, including hiring additional personnel with US GAAP experience and implementing internal control policies and procedures.

Industry Context

The paper-based packaging industry is facing challenges from economic slowdowns in key markets like Mainland China, increased shipment costs due to global conflicts, and an unpredictable economic climate. The company's strategic shift towards higher-quality customers and expansion into Southeast Asia (Vietnam) reflects an adaptation to these market dynamics, seeking to mitigate risks associated with traditional markets and supply chains. The industry is also subject to evolving regulatory landscapes in China and Vietnam, particularly concerning foreign investment, data security, and environmental protection.

Comparison to Industry Standards

• The company's gross profit margin of 18.5% in FY2025 is lower than its FY2024 margin of 21.6% and FY2023 margin of 19.9%, indicating a decline in profitability efficiency compared to its own recent performance, which may be below industry leaders in stable markets.
• The average accounts receivable turnover period of 124 days in FY2025 (compared to 94 days in FY2024 and 114 days in FY2023) suggests a lengthening collection cycle, which could be slower than industry best practices for maintaining healthy operating cash flow.
• The company's reliance on a few major customers (top five accounted for 48.7% of total revenues in FY2025) is a common characteristic in some specialized manufacturing sectors but can be higher than diversified industry standards, increasing customer concentration risk.
• The accreditation as a 'High-tech enterprise' for Millennium Shenzhen, entitling it to a 15% preferential tax rate, is a positive competitive advantage compared to non-accredited peers in China.
• The operation of an ISTA certified testing laboratory with Amazon recognition indicates adherence to high quality and packaging standards, potentially positioning the company favorably against competitors lacking such certifications for e-commerce focused clients.

Management Changes

Corporate Governance

Legal Proceedings

• A bank deposit of $87,842 was frozen in connection with a litigation proceeding as of June 30, 2025. The company reached a settlement with the counterparty and paid the settlement in full in August 2025, lifting the restriction.

Related Party Transactions

• Rental expenses of $659,678 and $707,311 were incurred by the Company from Yee Woo Paper Packaging (China) Company Limited (YWPPC) for the years ended June 30, 2024 and 2023, respectively. No such expenses in FY2025.
• Equipment and car expenses of $53,805 were incurred by the Company from Kunshan Chuangke Printing Products Co., Ltd for the year ended June 30, 2025.
• Equipment expenses of $845 were incurred by the Company from Kunshan Chuangke High Level Paper Products Co., Ltd for the year ended June 30, 2025.

Stakeholder Impact

• Shareholders: Face significant financial losses due to declining revenue, gross profit, and continued net losses. The identified material weakness in internal controls could further erode confidence. No dividends are expected in the foreseeable future, making returns dependent on stock price appreciation.
• Employees: The winding down of YWSZ operations and consolidation into MPSZ may impact employment levels and roles, though the filing mentions a decrease in staff compensation as a factor in reduced general and administrative expenses.
• Customers: The strategic focus on higher-quality customers and expansion into Vietnam aims to improve service and product offerings, potentially benefiting new and existing high-value clients. However, the decline in sales volume suggests challenges in retaining or attracting a broader customer base.
• Suppliers: The company's reliance on a few major suppliers and the volatility of raw material prices could impact supplier relationships and terms, especially if the company's financial health deteriorates.
• Creditors: Bank borrowings increased slightly in FY2025, and the company's ability to meet future funding requirements is subject to economic conditions and financial performance. The release of certain shareholder and related company guarantees on bank borrowings in FY2025 could shift risk profiles.

Next Steps

• Continue the voluntary liquidation process of Yee Woo Paper Industry (Shenzhen) Co., Ltd. (YWSZ), expected to conclude in the next six to nine months.
• Implement remedial actions to strengthen internal control over financial reporting, including hiring additional US GAAP experienced personnel and developing written policies and procedures.
• Monitor and evaluate the impact of newly issued accounting standards (ASU 2023-09 and ASU 2024-03/2025-01) on consolidated financial statements.
• Continue to expand business in packaging products supply chain management solutions, particularly in Southeast Asia.
• Maintain compliance with the annual research and development expenditure requirement (not less than 3% of total revenue) to retain 'High-tech enterprise' preferential tax status for Millennium Shenzhen.

Key Dates

Recommendation

The company's financial performance for FY2025 shows a substantial decline in revenue and gross profit, coupled with continued net losses. The significant drop in sales volume and the identified material weakness in internal controls over financial reporting are serious concerns. While strategic adjustments and expansion efforts are noted, the current financial trajectory and operational risks suggest a challenging period ahead. Investors should consider selling to mitigate potential further losses given the negative trends and uncertainties.

Keywords

Paper Packaging, Packaging Solutions, Corrugated Products, Supply Chain Management, SEC Filing, Annual Report, Financial Performance, Net Loss, Revenue Decline, China Operations, Vietnam Expansion, Manufacturing, Corporate Governance, Risk Factors, Nasdaq Capital Market, MGIH, SEC Form 20-F, Internal Controls, Raw Materials, Customer Concentration