10-Q: Natures Miracle Reports Steep Revenue Decline, Nasdaq Delisting

Natures Miracle Holding Inc. reported a 97.6% revenue decrease for Q3 2025 and a 80.8% decrease for the nine months ended September 30, 2025, alongside a Nasdaq delisting and ongoing liquidity concerns.

Summary

• Revenue for the three months ended September 30, 2025, plummeted 97.6% to $72,377 from $3,052,727 in the same period of 2024, primarily due to cash constraints limiting inventory purchases.
• Nine-month revenue for 2025 decreased 80.8% to $1,663,205 compared to $8,662,414 in the prior year period.
• Gross profit for Q3 2025 was $426, a 99.8% drop from $228,113 in Q3 2024, with gross margin falling to 0.6% from 7.5%.
• Net loss for Q3 2025 improved by 21.1% to $(2,170,789) from $(2,750,336) in Q3 2024, mainly due to reduced operating expenses.
• Net loss for the nine months ended September 30, 2025, improved by 12.7% to $(5,961,537) from $(6,825,461) in the prior year, also driven by lower operating expenses.
• Cash and cash equivalents decreased significantly to $61,450 as of September 30, 2025, from $420,131 at December 31, 2024.
• Working capital deficit worsened to approximately $19.0 million as of September 30, 2025, from $14.6 million at December 31, 2024.
• The company's securities were delisted from Nasdaq effective January 15, 2025, and are currently trading on the OTC Market.
• Acquired Zak Properties, LLC, a real estate asset in Ohio, for $17.5 million, paid with Series B and C Preferred Stock ($14.5M) and a $3M convertible promissory note to a related party.
• Management identified material weaknesses in internal control over financial reporting across multiple critical areas.

Sentiment

Score: 2

Explanation: The company faces severe operational and financial challenges, including a drastic revenue decline, significant gross profit reduction, Nasdaq delisting, and an explicit going concern warning. While net losses decreased and some financing was secured, these are overshadowed by the fundamental business deterioration and material weaknesses in internal controls.

Positives

• Net loss for Q3 2025 improved by 21.1% to $(2,170,789) compared to $(2,750,336) in Q3 2024.
• Net loss for the nine months ended September 30, 2025, improved by 12.7% to $(5,961,537) compared to $(6,825,461) in the same period of 2024.
• Operating expenses for Q3 2025 decreased by 40.1% to $1,331,949, primarily due to lower stock compensation, professional fees, and payroll expenses.
• Operating expenses for the nine months ended September 30, 2025, decreased by 27.0% to $3,849,952, also driven by reduced stock compensation, professional fees, and payroll.
• Gross margin for the nine months ended September 30, 2025, slightly increased to 12.3% from 11.5% in 2024, attributed to higher sales of new, higher-margin grow media products.
• Net cash used in operating activities improved to $(1,805,482) for the nine months ended September 30, 2025, from $(3,170,717) in the prior year.
• Total assets significantly increased to $22,054,710 as of September 30, 2025, from $11,311,819 at December 31, 2024, largely due to the acquisition of Zak Properties, LLC.
• Total Stockholders Deficit improved (less negative) to $(8,944,930) as of September 30, 2025, from $(14,339,150) at December 31, 2024, mainly due to preferred stock issuance for asset acquisition.
• Secured a $20 million Equity Line of Credit (ELOC) with GHS Investment, with approximately $19.8 million of credit still available.
• Entered into a $2 million Convertible Promissory Note with related party Big Lake Capital LLC, with $1,347,200 still available.
• Received an initial payment of $500,000 from Y.K. Capital Management, Inc. as part of a $2 million securities purchase agreement, with $1.5 million expected later.
• Received $450,000 from Huanfu Cui as part of a $500,000 investment for Series F Preferred Shares.

Negatives

• Revenue for the three months ended September 30, 2025, decreased by 97.6% to $72,377, primarily due to cash constraints and limited inventory.
• Revenue for the nine months ended September 30, 2025, decreased by 80.8% to $1,663,205, also due to cash constraints and limited inventory.
• Gross profit for the three months ended September 30, 2025, decreased by 99.8% to $426.
• Gross margin for the three months ended September 30, 2025, significantly declined to 0.6% from 7.5% in the prior year.
• Cash and cash equivalents decreased to $61,450 as of September 30, 2025, from $420,131 at December 31, 2024.
• Working capital deficit worsened to approximately $19.0 million as of September 30, 2025, from $14.6 million at December 31, 2024.
• Accumulated deficit increased to $(30,711,831) as of September 30, 2025, from $(24,734,689) at December 31, 2024.
• Provision for credit losses increased by 246.5% to $126,824 for Q3 2025 and by 401.9% to $306,091 for the nine months ended September 30, 2025, indicating higher estimated credit risk.
• Total other expense, net, increased by 11.2% to $(839,266) for Q3 2025, partly due to a new non-cash finance expense of $200,000.
• Interest expense, net, increased by $535,040 for the nine months ended September 30, 2025, to $2,062,483, due to multiple convertible notes and high-interest loans, with a higher proportion of high-rate factoring loans (84.0% to 97.0%).
• The company's securities were delisted from Nasdaq effective January 15, 2025, due to non-compliance with minimum shareholders' equity rule.
• Management determined that conditions raise substantial doubt about the company's ability to continue as a going concern within one year.
• Identified material weaknesses in internal control over financial reporting, including lack of effective risk assessment, overall control environment, monitoring, segregation of duties, IT control design and operating effectiveness, controls impacting financial reporting, and proper revenue recognition/purchase cutoff, and income tax controls.
• Multiple ongoing legal proceedings, including claims for breach of contract, wrongful discharge, fraud, and misappropriation of trade secrets.

Risks

• Inability to obtain required financings for the amounts needed or on commercially acceptable terms, which would materially adversely affect the ability to continue as a going concern.
• Recurring losses from operations and negative cash flows from operating activities since 2022.
• Ongoing need to raise additional cash from outside sources to fund expansion plans and operations.
• Substantial doubt about the company's ability to continue as a going concern within one year.
• Exposure to credit risk from unsecured accounts receivable.
• Customer and vendor concentration risk, with significant percentages of revenue and purchases from a few entities, including related parties.
• Legal proceedings and claims arising in the ordinary course of business, which could result in monetary damages, fines, penalties, or injunctions.
• Material weaknesses in internal control over financial reporting, including lack of effective risk assessment, overall control environment, monitoring, segregation of duties, information technology control design and operating effectiveness, controls impacting financial reporting, proper revenue recognition and purchase cutoff, and income tax controls.
• Potential for significant influence on share price due to the proposed reverse stock split.
• The Warrants may not be exercised unless and until the Company obtains stockholder approval, and there is no guarantee this approval will be obtained, potentially reducing warrant value.
• The company will incur substantial cost and management time attempting to obtain Warrant Stockholder Approval.

Future Outlook

Management expects the revenue situation to improve once inventory levels are restored, following current cash constraints. The company plans to increase investments in product and brand development, evaluate and pursue acquisitions, and develop additional manufacturing relationships in Europe. It is also developing proprietary all-in-one automated and robotic indoor growing systems and seeks joint ventures in other industry verticals to utilize excess space for vertical farming. The company intends to promptly seek stockholder approval for warrant exercises and a proposed reverse stock split and capital increase amendment.

Management Comments

• Revenue declined due to cash constraints that restricted inventory purchases; as we were mainly selling our inventory on hand.
• Management expects the revenue situation to improve once inventory levels are restored.
• We plan to increase investments in product and brand development.
• We continue to work with our suppliers in improving lighting products to be both of the highest quality and simultaneously cost effective for the customer.
• We expect to develop additional manufacturing relationships and suppliers in Europe in the near future.
• The Company is also developing proprietary all in one automated and robotic indoor growing systems that are under design and testing phases.
• We acquired Zak Properties in order to strengthen our balance sheet, generate rental income to provide us a steadier stream of cashflow, and to have the ability to obtain real estate loans to augment our capital needs.
• We can make no assurances that required financings will be available for the amounts needed, or on terms commercially acceptable to us, if at all.
• If one or all of these events does not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfall, there would likely be a material adverse effect on us and would materially adversely affect our ability to continue as a going concern.
• We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to its financial position.
• We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.

Industry Context

Natures Miracle Holding Inc. operates in the growing agriculture technology sector, specifically Controlled Environment Agriculture (CEA), providing products like LED grow lights and indoor grow containers. The company is diversifying into electric vehicle distribution, data centers/Bitcoin mining, and digital treasury management, indicating a broad, somewhat disparate, strategic shift beyond its core ag-tech business. The focus on vertical farming systems aligns with broader industry trends seeking higher yields, reduced water consumption, and localized food production. The company's reliance on Asian suppliers for LED equipment and efforts to establish European relationships reflect global supply chain dynamics in the industry. The entry into carbon credit tokenization with Datavault AI suggests an attempt to leverage emerging blockchain and sustainability trends, though its direct synergy with ag-tech is not immediately clear.

Management Changes

Corporate Governance

Legal Proceedings

• Lawsuits filed by Megaphoton against NMI and its subsidiaries (Visiontech Group Inc., Hydroman Inc.) for breach of contract/guarantee agreement, claiming $6,857,167. NMI filed a counter-suit. Megaphoton refiled in federal court.
• Lawsuit by Vien Le (former CFO) in San Bernardino Superior Court claiming wrongful discharge, untimely payment of wages, and related items.
• Complaint by Growterra, LLC in Ohio, alleging breach of contract, fraud, and misappropriation of trade secrets related to lighting products, seeking rescission and damages.
• Cross-complaint by Visiontech against Beverly Hills View, Inc. (BHV) in Los Angeles Superior Court, responding to BHV's claim of $2,500,000 damages for unsuitable lighting products.
• Lawsuit filed by Agrify Corp. in New York alleging breach of contract in a purchase order for L.E.D. lights, seeking approximately $481,000 plus fees and costs. An unfavorable outcome is reasonably possible.

Related Party Transactions

• UniNet Global Inc. (stockholder Zhiyi (Jonathan) Zhang, also management): Trade payable forgiveness of $2,135,573 in 2024, remaining $577,500 converted to 218,750 common shares for Jonathan Zhang. Outstanding balance $0 as of Sep 30, 2025.
• Iluminar Lighting LLC (customer and vendor, 10% investment by Company): Purchases of $58,031 (YTD Sep 2025) and $1,160 (YTD Sep 2024). Accounts payable of $366,437 as of Sep 30, 2025.
• Iluminar Lighting LLC: Sales revenue of $76,038 (YTD Sep 2025) and $2,129,726 (YTD Sep 2024). Accounts receivable, net, of $517,904 as of Sep 30, 2025.
• Jonathan Zhang: Prepayments of $10,000 as of Sep 30, 2025.
• Tie (James) Li: Prepayments of $11,662 as of Sep 30, 2025.
• Iluminar Lighting LLC: Deferred income contract liabilities of $86,468 as of Sep 30, 2025.
• Natures Miracle Inc. (Cayman) (NMCayman, former stockholders of NMI, common control by CEO Tie Li): $170,000 outstanding for legal and audit fees paid in 2022.
• Yang Wei (former shareholder of Visiontech, current shareholder): $23,813 outstanding for normal business operating fees paid in 2021.
• Zhiyi (Jonathan) Zhang: $20,645 outstanding for normal business operating fees paid in 2022-2024.
• Tie (James) Li and Zhiyi (Jonathan) Zhang: $25,100 and $25,000 respectively for board fees as of Sep 30, 2025.
• Accrued interest expense from related parties: $110,484 as of Sep 30, 2025.
• Zhiyi Zhang: $60,000 loan outstanding as of Sep 30, 2025, with accrued interest of $15,669.
• Big Lake Capital LLC (controlled by CEO Tie Li): $504,315 balance on a $2,000,000 convertible promissory note as of Sep 30, 2025, with accrued interest of $30,762.
• Big Lake Capital LLC (for Zak Properties acquisition): $3,000,000 convertible promissory note issued on Sep 18, 2025, with accrued interest of $10,685.
• Tie (James) Li: $673,476 of unpaid wages/salaries converted into 5,160,739 common shares on July 24, 2025.
• Zhiyi Zhang: $406,691 of unpaid wages/salaries converted into 3,111,408 common shares on July 24, 2025.
• George Yutuc: $52,083 of unpaid wages/salaries converted into 399,106 common shares on July 24, 2025.
• Peng Zhang: $560,000 debt converted into 4,291,188 common shares on July 24, 2025.
• Zak Properties, LLC (owned by CEO Tie Li) acquired for $17.5 million, paid with Series B and C Preferred Stock and a $3M convertible promissory note to Big Lake Capital LLC.

Stakeholder Impact

• Shareholders: Significant dilution risk from ongoing and proposed equity raises (ELOC, convertible notes, proposed capital increase). Delisting from Nasdaq reduces liquidity and visibility. Proposed reverse stock split could be perceived negatively. Existing shareholders experienced substantial losses per share.
• Employees: Reduced headcount and stock compensation expenses indicate potential workforce adjustments. Management converted unpaid wages to stock, suggesting cash flow issues affecting employee compensation.
• Customers: Limited inventory availability led to a drastic decline in revenue and average revenue per customer, potentially impacting customer satisfaction and retention.
• Creditors: High-interest loans and multiple extensions/settlement agreements indicate challenges in debt repayment. Increased provision for credit losses suggests higher risk for outstanding receivables.
• Management: Actively involved in financing efforts and strategic shifts, but also converted significant unpaid wages into stock, indicating personal financial exposure to the company's performance.

Next Steps

• Replenish inventory to improve revenue situation.
• Increase investments in product and brand development.
• Evaluate and pursue acquisitions of product brand names and improvements on existing products.
• Develop additional manufacturing relationships and suppliers in Europe.
• Develop proprietary all-in-one automated and robotic indoor growing systems.
• Seek joint ventures in other industry verticals to utilize excess space for vertical farming.
• Seek stockholder approval for warrant exercises.
• Seek stockholder approval for a reverse stock split (1:5 to 1:20) and an increase in authorized common shares (from 100M to 1B).
• Implement remedial measures for internal control weaknesses, including hiring qualified accounting personnel, implementing GAAP/SEC reporting training, engaging external consulting for SOX compliance, and appointing independent directors.
• Collect remaining $1.5 million from Y.K. Capital Management, Inc.
• Collect remaining $50,000 from Huanfu Cui.
• Continue negotiations and defense in ongoing legal proceedings (Megaphoton, Vien Le, Growterra, Beverly Hills View, Agrify Corp.).
• Future Tech acquisition closing subject to electricity sales agreement and lease option.

Key Dates

Recommendation

The company exhibits severe financial distress, evidenced by a near-total collapse in revenue (97.6% decline in Q3), a worsening working capital deficit, and critically low cash reserves. The explicit "going concern" warning from management, coupled with the Nasdaq delisting, signals fundamental business instability and a high risk of bankruptcy or further significant value erosion. While efforts to raise capital are ongoing, the terms often involve substantial dilution and high interest rates, further burdening the company. The identified material weaknesses in internal controls raise serious questions about financial reliability and governance. The diversification into disparate ventures (EVs, Bitcoin mining, digital treasury) appears opportunistic rather than strategically cohesive, especially given the core business's struggles. The numerous legal proceedings add further uncertainty and potential financial liabilities. For a seasoned investor, these factors collectively point to an extremely high-risk profile with a very low probability of recovery in the near to medium term, making a strong sell recommendation appropriate.

Keywords

Agriculture Technology, Controlled Environment Agriculture, LED Grow Lights, Greenhouse Solutions, SEC Filing, 10-Q, Financial Report, Nasdaq Delisting, Going Concern, Liquidity, Convertible Notes, Equity Line of Credit, Real Estate Acquisition, Bitcoin Mining, Data Center, Electric Vehicles, Digital Treasury Management, XRP, Tokenization, Internal Controls, Legal Proceedings, Related Party Transactions, Reverse Stock Split