CHEETAH NET SUPPLY CHAIN SERVICE INC
For the period ended Dec 31, 2024. Filed Mar 12, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 12, 2025
CTNT$1.57-2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-18.
0001410578-24-000224
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-12.
0001410578-25-000318
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 110 previous paragraphs and 141 current paragraphs.
16 unchanged; 16 reworded; 109 added; 75 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 26 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (109)
Current report
We are a provider of logistics and warehousing services, historically in connection with the sale of parallel-import vehicles sourced in the U.S. to be sold in the PRC market, and more recently for the transportation of other goods between the U.S. and the PRC. Parallel-import vehicles in the PRC refer to automobiles purchased directly from overseas markets and imported for sale outside of the brand manufacturers’ official distribution networks. This business contributed significantly to our revenue since our inception. Between 2016 and the first half of 2022, the Company experienced growth in sales volume and gross profit due to favorable market conditions. Since, beginning in the second half of 2023, the business was negatively affected by a decline in customer demand due to weakening macroeconomic conditions, price competition from luxury automakers in the PRC, and a shift in consumer preference toward domestic EVs. These market challenges led to a decline in parallel-import vehicle sales by 30.5% in 2023 and a reduction in net income by 87.5% compared to 2022. The decline accelerated in 2024, with vehicle sales decreasing from 303 units in 2023 to 14 units in 2024, resulting in a 95.7% drop in revenue from $38.3 million in 2023 to $1.6 million in 2024. In addition, the financial strain on the Company’s customers made it increasingly difficult to collect outstanding receivables. While the Company successfully recovered $4.0 million in 2024 and collected additional $2.5 million from the five aged accounts as of the date of the annual report, the remaining $1.6 million from two customers was determined to be uncollectible, as a result, the management recorded as a credit loss of $1.6 million for the year ended December 31, 2024.
Current report
As market conditions continued to deteriorate and sales activity in the parallel-import vehicle segment ceased, on March 3, 2025, our board of directors approved the discontinuation of our parallel-import vehicle business. In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, we determined that the parallel-import vehicle segment met the conditions for reporting as a discontinued operation. As a result, all financial results associated with this business have been reclassified as discontinued operations in the accompanying consolidated financial statements for all periods presented. For additional financial details regarding discontinued operations, refer to Note 5 – Discontinued Operations.
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Logistics and Warehousing
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In February 2024, we acquired Edward to expand our logistics and warehousing service operations. Beginning in the second quarter of 2024, we increased our marketing staff to pursue new business opportunities and focus on international trade flows between the PRC and the U.S.
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In July 2024, we relocated our headquarters from Charlotte, NC, to Irvine, CA, which we believe will enable a stronger management focus on our logistics and warehousing business due to Irvine’s proximity to the important ports of Los Angeles and Long Beach.
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In December 2024, we acquired TWEW, a California-based labor and logistics service provider which specializes in general labor support services and logistics coordination to further expand our logistics services.
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As of the date of this annual report, we are actively integrating TWEW’s operations to strengthen our position in the logistics sector. Additionally, on December 19, 2024, we entered into a membership interest purchase agreement with Pingzheng Li, the then 100% owner of NexTrade, pursuant to which we purchased the 100% membership interests in NexTrade for the consideration of $1. The transaction closed on the same day. As of the date of this annual report, NexTrade is not engaged in any business operations.
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Reverse Stock Split
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On September 30, 2024, our stockholders approved our fourth amended and restated articles of incorporation, which authorizes a reverse stock split of the issued shares of our common stock, par value $0.0001 per share, at a ratio ranging from 1-for-10 to 1-for-30, as
Current report
determined at the discretion of our board of directors. On October 7, 2024, our board of directors approved a reverse stock split of our common stock at a ratio of 1-for-16. On October 21, 2024, we effectuated a reverse stock split of our common stock at a ratio of 1-for-16. Following such reverse split, each 16 shares of our common stock outstanding were automatically combined into one new share of common stock. No fractional shares were issued in connection with the reverse split; any fractional shares resulting from the reverse split were rounded up to the nearest whole share. The par value per share of our common stock remained unchanged. Our Class A common stock started trading on a post-split basis on October 24, 2024, at which time the Class A common stock was assigned a new CUSIP number (16307X202).
Current report
The following discussion analyzes our results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023. In 2024, as we fully exited our parallel-import vehicle business, all financial results related to this segment have been reclassified as discontinued operations in accordance with ASC 205-20, Presentation of Financial Statements — Discontinued Operations. For further details, please refer to Note 5 — Discontinued Operations. Logistics and warehousing services business now represents our sole operating segment reported under continuing operations. The following table provides a summary of our consolidated results of operations for the years ended December 31, 2024 and 2023, highlighting the financial impact of both continuing and discontinued operations:
Current report
Our total revenue from continuing operations was $455,805 in 2024, reflecting our transition into the logistics and warehousing business. Meanwhile, the parallel-import vehicle business was discontinued during the year ended December 31, 2024, and its financial results are presented separately as discontinued operations in accordance with ASC 205-20. For further details, please refer to Note 5 – Discontinued Operations.
Current report
We reported a $5.2 million net loss for the year ended December 31, 2024. The loss was primarily driven by the wind-down of the discontinued parallel-import vehicle operations, increased operating expenses associated with our transition to logistics and warehousing services, and tax provisions related to deferred tax adjustments.
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Loss from continuing operations for the years ended December 31, 2024 and 2023 were $3.2 million and $1.7 million, respectively.
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Loss from discontinued operations, net of tax, was approximately $2.0 million in 2024, compared to income of $1.8 million in 2023, reflecting the financial impact of ceasing the parallel-import vehicle business, including associated costs and adjustments.
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Logistics and Warehousing Services
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Revenues
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In 2024, our logistics and warehousing revenue came from the two newly acquired businesses, Edward and TWEW, with revenue recognition beginning after their respective acquisition dates. The following table provides a breakdown of revenues from each entities:
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For the year ended December 31, 2024, we reported revenue of $455,805 from logistics and warehousing services segment, including $316,852, or 69.5% of our total revenue following the acquisition of Edward in February 2024, and $138,953, or 30.5 % of our total revenue, following the acquisition of TWEW in November 2024 (See also Note 8).
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We will continue to focus on improving operational efficiencies and expanding our market presence of the two acquired businesses in the California area.
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General and administrative expenses for our continuing operations increased by $1.4 million, or 66.3%, to $3.6 million for the year ended December 31, 2024 from $2.2 million for the year ended December 31, 2023, primarily due to (i) an increase of $0.5 million in personnel-related expenses which was attributed to the hiring of additional staff to support the newly launched logistics and warehousing segment, and labor services segment, (ii) an increase of $0.3 million in rental and leases following the acquisition of Edward with the addition of a new office workspace in California, (iii) an increase of $0.1 million in recruiting expenses associated with the development of new business lines, aligning with the Company’s strategic shift towards logistics and warehousing, (iv) an increase of $0.2 million in insurance expenses due to higher costs associated with directors and officers insurance, (v) an increase of $0.1 million in depreciation and amortization expenses, primarily due to the acquisition of new fixed assets and additional intangible assets, as detailed in Notes 6 & 8, and (vi) an increase of $0.2 million in other miscellaneous general and administration expenses during the year ended December 31, 2024.
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Share-based compensation expenses
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Share-based compensation expenses were $0.3 million and nil for the years ended December 31, 2024 and 2023, respectively.
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On August 16, 2024, our board of directors approved the adoption of the Amended and Restated 2024 Stock Incentive Plan (the “Plan”). Subsequently, on September 30, 2024, our stockholders approved the Plan. The total number of shares granted by the compensation committee of our board of directors on September 30, 2024 were 150,000, including 118,750 shares of Class A common stock and 31,250 shares of Class B common stock. Share-based compensation expenses of $277,345 were recognized during the year ended December 31, 2024. See Note 11 for more details.
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Other Income (Expenses), net
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Interest income from continuing operations was $320,472 for the year ended December 31, 2024, compared to $9,938 for the year ended December 31, 2023, representing an increase of $310,534, or 3,124.7%. The significant increase was primarily driven by interest earned on short-term loan receivables and certificates of deposit, funded by the net proceeds from our IPO, the May Offering, and the July Offering.
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Interest expense incurred from our continuing operations was $35,951 for the year ended December 31,2024, decreased $5,932 or 14.2%, from $41,883 in 2023, mainly due to decreased credit card interest.
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Income Tax (Benefits)
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Our income tax benefits for continuing operations were $0.2 million for the year ended December 31, 2024, compared with income tax benefits of approximately $0.5 for the same period in 2023.
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Net Loss
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As a result of the above factors, we had a net loss of $3.2 million from our continuing operations for the year ended December 31, 2024, compared to net loss of $1.7 million for the same period of 2023.
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Parallel- Import vehicle Business (Discontinued Operations)
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As disclosed in Note 5 – Discontinued Operations, we fully exited our parallel-import vehicle business in 2024, and its financial results have been classified as discontinued operations in our accompanying consolidated financial statements. The following discussion provides an overview of the financial impact of discontinued operations and related expense items.
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Financial Impact of Discontinued Operations
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The following table summarizes the financial results of our discontinued operations for the years ended December 31, 2024 and 2023:
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Revenue from discontinued operations was $1.6 million for the year ended December 31, 2024, compared to $38.3 million for the year ended December 31, 2023, representing a decrease of $36.7 million, or 95.7%. The significant decline was primarily due to the termination of parallel-import vehicle sales and the phase-out of operations. Revenue from the U.S. domestic market declined by 97.5% to $0.2 million, while revenue from the overseas market decreased by 95.3% to $1.4 million in 2024.
Current report
Cost of revenue decreased by $32.4 million, or 95.0%, to $1.7 million in 2024, compared to $34.1 million in 2023, primarily due to the substantial reduction in vehicle purchases and fulfillment expenses following the discontinuation of the business. The cost of vehicles decreased by $30.7 million, or 95.3%, while fulfillment expenses declined by $1.7 million, or 92.5%, in line with lower sales volumes.
Current report
As a result, we reported a gross loss of $24,820 for the year ended December 31, 2024, compared to a gross profit of $4.2 million in 2023, reflecting a decline of $4.3 million, or 100.6%. The decrease was primarily attributable to the cessation of the parallel-import vehicle business and the significant drop in revenue.
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Selling, General, and Administrative Expenses for Discontinued Operations
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The following table presents selling, general, and administrative (“SGA”) expenses for the discontinued operations:
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Removed paragraphs (75)
Previous report
We are a supplier of parallel-import vehicles sourced in the U.S. to be sold in the PRC market. We purchase automobiles, primarily luxury brands such as Mercedes, Lexus, Range Rover, RAM and Toyota, from authorized dealers in the U.S. market and resell them to our customers, including both U.S. and PRC based parallel-import car dealers. We derive profits primarily from the price difference between our buying and selling prices for parallel-import vehicles. Our expertise lies in our ability to identify the type of parallel-import vehicles that are in high demand and to procure them in a timely manner.
Previous report
The primary driver for our industry is the continuing growth of high-net-worth individuals in the PRC. We are focusing our attention on the most popular of the luxury vehicles that provide us with the best profit opportunity. We provide or utilize third parties in the U.S. to provide logistics and warehousing services and to truck transport our vehicles from an authorized dealer in the U.S. to the ultimate point of sale.
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Beginning in the second half of 2023, the market for new luxury vehicles in the PRC has been negatively impacted by weak economic conditions and a shift in consumer demand towards EVs, mainly those produced domestically by PRC manufacturers. Luxury import brand manufacturers have responded to these threats by discounting the sale price of their vehicles, which has resulted in a significant challenge to our ability to generate a profit from the sale of parallel import vehicles generally. Consistent with our strategy to focus only on profitable parallel-import vehicle transactions, our unit sales during the fourth quarter of 2023 fell to 49 vehicles, a 36.4% decrease from the fourth quarter of 2022 and a 38.0% drop from unit sales in the third quarter of 2023, which resulted in our recognition of a net loss during the fourth quarter of 2023. This market dynamic has continued into 2024 and we are unable at this time to predict the point at which the market for luxury vehicles will firm and the positive spread between the price of vehicles sourced from brand manufacturers’ official distribution systems compared with those sourced via the parallel-import market will return.
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We are responding to the current softness in luxury vehicle sales in China by reducing our operating costs, maintaining a very low level of inventory, and using our cashflow to strengthen our logistics and warehouse capabilities as well as cover overhead. We have significant flexibility to reduce expenses due to our scalable operations; for example, our procurement agents are paid on a commission basis only so these agents are paid only to the extent they purchase vehicles on our behalf. We are proceeding with our plans to integrate the acquisition of Edward and to acquire additional U.S.-based logistics and warehousing service providers to reduce our reliance on the purchase and sale of luxury vehicles and augment our core operations with service revenue, which we believe will provide the opportunity to generate revenue by selling these services to third-party parallel importers as well as to importers of other goods. We believe we can overlay these services with the financial services plans we launched in October 2022 for inventory financing (see “Item 1. Business—Overview—Recent Development” for more details), such that we can essentially become a one-stop shop for small- and medium-sized traders within the global supply chain sector.
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Key Factors Affecting our Results of Operations
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We believe the following key factors may affect our financial condition and results of operations:
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Major Components of Results of Operations
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The automobile models we purchase and sell are among the most popular vehicles in the market, which we believe provide lucrative profit opportunities. Our selection of customers and the models we plan to purchase are based on our efforts to maximize the overall profitability of each vehicle sale. We will continue to apply this guiding principle in developing and refining our procurement and sales
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strategies. As such, we consider market conditions, capital costs, and other factors when determining the models and categories we purchase and the prices at which we sell them. While the brands, models, and their price ranges at which we sell may be adjusted, we intend to maintain the highest gross profit opportunities to improve the overall efficiency of our capital and maximize our earnings potential.
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Revenue
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We generate revenue by selling vehicles to U.S. parallel-import vehicle exporters and PRC parallel-import vehicle dealers. A specific vehicle model’s pricing and profitability vary based on the market demand and supply for that model. We set our selling prices based on multiple factors, including the price of the same model sold by authorized dealers in China, the normal commercial terms, customer payment methods, and anticipated workload for trading activities. The selling price is finalized as the MSRP plus adjustments, which are determined upon comprehensive consideration of the overall market conditions for vehicles as well as the customer’s payment method. In addition to those specific factors that impact the parallel-import vehicle market, our revenue may be impacted by global economic factors including the U.S. dollar/RMB exchange rate, overall financial and economic conditions in the PRC, and any significant change in relevant import or export regulations.
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Our revenue decreased by $16.8 million, or 30.5%, from $55.2 million in 2023 to $38.4 million in 2023. Despite a year-over-year revenue decline in 2023, our average selling price per vehicle increased from 2022. The initial rise was due to our shift towards models with higher profit margins. Starting from the third quarter of 2023, we began adjusting our average selling prices downward in response to short-term market volatility, which continued during the fourth quarter with the onset of price inversion in the Chinese market. These adjustments affected our fourth quarter sales, which resulted in a 39.4% drop in revenue from the same quarter in 2022.
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Our cost of revenue mainly comprises (i) the purchase cost of vehicles including dealership service fees and non-refundable taxes incurred during procurement, and (ii) fulfillment expenses, mainly including (a) compensation and bonuses for staff in the purchasing department, (b) commission paid to purchasing agents, (c) transportation and storage costs for vehicles, and (d) consulting fees paid to dealer experts to assist us in making the best purchase decisions. Allowance for slow-moving inventories is also included in the cost of revenue when our cost of inventory is higher than net realizable value.
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Our cost of revenue decreased by $16.6 million, or 32.8%, from $50.7 million in 2022 to $34.1 million in 2023, primarily as a result of our decline in sales.
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Interest Expense, Net
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To improve our cash flow and expand our business, we obtain loans from finance companies through (i) inventory financing by keeping inventories not intended for immediate sale as collateral, (ii) LC financing by using letters of credit received from our international customers in overseas sales of parallel-import vehicles as collateral, and (iii) accessing revolving lines of credit to further support our operations and strategic initiatives. Accrued interest is recorded as interest expense. As of the date of this annual report, our LC financing annual interest rate is 18.0%, and our revolving line of credit interest rate is 18.0%.
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Our operations in 2022 were affected by the COVID-19 pandemic. First, the COVID-19 pandemic restricted our purchasing agents in the U.S. from freely purchasing designated automobiles at U.S. automobile dealerships, either because of the short supply of vehicles or because of store closings or limited opening hours due to the COVID-19 pandemic. Second, the COVID-19 pandemic adversely affected the market demand for our products. Due to the implementation of significant governmental measures in the PRC, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus, parallel-import vehicle consumers were less willing to spend, and their purchasing power declined. Consequently, the market demand for luxury cars, which make up the vast majority of our inventory, has decreased dramatically. As of the date of this annual report, the spread of COVID-19 has been under control, and during the year ended December 31, 2023, the COVID-19 pandemic did not have a material impact on our financial positions and operating results.
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Comparison of Results of Operations for the Years Ended December 31, 2023 and 2022
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Revenue
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During the year ended December 31, 2023, our financial performance reflected the consequences of our strategic decisions and external market forces. Our revenue experienced a substantial decline compared to the previous year. Revenue from our operations decreased by $16.8 million, or 30.5%, from approximately $55.2 million in 2022 to $38.4 million in 2023. This decline can be primarily attributed to an intentional pause in vehicle procurement in the fourth quarter of 2023, prompted by price inversion in the Chinese market, as well as a change in our procurement pricing strategy as detailed in our most recent quarterly report. The impact of these factors was particularly pronounced in the fourth quarter of 2023, during which period revenue was $5.8 million, a decrease of 39.4%, or $3.8 million, from the $9.6 million reported in the fourth quarter of the previous year.
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of total unit sales and 78.7% of total revenue during the year, compared with 434 vehicles in 2022, representing 93.7% of total unit sales and 93.1% of total revenue.
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The size of our procurement group enables us to purchase a large number of vehicles within a short period of time; therefore, many of our U.S.-based peers turn to us for vehicle purchasing. Our cooperation with selected U.S. counterparts generally improves our cash flow without compromising our ability to deliver vehicles to our PRC clients. Recent developments, including the price inversion in the Chinese market, have reinforced the effectiveness of this approach.
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Cost of Revenue
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Our total cost of revenue decreased by $16.6 million, or 32.8%, from $50.7 million in 2022 to $34.1 million in 2023. For the years ended December 31, 2023 and 2022, our total cost as a percentage of our total revenue was 88.9% and 91.9%, respectively. Our total cost of revenue decreased in line with the reduced revenue, indicating effective cost control measures. The procurement strategy shift, initiated earlier in 2023, was a significant factor in this decrease, allowing us to manage costs more effectively despite external market pressures.
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Cost of Vehicles
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Total cost of vehicles sold decreased by $16.3 million, or 33.7%, from $48.5 million in 2022 to $32.2 million in 2023. For the years ended December 31, 2023 and 2022, we sold 303 and 463 vehicles, respectively. The average purchase price per vehicle increased from $104,826 in 2022 to $106,217 in 2023.This increase was primarily driven by the increased MSRP of the vehicles we acquired.
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The cost of vehicles sold was approximately 84.0% and 88.0% of revenue for the years ended December 31, 2023, and 2022, respectively. This favorable change is primarily attributed to the altered composition of our sales between the U.S. domestic and overseas markets. During this period, we experienced a strategic shift with an increased percentage of sales occurring domestically. Given the lower transportation costs associated with U.S. domestic sales compared to the expenses incurred for overseas delivery, our cost of revenue as a percentage of total revenue improved.
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Fulfillment Expenses
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Fulfillment expenses decreased by approximately $0.3 million, or 12.3%, from $2.1 million in 2022, to $1.9 million in 2023. The decrease was mainly attributable to the cost reductions in payroll and benefits as well as the improved management of vehicle storage and towing costs. The decrease was partially offset by an increase in vehicle insurance and other miscellaneous expenses. In 2023, we made a shift in our procurement strategy by transporting a majority of our vehicles to the West Coast. While this decision resulted in an increase in procurement costs, it was offset by a decrease in selling expenses. The new strategy also streamlines shipping time and expedites receipt of payment through letters of credit, since it takes approximately 14 to 21 days to deliver a purchased vehicle to a customer overseas through the West Coast ports (compared with 40 to 60 days if through the East Coast ones), resulting in significantly shorter payment cycles.
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Gross Profit
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As a result of the foregoing, our gross profit decreased by $0.2 million, or 5.0%, from $4.5 million in 2022 to $4.3 million in 2023. As of percentage of revenue, the gross margin increased 3%, from 8.1% in 2022 to 11.1% in 2023. This positive shift is primarily attributable to our strategic adjustments within our product portfolio. These adjustments, which centered on optimizing the inventory mix towards products with more favorable margins, played a pivotal role in cushioning the revenue downtrend and improving our gross margin ratio.
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Selling Expenses
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In 2023, our total selling expenses decreased by 25.7% to $0.7 million, representing 1.7% of our revenue, a slight increase from 1.6% in 2022. This change is due to a 29.9% reduction in ocean freight expenses and 19.1% decrease in payroll and benefits, despite a 191.2% increase in other expenses. The decrease in selling expenses can be attributed primarily to a reduction in the number of vehicles sold during the fourth quarter.
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General and administrative expenses increased by $0.8 million, or 53.1%, to $2.2 million in 2023 from $1.4 million in 2022, primarily due to (i) an increase in personnel-related expenses by approximately $0.3 million, or 65.6%, as a result of the recruitment of additional employees in 2023, (ii) the leasing of an additional office workplace in New York, resulting in increased rental and lease expenses, (iii) an increase in legal and accounting expenses, and (iv) an increase in insurance expenses due to higher costs associated with directors and officers insurance.
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Other Income (Expenses)
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Interest Expenses, net
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Interest expenses decreased significantly by approximately $1.2 million, or 49.2%, to $1.2 million for the year ended December 31, 2023, from $2.4 million for the year ended December 31, 2022, primarily due to (i) the significant drop in inventory financing activities and reduced LC financing activities and (ii) the completion of our IPO in the third quarter of 2023, which marked a significant financial milestone and resulted in a substantial capital infusion. This financial event has played a key role in reducing our reliance on external financing and, subsequently, in the reduction of interest expenses.
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In order to improve our liquidity and retain more cash to acquire new cars, we may enter into short-term loans from time to time, pledging our inventory as collateral before the vehicles are delivered to our customers. We incur interest expenses on such inventory financing, provided mainly by small lenders, generally at a rate of 1.35% to 1.80% per month. In 2023, the total weighted average balance of funds we obtained through inventory financing was $0.6 million, the interest expenses incurred was $0.1 million, and the weighted average annual interest rate was 17.6%. In 2022, the total weighted average balance of funds we obtained through inventory financing was $4.5 million, the interest expense incurred was $0.7 million, and the weighted average annual interest rate was 16.6%. As we continue to develop our third-party financial services, which are provided in the form of financing for inventory purchase, we intend to minimize our own inventory financing obtained from other parties.
Previous report
We may also finance our operations from time to time through short-term loans using letters of credit, typically received from our international customers in overseas sales of parallel-import vehicles as collateral. Generally, we borrow approximately 90% or more of the letter of credit amount with a monthly interest rate of approximately 1.5%. In 2023, the total weighted average balance of funds we obtained through LC financing decreased to $4.7 million, the interest expenses incurred was $0.9 million, and the weighted average annual interest rate was 19.5%. In 2022, the total weighted average balance of funds we obtained through LC financing was $9.0 million, the interest expenses incurred was $1.7 million, and the weighted average annual interest rate was 18.5%. The decrease in total weighted average balance of funds through LC financing and the related interest expenses incurred in 2023 reflected a lower volume of vehicles shipped and greater use of our revolving lines of credit.
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As of December 31, 2023, the total weighted average balance of funds we obtained through revolving lines of credit was $0.9 million, the interest expenses incurred were $0.2 million for year ended December 31, 2023, and the weighted average annual interest rate was 18.0%.
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Reworded paragraphs (16)
Previous wording
Our operations are in the U.S. and our primary market is in the PRC. Accordingly, our business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the U.S. and the PRC, as well as by the general state of
Current wording
The Company is undergoing a business transformation of our business model. As a company located in the U.S. and doing business with the PRC, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the U.S. and the PRC, as well as by the general state of the U.S. and the PRC economies. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in the U.S. and the PRC.
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Risks and uncertainties related to our business include, but are not limited to, the following:
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Risks and uncertainties related to the Company’s business include, but are not limited to, the following:
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Our business, financial condition, and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics, and other catastrophic incidents, which could significantly disrupt our operations.
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The Company’s business, financial condition, and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics, and other catastrophic incidents, which could significantly disrupt the Company’s operations.
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The following table summarizes our cash flow for the years ended December 31, 2023 and 2022:
Current wording
The following table summarizes our cash flows for the years ended December 31, 2024 and 2023, with continuing operations and discontinued operations presented separately:
Previous wording
Net cash provided by operating activities was $5.6 million for the year ended December 31, 2023. This was primarily attributable to a collection of $0.6 million in accounts receivable, a $4.5 million decrease in inventory, $0.5 million decrease in other receivables, and other less significant factors.
Current wording
Net cash provided by operating activities from discontinued operations was $7.2 million for the year ended December 31, 2023. This was primarily attributable to (i) a net income of $1.8 million; (ii) a collection of $0.6 million in accounts receivable, a $4.5 million decrease in inventory, $0.5 million decrease in other receivables, and other less significant factors.
Previous wording
Net cash used in financing activities of $4.6 million for the year ended December 31, 2023, consisted of (i) net repayments of LC financing of $25.5 million; (ii) net repayments of inventory financing of $4.2 million; (iii) net repayments of revolving lines of credit of $2.6 million; and (iv) repayments of dealers financing of $0.4 million; partially offset by (v) proceeds from LC financing of $19.4 million; (vi) proceeds from revolving lines of credit of $3.2 million; (vi) proceeds from dealers financing of $0.4 million; (vii) proceeds from premium finance of $0.2 million; (viii) a reduction in subscriptions receivable of $1.2 million; and (ix) net proceeds from our IPO of $3.7 million.
Current wording
Net cash used in financing activities from discontinued operations was $9.6 million for the year ended December 31, 2023, consisted of (i) net repayments of LC financing of $6.1 million; (ii) repayments of inventory financing of $4.2 million; (iii) repayments of dealers financing of $0.4 million; and partially offset by (iv) net proceeds from revolving lines of credit of $0.7 million.
Previous wording
We did not have during the period presented, and we do not currently have, any off-balance sheet financing arrangements as defined under the rules and regulations of the SEC, or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Current wording
We do not currently have any off-balance sheet financing arrangements as defined under the rules and regulations of the SEC, or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Previous wording
ASC 606 establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that our Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) our Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way our Company records its revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the new guidance requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Current wording
ASC 606 establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the new guidance requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Previous wording
Our Company is primarily engaged in the parallel-import vehicle dealership business and generates revenue from the sales of parallel-import vehicles to both domestic and oversea parallel-import car dealers. We purchase automobiles from the U.S. market through our large team of professional purchasing agents, and mainly resell them to parallel-import car dealers in the U.S. and PRC. In accordance with ASC 606, our Company recognizes revenue at the point in time when the performance obligation has been satisfied and control of the vehicles has been transferred to the dealers. For sales to U.S. domestic parallel-import car dealers, revenue is recognized when a vehicle is delivered and its title has been transferred to the dealers. For overseas sales, our Company sells vehicles under Cost and Freight (“CFR”) shipping point term, and revenue is recognized when a vehicle is loaded on a cargo ship and its title has been transferred to the dealers. Our Company accounts for the revenue generated from sales of vehicles on a gross basis as our Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods, which our Company has control of the goods and has the ability to direct the use of goods to obtain substantially all the benefits. All of our Company’s contracts have one single performance obligation as the promise is to transfer the individual vehicle to parallel-import car dealers, and there is no separately identifiable other promises in the contracts. Our
Current wording
We generated revenues from the parallel-import vehicle dealership and logistics and warehousing services. Revenue from the parallel-import vehicle dealership business is generated from the sales of parallel-import vehicles to both domestic and overseas parallel-import car dealers. We purchase automobiles from the U.S. market through our team of professional purchasing agents, and mainly resells them to parallel-import car dealers in the U.S. and the PRC. In accordance with ASC 606, the Company recognizes revenue at the point in time when the performance obligation has been satisfied and control of the vehicles has been transferred to the dealers. For sales to U.S. domestic parallel-import car dealers, revenue is recognized when a vehicle is delivered, and its title has been transferred to the dealers. For overseas sales, the Company sells vehicles under Cost and Freight (“CFR”) shipping point terms, and revenue is recognized when a vehicle is loaded on a cargo ship and its title has been transferred to the dealers. The Company accounts for the revenue generated from sales of vehicles on a gross basis as the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods, which the Company has control of the goods and has the ability to direct the use of goods to obtain substantially all the benefits. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual vehicle to parallel-import vehicle dealers,
Previous wording
Company’s vehicles are sold with no right of return and our Company does not provide other credits or sales incentives to parallel-import car dealers. Historically, no customer returns have occurred. Therefore, our Company did not provide any sales return allowances for the years ended December 31, 2023 and 2022.
Current wording
and there is no separately identifiable other promise in the contracts. The Company’s vehicles are sold with no right of return and the Company does not provide other credits or sales incentives to parallel-import car dealers. Historically, no customer returns have occurred. Therefore, the Company did not provide any sales return allowances for the years ended December 31, 2024 and 2023.
Previous wording
Our Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, our Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Current wording
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized as income in the period that includes the enactment date.
Previous wording
Our Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, our Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. We have not assessed a valuation allowance as we determine it is more likely than not that all deferred tax assets will be realized before expiration.
Current wording
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.
Previous wording
Our Company records uncertain tax positions in accordance with ASC 740 (“ASC 740”), Income Taxes, on the basis of a two-step process in which (1) our Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, our Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Our Company does not believe that there were any uncertain tax positions as of December 31, 2023 and 2022.
Current wording
The Company records uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company records interest and penalties related to an uncertain tax position, is and when required, as part of income tax expenses in the consolidated statements of operations. The Company does not believe that there were any uncertain tax positions as of December 31, 2024 and 2023.
Previous wording
Our Company and its operating subsidiaries in the United States are subject to the tax law of the United States. Our Company elected to file income taxes as a corporation instead of an LLC for the tax years ended December 31, 2020 through December 31, 2023. As of December 31, 2023, the tax years ended December 31, 2020 through December 31, 2022 for our consolidated income tax returns remain open for statutory examination by U.S. tax authorities.
Current wording
The Company and its U.S. operating subsidiaries are subject to the U.S. tax laws. The Company elected to file income taxes as a corporation instead of an LLC for the tax years ended December 31, 2020 through December 31, 2021. As of December 31, 2024, the Company’s consolidated income tax returns for the tax years ended December 31, 2020 through December 31, 2023 remained open for statutory examination by U.S. tax authorities.
Previous wording
The Company’s loans receivable are recognized at the point of loan disbursement, initially measured at fair value, primarily reflecting the disbursed amount and associated transaction costs. Both secured and unsecured lending are encompassed in these receivables, with terms including varying interest rates and maturity dates. Subsequently, these receivables are measured at amortized cost using the effective interest method, which ensures the accurate recognition of interest income over the loan period. The interest rates for these loans may be subject to change based on the terms of loan agreements. Periodic reviews of the loan portfolio are conducted to assess for impairment, utilizing the expected credit loss model. This approach considers historical credit loss experience, current conditions, and reasonable forecasts in estimating potential credit losses. As of the date of this annual report, no significant impairment allowance has been recorded for these loans receivable.
Current wording
The Company’s loans receivable, which consist of loans to third parties, are recognized at the point of loan disbursement, initially measured at fair value, primarily reflecting the disbursed amount and associated transaction costs. Both secured and unsecured lending are encompassed in these receivables, with terms including varying interest rates and maturity dates. Subsequently, these receivables are measured at amortized cost using the effective interest method, which ensures the accurate recognition of interest income over the loan period. The interest rates for these loans may be subject to change based on the terms of loan agreements. Periodic reviews of the loan portfolio are conducted to assess for impairment, utilizing the expected credit loss model. This approach considers historical credit loss experience, current conditions, and reasonable forecasts in estimating potential credit losses. As of the end of the reporting periods, no impairment allowance was recorded for the loan receivables.
Previous wording
Inventories consist of new vehicles held for sale and are stated at the lower of cost or net realizable value using the specific identification method. The cost of inventory mainly includes the cost of auto vehicles purchased from U.S. automobile dealers, non-refundable sales tax, and dealership service fees. Our Company reviews its inventory periodically if any reserves are necessary for potential shrinkage. We recorded no inventory reserve as of December 31, 2023 and 2022.
Current wording
Inventory primarily consists of new vehicles held for sale and are stated at the lower of cost or net realizable value using the specific identification method, which includes the cost of vehicles purchased from U.S. automobile dealers, non-refundable sales tax, and dealership service fees. The Company reviews its inventory periodically if any reserves are necessary for potential impairment. The Company depleted its inventory on vehicles by the first quarter of 2024.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
the U.S. and the PRC economies. Our results may be adversely affected by changes in the political, regulatory, and social conditions in the U.S. and the PRC.
Previous report — wording carried elsewhere
Cash Flows for the Years Ended December 31, 2023 and 2022
Previous report — wording carried elsewhere
Our Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, our Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. We have not assessed a valuation allowance as we determine it is more likely than not that all deferred tax assets will be realized before expiration.