CHEETAH NET SUPPLY CHAIN SERVICE INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q. Forward-Looking Statements This quarterly report on Form 10-Q contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to: any projections of earnings, revenue, or other financial items; any statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “project,” or “anticipate,” and other similar words. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking statements include those factors set forth in the “Risk Factors” section included in our registration statement on Form S-1 (File No. 333-271185), as amended, which was initially filed with the SEC on April 7, 2023 and declared effective by the SEC on July 31, 2023. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this quarterly report. We do not intend, and undertake no obligation, to update any forward-looking statement, except as required by law. The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this quarterly report on Form 10-Q, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our registration statement on Form S-1 (File No. 333-271185). Business Overview and Outlook 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, BMW, Porsche, Lexus, and Bentley, 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. The primary driver for our industry is the continuing growth of wealthy groups 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 utilize third parties in the U.S. to provide logistics and warehousing services and to truck transport our vehicles from the registered U.S. dealer to the ultimate point of sale. Changes in consumer demand in the PRC market may be occurring as a result of increased consumer interest in electric vehicles coupled with a slowdown in the PRC economy, both of which have contributed to our lower revenue since the second quarter of 2023. We are proceeding with our plan to acquire U.S.-based logistics and warehousing service providers to augment our core operations, which we expect will reduce our transaction costs and provide the opportunity to generate revenue by selling these services to third-party parallel importers. We believe we can overlay these services with the financial services plans we announced in October 2022 for inventory financing, such that we can essentially become a one-stop shop for small- and medium-sized traders within the global supply chain sector. 20 Table of Contents Results of Operations Major Components of Results of Operations The automobile models we plan to 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 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. Revenue 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 manufacturer’s suggested retail price (“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. Cost of Revenue 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. Interest Expense, Net To improve our cash flow and expand our business, we obtain loans from financing 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 the date of this quarterly report, our inventory financing annual interest rates range from 16.2% to 27.6%, our LC financing annual interest rates range from 15.0% to 18.0%, and our revolving line of credit interest rate is 18.0%. Risks and Uncertainties 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 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. Risks and uncertainties related to our business include, but are not limited to, the following: ● Changes in consumer demand in the Chinese market towards fuel-efficient vehicles and electric vehicles could adversely affect our vehicle sales volumes and results of operations; ● The PRC government policies on the purchase and ownership of automobiles and stricter emissions standards may reduce the market demand for the automobiles we sell and thus negatively affect our business and growth prospects; 21 Table of Contents ● Any adverse change in political relations between the PRC and the U.S. or any other country where those brands originate, including the ongoing trade conflicts between the U.S. and the PRC, may negatively affect our business; ● The ongoing military conflicts between Russia and Ukraine and between Israel and Hamas could materially and adversely affect the global economy and capital markets, including significant volatility in commodity prices, especially energy prices, credit and capital markets, as well as supply chain interruptions; ● The inflation in the economy may result in higher interest rates and capital costs, shipping costs, supply shortages, and increased costs of labor, and may adversely affect our liquidity, business, financial condition, and results of operations, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. Although we have not experienced losses from these situations and believes that we are in compliance with existing laws and regulations, including our organization and structure disclosed in Note 1, such experience may not be indicative of future results. 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. Our operations have been affected by the COVID-19 pandemic. First, the COVID-19 pandemic has 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 are less willing to spend, and their purchasing power has declined. Consequently, the market demand for luxury cars, which make up the vast majority of our inventory, has decreased dramatically. In early December 2022, the Chinese government announced a nationwide loosening of its zero-COVID policy, and the PRC faced a wave in infections after the lifting of these restrictions. Although the spread of COVID-19 pandemic appears to be under control as of the date of this quarterly report, the extent to which the COVID-19 pandemic may impact our future financial results will depend on future developments, such as new information on the effectiveness of the mitigation strategies, the duration, spread, severity, and recurrence of COVID-19 and any COVID-19 variants, the related travel advisories and restrictions, the overall impact of the COVID-19 pandemic on the global economy and capital markets, and the efficacy of COVID-19 vaccines, which may also take extended time to be widely and adequately distributed, all of which remain highly uncertain and unpredictable. Given this uncertainty, we are currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity, and results of operations if the current situation continues. ​ ​ 22 Table of Contents ​ Comparison of Results of Operations for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, Change Nine Months Ended September 30, Change ​ 2023 2022 Amount % 2023 2022 Amount % ​ ​ USD % USD % ​ ​ ​ USD % USD % ​ ​ ​ Revenue ​ $ 10,038,246 100.0 % $ 11,911,614 100.0 % $ (1,873,368) (15.7) % $ 32,475,714 100.0 % $ 45,518,649 100.0 % $ (13,042,935) (28.7) % Cost of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of vehicles ​ 8,365,730 83.4 % 9,820,433 82.4 % (1,454,703) (14.8) % 27,190,224 83.7 % 40,556,778 89.1 % (13,366,554) (33.0) % Fulfillment expenses ​ 505,156 5.0 % 547,723 4.6 % (42,567) (7.8) % 1,722,704 5.3 % 1,643,727 3.6 % 78,977 4.8 % Total cost of revenue ​ 8,870,886 88.4 % 10,368,156 87.0 % (1,497,270) (14.4) % 28,912,928 89.0 % 42,200,505 92.7 % (13,287,577) (31.5) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit ​ 1,167,360 11.6 % 1,543,458 13.0 % (376,098) (24.4) % 3,562,786 11.0 % 3,318,144 7.3 % 244,642 7.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling expenses ​ 184,061 1.8 % 314,573 2.6 % (130,512) (41.5) % 603,184 1.9 % 603,680 1.3 % (496) (0.1) % General and administrative expenses ​ 530,089 5.3 % 411,280 3.5 % 118,809 28.9 % 1,676,559 5.2 % 994,129 2.2 % 682,430 68.6 % Total operating expenses ​ 714,150 7.1 % 725,853 6.1 % (11,703) (1.6) % 2,279,743 7.1 % 1,597,809 3.5 % 681,934 42.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income From Operations ​ 453,210 4.5 % 817,605 6.9 % (364,395) (44.6) % 1,283,043 3.9 % 1,720,335 3.8 % (437,292) (25.4) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Income (Expenses) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expenses, net ​ (286,197) (2.9) % (608,097) (5.1) % 321,900 (52.9) % (1,058,111) (3.3) % (2,141,206) (4.7) % 1,083,095 (50.6) % Other income, net ​ 107 ​ — % 3,276 — % (3,169) (96.7) % 4,009 — % 7,522 — % (3,513) (46.7) % Subsidy income from Business Recovery Grant Program ​ ​ — ​ — % ​ 1,340,316 ​ 11.3 % ​ (1,340,316) ​ (100.0) % ​ — ​ — % ​ 1,340,316 ​ 2.9 % ​ (1,340,316) ​ (100.0) % Total other expenses, net ​ (286,090) (2.9) % 735,495 6.2 % (1,021,585) (138.9) % (1,054,102) (3.3) % (793,368) (1.8) % (260,734) 32.9 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before Income Tax Provision ​ 167,120 1.6 % 1,553,100 13.1 % (1,385,980) (89.2) % 228,941 0.6 % 926,967 2.0 % (698,026) (75.3) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for Income Taxes ​ 44,217 0.4 % 333,844 2.8 % (289,627) (86.8) % 58,226 0.2 % 180,603 0.4 % (122,377) (67.8) % Net Income ​ $ 122,903 1.2 % $ 1,219,256 10.3 % $ (1,096,353) (89.9) % $ 170,715 0.4 % $ 746,364 1.6 % $ (575,649) (77.1) % ​ ​ ​ ​ 23 Table of Contents Comparison of the Three Months Ended September 30, 2023 and 2022 Revenue decreased by $1.9 million, or 15.7%, from approximately $11.9 million for the three months ended September 30, 2022 to $10.0 million for the three months ended September 30, 2023. The decrease was primarily due to a lower number of vehicles sold. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Average Selling Price Changes ​ No. Sales Amount Ave Selling Price No. Sales Amount Ave Selling Price Amount % ​ Bentley ​ — ​ $ — ​ $ — ​ 1 ​ $ 261,000 ​ $ 261,000 ​ $ — ​ — % Porsche Cayenne ​ — ​ ​ — ​ ​ — ​ 7 ​ ​ 670,059 ​ ​ 95,723 ​ ​ — ​ — % Mercedes G550 — ​ — ​ ​ 1 ​ 206,206 ​ 206,206 ​ — — % Mercedes GLS 450 42 ​ 4,861,346 ​ 115,746 43 ​ 4,934,107 ​ 114,747 ​ 1,000 0.9 % MB S500 — ​ — ​ — 4 ​ 587,018 ​ 146,755 ​ — ​ — % Land Rover Range Rover 5 ​ 745,557 ​ 149,111 1 ​ 147,271 ​ 147,271 ​ 1,841 1.3 % Toyota Sequoia 7 ​ 710,328 ​ 101,475 — ​ — ​ — ​ — — ​ LEXUS LX600 25 ​ 3,721,015 ​ 148,841 33 ​ 5,105,953 ​ 154,726 ​ (5,885) (3.8) % Total 79 ​ $ 10,038,246 ​ $ 127,066 90 ​ $ 11,911,614 ​ $ 132,351 ​ $ (5,285) (4.0) % ​ (i) For the three months ended September 30, 2023, we sold 79 vehicles compared with 90 for the three months ended September 30, 2022, mainly due to a decline in market demand. (ii) During the three months ended September 30, 2023, we strategically restructured our product portfolio by discontinuing the sale of select luxury car models, such as the Porsche Cayenne, Mercedes G550, and MB S500. This decision was driven by our objective to better align with market demand, streamline resource allocation toward higher-demand models, and improve our inventory cost management. (iii) Our average selling price per vehicle for the three months ended September 30, 2023 and 2022 was $127,066 and $132,351, respectively, representing a decrease of $5,285, or 4.0%, per vehicle. This decrease in the average selling price per vehicle signifies the need for adjusting our pricing strategy and underscores the impact of the portfolio restructuring on our revenue profile. (iv) Sales to U.S. market dealers/exporters accounted for 12.4%, or 10 cars, and 1.3%, or one car of our total revenue/vehicles for the three months ended September 30, 2023 and 2022, respectively. Sales to overseas markets, which was mainly the PRC market for the three months ended September 30, 2023 and 2022, accounted for 87.6%, or 69 cars, and 98.7%, or 89 cars, of our total revenue/vehicles, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2023 2022 Amount % Revenue: ​ ​ ​ ​ ​ ​ ​ U.S. domestic market ​ $ 1,244,615 ​ $ 150,935 ​ $ 1,093,680 ​ 724.6 % Overseas market ​ 8,793,631 ​ 11,760,679 ​ (2,967,048) ​ (25.2) % Total ​ $ 10,038,246 ​ $ 11,911,614 ​ $ (1,873,368) ​ (15.7) % ​ Our large procurement group enables us to purchase large numbers of vehicles within a short period of time; therefore, many of our U.S.-based peers turn to us for vehicle purchasing. Our work with selected U.S. counterparts generally improves our cash flow without compromising our ability to deliver vehicles to our PRC clients. The implementation of our strategy in 2022 to expand our sales channels and prioritize our long-term customers resulted in an increase in the share of our overseas sales in our revenue mix. During the three months ended September 30, 2022, 98.7% of our total revenue was generated from overseas sales; for the three months ended September 30, 2023, our direct sales to the PRC market accounted for 87.6% of our total revenue. 24 Table of Contents We expect to incur significant variability in the portion of our revenue from the overseas market compared with the U.S. domestic market. Our strategy remains to maximize the overall profit of each vehicle through efficient allocation of our capital. Therefore, the percentage of sales to our U.S. customers will also fluctuate depending on specific market conditions. Cost of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2023 2022 Amount % Cost of Revenue ​ ​ ​ ​ Cost of Vehicles ​ $ 8,365,730 ​ $ 9,820,433 ​ $ (1,454,703) (14.8) % Fulfillment Expenses ​ 505,156 ​ 547,723 ​ (42,567) (7.8) % Total Cost of Revenue ​ $ 8,870,886 ​ $ 10,368,156 ​ $ (1,497,270) (14.4) % ​ Our total cost of revenue decreased by $1.5 million, or 14.4%, from $10.4 million for the three months ended September 30, 2022 to $8.9 million for the three months ended September 30, 2023. For the three months ended September 30, 2023 and 2022, our total cost as a percentage of our total revenue was 88.4% and 87.0%, respectively, reflecting the impact of lower number of vehicles sold, changes in the sales mix, and higher fulfillment expenses. Cost of Vehicles Total cost of vehicles sold decreased by $1.4 million, or 14.8%, from $9.8 million for the three months ended September 30, 2022 to $8.4 million for the three months ended September 30, 2023. We sold 90 vehicles for the three months ended September 30, 2022, and 79 vehicles for the three months ended September 30, 2023. The average purchase price per vehicle decreased from $109,116 for the three months ended September 30, 2022 to $105,895 for the three months ended September 30, 2023.This increase was primarily driven by the increased MSRP of the vehicles we acquired. The cost of vehicles sold was approximately 83.3% and 82.4% of revenue for the three months ended September 30, 2023 and 2022, respectively. This change can be attributed to transient fluctuations in vehicle procurement costs. Our average procurement cost per vehicle decreased by only 3.0%, compared with the decrease in our average selling price per vehicle of 4.0%. Fulfillment Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2023 2022 Amount % Fulfillment expenses ​ ​ ​ ​ ​ ​ ​ Payroll and Benefits ​ $ 274,183 ​ $ 309,226 ​ $ (35,043) ​ (11.3) % Buyer Commission ​ 71,900 ​ 68,614 ​ 3,286 ​ 4.8 % Vehicle Storage and Towing ​ 91,400 ​ 132,010 ​ (40,610) ​ (30.8) % Vehicle Insurance Expense ​ 32,368 ​ 16,608 ​ 15,760 ​ 94.9 % Consulting Fee ​ 30,519 ​ 17,200 ​ 13,319 ​ 77.4 % Others ​ 4,786 ​ 4,065 ​ 721 ​ 17.7 % Total Fulfillment Expenses ​ $ 505,156 ​ $ 547,723 ​ $ (42,567) ​ (7.8) % ​ Fulfillment expenses decreased by $42,567, or 7.8%, from $0.5 million for the three months ended September 30, 2022, to $0.5 million for the three months ended September 30, 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 buyer commissions, vehicle insurance expenses, consulting fees, and other miscellaneous expenses. A noteworthy shift in our procurement strategy involved transporting a majority of the vehicles to the West Coast. While this decision resulted in an increase in procurement costs, it was offset by a decrease in selling expenses. Additionally, 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. 25 Table of Contents Gross Profit As a result of the foregoing, our gross profit during the third quarter of 2023 decreased by approximately $0.4 million, or 24.4%, compared with the third quarter of 2022. As of percentage of revenue, the gross margin decreased from 13.0% for the three months ended September 30, 2022, to 11.6% for the three months ended September 30, 2023. The primary reasons for the decrease in gross margin were a slight rise in the cost of vehicles and strategic adjustments in the product portfolio. Operating Expenses Selling Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2023 2022 Amount % Selling Expenses ​ ​ ​ ​ ​ ​ ​ Payroll and benefits ​ $ 57,646 ​ $ 44,766 ​ $ 12,880 ​ 28.8 % Ocean Freight ​ 113,470 ​ 266,160 ​ (152,690) ​ (57.4) % Others ​ 12,945 ​ 3,647 ​ 9,298 ​ 255.0 % Total Selling expenses ​ $ 184,061 ​ $ 314,573 ​ $ (130,512) ​ (41.5) % ​ Selling expenses decreased significantly during the third quarter of 2023 to $0.2 million, from $0.3 million for the third quarter of 2022. This reduction is primarily attributable to our strategic move to enhance the management of our ocean freight expenses through improved third-party partnerships. Selling expenses as a percentage of revenue were 1.8% and 2.6% for the three months ended September 30, 2023 and 2022, respectively. General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2023 2022 Amount % General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ Payroll and Benefits ​ $ 176,932 ​ $ 78,967 ​ $ 97,965 ​ 124.1 % Rental and Leases ​ 85,369 ​ 53,462 ​ 31,907 ​ 59.7 % Travel & Entertainment ​ 28,813 ​ 6,726 ​ 22,087 ​ 328.4 % Legal & Accounting Fees ​ 112,418 ​ 224,129 ​ (111,711) ​ (49.8) % Recruiting Fees ​ 2,365 ​ 7,249 ​ (4,884) ​ (67.4) % Bank charges and fees ​ 13,370 ​ 5,145 ​ 8,225 ​ 159.9 % Others ​ 110,823 ​ 35,603 ​ 75,220 ​ 211.3 % Total General and Administrative Expenses ​ $ 530,089 ​ $ 411,280 ​ $ 118,809 ​ 28.9 % ​ General and administrative expenses increased by $0.1 million, or 28.9%, to $0.5 million for the three months ended September 30, 2023 from $0.4 million for the three months ended September 30, 2022, primarily due to (i) an increase in personnel-related expenses by approximately $100,000, or 124.1%, as a result of the recruitment of additional employees during the third quarter of 2023, (ii) the leasing of an additional office workplace in New York, resulting in increased rental and lease expenses, (iii) an increase in travel expenses, and (iv) an increase in other general and administrative expenses due to higher costs associated with directors and officers insurance. We expect our general and administrative expenses to continue to increase in 2023 due to the increasing expenditures related to legal and other professional services. For the three months ended September 30, 2023 and 2022, our general and administrative expenses as a percentage of revenue were 5.3% and 3.5%, respectively, due to the above-mentioned expense growth. 26 Table of Contents Other Income (Expenses) Interest Expenses, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ ​ ​ ​ 2023 2022 Amount % Inventory Financing ​ $ — ​ $ 222,750 ​ $ (222,750) ​ (100.0) % Letter of Credit Financing ​ 207,648 ​ 379,336 ​ (171,688) ​ (45.3) % Dealers Finance Charges ​ 959 ​ 1,013 ​ (54) ​ (5.4) % Other Loan Interest ​ 7,751 ​ 4,998 ​ 2,753 ​ 55.1 % Line of Credit Interest ​ 63,277 ​ — ​ 63,277 ​ 100 % Credit Card Interest ​ ​ 2,750 ​ ​ — ​ ​ 2,750 ​ 100 % Interest on Tax ​ ​ 228 ​ ​ — ​ ​ 228 ​ 100 % Premium Finance Interest ​ 3,584 ​ — ​ 3,584 ​ 100 % Total ​ $ 286,197 ​ $ 608,097 ​ $ (321,900) ​ (52.9) % ​ Interest expenses decreased by approximately $0.3 million, or 52.9%, to $0.3 million for the three months ended September 30, 2023, from $0.6 million for the three months ended September 30, 2022, primarily due to (i) the absence of 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 for us 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. 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. For the three months ended September 30, 2023, the total weighted average balance of funds we obtained through inventory financing was nil, and there were no interest expenses incurred during the period. For the three months ended September 30, 2022, the total weighted average balance of funds we obtained through inventory financing was $5.2 million, the interest expenses incurred were $0.2 million, and the weighted average annual interest rate was 17.0%. As we continue to develop our financial services, which are provided in the form of inventory financing, we intend to minimize our inventory financing obtained from other parties. 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%. As of September 30, 2023, the total weighted average balance of funds we obtained through LC financing decreased to $4.2 million, the interest expenses incurred were $0.2 million for three months ended September 30, 2023, and the weighted average annual interest rate was 19.6%. For the three months ended September 30, 2022, the total weighted average balance of funds we obtained through LC financing was $7.9 million, the interest expenses incurred were $0.4 million, and the weighted average annual interest rate was 19.2%. The period-over-period decrease in total weighted average balance of funds through LC financing and the related interest expenses incurred thereby for the three months ended September 30, 2023 reflected a lower volume of vehicles shipped and greater use of our revolving lines of credit. As of September 30, 2023, the total weighted average balance of funds we obtained through revolving lines of credit was $1.4 million, the interest expenses incurred were $0.06 million for three months ended September 30, 2023, and the weighted average annual interest rate was 18.0%. Provision for Income Taxes Our provision for income tax was $0.04 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively. ​ 27 Table of Contents Comparison of the Nine Months Ended September 30, 2023 and 2022 Revenue Revenue decreased by $13.0 million, or 28.7%, from approximately $45.5 million for the nine months ended September 30, 2022 to $32.5 million for the nine months ended September 30, 2023. The decrease was primarily due to a reduction in the overall number of vehicles sold and the effect on revenue of the portfolio restructuring. For the nine months ended September 30, 2023, we sold 254 vehicles compared with 386 for the nine months ended September 30, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Average Selling Price Changes ​ No. Sales Amount Ave Selling Price No. Sales Amount Ave Selling Price Amount % Bentley ​ — ​ $ — ​ $ — ​ 2 ​ $ 537,448 ​ $ 268,724 ​ $ — ​ — % BMW X7 ​ 5 ​ ​ 480,210 ​ ​ 96,042 ​ 52 ​ ​ 4,515,193 ​ ​ 86,831 ​ ​ 9,211 ​ 10.6 % Porsche Cayenne ​ — ​ — ​ — ​ 24 ​ 2,200,896 ​ 91,704 ​ ​ — — % Mercedes G550 ​ — ​ — ​ — ​ 8 ​ 1,538,944 ​ 192,368 ​ ​ — — % Mercedes G63 ​ — ​ — ​ — ​ 8 ​ 1,917,066 ​ 239,633 ​ ​ — ​ — % Mercedes GLS 450 ​ 125 ​ 14,033,750 ​ 112,270 ​ 182 ​ 19,117,972 ​ 105,044 ​ ​ 7,226 6.9 % Mercedes Maybach ​ 12 ​ 2,877,516 ​ 239,793 ​ — ​ — ​ — ​ ​ — — % MB S500 ​ — ​ — ​ — ​ 51 ​ 6,976,494 ​ 136,794 ​ ​ — — % RAM Trucks ​ 14 ​ 1,698,061 ​ 121,290 ​ — ​ — ​ — ​ ​ — — ​ Land Rover Range Rover ​ 15 ​ 2,359,979 ​ 157,332 ​ 2 ​ 309,309 ​ 154,655 ​ ​ 2,677 1.7 % Toyota Sequoia ​ 31 ​ 3,144,186 ​ 101,425 ​ — ​ — ​ — ​ ​ — — ​ LEXUS LX570 ​ — ​ — ​ — ​ 3 ​ 318,503 ​ 106,168 ​ ​ — — ​ LEXUS LX600 ​ 52 ​ 7,882,011 ​ 151,577 ​ 54 ​ 8,086,824 ​ 149,756 ​ ​ 1,821 1.2 % Total ​ 254 ​ $ 32,475,714 ​ $ 127,857 ​ 386 ​ $ 45,518,649 ​ $ 117,924 ​ $ 9,933 8.4 % ​ (i) Our average selling price per vehicle for the nine months ended September 30, 2023 and 2022 was $127,857 and $117,924, respectively, representing an increase of $9,933, or 8.4%, per vehicle. (ii) For the nine months ended September 30, 2023, the average selling prices for the majority of models increased compared with comparable models for the nine months ended September 30, 2022. (iii) Sales to U.S. market dealers/exporters accounted for 25.1%, or 73 cars, and 7.9%, or 26 cars of our total revenue/vehicles for the nine months ended September 30, 2023 and 2022, respectively, and sales to overseas markets, which was mainly the PRC market for the nine months ended September 30, 2023 and 2022, accounted for 74.9%, or 181 cars, and 92.1%, or 360 cars, of our total revenue/vehicles, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2023 2022 Amount % Revenue: ​ ​ ​ ​ ​ ​ ​ U.S. domestic market ​ $ 8,160,395 ​ $ 3,582,413 ​ $ 4,577,982 ​ 127.8 % Overseas market ​ 24,315,319 ​ 41,936,236 ​ (17,620,917) ​ (42.0) % Total ​ $ 32,475,714 ​ $ 45,518,649 ​ $ (13,042,935) ​ (28.7) % ​ By adjusting our sales channels and strategically fostering business partnerships with our clients beginning in 2022, our overseas sales have emerged as the primary driver of our revenue. During the nine months ended September 30, 2022, sales to our overseas market amounted to almost 92.1% of total revenue. Although that percentage decreased to 74.9% during the nine months ended September 30, 2023, we expect our overseas market revenue to remain a significant portion of our total revenue. 28 Table of Contents Cost of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ 2023 ​ 2022 Amount % Cost of Revenue ​ ​ ​ ​ Cost of Vehicles ​ $ 27,190,224 ​ $ 40,556,778 ​ $ (13,366,554) (33.0) % Fulfillment Expenses ​ 1,722,704 ​ 1,643,727 ​ 78,977 4.8 % Total Cost of Revenue ​ $ 28,912,928 ​ $ 42,200,505 ​ $ (13,287,577) (31.5) % ​ Our total cost of revenue decreased by $13.3 million, or 31.5%, from $42.2 million for the nine months ended September 30, 2022 to $28.9 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2023 and 2022, our total cost as a percentage of our total revenue was 89.0% and 92.7%, respectively. The change was mainly due to a lower number of vehicles sold, particularly in the first two quarters of the year. Cost of Vehicles Total cost of vehicles sold decreased by $13.4 million, or 33.0%, from $40.6 million for the nine months ended September 30, 2022 to $27.2 million for the nine months ended September 30, 2023. We sold 254 vehicles for the nine months ended September 30, 2023, and 386 vehicles for the nine months ended September 30, 2022. The average purchase price per vehicle increased from $105,069 for the nine months ended September 30, 2022 to $107,048 for the nine months ended September 30, 2023. This increase was primarily driven by the increased MSRP of vehicles we acquired. For the nine months ended September 30, 2023, the cost of vehicles sold accounted for approximately 83.7% of revenue, contrasting with 89.1% during the same period in 2022. This ratio change demonstrates our ability to optimize our cost management and adapt to market dynamics to enhance overall financial performance. Fulfillment Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2023 2022 Amount % Fulfillment expenses ​ ​ ​ ​ ​ ​ ​ Payroll and Benefits ​ $ 955,683 ​ $ 1,016,288 ​ $ (60,605) ​ (6.0) % Buyer Commission ​ 266,253 ​ 249,748 ​ 16,505 ​ 6.6 % Vehicle Storage and Towing ​ 318,300 ​ 225,793 ​ 92,507 ​ 41.0 % Vehicle Insurance Expense ​ 90,044 ​ 58,933 ​ 31,111 ​ 52.8 % Consulting Fee ​ 61,049 ​ 73,619 ​ (12,570) ​ (17.1) % Others ​ 31,375 ​ 19,346 ​ 12,029 ​ 62.2 % Total Fulfillment Expenses ​ $ 1,722,704 ​ $ 1,643,727 ​ $ 78,977 ​ 4.8 % ​ Fulfillment expenses increased by $78,977, or 4.8%, from $1.6 million for the nine months ended September 30, 2022 to $1.7 million for the nine months ended September 30, 2023. The increase was mainly attributable to the increase in vehicle towing expenses and vehicle insurance expenses, partially offset by decreases in payroll and benefits and consulting fees. Gross Profit As a result of the foregoing, our gross profit increased by $0.3 million, or 7.4%, from a profit of $3.3 million for the nine months ended September 30, 2022 to $3.6 million for the nine months ended September 30, 2023. As of percentage of revenue, the gross margin increased from 11.0% for the nine months ended September 30, 2022 to 7.3% for the nine months ended September 30, 2023. 29 Table of Contents Operating Expenses Selling Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2023 2022 Amount % Selling Expenses ​ ​ ​ ​ ​ ​ ​ Payroll and benefits ​ $ 175,321 ​ $ 133,107 ​ $ 42,214 ​ 31.7 % Ocean Freight ​ 405,182 ​ 466,926 ​ (61,744) ​ (13.2) % Others ​ 22,681 ​ 3,647 ​ 19,034 ​ 521.9 % Total Selling expenses ​ $ 603,184 ​ $ 603,680 ​ $ (496.0) ​ (0.1) % ​ Selling expenses remained stable for the nine months ended September 30, 2023 and 2022. The increase in payroll and other selling expenses were offset by the decrease in ocean freight expenses. Selling expenses as a percentage of revenue were 1.9% and 1.3% for the nine months ended September 30, 2023 and 2022, respectively. General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ ​ 2023 2022 Amount % General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ Payroll and Benefits ​ $ 506,783 ​ $ 284,943 ​ $ 221,840 ​ 77.9 % Rental and Leases ​ 215,649 ​ 161,115 ​ 54,534 ​ 33.8 % Travel & Entertainment ​ 49,001 ​ 30,125 ​ 18,876 ​ 62.7 % Legal & Accounting Fees ​ 661,275 ​ 378,571 ​ 282,704 ​ 74.7 % Recruiting Fees ​ 6,809 ​ 26,349 ​ (19,540) ​ (74.2) % Bank charges and fees ​ 47,233 ​ 36,487 ​ 10,746 ​ 29.5 % Others ​ 189,809 ​ 76,539 ​ 113,270 ​ 148.0 % Total General and Administrative Expenses ​ $ 1,676,559 ​ $ 994,129 ​ $ 682,430 ​ 68.6 % ​ General and administrative expenses increased by $0.7 million, or 68.6%, to $1.7 million for the nine months ended September 30, 2023 from $1.0 million for the nine months ended September 30, 2022. The increase was primarily driven by increased payroll expenses, legal and accounting fees, and other general and administrative expenses due to costs associated with directors and officers insurance. For the nine months ended September 30, 2023 and 2022, our general and administrative expenses as a percentage of revenue were 5.2% and 2.2%, respectively, due to the above-mentioned expense growth. Other Income (Expenses) Interest Expenses, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ ​ 2023 2022 Amount % Inventory Financing ​ $ 112,769 ​ $ 768,055 ​ $ (655,286) ​ (85.3) % Letter of Credit Financing ​ 789,104 ​ 1,356,135 ​ (567,031) ​ (41.8) % Dealers Finance Charges ​ 3,975 ​ 1,122 ​ 2,853 ​ 254.2 % Other Loan Interest Expenses ​ 23,545 ​ 12,652 ​ 10,893 ​ 86.1 % Line of Credit ​ 120,675 ​ — ​ 120,675 ​ — % Credit Card Interest ​ ​ 4,459 ​ ​ 3,242 ​ ​ 1,217 ​ 37.5 % Premium Finance Interest ​ 3,584 ​ — ​ 3,584 ​ — % Total ​ $ 1,058,111 ​ $ 2,141,206 ​ $ (1,083,095) ​ (50.6) % ​ Interest expenses decreased by approximately $1.0 million, or 50.6%, to $1.1 million for the nine months ended September 30, 2023 from $2.1 million for the nine months ended September 30, 2022, primarily due to lower inventory financing and LC financing activities. 30 Table of Contents Liquidity and Capital Resources Cash Flows and Working Capital We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. We have relied primarily upon cash provided by operations and financing activities, including as necessary third-party loans and financial support from our founders. As reflected in the accompanying unaudited condensed consolidated financial statements, we reported net income of $0.2 million for the nine months ended September 30, 2023. We also reported cash provided by operating activities of $2.9 million for the nine months ended September 30, 2023, a positive working capital of $7.5 million and total stockholders’ equity of $7.0 million. In August 2023, we completed our IPO of 1.25 million shares of Class A common stock and raised net proceeds of approximately $3.7 million after expenses. We commenced using our revolving lines of credit during the second quarter of 2023, which has reduced our borrowings under our inventory and LC financing and reduce our interest expenses. We entered into a series of loan agreements with third-party companies for working capital purposes during the nine months ended September 30, 2023. Pursuant to these agreements, loan payables from LC financing were collateralized by letters of credit from overseas sales of parallel-import vehicles. The accounts receivable in connection with letters of credit with book values of $3,229,854 and $7,502,291 were pledged as collateral to guarantee our borrowings from these third-party companies as of September 30, 2023 and December 31, 2022, respectively. In October 2022, we entered into agreements with two third-party companies that have been providing financial support to us since 2021. Pursuant to the agreements, we can borrow under revolving lines of credit of up to $10.0 million and $5.0 million, respectively, from these two third-party companies for a total of $15.0 million for a period of 12 months at a fixed interest rate of 1.5% per month. In December 2022, we amended the Revolving Line of Credit Agreements to extend the maturity dates to April 2024. In June 2022, we sold 1,666,000 shares of Class A common stock at a purchase price of $1.80 per share. The gross proceeds were approximately $3.0 million, before deducting the offering expenses of approximately $0.3 million. The net proceeds were approximately $2.7 million, of which approximately $0.6 million was received in September 2022, $0.5 million in November 2022, $0.1 million in December 2022, $0.7 million in March 2023, and $0.5 million in July 2023, for a total receipt of approximately $2.4 million. The balance of $0.6 million is expected to be paid within six months after our IPO. In March 2022, we entered into an amended agreement with the SBA to borrow an additional $350,000 for 30 years as working capital to alleviate economic injury caused by the COVID-19 pandemic. In aggregate, our SBA borrowings amounted to $500,000 with a maturity date of May 23, 2050. The amended loan bears a fixed interest rate of 3.75% per annum. Beginning from March 2022, 24 months from the date of the original loan agreement, we are required to make a new monthly installment payment of $2,485 within the remaining term of the loan, with the last installment to be paid in May 2050. In assessing our liquidity, we monitor and analyze our cash on-hand, our ability to generate sufficient revenue, the collection of our accounts receivable, our ability to obtain additional financial support in the future, and our operating and capital expenditure commitments. We reported cash of $0.7 million as of September 30, 2023. As of September 30, 2023, we recorded a total of approximately $4.2 million loans payable, including approximately $3.0 loans payable from LC financing and $0.9 million loans payable from revolving line of credit. We expect that we will be able to continue borrowing under our existing credit facilities based on past experience, our good credit history, and well-established relationship with the lenders. We have also from time to time in the past several years been supported with loans from our principal stockholder, and we believe such support would be available in the future, if needed The completion of the IPO in the third quarter of 2023 provided us with a substantial influx of capital. With improved access to funds as a result of being a public company, we now have the increased financial flexibility to operate without the current need for external financing and can manage our operations with a more comfortable cash flow position. We are working to further improve our liquidity and capital sources primarily by generating cash from operations, debt financing, and, if needed, financial support from our principal stockholder. In order to fully implement our business plan and sustain continued growth, we may also seek additional equity financing from outside investors. Based on the current operating plan, management believes that the 31 Table of Contents above-mentioned measures collectively will provide sufficient liquidity to meet our future liquidity and capital requirements for at least 12 months from the issuance date of the consolidated financial statements. Cash Flows for the Nine Months Ended September 30, 2023 and 2022 The following table summarizes our cash flows for the nine months ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ Nine Months ended September 30, ​ ​ 2023 2022 Net cash provided by operating activities ​ $ 2,871,734 ​ $ 2,503,554 Net cash (used in) provided by financing activities ​ (2,225,246) ​ (2,346,634) Net increase in cash ​ $ 646,488 ​ $ 156,920 ​ Operating Activities Net cash provided by operating activities was $2.9 million for the nine months ended September 30, 2023. This was primarily attributable to net earnings of $0.2 million, a collection of $1.5 million in accounts receivable, a $0.6 million decrease in inventory, $0.3 million decrease in other receivables, and other less significant factors. Net cash provided by operating activities of $2.5 million for the nine months ended September 30, 2022 was due to net earnings of $0.7 million, adjusted primarily by a $6.6 million increase in accounts receivable, a $11.5 million decrease in inventory, a $0.4 million decrease in other receivable, a $1.7 million decrease in prepaid expenses, and a $1.8 million decrease in deferred revenue, as well as other less significant factors. Financing Activities Net cash used in financing activities of $2.2 million for the nine months ended September 30, 2023, consisted of (i) net repayments of LC financing of $20.7 million; (ii) net repayments of inventory financing of $4.2 million; (iii) net repayments of revolving lines of credit of $2.4 million; (iv) repayments of dealers financing of $0.4 million; partially offset by (v) proceeds from LC financing of $16.7 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. Net cash used in financing activities of $2.3 million for the nine months ended September 30, 2022, consisted of (i) net repayment of LC financing of $27.9 million; (ii) net repayment of inventory financing of $20.9 million; (iii) repayment to a founder of $1.1 million; and (iv) repayment of dealers financing of $0.1 million; partially offset by (v) net proceeds from LC financing of $26.9 million, (vi) net proceeds from inventory financing of $19.3 million; (vii)issuance of common stock of $0.6 million; (viii) proceeds from dealers financing of $0.2 million; (ix) net financing support from long-term borrowing of $0.4 million; and (x) financial support of $0.3 million from a founder. Contractual Obligations The following table sets forth our contractual obligations as of September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 1 1 to 5 Above 5 ​ ​ Total ​ Year ​ years ​ years Lease commitment ​ $ 267,008 ​ $ 66,003 ​ $ 201,005 ​ $ — Long-term borrowings ​ 685,580 ​ 32,477 ​ 147,493 ​ 505,610 Total ​ $ 952,588 ​ $ 98,480 ​ $ 348,498 ​ $ 505,610 ​ Except for those disclosed above, we did not have any significant capital or other commitments, long-term obligations, or guarantees outstanding as of September 30, 2023. 32 Table of Contents Off-Balance Sheet Arrangements 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. Critical Accounting Policies We prepare our financial statements in conformity with U.S. GAAP, which require us to make judgments, estimates, and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. As of the date of this quarterly report, there have been no material changes to our critical accounting policies as discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our registration statement on Form S-1 (File No. 333-271185). Item 3. Quantitative and Qualitative Disclosures About Market Risk . As a smaller reporting company, we are not required to provide this information.