Item 1. Business
Item 1. Business.
Overview
For the year ended December 31, 2024, we generated revenues from two sources: parallel-import vehicles sales and logistics and warehousing services, while parallel-import vehicles segment was our only source of revenue in 2023. We began our operations in 2016 as a seller of parallel-import vehicles, sourcing vehicles in the U.S. and selling them in the PRC market. In the PRC, parallel-import vehicles refer to those purchased by dealers directly from overseas markets and imported for sale through channels other than brand manufacturers’ official distribution systems. Parallel-import vehicles used to be popular in the PRC because they were generally priced 10% to 15% cheaper than vehicles sold through distribution systems authorized by brand manufacturers. In addition, some overseas models can only be obtained through this channel rather than through the brand manufacturers’ authorized distribution systems as a result of certain regulations that prohibit their production and sale in the PRC due to environmental protection and emission standards. For the years ended December 31, 2024 and 2023, parallel-import vehicles contributed 78.2% and 100.0% of our total revenue, respectively. However, due to the COVID-19 pandemic, lockdowns in the PRC, and weaker customer demand in the PRC caused by deteriorating macroeconomic conditions and a growing preference for domestically produced electric vehicles (“EVs”), our parallel-import vehicle sales volume has been significantly reduced. We sold 14 and 303 vehicles during the years ended December 31, 2024 and 2023, respectively, generating total revenue of $1.6 million and $38.3 million, respectively, representing a decrease of 95.7% from 2023 to 2024.
To offset the negative impact brought by the decline in the parallel-import vehicle market and to diversify our revenue sources, in February 2024, we acquired Edward Transit Express Group Inc. (“Edward”), a California-based common carrier specializing in ocean transportation services, to start our logistics and warehousing 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. Additionally, in July 2024, we relocated our headquarters from Charlotte, North Carolina, to Irvine, California, which we believe will enable stronger management focus on our logistics and warehousing business due to Irvine’s proximity to the key ports of Los Angeles and Long Beach. In December 2024, we acquired TW & EW Services Inc (“TWEW”), a California-based provider of general labor and logistics services. Through TWEW, we provide general labor services including loading, unloading, and other labor-related activities.
Organizational Structure
Cheetah Net was originally formed on August 9, 2016 under the laws of the State of North Carolina as a limited liability company known as Yuan Qiu Business Group LLC. On March 1, 2022, we filed Articles of Incorporation including Articles of Conversion with the Secretary of State of the State of North Carolina to convert from an LLC to a corporation, and changed our name to Cheetah Net Supply Chain Service Inc. Cheetah Net also conducts business under the trade name of “Elite Motor Group.” As of the date of this annual report, Cheetah Net holds 100% of the equity interests in the following entities:
● (i) Allen-Boy International LLC (“Allen-Boy”), a limited liability company organized on August 31, 2016 under the laws of the State of Delaware, which was acquired by Cheetah Net from Yingchang Yuan, the previous owner of Allen-Boy who beneficially owns 1,200,000 shares of Class A common stock of Cheetah Net, for a total consideration of $100 on January 1, 2017. Allen-Boy did not have any business activities until acquired by Cheetah Net. Currently, Allen-Boy is engaged in the parallel-import vehicle business.
● (ii) Pacific Consulting LLC (“Pacific”), a limited liability company organized on January 17, 2019 under the laws of the State of New York, which was acquired by Cheetah Net from Yingchang Yuan for a total consideration of $100 on February 15, 2019. Pacific did not have any business activities until acquired by Cheetah Net. Currently, Pacific is engaged in the parallel-import vehicle business.
● (iii) Entour Solutions LLC (“Entour”), a limited liability company organized on April 8, 2021 under the laws of the State of New York, which was acquired by Cheetah Net from Daihan Ding, the previous owner of Entour, for a total consideration of $100 on April 9, 2021. Entour did not have any business activities until acquired by Cheetah Net. Currently, Entour is engaged in the parallel-import vehicle business.
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● (iv) Cheetah Net Logistics LLC (“Logistics”), a limited liability company organized on October 12, 2022 under the laws of the State of New York, whose previous sole member and owner, Hanzhang Li, assigned all his membership interests in Logistics to Cheetah Net for a total consideration of $100 through a membership interest assignment agreement dated October 19, 2022. Currently, Logistics is engaged in the parallel-import vehicle business.
● (v) Edward, a corporation incorporated on July 14, 2010 under the laws of the State of California, whose previous sole shareholder and owner, Juguang Zhang, transferred all his right, title, and interest in and to all of the issued and outstanding equity interests of Edward to Cheetah Net for a total consideration of $1,500,000, consisting of a $300,000 cash payment and Cheetah Net’s Class A common stock initially valued at $1.2 million through a stock purchase agreement dated January 24, 2024, as amended. The fair value of the stock consideration was determined to be $900,000. (See Note 8 of our audited financial statements as of December 31, 2024.) Currently, Edward is engaged in ocean transportation services.
● (vi) TWEW, a corporation incorporated on February 27, 2020 under the laws of the State of California, whose previous shareholders and owners transferred all their rights, titles, and interests in and to all of the issued and outstanding equity interests of TWEW to Cheetah Net for a total consideration of $1.0 million, consisting of a $200,000 cash payment and Cheetah Net’s Class A common stock valued at $800,000 through a stock purchase agreement dated November 27, 2024. The TWEW acquisition was closed on December 19, 2024. Currently, TWEW is engaged in logistics and labor services to strengthen Cheetah Net’s position in the logistics sector.
● (vii) NexTrade International LLC (“NexTrade”), a limited liability company organized on September 13, 2024 under the laws of the State of Delaware. On December 19, 2024, the sole member of NexTrade transferred all his membership interests in NexTrade to Cheetah Net for a total consideration of $1 in cash. NexTrade currently holds 100% of the ownership interests in Naiside (Shenzhen) International Trading Co., Ltd., a limited liability company organized on December 3, 2024, under the laws of the PRC. As of the date of this annual report, NexTrade is not engaged in any business operations.
On August 3, 2023, we closed our IPO of 78,125 shares of Class A common stock at a price of $64.00 per share. In connection with the IPO, the shares of Class A common stock began trading on the Nasdaq Capital Market under the symbol “CTNT” on August 1, 2023.
On May 15, 2024, we closed a public offering of 825,625 shares of our Class A common stock at a price of $9.92 per share, for gross proceeds of approximately $8.19 million, before deducting placement agent fees and other offering fees and expenses.
On May 23, 2024, the Company dissolved two wholly owned subsidiaries, Canaan International LLC, an LLC organized on December 5, 2018 under the laws of the State of North Carolina, and Canaan Limousine LLC, an LLC organized on February 10, 2021 under the laws of the State of South Carolina.
On July 26, 2024, we closed a public offering of 404,979 shares of our Class A common stock at a price of $3.68 per share, for gross proceeds of approximately $1.49 million, before deducting placement agent fees and other offering fees and expenses.
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 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). Unless otherwise indicated, all share and per share amounts presented in this document have been retrospectively adjusted to reflect the reverse stock split as if it had occurred as of the earliest period presented.
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Our Industry and Business Model
(I) Parallel-Import Vehicles
Overview
For the years ended December 31, 2024 and 2023, we generated revenue primarily from the sales of parallel-import vehicles. In the PRC, parallel-import vehicles refer to those purchased directly by dealers from overseas markets and imported into the PRC market for sale through channels other than brand manufacturers’ official distribution systems. Models and prices of parallel-import vehicles vary from mid-range to high-end brands, with a manufacturer’s suggested retail price (“MSRP”) typically not less than $40,000. Parallel-import vehicles used to be popular in China because they were relatively cheaper and offered a wider variety of models and versions with more customization possibilities than regular imported cars. Specifically, because parallel-import vehicles do not have to pass through multiple levels of distributors, such as China general distributors, regional distributors, and 4S stores, to reach their end consumers, they could generally be priced at least 10% to 15% lower than regular-imported vehicles. Parallel-import vehicles were popular also because some overseas models could not be produced and sold in China due to certain regulations concerning environmental protection and emission standards and could only be introduced into the PRC market through parallel imports. As manufacturers frequently arbitrage markets, setting the price according to local market conditions so the same vehicle will have different retail prices in different territories, this enables parallel-import vehicle dealers to utilize a profit maximization strategy to drive profit from the industry.
Parallel-import vehicles in China are generally divided into three categories based on the original country of procurement, including the U.S. version, the Middle East version, and the European version. All of the cars we sold in the past two fiscal years were of the U.S. version with MSRPs typically not less than $80,000. Suppliers of U.S. versions of parallel-import cars are typically unable to purchase large quantities of vehicles, so most of the industry’s participants are small family businesses who purchase cars from local dealers and resell them to local dealers/exporters in the U.S. or to dealers/importers in China. For U.S. dealers of parallel-import vehicles, vehicle sourcing capabilities are critical.
We purchased automobiles from the U.S. market through our team of professional purchasing agents, and resold them to our customers, including both U.S.- and PRC-based parallel-import vehicle dealers. We derived profits primarily from the price difference between our buying and selling prices for parallel-import vehicles. Our parallel-import vehicle operating principle was to maximize sales margins rather than volume, so we mainly focused on luxury vehicle brands in large demand because of the strong purchasing power of the end consumers in the PRC and higher markups for pricing. This strategy allowed us to maintain efficient operations and effective management by keeping the size and scope of our Company within reasonable limits.
From 2016 to the first half of 2022, we experienced significant growth in sales volume, revenue, and gross profit due to our core strengths and a favorable economic climate. However, the parallel-import vehicle market has faced significant challenges in recent years. Since 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 dealers have responded to these threats by discounting the sale price of their vehicles, which has lately prevented us from generating a profit from the sale of parallel import vehicles. These factors, compounded by the lingering effects of the COVID-19 pandemic and lockdowns in the PRC, have significantly impacted our parallel-import vehicle business. Due to the unfavorable market conditions, our board of directors approved the discontinuation of our parallel-import vehicle business on March 3, 2025.
To offset the negative impact brought by the decline in the parallel-import vehicle market and to diversify our revenue sources, in February 2024, we acquired Edward, a California-based common carrier specializing in ocean transportation services, to start our logistics and warehousing 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. Additionally, in July 2024, we relocated our headquarters from Charlotte, North Carolina, to Irvine, California, which we believe will enable stronger management focus on our logistics and warehousing business due to Irvine’s proximity to the key ports of Los Angeles and Long Beach. Also, in December 2024, we acquired TWEW, a California-based provider of labor and logistics services. Through TWEW, we provide general labor services including loading, unloading, and other labor-related activities. See “—II. Logistics and Warehousing Services.”
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Our Parallel-Import Vehicles Customers
We primarily served two types of customers in our parallel-import vehicles business in the past two fiscal years: (i) PRC customers and (ii) U.S. domestic customers. Specifically, our PRC customers were Chinese automobile dealers/importers who intended to import automobiles into the PRC market as parallel-import vehicles. Our U.S. domestic customers were parallel-import car dealers/exporters based in the U.S., which were typically the branches or upstream suppliers of Chinese parallel-import vehicle car dealers, who often lack purchasing capabilities in the U.S. market and need to purchase vehicles from us to transport to their PRC branches or sell to their PRC customers. Our parallel-import vehicles customers were willing to work with us because we were able to provide them with a large number of vehicles having a wide variety of models, thus greatly reducing the difficulty of collecting and managing vehicles for them. Our PRC and U.S. parallel-import vehicles customers generated approximately 87.7% and 12.3% of our revenue from parallel-import vehicles, respectively, during the year ended December 31, 2024, and 78.2% and 21.8% of our revenue from parallel-import vehicles, respectively, during the year ended December 31, 2023. We had a total of two and four customers for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, our two largest customers accounted for approximately 100% of our total revenue from parallel import vehicles. For the year ended December 31, 2023, our three largest customers accounted for approximately 98.9% of our total revenue from parallel-import vehicles.
As an example of a typical transaction, under a sales contract entered into by and between our Company and a PRC parallel-import vehicle customer, we were required to (i) load the designated automobiles on a vessel by the time of shipment specified in the contract at a U.S. port of loading; (ii) facilitate export customs clearance; (iii) provide the PRC customer with information about the designated automobiles, quantity, invoice amount, vessel name, and departure date, and provide a bill of lading, packaging list, commercial invoice, and other necessary documents; and (iv) ensure that the sold automobiles are brand new. Pursuant to the sales contract, the PRC customer (i) was responsible for import customs clearance and other relevant import issues; (ii) was required to bear all costs and risks once the designated automobiles arrive at the designated port of destination in the PRC; and (iii) was responsible for arranging payment as specified in the contract. In the event of any dispute, controversy, or claim arising out of or relating to such sales contracts, both parties agreed (i) they will first try to resolve such disputes through friendly consultation; and that (ii) the validity, interpretation, and implementation of such contracts shall be governed by the laws of the State of North Carolina in the U.S.
Similarly, our U.S. customers entered into sales agreements for each automobile sold by us. According to a typical sales agreement entered into between our U.S. customers and our Company, we would (i) sell the designated automobile to the U.S. customer for the amount specified in the agreement and certify that all of the information provided therein is true and accurate to the best of our knowledge; (ii) deliver the automobile to the warehouse requested by the U.S. customer; and (iii) provide the automobile title within three weeks of the completion of the transaction. Meanwhile, the U.S. customer acknowledged that the automobile described therein was sold “as is” and that there was no guarantee or warranty either expressed or implied with respect to the automobile.
Our Parallel-Import Vehicles Suppliers
We did not have regular suppliers for our parallel-import vehicles business in the past two fiscal years, because we purchased all of our automobiles via our team of professional purchasing agents from U.S. automobile dealers that had the designated automobile model in stock. The designated brands and models were usually luxury or mid- to high-end vehicles that were in high demand in the PRC market, such as Mercedes GLS450, Mercedes G63, BMW X7, and Lexus 600.
Our Professional Purchasing Agents for Parallel-Import Vehicles
As of December 31, 2024, we did not work with any independent contractors on parallel-import vehicle purchases due to the shrinkage of the parallel-import vehicle market. Due to the unfavorable market conditions, our board of directors approved the discontinuation of our parallel-import vehicle business on March 3, 2025. See “—Overview.”
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As of December 31, 2023, we worked with 389 independent contractors as our professional purchasing agents, responsible for purchasing designated models of vehicles using the knowledge and negotiating skills they acquired from our training. We developed a standardized system of recruiting, training, and managing professional purchasing agents. Specifically, we posted job listings on various job platforms to attract qualified potential candidates and assigned received resumes to our full-time procurement specialists, who would schedule interviews by telephone or in person. A second interview would be conducted by a procurement manager and/or human resources manager to further review the candidate’s background and qualifications. Upon reviewing the applicant’s experience in the industry, knowledge of our Company, and other qualifications, we would determine whether a candidate is a good fit. In addition, we designed and developed our own referral program that incentivized our agents to utilize their network to attract additional qualified agents and thus further expanded our purchasing agent base. In particular, we encouraged our purchasing agents to introduce such positions to their connections and forward their resumes or contact information to our Company if consent was granted. The candidates so referred, if retained, would receive our training and start working as purchasing agents, and the referral agent would earn a $200 commission for each deal the referred agents closed. There were no limit or cap on how many referrals could be made in our referral program. In the referral program, existing agents acted as mentors to new agents by providing them with initial training and helping them become familiar with our Company.
Since most of the purchasing agents had other part-time employment, training sessions were provided to accommodate their schedules. In a training session, our procurement specialists would outline the details, such as models with specifications, purchasing procedures, commission structures, and agent conduct when visiting a dealership. The agents were trained continuously after each deal was completed to improve their skills and knowledge. To determine whether a new purchasing agent had been fully trained and understood well his or her responsibilities, workflow, and company procedures and policies, a procurement manager would schedule an assessment test or call with the new agent before the agent placed his or her first order with a dealership. We managed our purchasing agents through a variety of communication tools, including texts, phone calls, emails, and Zoom meetings. Each purchasing agent would be assigned to a procurement specialist in charge, who led and trained a group of agents. Depending on the agent’s schedule, the procurement specialists in charge were in direct communication with their agents on a weekly basis for updates on active deals, leads for new potential deals, and scheduling vehicle pick-ups.
In accordance with a typical independent contractor agreement entered between a professional purchasing agent and our Company, the purchasing agent agreed to (i) acquire the automobile identified by our Company and promptly transfer possession of the automobile to us; (ii) diligently execute all documents related to the transfer of title and delivery of the automobile; (iii) deliver the automobile without any physical damage, including all purchasing documents, user manuals, window sticker, keys, spare tires, and interior carpets; and (iv) acknowledge that the automobile was at all times the sole property of our Company insofar as we fulfilled our obligation to fund all related costs of purchasing the automobile and to pay/reimburse all fees owed pursuant to the independent contractor agreement. Pursuant to the independent contractor agreement, we were required to pay the purchasing agent a service fee calculated according to an agreed-upon payment structure specified in the agreement, which included (i) a base fee ranging from $500 to $2,000, depending on the model of the purchased automobile, and (ii) an incentive bonus that amounted to 25% of any further discount achieved by the purchasing agent beyond the pre-determined benchmark discount required for the purchased automobile. Such an agreement also included liability exemption clauses providing that the purchasing agent shall not be liable for any fines or lawsuits imposed by dealerships or manufacturers due to export infractions or infringements, and we agreed to indemnify, defend, and hold harmless the purchasing agent from and against any liability, losses, claims, costs, interests, penalties, expenses, and damages arising from any non-negligent execution of the role as purchasing agents on behalf of our Company.
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Parallel-Import Vehicles Brands We Supplied
The brands of automobiles we have procured include Mercedes, BMW, Land Rover, Lexus, Ram, and Toyota.
The following table sets forth a breakdown of brands purchased during the years ended December 31, 2024 and 2023.
Percentages
Percentages
Number of
of
Number of
of
Automobiles
Total
Automobiles
Total
Purchased
Purchase
Purchased
Purchase
During the
During the
During the
During the
Year
Year
Year
Year
Ended
Ended
Ended
Ended
December 31,
December 31,
December 31,
December 31,
Brands/Models:
2024
2024
2023
2023
Luxury Brands
Mercedes Benz GLS450
11
78.6
%
157
51.8
%
Mercedes Benz G63
1
7.1
%
—
—
%
Mercedes Benz GLS600
—
—
%
12
4.0
%
BMW X7
—
—
%
5
1.7
%
Lexus LX600
2
14.3
%
68
22.4
%
Land Rover Range Rover
—
—
%
15
4.9
%
Ram 1500 TRX
—
—
%
14
4.6
%
Toyota Sequoia
—
—
%
32
10.6
%
Total
14
100.0
%
303
100.0
%
Parallel-Import Vehicles Services and Operational Flow
Procurement
We made procurement decisions based on our extensive experience and insights into the PRC parallel-import vehicle industry. In order to avoid overstocking or understocking inventory, we would forecast inventory needs and expenses through meticulous market analysis and weekly sales department meetings. Specifically, our management would estimate, based on the data from the General Administration of Customs of China, that approximately 20,000 parallel-import cars had been exported annually from the U.S. to China in recent years, most of which were of low-end and mid-range brands. Our founding team understood the factors driving the growth of the luxury-car segment in China and the desires of the Chinese consumer. In addition, we had some close business partners in China who were parallel-import car traders or dealers, including some of our PRC customers and some third parties or potential customers. They provided us with timely information on the PRC market and often offered us more favorable terms of settlement. To develop our sales strategy and support our procurement department’s purchasing plans, the sales department met weekly with our procurement department to discuss the latest market needs and dynamics, including sales prices, brand composition, and inventory changes. Nonetheless, in the event that we overstocked or understocked our inventory, our business, financial condition, and results of operations could be adversely harmed.
We primarily procured automobiles through our team of professional purchasing agents, who served as independent contractors, from U.S. automobile dealers that had the designated automobile model in stock. Mr. Walter Folker, our previous Vice President of Procurement, oversaw a full-time procurement manager, who in turn supervised our full-time procurement specialists. Those full-time procurement specialists were responsible for training our purchasing agents and providing them with timely phone coaching and on-site support.
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Our purchasing agents negotiated the best price for our designated automobile models using the knowledge and negotiating skills they received from our training. We decided which automobiles to purchase primarily based on the demand and selling price for specific automobile models in the PRC market and their availability in the U.S. market. We regularly issued instructions about the brands and models of vehicles to be purchased, as well as the maximum acceptable prices and pick-up time limits. Professional purchasing agents could visit dealerships across the U.S. for quotes based on their schedules and convenience and provide us with the price information they obtained. We would then select the lowest prices for models in demand and assist those purchasing agents who provided such quotes in completing the purchases. Once the purchases were completed, the purchasing agents sell automobiles to our Company at their purchase prices and charge us a service fee per automobile based on the model of the vehicle and the discount they obtained from the automobile dealers. See “—Our Professional Purchasing Agents.”
A purchasing agent would usually pay the deposit to automobile dealers using a Company-issued credit and would pay the remaining balance via bank cashier check from our Company’s bank account. The purchasing agents would occasionally advance funds to the automobile dealers, which we would reimburse once they provided a receipt and other required documents. In addition, we would fund other costs, fees, and taxes incurred by purchasing agents related to the purchase and transfer of automobiles. Once the purchasing agents received the titles of the purchased automobiles from the Department of Motor Vehicles, they would immediately sign the titles over to us. Automobiles purchased from U.S. automobile dealers would be picked up by our purchasing agents and delivered to us at a designated warehouse or other agreed delivery locations.
Below is a diagram showing the procurement process:
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The following chart demonstrates the number of vehicles we acquired each year since 2016. We were able to support an annual purchase volume of 500 to 600 cars with our team size and working capital reserves before our business focus shift to logistics and warehousing services. We discontinued to acquire vehicles since the second quarter of 2024, and discontinued parallel-import vehicle business following the approval of Company’s Board of Director on March 3, 2025 due to unfavorable market conditions.
Note: Year 2020 was affected by the COVID-19 pandemic and China’s Implementation of National VI Standards.
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Sales and Services
In the past two fiscal years, we sold our automobile inventories to both U.S. customers (parallel-import vehicle exporters based in the U.S.) and PRC customers (Chinese parallel-import car dealers who purchased cars from us and imported them into the PRC to resell them to other dealers or end consumers). A specific vehicle model’s pricing and profitability varied 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, normal commercial terms, market pricing adjustments, customer payment methods, operational efficiency of our Company, and anticipated workload for trading activities. The selling price was finalized as the MSRP plus service fees, which were determined upon comprehensive consideration of the overall market adjustments for vehicles as well as the customer’s payment method. The following table sets forth the breakdown of our sales revenue by brands and models during the years ended December 31, 2024 and 2023.
Sales
Revenue Share
Sales
Revenue Share
Revenue
of Total
Revenue
of Total
During the
Sales for
During the
Sales for
Year
the Year
Year
the Year
Ended
Ended
Ended
Ended
December 31,
December 31,
December 31,
December 31,
Brands/Models:
2024
2024
2023
2023
Luxury Brands
Mercedes Benz GLS450
$
1,175,116
72.0
%
$
17,634,255
46.0
%
Mercedes Benz G63
$
200,297
12.3
%
$
—
—
%
Mercedes Benz GLS600
$
—
—
%
$
2,877,516
7.5
%
BMW X7
$
—
—
%
$
480,210
1.2
%
Lexus LX 600
$
255,835
15.7
%
$
10,023,386
26.2
%
Land Rover Range Rover
$
—
—
%
$
2,359,979
6.2
%
Ram 1500 RTX
$
—
—
%
$
1,698,061
4.4
%
Toyota Sequoia
$
—
—
%
$
3,242,567
8.5
%
Total
$
1,631,248
100.0
%
$
38,315,974
100.0
%
Typically, we would enter into sales contracts with our PRC and U.S. customers. See “—Our Parallel-Import Vehicles Customers.” Our U.S. customers usually pay the full amount to us within two days before or after the automobile is delivered to the appointed warehouse. In most cases, our PRC customers would make their payments one or two weeks after we arranged for a freight forwarding company to load the automobile and provided them with the ocean bill of lading and other related documents.
Fulfillment and U.S. Customs Clearance
For our domestic sales, we delivered the purchased vehicles to U.S. customers at their designated warehouses and provided the original copy of the title to them within the agreed timeframe. Our U.S. customers were responsible for export and cross-border transportation matters on their own after purchasing automobiles. In this case, we bore the risk of damage and loss before delivering the automobile to the warehouse designated by the U.S. customer. For our PRC customers, it was our responsibility to arrange for the ocean freight forwarder to load the automobile to be shipped and provide them with the ocean bill of lading and related documents. As such, we bore the risk of damage and loss prior to arranging for the shipping of automobiles by third-party logistics service providers, but these risks passed to our PRC customers once the automobile was dispatched on board. Our PRC customers, namely, Chinese parallel-import car dealers, were responsible for after-sale services for the end consumers of those parallel-import vehicles.
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Prior to shipping the automobiles, we would generally require PRC customers to make the majority of the amount owed (typically the MSRP amount) upfront via a letter of credit, where the release of payment was contingent upon our submission of a bill of lading and other required documents to the issuing bank underlying the letter of credit for its review. Once we confirmed receipt of the letter of credit, we would settle the loan (if any) and arrange for customs clearance and shipping by third-party logistics service providers. In the event that all customs clearance procedures had been completed with all forms filled out and accepted by U.S. Customs and Border Protection (“Customs”), we would ship the automobiles and provide the issuing bank with the bill of lading and related documents for its review. Upon completion of the review, the issuing bank would release payment to us and the bill of lading and related documents to PRC customers, which were necessary to obtain the automobiles from the freight forwarder. We cooperated with third-party logistics service providers whose primary responsibility was to provide cross-border logistics services, typically by sea, for the delivery of our automobiles to our PRC customers.
(II) Logistics and Warehousing Services
Logistics and warehousing services is a business line we launched in February 2024. Following the downturn in the parallel-import vehicle market, our management decided to pivot toward logistics and warehousing, drawing on the extensive experience we had developed in transporting parallel-import vehicles. In February 2024 and December 2024, we acquired Edward and TWEW, respectively, and have since generated revenue from their existing logistics and warehousing operations. For the year ended December 31, 2024, our logistics and warehousing business contributed 21.8% of our total revenue. As of December 31, 2024, we had an active customer base of 24 customers for our logistics and warehousing business, as compared with seven when we initially launched the business in February 2024. Although, as of the date of this annual report, logistics and warehousing accounts for a relatively small portion of our total revenue, we have taken actions to streamline operations, expand service offering, and enhance market position. Therefore, we anticipate the logistics and warehousing business will become our primary focus in the foreseeable future.
Our logistics and warehousing business focuses on providing freight forwarding services for clients shipping goods from the U.S. to mainland China or Hong Kong. We operate as a Non-Vessel-Operating Common Carrier (“NVOCC”), bridging the gap between shippers and ocean carriers to facilitate the movement of cargo. Generally, our customers lack either the industry knowledge or direct relationships with ocean carriers necessary to secure reliable, cost-effective transportation. By acting as our customers’ U.S. point of contact, we coordinate shipments on their behalf, leveraging our expertise and carrier network to streamline logistics. Our primary responsibilities include: (i) cargo storage, (ii) freight forwarding, (iii) U.S. customs clearance, and (iv) labor services and cargo loading and unloading. Customers may engage us for any combination of these services. For the year ended December 31, 2024, we conducted the first three services exclusively through Edward and handled labor services and cargo loading and unloading solely through TWEW.
Cargo Storage
The workflow of cargo storage begins when a customer submits a shipping request. Our customers are typically U.S.-based merchants needing to ship goods to Asia. They cover the cost of transporting their cargo from their locations to our California warehouse. Once the cargo arrives at our warehouse, our staff inspects it and records details such as contents and final destination in our system. As of the date of this annual report, we lease one warehouse located in Gardena, California, covering approximately 8,800 square feet. See “Item 2. Properties.” Our warehouse is equipped with handling equipment (such as forklifts and pallet jacks) and security measures (such as surveillance cameras and fire sprinkler systems) to protect stored cargo.
Freight Forwarding
After the cargo is received, customers may choose to either have us ship it or engage another service provider to do so. If a customer opts for our ocean freight service, we will secure space for the cargo through our established network of ocean carriers. As of the date of this annual report, we work with three ocean carriers, each of which had a longstanding partnership with Edward prior to its acquisition and continues to work with us after the acquisition.
We enter into master service agreements with ocean carriers, typically lasting for 12 months. These service agreements generally contain a minimum quantity commitment (“MQC”), which is the minimum volume of cargo (often measured in 20 and 40-foot equivalent units), that we, as the shipper, must tender to the carrier within the contractual period. This arrangement allows us to secure favorable rates and enough space while enabling the carrier to allocate its capacity efficiently. Under these agreements, we must submit individual booking requests within the timeframe specified by the agreement. In return for our MQC commitment, the carrier reserves space for our shipments at the agreed-upon rates.
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Ocean freight fees are generally paid at the estimated time of departure. However, we have credit arrangements with certain ocean carriers and, in some cases, settle multiple transactions together on a periodic basis. If we fail to meet the MQC, we may be subject to a “Dead Freight” penalty, meaning we must pay the contracted rate for any shortfall in the MQC. If the carrier cannot provide sufficient space, the contract permits a reduction of our MQC obligation by the undelivered volume. Because these agreements include a “Dead Freight” penalty, they typically do not offer early termination clauses. Once cargo leaves our warehouse, we coordinate with trucking companies to transport it to the port. According to industry practices, we and the trucking companies typically reach agreements for each service engagement, primarily through email communications, rather than executing formal written service agreements. As of the date of this annual report, we work with nine trucking companies. The ocean carriers and trucking companies serve as our suppliers.
U.S. Customs Clearance
Before cargo departs the United States, we handle U.S. customs clearance on behalf of the client if engaged to do so. Specifically, the customer signs a power of attorney designating us as its legal agent at the U.S. custom, authorizing us to endorse, sign, declare, or certify any entry, withdrawal, declaration, certificate, bill of lading, or other document required by law or regulation in connection with the shipment of the goods.
Labor Services and Cargo Loading and Unloading
We provide general labor and container loading and unloading workforce services to clients through TWEW. We enter into cooperation agreements with customers, which stipulates our obligations such as to supply workers to customers and handle payroll, taxes, and insurances. These workers typically work on terminal loading and unloading operations. We hire workers from independent third parties. Customers payments are generally calculated based on the hours worked by the assigned workers. These agreements can typically be early terminated by either party with prior written notice.
Technology and Intellectual Property
The success of our business depends on our proprietary technologies. Our logistics and warehousing business leverages GoFreight, a freight forwarding management software that streamlines workflows, enhances shipment tracking, and supports multi-modal logistics, with a primary focus on ocean freight. Key features of GoFreight include an automated freight management system that minimizes manual tasks, a centralized dashboard for shipment visibility, and integrated tools for efficient import and export operations.
We previously relied on our Office Automation System (the “OA System”), an information technology system used to track order status and monitor business workflow, to conduct our parallel-import vehicles business. The OA System facilitated the storage, exchange, and management of order data, thereby enhancing our productivity and efficiency. As of the date of this annual report, we have discontinued the use of the OA System. However, we cannot rule out the possibility of reusing it should we resume our parallel-import vehicles operations.
As of the date of this annual report, we own four domain names in the U.S., including (i) Cheetah-net.com, a domain name registered on August 17, 2022 and associated with the Cheetah Net website; (ii) Pacificconsultingusa.com, a domain name registered on January 7, 2019 and associated with the Pacific Consulting LLC website; (iii) Allen-boy.com, a domain name registered on December 5, 2018 and currently not in use; and (iv) edwardtransitusa.com, a domain name associated with the Edward website, which was registered by Edward prior to our acquisition and subsequently transferred to our domain provider on April 17, 2024. We also own the trademark “LOFIRST,” which was originally registered by Edward and later acquired by us following our acquisition of Edward.
We hold an Ocean Transportation Intermediary License (License No. 015545N), which allows us to operate as an NVOCC.
Employees
As of December 31, 2024, we had a total of 15 employees, 13 of whom worked as full-time employees, as set forth in the following table:
Number of
Number of
total
full-time
Function:
employees
employees
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Warehousing Management
3
3
Marketing
2
2
Accounting
4
4
Legal
3
3
Administration
2
—
Executive officer
1
1
Total
15
13
Our employment contracts with full-time employees include a confidentiality clause.
Under our logistics and warehousing services, we worked with two independent contractors as of December 31, 2024. These independent contractors provided general labor support for our operations. Under our parallel-import vehicles business, we worked with 389 independent contractors as of December 31, 2023. These independent contractors served as our professional purchasing agents, primarily responsible for visiting the U.S. automobile dealers and negotiating the best vehicle purchase price.
We believe that we maintain a good working relationship with our employees and our independent contractors, and we have not experienced material labor disputes in the past. None of our employees is represented by labor unions.
Competition
The logistics and warehousing industry in the U.S. is highly competitive and rapidly evolving, with many new entrants in recent years and only a few leading companies. We believe our ability to compete effectively for customers depends on several factors: the quality and variety of services we offer in our logistics and warehousing business, our relationships with ocean carriers, customers, customs, and trucking companies, and our ability to recruit and retain talented professionals with industry expertise. Based on these factors and our stable supplier and customer connections, we believe our niche focus on international trade flows between the PRC and U.S., combined with integrated services, provides a differentiated value proposition. However, some of our current or future competitors may have longer operating histories, greater brand recognition, or more extensive financial, technical, or marketing resources than we do. See also “Item 1A. Risk Factors—Economic, Political, and Market Risks—We are in the competitive logistics and warehousing industry, and we may not be able to compete successfully against existing or new competitors, which could reduce our market share and adversely affect our competitive position and financial performance.”
Governmental Regulations
The U.S. Federal Maritime Commission regulations require that all NVOCCs maintain proof of financial responsibility. Most NVOCCs satisfy this requirement by obtaining an NVOCC Bond. Licensed NVOCCs must maintain a bond in the amount of $75,000. As of the date of this annual report, Edward maintains a bond in the amount of $75,000.
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