Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Business Overview and Recent Developing Trends
We are a provider of logistics and warehousing services, historically in connection with the sale of parallel-import vehicles sourced in the U.S. to be sold in the PRC market, and more recently for the transportation of other goods between the U.S. and the PRC. Parallel-import vehicles in the PRC refer to automobiles purchased directly from overseas markets and imported for sale outside of the brand manufacturers’ official distribution networks. This business contributed significantly to our revenue since our inception. Between 2016 and the first half of 2022, the Company experienced growth in sales volume and gross profit due to favorable market conditions. Since, beginning in the second half of 2023, the business was negatively affected by a decline in customer demand due to weakening macroeconomic conditions, price competition from luxury automakers in the PRC, and a shift in consumer preference toward domestic EVs. These market challenges led to a decline in parallel-import vehicle sales by 30.5% in 2023 and a reduction in net income by 87.5% compared to 2022. The decline accelerated in 2024, with vehicle sales decreasing from 303 units in 2023 to 14 units in 2024, resulting in a 95.7% drop in revenue from $38.3 million in 2023 to $1.6 million in 2024. In addition, the financial strain on the Company’s customers made it increasingly difficult to collect outstanding receivables. While the Company successfully recovered $4.0 million in 2024 and collected additional $2.5 million from the five aged accounts as of the date of the annual report, the remaining $1.6 million from two customers was determined to be uncollectible, as a result, the management recorded as a credit loss of $1.6 million for the year ended December 31, 2024.
As market conditions continued to deteriorate and sales activity in the parallel-import vehicle segment ceased, on March 3, 2025, our board of directors approved the discontinuation of our parallel-import vehicle business. In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, we determined that the parallel-import vehicle segment met the conditions for reporting as a discontinued operation. As a result, all financial results associated with this business have been reclassified as discontinued operations in the accompanying consolidated financial statements for all periods presented. For additional financial details regarding discontinued operations, refer to Note 5 – Discontinued Operations.
Logistics and Warehousing
In February 2024, we acquired Edward to expand our logistics and warehousing service operations. Beginning in the second quarter of 2024, we increased our marketing staff to pursue new business opportunities and focus on international trade flows between the PRC and the U.S.
In July 2024, we relocated our headquarters from Charlotte, NC, to Irvine, CA, which we believe will enable a stronger management focus on our logistics and warehousing business due to Irvine’s proximity to the important ports of Los Angeles and Long Beach.
In December 2024, we acquired TWEW, a California-based labor and logistics service provider which specializes in general labor support services and logistics coordination to further expand our logistics services.
As of the date of this annual report, we are actively integrating TWEW’s operations to strengthen our position in the logistics sector. Additionally, on December 19, 2024, we entered into a membership interest purchase agreement with Pingzheng Li, the then 100% owner of NexTrade, pursuant to which we purchased the 100% membership interests in NexTrade for the consideration of $1. The transaction closed on the same day. As of the date of this annual report, NexTrade is not engaged in any business operations.
Reverse Stock Split
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
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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).
Risks and Uncertainties
The Company is undergoing a business transformation of our business model. As a company located in the U.S. and doing business with the PRC, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the U.S. and the PRC, as well as by the general state of the U.S. and the PRC economies. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in the U.S. and the PRC.
Risks and uncertainties related to the Company’s business include, but are not limited to, the following:
● The business shift from parallel-import vehicle sales to logistics and warehousing services may depend on factors from the business environment to operation management and market expansion;
● The government policies on ocean freight business and tariff policy may reduce the market demand for the freight, logistics and warehousing business, and thus negatively affect our business and growth prospects;
● Our logistics and warehousing business depend highly on the limited customers and third-party transportation and labor providers;
● Any adverse change in political relations between the PRC and the U.S., including the ongoing trade conflicts between the U.S. and the PRC, may negatively affect its business; and
● The competition of logistics and warehousing industry dependent on factors such as service quality, speed reliability, and pricing may limit our expanding non-vehicle logistics warehousing revenue, and our success in these areas will depend on our ability to develop and scale an effective salesforce to market these services to international trading companies in the U.S. and the PRC.
The Company’s business, financial condition, and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics, and other catastrophic incidents, which could significantly disrupt the Company’s operations.
Results of Operations
The following discussion analyzes our results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023. In 2024, as we fully exited our parallel-import vehicle business, all financial results related to this segment have been reclassified as discontinued operations in accordance with ASC 205-20, Presentation of Financial Statements — Discontinued Operations. For further details, please refer to Note 5 — Discontinued Operations. Logistics and warehousing services business now represents our sole operating segment reported under continuing operations. The following table provides a summary of our consolidated results of operations for the years ended December 31, 2024 and 2023, highlighting the financial impact of both continuing and discontinued operations:
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Years Ended December 31,
Change
2024
2023
Amount
Revenue
$
455,805
$
—
$
455,805
Cost of Revenue
277,293
—
277,293
Gross Profit
178,512
—
178,512
Total operation expenses
3,919,058
2,190,513
1,728,545
Total other income (expense)
292,530
(10,290)
302,820
(Loss) from continuing operations before tax provision
(3,448,016)
(2,200,803)
(1,247,213)
Income tax (benefits)
(215,822)
(488,918)
(273,096)
(Loss) from continuing operations
(3,232,194)
(1,711,885)
(1,520,309)
(Loss) income from discontinued operations, net of tax
(1,956,658)
1,845,755
(3,802,413)
Net (Loss) income
$
(5,188,852)
$
133,870
$
(5,322,722)
Our total revenue from continuing operations was $455,805 in 2024, reflecting our transition into the logistics and warehousing business. Meanwhile, the parallel-import vehicle business was discontinued during the year ended December 31, 2024, and its financial results are presented separately as discontinued operations in accordance with ASC 205-20. For further details, please refer to Note 5 – Discontinued Operations.
We reported a $5.2 million net loss for the year ended December 31, 2024. The loss was primarily driven by the wind-down of the discontinued parallel-import vehicle operations, increased operating expenses associated with our transition to logistics and warehousing services, and tax provisions related to deferred tax adjustments.
Loss from continuing operations for the years ended December 31, 2024 and 2023 were $3.2 million and $1.7 million, respectively.
Loss from discontinued operations, net of tax, was approximately $2.0 million in 2024, compared to income of $1.8 million in 2023, reflecting the financial impact of ceasing the parallel-import vehicle business, including associated costs and adjustments.
Logistics and Warehousing Services
Revenues
In 2024, our logistics and warehousing revenue came from the two newly acquired businesses, Edward and TWEW, with revenue recognition beginning after their respective acquisition dates. The following table provides a breakdown of revenues from each entities:
For the Years Ended December 31,
Change
2024
2023
Amount
%
USD
%
USD
%
Revenues
Revenues from Edward
$
316,852
69.5
%
$
—
—
$
316,852
N/A
Revenues from TWEW
138,953
30.5
%
—
—
138,953
N/A
Total revenues
$
455,805
100.0
%
$
—
—
$
445,805
N/A
For the year ended December 31, 2024, we reported revenue of $455,805 from logistics and warehousing services segment, including $316,852, or 69.5% of our total revenue following the acquisition of Edward in February 2024, and $138,953, or 30.5 % of our total revenue, following the acquisition of TWEW in November 2024 (See also Note 8).
We will continue to focus on improving operational efficiencies and expanding our market presence of the two acquired businesses in the California area.
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Operating Expenses
General and Administrative Expenses
Years Ended December 31,
Change
2024
2023
Amount
%
General and Administrative Expenses
Payroll and Benefits
$
1,209,633
$
692,729
$
516,904
74.6
%
Rental and Leases
545,441
268,801
276,640
102.9
%
Travel and Entertainment
123,073
65,533
57,540
87.8
%
Legal and Accounting Fees
796,921
764,375
32,546
4.3
%
Recruiting Fees
150,190
10,367
139,823
1,348.7
%
Bank charges and fees
8,659
50,844
(42,185)
(83.0)
%
Insurance Expenses
318,636
155,787
162,849
104.5
%
Depreciation and Amortization Expenses
80,328
—
80,328
N/A
Others
408,832
182,077
226,755
124.5
%
Total General and Administrative Expenses
$
3,641,713
$
2,190,513
$
1,451,200
66.3
%
General and administrative expenses for our continuing operations increased by $1.4 million, or 66.3%, to $3.6 million for the year ended December 31, 2024 from $2.2 million for the year ended December 31, 2023, primarily due to (i) an increase of $0.5 million in personnel-related expenses which was attributed to the hiring of additional staff to support the newly launched logistics and warehousing segment, and labor services segment, (ii) an increase of $0.3 million in rental and leases following the acquisition of Edward with the addition of a new office workspace in California, (iii) an increase of $0.1 million in recruiting expenses associated with the development of new business lines, aligning with the Company’s strategic shift towards logistics and warehousing, (iv) an increase of $0.2 million in insurance expenses due to higher costs associated with directors and officers insurance, (v) an increase of $0.1 million in depreciation and amortization expenses, primarily due to the acquisition of new fixed assets and additional intangible assets, as detailed in Notes 6 & 8, and (vi) an increase of $0.2 million in other miscellaneous general and administration expenses during the year ended December 31, 2024.
Share-based compensation expenses
Years Ended December 31,
2024
2023
Amount
%
Share-based compensation expenses
$
277,345
$
—
$
277,345
N/A
Share-based compensation expenses were $0.3 million and nil for the years ended December 31, 2024 and 2023, respectively.
On August 16, 2024, our board of directors approved the adoption of the Amended and Restated 2024 Stock Incentive Plan (the “Plan”). Subsequently, on September 30, 2024, our stockholders approved the Plan. The total number of shares granted by the compensation committee of our board of directors on September 30, 2024 were 150,000, including 118,750 shares of Class A common stock and 31,250 shares of Class B common stock. Share-based compensation expenses of $277,345 were recognized during the year ended December 31, 2024. See Note 11 for more details.
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Other Income (Expenses), net
Years Ended December 31,
2024
2023
Amount
%
Interest income
$
320,472
$
9,938
$
310,534
3,124.7
%
Interest expenses:
Loan Interest expense
(29,462)
(31,197)
1,735
(5.6)
%
Credit Card Interest
(694)
(4,713)
4,019
(85.3)
%
Interest expense on Tax
(3)
—
(3)
N/A
Premium Finance Interest
(5,792)
(5,973)
181
(3.0)
%
Total Interest expenses
(35,951)
(41,883)
5,932
(14.2)
%
Other income
8,009
21,655
(13,646)
(63.0)
%
Total other income(expense), net
$
292,530
$
(10,290)
$
302,820
2,942.9
%
Interest income from continuing operations was $320,472 for the year ended December 31, 2024, compared to $9,938 for the year ended December 31, 2023, representing an increase of $310,534, or 3,124.7%. The significant increase was primarily driven by interest earned on short-term loan receivables and certificates of deposit, funded by the net proceeds from our IPO, the May Offering, and the July Offering.
Interest expense incurred from our continuing operations was $35,951 for the year ended December 31,2024, decreased $5,932 or 14.2%, from $41,883 in 2023, mainly due to decreased credit card interest.
Income Tax (Benefits)
Our income tax benefits for continuing operations were $0.2 million for the year ended December 31, 2024, compared with income tax benefits of approximately $0.5 for the same period in 2023.
Net Loss
As a result of the above factors, we had a net loss of $3.2 million from our continuing operations for the year ended December 31, 2024, compared to net loss of $1.7 million for the same period of 2023.
Parallel- Import vehicle Business (Discontinued Operations)
As disclosed in Note 5 – Discontinued Operations, we fully exited our parallel-import vehicle business in 2024, and its financial results have been classified as discontinued operations in our accompanying consolidated financial statements. The following discussion provides an overview of the financial impact of discontinued operations and related expense items.
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Financial Impact of Discontinued Operations
The following table summarizes the financial results of our discontinued operations for the years ended December 31, 2024 and 2023:
Years Ended December 31,
Change
2024
2023
Amount
%
Revenue
U.S. domestic market
$
200,297
$
8,160,395
$
(7,960,098)
(97.5)
%
Overseas market
1,430,951
30,155,579
(28,724,628)
(95.3)
%
Total Revenue
$
1,631,248
$
38,315,974
$
(36,684,726)
(95.7)
%
Cost of Revenue
Cost of vehicle
$
1,515,270
$
32,183,676
$
(30,668,406)
(95.3)
%
Fulfilment expense
140,798
1,885,382
(1,744,584)
(92.5)
%
Total Cost of Revenue
$
1,656,068
$
34,069,058
$
(32,412,990)
(95.0)
%
Gross (loss) profit
$
(24,820)
$
4,246,916
$
(4,271,736)
(100.6)
%
Revenue from discontinued operations was $1.6 million for the year ended December 31, 2024, compared to $38.3 million for the year ended December 31, 2023, representing a decrease of $36.7 million, or 95.7%. The significant decline was primarily due to the termination of parallel-import vehicle sales and the phase-out of operations. Revenue from the U.S. domestic market declined by 97.5% to $0.2 million, while revenue from the overseas market decreased by 95.3% to $1.4 million in 2024.
Cost of revenue decreased by $32.4 million, or 95.0%, to $1.7 million in 2024, compared to $34.1 million in 2023, primarily due to the substantial reduction in vehicle purchases and fulfillment expenses following the discontinuation of the business. The cost of vehicles decreased by $30.7 million, or 95.3%, while fulfillment expenses declined by $1.7 million, or 92.5%, in line with lower sales volumes.
As a result, we reported a gross loss of $24,820 for the year ended December 31, 2024, compared to a gross profit of $4.2 million in 2023, reflecting a decline of $4.3 million, or 100.6%. The decrease was primarily attributable to the cessation of the parallel-import vehicle business and the significant drop in revenue.
Selling, General, and Administrative Expenses for Discontinued Operations
The following table presents selling, general, and administrative (“SGA”) expenses for the discontinued operations:
Years Ended December 31,
2024
2023
Amount
%
SGA Expenses
Selling expenses
$
117,819
$
668,172
$
(550,353)
(82.4)
%
Allowance of credit loss of accounts receivables
1,589,546
—
1,589,546
N/A
Forfeited vehicle deposit expense
100,800
—
100,800
N/A
Credit Loss on vehicle sale tax receivable
34,885
—
34,885
N/A
Total SGA Expenses
$
1,843,050
$
668,172
$
1,174,878
175.8
%
Total SGA Expenses for the discontinued parallel-import vehicle business increased by approximately $1.2 million, or 175.8%, to $1.8 million in 2024, compared to $0.7 million in 2023. The increase was primarily driven by credit losses of $1.6 million for aged uncollectible accounts receivable, and $0.1 million of forfeited vehicle deposits and sales tax receivables, reflecting the financial impact of the business exit.
However, in the second half of 2024, certain customers were impacted by broader economic pressures, resulting in slower payment cycles and delays in remittances. These challenges were reflected in our financial performance, as we recorded a credit loss of $1.6 million on accounts receivable and a credit loss of $34,885 on vehicle-related sales tax receivables. Additionally, we recognized a forfeited vehicle deposit expense of $100,800, primarily due to supplier-related contract terminations following the cessation of vehicle purchases.
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We remain focused on optimizing collections and has implemented a structured approach to manage outstanding receivables. Through ongoing efforts, we have recovered $2.5 million as of the date of this annual report. We continue to monitor and evaluate outstanding balances to maximize recoverability and ensure a disciplined financial transition from the vehicle import business. For further details on credit losses, refer to Note 5 – Discontinued Operations.
Interest Expenses
The table below presents interest expenses for the years ended December 31, 2024 and 2023:
December 31,
December 31,
2024
2023
Interest Expenses
Inventory Financing
$
—
$
112,769
LC Financing
23,123
925,426
Finance Deal charges
—
3,975
Line of Credit
65,665
155,245
Total interest expenses
$
88,788
$
1,197,415
Total interest expenses for the discontinued operations decreased significantly to $ 88,788 for the year ended December 31, 2024, compared to $1.2 million in 2023. This decrease was primarily due to the cessation of vehicle purchases and the associated financing activities. The absence of inventory financing and a substantial decrease in LC financing charges were the main causes of this decline.
Liquidity and Capital Resources
Historically, our primary uses of cash have been to finance working capital needs. We believe that we will be able to fund current operations and other commitments for at least the next 12 months from operating cash flow and proceeds from the capital infusion which were held in our cash and cash equivalents.
We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all.
As of December 31, 2024, we had current assets of $11.0 million, consisting of cash and cash equivalents of $1.7 million, $6.1 million in loan receivables, $0.4 million of other receivables, $0.3 million in prepaid expenses other current assets from continuing operations, as well as $2.5 million in current assets from discontinued operations, primarily accounts receivable, which had been fully collected as of the date of this report. As of December 31, 2024, our current liabilities, all of which related to continuing operations, totaled approximately $0.9 million, consisting of $0.4 million of operating lease liabilities, $0.2 million of other payables, and $0.2 million of loan payable, including the current portion of long-term borrowings.
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The following table summarizes our cash flows for the years ended December 31, 2024 and 2023, with continuing operations and discontinued operations presented separately:
Years ended December 31,
2024
2023
Net cash provided by operating activities
$
242,220
$
5,610,225
Cash outflows from operations-continuing operations
(3,455,918)
(1,646,921)
Cash inflows from operations-discontinued operations
3,698,138
7,257,146
Net cash used in investing activities
(6,130,932)
(672,500)
Cash outflows from operations-continuing operations
(6,130,932)
(672,500)
Net cash provided by (used in) financing activities
7,106,676
(4,563,108)
Cash inflows from operations-continuing operations
8,799,952
5,055,336
Cash outflows from operations-discontinued operations
(1,693,276)
(9,618,444)
Net increase in cash
$
1,217,964
$
374,617
Operating Activities
Net cash used in operating activities from continuing operations was $3.5 million for the year ended December 31, 2024. The negative cash flow was primarily due to (i) a net loss of $3.2 million during the year ended December 31, 2024; (ii) an increase of $0.3 million in deferred income tax benefits; and (iii) an increase of $0.3 million in other receivables and a decrease of $0.2 million in operating lease liabilities, partially offset by (iv) an increase of $0.3 million in amortization of operating lease right-of-use assets, and $0.3 million in share-based compensation expenses, respectively.
Net cash used in operating activities from continuing operations was $1.6 million for the year ended December 31, 2023. This was primarily attributable to (i)a net loss of $1.7 million; (ii) an increase in amortization of operating lease right-of-use assets of $0.1 million; offset by (iii) a decrease in operating lease liabilities of $0.2 million.
Net cash provided by operating activities from discontinued operations was $3.7 million in 2024. The decline was primarily attributable to (i) a decrease of $1.5 million in inventory; (ii)a decrease of $3.9 million in accounts receivable; offset by $1.7 million decrease in loans payable.
Net cash provided by operating activities from discontinued operations was $7.2 million for the year ended December 31, 2023. This was primarily attributable to (i) a net income of $1.8 million; (ii) a collection of $0.6 million in accounts receivable, a $4.5 million decrease in inventory, $0.5 million decrease in other receivables, and other less significant factors.
Investing Activities
Net cash used in investing activities from continuing operations was approximately $6.1 million for the year ended December 31, 2024, including (i) approximately $0.3 million in cash paid for the Edward and TWEW acquisitions, net of cash acquired, (ii) purchase of fixed assets of $0.4 million, (iii) $6.3 million in short-term loans lent to third parties, and offset by (iv) $0.9 million proceeds of repayment from short-term loans lent to third parties. For the year ended December 31, 2023, net cash used in investing activities was $0.7 million in short-term loans lent to third parties.
There were no investing activities related to discontinued operations for the years ended December 31, 2024 and 2023.
Financing Activities
Net cash provided by financing activities from continuing operations was $8.8 million for the year ended December 31, 2024, which consisted of (i) net proceeds from July Offering of approximately $1.1 million, (ii) net proceeds from the May Offering of approximately $7.3 million, (iii) proceeds of $0.6 million from the issuance of shares of common stock in private placements; partially offset by (iv) net repayments of premium finance of approximately $0.3 million.
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Net cash provided by financing activities from continuing operation of $5.0 million for the year ended December 31, 2023, consisted of (i) proceeds from initial public offering of approximately $3.7 million; (ii) a reduction in subscriptions receivable of $1.2 million; (iii) proceeds from premium finance of $0.2 million and other less significant factors.
Net cash used in financing activities from discontinued operations was $1.7 million for the year ended December 31, 2024, primarily reflecting (i) net repayments of LC financing of $1.0 million; and (ii) net repayments of revolving lines of credit of $0.7 million;
Net cash used in financing activities from discontinued operations was $9.6 million for the year ended December 31, 2023, consisted of (i) net repayments of LC financing of $6.1 million; (ii) repayments of inventory financing of $4.2 million; (iii) repayments of dealers financing of $0.4 million; and partially offset by (iv) net proceeds from revolving lines of credit of $0.7 million.
Off-Balance Sheet Arrangements
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
The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 2, “Summary of Significant Accounting Policies” of the Notes to in Part II, Item 8 of the 2024 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements.
Revenues
ASC 606 establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the new guidance requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
We generated revenues from the parallel-import vehicle dealership and logistics and warehousing services. Revenue from the parallel-import vehicle dealership business is generated from the sales of parallel-import vehicles to both domestic and overseas parallel-import car dealers. We purchase automobiles from the U.S. market through our team of professional purchasing agents, and mainly resells them to parallel-import car dealers in the U.S. and the PRC. In accordance with ASC 606, the Company recognizes revenue at the point in time when the performance obligation has been satisfied and control of the vehicles has been transferred to the dealers. For sales to U.S. domestic parallel-import car dealers, revenue is recognized when a vehicle is delivered, and its title has been transferred to the dealers. For overseas sales, the Company sells vehicles under Cost and Freight (“CFR”) shipping point terms, and revenue is recognized when a vehicle is loaded on a cargo ship and its title has been transferred to the dealers. The Company accounts for the revenue generated from sales of vehicles on a gross basis as the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods, which the Company has control of the goods and has the ability to direct the use of goods to obtain substantially all the benefits. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual vehicle to parallel-import vehicle dealers,
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and there is no separately identifiable other promise in the contracts. The Company’s vehicles are sold with no right of return and the Company does not provide other credits or sales incentives to parallel-import car dealers. Historically, no customer returns have occurred. Therefore, the Company did not provide any sales return allowances for the years ended December 31, 2024 and 2023.
In 2024, the Company generated revenue from freight forwarding services provided by Edward and general labor and logistics provided by TWEW to corporate and retail clients, including transportation, cargo warehousing, freight forwarding, labor service, and cargo loading and unloading. Revenue for freight forwarding services, both export and import, is recognized when the services are provided. The Company’s role as the principal in these services involves managing the process up to the point where control is transferred based on contractual terms, allowing revenue recognition on a gross basis throughout the transit period. For warehousing services, revenue is primarily derived from storage fees, which are recognized based on the actual number of days the goods are stored in the warehouse while awaiting further transportation. Across all operations, the Company maintains a principal position, controlling the goods and services, bearing inventory and pricing risks, and fulfilling performance obligations directly. Each contract is typically structured with a single performance obligation without allowances for returns or sales incentives. There were no provisions for sales return allowances based on historical experiences of no returns.
Revenue from general labor and logistics services, provided through TWEW, is recognized upon services rendered, based on verified labor hours or project milestones outlined in client agreements, with billing tied to predefined service rates (e.g., per-hour fees or fixed-scope pricing). The Company recognizes revenue on a gross basis as the principal service provider, reflecting its contractual obligation to deliver labor solutions to clients, despite outsourcing workforce operations to third parties. Contracts generally consist of a single performance obligation (supplying labor resources), with revenue measured at the transaction price agreed upon in service agreements. No provisions for returns or sales incentives are included, as historical experience indicates no material rights of return or refunds.
Cost of Revenue
Parallel-import Vehicles Segment
Cost of parallel import vehicle revenue mainly includes the cost of vehicles purchased from U.S. automobile dealers, non-refundable sales tax, dealership service fees, and other expenses. It also includes fulfillment expenses, which consist primarily of (i) vehicle warehousing and towing fees, (ii) vehicle insurance expenses, (iii) commissions paid to purchasing agents incurred in vehicle pick-up and the vehicle title transfer process, (iv) broker consulting fees incurred to acquire new vehicles, and (v) purchase department labor costs.
Logistics and Warehousing Segment
Cost of logistics and warehousing service revenue mainly includes the cost of freight and fulfillment expenses for freight forwarding services, while cost of labor services comprises payments to third parties for outsourced workforce provisioning, including bundled recruitment, training, and payroll processing. Cost recognition aligns with service delivery progress, validated through subcontractor utilization reports and client acceptance documentation.
Selling, General and Administration Expenses
Selling expenses was related to the discontinued parallel-import vehicles business and include salaries and benefits for the Company’s sales personnel, and ocean freight expenses, which are associated with shipping and delivery of vehicles to automobile dealers, are expensed as incurred. Total selling expenses for the discontinued parallel-import vehicle business were $117,819 and $668,172 for years ended December 31, 2024 and 2023, respectively.
The Company’s general and administrative expenses primarily include employee salaries and benefits, depreciation, office lease expenses, travelling and entertainment expenses, legal and consulting fees, insurance and other miscellaneous administrative expenses. For the years ended December 31, 2024 and 2023, general and administration expenses for the continuing expenses of $3,641,713 and $2,190,513, respectively, were attributable to continuing operations, with no allocation to discontinued operations.
Share-based compensation
The Company has adopted the Plan for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Company’s operations. Shareholders, directors, and employees of the Company receive remuneration in the form of share-
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based awards including option, restricted stock, restricted stock unit, dividend equivalent, or other awards that are permitted under the Plan, whereby the recipients render services as consideration for such share-based compensation.
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the period during which the employee is required to provide service in exchange for the award, which generally is the vesting period. The amount of cost recognized is adjusted to reflect any expected forfeitures prior to vesting. The fair value of stock award is measured at grant date’s per share closing price of the Company’s common stock, and the fair value of option is measured at grant date using the Black-Scholes pricing model, taking into account the terms and conditions upon which the share-based awards are granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the share-based awards, the total estimated fair value of the share-based awards is spread over the vesting period, taking into account the probability that the share-based awards will vest, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date.
Income taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized as income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.
The Company assesses deferred tax assets to determine whether they are realizable. As of December 31, 2024, the Company recorded a full valuation allowance against deferred tax assets, as it has generated a three-year cumulative pretax book loss and is forecasting a loss for 2025. Based on this evidence, realization of deferred tax assets is not considered more-likely-than-not at this time.
The Company records uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company records interest and penalties related to an uncertain tax position, is and when required, as part of income tax expenses in the consolidated statements of operations. The Company does not believe that there were any uncertain tax positions as of December 31, 2024 and 2023.
The Company and its U.S. operating subsidiaries are subject to the U.S. tax laws. The Company elected to file income taxes as a corporation instead of an LLC for the tax years ended December 31, 2020 through December 31, 2021. As of December 31, 2024, the Company’s consolidated income tax returns for the tax years ended December 31, 2020 through December 31, 2023 remained open for statutory examination by U.S. tax authorities.
(Loss) Earnings per share
The Company computes (loss) earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
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Related parties and transactions
The Company identifies related parties, and accounts for and discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.
Parties, which can be a corporation or individual, are considered related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Corporations are also considered to be related if they are subject to common control or common significant influence.
Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition.
Segment reporting
The Company uses the management approach in determining reportable operating segments. The management approach considers the internal reporting used by the Company’s chief operating decision maker for making operating decisions about the allocation of resources of the segment and the assessment of its performance in determining the Company’s reportable operating segments. As of December 31, 2023, the Company operated as a single reportable segment, focused solely on the parallel-import vehicle business. In 2024, the Company expanded its operations and reported two operating segments: the parallel-import vehicle business and logistics and warehousing services. However, following the discontinuation of the parallel-import vehicles business, as of December 31, 2024, the Company transitioned back to a single reportable segment, now focused exclusively on logistics and warehousing services.
Accounts receivable, net
Accounts receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the original amount less an allowance of credit loss, in accordance with the Current Expected Credit Loss (“CECL”) model under ASC 326. The Company estimates expected credit losses based on a combination of historical loss experience, customer creditworthiness, current economic conditions, and reasonable and supportable forward-looking information. The allowance for credit losses is updated at each reporting period to reflect changes in credit risk. The allowance for credit losses is recorded against accounts receivable balances, with a corresponding charge to the consolidated statements of operations. Delinquent account balances are written off against the allowance when management determines that collection is remote. If previously written-off receivables are subsequently recovered, the Company records a reversal of the allowance for credit losses.
As of December 31, 2024, all accounts receivable related to the discontinued parallel-import vehicle business, including the associated allowance for credit losses, have been reclassified to “Current Assets of Discontinued Operations” in the consolidated balance sheets. Accordingly, the remaining accounts receivable presented in continuing operations are solely related to the Company’s logistics and warehousing business. As of December 31, 2024 and 2023, there no allowance for credit losses on accounts receivable from continuing operations were recorded. (See Note 5 – Discontinued Operations for further details.)
Loan receivable
The Company’s loans receivable, which consist of loans to third parties, are recognized at the point of loan disbursement, initially measured at fair value, primarily reflecting the disbursed amount and associated transaction costs. Both secured and unsecured lending are encompassed in these receivables, with terms including varying interest rates and maturity dates. Subsequently, these receivables are measured at amortized cost using the effective interest method, which ensures the accurate recognition of interest income over the loan period. The interest rates for these loans may be subject to change based on the terms of loan agreements. Periodic reviews of the loan portfolio are conducted to assess for impairment, utilizing the expected credit loss model. This approach considers historical credit loss experience, current conditions, and reasonable forecasts in estimating potential credit losses. As of the end of the reporting periods, no impairment allowance was recorded for the loan receivables.
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Inventory
Inventory primarily consists of new vehicles held for sale and are stated at the lower of cost or net realizable value using the specific identification method, which includes the cost of vehicles purchased from U.S. automobile dealers, non-refundable sales tax, and dealership service fees. The Company reviews its inventory periodically if any reserves are necessary for potential impairment. The Company depleted its inventory on vehicles by the first quarter of 2024.
The Company does not hold any inventory related to its continuing logistics and warehousing business.
As a result of the Company’s decision to discontinue the parallel-import vehicles business, the entire inventory balance of $1,515,270 as of December 31, 2023, was reclassified to “Current Assets of Discontinued Operations” in accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations.
Intangible assets, net
The Company recorded intangible assets with the acquisitions of Edward and TWEW during the year ended December 31, 2024. Intangible assets consist of developed technology, customer relationships, and trade names, which are amortized on a straight-line basis or over their respective useful lives using patterns that reflect the economic benefits the assets are expected to realize. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
The Company did not recognize any impairment to intangible assets for the year ended December 31, 2024.
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of input used to measure fair value are as follows:
● Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
● Level 3 — inputs to the valuation methodology are unobservable.
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, loans receivable, loans payable, and other payables and other current liabilities, approximated the fair value of the respective assets and liabilities as of December 31, 2024 and 2023 based upon the short-term nature of the assets and liabilities.
The Company applied level 3 to obtain the fair value of intangible assets and goodwill. See NOTE 8 — Intangible Asset and Goodwill.
The Company believes that the carrying amount of long-term loans approximated fair value as of December 31, 2024 and 2023 based on the terms of the borrowings and current market rates as the rates of the borrowings are reflective of the current market rates.
Leases
The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 842, Leases (“Topic 842”). The Company leases office space, which is classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with an initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a
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lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The ROU asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment annually. There was no impairment for ROU lease assets as of December 31, 2024 and 2023.
Goodwill
The Company records goodwill as the excess of the consideration transferred over the fair value of net assets acquired in business combinations. Goodwill is tested for impairment at the reporting unit level, which is an operating segment, or one level below. The Company has one reporting unit. The Company measures goodwill impairment, if any, as the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill.
The review of goodwill impairment consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets is less than their respective carrying values or a one-step quantitative impairment test. In performing the qualitative assessment, the Company considers many factors in evaluating whether the carrying value of goodwill may not be recoverable, including declines in the Company’s stock price and market capitalization of the Company and macroeconomic conditions. If, based on the results of the qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, additional quantitative impairment testing is performed. The quantitative test requires that the carrying value of each reporting unit be compared with its estimated fair value. If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company uses the income approach and/or a market-based approach to determine the reporting units’ fair values, which are based on discounted cash flows. The determination of discounted cash flows of the reporting units and assets and liabilities within the reporting units requires significant estimates and assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.
Impairment of long-lived assets
The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the asset group to the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group. If the assets are impaired, an impairment loss is measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. The Company estimates fair value using the expected future cash flows discounted at a rate consistent with the risks associated with the recovery of the asset.
For the years ended December 31, 2024 and 2023, the Company did not record any impairment.
Recent accounting pronouncements
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , requires disclosures about significant segment expenses and additional interim disclosure requirements. This standard also requires a single reportable segment to provide all disclosures required by Accounting Standards Codification Topic 280. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively for all prior periods presented in the consolidated financial statements. We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2025. We are currently evaluating the potential impact of adopting this standard on our disclosures.
Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid. This standard is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it
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retrospectively. We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2025. We are currently evaluating the potential impact of adopting this standard on our disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller report company, we are not required to provide the information required by this item.
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Item 8. Financial Statements and Supplementary Data.
Please see the financial statements beginning on page F-1 following the signature pages in this Annual Report on Form 10-K and incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.