Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q.
Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to: any projections of earnings, revenue, or other financial items; any statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “project,” or “anticipate,” and other similar words. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking statements include those factors set forth in “Item 1A. Risk Factors” included in our annual report on Form 10-K (File No. 001-41761) (the “Annual Report”), which was filed with the SEC on March 12, 2025.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this quarterly report. We do not intend, and undertake no obligation, to update any forward-looking statement, except as required by law.
The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this quarterly report on Form 10-Q, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report.
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. 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 further in 2024. Vehicle sales dropped sharply from 82 units in the first quarter of 2023 to 13 units in the first quarter of 2024. For year ended December 31, 2024, vehicle sales decreased 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 March 31, 2025, the remaining $1.6 million from two customers was determined to be uncollectible. As a result, the management recorded 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.
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Logistics and Warehousing
In February 2024, we acquired Edward to start 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.
Additionally, on December 19, 2024, we acquired 100% membership interest of NexTrade, a Delaware limited liability company for the consideration of $1. As of the date of this quarterly report, NexTrade has not been engaged in any business operations.
Further, on March 28, 2025, the Company incorporated a wholly owned subsidiary, Cheetah BVI, in the British Virgin Islands. The incorporation of Cheetah BVI is intended to support the Company’s future international business development and facilitate potential global partnerships. As of the date of this quarterly report, Cheetah BVI has not commenced 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 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;
● 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; and
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● Recent changes in U.S. and international trade policies and tariffs on imports and exports, particularly the trade tensions between China and the United States have been intensified and may become worse in the future, resulting in the imposition of more tariffs or other trade restrictions, and may adversely impact our business and operating results.
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 table provides a summary of our consolidated results of operations for the three months ended March 31, 2025 and 2024, highlighting the financial impact of both continuing and discontinued operations:
For the Three Months Ended March 31,
Change
2025
2024
Amount
%
(Unaudited)
(Unaudited)
USD
%
USD
%
Revenue
$
479,799
100.0
%
$
76,834
100.0
%
$
402,965
524.5
%
Cost of Revenue
423,543
88.3
%
42,500
55.3
%
$
381,043
896.6
%
Gross Profit
$
56,256
11.7
%
$
34,334
44.7
%
$
21,922
63.8
%
General and administration expenses
1,000,519
208.5
%
767,642
999.1
%
232,877
30.3
%
Share-based compensation expenses
16,185
3.4
%
—
—
%
16,185
N/A
%
Interest income, net
199,278
41.5
%
20,625
26.8
%
178,653
866.2
%
Other income, net
12,616
2.6
%
621
0.8
%
11,995
1,931.6
%
(Loss) from continuing operations before tax provision
(748,554)
(156.0)
%
(712,062)
(926.8)
%
(36,492)
5.1
%
Income tax (benefits)
5,355
1.1
%
(245,714)
(319.8)
%
251,069
(102.2)
%
Loss from continuing operations
(753,909)
(157.1)
%
(466,348)
(607.0)
%
(287,561)
61.7
%
Loss from discontinued operations, net of tax
—
—
%
(142,582)
(185.6)
%
142,583
(100.0)
%
Net Loss
$
(753,909)
(157.1)
%
$
(608,930)
(792.5)
%
$
(144,979)
23.8
%
Continuing Operations-Logistics and Warehousing Services
Revenues
For the Three Months Ended March 31,
Change
2025
2024
Amount
%
(Unaudited)
(Unaudited)
USD
%
USD
%
Revenues
Revenues from Edward
$
62,515
13.0
%
$
76,834
100.0
%
$
(14,319)
(18.6)
%
Revenues from TWEW
417,284
87.0
%
—
—
$
417,284
N/A
Total revenues
$
479,799
100.0
%
$
76,834
100.0
%
$
402,965
524.5
%
For the three months ended March 31, 2025, we reported revenue of $479,799 from logistics and warehousing services segment, including $62,515, or 13.0%, of our total revenue from Edward, and $417,284, or 87.0%, of our total revenue from TWEW (See also Note 8- Intangible Asset and Goodwill).
Revenue from Edward decreased by 18.6% primarily due to the decreased international trade flow resulting from the trade tensions between China and the U.S.
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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Cost of Revenues
For the Three Months Ended March 31,
Change
2025
2024
Amount
%
(Unaudited)
(Unaudited)
USD
%
USD
%
Cost of Revenues
Cost of Revenues from Edward
$
41,810
9.9
%
$
42,500
100.0
%
$
(690)
(1.6)
%
Cost of Revenues from TWEW
381,733
90.1
%
—
—
$
381,733
N/A
Total cost of revenues
$
423,543
100.0
%
$
42,500
100.0
%
$
381,043
896.6
%
For the three months ended March 31, 2025, total cost of revenues increased to $423,543 from $42,500 for the same period in 2024, representing an increase of $381,043, or 896.6%, primarily due to the contribution from TWEW. Cost of revenues attributable to TWEW was $381,733, representing 90.1% of total cost of revenues in the first quarter of 2025.
Cost of revenues from Edward was $41,810, or 9.9% of total cost of revenues for the three months ended March 31, 2025, compared to $42,500 for the same period in 2024, representing a slight decrease of $690, or 1.6%, consistent with the corresponding decline in revenue from Edward.
Cost of revenues is mainly labor costs for TWEW and ocean freight service cost for Edward.
Operating Expenses
General and Administrative Expenses
Three Months Ended March 31,
Change
2025
2024
Amount
%
(Unaudited)
(Unaudited)
General and Administrative Expenses
Payroll and Benefits
$
314,192
$
196,422
$
117,770
60.0
%
Rental and Leases
208,129
86,205
121,924
141.4
%
Travel and Entertainment
42,030
19,483
22,547
115.7
%
Legal and Accounting Fees
258,005
309,916
(51,911)
(16.8)
%
Insurance Expenses
68,736
87,973
(19,237)
(21.9)
%
Depreciation and Amortization Expenses
37,953
10,886
27,067
248.6
Others
71,474
56,757
14,716
25.9
%
Total General and Administrative Expenses
$
1,000,519
$
767,642
$
232,876
30.3
%
General and administrative expenses for our continuing operations increased by $0.2 million, or 30.3%, to $1.0 million for the three months ended March 31, 2025 from $0.8 million for the three months ended March 31, 2024, primarily due to (i) an increase of $0.1 million in personnel-related expenses, which was attributed to the hiring of additional staff to support the newly launched logistics and warehousing segment, (ii) an increase of $0.1 million in rental and leases following the acquisition of Edward and a new office workspace in California in July 2024, (iii) an increase of $22,547 in travel and entertainment expenses as part of business development efforts and client engagement, (iv) an increase of $27,067 in depreciation and amortization expenses, primarily due to the acquisition of new fixed assets and recorded intangible assets from Edward and TWEW acquisitions, as detailed in Notes 6 – Property, Plant, and Equipment, Net, and Note 8 - Intangible Asset and Goodwill, (v) an increase of 14,716 in other miscellaneous general and administration expenses during the three months ended March 31, 2025, partially offset by a decrease of $51,911 in legal and accounting fees due to additional professional fees for preparing a registration statement on Form S-1 during the first quarter of 2024 and a decrease of $19,237 in insurance expenses resulting from a change in our insurance provider.
Share-based compensation expenses
Three Months Ended March 31,
2025
2024
Amount
%
(Unaudited)
(Unaudited)
Share-based compensation expenses
$
16,185
$
—
$
16,185
N/A
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Share-based compensation expenses were $16,185 and nil for the three months ended March 31, 2025 and 2024, 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 $16,185 were recognized during the three months ended March 31, 2025. See Note 11 – Stock Based Compensation for more details.
Other Income (Expenses), net
Three Months Ended March 31,
2025
2024
Amount
%
(Unaudited)
(Unaudited)
Interest income
$
208,090
$
28,930
$
179,160
619.3
%
Interest expenses:
Loan Interest expense
6,670
7,552
(882)
(11.7)
%
Credit Card Interest
—
(242)
242
(100.0)
%
Premium Finance Interest
2,142
996
1,146
115.1
%
Total Interest expenses
8,812
8,305
507
6.1
%
Other income, net
12,616
621
11,995
1,931.6
%
Total other income net
$
211,894
$
21,246
$
190,648
897.3
%
Interest income from continuing operations was $208,090 for the three months ended March 31, 2025, compared to $28,930 for the three months ended March 31, 2024, representing an increase of $179,160, or 619.3%. 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 $8,812 for the three months ended March 31, 2025, which increased by $507, or 6.1%, from $8,305 for the three months ended March 31, 2024, mainly due to increased Premium Finance interest for D&O Insurance.
Income Tax (Benefits)
Our income tax provision for continuing operations were $5,355 for the three months ended March 31, 2025, compared with income tax benefits of approximately $245,714 for the same period in 2024.
Net Loss
As a result of the above factors, we had a net loss of $753,909 from our continuing operations for the three months ended March 31, 2025, compared to net loss of $608,930 for the same period of 2024.
Discontinued Operations -Parallel- Import vehicle Business
As disclosed in Note 5 – Discontinued Operations, our Board approved the discontinuation of our parallel-import vehicle business on March 3, 2025. The Company fully exited its parallel-import vehicle business during the year ended December 31, 2024. In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the following discussion provides an overview of the operating results of discontinued operations during the first quarter of 2024.
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Discontinued Operations- Parallel -Import Vehicles Business
The following table summarizes the operating results of our discontinued operations for the three months ended 2024:
Three Months Ended March 31,
2024
(Unaudited)
Revenue
U.S. domestic market
$
—
Overseas market
1,430,951
Total Revenue
$
1,430,951
Cost of Revenue
Cost of vehicle
$
1,314,973
Fulfilment expense
125,261
Total Cost of Revenue
$
1,440,234
Gross loss
$
(9,283)
During the three months ended March 31, 2024, we generated revenue of $1.4 million from the parallel-vehicle business. Only 13 units of vehicles were sold following the significant downturn of parallel-import vehicle business as stated in “—Business Overview and Recent Developing Trends.”
We also reported cost of revenue of $1.4 million, mainly the fulfillment expenses, and a gross loss of $9,283 of the discontinued business for the three months ended March 31, 2024.
Selling Expenses for Discontinued Operations
The following table presents selling expenses for the discontinued operations:
Three Months Ended March 31,
2024
(Unaudited)
Selling Expenses
Payroll and benefits
$
58,230
Ocean freight
20,610
Total selling expenses
$
78,840
Total selling expenses for the discontinued parallel-import vehicle business was $78,840 for the three months ended March 31, 2024.
Interest Expenses
The table below presents interest expenses for the three months ended March 31, 2024:
March 31,
2024
(Unaudited)
Interest Expenses
LC Financing
23,123
Line of Credit
31,336
Total interest expenses
$
54,459
Total interest expenses on LC financing and Line of Credit charges was $54,459 for the three months ended March 31, 2024.
Net loss for the discontinued operations was approximately $142,582 for the three months ended March 31, 2024.
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Liquidity and Capital Resources
Historically, our primary uses of cash have been to finance the 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 March 31, 2025, we had current assets of $10.2 million, consisting of cash and cash equivalents of $0.3 million, $9.1 million in loan receivables, $0.5 million of other receivables, $0.1 million of accounts receivable, and $0.2 million in prepaid expenses other current assets from continuing operations. Our current liabilities, all of which related to continuing operations, totaled approximately $0.9 million, consisting of $0.5 million of operating lease liabilities, $0.3 million of other payables, and $0.1 million of loan payable, including the current portion of long-term borrowings.
The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024, with continuing operations and discontinued operations presented separately:
Three Months ended March 31,
2025
2024
(Unaudited)
(Unaudited)
Net cash provided by operating activities
$
1,768,126
$
1,695,717
Cash outflows from operations-continuing operations
(772,374)
(1,470,341)
Cash inflows from operations-discontinued operations
2,540,500
3,166,058
Net cash used in investing activities
(3,026,400)
(47,617)
Cash outflows from operations-continuing operations
(3,026,400)
(47,617)
Net cash used in financing activities
(68,539)
(1,177,894)
Cash outflows from operations-continuing operations
(68,539)
(173,329)
Cash outflows from operations-discontinued operations
—
(1,004,565)
Net (decrease) increase in cash
$
(1,326,813)
$
470,206
Operating Activities
Net cash used in operating activities from continuing operations was $0.8 million for the three months ended March 31, 2025. The negative cash flow was primarily due to (i) a net loss of $0.8 million during the three months ended March 31, 2025, and (ii) an increase of $0.2 million in other receivables, partially offset by (iii) an increase of $0.1 million in amortization of operating lease right-of-use assets and intangible assets, and (iv) $0.1 million in prepaid expenses.
Net cash used in operating activities from continuing operations was $1.5 million for the three months ended March 31, 2024. This was primarily attributable to (i) a net loss of $0.6 million, (ii) a deferred tax benefit of $0.2 million, (iii) an increase of $0.7 million in other receivables, partially offset by non-cash adjustments including, (iv) $38,560 in amortization of operating lease right-of-use assets, (v) $8,714 in amortization of intangible assets, and (vi) $41,152 increase in other payables.
Net cash provided by operating activities from discontinued operations was $2.5 million for the three months ended March 31, 2025, primarily due to the collection of $2.5 million in accounts receivable resulting from vehicle sales.
Net cash provided by operating activities from discontinued operations was $3.2 million for the three months ended March 31, 2024. This was primarily attributable to (i) the collection of $1.6 million in accounts receivable resulting from vehicle sales, (ii) a $1.3 million decrease in vehicle inventory, (iii) a $0.2 million decrease in other receivables from vehicle deposit and sales tax return, and (iv) a $0.1 million increase in other payables.
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Investing Activities
Net cash used in investing activities from continuing operations was approximately $3.0 million for the three months ended March 31, 2025, including (i) $3.0 million in short-term loans receivable from third parties, and offset by (ii) $49,000 proceeds of repayment from these loans.
For the three months ended March 31, 2024, net cash used in investing activities was $47,617, including (i) $220,117 cash paid in the Edward acquisition, offset by (ii) $172,500 proceeds of repayment from pledged loan made to third parties.
There were no investing activities related to discontinued operations for the three months ended March 31, 2025 and 2024.
Financing Activities
Net cash used in financing activities from continuing operations was $68,539 for the three months ended March 31, 2025, which consisted of (i) net repayment of premium finance of $59,590, and (ii) net repayment of long-term borrowings of $8,949.
Net cash used in financing activities from continuing operation of $173,329 for the three months ended March 31, 2024, consisted of (i) cash paid for warrant termination of $78,125, (ii) repayments of premium finance of $73,713, (iii) repayments of long-term borrowing of $8,068, and (iv) repayment of $13,423 to a related party.
There were no financing activities related to discontinued operations for the three months ended March 31, 2025.
Net cash used in financing activities from discontinued operations was $1.0 million for the three months ended March 31, 2024, which was the repayment of LC financing.
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 Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the Annual Report describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the Annual Report.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk .
As a smaller reporting company, we are not required to provide this information.