UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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| Accelerated filer | ☐ |
☒ | Smaller reporting company | |||
Emerging growth company |
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As of August 12, 2024, there were
Cheetah Net Supply Chain Service Inc.
Form 10-Q
For the Quarterly Period Ended June 30, 2024
Contents
i
CHEETAH NET SUPPLY CHAIN SERVICE INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CHEETAH NET SUPPLY CHAIN SERVICE INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable |
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Loans receivable | | | ||||
Inventory | — |
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Other receivables |
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Prepaid expenses and other current assets |
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TOTAL CURRENT ASSETS |
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OTHER NONCURRENT ASSETS: | ||||||
Property, plant, and equipment, net | | — | ||||
Operating lease right-of-use assets |
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Deferred tax assets, net |
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Intangibles, net | | — | ||||
Goodwill | | — | ||||
TOTAL ASSETS | $ | | $ | | ||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable | $ | | $ | | ||
Current portion of long-term debt |
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Loans payable from letter of credit financing |
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Loans payable from line of credit | | | ||||
Loans payable from premium finance |
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Due to a related party |
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Operating lease liabilities, current |
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Accrued liabilities and other current liabilities | | | ||||
TOTAL CURRENT LIABILITIES |
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NONCURRENT LIABILITIES: | ||||||
Long-term debt, net of current portion |
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Operating lease liabilities, net of current portion |
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TOTAL LIABILITIES |
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COMMITMENTS AND CONTINGENCIES (Note 17) |
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STOCKHOLDERS’ EQUITY |
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Common stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Subscription receivable |
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Retained earnings (Accumulated deficit) |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CHEETAH NET SUPPLY CHAIN SERVICE INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||
| 2024 |
| 2023 |
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REVENUES | ||||||||||||
Parallel-import Vehicles | $ | | | $ | | | ||||||
Logistics and Warehousing | | — | | — | ||||||||
Total Revenues | | | | | ||||||||
COST OF REVENUES |
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Cost of vehicles |
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Fulfillment expenses |
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Ocean freight service cost | | — | | — | ||||||||
Total cost of revenues |
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GROSS PROFIT |
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OPERATING EXPENSES |
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Selling expenses |
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General and administrative expenses |
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Total operating expenses |
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(LOSS) INCOME FROM OPERATIONS |
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OTHER (EXPENSE) INCOME |
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Interest expense, net |
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Other income, net |
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Total other expense, net | ( | ( | ( | ( | ||||||||
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES |
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Income tax (benefit) provision |
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NET (LOSS) INCOME | $ | ( | $ | | $ | ( | $ | | ||||
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(Loss) Earnings per share - basic and diluted | $ | ( | $ | | $ | ( | $ | | ||||
Weighted average shares - basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
CHEETAH NET SUPPLY CHAIN SERVICE INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock |
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Class A | Class B | Additional | Retained Earnings | Total | ||||||||||||||||||
Common | Common | paid-in | Subscription | (Accumulated | Stockholders’ | |||||||||||||||||
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| capital |
| Receivable |
| Deficit) |
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Balance, December 31, 2023 |
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Termination of equity-classified warrant |
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Issuance of common stock for acquisition | | | — | — | | — | — | | ||||||||||||||
Net loss for the period |
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Balance, March 31, 2024 | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||||
Issuance of follow-on public offering | | | — | — | | — | — | | ||||||||||||||
Net loss for the period | — | — | — | — | — | — | ( | ( | ||||||||||||||
Balance, June 30, 2024 |
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Common Stock | ||||||||||||||||||||||
Class A | Class B | Additional | Total | |||||||||||||||||||
Common | Common | paid-in | Subscription | Retained | Stockholders’ | |||||||||||||||||
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Balance, December 31, 2022 |
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Stock issuance | — | — | — | — | — | | — | | ||||||||||||||
Net loss for the period |
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Balance, March 31, 2023 | | $ | | | $ | | $ | | $ | ( | $ | | $ | | ||||||||
Net income for the period | — | — | — | — | — | — | | | ||||||||||||||
Balance, June 30, 2023 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
CHEETAH NET SUPPLY CHAIN SERVICE INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended | |||||
June 30, | ||||||
| 2024 |
| 2023 | |||
Cash flows from operating activities: |
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Net (loss) income | $ | ( | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Amortization of operating lease right-of-use assets |
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Amortization of Intangible Assets | | — | ||||
Depreciation | | — | ||||
Deferred tax provision |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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Other receivables |
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Prepaid expenses and other current assets |
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Deferred revenue |
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Other payables and other current liabilities |
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Operating lease liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: | ||||||
Acquisition of business, net of cash acquired | ( | — | ||||
Purchase of property, plant, and equipment | ( | — | ||||
Loans made to third parties | ( | — | ||||
Loans repayments from third parties | | |||||
Net cash used in investing activities | ( | — | ||||
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Cash flows from financing activities: |
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Proceeds from follow-on public offering, net of expenses | | — | ||||
Cash paid for warrant termination | ( | — | ||||
Proceeds from issuance of common stock under private placement transaction |
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Repayments of inventory financing |
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Proceeds from letter of credit financing |
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Repayments of letter of credit financing |
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Proceeds from loans from dealer finance |
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Repayments of loans from dealers finance |
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Proceeds from Line of Credit |
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Repayment of Line of Credit |
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Repayments of premium finance | ( | — | ||||
Repayments of long-term borrowings |
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Borrowing from a related party |
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Repayments made to a related party |
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Net cash provided by (used in) financing activities |
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Net increase in cash |
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Cash, beginning of period |
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Cash, end of period | $ | | $ | | ||
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Supplemental cash flow information |
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Cash paid for interest | $ | | $ | | ||
Noncash Financing and investing activities: | ||||||
Fair value of common stock issued for acquisition | $ | | $ | — | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
CHEETAH NET SUPPLY CHAIN SERVICE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Cheetah Net Supply Chain Service Inc. (“Cheetah Net” or the “Company”), formerly known as Yuan Qiu Business Group LLC, was established under the laws of the State of North Carolina on August 9, 2016 as a limited liability company (“LLC”). On March 1, 2022, the Company 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 its name to Cheetah Net Supply Chain Service Inc. The Company holds
| ● | (i) Allen-Boy International LLC (“Allen-Boy”), an LLC 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 |
| ● | (ii) Pacific Consulting LLC (“Pacific”), an LLC organized on January 17, 2019 under the laws of the State of New York, which was acquired by Cheetah Net from Yingchang Yuan, the previous owner of Pacific who beneficially owns |
| ● | (iii) Entour Solutions LLC (“Entour”), an LLC 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 $ |
| ● | (iv) Cheetah Net Logistics LLC (“Logistics”), an LLC organized on October 12, 2022 under the laws of the State of New York, whose previous sole member and owner, Hanzhang Li, the previous owner of Logistics, for a total consideration of $ |
| ● | (v) Edward Transit Express Group Inc. (“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 shares of Edward to Cheetah Net for a total consideration of $ |
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.
The Company and its wholly owned subsidiaries are engaged in
Parallel-import Vehicles
In the People’s Republic of China (the “PRC”), parallel-import vehicles refer to vehicles purchased by dealers directly from overseas markets and imported for sale through channels other than brand manufacturers’ official distribution systems. The Company purchases automobiles from the U.S. market through its team of professional purchasing agents and resells the automobiles to parallel-import vehicle dealers in the U.S. and the PRC.
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Logistics and Warehousing
The Company’s subsidiary, Edward, operates as a licensed Non-Vessel Operating Common Carrier. It manages freight forwarding, including shipment consolidation and carrier selection, aimed at optimizing shipping operations. Edward also provides warehousing services encompassing fulfillment, storage, and inventory management, crucial for supporting both the Company’s operations and its clients’ logistics needs.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These statements should be read in conjunction with the Company’s audited consolidated financial statements and noted thereto for the year ended December 31, 2023, included in the Company’s annual report on Form 10-K (File No. 001-41761), filed with the SEC on March 18, 2024 (the “Annual Report”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the unaudited condensed consolidated financial statements not misleading have been included. Operating results for the interim period ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All inter-company balances and transactions are eliminated upon consolidation.
Uses of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivables, the valuation of inventory, the revenue recognition, and the realization of deferred tax assets. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist of cash in bank and interest-bearing certificates of deposit with an initial term of three months when purchased.
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
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Cash held in Current Accounts | $ | | $ | | ||
Certificate of Deposit |
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Total cash and cash equivalents shown in the statements of cash flows | $ | | $ | | ||
Accounts receivable
Accounts receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the original amount less an allowance for doubtful accounts. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of operations. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is remote. In circumstances in which the Company
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receives payments for accounts receivable that have previously been written off, the Company reverses the allowance and bad debt expenses. As of June 30, 2024 and December 31, 2023, there was
Loans receivable
The Company’s loans receivable are recognized at the point of loan disbursement, initially measured at fair value, primarily reflecting the disbursed amount and associated transaction costs. Both secured and unsecured lending are encompassed in these receivables, with terms including varying interest rates and maturity dates. Subsequently, these receivables are measured at amortized cost using the effective interest method, which ensures the accurate recognition of interest income over the loan period. The interest rates for these loans may be subject to change based on the terms of loan agreements. Periodic reviews of the loan portfolio are conducted to assess for impairment, utilizing the expected credit loss model. This approach considers historical credit loss experience, current conditions, and reasonable forecasts in estimating potential credit losses. As of the end of the reporting periods,
Inventory
Inventory consists of new vehicles held for sale and are stated at the lower of cost or net realizable value using the specific identification method. The value of inventory mainly includes the cost of auto 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 shrinkage. The Company recorded
Property, plant, and equipment, net
Property, plant, and equipment are stated at cost less accumulated depreciation and impairment charges. Depreciation is calculated primarily based on the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the assets:
Property, plant, and equipment |
| Estimated useful life |
Motor vehicles | ||
Leasehold improvements |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized.
Intangible assets, net
The Company’s 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.
Amortization of intangible assets is computed using the straight-line method over the estimated useful lives as below:
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Trade names |
The estimated useful lives of intangible assets with finite lives are reassessed if circumstances occur that indicate the original estimated useful lives have changed.
The Company did
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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 inputs 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, deferred revenue, and other payables and other current liabilities, approximated the fair value of the respective assets and liabilities as of June 30, 2024 and December 31, 2023 based upon the short-term nature of the assets and liabilities.
The Company believes that the carrying amount of long-term loans approximated fair value as of June 30, 2024 and December 31, 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 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
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
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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.
Revenue recognition
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.
The Company operates in
In the logistics and warehousing services segment, revenue from freight forwarding services, both export and import, is recognized when the services are provided, based on the relative transit time. The Company’s role as the principal in these services involves managing the entire shipping process from origin to destination, 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, ensuring straightforward revenue recognition with no provisions for sales return allowances based on historical experiences of no returns.
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Contract balances and remaining performance obligations
The Company did not have any contract assets or liabilities as of June 30, 2024 and December 31, 2023.
Disaggregation of Revenue
The Company disaggregates its revenue by type and geographic areas, as the Company believes it best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the three and six months ended June 30, 2024 and 2023 was as follows:
| Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | |||||||||||
2024 |
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(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
Revenue from Parallel-Import Vehicles |
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U.S. domestic market | $ | | $ | | $ | | $ | | ||||
Overseas market |
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Revenue from Logistics and Warehousing |
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U.S. domestic market |
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Overseas market |
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Total revenue | $ | | $ | | $ | | $ | | ||||
Geographic information
The Company’s total revenue by geographic area for the three and six months ended June 30, 2024 and 2023 was as follows:
| Three Months Ended |
| Six Months Ended | |||||||||
June 30, | June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
U.S. domestic market | $ | | $ | | $ | | $ | | ||||
Overseas market |
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Total revenue | $ | | $ | | $ | | $ | | ||||
Cost of revenues
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.
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.
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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 has not assessed a valuation allowance as it determines it is more likely than not that all deferred tax assets will be realized before expiration.
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 unaudited condensed consolidated statements of operations. The Company does not believe that there were any uncertain tax positions as of June 30, 2024 and December 31, 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 June 30, 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. For the six months ended June 30, 2024 and 2023, there were
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.
Shipping and handling costs
Shipping and handling costs, which are associated with shipping and delivery of vehicles to automobile dealers, are expensed as incurred and are included in selling expenses in the unaudited condensed consolidated statements of operations. Total shipping and handling expenses were
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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. Management has determined that the Company has
Recent accounting pronouncements
In November 2023, the FASB issued Accounting Standards Update No. 2023-07 (the “Update”), which applies to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the chief operating decision maker uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt this Update within its annual reporting period beginning on January 1, 2024 and is evaluating the impact of the adoption on the Company’s consolidated financial statements.
NOTE 3 — ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Accounts receivable |
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Parallel-import Vehicles | $ | | $ | | ||
Logistics and Warehousing |
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Less: allowance for doubtful accounts |
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| — | ||
Total accounts receivable | $ | | $ | | ||
The Company’s accounts receivable primarily include balances generated from (i) selling parallel-import vehicles to both domestic and overseas parallel-import car dealers and (ii) providing logistics and warehousing services to both domestic and overseas customers, which have not been collected as of the balance sheet dates.
Parallel-import Vehicles Segment
The Company identified four accounts with deferred payments overdue for over 150 days, totaling approximately $
| June 30, | ||
2024 | |||
Accounts receivable aging: |
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Less than 150 days | $ | | |
151-180 days |
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181-210 days |
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Over 210 days |
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Less: allowance for doubtful accounts |
| — | |
Total accounts receivable | $ | | |
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The accounts receivable transactions in connection with letters of credit with book value of $
NOTE 4 — LOANS RECEIVABLE
Loans receivable consisted of the following:
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Vehicle pledge loan receivable | $ | — | $ | | ||
Short-term loan | $ | |
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Total loans receivable | $ | | $ | | ||
On December 6, 2023, the Company entered into
On December 11, 2023, the Company provided an unsecured short-term loan to
On June 20, 2024, the Company entered into an unsecured short-term loan agreement with Hongkong Sanyou Petroleum Co Limited. The principal amount of the loan was $
Interest income for the three and six months ended June 30, 2024 was $
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