Quanome Technologies, Inc 10-Q for FY2025 Q1
Quanome Technologies, Inc. (QNME)
About this 10-Q
Quanome Technologies, Inc filed this 10-Q on November 14, 2024, covering the quarter ended September 30, 2024 (FY2025 Q1).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.08M
- down 1.6% from $4.15M a year earlier
- Net loss
- $1.34M
- compared with a net loss of $304.26K a year earlier
- Diluted EPS
- -$0.18
- compared with -$0.05 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to .
Commission File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| The |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. ☒
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
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Indicate by check mark whether
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As of the date of this report,
the Registrant had
Lakeside Holding Limited
FORM 10-Q
For the Quarterly Period Ended September 30, 2024
INDEX
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EXPLANATORY NOTE
As used in this Annual Report on Form 10-Q, unless otherwise indicated or the context otherwise requires, references to “Lakeside,” “the Company,” “we,” “us,” and “our” refer to Lakeside Holding Limited together with its consolidated subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain statements related to future results, or states our intentions, beliefs, and expectations or predictions for the future, all of which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent management’s expectations or forecasts of future events. Forward-looking statements are typically identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “project,” “intend,” “plan,” “probably,” “potential,” “looking forward,” “continue,” and other similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will,” and “would.” You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Forward-looking statements in this Form 10-Q may include, for example, statements concerning:
| ● | our future operating and financial performance, ability to generate positive cash flow and ability to achieve and sustain profitability; |
| ● | our competitive position; |
| ● | the sufficiency of our existing capital resources to fund our future operating expenses; |
| ● | the timing of the introduction of new solutions and services; |
| ● | the likelihood of success in and impact of litigation; |
| ● | our protection or enforcement of our intellectual property rights; |
| ● | our expectation with respect to securities, options and future markets and general economic conditions; |
| ● | our ability to keep up with rapid technological change; |
| ● | the impact of future legislation and regulatory changes on our business; and |
| ● | our anticipated use of proceeds from our initial public offering. |
Any or all of our forward-looking statements may turn out to be inaccurate, and there are no guarantees about our performance. The factors identified above are not exhaustive. We operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, readers should not place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We are under no (and expressly disclaim any) obligation to update or alter any forward-looking statement that we may make from time to time, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.
ii
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LAKESIDE HOLDING LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of (unaudited) | As of (audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Accounts receivable – third parties, net | ||||||||
| Accounts receivable – related party, net | ||||||||
| Prepayment and other receivable | ||||||||
| Contract assets | ||||||||
| Due from related parties | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Investment in other entity | ||||||||
| Property and equipment at cost, net of accumulated depreciation | ||||||||
| Right of use operating lease assets | ||||||||
| Right of use financing lease assets | ||||||||
| Deferred tax asset | - | |||||||
| Deferred offering costs | ||||||||
| Deposit and prepayment | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payables – third parties | $ | $ | ||||||
| Accounts payables – related parties | ||||||||
| Accrued liabilities and other payables | ||||||||
| Current portion of obligations under operating leases | ||||||||
| Current portion of obligations under financing leases | ||||||||
| Loans payable, current | ||||||||
| Dividend payable | ||||||||
| Tax payable | ||||||||
| Due to shareholders | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Loans payable, non-current | ||||||||
| Obligations under operating leases, non-current | ||||||||
| Obligations under financing leases, non-current | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| EQUITY | ||||||||
| Common stocks, $ | ||||||||
| Subscription receivable | ( | ) | ||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Deficits | ( | ) | ( | ) | ||||
| Total equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
LAKESIDE HOLDING LIMITED
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| For the Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue from third party | $ | $ | ||||||
| Revenue from related parties | ||||||||
| Total revenue | ||||||||
| Cost of revenue from third party | ||||||||
| Cost of revenue from related parties | ||||||||
| Total cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative expenses | ||||||||
| Loss from deconsolidation of a subsidiary | ||||||||
| Provision of allowance for expected credit loss | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Other income, net | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income, net | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes expense (recovery) | ( | ) | ||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interest | ( | ) | ||||||
| Net loss attributable to common stockholders | ( | ) | ( | ) | ||||
| Other comprehensive loss | ||||||||
| Foreign currency translation gain | ||||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Less: comprehensive loss attributable to non-controlling interest | ( | ) | ||||||
| Comprehensive loss attributable to the common shareholders | $ | ( | ) | $ | ( | ) | ||
| Loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding – basic and diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
LAKESIDE HOLDING LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(UNAUDITED)
| Common Shares | Amount | Subscription Receivable | Additional Paid in Capital | Retained Earnings (Deficits) | Accumulated Other Comprehensive Income (Loss) | Non- controlling Interest | Total | |||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Net loss for the three months ended September 30, 2023 | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Termination of S Corporation upon reorganization | — | ( | ) | |||||||||||||||||||||||||||||
| Deconsolidation of a subsidiary | — | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | |||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Paid in capital | — | |||||||||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2024 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Initial public offering, net of share issuance costs | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
LAKESIDE HOLDING LIMITED
CONDENSSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation – G&A | ||||||||
| Depreciation – cost of revenue | ||||||||
| Amortization of operating lease assets | ||||||||
| Depreciation of right-of-use finance assets | ||||||||
| Provision of allowance for expected credit loss | ||||||||
| Deferred tax expense (benefit) | ( | ) | ||||||
| Loss from derecognition of shares in subsidiary | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable – third parties | ( | ) | ||||||
| Accounts receivable – related parties | ( | ) | ||||||
| Contract assets | ||||||||
| Due from related parties | ( | ) | ||||||
| Prepayment, other deposit | ( | ) | ||||||
| Accounts payables – third parties | ( | ) | ||||||
| Accounts payables – related parties | ( | ) | ||||||
| Accrued expense and other payables | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Payment made for investment in other entity | ( | ) | ||||||
| Net cash outflow from deconsolidation of a subsidiary (Appendix A) | ( | ) | ||||||
| Prepayment for system installation | ( | ) | ||||||
| Acquisition of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from loans | ||||||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Repayment of equipment and vehicle loans | ( | ) | ( | ) | ||||
| Principal payment of finance lease liabilities | ( | ) | ( | ) | ||||
| Proceeds from initial public offering, net of share issuance costs | ||||||||
| Advanced to related parties | ( | ) | ||||||
| Repayment to shareholders | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ||||||||
| Net decrease in cash and cash equivalent | ||||||||
| Cash and cash equivalent, beginning of the period | ||||||||
| Cash and cash equivalent, end of the period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH IN FINANCING ACTIVITIES | ||||||||
| Deferred offering costs within due to shareholders | $ | $ | ||||||
| NON-CASH ACTIVITIES | ||||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | $ | ||||||
| Right of use assets obtained in exchange for finance lease obligation | $ | $ | ||||||
| APPENDIX A – Net cash outflow from deconsolidation of a subsidiary | ||||||||
| Working capital, net | $ | |||||||
| Investment in other entity recognized | ( | ) | ||||||
| Elimination of NCl at deconsolidation of a subsidiary | ||||||||
| Loss from deconsolidation of a subsidiary | ( | ) | ||||||
| Cash | $ | ( | ) | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Lakeside Holding Limited (the
“Company”), is a holding company established on August 28, 2023 under the laws of the State of Nevada. The Company, acting
through its subsidiary, is primarily engaged in providing customized cross-border ocean freight solutions and airfreight solutions.
On July 1, 2024, the Company closed its initial public offering (“IPO”) of
| Name | Date of Incorporation | Jurisdiction of Formation | Percentage of direct/indirect Economic Ownership | Principal Activities | ||||||
| Parent Company | ||||||||||
| Lakeside Holding Limited | ||||||||||
| Subsidiary | ||||||||||
| American Bear Logistics Corp. (“ABL Chicago”) | ||||||||||
| Sichuan Hupan Jincheng Enterprise Management Co., Ltd (“Sichuan Hupan”)* | ||||||||||
| * |
Reorganization
A reorganization of the legal structure was completed on September 23, 2023 (“The Reorganization”). The Reorganization involved the incorporation of Lakeside Holding Limited and the transfer the shares of American Bear Logistics Corp (“ABL Chicago”) to the Company.
Prior to the Reorganization,
Mr. Henry Liu, the Chairman of the Board and Chief Executive Officer (“CEO”), and Mr. Shuai Li, the President and
Chief Operating Officer (“COO”), each owned
As part of the series of reorganization
transactions to be completed before the offering, a 120-for-1 share split was conducted by the Company on March 29, 2024. After
the share split, the issued share capital of the Company consists of $
Before and after the Reorganization, the Company, together with its subsidiaries, is effectively controlled by the same Controlling Group, and therefore the Reorganization is considered as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.
On July 1, 2024, the Company
closed its IPO of
5
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The condensed consolidated financial statements include the accounts of Lakeside Holding Limited and its wholly owned subsidiaries (collectively the “Company”). In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the use of management estimates. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Use of estimates and assumptions
In preparing the 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 financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the condensed consolidated financial statements. Significant accounting estimates required to be made by management include allowance for credit losses, the percentage of performance obligation completed at the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis and its estimates on historical experience, current and expected future conditions and various other assumptions that management believes are reasonable under the circumstances based on the information available to management at the time these estimates and assumptions are made. Actual results and outcomes may differ significantly from these estimates and assumptions.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted balances held with banks and deposits at banks or other financial institutions, which are available for withdrawal or use and have original maturities of three months or less. The Company maintains most of its bank accounts in the United States, which are insured by Federal Deposit Insurance Corporation (“FDIC”). The Company has one bank account in the PRC. Cash balances in bank accounts in PRC are not insured.
Accounts receivable, net
Accounts receivables are carried
at the original invoiced amount less an estimated allowance for expected credit losses based on the probability of future collection.
The Company reviews its 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 grant credit to customers, without collateral, under normal payment terms. The Company
uses a loss rate method to estimate the allowance for credit losses. For those past due balances over
6
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Investment in Other entity
The Company assesses its investment in ABL Wuhan and determines that no significant influence over investee existed, as defined in ASC 323-10-15-6, and therefore accounts for the investment using the cost method of accounting. Under the cost method of accounting, the investment is measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. The investment in other entity that does not report net asset value is subject to qualitative assessment for indicators of impairments.
On August 4, 2023, ABL
Wuhan ceased to be the Company’s subsidiary and became the Company’s long-term investment. As of September 30, 2024 and
June 30, 2024, the Company’s investment in ABL Wuhan amounted to $
Property and equipment
Property and equipment are
stated at cost less accumulated depreciation.
| Useful life | ||
| Furniture and fixtures | ||
| Machinery equipment | ||
| Vehicles | ||
| Leasehold improvement |
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. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in other income or expenses in the condensed consolidated statements of income (loss) and other comprehensive income (loss).
Impairment of long-lived asset
Long-lived assets, including plant, property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. The Company reviews the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets. No impairment charge was recognized for the three months ended September 30, 2024 and 2023, respectively.
7
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Accounts payable
The account payables are derived from logistic services and forwarding service providers. The balances arise from logistics services provider are usually settled within 7 to 30 days.
Deferred offering costs
Pursuant to ASC 340-10-S99-1, incremental offering costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related to the registration preparation, audit fees, SEC filing and print related costs and exchange listing costs. The deferred offering costs are offset against additional paid-in capital upon receipts of the capital raised at IPO closing date.
Leases
The Company evaluates the contracts it entered into to determine whether such contracts contain leases at inception. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.
Operating Leases
A lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lease as an operation lease. Operating leases are included in the line items right-of-use (ROU) asset, lease liabilities, current, and lease liabilities, non-current in the consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. The Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The Company measures ROU assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.
For leases with lease term less than one year (short-term leases), the Company has elected not to recognize a lease liability or ROU asset on its consolidated balance sheet. Instead, it recognizes the lease payments as expenses on a straight-line basis over the lease term. Short-term lease costs are immaterial to its consolidated statements of operations and cash flows.
8
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Finance leases
Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation of right-of-use finance asset” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense”. Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases. If the Company is reasonably certain to exercise the option to purchase the underlying asset at the end of lease term, the finance lease ROU assets are amortized to the end of useful life of the assets on a straight-line basis.
Related parties
The Company adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Fair value of financial instruments
ASC 820, “Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
| Level 1 — | Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities | |
| Level 2 — | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | |
| Level 3 — | Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The carrying value of cash and cash equivalent, accounts receivable from third parties and related parties, amount due from related parties, due to shareholders, other receivables, contract assets, accounts payable, other payables, dividend payable and accrued expenses and other current liabilities approximate fair value due to their short-term nature. For lease liabilities and loans payable, their carrying value approximate the fair value at the year-end, as the interest rates used to discount the host contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2024 and June 30, 2024.
9
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue recognition
The Company adopted ASC Topic 606 “Revenue from Contracts with Customers” and all subsequent ASUs that modified ASC 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:
Step 1: Identify the contract (s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Company generates revenue from providing cross-border ocean and airfreight solutions. No practical expedients were used when adoption ASC606. Revenue recognition policies are as follow:
Revenue from cross-border freights solutions
The Company provides comprehensive services in the United States for customers to transport goods from overseas to the United States and from the United States to overseas. Operating under service contracts, for goods entering the United States, after the goods arrive at a U.S. seaports or airports, the Company offers customs clearance, container unloading, storage, unpacking, packing, and transportation services to the locations specified by the customers. For customers shipping goods overseas, the Company provides cargo space arrangements, storage, packing, export customs clearance, and arranges transportation to seaports or airports for loading.
The transaction price is determined based on the range of services provided and the volume of goods. The Company considers these comprehensive services as one performance obligation since these promises are not distinct within the context of the contract, and the bundle of integrated services represents a combined output. This performance obligation is satisfied over time as customers receive the benefits of these services during the process of transporting goods from one location to another.
For goods entering the United States, the Company determines that the performance period for revenue recognition is between the pickup date and the date of completing delivery. For customers shipping goods overseas with cargo space booking service, the Company determines that the performance period for revenue recognition is between the container or cargo space confirmed date and the date of arrival at destination. For customers shipping goods overseas without cargo space booking service, the Company determines that the performance period for revenue recognition is between pickup date and the date when the goods are departed from airport or port. The performance period may be estimated if the date of completing delivery or the departure date or arrival date has not occurred by the reporting date. Determining the performance period and the progress of the transportation as of the reporting date requires management’s estimation and judgement, which may impact the timing of revenue recognition.
10
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue recognition (cont.)
Principal and agent considerations
In the Company’s transportation business, the Company utilizes independent contractors and third-party carriers and related party carriers in the performances of some transportation services as and when needed. U.S. GAAP requires us to evaluate, using a control model, whether the Company itself promises to provide services to the customers (as a principal) or to arrange for services to be provided by another party (as an agent). Based on the Company’s evaluation using a control model, the Company determined that in all of its major business activities, it serves as a principal rather than an agent within their revenue arrangements. Revenue and the associated purchased transportation costs are both reported on a gross basis within the condensed consolidated statements of income (loss) and comprehensive income (loss).
Disaggregation of revenues
The Company disaggregates its revenue from types of services providing and the customer geographic of its customers, 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 revenues for three months ended September 30, 2024 and 2023 is disclosed as below:
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cross-border ocean freights solutions | $ | $ | ||||||
| Cross-border airfreights solutions | ||||||||
| Total revenue | $ | $ | ||||||
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Asia-based customers | $ | $ | ||||||
| U.S.-based customers | ||||||||
| Total revenue | $ | $ | ||||||
Contract assets
Contract assets represent estimated amounts for which the Company has the right to consideration for the services provided while a delivery is still in-transit and has not yet invoiced the customer. Upon completion of the performance obligations, which can vary in duration based upon the method of transport and billing the customer, these amounts become classified within accounts receivable.
11
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Cost of revenues
Cost of revenue primarily consists of the transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation, which includes operating and financing lease-related costs, the depreciation expenses of property and equipment and others miscellaneous items.
General and administrative expenses
General and administrative expenses primarily include salaries and staff benefits, repair and maintenance expense, depreciation on property and equipment, lease expenses, travelling and entertainment, bank charges, legal and professional fees, insurance expenses and other office expenses.
401(k) benefit plan
401(k) benefit plan covers
substantially all employees and allows voluntary employee contributions up to the annually adjusted Inland Revenue Service (“IRS”)
dollar limit. These voluntary contributions are matched equal to
Rental income
The Company subleased portion
of its offices area, warehouse and parking lots to third parties and related parties. The Company recognizes rental income over the sublease
period. For the three months ended September 30, 2024 and 2023, the Company recognized rental income amounted to $
Income taxes
Before the Reorganization,
the Company has elected to be taxed as an S Corporation for federal and state income tax purposes. As an S Corporation, the Company is
not subject to federal income tax and state tax in Illinois. However, Illinois allows subchapter S corporations to elect to pay the Pass-through Entity
(PTE) tax at entity level for tax years ending on or after December 31, 2021 and beginning prior to January 1, 2026. The
PTE tax rate is equal to
12
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Income taxes (cont.)
The Company’s PRC subsidiary
is governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable
tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under
the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIE”)
are usually subject to a unified
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
The Company accounts for uncertain
tax positions in accordance with FASB ASC Topic No. 740, Accounting for Uncertainty in Income Taxes. A tax position is recognized as a
benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
Basic and diluted earnings (loss) per share
The Company computes 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 (loss) 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.
Foreign currency transactions
Our reporting currency is the U.S. dollar. The functional currency of our operations, except for Lakeside Sichuan, is the U.S. dollar. The functional currency of Lakeside Sichuan is the RMB. The assets, liabilities, revenues, and expenses of Lakeside Sichuan are remeasured in accordance with ASC 830. For the period ended September 30, 2024, assets and liabilities of Lakeside Sichuan are translated into U.S. dollars based upon exchange rates prevailing at the end of each period. Revenues and expenses of Lakeside Sichuan are translated at average exchange rates during the reporting period. The resulting translation adjustment is included in accumulated other comprehensive loss.
13
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Foreign currency transactions (cont.)
| September 30, 2024 | ||||
| Balance sheet items, except for equity accounts | US$ | |||
| Items in the statements of income and cash flows | US$ |
Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingency liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
Segment reporting
The Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company operates and manages its business as a single segment. As the Company’s long-lived assets are substantially all located in the United States and substantially all the Company’s revenues are derived from within the United States.
Concentrations and risks
a. Concentration of credit risk
The Company estimates credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable, contract assets, other receivable and amounts due from related parties. The Company has designed their credit policies with an objective to minimize their exposure to credit risk.
14
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Concentrations and risks (cont.)
a. Concentration of credit risk (cont.)
The maximum exposure of such
assets to credit risk is their carrying amounts at the balance sheet dates. The Company maintains majority of the bank accounts at financial
institutions in the United States, where there is $
The Company has adopted a
credit policy of dealing with creditworthy counterparties to mitigate the credit risk from defaults. The management team conducts credit
evaluations of its customers, and generally does not require collateral or other security from them. The Company establishes an accounting
policy to provide for allowance for credit loss based on the individual customer’s financial condition, credit history, and the
future economic conditions. Due from related parties’ balances are monitored on an ongoing basis with the result that the Company’s
exposure to impairment is not significant. As of September 30, 2024 and June 30, 2024,
b. Foreign exchange risk
Our subsidiary in PRC has functional currency in RMB. The value of the Chinese Yuan against the U.S. dollar is affected by the changes in China and United States economic conditions. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Also, by considering the volume of its business, the impact of foreign exchange risk is limited.
c. Interest rate risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Our exposure to interest rate risk primarily relates to the interest rates from our lessors and our private lenders. The shareholder loans bear no interest. We have not been exposed to material risks due to the fact that our leasing obligations’ interest rates and private loan’s interest are fixed at commence date of the leases and loans and we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.
d. Liquidity risk
Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. The Company monitors and analyze its cash flow position, its ability to generate sufficient revenue sources in the future and its operating and capital expenditure commitments. The Company is historically funded the working capital needs primarily from operations, loans, as well as shareholder advances to the Company. The Company will use the capital from its offering closed in July 2024 to fund the further working capital needs.
15
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Recent accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. Management is currently evaluating the provisions of this ASU and expect to adopt them for the year ending June 30, 2025.
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited consolidated balance sheets, statements of income (loss) and comprehensive income (loss) and statements of cash flows.
16
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 — ACCOUNTS RECEIVABLE, NET
| September 30, 2024 | June 30, 2024 | |||||||
| Accounts receivable – third-party customers | $ | $ | ||||||
| Less: allowance for credit loss – third-party customers | ( | ) | ( | ) | ||||
| Accounts receivable from third-party customers, net | $ | $ | ||||||
| Add: accounts receivable – related party customers | $ | $ | ||||||
| Less: allowance for credit loss – related party customers | ( | ) | ( | ) | ||||
| Total accounts receivable, net | $ | $ | ||||||
Approximately $
| September 30, 2024 | June 30, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Addition of provision | ||||||||
| Ending balance | $ | $ | ||||||
The Company recorded addition
of allowance for credit loss of $
NOTE 4 — PROPERTY AND EQUIPMENT, NET
| September 30, 2024 | June 30, 2024 | |||||||
| Furniture and Fixtures | $ | $ | ||||||
| Machinery equipment | ||||||||
| Vehicles | ||||||||
| Leasehold improvement | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense recorded
in general and administrative expense was $
17
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 — LEASES
The Company has multiple lease agreements for warehouses, warehouse machinery and equipment and offices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As
of September 30, 2024 and June 30, 2024, balance of lease liabilities was $
As of September 30, 2024, the Company did not recognize any additional finance lease liabilities.
Total operating lease expenses
on offices, warehouses, and warehouse equipment for the three months ended September 30, 2024 and 2023 were $
Total finance lease expenses
on warehouse machinery and equipment for the three months ended September 30, 2024 and 2023 were $
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid of amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Operating cash flows from finance leases | $ | $ | ||||||
| Financing cash flows from finance leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating lease liabilities | $ | $ | ||||||
| September 30, 2024 | June 30, 2024 | |||||||
| Weighted-average remaining lease term (years): | ||||||||
| Operating lease | ||||||||
| Finance lease | ||||||||
| Weighted average discount rate: | ||||||||
| Operating lease | % | % | ||||||
| Finance lease | % | % | ||||||
18
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 — LEASES (cont.)
The following is a schedule of maturities of operating and finance lease liabilities as of September 30, 2024:
| Twelve months ending September 30, | Repayment | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total operating lease liabilities | $ | |||
| Twelve months ending September 30, | Repayment | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total finance lease liabilities | $ | |||
NOTE 6 — ACCRUED LIABILITIES AND OTHER PAYABLES
| September 30, 2024 | June 30, 2024 | |||||||
| Credit card payables | $ | $ | ||||||
| Payroll liabilities | ||||||||
| Accrued expense (a) | ||||||||
| Other payables (b) | ||||||||
| Total | $ | $ | ||||||
Note (a): The balance mainly
consists of accrued interest of $
(b):
19
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 — LOANS PAYABLE
The Company obtained multiple loans to finance the purchase of vehicles and warehouse machinery and obtained other loans to support its working capital needs.
| September 30, 2024 | June 30, 2024 | |||||||
| Equipment loans | $ | $ | ||||||
| Vehicle loans | ||||||||
| Other loans | ||||||||
| Total | ||||||||
| Less: loan payable, current | ( | ) | ( | ) | ||||
| Loan payable, non-current | $ | $ | ||||||
Equipment loans
On December 7, 2020,
the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On March 9, 2021, the
Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On April 7, 2021, the
Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On June 4, 2021, the
Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On June 14, 2021, the
Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On July 13, 2021, the
Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On September 28, 2021,
the Company entered into another equipment loan with Toyota Commercial Finance for a principal amount of $
20
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 — LOANS PAYABLE (cont.)
On February 21, 2023,
the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $
On June 10, 2021, the
Company entered into an equipment loan with Amur Equipment Finance for a principal amount of $
On September 9, 2021,
the Company entered into an equipment loan with Hatachi Capital America Corp. for a principal amount of $
The Company made the total
principal repayments of $
Vehicle loans
On May 20, 2020, the
Company entered into a vehicle loan with BMW Financial Services for a principal amount of $
On July 29, 2021, the
Company entered into a vehicle loan with AutoNation Honda O’Hare for a principal amount of $
On June 3, 2022, the
Company entered into a vehicle loan with Tesla, Inc. for a principal amount of $
On January 23, 2023,
the Company entered into a vehicle loan with Tesla, Inc. for a principal amount of $
The Company made the total
principal repayments of $
21
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 — LOANS PAYABLE (cont.)
| September 30, 2024 | June 30, 2024 | |||||||
| Loan A | $ | $ | ||||||
| Loan B | ||||||||
| Loan C | ||||||||
| Loan D | ||||||||
| Loan E | ||||||||
| Total | $ | $ | ||||||
| (a) |
| (b) |
| (c) | The Company entered a loan agreement
of |
On October 26, 2022, both parties agreed to extend the loan term to on demand.
| (d) | The Company entered a loan agreement of $ |
On April 10, 2024, the Company entered
another loan agreement of $
The
Company made repayment of $
| (e) |
The Company made the total
principal repayments of $
22
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 — LOANS PAYABLE (cont.)
| Twelve months ending September 30, | Vehicle loans | Equipment loans | Others | Total | ||||||||||||
| 2025 | $ | $ | $ | $ | ||||||||||||
| 2026 | ||||||||||||||||
| 2027 | ||||||||||||||||
| 2028 | ||||||||||||||||
| 2029 | ||||||||||||||||
| Total undiscounted borrowings | ||||||||||||||||
| Less: imputed interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | $ | $ | $ | ||||||||||||
NOTE 8 — GENERAL AND ADMINISTRATIVE EXPENSES
| September 30, 2024 | September 30, 2023 | |||||||
| Payroll expense | $ | $ | ||||||
| Staff benefit expense | ||||||||
| Office expense | ||||||||
| Professional expense | ||||||||
| Travelling and entertainment | ||||||||
| Repair and maintenance | ||||||||
| Lease expense | ||||||||
| Depreciation expense | ||||||||
| Insurance | ||||||||
| Advertising | ||||||||
| Other expense | ||||||||
| Motor expense | ||||||||
| Bank charges | ||||||||
| Total | $ | $ | ||||||
23
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 — RELATED PARTY TRANSACTIONS
| Name of Related Party | Relationship to the Company | |
| Mr. Henry Liu | ||
| Mr. Shuai Li | ||
| Weship Transport Inc. (“Weship”) | ||
| American Bear Logistics (Wuhan) Co., Ltd. (“ABL Wuhan”) | ||
| American Bear Logistics (Shenzhen) Co., Ltd. (“ABL Shenzhen”) | ||
| LLL Intermodal Inc. (“Intermodal”) |
a) Summary of balances with related parties
| September 30, 2024 | June 30, 2024 | |||||||
| Due from Weship | $ | $ | ||||||
| Due from Intermodal | ||||||||
| Total | $ | $ | ||||||
The Company has collected approximately $
b)
| September 30, 2024 | June 30, 2024 | |||||||
| Account payable to Weship | $ | $ | ||||||
| Account payable to ABL Wuhan | ||||||||
| Account payable to Intermodal | - | |||||||
| Total | $ | $ | ||||||
c)
| September 30, 2024 | June 30, 2024 | |||||||
| Account receivable from Weship | $ | $ | ||||||
| Account receivable from ABL Shenzhen | - | |||||||
| Account receivable from ABL Wuhan | ||||||||
| Total | $ | $ | ||||||
The Company has collected approximately $
24
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 — RELATED PARTY TRANSACTIONS (cont.)
d)
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue from Weship | $ | $ | ||||||
| Revenue from ABL Wuhan | $ | $ | ||||||
| Revenue from ABL Shenzhen | $ | $ | - | |||||
| Cost of revenue charged by Weship | $ | $ | ||||||
| Rental income from Weship | $ | $ | ||||||
| Cost of revenue charged by Intermodal | $ | $ | ||||||
| Cost of revenue charged by ABL Wuhan | $ | $ | ||||||
During the three months ended September 30, 2024 and 2023, the Company had the following transactions with its related parties — Weship, ABL Wuhan, ABL Shenzhen and Intermodal
| (a) | The Company provides logistic forwarding services to Weship, ABL Wuhan and ABL Shenzhen and charges Weship, ABL Wuhan and ABL Shenzhen at its regular market rate for the services provided. |
| (b) | Weship is one of the Company’s vendors for truck delivery service. |
| (c) | The Company subleased portion of its warehouse space to Weship for rental income. The Company subleased its warehouse in Chicago to Weship in July 2023 and again for the period from January 2024 to September 2024. The Company also subleased another warehouse in Los Angeles beginning in August 2023. |
| (d) | Intermodal is one of the Company’s vendors for truck delivery service. |
| (e) | ABL Wuhan provides labor force and certain cross-border freight consolidation and forwarding services and is one of our cross-border freight consolidation and forwarding service providers. |
e)
| September 30, 2024 | June 30, 2024 | |||||||
| Due to shareholders, end | $ | ( | ) | $ | ( | ) | ||
The balance with the shareholders
is unsecured, interest free, and due on demand. The Company had balance of due to shareholder Henry Liu of $
f)
| September 30, 2024 | June 30, 2024 | |||||||
| Dividend payable to Mr. Henry Liu | $ | ( | ) | $ | ( | ) | ||
| Dividend payable to Mr. Shuai Li | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
No non-taxable dividend was declared to shareholders
for the three months ended September 30, 2024. During the year ended June 30, 2023, ABL Chicago declared non-taxable dividend
of total $
25
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 — RELATED PARTY TRANSACTIONS (cont.)
g)
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Mr. Henry Liu | $ | $ | ||||||
| Mr. Shuai Li | ||||||||
| Total | $ | $ | ||||||
NOTE 10 — TAXES
Corporate Income Taxes
Before the Reorganization,
the Company was elected to be taxed as an “S Corporation” under the provisions of the Internal Revenue Code and comparable
state income tax law. As an S Corporation, the Company is not subject to Federal income tax and Illinois State tax. Taxable income “pass
through” to the personal tax returns of the owners. However, Illinois allows subchapter S corporations to elect to pay the Pass-through Entity
(“PTE”) tax at entity level for tax years ending on or after December 31, 2021 and beginning prior to January 1,
2026. The PTE tax rate is equal to
The Company terminated its
status as a Subchapter S Corporation as of September 23, 2023, in connection with its Reorganization. As a C Corporation, the Company
combined statutory income tax rate is
The Company’s PRC subsidiary,
is governed by the income tax laws of the PRC and is subjected to
In conjunction with the termination
of the Subchapter S corporation status, the C Corporation deferred tax assets and liabilities were estimated for future tax consequences
attributable to difference between the financial statement carrying amounts of the Company’s existing assets and liabilities and
their respective tax bases. The deferred tax assets and liabilities were measured using tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of the change in tax rates resulting from becoming a C Corporation was recognized as a $
As of September 30, 2024 and June 30, 2024, the Company did not have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the period ended September 30, 2024 and 2023, no amounts were incurred for income tax uncertainties or interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examination by its major taxing authorities for all periods.
26
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 — TAXES (cont.)
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Current income tax expense | $ | $ | ||||||
| Deferred income tax expense (recovery) | ( | ) | ||||||
| Deferred state tax adjustment – change of tax rates | ||||||||
| Total income tax expense (recovery) | $ | $ | ( | ) | ||||
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Loss before tax | $ | ( | ) | $ | ( | ) | ||
| Statutory state tax rate | % | % | ||||||
| Income tax recovery at the federal statutory rate | $ | ( | ) | $ | ( | ) | ||
| Illinois state tax/PET tax recovery | ( | ) | ( | ) | ||||
| Illinois replacement tax recovery | ( | ) | ( | ) | ||||
| Tax effect on change in tax rate | ||||||||
| Change in valuation allowance | ||||||||
| Tax effect on other tax jurisdiction | ( | ) | ||||||
| Total income tax expense (recovery) | ( | ) | ||||||
| September 30, 2024 | June 30, 2024 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for credit loss | $ | $ | ||||||
| Lease liability – operating | ||||||||
| Lease liability – financing | ||||||||
| Non-capital loss carried forward | ||||||||
| Valuation allowance | ( | ) | ||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Right of use assets – operating | ( | ) | ( | ) | ||||
| Right of use assets – financing | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
27
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 — STOCKHOLDERS’ EQUITY
Common Stocks
The Company was incorporated
under the laws of the State of Nevada on August 28, 2023. In accordance with the Company’s Articles of Incorporation, the Company
is authorized to issue
On October 25, 2023,
the Company amended its Articles of Incorporation to increase its number of authorized common stocks from
On March 29, 2024, a
On
July 1, 2024, the Company closed its IPO of
As of September 30, 2024 and
June 30, 2024,
Additional Paid-in Capital
The Company transferred its accumulated retained earnings as of September 23, 2023 from retained earnings to additional paid-in capital as the original owners’ contribution to the capital of the Company upon the Reorganization and the termination of S corporation for ABL Chicago. For the period ended September 30, 2024, the Company closed its IPO and net proceed from offering, deducted by the IPO deferring cost and par value was transferred to additional paid-in capital.
Representative’s Warrants
Pursuant to the Underwriting
Agreement, the Company issued to the Representative and its designee warrants (the “Representative’s Warrants”) to purchase
Management determined that
these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to their own shares and meet
the requirements for equity classification. The warrants were recorded at their fair value on the date of grant as a component of shareholders’
equity. The fair value of these warrants was $
As of September 30, 2024,
NOTE 12 — EARNINGS PER SHARE
For the three months ended September 30, 2024, the Company has no stock
option issued and its warrants are considered to be antidilutive. Thus, no impact on diluted earnings per share.
| For
the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to the Company | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding – Basic and Diluted | ||||||||
| Loss per share – Basic and Diluted | $ | ( | ) | $ | ( | ) | ||
28
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 13 — CONCENTRATIONS AND CREDIT RISK
The Company had two and two third-party customers and one and no related-party customer individually generated over 10% of the Company’s total revenue for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and June 30, 2024, the Company had two and one third-party customers and one and no related-party customer individually represented over 10% of account receivables, respectively.
The Company had no and no third-party suppliers and no and one related-party suppliers individually represented over 10% of the Company’s cost of revenue for three months ended September 30, 2024 and 2023, respectively. The Company had no and one third-party supplier and no and one related-party supplier represented over 10% of the Company’s accounts payable as of September 30, 2024 and June 30, 2024, respectively.
NOTE 14 — SEGMENT REPORTING
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
Management of the Company
concludes that it has only
The Company’s CEO reviews
consolidated results when making decisions about allocating resources and assessing performance of the Company, rather than by service
types or customer geographic location; hence the Company concluded it has only
The following table presents sales by service type for the three months ended September 30, 2024 and 2023, respectively:
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cross-border ocean freights solutions | $ | $ | ||||||
| Cross-border airfreights solutions | ||||||||
| Total revenue | $ | $ | ||||||
The following table presents sales by customer geographic location for the three months ended September 30, 2024 and 2023, respectively:
| For the three
months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Asia-based customers | $ | $ | ||||||
| U.S.-based customers | ||||||||
| Total revenue | $ | $ | ||||||
29
LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 15 — COMMITMENTS AND CONTINGENCIES
Contractual Commitments
| Contractual Obligations | Total | Less than 1 year | 1 – 3 years | 3 – 5 years | More than 5 years | |||||||||||||||
| Operating lease obligations | $ | $ | $ | $ | $ | |||||||||||||||
| Finance lease obligations | ||||||||||||||||||||
| Vehicle loans | ||||||||||||||||||||
| Equipment loans | ||||||||||||||||||||
| Other loans | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
Contingencies
The Company may be involved in certain legal proceedings, claims and disputes arising from the commercial operations, which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity as of September 30, 2024 and June 30, 2024.
NOTE 16 — SUBSEQUENT EVENTS
The Company evaluated all events and transactions that occurred after September 30, 2024 up through the date the Company issued these consolidated financial statements, and unless disclosed below, there are not any material subsequent events that require disclosure in these consolidated financial statements.
Equity Transfer Agreement
On November 5, 2024, Sichuan
Hupan Jincheng Enterprise Management Co., Ltd ("Sichuan Hupan"), a wholly owned subsidiary of Lakeside Holding Limited ("Lakeside")
and a limited company incorporated in China, primarily in the business of pharmaceutical supply chain, entered into an equity transfer
agreement (the "Equity Transfer Agreement") with Hubei Haoyaoshi Zhenghe Pharmacy Chain Co., Ltd and Hubei Huayao Pharmaceutical
Co., Ltd to acquire
Hubei Haoyaoshi Zhenghe Pharmacy
Chain Co., Ltd and Hubei Huayao Pharmaceutical Co., Ltd. currently hold
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Item 2. 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 in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements.
Overview
We are a U.S.-based integrated cross-border supply chain solution provider with a strategic focus on the Asian market including China and South Korea. We primarily provide customized cross-border ocean freight solutions and airfreight solutions in the U.S. that specifically cater to our customers’ requirements and needs in transporting goods into the U.S. We offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.
Founded in Chicago, Illinois in 2018, we are an Asian American-owned business rooted in the U.S. with in-depth understanding of both the U.S. and Asian international trading and logistics service markets. Our customers are typically Asia- and U.S.-based logistics service companies serving large e-commerce platforms, social commerce platforms and manufacturers to sell and transport consumer and industrial goods made in Asia into the U.S. Since inception and as of September 30, 2024, we had served over 300 customers to fulfill over 45,000 cross-border supply chain solution orders.
We have established an extensive collaboration network of service providers, including global freight carriers for our cross-border freight consolidation and forwarding services as well as domestic ground transportation carriers for our U.S. domestic transportation services. Since inception and as of September 30, 2024, we had collaborated with almost all major global ocean and air carriers to forward 32,800 TEU of container loads and 55,100 tons of air cargo. As of September 30, 2024, we had also cooperated with over 200 domestic ground transportation carriers, including almost all major U.S. domestic ground transportation carriers, on a long-term, short-term or order basis, as the case may be.
We operate three massive and hyper-busy regional warehousing and distribution centers in the U.S., in Illinois and Texas. With an aggregate gross feet area of approximately 142,484 square feet and 52 docks, our regional warehousing and distribution centers have an aggregate daily floor load of up to 3,000 cubic meters of freight. In addition to our self-operated regional centers, we maintain close contact with over 150 warehouses and distribution terminals in almost all transportation hubs in the U.S. which we have cooperated in the past to support the warehousing and distributing services of our cross-border freight in case such freight requires storage, fulfilment, transloading, palletizing, packaging or distribution in states other than Illinois and Texas. As of September 30, 2024, we had assisted with the customs clearance, in conjunction with our other service offerings, of cross-border freight of an aggregate assessed value of over $42.6 million.
Leveraging our strong cross-border supply chain service capabilities, extensive service provider network of cross-border freight carriers and U.S. domestic ground transportation carriers, massive and hyper-busy regional warehousing and distribution centers as well as deep understanding of the Asian market, we have been able to build up our brand and reputation and have achieved fast growth since our inception. For the three months ended September 30, 2024 and 2023, our revenues amounted to $4.1 million and $4.1 million, respectively, and our gross profit amounted to $0.5 million and $0.6 million during the same periods, respectively. As of September 30, 2024, we had fulfilled over 45,000 cross-border supply chain solution orders for freight of an aggregate assessed value of $1.0 billion, delivered to thousands of business and residential addresses in approximately 48 U.S. states.
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Key Factors Affecting Our Results of Operations
We believe the most significant factors that affect our business and results of operations include the following:
Our Ability to Expand Our Customer Base
Our results of operations are dependent upon our ability to expand and maintain our customer base. Since inception and as of September 30, 2024, we had served over 300 customers to fulfill over 45,000 cross-border supply chain solution orders. We will continue to expand our customer base to achieve a sustainable business growth. We aim to attract new customers and maintain our existing customers. We plan to improve the quality and expand the variety of our services to obtain more customers.
Our Ability to Control Costs
Our results of operations are affected by our ability to control costs including transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation, which may be subject to factors, including, among other things, fluctuations in wage rates, fuel prices, toll fees, and leasing costs. Effective cost-control measures have a direct impact on our financial condition and results of operations. For example, our cross-border freight carrier and U.S. domestic ground transportation carrier services providers use large quantities of fuel to operate vehicles, and therefore, hence the higher fuel cost incurred by them may causes our higher fee rates cost charged on us by such the service providers. The availability and price of fuel and third-party transportation capacity are subject to political, economic, and market factors that are beyond our control. We also incur a significant amount of costs in relation to transportation and labor. Any unexpected increase in these costs, which is subject to factors beyond our control, could adversely impact our profitability. We have adopted, and expect to adopt, additional cost control measures. However, the measures we have adopted or will adopt in the future may not be as effective as expected. If we are not able to effectively control our costs and adjust the level of fee rates based on operating costs and market conditions, our profitability and cash flow may be adversely affected.
Our Ability to Provide High-quality Services
Our results of operations depend on our ability to maintain and further enhance our service quality. Together with our network of service providers, we provide integrated cross-border ocean and air freight supply chain solutions and services to our customers. If we or our service providers are unable to provide express delivery services in a timely, reliable, safe and secure manner, our reputation and customer loyalty could be negatively affected. In additional, if our customer service personnel fail to satisfy customer needs or respond effectively to customer complaints, we may lose potential or existing customers and experience a decrease in customer orders, which could have a material adverse effect on our business, financial condition and results of operations.
Strategic Acquisitions and Investments
Our results of operations also depend on our ability to pursue strategic acquisitions and investments in expanding our global footprints, diversifying our service offerings, and advancing our technologies. We may selectively pursue mergers, acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. However, we cannot assure you that we will make prudent decisions at all times. Our ability to successfully execute or effectively operate, integrate, leverage and grow these investments or strategic partnerships could impact our results of operations and financial conditions.
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Impact of COVID-19
The global spread of COVID-19 and the efforts to control it have slowed global economic activity and disrupted, and reduced the efficiency of, normal business activities in much of the world. The pandemic has resulted in authorities around the world implementing numerous unprecedented measures such as travel restrictions, quarantines, shelter in place orders, and factory and office shutdowns. These measures have impacted and will likely continue to impact our workforce and operations, and those of our customers and suppliers.
Delays and congestions at various ports as a result of the COVID-19 restrictions during the pandemic also prolonged the delivery times for certain of our cross-border freight. Additionally, ocean freight carriers have consolidated with the potential for more to occur in the future. COVID-19 has placed significant stress on our global ocean and air freight carriers, U.S. domestic ground transportation carriers as well as other service providers, which may result in reduced carrier capacity or availability, pricing volatility or more limited carrier transportation schedules and other services that we utilize, which could adversely impact our business, financial condition and results of operations.
In response to governmental directives and recommended safety measures, we have implemented personal safety measures at all of our facilities. However, these measures may not be sufficient to mitigate the risk of infection by COVID-19. If a significant number of our employees, or third parties performing key functions, including our chief executive officer and members of our board of directors, become ill, our business may be further adversely impacted.
The impact of COVID-19 pandemic on us in the future will depend on future developments which are highly unpredictable and beyond our control, such as the frequency, duration and severity of the resurgence of COVID-19 and the emergence of new variants, as well as the measures that may be taken by governments around the world in response to these developments, the impact of the pandemic on the global economy and the measures taken by governments to stimulate the general economy. Therefore, we cannot guarantee that the pandemic will not continue to have an adverse effect on our business and results of operations in the future, which may be material.
We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, service providers and stockholders.
Key Components of Results of Operations
Revenues. We generate revenues primarily by providing customized cross-border ocean freight solutions and airfreight solutions to customers that specifically cater to their requirements and needs in transporting goods into the U.S. Under the service agreements with our customers, we offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.
Cost of Revenues. Our cost of revenues mainly comprises transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation which includes operating and financing lease-related costs, depreciation expenses of property and equipment and other miscellaneous expenses.
General and Administrative Expenses. Our general and administrative expenses primarily include salaries and staff benefits, repair and maintenance expense, depreciation on property and equipment, lease expenses, travelling and entertainment, bank charges, legal and professional fees, insurance expenses and other office expenses.
Other Income. Our other income primarily consists of rental income, if any.
Interest Expenses. Our interest expenses primarily consist of the interest expenses incurred for finance leases, equipment loans, vehicle loans and other loans and interest for late credit card payment.
33
Income Tax Expenses. Our income tax expenses consist primarily of U.S. federal, state income taxes, replacement tax in the state of Illinois and PRC enterprise income tax.
Results of Operations
For the Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
The following table summarizes the results of condensed consolidated statements of operations and comprehensive income (unaudited) for the three months ended September 30, 2024 and 2023 in U.S. dollars.
| For the Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | 4,081,554 | 4,148,476 | ||||||
| Cost of revenue | 3,559,015 | 3,500,933 | ||||||
| Gross profit | 522,539 | 647,543 | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | 1,837,206 | 855,778 | ||||||
| Loss from deconsolidation of a subsidiary | - | 73,151 | ||||||
| Provision of allowance for expected credit loss | 12,837 | 52,122 | ||||||
| Total operating expenses | 1,850,043 | 981,051 | ||||||
| Loss from operations | (1,327,504 | ) | (333,508 | ) | ||||
| Other income (expense): | ||||||||
| Other income, net | 109,788 | 46,949 | ||||||
| Interest expense | (28,110 | ) | (22,785 | ) | ||||
| Total other income, net | 81,678 | 24,164 | ||||||
| Loss before income taxes | (1,245,826 | ) | (309,344 | ) | ||||
| Income taxes expense (recovery) | 89,581 | (2,059 | ) | |||||
| Net loss and comprehensive loss | (1,335,407 | ) | (307,285 | ) | ||||
| Net loss attributable to non-controlling interest | - | (3,025 | ) | |||||
| Net loss attributable to common stockholders | (1,335,407 | ) | (304,260 | ) | ||||
| Other comprehensive loss | ||||||||
| Foreign currency translation gain | 12,993 | 3,122 | ||||||
| Comprehensive loss | (1,322,414 | ) | (304,163 | ) | ||||
| Less: comprehensive loss attributable to non-controlling interest | - | (3,119 | ) | |||||
| Comprehensive loss attributable to the common shareholders | $ | (1,322,414 | ) | $ | (301,044 | ) | ||
The following table summarizes our consolidated results of operations and percentages of certain items in relation to total revenues for the three months ended September 30, 2024 and 2023, and provides information regarding the dollar and percentage increase or (decrease) during such periods. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.
| For the three months ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| Revenues | Amount | % of total Revenues | Amount | % of total Revenues | Amount Increase (Decrease) | Percentage Increase (Decrease) | ||||||||||||||||||
| Cross-border ocean freight solutions | $ | 1,836,591 | 45.0 | % | $ | 1,703,657 | 41.1 | % | $ | 132,934 | 7.8 | % | ||||||||||||
| Cross-border airfreight solutions | 2,244,963 | 55.0 | % | 2,444,819 | 58.9 | % | (199,856 | ) | (8.2 | )% | ||||||||||||||
| Total revenues | 4,081,554 | 100.0 | % | 4,148,476 | 100.0 | % | (66,922 | ) | (1.6 | )% | ||||||||||||||
| Cost of revenues | 3,559,015 | 87.2 | % | 3,500,933 | 84.4 | % | 58,082 | 1.7 | % | |||||||||||||||
| Gross profit | $ | 522,539 | 12.8 | % | $ | 647,543 | 15.6 | % | $ | (125,004 | ) | (19.3 | )% | |||||||||||
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Revenues
Our total revenues decreased by $66,922, or 1.6%, from $4,148,476 for the three months ended September 30, 2023, to $4,081,554 for the three months ended September 30, 2024. The decrease was primarily driven by a decrease in revenues from our cross-border airfreight solutions, partially offset by an increase in revenues from our cross-border ocean freight solutions.
Revenues from our cross-border airfreight solutions decreased by $0.2 million or 8.2%, from $2.4 million in the three months ended September 30, 2023, to $2.2 million in the three months ended September 30, 2024. The decrease was primarily due to a decrease in the volume of cross-border air freight processed, from approximately 7,816 tons for the three months ended September 30, 2023, to approximately 7,273 tons for the three months ended September 30, 2024.
Revenues from our cross-border ocean freight solutions increased by $0.1 million, or 7.8%, from $1.7 million in the three months ended September 30, 2023, to $1.8 million in the three months ended September 30, 2024. This growth was primarily due to an increase in the volume of cross-border ocean freights processed and forwarded, rising from 1,290 TEU in the three months ended September 30, 2023, to 1,430 TEU in the three months ended September 30, 2024.
We anticipate a revenue rebound in the next quarter, driven by increased air freight demand for the upcoming holiday season as online purchases surge. In response to rising customer demand, we have expanded our production capacity and are now equipped to handle a higher volume of purchase orders. Additionally, the continued decline in ocean freight charges is stimulating import and export activities, while the ongoing trend toward online shopping highlights the need for timely and competitively priced deliveries to end consumers.
Revenues by Customer Geographic
| For the three months ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| Revenues | Amount | % of total Revenues | Amount | % of total Revenues | Amount Increase (Decrease) | Percentage Increase (Decrease) | ||||||||||||||||||
| Asia-based customers | $ | 2,809,636 | 68.8 | % | $ | 1,694,223 | 40.8 | % | $ | 1,115,413 | 65.8 | % | ||||||||||||
| U.S.-based customers | 1,271,918 | 31.2 | % | 2,454,253 | 59.2 | % | (1,182,335 | ) | (48.2 | )% | ||||||||||||||
| Total revenues | $ | 4,081,554 | 100.0 | % | $ | 4,148,476 | 100.0 | % | $ | (66,922 | ) | (1.6 | )% | |||||||||||
Revenues from the Asia-based customers increased by $1.1 million, or 65.8%, from $1.7 million in the three months ended September 30, 2023, to $2.8 million in the three months ended September 30, 2024. Revenues from the U.S.-based customers decreased by $1.2 million, or 48.2%, from $2.5 million in the three months ended September 30, 2023 to $1.3 million in the same period in 2024.
The increase in revenues from Asia-based customers in the three months ended September 30, 2024, was driven by a surge in volume from these customers, particularly those serving large e-commerce platforms. This growth reflects the rising demand for our services, a direct result of the overall expansion of the U.S. e-commerce market.
35
The decrease in revenue from the U.S.-based customers in the three months ended September 30, 2024, compared to the same period in 2023, was primarily due to our strategic shift toward Asia-based e-commerce customers. Additionally, special projects with larger shipment volumes from U.S. customers were completed in the three months ended September 30, 2023, with no comparable projects in the same period in 2024.
Cost of Revenues
A breakdown of our cost of revenues for the three months ended September 30, 2024 and 2023 is as follows:
| For the three months ended September 30, | Amount Increase | Percentage Increase | ||||||||||||||
| 2024 | 2023 | (Decrease) | (Decrease) | |||||||||||||
| Transportation and delivery costs | $ | 1,633,890 | $ | 1,961,011 | $ | (327,121 | ) | (16.7 | )% | |||||||
| Warehouse service charges | 770,102 | 712,914 | 57,188 | 8.0 | % | |||||||||||
| Custom declaration and terminal charges | 441,624 | 420,323 | 21,301 | 5.1 | % | |||||||||||
| Freight arrangement charges | 164,340 | 103,178 | 61,162 | 59.3 | % | |||||||||||
| Overhead cost | 549,059 | 303,507 | 245,552 | 80.9 | % | |||||||||||
| Total cost of revenue | $ | 3,559,015 | $ | 3,500,933 | $ | 58,082 | 1.7 | % | ||||||||
Our cost of revenues increased by $0.1 million, or 1.7%, from $3.5 million in the three months ended September 30, 2023, to $3.6 million in the three months ended September 30, 2024. The increase in cost of revenues was mainly due to the combined effects of:
| (i) | an increase in our warehouse service charges, mainly representing labor costs at our regional warehousing and distribution centers during the three months ended September 30, 2024, due to (a) extended service hours to process higher volumes of cross-border airfreight, and (b) the hiring of additional employees at our regional warehousing and distribution centers to support our growing business; |
| (ii) | an increase in custom declaration and terminal charges, consisting of customs fees, handling charges, and entry service fees charged by ports and terminals during the three months ended September 30, 2024, resulting from the higher assessed value of cross-border freight, particularly airfreight, during the same period; |
| (iii) | an increase in freight arrangement charges, mainly representing scheduling and booking fees for cross-border ocean freight during the three months ended September 30, 2024, primarily due to increased business for cross boarder shipping from the U.S. to China; and |
| (iv) |
an increase in overhead costs, mainly comprising warehouse and equipment lease expenses, utilities, depreciation of property and equipment, and other direct costs during the three months ended September 30, 2024. The warehouse and equipment lease expenses increased significantly, from $207,807 in the three months ended September 30, 2023, to $410,193 in the three months ended September 30, 2024. The increase in lease expenses was primarily due to the addition of two warehouse agreements in the three months ended September 30, 2024, compared to the same period last year, and
| |
| (v) | A decrease in transportation and delivery costs, including trucking, drayage, chassis rental, freight and delivery cost during the three months ended September 30, 2024, which was primarily due to a reduction in delivery service provided to customers. Instead, we offered a more comprehensive service package, which included warehouse and transloading services. |
Gross Profit
Our gross profit decreased by $0.1 million, or 19.3%, from $0.6 million in the three months ended September 30, 2023, to $0.5 million in the three months ended September 30, 2024. Our gross margin was 12.8% for the three months ended September 30, 2024, compared to 15.6% for the three months ended September 30, 2023. The decline in gross margin was primarily attributable to (i) reduced revenue from the airfreight solution, and (ii) an increase in our cost of revenue in warehouse services, custom declaration and terminal charges, frights arrange charge and overhead costs allocated, as discussed above.
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General and Administrative Expenses
Our general and administrative expenses increased by $1.0 million, or 114.7%, from $0.9 million in the three months ended September 30, 2023, to $1.8 million in the three months ended September 30, 2024. These expenses represented 45.0% and 20.6% of our total revenues for the three months ended September 30, 2024 and 2023, respectively. The increase was primarily attributed to higher salary and employee benefit expenses, professional fee, office expense and traveling, insurance expense and entertainment expense:
Our salaries and employee benefits expenses increased by $0.3 million, or 116.9%, from $0.5 million in the three months ended September 30, 2023, to $0.8 million in the three months ended September 30, 2024. Our salaries and employee benefits expenses represented 50.3% and 66.8% of our total general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to the recruitment of additional sales, customer services, and back-office support personnel to support our business growth. For our salaries and employee benefits expenses, (i) our payroll expenses increased by $0.3 million, or 63.6%, from $0.5 million in the three months ended September 30, 2023, to $0.8 million in the three months ended September 30, 2024, and (ii) our employee benefit expenses, which mainly consist of 401(k) company contribution, meal allowance and health insurance expenses, increased by $0.01 million, or 53.3%, from $0.1 million in the three months ended September 30, 2023, to $0.2 million in the three months ended September 30, 2024, representing 8.9% and 12.5% of our total general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to rising employee health insurance premiums.
Our professional fee increased by $0.3 million, or 1,839.6%, from $17,535 in the three months ended September 30, 2023, to $340,114 in the three months ended September 30, 2024. Our professional fee represented 18.5% and 2.0% of our total general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively. The increase was primarily due to audit fee, legal fee, consulting expense, investor-related expenses and financial reporting service fees for the three months ended September 30, 2024. In the three months ended September 30, 2023, most of the expenses directly related to offering that were not included in professional fees, as they were accounted for as deferred initial public offering assets.
Our office expense represented 9.0% and 8.2% of our total general and administrative expenses for three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to office hardware including monitors and keyboard, printer ink, printer kits and charger purchased and more office supplies consumed due to more staff hired.
Our insurance expense increased by $68,937, or 1,452.6%, from $4,746 in the three months ended September 30, 2023, to $73,683 in the three months ended September 30, 2024. The increase was primarily due to purchasing insurance premiums for our directors and officers, as we became a public company in July 2024.
Our traveling and entertainment expense represented 6.9% and 8.4% of our total general and administrative expenses for three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to higher entertainment and gift expenses related to networking with our business partners.
Other Income, Net
Our other income, net, increased by $62,839, or 133.8%, from $46,949 in the three months ended September 30, 2023, to $109,788 in the three months ended September 30, 2024. The increase was primarily due to renting out part of our office space to our related party, Weship, for an additional two months during the three months ended September 30, 2024.
Interest Expenses
Our interest expenses for the three months ended September 30, 2024, remained relatively stable compared to same period in last year.
37
Loss Before Income Taxes
We had loss before income taxes of $1.2 million for the three months ended September 30, 2024, compared to loss before income taxes of $0.3 million for the three months ended September 30, 2023. We were in a loss position before income taxes for the three months ended September 30, 2024, primarily attributable to the net effects of: (i) the decrease in gross profit, (ii) the rise in operating expenses; and (iii) the increase in other income for the three months ended September 30, 2024 as mentioned above.
Income Tax Expense
We had income tax expense of $89,581 and income tax recovery of $2,059 in the three months ended September 30, 2024 and 2023, respectively. We did not have current income tax provision in the three months ended September 30, 2024, due to net operating loss, and we recognized a deferred income tax asset of $373,897 due to temporary differences recognized and net operating loss carried forward. We also recognized a valuation allowance of $463,478 to write off our deferred tax asset since we are uncertain that we will be able to utilize the deferred tax asset to offset future taxable income, resulting in a net deferred tax expense of $89,581 in the three months ended September 30, 2024. We did not have current income tax provision in the three months ended September 30, 2023, due to net operating loss, and we recognized a deferred income tax asset of $2,059, due to temporary differences recognized and a deferred income tax expense of $373,897 due to the change from an S Corporation to a C Corporation upon the completion of our reorganization on September 23, 2023. Since our transition to a C Corporation on September 23, 2023, ABL Chicago, our subsidiary in the U.S. is now obligated to pay federal tax at a rate of 21% and Illinois state tax at a rate of 7.5%. This tax obligation was previously exempt for us as an S Corporation.
Net Loss
As a result of the foregoing, we had a net loss of $1.3 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively.
Liquidity and Capital Resources
As of September 30, 2024, we had a cash and cash equivalent balance of $2.7 million. Our current assets were $5.8 million, and our current liabilities were $4.4 million, resulting in a current ratio of 1.3:1 and a positive working capital of $1.4 million. Total stockholders’ equity as of September 30, 2024 was $3.6 million.
As of September 30, 2024 and June 30, 2023, we had accounts receivable net of allowance of $2.3 million and $2.8 million, respectively. We periodically review our accounts receivable and allowance level to ensure our methodology for determining allowances is reasonable and to accrue additional allowances if necessary. For the accounts receivable, as of September 30, 2024 and June 30, 2023, we provided a credit loss allowance of $66,903 and $54,066, respectively.
In assessing our liquidity, we monitor and analyze our cash on hand, our ability to generate sufficient revenue sources in the future, and our operating and capital expenditure commitments. Historically, we have funded our working capital needs primarily through operations, loans, and working capital loans from stockholders. Since our offering closed in July 2024, we plan to use the proceeds to meet our ongoing working capital requirements. Our working capital requirements are influenced by the efficiency of our operations, the volume and dollar value of our revenue contracts, the progress or execution of customer contracts, and the timing of accounts receivable collections.
Cash Flows
The following table sets forth summary of our cash flows for the periods indicated:
| For the periods ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash (used in) provided by operating activities | $ | (1,402,784 | ) | $ | 40,357 | |||
| Net cash used in investing activities | (38,279 | ) | (78,799 | ) | ||||
| Net cash provided by financing activities | 4,044,402 | 66,760 | ||||||
| Effect of exchange rate changes on cash | 12,386 | 3,216 | ||||||
| Net increase in cash and cash equivalent | 2,615,725 | 31,534 | ||||||
| Cash and cash equivalent, beginning of the period | 123,550 | 174,018 | ||||||
| Cash and cash equivalent, end of the period | $ | 2,739,275 | $ | 205,552 | ||||
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Operating Activities
Net cash used in operating activities was $1,402,784 in the three months ended September 30, 2024, including net loss of $1,335,407, adjusted for non-cash items for $612,895 and changes in working capital of negative $680,272. The non-cash items primarily included $466,723 amortization of operating lease assets, $36,159 depreciation included in G&A and cost of revenue, $7,595 depreciation of right-of-use finance assets and $12,837 from provision of allowance for expected credit loss and a decrease of $89,581 from deferred tax asset due to recognition of valuation allowance. The adjustments for changes in working capital mainly included a decrease of $402,895 and $156,850 in accounts payable — third parties and related parties, respectively, an increase of $77,812 in due from related parties because of rental income recognized for the three months ended September 30, 2024, a decrease of $470,260 in operating lease liabilities and a decrease of $24,876 in accrued expense and other payable, partially offset by a decrease of $282,864 and $257,924 in accounts receivable — third parties and related parties, respectively, due to a decrease of revenues near period end.
Net cash provided by operating activities was $40,357 for the three months ended September 30, 2023, including net loss of $307,285, adjusted for non-cash items for $386,277, and changes in working capital of negative $38,635. The non-cash items primarily included $219,571 amortization of operating lease assets, $36,160 depreciation included in G&A and cost of revenue, $52,122 from provision of allowance for expected credit loss, and impacted by a loss of $73,151 from deconsolidation of a subsidiary. The adjustments for changes in working capital mainly included a decrease of $225,023 in operating lease liabilities, a decrease of $49,182 in due from related parties , an increase of $65,995 in accounts receivable — related parties and an increase of $138,491 in accounts receivable — third parties reflecting the impact of revenue growth combined with the timing of payments to third party providers, related parties and collections from clients on net working capital, partially offset by an increase of $133,904 in accounts payable — third parties, an increase of $141,213 in accounts payable — related parties, an increase of $37,739 in accrued expenses and other payables, and a decrease of $26,213 in contract assets.
The $1,443,141 increase in cash used in operating activities in the three months ended September 30, 2024 compared to the prior year was primarily due to an increase in net loss of $1,028,122 in the three months ended September 30, 2024 compared to same period in the prior year, together with an increase of $641,637 in cash outflow from working capital due to timing of vendor payments, client payments and related parties payment.
Investing Activities
Net cash used in investing activities was $38,279 and $78,799 for the three months ended September 30, 2024 and 2023, respectively. Net cash used in investing activities for the three months ended September 30, 2024, was primarily attributable to our purchases of property and equipment and the prepayment for the installation of a security system which was still in progress as of the period ended. On August 4, 2023, we reduced our unpaid registered capital contribution in our investee company in China, namely ABL Wuhan, and concurrently, the third-party shareholders increased their registered capital contribution accordingly. Following this change, the third-party shareholders own 80% of equity interest and we own 20% of equity interest in ABL Wuhan. Consequently, ABL Wuhan ceased to be the Company’s subsidiary after August 4, 2023. Therefore, we had cash outflow of $48,893 upon deconsolidation of a subsidiary and payment for registered capital of $29,906 during the three months ended September 30, 2023.
Financing Activities
Net cash provided by financing activities was $4,044,402 and $66,760 in the three months ended September 30, 2024 and 2023, respectively. The increase in net cash provided by financing activities was mainly due to the net proceeds of approximately $5,351,281 from the offering, partly offset by repayment of $879,574 to shareholders, loans repayment of $265,456 and advancement to related party of $126,227 during the three months ended September 30, 2024. The net cash provided by financing activities for the three months ended September 30, 2023, was primarily attributable proceeds from net proceed of loans of $102,863.
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Capital Expenditures
Our capital expenditures are incurred primarily in connection with the purchase of fixed assets, including machinery and equipment, furniture and fixtures, leasehold improvement and vehicles. Our capital expenditures amounted to $38,279 and $nil in the three months ended September 30, 2024 and 2023, respectively.
We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We intend to fund our future capital expenditures with our existing cash balance, proceeds of loans, working capitals loans from stockholders and the proceeds from our IPO which was closed in July 2024.
Commitments and Contractual Obligations
As of September 30, 2024, the Company’s contractual obligations consist of the following:
| Contractual Obligations | Total | Less than 1 year | 1 – 3 years | 3 – 5 years | More than 5 years | |||||||||||||||
| Operating lease obligations | $ | 5,104,017 | $ | 2,149,231 | $ | 2,020,342 | $ | 934,444 | $ | — | ||||||||||
| Finance lease obligations | 49,055 | 35,354 | 13,701 | — | — | |||||||||||||||
| Vehicle loans | 141,490 | 57,279 | 65,219 | 18,992 | — | |||||||||||||||
| Equipment loans | 76,320 | 48,823 | 27,497 | — | — | |||||||||||||||
| Other loans | 392,320 | 392,320 | — | — | — | |||||||||||||||
| Total | $ | 5,763,202 | $ | 2,683,007 | $ | 2,126,759 | $ | 953,436 | $ | — | ||||||||||
Off-Balance Sheet Commitments and Arrangements
There were no off-balance sheet arrangements as of and for the three months ended September 30, 2024 and 2023, that have, or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past two years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
Despite the fact that the management determines there are no critical accounting estimates, the most significant estimates relate to allowance for credit losses, for which we are required to estimate the collectability of accounts receivable, and contract asset relating to shipment in transit.
The estimates were based on a number of factors including historical experience, the age of the accounts receivable balances, the credit quality of customers, current and reasonably expected future economic conditions, and other factors that may affect our ability to collect from customers.
The estimated contract asset is based on the estimated completion percentage of the performance obligation. We believe that customers simultaneously benefit from the comprehensive services it provides. For customers with goods entering the United States, we offer customs clearance, container unloading, storage, unpacking, packing, and transportation services to customer-specified locations after the goods arrive at a U.S. seaport or airport. For customers shipping goods overseas, we provide cargo space arrangement, storage, packing, export customs clearance, and transportation to the seaport or airport for loading. The performance obligation is satisfied over time as customers receive the benefits of these services during the process of transporting goods from one location to another. As a result, we recognize revenue over time. We believe that the methodology employed is comparable to that of other global logistics companies and offers faithful depiction of the services rendered to customers.
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While our significant accounting policies are more fully described in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements, we believe that there were no critical accounting policies that affect the preparation of financial statements.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. Management is currently evaluating the provisions of this ASU and expect to adopt them for the year ending June 30, 2025.
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited consolidated balance sheets, statements of income (loss) and comprehensive income (loss) and statements of cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
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Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.
Based upon this evaluation, our management concluded that as of September 30, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
| ● | We are lacking adequate segregation of duties and effective risk assessment; and |
| ● | We are lacking sufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both the U.S. GAAP, and SEC guidelines. |
A material weakness is a deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We plan to address the weaknesses identified above by implementing the following measures:
| (i) | Continuously hiring additional accounting staffs with comprehensive knowledge of U.S. GAAP and SEC reporting requirements; |
| (ii) | Designing and implementing formal procedures and controls supporting the Company’s period-end financial reporting process, such as controls over the preparation and review of account reconciliations and disclosures in the consolidated financial statements; and |
| (iii) | Ameliorating our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internal controls related to financial reporting. |
Changes in Internal Control over Financial Reporting
During the most recent fiscal quarter, there has not been any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to legal proceedings, investigations and claims incidental to the conduct of our business. We are currently not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information otherwise required under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds from Initial Public Offering of Common Stock
On July 1, 2024, we closed our initial public offering ("IPO"), in which we sold 1,500,000 shares of common stock at a price to the public of $4.50 per share. The offer and sale of the shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-278416), which was declared effective by the Securities and Exchange Commission on June 27, 2024. We raised approximately $5.7 million in net proceeds after deducting underwriters' discounts and commissions as well as offering. As of the date of this report, with the proceeds of the IPO, we used approximately $1.8 million for in marketing activities and business expansion and used approximately $1.9 million for working capital needs. We expect to use the remaining net proceeds for (i) investment in strengthening our cross-border supply chain capabilities, (ii) marketing activities to grow our customer base, (iii) strategic investments and potential mergers and acquisitions in the future, and (iv) general corporate purposes.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
| # | This certification is deemed not filed for purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Lakeside Holding Limited | ||
| Dated: November 14, 2024 | By: | /s/ Henry Liu |
|
Henry Liu Chairman and Chief Executive Officer | ||
45
Exhibit 10.8
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is entered into as of 11 August 2024, by and between Liberty Property Limited Partnership (“Landlord”) and American Bear Logistics Corp (“Tenant”).
W I T N E S S E T H:
WHEREAS, Landlord and Tenant have entered into a Lease dated July 18, 2024, pursuant to which Landlord leased to Tenant certain premises consisting of approximately 56,264 square feet located at 1071 Thorndale Avenue, Bensenville, IL 60106 (the “Premises”), such lease, as heretofore modified, being herein referred to as the “Lease”; and
WHEREAS, a scrivener’s error occurred in the drafting of the Lease whereby the Building street address was drafted as 1071 Thorndale Avenue; and
WHEREAS, Landlord and Tenant hereby desire to correct the Building street address to 1065 Thorndale Avenue; and
WHEREAS, the parties hereto now desire to amend and modify said Lease as more fully hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the Premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. Landlord and Tenant hereby acknowledge and agree that the Building street address is hereby revised to reflect 1065 Thorndale Avenue.
2. Except as herein amended, the terms and conditions of the Lease and any amendments thereto, shall continue in full force and effect and the Lease (and any amendments thereto) as amended herein is hereby ratified and affirmed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the day and year first above written.
| TENANT: | LANDLORD: | |||
| AMERICAN BEAR LOGISTICS CORP. an Illinois S corporation |
LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership | |||
| By: | Liberty Property Trust a Maryland real estate investment trust its general partner | |||
| By: | /s/ Henry Liu | By: | /s/ Sean Olvany | |
| Name: | Henry Liu | Name: | Sean Olvany | |
| Title: | PRESIDENT | Title: | Vice President Market Officer | |
EXHIBIT 31.1
CERTIFICATION
I, Henry Liu, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Lakeside Holding Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Dated: November 14, 2024
| By: | /s/ Henry Liu | |
|
Henry Liu Chairman and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Long (Leo) Yi, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Lakeside Holding Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Dated: November 14, 2024
| By: | /s/ Long (Leo) Yi | |
|
Long (Leo) Yi Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION
In connection with the Quarterly Report of Lakeside Holding Limited (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Henry Liu, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
Dated: November 14, 2024
| By: | /s/ Henry Liu | |
|
Henry Liu Chairman and Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION
In connection with the Quarterly Report of Lakeside Holding Limited (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date here of (the “Report”), I, Long (Leo) Yi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
Dated: November 14, 2024
| By: | /s/ Long (Leo) Yi | |
|
Long (Leo) Yi Chief Financial Officer |