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What changed in SHENGFENG DEVELOPMENT Ltd's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of SHENGFENG DEVELOPMENT Ltd's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+619 added−594 removedSource: 20-F (2024-03-29) vs 20-F (2023-05-01)

Top changes in SHENGFENG DEVELOPMENT Ltd's 2023 20-F

619 paragraphs added · 594 removed · 491 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

225 edited+58 added−45 removed574 unchanged
Biggest changeBusiness Overview—Regulation—Regulations Relating to Internet Security.” 48 The Cybersecurity Law, which was adopted by the National People’s Congress on November 7, 2016 and came into force on June 1, 2017, and the Cybersecurity Review Measures, or the “2020 Review Measures,” which were promulgated on April 13, 2020, provide that personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affect or may affect national security, it should be subject to cybersecurity review by the CAC (defined hereinafter).
Biggest changeBusiness Overview—Regulation—Regulations Relating to Internet Security.” The Cybersecurity Law, which was adopted by the National People’s Congress on November 7, 2016 and came into force on June 1, 2017 provide that network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services.
Risk Factors—Risks Relating to Our Corporate Structure—Our VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements” and “—D.
Risk Factors—Risks Relating to Our Corporate Structure—Our VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements” and “—D.
We have evaluated the guidance in FASB ASC 810 and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a result of our direct ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE’s subsidiaries as our consolidated entities under U.S. GAAP.
We have evaluated the guidance in FASB ASC 810 and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a result of our direct ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE’s subsidiaries as our consolidated entities under U.S. GAAP.
We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
For example, Shengfeng Logistics and the Shengfeng Logistics Shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.
For example, Shengfeng Logistics and the Shengfeng Logistics Shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.
If we had direct ownership of Shengfeng Logistics, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Shengfeng Logistics, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level.
If we had direct ownership of Shengfeng Logistics, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Shengfeng Logistics, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level.
Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements with Shengfeng Logistics.
Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements with Shengfeng Logistics.
Furthermore, failure of the VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.
Furthermore, failure of the VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.
We are, therefore, subject to risks due to the uncertainty of the interpretation and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements with the VIE.
We are, therefore, subject to risks due to the uncertainty of the interpretation and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements with the VIE.
The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.
The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.
Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior March 31, 2023 but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior to March 31, 2023 but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023.
Those that complete their indirect overseas offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their indirect overseas offerings and listings.
Those that complete their indirect overseas offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their indirect overseas offerings and listings.
The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies”, and came into effect on March 31, 2023 together with the Trial Measures.
The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies”, and came into effect on March 31, 2023 together with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely to make such loans to Shengfeng Logistics, which is a PRC domestic company.
Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely to make such loans to Shengfeng Logistics, which is a PRC domestic company.
If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies”, and came into effect on March 31, 2023 together with the Trial Measures.
The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies”, and came into effect on March 31, 2023 together with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
The revised Provisions require that, including, but not limited, to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
The revised Provisions require that, including, but not limited, to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior March 31, 2023 but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior to March 31, 2023 but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023.
Those that complete their indirect overseas offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their indirect overseas offerings and listings.
Those that complete their indirect overseas offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their indirect overseas offerings and listings.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
The revised Provisions require that, including, but not limited to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
The revised Provisions require that, including, but not limited to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
(WFOE) (100% owned by Shengfeng HK) Shengfeng Logistics Group Co., Ltd. and its subsidiaries (VIE) Eliminations Consolidated Total $ in thousands Condensed Consolidating Schedule – Balance Sheet Assets: Current assets $ 47 $ - $ - $ 135,650 $ - $ 135,697 Receivable from VIE $ - $ - $ 91,695 $ - $ (91,695 ) $ - Investments in subsidiaries $ 91,695 $ 91,695 $ - $ - $ (183,390 ) $ - Non-current assets $ 91,776 $ 91,695 $ 91,695 $ 109,481 $ (275,085 ) $ 109,562 Total assets $ 91,823 $ 91,695 $ 91,695 $ 245,131 $ (275,085 ) $ 245,259 Liabilities: Current liabilities $ 600 $ - $ - $ 130,196 $ - $ 130,796 Payable to WFOE $ - $ - $ - $ 91,695 $ (91,695 ) $ - Non-current liabilities $ - $ - $ - $ 111,072 $ (91,695 ) $ 19,377 Total liabilities $ 600 $ - $ - $ 241,268 $ (91,695 ) $ 150,173 Total shareholders’ equity $ 91,223 $ 91,695 $ 91,695 $ 3,863 $ (183,390 ) $ 95,086 Total liabilities and shareholders’ equity $ 91,823 $ 91,695 $ 91,695 $ 245,131 $ (275,085 ) $ 245,259 Condensed Consolidating Schedule – Statement of Operations Revenues $ - $ - $ - $ 370,325 $ - $ 370,325 Cost of revenues $ - $ - $ - $ (328,793 ) $ - $ (328,793 ) Gross profit $ - $ - $ - $ 41,532 $ - $ 41,532 Operating expenses $ (472 ) $ - $ - $ (31,214 ) $ - $ (31,686 ) Technical service income from VIE and its subsidiaries (1) $ - $ - $ 8,298 $ - $ (8,298 ) $ - Technical Service expense in WFOE (1) $ - $ - $ - $ (8,298 ) $ 8,298 $ - Income for equity method investments $ 8,298 $ 8,298 $ - $ - $ (16,596 ) $ - Net income $ 7,826 $ 8,298 $ 8,298 $ - $ (16,596 ) $ 7,826 Condensed Consolidating Schedule – Statement of Cash Flows Net cash provided by (used in) operating activities $ (472 ) $ - $ - $ 7,402 $ - $ 6,930 Net cash used in investing activities $ - $ - $ - $ (6,715 ) $ - $ (6,715 ) Net cash provided by financing activities $ 519 $ - $ - $ 5,530 $ - $ 6,049 Effects of exchange rate changes on cash and restricted cash $ - $ - $ - $ (1,814 ) $ - $ (1,814 ) Net increase in cash and restricted cash $ 47 $ - $ - $ 4,403 $ - $ 4,450 Cash and restricted cash, beginning of year $ - $ - $ - $ 18,918 - $ 18,918 Cash and restricted cash, end of year $ 47 $ - $ - $ 23,321 $ - $ 23,368 Inter-company cash transfers (2) $ - $ - $ - $ - $ - $ - 17 As of and for the year ended December 31, 2021 Shengfeng Development Limited (Shengfeng Cayman) Shengfeng HK (100% owned by Shengfeng Cayman) Fujian Tianyu Shengfeng Logistics Co., Ltd.
(WFOE) (100% owned by Shengfeng HK) Shengfeng Logistics Group Co., Ltd. and its subsidiaries (VIE) Eliminations Consolidated Total $ in thousands Condensed Consolidating Schedule – Balance Sheet Assets: Current assets $ 47 $ - $ - $ 135,650 $ - $ 135,697 Receivable from VIE $ - $ - $ 91,695 $ - $ (91,695 ) $ - Investments in subsidiaries $ 91,695 $ 91,695 $ - $ - $ (183,390 ) $ - Non-current assets $ 91,776 $ 91,695 $ 91,695 $ 109,481 $ (275,085 ) $ 109,562 Total assets $ 91,823 $ 91,695 $ 91,695 $ 245,131 $ (275,085 ) $ 245,259 Liabilities: Current liabilities $ 600 $ - $ - $ 130,196 $ - $ 130,796 Payable to WFOE $ - $ - $ - $ 91,695 $ (91,695 ) $ - Non-current liabilities $ - $ - $ - $ 111,072 $ (91,695 ) $ 19,377 Total liabilities $ 600 $ - $ - $ 241,268 $ (91,695 ) $ 150,173 Total shareholders’ equity $ 91,223 $ 91,695 $ 91,695 $ 3,863 $ (183,390 ) $ 95,086 Total liabilities and shareholders’ equity $ 91,823 $ 91,695 $ 91,695 $ 245,131 $ (275,085 ) $ 245,259 Condensed Consolidating Schedule – Statement of Operations Revenues $ - $ - $ - $ 370,325 $ - $ 370,325 Cost of revenues $ - $ - $ - $ (328,793 ) $ - $ (328,793 ) Gross profit $ - $ - $ - $ 41,532 $ - $ 41,532 Operating expenses $ (472 ) $ - $ - $ (31,214 ) $ - $ (31,686 ) Technical service income from VIE and its subsidiaries (1) $ - $ - $ 8,298 $ - $ (8,298 ) $ - Technical Service expense in WFOE (1) $ - $ - $ - $ (8,298 ) $ 8,298 $ - Income for equity method investments $ 8,298 $ 8,298 $ - $ - $ (16,596 ) $ - Net income $ 7,826 $ 8,298 $ 8,298 $ - $ (16,596 ) $ 7,826 Condensed Consolidating Schedule – Statement of Cash Flows Net cash provided by (used in) operating activities $ (472 ) $ - $ - $ 7,402 $ - $ 6,930 Net cash used in investing activities $ - $ - $ - $ (6,715 ) $ - $ (6,715 ) Net cash provided by financing activities $ 519 $ - $ - $ 5,530 $ - $ 6,049 Effects of exchange rate changes on cash and restricted cash $ - $ - $ - $ (1,814 ) $ - $ (1,814 ) Net increase in cash and restricted cash $ 47 $ - $ - $ 4,403 $ - $ 4,450 Cash and restricted cash, beginning of year $ - $ - $ - $ 18,918 - $ 18,918 Cash and restricted cash, end of year $ 47 $ - $ - $ 23,321 $ - $ 23,368 Inter-company cash transfers (2) $ - $ - $ - $ - $ - $ - 17 As of and for the year ended December 31, 2021 Shengfeng Development Limited (Shengfeng Cayman) Shengfeng HK (100% owned by Shengfeng Cayman) Tianyu Shengfeng Logistics Group Co., Ltd.
(3) As of the date of this annual report, Shengfeng Logistics is held by Fujian Yunlian Shengfeng Industry Co., Ltd., which is 90% owned by Yongxu Liu, who is our chief executive officer, chairman of the board and president, as to 54.58%, Yongxu Liu directly as to 30.99%, Zhoushan Zhongxin Equity Investment Partnership (Limited Partnership) as to 1.5%, Zhoushan Guancheng Equity Investment Partnership (Limited Partnership) as to 2%, Daqiu Tang as to 0.85%, Yelie Song as to 0.97%, Zhiping Yang as to 1.58%, Chaoxin Yang as to 0.96%, Guangsheng Lin as to 0.85%, Zhuangyuan Lin as to 2.59%, Zhongdeng Pan as to 2.13% and Yufan Chen as to 1%, who collectively hold 100% of the shares of Shengfeng Logistics.
(1) As of the date of this annual report, Shengfeng Logistics is held by Fujian Yunlian Shengfeng Industry Co., Ltd., which is 90% owned by Yongxu Liu, who is our chief executive officer, chairman of the board and president, as to 54.58%, Yongxu Liu directly as to 30.99%, Zhoushan Zhongxin Equity Investment Partnership (Limited Partnership) as to 1.5%, Zhoushan Guancheng Equity Investment Partnership (Limited Partnership) as to 2%, Daqiu Tang as to 0.85%, Yelie Song as to 0.97%, Zhiping Yang as to 1.58%, Chaoxin Yang as to 0.96%, Guangsheng Lin as to 0.85%, Zhuangyuan Lin as to 2.59%, Zhongdeng Pan as to 2.13% and Yufan Chen as to 1%, who collectively hold 100% of the shares of Shengfeng Logistics.
The revised Provisions require that, including, but not limited to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. 12 As of the date of this annual report, the revised Provisions have come into effect, and any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
The revised Provisions require that, including, but not limited to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. 11 As of the date of this annual report, the revised Provisions have come into effect, and any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
Some provisions of our amended and restated memorandum and articles of association may discourage, delay, or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following: ● provisions that authorize our board of directors to issue shares with preferred, deferred, or other special rights or restrictions without any further vote or action by our shareholders; and ● provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings.
Some provisions of our amended and restated memorandum and articles of association may discourage, delay, or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following: ● provisions that authorize our board of directors to issue shares with preferred, deferred, or other special rights or restrictions without any further vote or action by our shareholders; and ● provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings. 57
In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, results of operations, and the offering..” Since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (i) establishing the National Anti-Monopoly Bureau; (ii) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law of the PRC (amended on June 24, 2022 and effective on August 1, 2022), the anti-monopoly guidelines for various industries, and the Detailed Rules for the Implementation of the Fair Competition Review System; and (iii) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises.
In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our continued listing on Nasdaq, our financial condition, results of operations, and the subsequent offering.” Since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (i) establishing the National Anti-Monopoly Bureau; (ii) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law of the PRC (amended on June 24, 2022 and effective on August 1, 2022), the anti-monopoly guidelines for various industries, and the Detailed Rules for the Implementation of the Fair Competition Review System; and (iii) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises.
As of the date of this annual report, the revised Provisions came into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
As of the date of this annual report, the revised Provisions came into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any regulatory objection from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
As of the date of this annual report, the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
As of the date of this annual report, the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any regulatory objection from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
Notwithstanding the foregoing, as of the date of this annual report, we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
Notwithstanding the foregoing, as of the date of this annual report, we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction or any regulatory objection from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
The COVID-19 pandemic resulted in a series of governmental orders and mandates, including lockdowns, closures, quarantines, and travel bans in order to contain and control the spread of the virus. Consequently, the COVID-19 pandemic has materially and adversely affected our business operations and conditions and operating results for 2020, including material negative impact on our total revenue and net income.
The COVID-19 pandemic resulted in a series of governmental orders and mandates, including lockdowns, closures, quarantines, and travel bans in order to contain and control the spread of the virus. 44 Consequently, the COVID-19 pandemic has materially and adversely affected our business operations and conditions and operating results for 2020, including material negative impact on our total revenue and net income.
Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Ordinary Shares. Since we are a “controlled company” within the meaning of the Nasdaq listing rules, we may follow certain exemptions from certain corporate governance requirements that could adversely affect our public shareholders.
Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Ordinary Shares. 52 Since we are a “controlled company” within the meaning of the Nasdaq listing rules, we may follow certain exemptions from certain corporate governance requirements that could adversely affect our public shareholders.
We will continue investigating and monitoring our compliance status in connection with PRC labor-related laws and regulations in order to promptly address any shortfall going forward. 33 The interpretation and implementation of labor-related laws and regulations are still constantly evolving which may be further amended from time to time.
We will continue investigating and monitoring our compliance status in connection with PRC labor-related laws and regulations in order to promptly address any shortfall going forward. The interpretation and implementation of labor-related laws and regulations are still constantly evolving which may be further amended from time to time.
Business Overview—Regulations—The Interim Provisions on Labor Dispatching .” 34 The term “labor dispatch” refers to an atypical employment relationship pursuant to which the dispatch work agencies enter into employment agreements with the workers, and then send such dispatched workers to the enterprises which have entered into labor dispatch service agreements with the dispatch work agencies to provide services.
Business Overview—Regulations—The Interim Provisions on Labor Dispatching.” The term “labor dispatch” refers to an atypical employment relationship pursuant to which the dispatch work agencies enter into employment agreements with the workers, and then send such dispatched workers to the enterprises which have entered into labor dispatch service agreements with the dispatch work agencies to provide services.
Risk Factors — Risks Relating to Our Corporate Structure—The VIE Agreements may result in adverse tax consequences.” 38 Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
Risk Factors — Risks Relating to Our Corporate Structure—The VIE Agreements may result in adverse tax consequences.” Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
As of the date of this annual report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our or the PRC operating entities’ ability to conduct business or our ability to accept foreign investments or issue our securities to foreign investors because neither we and our subsidiaries, nor the VIE and the VIE’s subsidiaries engage in monopolistic behaviors that are subject to these statements or regulatory actions. 10 On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023.
As of the date of this annual report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our or the PRC operating entities’ ability to conduct business or our ability to accept foreign investments or issue our securities to foreign investors because neither we and our subsidiaries, nor the VIE and the VIE’s subsidiaries engage in monopolistic behaviors that are subject to these statements or regulatory actions. 9 On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.” Dividend Distributions, Cash Transfer, and Tax Consequences Shengfeng Cayman transfers cash to its wholly-owned Hong Kong subsidiary, Shengfeng HK, by making capital contributions or providing loans, and the Hong Kong subsidiary transfers cash to the subsidiary in China by making capital contributions or providing loans to it.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.” Dividend Distributions, Cash Transfer, and Tax Consequences Shengfeng Cayman transfers cash to its wholly-owned Hong Kong subsidiary, Shengfeng HK, by making capital contributions or providing loans, and the Hong Kong subsidiary transfers cash to the subsidiary in China by making capital contributions or providing loans to it.
We face risks related to complying with applicable laws, rules, and regulations relating to the collection, use, disclosure, and security of personal information, as well as any requests from regulatory and government authorities relating to such data. We could be subject to cybersecurity review in the future.
However, we face risks related to complying with applicable laws, rules, and regulations relating to the collection, use, disclosure, and security of personal information, as well as any requests from regulatory and government authorities relating to such data. We could be subject to cybersecurity review in the future.
We, through the VIE and the VIE’s subsidiaries, also donated some epidemic prevention materials to areas and entities in need. These measures reduced the capacity and efficiency of our operations and increased our expenditures. 45 The spread of COVID-19 has caused us to incur incremental costs.
We, through the VIE and the VIE’s subsidiaries, also donated some epidemic prevention materials to areas and entities in need. These measures reduced the capacity and efficiency of our operations and increased our expenditures. The spread of COVID-19 has caused us to incur incremental costs.
If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting. 54 If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including: ● a limited availability for market quotations for our securities; ● reduced liquidity with respect to our securities; ● a determination that our Class A Ordinary Share is a “penny stock,” which will require brokers trading in our Class A Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Class A Ordinary Share; ● limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting. 55 If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including: ● a limited availability for market quotations for our securities; ● reduced liquidity with respect to our securities; ● a determination that our Class A Ordinary Share is a “penny stock,” which will require brokers trading in our Class A Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Class A Ordinary Share; ● limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.” Risks Associated with being based in the PRC We are subject to certain legal and operational risks associated with having the majority of our operations in China, which could cause the value of our securities to significantly decline or become worthless.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.” Risks Associated with being based in the PRC We are subject to certain legal and operational risks associated with having the majority of our operations in China, which could cause the value of our securities to significantly decline or become worthless.
Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected. 42 The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.
Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected. The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.
If fuel prices rise significantly in the future, we will experience pressure of increased costs. Our past growth rates may not be indicative of our future growth, and if we are not able to manage our growth effectively, our business and prospects may be materially and adversely affected.
If fuel prices rise significantly in the future, we will experience the pressure of increased costs. 46 Our past growth rates may not be indicative of our future growth, and if we are not able to manage our growth effectively, our business and prospects may be materially and adversely affected.
Risk Factors—Risks Relating to Doing Business in the PRC—Our PRC subsidiary is subject to restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.” 15 If needed, cash can be transferred between our holding company and subsidiaries through intercompany fund advances, and there are currently no restrictions on transferring funds between our Cayman Islands holding company and subsidiaries in Hong Kong and mainland China, other than certain restrictions and limitations imposed by the PRC government.
Risk Factors—Risks Relating to Doing Business in the PRC—Our PRC subsidiary is subject to restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.” 14 If needed, cash can be transferred between our holding company and subsidiaries through intercompany fund advances, and there are currently no restrictions on transferring funds between our Cayman Islands holding company and subsidiaries in Hong Kong and mainland China, other than certain restrictions and limitations imposed by the PRC government.
If Shengfeng Logistics or the VIE’s subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict any such party’s ability to pay dividends or make other distributions to us. 14 Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity.
If Shengfeng Logistics or the VIE’s subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict any such party’s ability to pay dividends or make other distributions to us. 13 Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity.
We refer to the above shareholders of Shengfeng Logistics as the “Shengfeng Logistics Shareholders.” 3 For details of our principal shareholders’ ownership, please refer to the beneficial ownership table in the section captioned “Item 6. Directors, Senior Management and Employees—E.
We refer to the above shareholders of Shengfeng Logistics as the “Shengfeng Logistics Shareholders.” For details of our principal shareholders’ ownership, please refer to the beneficial ownership table in the section captioned “Item 6. Directors, Senior Management and Employees—E.
We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor. 23 Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company, except that we could exercise our purchase option under the exclusive call option agreements with these shareholders to request them to transfer all of their equity interests in Shengfeng Logistics to a PRC entity or individual designated by us, to the extent permitted by PRC law.
We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor. 22 Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company, except that we could exercise our purchase option under the exclusive call option agreements with these shareholders to request them to transfer all of their equity interests in Shengfeng Logistics to a PRC entity or individual designated by us, to the extent permitted by PRC law.
Business Overview—Regulations—Regulations relating to Internet Information Security and Privacy Protection .” We have limited insurance coverage which could expose us to significant costs and business disruption. We maintain various insurance policies to safeguard against risks and unexpected events.
Business Overview—Regulations—Regulations relating to Internet Information Security and Privacy Protection .” 50 We have limited insurance coverage which could expose us to significant costs and business disruption. We maintain various insurance policies to safeguard against risks and unexpected events.
As a result, there is no assurance that foreign investment via contractual arrangements would not be interpreted as a type of indirect foreign investment activities under the definition in the future. 24 If we are deemed to have a non-PRC entity as a controlling shareholder, the provisions regarding control through contractual arrangements could apply to our VIE Agreements, and as a result Shengfeng Logistics might become subject to restrictions on foreign investment, which may materially impact the viability of our current and future operations.
As a result, there is no assurance that foreign investment via contractual arrangements would not be interpreted as a type of indirect foreign investment activities under the definition in the future. 23 If we are deemed to have a non-PRC entity as a controlling shareholder, the provisions regarding control through contractual arrangements could apply to our VIE Agreements, and as a result Shengfeng Logistics might become subject to restrictions on foreign investment, which may materially impact the viability of our current and future operations.
Furthermore, if the PRC government determines that the contractual arrangements constituting part of our VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently in the future, our Class A Ordinary Shares may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of the VIE and the VIE’s subsidiaries that conduct substantially all of our operations in China. 21 Our VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be effective in providing control over Shengfeng Logistics.
Furthermore, if the PRC government determines that the contractual arrangements constituting part of our VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently in the future, our Class A Ordinary Shares may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of the VIE and the VIE’s subsidiaries that conduct substantially all of our operations in China. 20 Our VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be effective in providing control over Shengfeng Logistics.
In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, results of operations, and the offering.
In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our continued listing on Nasdaq, our financial condition, results of operations, and the subsequent offering.
As of the date of this annual report, the share pledges under the Equity Pledge Agreement have been registered with the competent PRC regulatory authority. 8 Exclusive Call Option Agreement Under the Call Option Agreement, the Shengfeng Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, irrevocably granted Tianyu (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their shares in Shengfeng Logistics in consideration of the payment of RMB1.
As of the date of this annual report, the share pledges under the Equity Pledge Agreement have been registered with the competent PRC regulatory authority. 7 Exclusive Call Option Agreement Under the Call Option Agreement, the Shengfeng Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, irrevocably granted Tianyu (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their shares in Shengfeng Logistics in consideration of the payment of RMB1.
Any of these actions by the PRC government may have a material and adverse effect on our results of operations. Relevant state policies on environmental protection may affect our future performance.
Any of these actions by the PRC government may have a material and adverse effect on our results of operations. 45 Relevant state policies on environmental protection may affect our future performance.
Measures that we implement may not fully address the material weakness in our internal control over financial reporting and we may not be able to conclude that the material weakness has been fully remedied.
Measures that we expect to implement may not fully address the material weakness in our internal control over financial reporting and we may not be able to conclude that the material weakness has been fully remedied.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.” 7 Each of the VIE Agreements is described in detail below: Exclusive Technical Consultation and Service Agreement Pursuant to the Technical Consultation and Service Agreement between Shengfeng Logistics and Tianyu, Tianyu provides Shengfeng Logistics with consultation and services in the areas of funding, human, technology and intellectual properties, including, but not limited to, training and technical support, marketing consultation services, general advice and assistance relating to management and operation of Shengfeng Logistics’ business, and other consultation and services which are necessary for Shengfeng Logistics’ business, on an exclusive basis, utilizing its resources.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.” 6 Each of the VIE Agreements is described in detail below: Exclusive Technical Consultation and Service Agreement Pursuant to the Technical Consultation and Service Agreement between Shengfeng Logistics and Tianyu, Tianyu provides Shengfeng Logistics with consultation and services in the areas of funding, human, technology and intellectual properties, including, but not limited to, training and technical support, marketing consultation services, general advice and assistance relating to management and operation of Shengfeng Logistics’ business, and other consultation and services which are necessary for Shengfeng Logistics’ business, on an exclusive basis, utilizing its resources.
Yongxu Liu, our chief executive officer and Chairman and a PRC citizen beneficially and indirectly owns 41,880,000 Class B Ordinary Shares, representing approximately 91.66% of the voting rights in our Company. It is uncertain, however, if these factors would be sufficient to give them control over us under the Foreign Investment Law.
Yongxu Liu, our chief executive officer and Chairman and a PRC citizen beneficially and indirectly owns 41,880,000 Class B Ordinary Shares, representing approximately 91.16% of the voting rights in our Company. It is uncertain, however, if these factors would be sufficient to give them control over us under the Foreign Investment Law.
As a result, we have experienced lower efficiency, increased aging of our trade receivable, longer collection period and more bad debts. which could adversely affect our business operation. However, by leveraging our advantages in the logistics fields and our networks, our results of operation for the year ended December 31, 2022 have not been materially negatively affected by the COVID-19.
As a result, we have experienced lower efficiency, increased aging of our trade receivable, longer collection period and more bad debts. which could adversely affect our business operation. However, by leveraging our advantages in the logistics fields and our networks, our results of operation for the year ended December 31, 2023 have not been materially negatively affected by the COVID-19.
As of the date of this annual report, Mr. Yongxu Liu, our chief executive officer and Chairman, beneficially owns 41,880,000, or 100%, of our issued Class B Ordinary Shares, representing approximately 91.18% of the voting rights in our Company. As a result, until such time as Mr. Yongxu Liu’s voting power is below 50%, Mr.
As of the date of this annual report, Mr. Yongxu Liu, our chief executive officer and Chairman, beneficially owns 41,880,000, or 100%, of our issued Class B Ordinary Shares, representing approximately 91.16% of the voting rights in our Company. As a result, until such time as Mr. Yongxu Liu’s voting power is below 50%, Mr.
If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our Class A Ordinary Shares. 39 The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.
If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our Class A Ordinary Shares. 37 The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.
Our PRC legal counsel has advised us, based on their understanding of the current PRC law, rules, and regulations that the CSRC’s approval is not required for the listing and trading of our shares on Nasdaq in the context of this offering, given that: ● we established our PRC subsidiary by means of direct investment rather than by merger with or acquisition of PRC domestic companies as defined in the M&A Rules; ● the CSRC already promulgated the Trial Measures and its supporting guidelines, which came into effect on March 31, 2023.
Our PRC legal counsel has advised us, based on their understanding of the current PRC law, rules, and regulations that the CSRC’s approval is not required for the listing and trading of our shares on Nasdaq, given that: ● we established our PRC subsidiary by means of direct investment rather than by merger with or acquisition of PRC domestic companies as defined in the M&A Rules; ● the CSRC already promulgated the Trial Measures and its supporting guidelines, which came into effect on March 31, 2023.
Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the Class A Ordinary Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur. 40 We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.
Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the Class A Ordinary Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur. 38 We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless.
Nasdaq Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company’s common stock or voting power for less than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended.
Nasdaq Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company’s ordinary share or voting power for less than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended.
In the event that we are unable to enforce the VIE Agreements, we may not be able to exert effective control over Shengfeng Logistics, and our ability to conduct our business may be materially and adversely affected. 22 Our VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements.
In the event that we are unable to enforce the VIE Agreements, we may not be able to exert effective control over Shengfeng Logistics, and our ability to conduct our business may be materially and adversely affected. 21 Our VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas; and d) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
The New Overseas Listing Rules further require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; and c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”).
According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as the Existing Issuers.
Other than the social insurance and housing fund contributions and the estimate of costs to reduce the number of dispatched workers, we are currently not able to quantify the contribution amounts that we will need to make for us to be in full compliance with all PRC labor-related laws and regulations.
Other than the social insurance and housing fund contributions and the estimate of costs to maintain or reduce the number of dispatched workers, we are currently not able to quantify the contribution amounts that we will need to make for us to be in full compliance with all PRC labor-related laws and regulations.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas; and d) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
The New Overseas Listing Rules further require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; and c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
As a result, we may be subject to challenges, lawsuits or other actions taken against us with respect to the properties leased to us that are without valid title certificates from the relevant lessors. 44 Under PRC laws, all lease agreements are required to be registered with the local housing authorities.
As a result, we may be subject to challenges, lawsuits or other actions taken against us with respect to the properties leased to us that are without valid title certificates from the relevant lessors. 43 Under PRC laws, all lease agreements are required to be registered with the local housing authorities.
Shengfeng Development Limited is a holding company incorporated in the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its own, its operations have been conducted in China by its subsidiaries and through contractual arrangements, or VIE Agreements, with a VIE, Shengfeng Logistics, and the VIE’s subsidiaries.
Shengfeng Development Limited is a holding company incorporated under the laws of the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its own, its operations have been conducted in China by its subsidiaries and through contractual arrangements, or VIE Agreements, with a VIE, Shengfeng Logistics, and the VIE’s subsidiaries.
Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however, the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules involve uncertainties. 26 From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however, the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules involve uncertainties. 25 From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
These developments could add uncertainties to our offering.” 11 Permissions Required from the PRC Authorities for The VIE’s Operations and the Company’s Issuance of Securities to Foreign Investors We are currently not required to obtain permission from any of the PRC authorities to operate and issue our Class A Ordinary Shares to foreign investors.
These developments could add uncertainties to our offering.” 10 Permissions Required from the PRC Authorities for The VIE’s Operations and the Company’s Issuance of Securities to Foreign Investors We are currently not required to obtain permission from any of the PRC authorities to operate and issue our Class A Ordinary Shares to foreign investors.
For more details, see “—Our VIE Agreements.” Our shares and per share data as of December 31, 2022 and 2021 have been presented on a retroactive basis to reflect the Reorganization. 1 History of Share Issuances The following is a summary of our share issuances since incorporation.
For more details, see “—Our VIE Agreements.” Our shares and per share data as of December 31, 2023 and 2022 have been presented on a retroactive basis to reflect the Reorganization. 1 History of Share Issuances The following is a summary of our share issuances since incorporation.
Nevertheless, Shengfeng HK, as an entity incorporated under law of Hong Kong, shall be subject to Hong Kong law in general. 25 While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy.
Nevertheless, Shengfeng HK, as an entity incorporated under law of Hong Kong, shall be subject to Hong Kong law in general. 24 While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy.
Fuel costs accounted for approximately 3.8% of our total operational expenses for the year ended December 31, 2021.
Fuel costs accounted for approximately 3.8% of our total operational expenses for the fiscal year ended December 31, 2021.
If we fail to comply with these regulatory requirements, relevant regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China, or even take other actions that could materially and adversely affect our business, financial condition, results of operations, prospects and the trading price of our shares.
If we fail to comply with these regulatory requirements, relevant regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds into China, or even take other actions that could materially and adversely affect our business, financial condition, results of operations, prospects and the trading price of our shares.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless..” Other than the foregoing, as of the date of this annual report, according to AllBright, no relevant PRC laws or regulations in effect require that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction, or any regulatory objection to our offerings from the CSRC, the CAC, or any other PRC authorities that have jurisdiction over our operations.
Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors and/or (ii) for the VIE’s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value and become worthless..” Other than the foregoing, as of the date of this annual report, according to our PRC counsel, AllBright Law Offices, or “AllBright”, no relevant PRC laws or regulations in effect require that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction, or any regulatory objection to our offerings from the CSRC, the CAC, or any other PRC authorities that have jurisdiction over our operations.
Our current auditor, Marcum Asia CPAs LLP (“Marcum Asia”), has been inspected by the PCAOB on a regular basis, with the last inspection in 2020. Neither Friedman nor Marcum Asia is subject to the determinations announced by the PCAOB on December 16, 2021.
Our current auditor, Marcum Asia CPAs LLP (“Marcum Asia”), has been inspected by the PCAOB on a regular basis, with the last inspection in 2023. Neither Friedman nor Marcum Asia is subject to the determinations announced by the PCAOB on December 16, 2021.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePursuant to the PRC Civil Code, if one intentionally infringes upon the intellectual property rights of others and the circumstance is severe, the infringed party is entitled to the corresponding punitive compensation; or (4) abetting a person, or tempting, or aiding a person into or in acquiring, disclosing, using, or allowing another person to use the trade secret of the rightful holder in violation of his or her non-disclosure obligations or the requirements of the rightful holder for keeping the trade secret confidential. 88 Regulations relating to Employment The Labor Law and the Labor Contract Law According to the Labor Law of the PRC, or the Labor Law, which was promulgated on July 5, 1994 and last amended and came into effect on December 29, 2018, enterprises and institutions shall establish, provide and improve their system of workplace safety and sanitation, strictly follow state rules and standards on workplace safety and the relevant articles of occupational protection, and educate employees in occupational safety and sanitation in the PRC.
Biggest changePursuant to the PRC Civil Code, if one intentionally infringes upon the intellectual property rights of others and the circumstance is severe, the infringed party is entitled to the corresponding punitive compensation; or (4) abetting a person, or tempting, or aiding a person into or in acquiring, disclosing, using, or allowing another person to use the trade secret of the rightful holder in violation of his or her non-disclosure obligations or the requirements of the rightful holder for keeping the trade secret confidential.
We, through the VIE and the VIE’s subsidiaries, have also established a broad clientele base across more than 4,000 manufacturers and trading companies (medium-scale to large-scale) throughout China, including brand names such as CATL Battery, Bright Dairy, SF Express, Schneider Electric, and Xiaomi. We, through the VIE and the VIE’s subsidiaries, have achieved significant growth while maintaining profitability.
We, through the VIE and the VIE’s subsidiaries, have also established a broad clientele base across more than 4,000 manufacturers and trading companies (medium-scale to large-scale) throughout China, including brand names such as CATL Battery, Bright Dairy, SF Express, Schneider Electric, and Xiaomi. We have achieved significant growth while maintaining profitability.
Furthermore, our national network’s fast growth allows us to provide clients with greater geographic reach at a lower cost. We, through the VIE and the VIE’s subsidiaries, own and operate our own regional sorting centers, Cloud OFCs and service outlets. We, through the VIE and the VIE’s subsidiaries, also directly own and operate our fleets.
Furthermore, our national network’s fast growth allows us to provide clients with greater geographic reach at a lower cost. We, through the VIE and the VIE’s subsidiaries, directly own and operate our own regional sorting centers, Cloud OFCs and service outlets. We, through the VIE and the VIE’s subsidiaries, also directly own and operate our fleets.
With our WMS, we are able to effectively monitor the capacity of our warehouses on a real-time basis and track each and every movement of a good from its entry into our warehouse to its delivery at its destination, including receiving, storing, packing, and shipping.
With our WMS, we are able to effectively monitor the capacity of our warehouses on a real-time basis and track each and every movement of a good from its entry into our warehouse to its delivery at its destination, including receiving, storing, packing, and shipping.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their overseas offering and listing prior March 31, 2023 but have not yet completed their overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their overseas offering and listing prior to March 31, 2023 but have not yet completed their overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023.
The Supreme People’s Court has revised a judicial interpretation regarding disputes over lease contracts on urban buildings, which took effect in January 2021, providing that if the ownership of the leased premises changes during the term of lessee’s occupation in accordance with the lease contract, and the lessee requests the assignee of such premises to continue to perform the original lease contract, the PRC court shall support such request unless the mortgage right has been established before the leasing and the ownership changes due to the mortgagee’s realization of the mortgage right. 83 Regulations relating to Internet Information Security and Privacy Protection On December 28, 2000, the SCNPC enacted the Decision on the Protection of Internet Security, as amended on August 27, 2009, which provides that the following activities conducted through the internet are subject to criminal liabilities: (1) gaining improper entry into any of the computer information networks relating to state affairs, national defensive affairs, or cutting-edge science and technology; (2) violation of relevant provisions of the State in the form of unauthorized interruption of any computer network or communication service resulting in the computer network or communication system’s malfunction ; (3) spreading rumors, slanders or other harmful information via the internet for the purpose of inciting subversion of the state political power; (4) stealing or divulging state secrets, intelligence or military secrets via internet; (5) spreading false or inappropriate commercial information; or (6) infringing on the intellectual property.
The Supreme People’s Court has revised a judicial interpretation regarding disputes over lease contracts on urban buildings, which took effect in January 2021, providing that if the ownership of the leased premises changes during the term of lessee’s occupation in accordance with the lease contract, and the lessee requests the assignee of such premises to continue to perform the original lease contract, the PRC court shall support such request unless the mortgage right has been established before the leasing and the ownership changes due to the mortgagee’s realization of the mortgage right . 81 Regulations relating to Internet Information Security and Privacy Protection On December 28, 2000, the SCNPC enacted the Decision on the Protection of Internet Security, as amended on August 27, 2009, which provides that the following activities conducted through the internet are subject to criminal liabilities: (1) gaining improper entry into any of the computer information networks relating to state affairs, national defensive affairs, or cutting-edge science and technology; (2) violation of relevant provisions of the State in the form of unauthorized interruption of any computer network or communication service resulting in the computer network or communication system’s malfunction ; (3) spreading rumors, slanders or other harmful information via the internet for the purpose of inciting subversion of the state political power; (4) stealing or divulging state secrets, intelligence or military secrets via internet; (5) spreading false or inappropriate commercial information; or (6) infringing on the intellectual property.
Risk Factors—Risks Related to Our Business and Industry—We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position . ” As of the date of this annual report, we have not been subject to any material dispute or claims for infringement upon third-party trademarks, licenses, and other intellectual property rights in China.
Risk Factors—Risks Related to Our Business and Industry—We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position . ” 73 As of the date of this annual report, we have not been subject to any material dispute or claims for infringement upon third-party trademarks, licenses, and other intellectual property rights in China.
As of the date of this annual report, the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
As of the date of this annual report, the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any regulatory objection from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
In addition, according to the Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the State Council on February 3, 2011 and became effective on March 4, 2011, the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by MOFCOM on August 25, 2011 and became effective on September 1, 2011, mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and the regulations prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement. 96 On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the “Opinions.” The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.
In addition, according to the Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the State Council on February 3, 2011 and became effective on March 4, 2011, the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by MOFCOM on August 25, 2011 and became effective on September 1, 2011, mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and the regulations prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement. 93 On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the “Opinions.” The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.
Our route planning and management benefit from our years of experiences and information technology infrastructures, and they enable us to track freight movement on a real-time basis. Among our regional sorting centers, 2 are located on lands that we own and the remaining 33 are located on leased lands. 68 Cloud OFCs See “—Service Offerings by Us—Cloud Storage Services” above.
Our route planning and management benefit from our years of experiences and information technology infrastructures, and they enable us to track freight movement on a real-time basis. Among our regional sorting centers, 2 are located on lands that we own and the remaining 33 are located on leased lands. Cloud OFCs See “—Service Offerings by Us—Cloud Storage Services” above.
In addition, third-party transportation providers retain their own employees according to their individual operational needs. 76 We believe our employees’ compensation packages are competitive and we have created a merit-based work environment that encourages initiative. As a result, we have generally been able to attract and retain qualified personnel and maintain a stable core management team.
In addition, third-party transportation providers retain their own employees according to their individual operational needs. We believe our employees’ compensation packages are competitive and we have created a merit-based work environment that encourages initiative. As a result, we have generally been able to attract and retain qualified personnel and maintain a stable core management team.
According to the Arrangement, 5% withholding tax rate shall apply to the dividends paid by a mainland China company to a Hong Kong resident, provided that such Hong Kong resident directly holds at least 25% of the equity interests in the mainland China company, and 10% of withholding tax rate shall apply if the Hong Kong resident holds less than 25% of the equity interests in the mainland China company. 93 Pursuant to the Circular on Relevant Issues Relating to the Implementation of Dividend Clauses in Tax Treaties, which was promulgated by the SAT and became effective on February 20, 2009, all of the following requirements shall be satisfied when a fiscal resident as the other party of a tax agreement needs to be entitled to be taxed at a tax rate specified in the tax agreement for the dividends paid to it by a PRC resident company: (i) such a fiscal resident who obtains dividends shall be a company as provided in the tax agreement; (ii) owner’s equity interests and voting shares of the PRC resident company directly owned by such a fiscal resident reaches a specified percentage; and (iii) the equity interests of the PRC resident company directly owned by such a fiscal resident, at any time during the 12 months prior to obtaining the dividends, reach a percentage specified in the tax agreement.
According to the Arrangement, 5% withholding tax rate shall apply to the dividends paid by a mainland China company to a Hong Kong resident, provided that such Hong Kong resident directly holds at least 25% of the equity interests in the mainland China company, and 10% of withholding tax rate shall apply if the Hong Kong resident holds less than 25% of the equity interests in the mainland China company. 90 Pursuant to the Circular on Relevant Issues Relating to the Implementation of Dividend Clauses in Tax Treaties, which was promulgated by the SAT and became effective on February 20, 2009, all of the following requirements shall be satisfied when a fiscal resident as the other party of a tax agreement needs to be entitled to be taxed at a tax rate specified in the tax agreement for the dividends paid to it by a PRC resident company: (i) such a fiscal resident who obtains dividends shall be a company as provided in the tax agreement; (ii) owner’s equity interests and voting shares of the PRC resident company directly owned by such a fiscal resident reaches a specified percentage; and (iii) the equity interests of the PRC resident company directly owned by such a fiscal resident, at any time during the 12 months prior to obtaining the dividends, reach a percentage specified in the tax agreement.
Occupational safety and sanitation facilities shall comply with state-fixed standards. The Labor Contract Law of the PRC, or the Labor Contract Law, which was issued on June 29, 2007, amended on December 28, 2012 and became effective on July 1, 2013, and its implementation rules provide requirements concerning employment contracts between an employer and its employees.
Occupational safety and sanitation facilities shall comply with state-fixed standards. 86 The Labor Contract Law of the PRC, or the Labor Contract Law, which was issued on June 29, 2007, amended on December 28, 2012 and became effective on July 1, 2013, and its implementation rules provide requirements concerning employment contracts between an employer and its employees.
We will verify and examine the drivers’ licenses and take into consideration the history of cooperation between the Company and the drivers. 71 ● Inspection . After a transportation provider begins cooperating with us, we regularly inspect its performance during different stages of the cooperation according to detailed specifications and timeline for services in our agreement. ● Review .
We will verify and examine the drivers’ licenses and take into consideration the history of cooperation between the Company and the drivers. ● Inspection . After a transportation provider begins cooperating with us, we regularly inspect its performance during different stages of the cooperation according to detailed specifications and timeline for services in our agreement. ● Review .
Any proposal discussed and approved during the meeting will be presented to the management for further discussion and decision. From time to time, we contract with some third-party software design companies for licenses to use some of the systems they designed and developed, such as some financial reporting and accounting systems.
Any proposal discussed and approved during the meeting will be presented to the management for further discussion and decision. 75 From time to time, we contract with some third-party software design companies for licenses to use some of the systems they designed and developed, such as some financial reporting and accounting systems.
According to the Foreign Investment Law, “foreign-invested enterprises” thereof refers to enterprises that are wholly or partly invested by foreign investors and registered within China under the PRC laws, “foreign investment” thereof refers to any foreign investor’s direct or indirect investment in China, including: (1) establishing foreign-invested enterprises in China either individually or jointly with other investors; (2) obtaining stock shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (3) investing in new projects in China either individually or jointly with other investors; and (4) making investment through other means provided by laws, administrative regulations, or State Council provisions. 80 Investments conducted by foreign investors in the PRC are subject to the Catalogue of Industries for Encouraging Foreign Investment, or the Catalogue, and the Negative List, which were jointly issued by the NDRC and the MOFCOM.
According to the Foreign Investment Law, “foreign-invested enterprises” thereof refers to enterprises that are wholly or partly invested by foreign investors and registered within China under the PRC laws, “foreign investment” thereof refers to any foreign investor’s direct or indirect investment in China, including: (1) establishing foreign-invested enterprises in China either individually or jointly with other investors; (2) obtaining stock shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (3) investing in new projects in China either individually or jointly with other investors; and (4) making investment through other means provided by laws, administrative regulations, or State Council provisions. 78 Investments conducted by foreign investors in the PRC are subject to the Catalogue of Industries for Encouraging Foreign Investment, or the Catalogue, and the Negative List, which were jointly issued by the NDRC and the MOFCOM.
As of the date of this annual report, we have not identified any specific strategic alliances or acquisition opportunities. 61 Our Service Offerings Through our integrated network model, we, through the VIE and the VIE’s subsidiaries, provide B2B freight transportation services and cloud storage services to our clients.
As of the date of this annual report, we have not identified any specific strategic alliances or acquisition opportunities. Our Service Offerings Through our integrated network model, we, through the VIE and the VIE’s subsidiaries, provide B2B freight transportation services and cloud storage services to our clients.
While industry definitions vary, given our extensive contracting to create a flexible network of solutions, we are generally referred to in the industry as a contract logistics company. The following chart sets out the services provided by us through the VIE and the VIE’s subsidiaries.
While industry definitions vary, given our extensive contracting to create a flexible network of solutions, we are generally referred to in the industry as a contract logistics company. 62 The following chart sets out the services provided by us through the VIE and the VIE’s subsidiaries.
With WMS, we are able to increase the accuracy of goods dispatching, to enhance the efficiency of the operation, to improve the quality management and to control and realize the warehouse management process visualization. Our WMS operates according to certain rules of warehouse management including rules of pick-up, quality inspection, warehouse and storage separation and arrangement.
With WMS, we are able to increase the accuracy of goods dispatching, to enhance the efficiency of the operation, to improve the quality management and to control and realize the warehouse management process visualization. 72 Our WMS operates according to certain rules of warehouse management including rules of pick-up, quality inspection, warehouse and storage separation and arrangement.
The following table summarizes our domain name registration: Domain Name Territory sfwl.com.cn China sfwl.ink International sfwl.net International sfwl.online International sfwl.vip International 4008556688.cn China 4008556688.com.cn China 4008556688.net International Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to infringe upon our intellectual property rights.
The following table summarizes our domain name registration: Domain Name Territory sfwl.com.cn China sfwl.ink International sfwl.net International sfwl.online International sfwl.vip International tysfwl.com.cn China tysfwl.com International tysfwl.cn China tysfwl.net International 4008556688.cn China 4008556688.com.cn China 4008556688.net International Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to infringe upon our intellectual property rights.
The VIE and the VIE’s subsidiaries have obtained road transportation operation permits to operate general road freight transportation or station (sites). 81 Pursuant to the Measures for the Administration of Road Transportation Safety of Hazardous Goods, or the “Measures,” jointly promulgated by the Ministry of Transport, the Ministry of Industry & Information Technology, the Ministry of Public Security, the Ministry of Ecology and Environment, the Ministry of Emergency Management and the State Administration for Market Regulation in China, which took effect on January 1, 2020, the transportation of hazardous goods with road transportation vehicles and relevant activities shall be governed by the Measures.
The VIE and the VIE’s subsidiaries have obtained road transportation operation permits to operate general road freight transportation or station (sites). 79 Pursuant to the Measures for the Administration of Road Transportation Safety of Hazardous Goods, or the “Measures,” jointly promulgated by the Ministry of Transport, the Ministry of Industry & Information Technology, the Ministry of Public Security, the Ministry of Ecology and Environment, the Ministry of Emergency Management and the State Administration for Market Regulation in China, which took effect on January 1, 2020, the transportation of hazardous goods with road transportation vehicles and relevant activities shall be governed by the Measures.
Once the recipient confirms receipt through signature, our whole service cycle is completed and the settlement of delivery service fee promptly appears on our payment settlement system. 63 For FTL shipments, we generally pick up the freight directly from the clients’ sites and transport them to the recipients’ destination using our line-haul transportation, without combining orders from different clients for an FTL shipment.
Once the recipient confirms receipt through signature, our whole service cycle is completed and the settlement of delivery service fee promptly appears on our payment settlement system. 64 For FTL shipments, we generally pick up the freight directly from the clients’ sites and transport them to the recipients’ destination using our line-haul transportation, without combining orders from different clients for an FTL shipment.
Prioritize Capacity Arrangement – On a daily basis, every station and routing center will, based on our system’s support and their industry experience, adjust, arrange, and prioritize each and every order based on clients, weights, and routes in order to fulfill every order and maximize cost efficiency. 59 Finance and Accounting Management – We, through the VIE, have retained Marcum Asia to perform annual auditing of our financial positions.
Prioritize Capacity Arrangement – On a daily basis, every station and routing center will, based on our system’s support and their industry experience, adjust, arrange, and prioritize each and every order based on clients, weights, and routes in order to fulfill every order and maximize cost efficiency. 60 Finance and Accounting Management – We, through the VIE, have retained Marcum Asia to perform annual auditing of our financial positions.
If the lessor and lessee fail to complete the registration procedures, both lessor and lessee may be subject to fines ranging from RMB1,000 (approximately USD$140) to RMB10,000 (approximately USD$1,400).
If the lessor and lessee fail to complete the registration procedures, both lessor and lessee may be subject to fines ranging from RMB1,000 (approximately $140) to RMB10,000 (approximately $1,400).
Risk Factors—Risks Relating to Doing Business in the PRC—The M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China . ” 97 C. Organizational Structure See “—A. History and Development of the Company.” D.
Risk Factors—Risks Relating to Doing Business in the PRC—The M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China . ” 94 C. Organizational Structure See “—A. History and Development of the Company.” D.
For further details on our directors and senior management, see “Management.” 60 Our Growth Strategies We aspire to be a leading company in the contract logistics market in China, and we intend to pursue the following strategies in furtherance of our growth: Expand Market Share We currently intend to build our business upon our current position and presence with the goal to become more influential in the contract logistics market in China.
For further details on our directors and senior management, see “Management.” 61 Our Growth Strategies We aspire to be a leading company in the contract logistics market in China, and we intend to pursue the following strategies in furtherance of our growth: Expand Market Share We currently intend to build our business upon our current position and presence with the goal to become more influential in the contract logistics market in China.
Therefore, we provide ongoing trainings to our employees and transportation providers, and we conduct regular performance reviews to ensure the quality of our services. We, through the VIE and the VIE’s subsidiaries, operate a call center system to provide real-time assistance to our clients by our approximately 245 client service representatives 10 hours a day, 7 days a week.
Therefore, we provide ongoing trainings to our employees and transportation providers, and we conduct regular performance reviews to ensure the quality of our services. We, through the VIE and the VIE’s subsidiaries, operate a call center system to provide real-time assistance to our clients by our approximately 292 client service representatives 10 hours a day, 7 days a week.
The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas; and d) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
The New Overseas Listing Rules further require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances, such as: a) an issuer making an application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas market; and c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means.
According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”).
According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as the Existing Issuers.
We also need to pay a monthly property management fee of RMB15,564 (approximately US$2,314). We have priority to renew the lease as long as we use the property for the same purpose, but we are required to notify the landlord at least two months in advance if we would like to renew the lease.
We also need to pay a monthly property management fee of RMB15,564 (approximately US$2,209). We have priority to renew the lease as long as we use the property for the same purpose, but we are required to notify the landlord at least two months in advance if we would like to renew the lease.
The SAFE Circular No. 59 also simplified the capital verification and confirmation formalities for foreign invested entities, the foreign capital and foreign exchange registration formalities required for the foreign investors to acquire equities from Chinese parties, and further improved the administration on exchange settlement of foreign exchange capital of foreign invested entities. 94 SAFE Circular 37 In July 2014, SAFE promulgated SAFE Circular 37, which replaces the previous SAFE Circular 75.
The SAFE Circular No. 59 also simplified the capital verification and confirmation formalities for foreign invested entities, the foreign capital and foreign exchange registration formalities required for the foreign investors to acquire equities from Chinese parties, and further improved the administration on exchange settlement of foreign exchange capital of foreign invested entities. 91 SAFE Circular 37 In July 2014, SAFE promulgated SAFE Circular 37, which replaces the previous SAFE Circular 75.
As of December 31, 2022, we, through the VIE and the VIE’s subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other provinces in China. Among our regional sorting centers, two are located on lands that we own and the remaining 33 are located on leased lands.
As of December 31, 2023, we, through the VIE and the VIE’s subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other provinces in China. Among our regional sorting centers, two are located on lands that we own and the remaining 33 are located on leased lands.
Additional packaging protection upon request from our clients will incur additional fees based on the shipment and the requests. 66 Pay-at-arrival services . We typically require senders to pay for shipment fees as we collect freight from them. Alternatively, senders may select the pay-at-arrival option, which authorizes us to collect shipment fees from recipients upon freight arrival.
Additional packaging protection upon request from our clients will incur additional fees based on the shipment and the requests. 67 Pay-at-arrival services . We typically require senders to pay for shipment fees as we collect freight from them. Alternatively, senders may select the pay-at-arrival option, which authorizes us to collect shipment fees from recipients upon freight arrival.
Our Clients We, through the VIE and the VIE’s subsidiaries, mainly serve clients in connection with the delivery of their products to consumers and other businesses. We have clients in various industries, including manufacturing, energy, telecommunications, internet, fashion, fast moving consumer goods, publishing, agriculture and e-commerce.
Our Clients We, through the VIE and the VIE’s subsidiaries, mainly serve clients in connection with the delivery of their products to consumers and other businesses. We have clients in various industries, including manufacturing, energy, new energy (vehicle), telecommunications, internet, fashion, fast moving consumer goods, publishing, agriculture and e-commerce.
Vehicle operators who violate this regulation may be subject to a fine of up to RMB30,000 (approximately USD4,300) for each violation. In the event of repeated violations, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of the relevant vehicle.
Vehicle operators who violate this regulation may be subject to a fine of up to RMB30,000 (approximately $4,300) for each violation. In the event of repeated violations, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of the relevant vehicle.
Where the responsibility lies with the manufacturer, the seller shall, after settling compensation with the consumer, have the right to recover such compensation from the manufacturer, and vice versa. 82 Regulations Relating to Pricing In China, the prices of a small number of products and services are guided or fixed by the government.
Where the responsibility lies with the manufacturer, the seller shall, after settling compensation with the consumer, have the right to recover such compensation from the manufacturer, and vice versa. 80 Regulations Relating to Pricing In China, the prices of a small number of products and services are guided or fixed by the government.
As of December 31, 2022, we, through two of the VIE’s subsidiaries, owned 2 office buildings in China with aggregate gross floor areas of approximately 58,348.58 square feet are on the land we own, and we, through the VIE and the VIE’s subsidiaries, leased 34 office buildings in China with aggregate gross floor areas of approximately 255,868.48 square feet.
As of December 31, 2023, we, through two of the VIE’s subsidiaries, owned 2 office buildings in China with aggregate gross floor areas of approximately 58,348.58 square feet are on the land we own, and we, through the VIE and the VIE’s subsidiaries, leased 34 office buildings in China with aggregate gross floor areas of approximately 255,868.48 square feet.
We also owned 262 vehicles for our short-haul transportation as of the same date. Tangible properties of our regional sorting centers, Cloud OFCs, service outlets, and line-haul and short-haul transportation network operated by the VIE and the VIE’s subsidiaries across China include transportation and electronic equipment.
We also owned 160 vehicles for our short-haul transportation as of the same date. Tangible properties of our regional sorting centers, Cloud OFCs, service outlets, and line-haul and short-haul transportation network operated by the VIE and the VIE’s subsidiaries across China include transportation and electronic equipment.
On May 10, 2013, the SAFE promulgated the Circular of the SAFE on Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents, or the SAFE Circular No. 21, which was last amended and became effective on December 31, 2019.
On May 10, 2013, the SAFE promulgated the Circular of the SAFE on Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents, or the SAFE Circular No. 21, which was last amended and became effective on December 30, 2019.
The terms of such leases range from 1 to 5 years. As of the date of this annual report, we, through the VIE and the VIE’s subsidiaries, directly operate 22 Cloud OFCs across China to provide warehouse storage and management services.
The terms of such leases range from 1 to 5 years. As of the date of this annual report, we, through the VIE and the VIE’s subsidiaries, directly operate 49 Cloud OFCs across China to provide warehouse storage and management services.
Our national footprint allows us to provide these services to our clients and their manufacturing partners across many regions of China. 65 The following diagram illustrates the product flow in a typical supply chain.
Our national footprint allows us to provide these services to our clients and their manufacturing partners across many regions of China. 66 The following diagram illustrates the product flow in a typical supply chain.
Copyright As of the date of this annual report, we had registered, through the VIE and the VIE’s subsidiaries, 79 computer software copyrights, including those that relate to Shengfeng TMS, with the PRC National Copyright Administration.
Copyright As of the date of this annual report, we had registered, through the VIE and the VIE’s subsidiaries, 117 computer software copyrights, including those that relate to Shengfeng TMS, with the PRC National Copyright Administration.
The terms of such leases range from 1 to 3 years. As of the date of this annual report, we, through the VIE and the VIE’s subsidiaries, directly operate 36 service outlets across China.
The terms of such leases range from 1 to 3 years. As of the date of this annual report, we, through the VIE and the VIE’s subsidiaries, directly operate 33 service outlets across China.
The Opinions, the Trial Measures and any related implementing rules to be enacted may subject us to additional compliance requirements in this offering and future financial activities. See “Item 3. Key Information—D.
The Opinions, the Trial Measures and any related implementing rules to be enacted may subject us to additional compliance requirements in future financial activities. See “Item 3. Key Information—D.
Neither we nor our subsidiaries own any equity interests in the VIE or the VIE’s subsidiaries. As an investor in this offering, you may be subject to unique risks due to our VIE structure.
Neither we nor our subsidiaries own any equity interests in the VIE or the VIE’s subsidiaries. As an investor, you may be subject to unique risks due to our VIE structure.
Through years of operation, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities across 31 provinces, as of December 31, 2022.
Through years of operation, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities across 31 provinces, as of December 31, 2023.
Trademark As of the date of this annual report, we had registered, through the VIE and the VIE’s subsidiaries, 36 trademarks, including 33 trademarks with the Trademark Office of the State Administration for Industry and Commerce in China, such as our Company’s Chinese name, “Shengfeng ( 盛丰 ),” 1 trademark with the Economic Affairs Bureau of Macao Special Administrative Region, 1 trademark with Trade Marks Registry Intellectual Property Department of the Government of the Hong Kong Special Administrative Region and 1 trademark with the Intellectual Property Office of Taiwan.
Trademark As of the date of this annual report, we had registered, through the VIE and the VIE’s subsidiaries, 38 trademarks, including 35 trademarks with the Trademark Office of the State Administration for Industry and Commerce in China, such as our Company’s Chinese name, “Shengfeng (盛丰),” 1 trademark with the Economic Affairs Bureau of Macao Special Administrative Region, 1 trademark with Trade Marks Registry Intellectual Property Department of the Government of the Hong Kong Special Administrative Region and 1 trademark with the Intellectual Property Office of Taiwan.
Through years of effort, as of December 31, 2022, we have registered 43 computer software copyrights with the PRC National Copyright Administration and 1 invention patent with the National Intellectual Property Administration.
Through years of effort, as of December 31, 2023, we have registered 43 computer software copyrights with the PRC National Copyright Administration and 1 invention patent with the National Intellectual Property Administration.
They collect freight directly from clients or from service outlets within their coverage area, sort it according to destinations, and dispatch the freight to the designated regional sorting centers. As of December 31, 2022, we, through the VIE and the VIE’s subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other provinces in China.
They collect freight directly from clients or from service outlets within their coverage area, sort it according to destinations, and dispatch the freight to the designated regional sorting centers. As of December 31, 2023, we, through the VIE and the VIE’s subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 15 other provinces in China.
Our superior service quality was demonstrated when the VIE was ranked 32 nd among the 50 listed privately owned logistics companies by CFLP, the first association in the logistics and procurement industry in China and an association approved by the State Council of China, on August 24, 2022.
Our superior service quality was demonstrated when the VIE was ranked 32nd among the 50 listed privately owned logistics companies by CFLP, the first association in the logistics and procurement industry in China and an association approved by the State Council of China, on August 24, 2022.
The network partners are solely responsible for the rights and obligations under the service agreements entered into by and between them and their clients. For the fiscal year ended December 31, 2022, our network partners contributed approximately 0.31% of our income from operations.
The network partners are solely responsible for the rights and obligations under the service agreements entered into by and between them and their clients. For the fiscal year ended December 31, 2023, our network partners contributed approximately 0.14% of our income from operations.
For more details on our technology infrastructure and intellectual property, please refer to “—Our Technology Infrastructure” and “—Intellectual Property.” 77 Properties and Facilities Our principal executive office is located at Shengfeng Building, No. 478 Fuxin East Road, Jin’an District, Fuzhou City, Fujian Province, People’s Republic of China, 350001, where we, through Shengfeng Logistics, lease such property from a related party, Fuzhou Tianyu Shengfeng Industrial Co., Ltd., a company controlled by Yongteng Liu, who is the brother of Yongxu Liu, our CEO and Chairman, with an area of approximately 24,886.16 square feet, with a lease term from November 1, 2020 to October 31, 2022 and was renewed to October 31, 2024 with a monthly rent of RMB115,648 (approximately US$17,194).
For more details on our technology infrastructure and intellectual property, please refer to “—Our Technology Infrastructure” and “—Intellectual Property.” Properties and Facilities Our principal executive office is located at Shengfeng Building, No. 478 Fuxin East Road, Jin’an District, Fuzhou City, Fujian Province, People’s Republic of China, 350001, where we, through Shengfeng Logistics, lease such property from a related party, Fuzhou Tianyu Shengfeng Industrial Co., Ltd., a company controlled by Yongxu Liu, our CEO and Chairman, with an area of approximately 24,886.16 square feet, with a lease term from November 1, 2020 to October 31, 2022 and was renewed to October 31, 2024 with a monthly rent of RMB115,648 (approximately US$16,412).
The following map illustrates our Cloud OFCs network as of December 31, 2022. 64 By utilizing our Cloud OFCs, we provide the following services to our clients through the VIE and the VIE’s subsidiaries: ● Storage. We offer reliable and convenient storage solutions for a variety of commercial needs through the warehouses owned or leased by us.
The following map illustrates our Cloud OFCs network as of December 31, 2023. 65 By utilizing our Cloud OFCs, we provide the following services to our clients through the VIE and the VIE’s subsidiaries: ● Storage. We offer reliable and convenient storage solutions for a variety of commercial needs through the warehouses owned or leased by us.
Pursuant to the Notice of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the SAFE Circular No. 59, promulgated by the SAFE on November 19, 2012, became effective on December 17, 2012 and was further amended on May 4, 2015, approval is not required for opening a foreign exchange account and depositing foreign exchange into the account relating to the direct investments.
Pursuant to the Notice of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the SAFE Circular No. 59, promulgated by the SAFE on November 19, 2012, became effective on December 17, 2012 and was further amended on May 4, 2015, October 10, 2018, and December 30, 2019, approval is not required for opening a foreign exchange account and depositing foreign exchange into the account relating to the direct investments.
We, through the VIE and the VIE’s subsidiaries, have established business relationships with over 4,000 medium to large-scale corporate clients, and over 40,000 transportation providers, as of December 31, 2022. Moreover, our reach extends to individual consumers, small and medium corporate clients, and large-cap companies through our network.
We, through the VIE and the VIE’s subsidiaries, have established business relationships with over 4,000 medium to large-scale corporate clients, and over 60,000 transportation providers, as of December 31, 2023. Moreover, our reach extends to individual consumers, small and medium corporate clients, and large-cap companies through our network.
Although (i) The CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours are subject to the M&A Rules; and (ii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules, the interpretation and application of the regulations remain unclear, this offering may ultimately require approval from the CSRC.
Although (i) The CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours are subject to the M&A Rules; and (ii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules, the interpretation and application of the regulations remain unclear, future financial activities may ultimately require approval from the CSRC.
We will make specific marketing plans and take different approaches based on the various industries, sizes, contract amounts and needs of our clients. Employees As of December 31, 2022, 2021, and 2020, we, through the VIE and the VIE’s subsidiaries, had a total of 1,550, 1,543 and 1,583 full-time employees located in China, respectively.
We will make specific marketing plans and take different approaches based on the various industries, sizes, contract amounts and needs of our clients. 74 Employees As of December 31, 2023, 2022, and 2021, we, through the VIE and the VIE’s subsidiaries, had a total of 1,341, 1,550 and 1,543 full-time employees located in China, respectively.
The version of the Catalogue currently in force was amended in 2020 and became effective on January 27, 2021, and the version of the Negative List currently in force was amended in 2021 and became effective on January 1, 2022, both of which further reduce restrictions on foreign investment.
The version of the Catalogue currently in force was amended in 2022 and became effective on January 1, 2023, and the version of the Negative List currently in force was amended in 2021 and became effective on January 1, 2022, both of which further reduce restrictions on foreign investment.
Our integrated logistics solutions are comprised of three segments: (1) B2B freight transportation services; (2) cloud storage services; and (3) value-added services. Since the VIE’s inception, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities across 31 provinces, as of December 31, 2022.
Our integrated logistics solutions are comprised of three business streams: (1) B2B freight transportation services; (2) cloud storage services; and (3) value-added services. Since the VIE’s inception, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities across 31 provinces, as of December 31, 2023.
We, through the VIE and the VIE’s subsidiaries, maintain an in-house R&D team which consists of four departments in Shengfeng Logistics: Product Department (8 employees and 1 manager), Operation and Maintenance Department (3 employees and 1 manager), TMS Research and Development Department (10 employees and 1 manager) and WMS Research and Development Department (3 employees and 1 manager).
We, through the VIE and the VIE’s subsidiaries, maintain an in-house R&D team which consists of four departments in Shengfeng Logistics: Product Department (3 employees and 1 manager), Operation and Maintenance Department (2 employees), TMS Research and Development Department (8 employees and 2 managers) and WMS Research and Development Department (4 employees and 1 manager).
For the year ended December 31, 2021, our network partners contributed approximately 0.49% of our income from operations. 69 Our Ecosystem We have built a growing ecosystem with various types of participants, including the Company, clients, and transportation providers.
For the fiscal year ended December 31, 2022, our network partners contributed approximately 0.31% of our income from operations. 69 Our Ecosystem We have built a growing ecosystem with various types of participants, including the Company, clients, and transportation providers.
The terms of such leases range from 1 to 5 years. As of December 31,2022, we, through one of the VIE’s subsidiaries, owned 4 land use rights with aggregate gross areas of approximately 340,388.43 square feet in Tong Zhou District, Beijing, China. The use terms of the lands are 50 years.
The terms of such leases range from 1 to 5 years. As of December 31, 2023, we, through one of the VIE’s subsidiaries, owned 4 land use rights with aggregate gross areas of approximately 340,388.43 square feet in Tong Zhou District, Beijing, China. The use terms of such land is 50 years.
Regulations Relating to Road Transportation Pursuant to the PRC Regulations on Road Transportation promulgated by the State Council in April 2004 and most recently amended in March 2019, and the Provisions on Administration of Road Freight Transportation and Stations (Sites) issued by the Ministry of Transportation in June 2005 and most recently amended in June 2019, or the Road Freight Provisions, the business operations of road freight transportation refer to commercial road freight transportation activities that provide public services.
Regulations Relating to Road Transportation Pursuant to the PRC Regulations on Road Transportation promulgated by the State Council in April 2004 and most recently amended in July 2023, and the Provisions on Administration of Road Freight Transportation and Stations (Sites) issued by the Ministry of Transportation in June 2005 and most recently amended in November 2023, or the Road Freight Provisions, the business operations of road freight transportation refer to commercial road freight transportation activities that provide public services.
Patent As of the date of this annual report, we had registered, through Guangdong Shengfeng Logistics Co., Ltd., one of the VIE’s subsidiaries, 2 invention patents and 12 utility model patents with the National Intellectual Property Administration. 74 Domain Name As of the date of this annual report, we had registered, through the VIE, 8 domain names, including our main website.
Patent As of the date of this annual report, we had registered, through Guangdong Shengfeng Logistics Co., Ltd., one of the VIE’s subsidiaries, 3 invention patents and 15 utility model patents with the National Intellectual Property Administration. Domain Name As of the date of this annual report, we had registered, through the VIE, 12 domain names, including our main website.
For the fiscal years ended December 31, 2022 and 2021, approximately 30% and 29% of our freight transportation services were provided by our self-owned fleet and the balance was outsourced and provided by independent third-party transportation providers.
For the fiscal years ended December 31, 2023 and 2022, approximately 23% and 30% of our freight transportation services were provided by our self-owned fleet and the balance was outsourced and provided by independent third-party transportation providers.
GAAP. 58 Our Class A Ordinary Shares offered in this offering are shares of our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE’s subsidiaries in China, therefore, you will not directly hold equity interests in the VIE or the VIE’s subsidiaries, and you may never directly hold equity interests in the VIE or the VIE’s subsidiaries through your investment in this offering.
GAAP. 59 Our Class A Ordinary Shares are shares of our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE’s subsidiaries in China, therefore, you will not directly hold equity interests in the VIE or the VIE’s subsidiaries, and you may never directly hold equity interests in the VIE or the VIE’s subsidiaries through your investment in our Class A Ordinary Shares.
Our net profit amounted to approximately $7.8 million, $6.6 million and $6.1 million for the fiscal years ended December 31, 2022, 2021 and 2020, respectively; our net profit margins for the fiscal years ended December 31, 2022, 2021 and 2020 were approximately 2.1%, 1.9% and 2.1%, respectively.
Our net profit amounted to approximately $10.3 million, $7.8 million and $6.6 million for the fiscal years ended December 31, 2023, 2022 and 2021, respectively; our net profit margins for the fiscal years ended December 31, 2023, 2022 and 2021 were approximately 2.6%, 2.1% and 1.9%, respectively.
For the fiscal years ended December 31, 2022, 2021, and 2020, we, through the VIE and the VIE’s subsidiaries, provided freight transportation services for 2,291, 2,226 and 2,431 clients, respectively, in the industries of, among others, manufacturing, energy, telecommunications, internet, fashion, fast moving consumer goods, publishing, agriculture and e-commerce. 62 Shipment Flow The following diagram illustrates the process for the completion of a typical freight transportation order.
For the fiscal years ended December 31, 2023, 2022, and 2021, we, through the VIE and the VIE’s subsidiaries, provided freight transportation services for 2,160, 2,291 and 2,226 clients, respectively, in the industries of, among others, manufacturing, energy, new energy (vehicle), telecommunications, internet, fashion, fast moving consumer goods, publishing, agriculture and e-commerce. 63 Shipment Flow The following diagram illustrates the process for the completion of a typical freight transportation order.
To increase our transportation efficiency, we utilize the drop and pull transportation method. As of December 31, 2022, we, through the VIE and the VIE’s subsidiaries, also owned 242 vehicles for our short-haul transportation.
To increase our transportation efficiency, we utilize the drop and pull transportation method. As of December 31, 2023, we, through the VIE and the VIE’s subsidiaries, also owned 160 vehicles for our short-haul transportation.
For details on third-party transportation providers, see “—Our Transportation Providers.” Service Outlets As of December 31, 2022, we, through the VIE and the VIE’s subsidiaries, operated 36 service outlets across China.
For details on third-party transportation providers, see “—Our Transportation Providers.” Service Outlets As of December 31, 2023, we, through the VIE and the VIE’s subsidiaries, operated 33 service outlets across China.
Our largest clients include CATL Battery, Bright Dairy, SF Express, Schneider Electric, Tesla and Xiaomi. We served 2,634 and 2,535 clients during the fiscal years ended December 31, 2022 and 2021, respectively, and no client accounted for more than 5% of our total revenue during those years.
Our largest clients include CATL Battery, Bright Dairy, SF Express, Schneider Electric, Tesla and Xiaomi. We served 2,503 and 2,634 clients during the fiscal years ended December 31, 2023 and 2022, respectively, and no client accounted for more than 6% of our total revenue during those years.
If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for future financial activities would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
We, through the VIE and the VIE’s subsidiaries, also own and operate our fleets. In order to establish broader network and provide more efficient services, we, through the VIE and the VIE’s subsidiaries, cooperate with third-party transportation providers in providing freight transportation services and with some network partners to promote our business.
In order to establish a broader network and provide more efficient services, we, through the VIE and the VIE’s subsidiaries, cooperate with third-party transportation providers in providing freight transportation services and with some network partners to promote our business.
They are “cloud-based” because we take full responsibility for the optimal allocation of our clients’ inventory into different Cloud OFCs and save our clients from the hassle of day-to-day operations, therefore, from our clients’ point of view, these Cloud OFCs are “in the cloud.” As of December 31, 2022, we, through the VIE and the VIE’s subsidiaries, directly operated 22 Cloud OFCs across China with a total area of approximately 2,444,000 square feet, among which 5 Cloud OFCs were multistory facilities.
They are “cloud-based” because we take full responsibility for the optimal allocation of our clients’ inventory into different Cloud OFCs and save our clients from the hassle of day-to-day operations, therefore, from our clients’ point of view, these Cloud OFCs are “in the cloud.” As of December 31, 2023, we, through the VIE and the VIE’s subsidiaries, directly operated 49 Cloud OFCs across China with a total area of approximately 3,618,164 square feet, among which 5 Cloud OFCs were multistory facilities.
As of December 31, 2022, the VIE and the VIE’s subsidiaries’ transportation and sorting network is comprised of 35 regional sorting centers, 22 Cloud OFCs and 42 service outlets. Our network in China covered 341 cities in over 31 provinces as of December 31, 2022. Extensive and Growing Ecosystem Our ecosystem is comprised of the Company, clients, and transportation providers.
As of December 31, 2023, the VIE and the VIE’s subsidiaries’ transportation and sorting network is comprised of 35 regional sorting centers, 49 Cloud OFCs and 33 service outlets. Our network in China covered 341 cities in over 31 provinces as of December 31, 2023. Extensive and Growing Ecosystem Our ecosystem is comprised of the Company, clients, and transportation providers.
Under his leadership, our Company started off in 2001 from being a small-sized logistics service provider with only 60 employees, to becoming one of the largest logistics service providers in China with total transportation volume of approximately 7,800,000 tons for the fiscal year ended December 31, 2022 and we have 1,550 employees as of December 31, 2022.
Under his leadership, our Company started off in 2001 from being a small-sized logistics service provider with only 60 employees, to becoming one of the largest logistics service providers in China with total transportation volume of approximately 10,170,000 tons for the fiscal year ended December 31, 2023 and we have 1,341 employees as of December 31, 2023.
We also design and develop different service packages to cater for the demands of clients in different industries so that we could extend our reach of potential clients in similar industries and upstream and downstream suppliers.
We participate in conferences and exhibitions in different industries to expand our pool of potential clients. We also design and develop different service packages to cater for the demands of clients in different industries so that we could extend our reach of potential clients in similar industries and upstream and downstream suppliers.
As of the date of this annual report, other than that we have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations, and that our number of dispatched workers has exceeded the limitation required by PRC regulations, we believe that we are currently compliant with the foregoing laws and regulation in all material respects.
As of the date of this annual report, other than that we have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations, we believe that we are currently compliant with the foregoing laws and regulation in all material respects.
The term of agreement was from September 1, 2020 to August 31, 2021. We, through Shengfeng Logistics, have renewed the agreement in which the new term is from September 1, 2021 to December 31, 2023.
The term of the agreement was from September 1, 2020 to August 31, 2021. On September 1, 2021, we, through Shengfeng Logistics, renewed the agreement in which the term was from September 1, 2021 to December 31, 2023.
Failing to comply by the expiration of the time limit will subject the employer to a fine ranging from RMB10,000 (approximately USD1,400) to RMB50,000 (approximately USD7,200).
Failing to comply by the expiration of the time limit will subject the employer to a fine ranging from RMB10,000 (approximately $1,400) to RMB50,000 (approximately $7,200).

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDecember 31, 2021 2020 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Other income (expense) Interest income $ 1,330 $ 1,329 $ 1 0.1 % Interest expense (2,315 ) (1,990 ) (325 ) 16.3 % Other income, net 559 2,070 (1,511 ) (73.0 )% Total other income (expense), net $ (426 ) $ 1,409 $ (1,835 ) (130.2 )% 105 Our total net other income was approximately $1.4 million for the year ended December 31, 2020, decreased by approximately $1.8 million or approximately 130.2% to approximately $0.4 million net total other expense for the year ended December 31, 2021 for the following reasons: Interest expense Our interest expense increased by approximately 16.3% from approximately $2.0 million for the year ended December 31, 2020 to approximately $2.3 million for the year ended December 31, 2021, as a result of an increased weighted average interest rate and average balance of bank loans during the year ended December 31, 2021 compared with 2020.
Biggest changeInterest income Our interest income decreased by approximately 90.1% from approximately $1.3 million for the year ended December 31, 2022 to approximately $0.1 million for the year ended December 31, 2023, which was driven by a decreased interest income from deposit for investment. 99 Interest expense Our interest expense decreased by approximately 20.3% from approximately $2.2 million for the year ended December 31, 2022 to approximately $1.8 million for the year ended December 31, 2023, as a result of a decreased average balance and interest rate of bank loans for the year ended December 31, 2023 compared with the year ended December 31, 2022.
Accordingly, we treat the VIE and the VIE’s subsidiaries as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S.
Accordingly, we treat the VIE and the VIE’s subsidiaries as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
General and administrative expenses Our general and administrative expenses consist primarily of employee wages and benefits for corporate employees, rental expenses, depreciation and amortization expense and other expenses which are related to the general corporate functions.
General and administrative expenses Our general and administrative expenses consist primarily of employee wages and benefits for corporate employees, rental expenses, depreciation and amortization expense and other expenses which are related to the general corporate functions.
Years ended December 31, 2022 2021 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Operating expenses Selling and marketing $ (7,427 ) $ (7,720 ) $ 293 (3.8 )% General and administrative (24,259 ) (25,038 ) 779 (3.1 )% Total operating expenses $ (31,686 ) $ (32,758 ) $ 1,072 (3.3 )% Operating expenses Our operating expenses decreased by approximately 3.3% from approximately $32.8 million for the year ended December 31, 2021 to approximately $31.7 million for the year ended December 31, 2022 for the following reasons: Selling and marketing expenses Our sales and marketing expenses consist primarily of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses which are related to the sales and marketing functions.
Years ended December 31, 2022 2021 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Operating expenses Selling and marketing $ (7,427 ) $ (7,720 ) $ 293 (3.8 )% General and administrative (24,259 ) (25,038 ) 779 (3.1 )% Total operating expenses $ (31,686 ) $ (32,758 ) $ 1,072 (3.3 )% 101 Operating expenses Our operating expenses decreased by approximately 3.3% from approximately $32.8 million for the year ended December 31, 2021 to approximately $31.7 million for the year ended December 31, 2022 for the following reasons: Selling and marketing expenses Our selling and marketing expenses consist primarily of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses which are related to the sales and marketing functions.
Off-Balance Sheet Commitments and Arrangements We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits. C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Our Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.
Off-Balance Sheet Commitments and Arrangements We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits. 105 C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Our Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.
We primarily charge our customers service fees for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over the service period. Our net revenues were approximately $370.3 million for the year ended December 31, 2022, increasing by approximately 6.8% from approximately $346.7 million for the year ended December 31, 2021.
We primarily charge our customers service fees for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over the service period. 100 Our net revenues were approximately $370.3 million for the year ended December 31, 2022, increasing by approximately 6.8% from approximately $346.7 million for the year ended December 31, 2021.
Liquidity and Capital Resources The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE.
B. Liquidity and Capital Resources The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE.
See “Risk Factors—Governmental control of currency conversion may affect the value of your investment and our payment of dividends.” Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
See “Risk Factors—Governmental control of currency conversion may affect the value of your investment and our payment of dividends.” 103 Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
Cash flows in Investing Activities For the year ended December 31, 2022, net cash used in investing activities was approximately $6.7 million, consisted primarily of cash used to acquire property and equipment of approximately $6.9 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal of property and equipment of approximately $0.5 million.
For the year ended December 31, 2022, net cash used in investing activities was approximately $6.7 million, consisted primarily of cash used to acquire property and equipment of approximately $6.9 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal of property and equipment of approximately $0.5 million.
Warehouse storage management services We, through the VIE and the VIE’s subsidiaries, generate revenue of warehouse storage management services through the provision of warehouse storage management services to various customers. We help companies place the goods and maintain the daily input and output of the goods.
Warehouse storage management services We, primarily through the VIE and the VIE’s subsidiaries, generate revenue of warehouse storage management services through the provision of warehouse storage management services to various customers. We help companies place the goods and maintain the daily input and output of the goods.
GAAP. 98 Our Class A Ordinary Shares are shares of our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE’s subsidiaries in China, therefore, as an investor, you will not directly hold equity interests in the VIE or the VIE’s subsidiaries, and you may never directly hold equity interests in the VIE or the VIE’s subsidiaries through your investment in our Class A Ordinary Shares.
Our Class A Ordinary Shares are shares of our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE’s subsidiaries in China, therefore, as an investor, you will not directly hold equity interests in the VIE or the VIE’s subsidiaries, and you may never directly hold equity interests in the VIE or the VIE’s subsidiaries through your investment in our Class A Ordinary Shares.
Unfavorable changes in any of these general factors could materially and adversely affect our business and our results of operations. 99 Key Factors Affecting Our Results of Operations Our ability to expand our customer base We will continue to seek to expand our customer base to achieve sustainable growth. We aim to attract new customers and maintain our existing customers.
Unfavorable changes in any of these general factors could materially and adversely affect our business and our results of operations. 96 Key Factors Affecting Our Results of Operations Our ability to expand our customer base We will continue to seek to expand our customer base to achieve sustainable growth. We aim to attract new customers and maintain our existing customers.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are recoverable, valuation allowances of nil were provided for the Company’s certain subsidiaries with continuous losses as of December 31, 2022 and 2021.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are recoverable, valuation allowances of nil were provided for the Company’s certain subsidiaries with continuous losses as of December 31, 2023 and 2022.
Net cash generated from operating activities was partially offset by approximately $9.4 million decrease in operating lease liabilities, approximately $3.2 million increase in accounts receivables, approximately $2.3 million increased in prepayments and other current assets, approximately $3.8 million increase in other non-current assets and approximately $2.4 million decrease in note payable.
Net cash generated from operating activities was partially offset by approximately $9.4 million decrease in operating lease liabilities, approximately $3.2 million increase in accounts receivables, approximately $2.3 million increased in prepayments and other current assets and approximately $2.4 million decrease in note payable.
Contract logistics companies outsource resource management tasks to third-party companies and handle activities such as planning and designing supply chains, designing facilities, processing orders, collecting payments, managing inventories, and providing client services. Our integrated logistics solution services are comprised of three segments: (1) B2B freight transportation; (2) cloud storage; and (3) value-added services.
Contract logistics companies outsource resource management tasks to third-party companies and handle activities such as planning and designing supply chains, designing facilities, processing orders, collecting payments, managing inventories, and providing client services. Our integrated logistics solution services are comprised of three business streams: (1) B2B freight transportation; (2) cloud storage; and (3) value-added services.
Since 2001, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities in over 31 provinces as of December 31, 2022.
Since 2001, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities in over 31 provinces as of December 31, 2023.
Cash flows in Operating Activities For the year ended December 31, 2022, net cash generated from operating activities was approximately $6.9 million, primarily comprised of net income of approximately $7.8 million and adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $7.0 million, approximately $10.8 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately $1.2 million, increased of notes payable approximately $2.1 million in operating activities, increased of accounts payable of approximately $7.9 million.
For the year ended December 31, 2022, net cash provided by operating activities was approximately $6.9 million, primarily comprised of net income of approximately $7.8 million and adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $7.0 million, approximately $10.8 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately $1.2 million, increased of notes payable approximately $2.1 million in operating activities, increased of accounts payable of approximately $7.9 million.
December 31, 2022 2021 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Other income (expense) Interest income $ 1,274 $ 1,330 $ (56 ) (4.2 )% Interest expense (2,227 ) (2,315 ) 88 (3.8 )% Other income, net 532 559 (27 ) (4.8 )% Total other expense, net $ (421 ) $ (426 ) $ (5 ) (1.2 )% Our total net other expense amounted to approximately $0.4 million for the years ended December 31, 2022 and 2021.
Years Ended December 31, 2022 2021 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Other income (expense) Interest income $ 1,274 $ 1,330 $ (56 ) (4.2 )% Interest expense (2,227 ) (2,315 ) 88 (3.8 )% Other income, net 532 559 (27 ) (4.8 )% Total other expense, net $ (421 ) $ (426 ) $ (5 ) (1.2 )% Our total net other expense both was approximately $0.4 million for the years ended December 31, 2022 and 2021.
Capital Expenditures Our capital expenditures are incurred primarily in connection with purchase of fixed assets, including electronic equipment, office equipment and vehicles, and intangible assets. Our capital expenditures were approximately $7.2 million, $25.7 million and $7.9 million for the fiscal years ended December 31, 2022, 2021 and 2020, respectively.
Capital Expenditures Our capital expenditures are incurred primarily in connection with purchase of fixed assets, including electronic equipment, office equipment and vehicles, and intangible assets. Our capital expenditures were approximately $28.7 million, $7.2 million and $25.7 million for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.
A 1% increase or decrease of allowance rate for each aged account receivable balances would result in a decrease or increase of approximately $0.14 million and $0.10 million in profit before tax for the years ended December 31, 2022 and 2021, respectively.
A 1% increase or decrease of allowance rate for each aged account receivable balances would result in a decrease or increase of approximately $0.16 million and $0.14 million in profit before tax for the years ended December 31, 2023 and 2022, respectively.
When determining the rate, management assesses various factors including the lease term, nature of the asset and the level of security for the right-of-use asset. For the years ended December 31, 2022 and 2021, the estimated weighted average discount rates used in determining the present value of lease payments was 5.78% and 5.80%, respectively.
When determining the rate, management assesses various factors including the lease term, nature of the asset and the level of security for the right-of-use asset. For the years ended December 31, 2023 and 2022, the estimated weighted average discount rates used in determining the present value of lease payments was approximately 5.84% and 5.78%, respectively.
Cash flows in Financing Activities For the year ended December 31, 2022, net cash generated from financing activities was approximately $6.0 million, consisted primarily of cash proceeds from bank loans of approximately $61.3 million, partially offset by cash repaid for bank loans of approximately $55.5 million.
For the year ended December 31, 2022, net cash provided by financing activities was approximately $6.0 million, consisted primarily of cash proceeds from bank loans of approximately $61.3 million, partially offset by cash repaid for bank loans of approximately $55.5 million.
Provision for prepayments and other assets Prepayment and other assets primarily consist of VAT recoverable, advances to vendors for purchasing goods, long-lived assets or services that have not been received or provided, advances to employees, security deposits made to customers and advances to employees.
Allowance for credit losses for prepayments and other assets Prepayment and other assets primarily consist of VAT recoverable, advances to vendors for purchasing goods, long-lived assets or services that have not been received or provided, advances to employees, security deposits made to customers and advances to employees.
In addition, our PRC subsidiary is required to set aside at least 10% of its respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. We had various outstanding bank loans of approximately $47.7 million as of December 31, 2022.
In addition, our PRC subsidiary is required to set aside at least 10% of its respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. We had various outstanding bank loans of approximately $36.1 million as of December 31, 2023.
Net revenue generated from our warehouse storage management services increased by approximately 20.4% from approximately $16.9 million (which accounted for approximately 4.9% of our total net revenue) for the year ended December 31, 2021 to approximately $20.3 million (which accounted for approximately 5.5% of our total net revenue) for the year ended December 31, 2022, primarily due to the growth of our existing clients’ business. 101 Cost of revenues Our cost of revenue consists of cost of transportation services and cost of warehouse storage management services.
Net revenue generated from our warehouse storage management services increased by approximately 20.4% from approximately $16.9 million (which accounted for approximately 4.9% of our total net revenue) for the year ended December 31, 2021 to approximately $20.3 million (which accounted for approximately 5.5% of our total net revenue) for the year ended December 31, 2022, primarily due to the growth of our existing clients’ business.
We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements. 109 We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
For the year ended December 31, 2021, net cash used in investing activities was approximately $23.9 million, consisted primarily of cash used to acquire property and equipment of approximately $25.4 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal of property and equipment of approximately $1.3 million and disposal of subsidiaries of approximately $0.5 million.
For the year ended December 31, 2021, net cash used in investing activities was approximately $27.7 million, consisted primarily of cash used to acquire property and equipment of approximately $22.6 million and approximately $6.9 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal of property and equipment of approximately $1.3 million and disposal of subsidiaries of approximately $0.5 million.
For the year ended December 31, 2021, net cash used in financing activities was approximately $2.1 million, consisted primarily of cash repaid for bank loans of approximately $67.6 million, partially offset by capital contribution from non-controlling shareholders of approximately $3.4 million and cash proceeds from bank loans of approximately $62.6 million. 108 For the year ended December 31, 2020, net cash provided by financing activities of approximately $13.1 million, consisted primarily of cash proceeds from bank loans of approximately $62.3 million and cash injection from the non-controlling shareholders of approximately $0.3 million, partially offset by cash repaid for bank loans of approximately $50 million.
For the year ended December 31, 2021, net cash used in financing activities was approximately $2.1 million, consisted primarily of cash repaid for bank loans of approximately $67.6 million, partially offset by capital contribution from non-controlling shareholders of approximately $3.4 million and cash proceeds from bank loans of approximately $62.6 million.
Our major customers are in the manufacturing industry, the fast moving consumer goods industry, the telecommunications industry, and the publishing industry. Revenue from transportation services is recognized upon customers’ receipt of the transported goods.
Our major customers are in the manufacturing industry, the fast-moving consumer goods industry, the new energy (vehicle) industry, the telecommunication industry, and the publishing industry. Revenue from transportation services is recognized upon customers’ receipt of the transported goods.
Our total net revenue increased by approximately 20.6% during 2021 compared to 2020, primarily driven by the higher net revenue from both transportation services, warehouse storage and storage management services. We recorded net income of approximately $6.6 million and $6.0 million for the years ended December 31, 2021 and 2020, respectively.
Our total net revenue increased by approximately 6.8% during 2022 compared to 2021, primarily driven by the higher net revenue from transportation services and warehouse storage management services. We recorded net income of approximately $7.8 million and $6.6 million for the years ended December 31, 2022 and 2021, respectively.
Dollar Exchange Rate December 31, 2022 December 31, 2021 December 31, 2020 At the end of the period - USD: RMB US$1=RMB 6.9646 US$1=RMB 6.3757 US$1=RMB 6.5249 Average rate for the period - USD: RMB US$1=RMB 6.7261 US$1=RMB 6.4515 US$1=RMB 6.8976 We did not have any foreign currency investments hedged by currency borrowings or other hedging instruments in years ended December 31, 2022, 2021 and 2020. 106 B.
Dollar Exchange Rate December 31, 2023 December 31, 2022 December 31, 2021 At the end of the period - USD: RMB US$1=RMB 7.0827 US$1=RMB 6.9646 US$1=RMB 6.3757 Average rate for the period - USD: RMB US$1=RMB7.0467 US$1=RMB 6.7261 US$1=RMB 6.4515 We did not have any foreign currency investments hedged by currency borrowings or other hedging instruments in years ended December 31, 2023, 2022 and 2021.
We, through the VIE and the VIE’s subsidiaries, have achieved strong operational efficiency through centralized control and management of 35 regional sorting centers, 22 Cloud OFCs, 42 service outlets, approximately 600 self-owned trucks and vehicles, and over 40,000 transportation providers, route planning and optimization, and transportation and management system.
We, through the VIE and the VIE’s subsidiaries, have achieved strong operational efficiency through centralized control and management of 35 regional sorting centers, 49 Cloud OFCs, 33 service outlets, approximately 450 self-owned trucks and vehicles, and over 60,000 transportation providers, route planning and optimization, and transportation and managements system.
For the fiscal years ended December 31, 2022 and 2021, our net revenue, mainly generated from providing transportation and warehouse storage services, was approximately $370.3 million and $346.7 million, respectively. Our total net revenue increased by approximately 6.8% during 2022 compared to 2021, primarily driven by the higher net revenue from transportation services and warehouse storage and storage management services.
For the fiscal years ended December 31, 2023 and 2022, our net revenue, mainly generated from providing transportation and warehouse storage management services, was approximately $404.1 million and $370.3 million, respectively. Our total net revenue increased by approximately 9.1% during 2023 compared to 2022, primarily driven by the higher net revenue from transportation services.
Our general and administrative expenses decreased by approximately 3.1% from approximately $25.0 million for the year ended December 31, 2021 to approximately $24.3 million for year ended December 31, 2022, which was attributable to the decrease in employee wages and benefits as some employees worked from home or worked in alternating turns in the first half of fiscal year 2022, due to the COVID-19 Omicron variant. 102 Income from operations As a result of the foregoing, our profit from operations increased by approximately 14.7% from approximately $8.6 million for the year ended December 31, 2021 to approximately $9.8 million for the year ended December 31, 2022 .
Our general and administrative expenses decreased by approximately 3.1% from approximately $25.0 million for the year ended December 31, 2021 to approximately $24.3 million for year ended December 31, 2022, which was attributable to the decrease in employee wages and benefits as some employees worked from home or worked in alternating turns in the first half of fiscal year 2022, due to the COVID-19 Omicron variant.
Net income As a result of the foregoing, our net income increased by approximately $1.2 million or 17.8% to approximately $7.8 million for the year ended December 31, 2022 from approximately $6.6 million for the year ended December 31, 2021.
Net income As a result of the foregoing, our net income increased by approximately $1.2 million or 17.8% to approximately $7.8 million for the year ended December 31, 2022 from approximately $6.6 million for the year ended December 31, 2021. Impact of Foreign Currency Fluctuations The reporting currency of the Company is USD.
We recorded net income of approximately $7.8 million and $6.6 million for the years ended December 31, 2022 and 2021, respectively. For the fiscal years ended December 31, 2021 and 2020, our net revenue, mainly generated from providing transportation and warehouse storage services, was approximately $346.7 million and $287.5 million, respectively.
We recorded net income of approximately $10.3 million and $7.8 million for the years ended December 31, 2023 and 2022, respectively. For the fiscal years ended December 31, 2022 and 2021, our net revenue, mainly generated from providing transportation and warehouse storage management services, was approximately $370.3 million and $346.7 million, respectively.
We consider our critical accounting estimates include (i) allowance for doubtful accounts for accounts receivable, (ii) provision for prepayments and other assets, (iii) discount rate used in operating lease right-of-use assets, and (iv) valuation allowance of deferred tax assets.
We consider our critical accounting estimates include (i) allowance for credit losses for accounts receivable, (ii) allowance for credit losses for prepayments and other assets, (iii) discount rate used in operating lease right-of-use assets, and (iv) valuation allowance of deferred tax assets. Allowance for credit losses for accounts receivable Accounts receivables are recorded net of an allowance for credit losses.
The business or financial performance of the companies we have invested in as well as our ability to successfully integrate these investments with our existing business would impact our results of operations and financial conditions. Impact of COVID-19 on Our Operations and Financial Performance The COVID-19 pandemic has spread in China and throughout the world.
The business or financial performance of the companies we have invested in as well as our ability to successfully integrate these investments with our existing business would impact our results of operations and financial conditions.
Income from operations As a result of the foregoing, our profit from operations increased by approximately 38.4% from approximately $6.2 million for the year ended December 31, 2020 to approximately $8.6 million for the year ended December 31, 2021.
Income from operations As a result of the foregoing, our profit from operations increased by approximately 14.7% from approximately $8.6 million for the year ended December 31, 2021 to approximately $9.8 million for the year ended December 31, 2022 .
Year Ended December 31, 2022 2021 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Income before income taxes $ 9,425 $ 8,161 $ 1,264 15.5 % Provision for income taxes (1,599 ) (1,517 ) (82 ) 5.4 % Net income $ 7,826 $ 6,644 $ 1,182 17.8 % Income before income taxes As a result of the foregoing, our income before income taxes increased by approximately $1.3 million or approximately 15.5% to approximately $9.4 million for the year ended December 31, 2022 from approximately $8.2 million for the year ended December 31, 2021.
Years Ended December 31, 2022 2021 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Income before income taxes $ 9,425 $ 8,161 $ 1,264 15.5 % Provision for income taxes (1,599 ) (1,517 ) (82 ) 5.4 % Net income $ 7,826 $ 6,644 $ 1,182 17.8 % Income before income taxes As a result of the foregoing, our income before income taxes increased by approximately $1.3 million or approximately 15.5% to approximately $9.4 million for the year ended December 31, 2022 from approximately $8.2 million for the year ended December 31, 2021. 102 Provision for income taxes The effective income tax rate decreased from approximately 18.6% for the year ended December 31, 2021 to approximately 17.0% for the year ended December 31, 2022, which is mainly due to the different profit made in different VIE’s subsidiaries.
For a description of the VIE Agreements, see “ Corporate History and Structure—Our VIE Agreements .” The VIE is a contract logistics service provider in China. Contract logistics is a comprehensive process that merges traditional logistics with supply chain management.
For a description of the VIE Agreements, see “Item 3. Key Information — Our VIE Agreements.” 95 The VIE is a contract logistics service provider in China. Contract logistics is a comprehensive process that merges traditional logistics with supply chain management.
Our net income increased by approximately $1.2 million to approximately $7.8 million for the year ended December 31, 2022 from approximately $6.6 million for the year ended December 31, 2021. 107 For the year ended December 31, 2021, net cash generated from operating activities was approximately $16.6 million, primarily comprised of net income of approximately $6.6 million and adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $5.9 million, approximately $9.5 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately $1.5 million, the decrease of notes receivable of approximately $9.4 million in operating activities, decreased of inventories of approximately $0.8 million and increase of accounts payable of approximately $2.5 million.
Net cash generated from operating activities was partially offset by approximately $11.3 million decrease in operating lease liabilities, approximately $1.0 million decreased in salary and welfare payables, approximately $2.0 million increased in prepayments and other current assets, approximately $17.0 million increased in account receivable and approximately $1.0 million increase in notes receivable. 104 For the year ended December 31, 2021, net cash provided by operating activities was approximately $20.4 million, primarily comprised of net income of approximately $6.6 million and adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $5.9 million, approximately $9.5 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately $1.5 million, the decrease of notes receivable of approximately $9.4 million in operating activities, decreased of inventories of approximately $0.8 million and increase of accounts payable of approximately $2.5 million.
As of December 31, 2022 and 2021, there were approximately $9.5 million and $16.8 million net operating losses carryforwards in certain subsidiaries, respectively. The net operating tax loss carryforwards will expire from 2023 to 2027. 110
As of December 31, 2023 and 2022, there were approximately $2.8 million and $9.5 million net operating losses carryforwards in certain subsidiaries, respectively. Most of the net operating tax loss carryforwards will expire from fiscal year 2024 to 2028. 107
For the year ended December 31, 2020, net cash provided by operating activities was approximately $2.3 million, primarily comprised of net income of approximately $6.0 million and adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $4.7 million, approximately $8.6 million for amortization of right-of-use assets and interest of lease liabilities, approximately $1.3 million deferred income taxes, the increase in notes payable related to normal operating activities of approximately $1.5 million, the increase of accounts payable of approximately $14.0 million, the increase in salary and welfare payable of approximately $1.3 million, the increase in accrued expenses and other current liabilities of approximately $1.8 million and the increase in tax payable of approximately $2.3 million.
Cash flows in Operating Activities For the year ended December 31, 2023, net cash provided by operating activities was approximately $12.1 million, primarily comprised of net income of approximately $10.3 million and adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $6.4 million, approximately $9.3 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately $1.5 million, decreased of prepayments and other current assets approximately $3.5 million, increased of accounts payable approximately $4.5 million and increased of salary and welfare payable of approximately $1.5 million.
Net cash generated from operating activities was partially offset by approximately $11.3 million decrease in operating lease liabilities, approximately $1.0 million decreased in salary and welfare payables, approximately $2.0 million increased in prepayments and other current assets, approximately $17.0 million increased in account receivable and approximately $1.0 million increase in notes receivable.
Net cash generated from operating activities was partially offset by approximately $9.4 million decrease in operating lease liabilities, approximately $2.0 million decreased in notes payable, approximately $10.7 million increased in account receivable and approximately $3.7 million increase in other non-current assets.
If actual conditions are less favorable than those projected by the management, additional doubtful accounts may be required, which could negatively impact our operating results. If actual conditions are more favorable than those projected by the management, we may have a higher profit margin when account receivable balances that have been previously reserved are eventually collected.
If actual conditions are more favorable than those projected by the management, we may have a higher profit margin when account receivable balances that have been previously reserved are eventually collected.
Subsequent to December 31, 2022 and as of the date of this annual report, there have been no material commitments for capital expenditures. We intend to fund our future capital expenditures with our existing cash balance, proceeds of bank loans and proceeds from the initial public offering.
Subsequent to December 31, 2023 and as of the date of this annual report, we made capital expenditures of approximately $10.0 million. We intend to fund our future capital expenditures with our existing cash balance, proceeds of bank loans and proceeds from the initial public offering.
Discount rate used in operating lease right-of-use asset Right-of-use asset (“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.
The allowance for credit losses were approximately $0.4 million and $0.5 million as of December 31, 2023 and 2022, respectively. Discount rate used in operating lease right-of-use assets Right-of-use (“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.
Provision for income taxes The effective income tax rate decreased from approximately 18.6% for the year ended December 31, 2021 to approximately 17.0% for the year ended December 31, 2022, which is mainly due to the different profit made in different VIE’s subsidiaries.
Provision for income taxes The effective income tax rate increased from approximately 17.0% for the year ended December 31, 2022 to approximately 18.4% for the year ended December 31, 2023, due to the higher profit made in subsidiaries and VIE’s subsidiaries, which didn’t have preferential tax treatment for the year ended December 31, 2023.
See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of these accounting policies.
See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of these accounting policies. We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.
The following table sets forth our contractual obligations as of December 31, 2022: Payments Due by Period (Amount in thousand) Total Within 1 Year 1-3 Years 3-5 Years More than 5 Years Borrowings $ 47,655 $ 47,655 $ - $ - $ - Operating leases commitments 31,206 9,924 11,450 5,126 4,706 Total $ 78,861 $ 57,579 $ 11,450 $ 5,126 $ 4,706 Cash flows and working capital The following table sets forth a summary of our cash flows for the periods indicated: December 31, December 31, December 31, 2022 2021 2020 (Amount in thousand) (Amount in thousand) (Amount in thousand) Net cash provided by operating activities $ 6,930 $ 16,592 $ 2,332 Net cash used in investing activities (6,715 ) (23,869 ) (7,821 ) Net cash flows provided by (used in) financing activities 6,049 (2,127 ) 13,144 Effects of exchange rate changes on cash and restricted cash (1,814 ) 538 1,714 Cash and restricted cash, beginning of year 18,918 27,784 18,415 Cash and restricted cash, end of year $ 23,368 $ 18,918 $ 27,784 As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our PRC subsidiary and the VIE in China.
The following table sets forth our contractual obligations as of December 31, 2023: Payments Due by Period (Amount in thousand) Total Within 1 Year 1-3 Years 3-5 Years More than 5 Years Short-term bank loans $ 36,130 $ 36,130 $ - $ - $ - Operating lease commitments 19,836 6,524 6,709 3,213 3,390 Total $ 55,966 $ 42,654 $ 6,709 $ 3,213 $ 3,390 Cash flows and working capital The following table sets forth a summary of our cash flows for the periods indicated: December 31, December 31, December 31, 2023 2022 2021 (Amount in thousand) (Amount in thousand) (Amount in thousand) Net cash provided by operating activities $ 12,113 $ 6,930 $ 20,393 Net cash used in investing activities (18,821 ) (6,715 ) (27,670 ) Net cash flows provided by (used in) financing activities 13,191 6,049 (2,127 ) Effects of exchange rate changes on cash, cash equivalent and restricted cash (558 ) (1,814 ) 538 Cash, cash equivalent and restricted cash, beginning of year 23,368 18,918 27,784 Cash, cash equivalent and restricted cash, end of year $ 29,293 $ 23,368 $ 18,918 As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our PRC subsidiary and the VIE in China.
We primarily charge our customers service fees for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over the service period. Our net revenues were approximately $346.7 million for the year ended December 31, 2021, increasing by approximately 20.6% from approximately $287.5 million for the year ended December 31, 2020.
We primarily charge our customers service fees for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over the service period. 97 Our net revenues increased by approximately 9.1% from approximately $370.3 million for the year ended December 31, 2022 to approximately $404.1 million for the year ended December 31, 2023.
The cost of warehouse storage management services consists of rental fees, handling fees, employee wages and benefits in connection with our services to our clients.
Cooperation cost is the direct cost of transportation paid by the Company to third-party transportation providers, who are independent contractors and third-party carriers. The cost of warehouse storage management services consists of rental fees, handling fees, employee wages and benefits in connection with our services to our clients.
The cost of transportation services comprises cooperation cost (the payments made to third-party transportation providers), depreciation and amortization expenses, toll fees, employee wages and benefits and fuel cost. Cooperation cost is the direct cost of transportation paid by the Company to third-party transportation providers, who are independent contractors and third-party carriers.
Cost of revenues Our cost of revenue consists of cost of transportation services and cost of warehouse storage management services. The cost of transportation services comprises cooperation cost (the payments made to third-party transportation providers), depreciation and amortization expenses, toll fees, employee wages and benefits and fuel cost.
In addition, the toll fees increased as a result of the expiration of a deduction policy on toll fees, as previous mentioned. 104 December 31, 2021 2020 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Operating expenses Selling and marketing $ (7,720 ) $ (6,139 ) $ (1,581 ) 25.8 % General and administrative (25,038 ) (23,632 ) (1,406 ) 5.9 % Total operating expenses $ (32,758 ) $ (29,771 ) $ (2,987 ) 10.0 % Operating expenses Our operating expenses increased by approximately 10.0% from approximately $29.8 million for the year ended December 31, 2020 to approximately $32.8 million for the year ended December 31, 2021 for the following reasons: Selling and marketing expenses Our sales and marketing expenses consist primarily of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses which are related to the sales and marketing functions.
Years Ended December 31, 2023 2022 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Operating expenses Selling and marketing $ (6,688 ) $ (7,427 ) $ 739 (10.0 )% General and administrative (25,912 ) (24,259 ) (1,653 ) 6.8 % Total operating expenses $ (32,600 ) $ (31,686 ) $ (914 ) 2.9 % 98 Operating expenses Our operating expenses increased by approximately 2.9% from approximately $31.7 million for the year ended December 31, 2022 to approximately $32.6 million for the year ended December 31, 2023 for the following reasons: Selling and marketing expenses Our selling and marketing expenses consist primarily of employee wages, rental expenses, benefits for sales and marketing staff, depreciation expenses and other daily expenses which are related to the sales and marketing functions.
For the year ended December 31, 2020, net cash used in investing activities approximately of $7.8 million, consisted primarily of cash used to acquire property and equipment of approximately $7.9 million, partially offset by proceeds from disposal of property and equipment of approximately $0.1 million.
Cash flows in Investing Activities For the year ended December 31, 2023, net cash used in investing activities was approximately $18.8 million, consisting primarily of cash used to acquire property and equipment of approximately $10.8 million and approximately $17.9 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal of property and equipment of approximately $1.2 million, investment deposit refund of approximately $5.7 million and consideration deposit received from a third party of approximately $2.8 million.
Year Ended December 31, 2021 2020 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Income before income taxes $ 8,161 $ 7,613 $ 548 7.2 % Provision for income taxes (1,517 ) (1,570 ) (53 ) (3.4 )% Net income $ 6,644 $ 6,043 $ 601 9.9 % Income before income taxes As a result of the foregoing, our income before income taxes increased by approximately $0.5 million or approximately 7.2% to approximately $8.2 million for the year ended December 31, 2021 from approximately $7.6 million for the year ended December 31, 2020.
Years Ended December 31, 2023 2022 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Income before income taxes $ 12,628 $ 9,425 $ 3,203 34.0 % Provision for income taxes (2,320) (1,599) (721) 45.1 % Net income $ 10,308 $ 7,826 $ 2,482 31.7 % Income before income taxes As a result of the foregoing, our income before income taxes increased by 34.0% from approximately $9.4 million for the year ended December 31, 2022 to approximately $12.6 million for the year ended December 31, 2023.
The gross profit increased by approximately $5.4 million mainly due to the increase of revenue without too much changes in gross profit margin from fiscal year 2020 to fiscal year 2021. For the years ended December 31, 2021 and 2020, our overall gross margin was approximately 11.9% and 12.5%, respectively.
Gross profit Our overall gross profit increased by approximately 12.0% from approximately $41.5 million for the year ended December 31, 2022 to approximately $46.5 million for the year ended December 31, 2023. For the years ended December 31, 2023 and 2022, our overall gross margin was approximately 11.5% and 11.2%, respectively.
The following table summarizes our consolidated results of operations, both in absolute amounts and as percentages of our total net revenue for the periods presented. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.
The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.
Our general and administrative expenses increased by approximately 5.9% from approximately $23.6 million for the year ended December 31, 2020 to approximately $25.0 million for year ended December 31, 2021, which was mainly attributable to the increase in employee wages and benefits from approximately $15.4 million for the year ended December 31, 2020 to approximately $16.0 million for the year ended December 31, 2021.
Our general and administrative expenses increased by approximately 6.8% from approximately $24.3 million for the year ended December 31, 2022 to approximately $25.9 million for year ended December 31, 2023, which was attributable to the increase in employee salaries and benefits, due to increased revenue and increased headcount of G&A department to support our expended business.
Net income As a result of the foregoing, our net income increased by approximately $0.6 million or 9.9% to approximately $6.6 million for the year ended December 31, 2021 from approximately $6.0 million for the year ended December 31, 2020. Impact of Foreign Currency Fluctuations The reporting currency of the Company is USD.
Net income As a result of the foregoing, our net income increased by 31.7% from approximately $7.8 million for the year ended December 31, 2022 to approximately $10.3 million for the year ended December 31, 2023.
The allowance is based on our management’s best estimates of specific losses on individual exposures and a provision on historical trends of collections. The allowance rate will fluctuate based upon the changes of the historical allowance rate and our management’s estimate.
The allowance for credit losses was approximately $3.3 million and $3.1 million as of December 31, 2023 and 2022, respectively. 106 The allowance is based on our management’s best estimates of specific losses on individual exposures and a provision on historical trends of collections.
Our cost of revenues was approximately $305.4 million for the year ended December 31, 2021, compared to approximately $251.5 million for the year ended December 31, 2020, which was in line with the increase of revenue, and was mainly attributable to the increase in the cooperation cost, due to the sharp increase of transportation revenue for the year ended December 31, 2021.
Our cost of revenues increased by approximately 8.8%, from approximately $328.8 million for the year ended December 31, 2022 to approximately $357.6 million for the year ended December 31, 2023, which was in line with the increase of revenue.
Gross profit Our overall gross profit increased by approximately 14.9% from approximately $36.0 million for the year ended December 31, 2020 to approximately $41.3 million for the year ended December 31, 2021.
Income from operations As a result of the foregoing, our profit from operations increased by approximately 41.2% from approximately $9.8 million for the year ended December 31, 2022 to approximately $13.9 million for the year ended December 31, 2023.
For the years ended December 31, 2021 and 2020 Years Ended December 31, 2021 2020 Change Amount in thousand % Amount in thousand % (Amount in thousand) % Revenue Transportation $ 327,848 94.6 % $ 273,685 95.2 % $ 54,163 19.8 % Warehouse storage management services 16,885 4.9 % 12,364 4.3 % 4,521 36.6 % Other revenue 1,966 0.5 % 1,415 0.5 % 551 38.9 % Net revenue 346,699 100 % 287,464 100 % 59,235 20.6 % Cost of revenue (305,354 ) (88.1 )% (251,489 ) (87.5 )% (53,865 ) 21.4 % Gross profit $ 41,345 11.9 % 35,975 12.5 % $ 5,370 14.9 % 103 Net revenues Transportation services We, through the VIE and the VIE’s subsidiaries, provide transportation services to companies in mainland China.
For the years ended December 31, 2023 and 2022 Years Ended December 31, 2023 2022 Change Amount in thousand % Amount in thousand % (Amount in thousand) % Revenue Transportation $ 383,211 94.8 % $ 346,039 93.4 % $ 37,172 10.7 % Warehouse storage management services 18,160 4.5 % 20,322 5.5 % (2,162 ) (10.6 )% Other revenue 2,750 0.7 % 3,964 1.1 % (1,214 ) (30.6 )% Net revenue 404,121 100 % 370,325 100 % 33,796 9.1 % Cost of revenue (357,615 ) (88.5 )% (328,793 ) (88.8 )% (28,822 ) 8.8 % Gross profit $ 46,506 11.5 % $ 41,532 11.2 % $ 4,974 12.0 % Net revenues Transportation services We, primarily through the VIE and the VIE’s subsidiaries, provide transportation services to companies in mainland China.
Our net income increased by approximately $0.6 million to approximately $6.6 million for the year ended December 31, 2021 from approximately $6.0 million for the year ended December 31, 2020.
The increase was primarily driven by a significant increase in revenue from our transportation services. Net revenues generated from our transportation services increased by approximately 10.7% from approximately $346.0 million for the year ended December 31, 2022 to approximately $383.2 million for the year ended December 31, 2023.
Net revenue generated from our warehouse storage management services also increased by approximately 36.6% from approximately $12.4 million (which accounted for approximately 4.3% of our total net revenue) for the year ended December 31, 2020 to approximately $16.9 million (which accounted for approximately 4.9% of our total net revenue) for the year ended December 31, 2021, primarily due to approximately 15.1% increase in client number and the growth of our existing clients’ business.
Net revenue generated from our warehouse storage management services decreased by approximately 10.6% from approximately $20.3 million for the year ended December 31, 2022 to approximately $18.2 million for the year ended December 31, 2023, primarily due to shutting down redundant warehouses and shift focusing on transportation services for the year ended December 31, 2023.
Our sales and marketing expenses increased by approximately 25.8% from approximately $6.1 million for the year ended December 31, 2020 to approximately $7.7 million for the year ended December 31, 2021.
Selling and marketing expenses decreased by approximately 10.0% from approximately $7.4 million for the year ended December 31, 2022 to approximately $6.7 million for the year ended December 31, 2023, which was attributable to decreased related employee wages and benefits due to workforce optimization practices.
Our net income increased by approximately $4.1 million to approximately $6.0 million in the fiscal year ended December 31, 2020 from approximately $1.9 million for the fiscal year ended December 31, 2019.
Years Ended December 31, 2023 2022 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Other income (expense) Interest income $ 126 $ 1,274 $ (1,148 ) (90.1 )% Interest expense (1,775 ) (2,227 ) 452 (20.3 )% Other income, net 371 532 (161 ) (30.3 )% Total other expense, net $ (1,278 ) $ (421 ) $ (857 ) 203.6 % Our total net other expense increased by approximately 203.6% from approximately $0.4 million for the year ended December 31, 2022 to approximately $1.3 million for the year ended December 31, 2023 for the following reasons.
Removed
As the majority of our net revenue is derived from transportation and warehouse storage management services in China, our results of operations and financial condition have been, and could continue to be affected by the spread of COVID-19.
Added
Results of Operations The following consolidated results of operations include the results of operations of the Company, its wholly owned subsidiaries and consolidated VIE and the VIE’s subsidiaries. The following table summarizes our consolidated results of operations, both in absolute amounts and as percentages of our total net revenue for the periods presented.
Removed
In connection with the intensifying efforts to contain the spread of COVID-19, the Chinese government has taken a number of actions, which included extending the Chinese Spring Festival in 2020, quarantining individuals infected with or suspected of having COVID-19, prohibiting residents from free travel, encouraging employees of enterprises to work remotely from home and cancelling public activities, among others.
Added
The increase was mainly driven by increasing orders from some new customers, as well as the growth of other existing clients’ businesses.
Removed
The COVID-19 has also resulted in temporary closure of many corporate offices, retail stores, manufacturing facilities and factories across China. In response to the evolving dynamics related to the COVID-19 pandemic, we have followed guidelines issued by local authorities to prioritize the health and safety of our employees and suppliers including third-party transportation providers.
Added
The gross margin increased mainly due to our cost optimization structure by outsourcing transport service, reducing redundant departments, and incorporating workforce optimization practices for the year ended December 31, 2023. Accordingly, our total revenues had higher proportional increase than the increase in cost of revenues during the same period, led a higher overall gross profit margin.
Removed
As a result of the government-imposed restrictions, the VIE and the VIE’s subsidiaries’ facilities and operations were mostly closed from February 2020 to late March 2020.
Added
Cash flows in Financing Activities For the year ended December 31, 2023, net cash provided by financing activities was approximately $13.2 million, consisting primarily of cash proceeds from bank loans of approximately $46.4 million, proceeds from the initial public offering of approximately $8.5 million and an advance from a third party of approximately $7.2 million, offset by cash repaid for bank loans of approximately $48.7 million.
Removed
The VIE and the VIE’s subsidiaries gradually resumed operation during February and March 2020, but it was not until April 2020 that we resumed full operation, which has caused a decrease in our net revenue and also adversely affected our marketing activities during the closure.
Added
The Company’s estimation of allowance for credit losses considers factors such as historical credit loss experience, age of receivable balances, current market conditions, reasonable and supportable forecasts of future economic conditions, as well as an assessment of receivables due from specific identifiable counterparties to determine whether these receivables are considered at risk or uncollectible.
Removed
We, through the VIE and the VIE’s subsidiaries, took a series of measures in response to the pandemic, including, among others, the establishment of a special team for epidemic prevention and control, the remote working arrangements for some of our employees, and the requirement for our employees on site to take extra measures and procedures to lower the risks of COVID-19 exposure.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

41 edited+12 added−6 removed31 unchanged
Biggest changeLevy served on the board of directors of Applied Minerals, Inc. from January 2008 to August 2022), Washington Prime Group, Inc. from June 2016 to October 2021), Singularity Future Technology Limited (from November 2021 to February 2023), Takung Art Co., Ltd. (from March 2016 to June 2019), China Commercial Credit, Inc. (from August 2013 to December 2016), Applied Energetics, Inc.
Biggest changeLevy served on the board of directors of (i) Applied Minerals, Inc. from January 2008 to August 2022, (ii) Washington Prime Group, Inc. from June 2016 to October 2021 (Washington Prime Group filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code on June 13, 2021, and it emerged from bankruptcy protection on October 21, 2021), (iii) Singularity Future Technology Limited from November 2021 to February 2023, (iv) Takung Art Co., Ltd. from March 2016 to June 2019, (v) China Commercial Credit, Inc. from August 2013 to December 2016, (vi) Applied Energetics, Inc. from June 2009 to February 2016, and (vii) several other publicly held companies prior to 2016.
Board Diversity Matrix Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 2 3 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 112 Family Relationships None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Board Diversity Matrix Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 2 3 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 Family Relationships None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
As a controlled company, we are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements, including: ● the requirement that a majority of the board of directors consist of independent directors; ● the requirement that our director nominees be selected or recommended solely by independent directors; and ● the requirement that we have a nominating and corporate governance committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purposes and responsibilities of the committees.
As a controlled company, we are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements, including: ● the requirement that a majority of the board of directors consist of independent directors; 109 ● the requirement that our director nominees be selected or recommended solely by independent directors; and ● the requirement that we have a nominating and corporate governance committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purposes and responsibilities of the committees.
All of our executive officers are appointed by and serve at the discretion of our board of directors. Qualification There is currently no shareholding qualification for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution. Employment Agreements We have entered into employment agreements with each of our executive officers.
All of our executive officers are appointed by and serve at the discretion of our board of directors. Qualification There is currently no shareholding qualification for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution. Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. 115 Compensation Committee .
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. 112 Compensation Committee .
Each holder of Class A Ordinary Shares is entitled to one vote per one Class A Ordinary Share and each holder of Class B Ordinary Shares is entitled to ten votes per one Class B Ordinary Share. 117 (1) Unless otherwise indicated, the business address of each of the individuals is Shengfeng Building, No. 478 Fuxin East Road, Jin’an District, Fuzhou City, Fujian Province, People’s Republic of China, 350001 (2) The number of Class B Ordinary Shares beneficially owned represents 41,880,000 Class B Ordinary Shares held by Shengfeng International Limited, a British Virgin Islands company, which is 100% owned by Yongxu Liu, our CEO, Chairman and President.
Each holder of Class A Ordinary Shares is entitled to one vote per one Class A Ordinary Share and each holder of Class B Ordinary Shares is entitled to ten votes per one Class B Ordinary Share. 114 (1) Unless otherwise indicated, the business address of each of the individuals is Shengfeng Building, No. 478 Fuxin East Road, Jin’an District, Fuzhou City, Fujian Province, People’s Republic of China, 350001 (2) The number of Class B Ordinary Shares beneficially owned represents 41,880,000 Class B Ordinary Shares held by Shengfeng International Limited, a British Virgin Islands company, which is 100% owned by Yongxu Liu, our CEO, Chairman and President.
Share Ownership The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Class A Ordinary Shares and Class B Ordinary Shares as of the date of this annual report for: ● each of our directors and executive officers; and ● each person known to us to own beneficially more than 5% of our Class A Ordinary Shares or Class B Ordinary Shares. 116 Beneficial ownership includes voting or investment power with respect to the securities.
Share Ownership The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Class A Ordinary Shares and Class B Ordinary Shares as of the date of this annual report for: ● each of our directors and executive officers; and ● each person known to us to own beneficially more than 5% of our Class A Ordinary Shares or Class B Ordinary Shares. 113 Beneficial ownership includes voting or investment power with respect to the securities.
The registered address of Mid-Castle Development Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (8) The number of Class A Ordinary Shares beneficially owned represents 3,088,000 Class A Ordinary Shares held by Prime Link Capital International Limited, a British Virgin Islands company, which is 100% owned by Jinyuan Huang.
The registered address of Mid-Castle Development Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (8) The number of Class A Ordinary Shares beneficially owned represents 3,074,000 Class A Ordinary Shares held by Prime Link Capital International Limited, a British Virgin Islands company, which is 100% owned by Jinyuan Huang.
Each executive officer agrees to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information. 114 We have also entered into indemnification agreements with each of our directors and executive officers.
Each executive officer agrees to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information. 111 We have also entered into indemnification agreements with each of our directors and executive officers.
Controlled Company Mr. Yongxu Liu, our chief executive officer, president and chairman of the board of directors, currently beneficially owns approximately 91.18% of the aggregate voting power of our outstanding ordinary shares. As a result, we are a “controlled company” within the meaning of the Nasdaq listing rules.
Controlled Company Mr. Yongxu Liu, our chief executive officer, president and chairman of the board of directors, currently beneficially owns approximately 91.16% of the aggregate voting power of our outstanding ordinary shares. As a result, we are a “controlled company” within the meaning of the Nasdaq listing rules.
Levy 66 Independent Director The following is a brief biography of each of the executive officers and directors listed above: Yongxu Liu has been our chief executive officer, president and chairman since May 20, 2021 and director since July 16, 2020. Mr.
Levy 68 Independent Director The following is a brief biography of each of the executive officers and directors listed above: Yongxu Liu has been our chief executive officer, president and chairman since May 20, 2021 and director since July 16, 2020. Mr.
Class A Ordinary Shares Beneficially Owned Class B Ordinary Shares Beneficially Owned Voting Power* Number % Number % % Directors, Director Appointees, and Executive Officers (1) : Yongxu Liu (2) — — % 41,880,000 100 % 91.18 % Guoping Zheng — — — — — Zhiping Yang — — — — — Dan Liu — — — — — Wen Li — — — — — John F.
Class A Ordinary Shares Beneficially Owned Class B Ordinary Shares Beneficially Owned Voting Power* Number % Number % % Directors, Director Appointees, and Executive Officers (1) : Yongxu Liu (2) — — % 41,880,000 100 % 91.16 % Guoping Zheng — — — — — Zhiping Yang — — — — — Dan Liu — — — — — Wen Li — — — — — John F.
Under these agreements, we have agreed to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our Company. Insider Participation Concerning Executive Compensation Our chief executive officer, president and chairman, Mr.
Under these agreements, we have agreed to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our Company. Insider Participation Concerning Executive Compensation Before the establishment of our Compensation Committee, our chief executive officer, president and chairman, Mr.
Percentage of beneficial ownership of each listed person is based on 40,520,000 Class A Ordinary Shares outstanding, and 41,880,000 Class B Ordinary Shares outstanding as of the date of this annual report.
Percentage of beneficial ownership of each listed person is based on 40,617,513 Class A Ordinary Shares outstanding, and 41,880,000 Class B Ordinary Shares outstanding as of the date of this annual report.
She also completed a Master course in Finance conducted by Xiamen University in 1999. She has been certified as a Senior Accountant in China since 2001, obtained Securities Practitioner qualification in China since 2002 and Independent Director qualification in Shenzhen Stock Exchange since 2007. Ms.
She also completed a Master course in Finance conducted by Xiamen University in 1999. She has been certified as a Senior Accountant in China since 2001, obtained Securities Practitioner qualification in China since 2002 and Independent Director qualification in Shenzhen Stock Exchange since 2007. John F. Levy is an independent director. Mr.
The Companies Act (2021 Revision) of the Cayman Islands imposes a number of statutory duties on a director.
The Companies Act (Revised) of the Cayman Islands imposes a number of statutory duties on a director.
Liu received her bachelor’s degree in Material Management Engineering from Huazhong University of Science & Technology (formerly named Huazhong Institute of Technology) in 1987, her master’s degree in Business Management from Fuzhou University in 2005 and her Ph.D. in Logistics Management from Fuzhou University in 2012. Ms.
Liu received her bachelor’s degree in Material Management Engineering from Huazhong University of Science & Technology (formerly named Huazhong Institute of Technology) in 1987, her master’s degree in Business Management from Fuzhou University in 2005 and her Ph.D. in Logistics Management from Fuzhou University in 2012. 108 Wen Li is an independent director. Ms.
Levy — — — — — All directors, director appointees, and executive officers as a group (6 individuals): — — % 41,880,000 100 % 91.18 % 5% Shareholders: Shengfeng International Limited (2) — — % 41,880,000 100 % 91.18 % Everbright International Development Limited (3) 8,736,000 21.56 % — — 1.90 % Double Sun Capital Limited (4) 3,928,000 9.69 % — — 0.86 % Changle International Limited (5) 3,904,000 9.63 % — — 0.85 % Chia-Yu Chen 3,880,000 9.58 % — — 0.84 % Yuansheng International Limited (6) 3,784,000 9.34 % — — 0.82 % Mid-Castle Development Limited (7) 3,648,000 9.00 % — — 0.79 % Prime Link Capital International Limited (8) 3,088,000 7.62 % — — 0.67 % Sky Top Capital International Limited (9) 2,880,000 7.11 % — — 0.63 % * Represents the voting power with respect to all of our Class A Ordinary Shares and Class B Ordinary Shares, voting as a single class.
Levy — — — — — All directors, director appointees, and executive officers as a group (6 individuals): — — % 41,880,000 100 % 91.16 % 5% Shareholders: Shengfeng International Limited (2) — — % 41,880,000 100 % 91.16 % Everbright International Development Limited (3) 8,736,000 21.51 % — — 1.90 % Double Sun Capital Limited (4) 3,928,000 9.67 % — — 0.85 % Changle International Limited (5) 3,904,000 9.61 % — — 0.85 % Chia-Yu Chen 3,519,251 8.66 % — — 0.77 % Yuansheng International Limited (6) 3,784,000 9.32 % — — 0.82 % Mid-Castle Development Limited (7) 3,648,000 8.98 % — — 0.79 % Prime Link Capital International Limited (8) 3,074,000 7.57 % — — 0.67 % Sky Top Capital International Limited (9) 2,880,000 7.09 % — — 0.63 % * Represents the voting power with respect to all of our Class A Ordinary Shares and Class B Ordinary Shares, voting as a single class.
Name Age Position(s) Yongxu Liu 50 Chief Executive Officer, Director, President and Chairman Guoping Zheng 35 Chief Financial Officer and Vice President Zhiping Yang 39 Director Dan Liu 54 Independent Director Wen Li 54 Independent Director John F.
Name Age Position(s) Yongxu Liu 53 Chief Executive Officer, Director, President and Chairman Guoping Zheng 38 Chief Financial Officer and Vice President Zhiping Yang 42 Director Dan Liu 57 Independent Director Wen Li 57 Independent Director John F.
Additionally, our biggest shareholder, Shengfeng International Limited, has the ability to control the outcome of matters submitted to the shareholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. B. Compensation Yongxu Liu $ 89,430 Guoping Zheng $ 82,062 Zhiping Yang $ 89,267 C.
Additionally, our biggest shareholder, Shengfeng International Limited, has the ability to control the outcome of matters submitted to the shareholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. B. Compensation Yongxu Liu $ 101,545.68 Guoping Zheng $ 90,591.76 Zhiping Yang $ 91,907.50 C.
From 2000 to 2001, she was a senior lecturer of the Department of Vocational Education of Fujian Economics and Management Cadre Institute after being a lecturer in the same department from 1994 to 2000. From 1987 to 1994, she served as a teaching assistant under the same department. Ms.
From 2001 to 2006, Ms. Liu served as an associate professor in Fuzhou Polytechnic. From 2000 to 2001, she was a senior lecturer of the Department of Vocational Education of Fujian Economics and Management Cadre Institute after being a lecturer in the same department from 1994 to 2000.
From 2006 to 2012, she served as an independent director of Fufa Group Co., Ltd. in Fujian Province. She also served as the financial director of Fuzhou TV Station from 2008 to 2013 and the financial director of Fujian Zhongcheng Group from 2006 to 2008.
She also served as the financial director of Fuzhou TV Station from 2008 to 2013 and the financial director of Fujian Zhongcheng Group from 2006 to 2008.
In fulfilling their duty of care to us, our directors must ensure compliance with our articles of association, as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our directors is breached.
In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated articles of association. We have the right to seek damages if a duty owed by any of our directors is breached. Our board of directors have all powers necessary for managing, directing and supervising our business affairs.
Terms of Directors and Executive Officers Each of our directors holds office until a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for reelection.
Unless re-appointed or removed from office pursuant to the provisions of our amended and restated articles of association, each of our directors shall hold office until a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for reelection.
Dan Liu is an independent director. Ms. Liu has been a professor in the School of Economics and Management of Fuzhou University since 2017. Prior to that, she served as an associate professor in the same school of Fuzhou University from 2006 to 2017. From 2001 to 2006, Ms. Liu served as an associate professor in Fuzhou Polytechnic.
He also completed a Human Resources Advanced Training Class conducted by Tsinghua University in 2014. Dan Liu is an independent director. Ms. Liu has been a professor in the School of Economics and Management of Fuzhou University since 2017. Prior to that, she served as an associate professor in the same school of Fuzhou University from 2006 to 2017.
Yongxu Liu, has been making all determinations regarding executive officer compensation from the inception of the Company. When our Compensation Committee is set up, it will be making all determination regarding executive officer compensation (please see below).
Yongxu Liu, made all determinations regarding executive officer compensation from the inception of the Company. Since the establishment of our Compensation Committee, it has been making all determinations regarding executive officer compensation (please see below).
Levy currently serves on the board of directors and audit committee chair of Paranovus Entertainment Technology Ltd. (formerly Happiness Development Group Limited). Mr.
Levy currently serves on the board of directors and audit committee chair of Paranovus Entertainment Technology Ltd. (formerly Happiness Development Group Limited). Since 2023, Mr. Levy has also served on the board of directors and as the audit committee chair of Cartica Acquisition Corp (Nasdaq: CITE). Mr.
Liu received his master’s degree in Executive Master of Business Administration from Tsinghua University in 2016. Mr. Liu has been chosen as a director and our chairman because of his knowledge and extensive experience in logistics industry and our business. Guoping Zheng has been our chief financial officer and vice president since May 20, 2021. Mr.
Liu received his master’s degree in Executive Master of Business Administration from Tsinghua University in 2016. Guoping Zheng has been our chief financial officer and vice president since May 20, 2021. Mr. Zheng has served as the vice president and chief financial officer of Shengfeng Logistics, principal of its Strategy Department and its Finance Department since 2016.
Zheng received his bachelor’s degree in Financial Management from Xiamen University in 2008. Zhiping Yang has been our director since April 7, 2021. Mr. Yang joined Shengfeng Logistics in 2001. He has served as the vice president of Shengfeng Logistics since 2020 and the general manager of the Operation Center in Shengfeng Logistics since 2014. Mr.
Yang joined Shengfeng Logistics in 2001. He has served as the vice president of Shengfeng Logistics since 2020 and the general manager of the Operation Center in Shengfeng Logistics since 2014. Mr. Yang has served as the director of Shengfeng Logistics from December 2018 to April 2021.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company. 118
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company. 115 F. Disclosure of a registrant’s action to recover erroneously awarded compensation Not applicable.
Our compensation committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. Dan Liu is the chairperson of our compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.
Our compensation committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. Dan Liu is the chairperson of our compensation committee.
Zheng has served as the vice president and chief financial officer of Shengfeng Logistics, principal of its Strategy Department and its Finance Department since 2016. Prior to that, Mr. Zheng served as the senior director of the Financial Management Department of East China and North China in Deppon Logistics Co., Ltd. from 2008 to 2016. Mr.
Prior to that, Mr. Zheng served as the senior director of the Financial Management Department of East China and North China in Deppon Logistics Co., Ltd. from 2008 to 2016. Mr. Zheng received his bachelor’s degree in Financial Management from Xiamen University in 2008. Zhiping Yang has been our director since April 7, 2021. Mr.
At each annual general meeting, each director so elected shall hold office for a one-year term and until the election of their respective successors in office or removed. 113 Duties of Directors Under Cayman Islands law, all of our directors owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties.
At each annual general meeting, each director so elected shall hold office for a one-year term and until the election of their respective successors in office or removed pursuant to our amended and restated articles of association.
Levy is a graduate of the Wharton School of Business at the University of Pennsylvania, and received his MBA from St. Joseph’s University in Philadelphia, Pennsylvania. Mr. Levy has been chosen as a director appointee because of his knowledge and extensive experience in financial, accounting, governance and business.
Mr. Levy is a frequent lecturer and has written several articles and courses on accounting, finance business and governance. Mr. Levy is a Certified Public Accountant. Mr. Levy is a graduate of the Wharton School of Business at the University of Pennsylvania, and received his MBA from St. Joseph’s University in Philadelphia, Pennsylvania.
Yang has served as the director of Shengfeng Logistics from December 2018 to April 2021. From 2001 to 2013, he served as the General Manager of Beijing Shengfeng Supply Chain Management Co., Ltd., a subsidiary wholly owned by Shengfeng Logistics. Mr.
From 2001 to 2013, he served as the General Manager of Beijing Shengfeng Supply Chain Management Co., Ltd., a subsidiary wholly owned by Shengfeng Logistics. Mr. Yang received his bachelor’s degree in Applied Psychology from Xi ‘an Institute of Political Science of the People’s Liberation Army in 2015.
Liu has been chosen as a director appointee because of her extensive knowledge and experience in economics and management. 111 Wen Li is an independent director. Ms. Li has served as a financial director of Fujian Qunsheng Property Limited Company in China since 2013 and an independent director of Shenzhen Coship Electronics Co., Ltd. since March 2021.
Li has served as a financial director of Fujian Qunsheng Property Limited Company in China since 2013 and an independent director of Shenzhen Coship Electronics Co., Ltd. since March 2021. From 2006 to 2012, she served as an independent director of Fufa Group Co., Ltd. in Fujian Province.
The functions and powers of our board of directors include, among others: ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of the company and mortgaging the property of the company; and ● maintaining or registering a register of mortgages, charges, or other encumbrances of the company.
The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the terms of office of the officers; ● exercising the borrowing powers of the company and mortgaging the property of the company; ● approving the transfer of shares in the Company, including the registration of such Ordinary Shares in our share register; and ● maintaining or registering a register of mortgages, charges, or other encumbrances of the company.
Our audit committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. John F. Levy is the chairperson of our audit committee. We have determined that each of our independent director also satisfy the “independence” requirements of Rule 10A-3 under the Securities Exchange Act. Our board also has determined that John F.
We have determined that each of our independent directors also satisfy the “independence” requirements of Rule 5602(a)(2) of the Listing Rules of the Nasdaq Stock Market and Rule 10A-3 under the Securities Exchange Act. Our board also has determined that John F.
He also served as the chief executive officer of Sticky Fingers Restaurants, LLC from 2019 to 2020. Mr.
Levy currently serves as the chief executive officer and principal consultant for Board Advisory. He has held this role since May 2005. He also served as the chief executive officer of Sticky Fingers Restaurants, LLC from 2019 to 2020. Mr.
Pursuant to our amended and restated articles of association, the minimum number of directors shall consist of not less than one person unless otherwise determined by the shareholders in a general meeting. Unless removed or re-appointed, each director shall be appointed for a term expiring at the next-following annual general meeting, if any is held.
Unless removed or re-appointed, each director shall be appointed for a term expiring at the next-following annual general meeting, if any is held. At any annual general meeting held, our directors will be elected by ordinary resolution.
The registered address of Sky Top Capital International Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. As of the date of this annual report, none of our outstanding Class A Ordinary Shares or Class B Ordinary Shares are held by record holders in the United States.
The registered address of Sky Top Capital International Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
Removed
Yang received his bachelor’s degree in Applied Psychology from Xi ‘an Institute of Political Science of the People’s Liberation Army in 2015. He also completed a Human Resources Advanced Training Class conducted by Tsinghua University in 2014. Mr. Yang has been chosen as a director because of his knowledge and extensive experience in logistics industry and our business.
Added
From 1987 to 1994, she served as a teaching assistant under the same department. Ms.
Removed
Li has been chosen as a director appointee because of her knowledge and extensive experience in finance. John F. Levy is an independent director. Mr. Levy currently serves as the chief executive officer and principal consultant for Board Advisory (the “Levy Company”). He has held this role since May 2005.
Added
Pursuant to our amended and restated articles of association, the minimum number of directors shall consist of not less than one person provided however that the Company may by ordinary resolution increase or reduce the limits in the numbers of directors. Unless fixed by ordinary resolution of the Company, the maximum number of directors is unlimited.
Removed
(from June 2009 to February 2016), as well as several other publicly held companies prior to 2016. Mr. Levy is a frequent lecturer and has written several articles and courses on accounting, finance business and governance. Mr. Levy is a Certified Public Accountant. Mr.
Added
A director shall not, as a director, vote in respect of any contract, transaction, arrangement or proposal in which they have an interest which (together with any interest of any person connected with them) is a material interest (otherwise then by virtue of their interests, direct or indirect, in shares or debentures or other securities of, or otherwise in or through, the Company) and if they shall do so their vote shall not be counted, nor in relation thereto shall they be counted in the quorum present at the meeting, but (in the absence of some other material interest than is mentioned below) none of these prohibitions shall apply to: (a) the giving of any security, guarantee or indemnity in respect of: (i) money lent or obligations incurred by them or by any other person for the benefit of the Company or any of its subsidiaries; or (ii) a debt or obligation of the Company or any of its subsidiaries for which the director themself has assumed responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; (b) where the Company or any of its subsidiaries is offering securities in which offer the director is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which the director is to or may participate; (c) any contract, transaction, arrangement or proposal affecting any other body corporate in which he is interested, directly or indirectly and whether as an officer, shareholder, creditor or otherwise howsoever, provided that he (together with persons connected with them) does not to their knowledge hold an interest representing one per cent or more of any class of the equity share capital of such body corporate (or of any third body corporate through which his interest is derived) or of the voting rights available to members of the relevant body corporate; (d) any act or thing done or to be done in respect of any arrangement for the benefit of the employees of the Company or any of its subsidiaries under which they are not accorded as a director any privilege or advantage not generally accorded to the employees to whom such arrangement relates; (e) any matter connected with the purchase or maintenance for any director of insurance against any liability or (to the extent permitted by the Companies Act (Revised) of the Cayman Islands) indemnities in favor of directors, the funding of expenditure by one or more directors in defending proceedings against him or them or the doing of any thing to enable such director or directors to avoid incurring such expenditure; or (f) any contract, transaction, arrangement or proposal in which the director has an interest which is not a material interest.
Removed
At any annual general meeting held, our directors will be elected by a majority vote of shareholders eligible to vote at that meeting.
Added
A director may vote with respect to any contract, proposed contract or arrangement in which he is materially interested, provided that (a) such director, if his or her interest in such contract or arrangement is material, has declared the nature of his or her interest at the earliest meeting of the board at which it is practicable for him or her to do so, either specifically or by way of a general notice and (b) if such contract or arrangement is a transaction with a related party, such transaction has been approved by the audit committee.
Removed
D. Employees See “Item 4. Information on the Company—B. Business Overview—Employees.” E.
Added
The directors may exercise all the powers of the Company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the Company or of any third party. 110 Duties of Directors Under Cayman Islands law, all of our directors owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties.
Removed
As of the date of the annual report, we have 13 shareholders of record, none of whom are located in the United States.
Added
Terms of Directors and Executive Officers Our directors may be elected by a resolution of our board of directors or by an ordinary resolution of our shareholders.
Added
A director will cease to be a director if, among other things, the director (i) is prohibited under the law of the Cayman Islands from acting as a director; (ii) becomes bankrupt or makes any arrangement or composition with his creditors; (iii) resigned his office by notice to the company; (iv) only held office as a director for a fixed term and such term expires; (v) in the opinion of a registered medical practitioner by whom the director is being treated, the director becomes physically or mentally incapable of acting as a director; (vi) is given notice by the majority of the other directors (not being less than two in number) to vacate office, without prejudice to any claim for damages for breach of any agreement relating to the provision of the services of such director; (vii) is made subject to any law relating to mental health or incompetence, whether by court order or otherwise; or (viii) without the consent of the other directors, is absent from meetings of directors for a continuous period of six months.
Added
Our audit committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. John F. Levy is the chairperson of our audit committee.
Added
We have determined that each of our independent directors also satisfy the “independence” requirements of Rule 5602(a)(2) of the Listing Rules of the Nasdaq Stock Market and Rule 10C-1 under the Securities Exchange Act. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.
Added
Code of Business Conduct and Ethics Our board of directors has adopted a code of business conduct and ethics applicable to all of our directors, officers, and employees. We have made our code of business conduct and ethics publicly available on our website.
Added
Compensation Recovery Policy We have adopted a compensation recovery policy to provide for the recovery of erroneously-awarded incentive compensation, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, final SEC rules, and applicable listing standards. D. Employees See “Item 4. Information on the Company—B. Business Overview—Employees.” E.
Added
As of the date of this annual report, approximately 30.44% of our issued and outstanding Class A Ordinary Shares are held in the United States by one record holder (CEDE & CO), representing 2.69% of the aggregated voting power.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAfter the transaction, Hainan Tianyi became a non-related party to the Company. 119 i) Significant transactions with related parties were as follows: Year ended December 31, 2022 Year ended December 31, 2021 Year ended December 31, 2020 Transportation services to Fujian Bafang $ 18 $ - $ 7 Transportation services to Fujian Desheng - 349 - Sales of material to Suxing - - 49 Total $ 18 $ 349 $ 56 Year ended December 31, 2022 Year ended December 31, 2021 Year ended December 31, 2020 Transportation services from Beijing Banglian $ - $ 2,265 $ 2,750 Transportation services from Hainan Tianyi $ - $ 1,207 $ 1,109 Transportation services from Fujian Bafang $ 1,196 $ 157 $ 144 Purchase raw materials from Suxing $ - $ 577 $ 781 Lease services from Fuzhou Tianyu $ 305 $ 358 $ 296 Lease services from Fuzhou Tianyu Management $ 35 $ - $ - ii) Guarantees The Company’s shareholder, CEO and Chairman, Yongxu Liu, his spouse, Xiying Yang, and his brother, Yongteng Liu, were the guarantors of the Company’s short-term bank loans. iii) Significant balances with related parties were as follows: As of December 31, 2022 As of December 31, 2021 Due from related parties Fuzhou Tianyu $ 42 $ 46 Beijing Banglian - 4 Total $ 42 $ 50 As of December 31, 2022 As of December 31, 2021 Due to related parties Fujian Bafang (a) $ 1,694 $ 1,574 Fuzhou Tianyu 84 29 Beijing Banglian - 246 Fuzhou Tianyu Management 36 24 Hainan Tianyi - 4 Yongteng Liu 600 - Total $ 2,414 $ 1,877 (a) On December 10, 2007, the Company entered into an interest-free loan agreement with Fujian Bafang for a principal amount of approximately $1.4 million (RMB 9.6 million).
Biggest changeAfter the transaction, Hainan Tianyi became a non-related party to the Company. 116 i) Significant transactions with related parties were as follows: Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 Transportation services to Fujian Bafang $ - $ 18 $ - Transportation services to Fujian Desheng 37 - 349 Total $ 37 $ 18 $ 349 Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 Transportation services from Beijing Banglian $ - $ - $ 2,265 Transportation services from Hainan Tianyi $ - $ - $ 1,207 Transportation services from Fujian Bafang $ 1,108 $ 1,196 $ 157 Purchase raw materials from Suxing $ - $ - $ 577 Lease services from Fuzhou Tianyu $ 228 $ 305 $ 358 Lease services from Fuzhou Tianyu Management $ 17 $ 35 $ - Catering services from Tianyu Catering $ 2 $ - $ - ii) Guarantees The Company’s shareholder, CEO and Chairman, Yongxu Liu, his brother, Yongteng Liu, and Fuzhou Puhui Technology Co., Ltd, were the guarantors of the Company’s short-term bank loans. iii) Significant balances with related parties were as follows: As of December 31, 2023 As of December 31, 2022 Due from related parties Fuzhou Tianyu $ 41 $ 42 Fujian Desheng 40 - Total $ 81 $ 42 As of December 31, 2023 As of December 31, 2022 Due to related parties Fujian Bafang (a) $ 1,622 $ 1,694 Fuzhou Tianyu 48 84 Fuzhou Tianyu Management 34 36 Yongteng Liu - 600 Total $ 1,704 $ 2,414 (a) On December 10, 2007, the Company entered into an interest-free loan agreement with Fujian Bafang for a principal amount of approximately $1.4 million (RMB 9.6 million).
Such loan is due on demand. C. Interests of Experts and Counsel Not applicable. 120
Such loan is due on demand. C. Interests of Experts and Counsel Not applicable. 117
Key Information—Our VIE Agreements.” Material Transactions with Related Parties The relationship and the nature of related party transactions are summarized as follow: The table below sets forth the major related parties and their relationships with the Company as of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021 and 2020: Name of related parties Relationship with the Company Fujian Bafang An equity investee of the Company Fuzhou Tianyu Shengfeng Industrial Co., Ltd (“Fuzhou Tianyu”) A company controlled by Yongteng Liu, who is the brother of Yongxu Liu, CEO and Chairman of the Company Fuzhou Tianyu Shengfeng Property Management Co., Ltd (“Fuzhou Tianyu Management”) A company under the control of a shareholder Fuzhou Tianyu Yuanmei Catering Co., Ltd (“Fuzhou Tianyu Catering”) A company under the control of a shareholder Beijing Union Logistics Co., Ltd (“Beijing Banglian”) (1) A company under the control of a shareholder Fujian Desheng Logistics Co., Ltd (“Fujian Desheng”) A company under the control of a shareholder Dongguan Suxing New Material Co., Ltd (“Suxing”) (2) A company under the control of a non-controlling shareholder Hainan Tianyi Logistics Distribution Co., Ltd (“Hainan Tianyi”) (3) An equity investee of the Company Yongteng Liu CEO’s brother (1) In January 2022, the Company’s shareholder sold the equity interest in Beijing Banglian.
Key Information—Our VIE Agreements.” Material Transactions with Related Parties The relationship and the nature of related party transactions are summarized as follow: The table below sets forth the major related parties and their relationships with the Company as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021: Name of related parties Relationship with the Company Fujian Bafang Shengfeng Logistics Co., Ltd (“Fujian Bafang”) An equity investee of the Company Fuzhou Tianyu Shengfeng Industrial Co., Ltd (“Fuzhou Tianyu”) A company controlled by Yongxu Liu, CEO and Chairman of the Company Fuzhou Tianyu Shengfeng Property Management Co., Ltd (“Fuzhou Tianyu Management”) A company under the control of a shareholder Fuzhou Tianyu Yuanmei Catering Co., Ltd (“Fuzhou Tianyu Catering”) A company under the control of a shareholder Beijing Union Logistics Co., Ltd (“Beijing Banglian”) (1) A company under the control of a shareholder Fujian Desheng Logistics Co., Ltd (“Fujian Desheng”) A company under the control of a shareholder Dongguan Suxing New Material Co., Ltd (“Suxing”) (2) A company under the control of a non-controlling shareholder Hainan Tianyi Logistics Distribution Co., Ltd (“Hainan Tianyi”) (3) An equity investee of the Company Yongteng Liu CEO’s brother Fuzhou Puhui Technology Co., Ltd A non-controlling shareholder of Ningde Shengfeng Logistics Co.
(3) On September 15, 2021, the Company signed a share purchase agreement with a third party. According to such agreement, the Company sold its 5% equity interests in Hainan Tianyi to such third party.
After the transaction, Suxing became a non-related party to the Company. (3) On September 15, 2021, the Company signed a share purchase agreement with a third party. According to such agreement, the Company sold its 5% equity interests in Hainan Tianyi to such third party.
(2) On July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd (“Dongguan Suxing”), a related party, to transfer its 51% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. (“New Material Technology”) to Dongguan Suxing. After the transaction, Suxing became a non-related party to the Company.
Ltd. (1) In January 2022, the Company’s shareholder sold the equity interest in Beijing Banglian. (2) On July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd (“Dongguan Suxing”), a related party, to transfer its 51% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. (“New Material Technology”) to Dongguan Suxing.

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