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What changed in SHENGFENG DEVELOPMENT Ltd's 20-F — 2023 vs 2024

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Paragraph-level year-over-year comparison of SHENGFENG DEVELOPMENT Ltd's 2023 and 2024 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 2024 report.

+529 added−570 removedSource: 20-F (2025-03-28) vs 20-F (2024-03-29)

Top changes in SHENGFENG DEVELOPMENT Ltd's 2024 20-F

529 paragraphs added · 570 removed · 437 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

189 edited+31 added−47 removed621 unchanged
Biggest changeThe following tables present selected condensed consolidating financial data of Shengfeng Cayman and its subsidiaries, the VIE, and the VIE’s subsidiaries for the fiscal years ended December 31, 2023, 2022 and 2021, and balance sheet data as of December 31, 2023, 2022 and 2021, which have been derived from our audited consolidated financial statements for those years. 15 As of and for the fiscal year ended December 31, 2023 Shengfeng Development Limited (Shengfeng Cayman) Shengfeng HK (100% owned by Shengfeng Cayman) Tianyu Shengfeng Logistics Group Co., Ltd. and its subsidiaries (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 $ 635 $ 10 $ 14,434 $ 146,894 $ (12,868 ) $ 149,105 Receivable from VIE $ - $ - $ 93,425 $ - $ (93,425 ) $ - Investments in subsidiaries $ 107,312 $ 107,302 $ - $ - $ (214,614 ) $ - Non-current assets $ 107,312 $ 113,952 $ 114,021 $ 103,055 $ (321,607 ) $ 116,733 Total assets $ 107,947 $ 113,962 $ 128,455 $ 249,949 $ (334,475 ) $ 265,838 Liabilities: Current liabilities $ - $ 6,660 $ 21,061 $ 127,603 $ (18,948 ) $ 136,376 Payable to WFOE $ - $ - $ - $ 93,425 $ (93,425 ) $ - Non-current liabilities $ - $ - $ 92 $ 17,057 $ - $ 17,149 Total liabilities $ - $ 6,660 $ 21,153 $ 238,085 $ (112,373 ) $ 153,525 Total shareholders’ equity $ 107,947 $ 107,302 $ 107,302 $ 11,864 $ (222,102 ) $ 112,313 Total liabilities and shareholders’ equity $ 107,947 $ 113,962 $ 128,455 $ 249,949 $ (334,475 ) $ 265,838 Condensed Consolidating Schedule – Statement of Operations Revenues $ - $ - $ 14,098 $ 401,825 $ (11,802 ) $ 404,121 Cost of revenues $ - $ - $ (13,137 ) $ (355,662 ) $ 11,184 $ (357,615 ) Gross profit $ - $ - $ 961 $ 46,163 $ (618 ) $ 46,506 Operating expenses $ (421 ) $ - $ (472 ) $ (31,743 ) $ 36 $ (32,600 ) Technical service income from VIE and its subsidiaries (1) $ - $ - $ 10,828 $ - $ (10,828 ) $ - Technical Service expense in WFOE (1) $ - $ - $ - $ (10,828 ) $ 10,828 $ - Income for equity method investments $ 11,310 $ 11,310 $ - $ - $ (22,620 ) $ - Net income $ 10,889 $ 11,310 $ 11,310 $ 10,828 $ (34,029 ) $ 10,308 Condensed Consolidating Schedule – Statement of Cash Flows Net cash provided by (used in) operating activities $ (514 ) $ - $ 2,982 $ 9,645 $ - $ 12,113 Net cash used in investing activities $ (6,660 ) $ (6,650 ) $ (19,080 ) $ (6,694 ) $ 20,263 $ (18,821 ) Net cash provided by financing activities $ 7,669 $ 6,660 $ 20,842 $ (1,717 ) $ (20,263 ) $ 13,191 Effects of exchange rate changes on cash and restricted cash $ - $ - $ (74 ) $ (484 ) $ - $ (558 ) Net increase in cash and restricted cash $ 495 $ 10 $ 4,670 $ 750 $ - $ 5,925 Cash and restricted cash, beginning of year $ 47 $ - $ - $ 23,321 - $ 23,368 Cash and restricted cash, end of year $ 542 $ 10 $ 4,670 $ 24,071 $ - $ 29,293 Inter-company cash transfers Transfer from Shengfeng Cayman to Shengfeng HK $ (6,660 ) $ 6,660 $ - $ - $ - $ - Transfer from Shengfeng HK to WFOE $ - $ (6,650 ) $ 6,650 $ - $ - $ - Transfer from VIE to WFOE $ - $ - $ 6,954 $ (6,954 ) $ - $ - 16 As of and for the fiscal year ended December 31, 2022 Shengfeng Development Limited (Shengfeng Cayman) Shengfeng HK (100% owned by Shengfeng Cayman) Tianyu Shengfeng Logistics Group Co., Ltd.
Biggest change(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 $ 635 $ 10 $ 14,434 $ 146,894 $ (12,868 ) $ 149,105 Receivable from VIE $ - $ - $ 93,425 $ - $ (93,425 ) $ - Investments in subsidiaries $ 107,312 $ 107,302 $ - $ - $ (214,614 ) $ - Non-current assets $ 107,312 $ 113,952 $ 114,021 $ 103,055 $ (321,607 ) $ 116,733 Total assets $ 107,947 $ 113,962 $ 128,455 $ 249,949 $ (334,475 ) $ 265,838 Liabilities: Current liabilities $ - $ 6,660 $ 21,061 $ 127,603 $ (18,948 ) $ 136,376 Payable to WFOE $ - $ - $ - $ 93,425 $ (93,425 ) $ - Non-current liabilities $ - $ - $ 92 $ 17,057 $ - $ 17,149 Total liabilities $ - $ 6,660 $ 21,153 $ 238,085 $ (112,373 ) $ 153,525 Total equity $ 107,947 $ 107,302 $ 107,302 $ 11,864 $ (222,102 ) $ 112,313 Total liabilities and equity $ 107,947 $ 113,962 $ 128,455 $ 249,949 $ (334,475 ) $ 265,838 Condensed Consolidating Schedule – Statement of Operations Revenues $ - $ - $ 14,098 $ 401,825 $ (11,802 ) $ 404,121 Cost of revenues $ - $ - $ (13,137 ) $ (355,662 ) $ 11,184 $ (357,615 ) Gross profit $ - $ - $ 961 $ 46,163 $ (618 ) $ 46,506 Operating expenses $ (421 ) $ - $ (472 ) $ (31,743 ) $ 36 $ (32,600 ) Technical service income from VIE and its subsidiaries (1) $ - $ - $ 10,828 $ - $ (10,828 ) $ - Technical Service expense in WFOE (1) $ - $ - $ - $ (10,828 ) $ 10,828 $ - Income for equity method investments $ 11,310 $ 11,310 $ - $ - $ (22,620 ) $ - Net income $ 10,889 $ 11,310 $ 11,310 $ 10,828 $ (34,029 ) $ 10,308 Condensed Consolidating Schedule – Statement of Cash Flows Net cash provided by (used in) operating activities $ (514 ) $ - $ 2,982 $ 9,645 $ - $ 12,113 Net cash used in investing activities $ (6,660 ) $ (6,650 ) $ (19,080 ) $ (6,694 ) $ 20,263 $ (18,821 ) Net cash provided by (used in) financing activities $ 7,669 $ 6,660 $ 20,842 $ (1,717 ) $ (20,263 ) $ 13,191 Effects of exchange rate changes on cash, cash equivalents and restricted cash $ - $ - $ (216 ) $ (342 ) $ - $ (558 ) Net increase in cash, cash equivalents and restricted cash $ 495 $ 10 $ 4,670 $ 750 $ - $ 5,925 Cash, cash equivalents and restricted cash, beginning of year $ 47 $ - $ - $ 23,321 - $ 23,368 Cash, cash equivalents and restricted cash, end of year $ 542 $ 10 $ 4,528 $ 24,213 $ - $ 29,293 Inter-company cash transfers Transfer from Shengfeng Cayman to Shengfeng HK $ (6,660 ) $ 6,660 $ - $ - $ - $ - Transfer from Shengfeng HK to WFOE $ - $ (6,650 ) $ 6,650 $ - $ - $ - Transfer from VIE to WFOE $ - $ - $ 6,954 $ (6,954 ) $ - $ - 18 As of and for the fiscal year ended December 31, 2022 Shengfeng Development Limited (Shengfeng Cayman) Shengfeng HK (100% owned by Shengfeng Cayman) Tianyu Shengfeng Logistics Group Co., Ltd.
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.
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.
Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.
Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.
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.
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.
Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall complete the filing procedures with the CSRC.
Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall complete the filing procedures with the CSRC.
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.
According to the Trial Measures, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure to the CSRC; (2) if the issuer meets both of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China; and (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for initial public offering and listing in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is submitted.
According to the Trial Measures, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure to the CSRC; (2) if the issuer meets both of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China; and (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for initial public offering and listing in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is submitted.
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.
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.
The required filing scope is not limited to the initial public offering, but also includes subsequent overseas securities offering, single or multiple acquisition(s), share swap, transfer of shares or other means to seek an overseas direct or indirect listing and a secondary listing or dual major listing of issuers already listed overseas.
The required filing scope is not limited to the initial public offering, but also includes subsequent overseas securities offering, single or multiple acquisition(s), share swap, transfer of shares or other means to seek an overseas direct or indirect listing and a secondary listing or dual major listing of issuers already listed overseas.
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 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.
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.
Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall complete the filing procedures with the CSRC.
Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall complete the filing procedures with the CSRC.
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.
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.
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.” 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.
The Cybersecurity Review Measures also provide the following key points: (i) companies who are engaged in data processing are also subject to the regulatory scope; (ii) the CSRC is included as one of the regulatory authorities for purposes of jointly establishing the state cybersecurity review working mechanism; and (iii) the risks of core data, material data or large amounts of personal information being stolen, leaked, destroyed, damaged, illegally used or transmitted to overseas parties and the risks of critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or used maliciously shall be collectively taken into consideration during the cybersecurity review process. 49 On July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures (the “Outbound Data Transfer Security Assessment Measures”), which became effective on September 1, 2022, specifies the circumstances in which data processors providing data outbound shall apply for outbound data transfer security assessment coordinated by the CAC, and applies to: (i) any data processor that transfers important data overseas; (ii) any critical information infrastructure operator or data processor that processes personal information of over 1 million people and provides such personal information overseas; (iii) any data processor that provides personal information overseas and has already provided personal information of more than 100,000 people or sensitive personal information of more than 10,000 people overseas since January 1st of the previous year and; and (iv) other circumstances under which the data cross-border transfer security assessment is required as prescribed by the CAC.
The Cybersecurity Review Measures also provide the following key points: (i) companies who are engaged in data processing are also subject to the regulatory scope; (ii) the CSRC is included as one of the regulatory authorities for purposes of jointly establishing the state cybersecurity review working mechanism; and (iii) the risks of core data, material data or large amounts of personal information being stolen, leaked, destroyed, damaged, illegally used or transmitted to overseas parties and the risks of critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or used maliciously shall be collectively taken into consideration during the cybersecurity review process. 51 On July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures (the “Outbound Data Transfer Security Assessment Measures”), which became effective on September 1, 2022, specifies the circumstances in which data processors providing data outbound shall apply for outbound data transfer security assessment coordinated by the CAC, and applies to: (i) any data processor that transfers important data overseas; (ii) any critical information infrastructure operator or data processor that processes personal information of over 1 million people and provides such personal information overseas; (iii) any data processor that provides personal information overseas and has already provided personal information of more than 100,000 people or sensitive personal information of more than 10,000 people overseas since January 1st of the previous year and; and (iv) other circumstances under which the data cross-border transfer security assessment is required as prescribed by the CAC.
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.
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.
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
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.
Taxation—People’s Republic of China Enterprise Taxation (for the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau) . ” In order for us to pay dividends to our shareholders, we will rely on payments made from Shengfeng Logistics to Tianyu, pursuant to contractual arrangements between such parties, and the distribution of such payments to Shengfeng HK as dividends from Tianyu.
Taxation—People’s Republic of China Enterprise Taxation (for the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau) . ” 14 In order for us to pay dividends to our shareholders, we will rely on payments made from Shengfeng Logistics to Tianyu, pursuant to contractual arrangements between such parties, and the distribution of such payments to Shengfeng HK as dividends from Tianyu.
Some of our lease agreements have not been registered with the relevant government authorities. Failure to complete these required registrations may expose our landlords, lessors and the Company to potential monetary fines. Our business and results of operations may be materially and adversely affected if we or third-party transportation providers are unable to provide high-quality services to our clients.
Some of our lease agreements have not been registered with the relevant government authorities. Failure to complete these required registrations may expose our landlords, lessors and the Company to potential monetary fines. 46 Our business and results of operations may be materially and adversely affected if we or third-party transportation providers are unable to provide high-quality services to our clients.
In addition, our Class A Ordinary Shares may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditors for three consecutive years beginning in 2021.
Holding Foreign Companies Accountable Act Our Class A Ordinary Shares may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditors for three consecutive years beginning in 2021.
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.
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.
However, if we inadvertently conclude that such permission or approval is not required, or applicable laws, regulations, or interpretations change and the VIE or the holding company are required to obtain such permission or approval in the future and are denied such permission or approval from the Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges or continue to offer securities to investors, which could cause significant depreciation of the price of our Class A Ordinary Shares and materially affect the interest of the investors. 39 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.
However, if we inadvertently conclude that such permission or approval is not required, or applicable laws, regulations, or interpretations change and the VIE or the holding company are required to obtain such permission or approval in the future and are denied such permission or approval from the Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges or continue to offer securities to investors, which could cause significant depreciation of the price of our Class A Ordinary Shares and materially affect the interest of the investors. 42 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.
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.
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. Under PRC laws, all lease agreements are required to be registered with the local housing authorities.
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.
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. 34 The interpretation and implementation of labor-related laws and regulations are still constantly evolving which may be further amended from time to time.
Otherwise, we may be subject to penalties if we continue to operate those trucks that exceed the limits set forth in the provisions. New laws and regulations may be promulgated from time to time and substantial uncertainties exist regarding the interpretation and implementation of current and future PRC laws and regulations applicable to our businesses.
Otherwise, we may be subject to penalties if we continue to operate those trucks that exceed the limits set forth in the provisions. 47 New laws and regulations may be promulgated from time to time and substantial uncertainties exist regarding the interpretation and implementation of current and future PRC laws and regulations applicable to our businesses.
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.
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.
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.
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. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
In particular, we may face competition from existing or new express delivery service providers which may expand their service offerings to freight transportation and logistics services or adopt a business model disruptive to our business and compete with us for hiring of delivery personnel.
In particular, we may face competition from existing or new express delivery service providers which may expand their service offerings to freight transportation and logistics services or adopt a business model disruptive to our business and compete with us for hiring delivery personnel.
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.
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.
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.
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. 41 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.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. 41 As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. 44 As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate.
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 refer to the above shareholders of Shengfeng Logistics as the “Shengfeng Logistics Shareholders.” 2 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.
Risk Factors Risks Relating to Our Corporate Structure Our corporate structure, in particular our contractual arrangements (the “VIE Agreements”) with Shengfeng Logistics and the Shengfeng Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, are subject to significant risks, as set forth in the following risk factors.
Risks Relating to Our Corporate Structure Our corporate structure, in particular our WFOE’s contractual arrangements (the “VIE Agreements”) with Shengfeng Logistics and the Shengfeng Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, are subject to significant risks, as set forth in the following risk factors.
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.
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.
Further, if we fail to renew such VIE Agreements upon their expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China. 19 In addition, if the VIE or the VIE’s subsidiaries or all or part of their respective assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations.
Further, if we fail to renew such VIE Agreements upon their expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China. 20 In addition, if the VIE or the VIE’s subsidiaries or all or part of their respective assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations.
Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. 29 On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act, which became effective on January 10, 2022.
Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. 31 On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act, which became effective on January 10, 2022.
A termination in the trading of our securities or any restriction on the trading in our securities would be expected to have a negative impact on the Company as well as on the value of our securities. 30 It remains unclear what the SEC’s implementation process related to the above rules will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on the companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market).
A termination in the trading of our securities or any restriction on the trading in our securities would be expected to have a negative impact on the Company as well as on the value of our securities. 32 It remains unclear what the SEC’s implementation process related to the above rules will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on the companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market).
Based on the foregoing, according to our PRC counsel, since our registration statement on Form F-1 was declared effective on March 30, 2023, and we completed our IPO and listing before September 30, 2023, we were not required to complete the filing procedures pursuant to the Trial Measures for our IPO. 26 On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009.
Based on the foregoing, according to our PRC counsel, since our registration statement on Form F-1 was declared effective on March 30, 2023, and we completed our IPO and listing before September 30, 2023, we were not required to complete the filing procedures pursuant to the Trial Measures for our IPO. 28 On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009.
Share Ownership.” 3 Significant subsidiaries of Shengfeng Cayman and significant subsidiaries of Shengfeng Logistics, as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, consist of the following entities: No.
Share Ownership.” Significant subsidiaries of Shengfeng Cayman and significant subsidiaries of Shengfeng Logistics, as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, consist of the following entities: No.
GAAP,” the assets and liabilities of Shengfeng Logistics are treated as our assets and liabilities and the results of operations of Shengfeng Logistics are treated in all aspects as if they were the results of our operations. For a description of these contractual arrangements, see “Item 3.
GAAP, the assets and liabilities of Shengfeng Logistics are treated as our assets and liabilities and the results of operations of Shengfeng Logistics are treated in all aspects as if they were the results of our operations. For a description of these contractual arrangements, see “Item 3.
Neither we nor our subsidiaries own any equity interests in the VIE or the VIE’s subsidiaries. 2 The following diagram illustrates our corporate structure, including our subsidiaries and the VIE and the VIE’s subsidiaries, as of the date of this annual report.
Neither we nor our subsidiaries own any equity interests in the VIE or the VIE’s subsidiaries. The following diagram illustrates our corporate structure, including our subsidiaries and the VIE and the VIE’s subsidiaries, as of the date of this annual report.
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.
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.
If any disputes arise between any of our senior executives or key personnel and us, we cannot assure you of the extent to which any of these agreements may be enforced. 47 We use third-party services in connection with our business, and any disruption to these services could result in a disruption to our business, negative publicity, and a slowdown in the growth of our customer base, materially and adversely affecting our business, financial condition, and results of operations.
If any disputes arise between any of our senior executives or key personnel and us, we cannot assure you of the extent to which any of these agreements may be enforced. 49 We use third-party services in connection with our business, and any disruption to these services could result in a disruption to our business, negative publicity, and a slowdown in the growth of our customer base, materially and adversely affecting our business, financial condition, and results of operations.
Personal injuries or property damages may arise if such incidents escalate. 42 Any of the foregoing could disrupt our services, cause us to incur substantial expenses, and divert the time and attention of our management. We and third-party transportation providers may face claims and incur significant liabilities if found liable or partially liable for any of injuries, damages, or losses.
Personal injuries or property damages may arise if such incidents escalate. 45 Any of the foregoing could disrupt our services, cause us to incur substantial expenses, and divert the time and attention of our management. We and third-party transportation providers may face claims and incur significant liabilities if found liable or partially liable for any of injuries, damages, or losses.
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.
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.
Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations. 48 Our business generates and processes a large quantity of data, and improper handling of or unauthorized access to such data may adversely affect our business.
Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations. 50 Our business generates and processes a large quantity of data, and improper handling of or unauthorized access to such data may adversely affect our business.
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.
Nevertheless, Shengfeng HK, as an entity incorporated under law of Hong Kong, shall be subject to Hong Kong law in general. 26 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.
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.
The success of our business largely depends on our ability to maintain and further enhance our service quality. About 30% of our freight transportation services are provided, through the VIE and the VIE’s subsidiaries, by our self-owned fleet and the balance is provided by third-party transportation providers.
The success of our business largely depends on our ability to maintain and further enhance our service quality. About 17% of our freight transportation services are provided, through the VIE and the VIE’s subsidiaries, by our self-owned fleet and the balance is provided by third-party transportation providers.
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.
If fuel prices rise significantly in the future, we will experience the pressure of increased costs. 48 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.
On October 25, 2023, we issued 97,513 Class A Ordinary Shares to Univest Securities, LLC, as it fully and cashlessly exercised its warrant with a cost basis of $13.815 per share on October 19, 2023. Our Corporate Structure Shengfeng Development Limited is a holding company incorporated in the Cayman Islands and it is not a Chinese operating company.
On October 25, 2023, we issued 97,513 Class A Ordinary Shares to Univest Securities, LLC, as it fully and cashlessly exercised its warrant with a cost basis of $13.815 per share on October 19, 2023. Our Corporate Structure Shengfeng Development Limited is a holding company incorporated in the Cayman Islands.
If we fail to keep the rate of dispatched workers among our total employees and dispatched workers lower than 10%, w e may be required by the competent authorities to decrease our number of dispatched workers within a stipulated period.
If we fail to keep the rate of dispatched workers among our total employees and dispatched workers lower than 10%, we may be required by the competent authorities to decrease our number of dispatched workers within a stipulated period.
Guangdong, the PRC December 30, 2011 100 % Transportation and warehouse storage management service 7 Hainan Shengfeng Supply Chain Management Co., Ltd. Hainan, the PRC August 18, 2020 100 % Transportation and warehouse storage management service 8 Beijing Tianyushengfeng E-commerce Technology Co., Ltd.
Guangdong, the PRC December 30, 2011 100 % Transportation and warehouse storage management service 7 Hainan Shengfeng Supply Chain Management Co., Ltd. Hainan, the PRC August 18, 2020 5 1 % Transportation and warehouse storage management service 8 Beijing Tianyushengfeng E-commerce Technology Co., Ltd.
(d) On April 20, 2023, SF Smart was set up in Fujian, China, with 55% of the equity interests owned by Tianyu, and 45% of the equity interests owned by Shengfeng Supply Chain Management Co., Ltd.
(b) On April 20, 2023, SF Smart was set up in Fujian, China, with 55% of the equity interests owned by Tianyu, and 45% of the equity interests owned by Shengfeng Supply Chain Management Co., Ltd.
As a result, fluctuations in exchange rates may have a material adverse effect on your investment. 34 Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes.
As a result, fluctuations in exchange rates may have a material adverse effect on your investment. 37 Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes.
Risk Factors—Risks Relating to Our Class A Ordinary Shares and the Trading Market.” 8 The VIE Agreements may not be as effective as direct ownership in providing operational control.
Risk Factors—Risks Relating to Our Class A Ordinary Shares and the Trading Market.” 9 The VIE Agreements may not be as effective as direct ownership in providing operational control.
We may be subject to catastrophic events. A disruption or failure of our systems or operations in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions.
We may be subject to catastrophic events. A disruption or failure of our systems or operations in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, pandemic including COVID-19, or other catastrophic event could cause delays in providing services or performing other critical functions.
Yunnan, the PRC January 25, 2016 100 % Transportation and warehouse storage management service 17 Shengfeng Logistics (Guangxi) Co., Ltd. Guangxi, the PRC February 1, 2016 100 % Transportation and warehouse storage management service 18 Hubei Shengfeng Logistics Co., Ltd. Hubei, the PRC December 15, 2010 100 % Transportation and warehouse storage management service 4 No.
Yunnan, the PRC January 25, 2016 100 % Transportation and warehouse storage management service 17 Shengfeng Logistics (Guangxi) Co., Ltd. Guangxi, the PRC February 1, 2016 100 % Transportation and warehouse storage management service 18 Hubei Shengfeng Logistics Co., Ltd. Hubei, the PRC December 15, 2010 100 % Transportation and warehouse storage management service 3 No.
A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere. 27 The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law .
A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere. 29 The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law .
In particular, for the fiscal year ended December 31, 2023, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately 32.7% of the total cost of revenue of the Company. For the fiscal year ended December 31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately 23.5% of the total cost of revenue of the Company.
For the fiscal year ended December 31, 2023, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately 32.7% of the total cost of revenue of the Company. For the fiscal year ended December 31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately 23.5% of the total cost of revenue of the Company.
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.
For more details, see “—Our VIE Agreements.” Our shares and per share data as of December 31, 2024 and 2023 have been presented on a retroactive basis to reflect the Reorganization. History of Share Issuances The following is a summary of our share issuances since incorporation.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the U.S. In particular, the Cayman Islands has a less developed body of securities laws relative to the U.S.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the U.S. In particular, the Cayman Islands has a different body of securities laws relative to the U.S.
O ur number of dispatched workers exceeded the 10% limitation required by the Interim Provisions on Labor Dispatching in the fiscal year ended December 31, 2022. The Company had taken measures to try to comply with related laws and regulations in the fiscal year ended December 31, 2023.
Our number of dispatched workers exceeded the 10% limitation required by the Interim Provisions on Labor Dispatching in the fiscal year ended December 31, 2022. The Company had taken measures to try to comply with related laws and regulations in the fiscal year ended December 31, 2023.
For the fiscal years ended December 31, 2023, 2022 and 2021, about 77%, 71% and 70% of our freight transportation services were provided by third-party transportation providers, respectively, which included owner-operators of a single truck, private fleets, and large trucking companies. Several third-party transportation providers contributed a significant part of the total cost of revenue of the Company.
For the fiscal years ended December 31, 2024, 2023 and 2022, about 83%, 77% and 71% of our freight transportation services were provided by third-party transportation providers, respectively, which included owner-operators of a single truck, private fleets, and large trucking companies. Several third-party transportation providers contributed a significant part of the total cost of revenue of the Company.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeThe 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.
Biggest changeThe 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.
We raised $9.60 million in gross proceeds from our initial public offering, before deducting underwriting discounts and other related expenses. Corporate Information Our principal executive office is located at Shengfeng Building, No. 478 Fuxin East Road, Jin’an District, Fuzhou City, Fujian Province, China, and our phone number is +86-591-83619860.
We raised $9.60 million in gross proceeds from our initial public offering, before deducting underwriting discounts and other related expenses. 60 Corporate Information Our principal executive office is located at Shengfeng Building, No. 478 Fuxin East Road, Jin’an District, Fuzhou City, Fujian Province, China, and our phone number is +86-591-83619860.
Customs declaration services. Some of our clients require international shipping services, in response, we provide customs declaration on an as-needed basis to assist them in meeting the legal requirements such as import and export, and trade. We engage third-party service providers that maintain the licenses required under applicable PRC laws and regulations for providing customs declaration services. Delivery upstairs services.
Some of our clients require international shipping services, in response, we provide customs declaration on an as-needed basis to assist them in meeting the legal requirements such as import and export, and trade. We engage third-party service providers that maintain the licenses required under applicable PRC laws and regulations for providing customs declaration services. Delivery upstairs services.
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.
Regulations Relating to Foreign Investment The Foreign Investment Law, promulgated by the National People’s Congress on March 15, 2019, has come into effect on January 1, 2020 and has replaced the major existing laws and regulations governing foreign investment in the PRC, including the Sino-foreign Equity Joint Ventures Enterprises Law, the Sino-foreign Co-operative Enterprises Law, the Wholly Foreign-invested Enterprise Law, and their implementation rules and ancillary regulations.
Regulations Relating to Foreign Investment The PRC Foreign Investment Law The Foreign Investment Law, promulgated by the National People’s Congress on March 15, 2019, has come into effect on January 1, 2020 and has replaced the major existing laws and regulations governing foreign investment in the PRC, including the Sino-foreign Equity Joint Ventures Enterprises Law, the Sino-foreign Co-operative Enterprises Law, the Wholly Foreign-invested Enterprise Law, and their implementation rules and ancillary regulations.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued in April 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (1) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (2) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (3) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (4) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued in April 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (1) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (2) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (3) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (4) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations.
Regulations relating to Leasing Pursuant to the Law on Administration of Urban Real Estate of the PRC promulgated by the SCNPC on July 5, 1994, amended on August 30, 2007, August 27, 2009, August 26, 2019 and took effect on January 1, 2020, when leasing premises, the lessor and lessee are required to enter into a written lease contract, containing provisions such as the leasing term, use of the premises, rental and repair liabilities, and other rights and obligations of both parties.
Regulations relating to Leasing Pursuant to the Law on Administration of Urban Real Estate of the PRC promulgated by the SCNPC on July 5, 1994, amended on August 30, 2007, August 27, 2009, August 26, 2019 and took effect on January 1, 2020, when leasing premises, the lessor and lessee are required to enter into a written lease contract, containing provisions such as the leasing term, use of the premises, rental and repair liabilities, and other rights and obligations of both parties.
The lessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between the lessee and the lessor will still remain valid.
The lessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between the lessee and the lessor will still remain valid.
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 . ” 83 On December 29, 2011, the MIIT promulgated the Several Provisions on Regulating the Market Order of Internet Information Services, which became effective on March 15, 2012.
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 . ” On December 29, 2011, the MIIT promulgated the Several Provisions on Regulating the Market Order of Internet Information Services, which became effective on March 15, 2012.
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.
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 . ” C. Organizational Structure . See “—A. History and Development of the Company.” D.
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.
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.
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).
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, 2027 with a monthly rent of RMB115,648 (approximately US$16,412).
We believe this network model allows us to achieve strong operating results while maintaining and minimizing fixed costs and capital requirements, which results in higher return on earnings and equities. Operational efficiency, cost management, and competitive pricing are critical to the success of a contract logistics company.
We believe this network model allows us to achieve strong operating results while maintaining and minimizing fixed costs and capital requirements, which results in higher return on earnings and equities. 61 Operational efficiency, cost management, and competitive pricing are critical to the success of a contract logistics company.
Anhui Luge and Hubei Luge are affiliates under the control of Hefei Weitian. Security and Safety We have designed and integrated safety policies and procedures across the full scope of our business. Our key safety measures include: 71 Operational Security and Safety We, through the VIE and the VIE’s subsidiaries, have established security screening protocols to inspect freights before acceptance.
Anhui Luge and Hubei Luge are affiliates under the control of Hefei Weitian. Security and Safety We have designed and integrated safety policies and procedures across the full scope of our business. Our key safety measures include: Operational Security and Safety We, through the VIE and the VIE’s subsidiaries, have established security screening protocols to inspect freights before acceptance.
However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested enterprise, and certain requirements specified by PRC tax authorities are satisfied. 92 Regulations on Mergers & Acquisitions and Overseas Listings On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and were amended on June 22, 2009.
However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested enterprise, and certain requirements specified by PRC tax authorities are satisfied. 99 Regulations on Mergers & Acquisitions and Overseas Listings On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and were amended on June 22, 2009.
The permits for registered domain names are effective for five years, which are subject to renewals, cancellations or revocations. 85 Trade secrets According to the PRC Anti-Unfair Competition Law, promulgated by the SCNPC in September 1993, as amended in November 4, 2017 and April 23, 2019 respectively, the term “trade secrets” refers to technical, operational or other commercial information that is unknown to the public, has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its legal owners or holders through corresponding confidentiality measures.
The permits for registered domain names are effective for five years, which are subject to renewals, cancellations or revocations. 93 Trade secrets According to the PRC Anti-Unfair Competition Law, promulgated by the SCNPC in September 1993, as amended in November 4, 2017 and April 23, 2019 respectively, the term “trade secrets” refers to technical, operational or other commercial information that is unknown to the public, has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its legal owners or holders through corresponding confidentiality measures.
The amount of revenue we generate depends on the unit price and volume. Logistics We, through the VIE and the VIE’s subsidiaries, have integrated our transportation network and Shengfeng TMS with our client’s respective logistics network and systems.
The amount of revenue we generate depends on the unit price and volume. 71 Logistics We, through the VIE and the VIE’s subsidiaries, have integrated our transportation network and Shengfeng TMS with our client’s respective logistics network and systems.
We regularly provide to our clients different reports reflecting the status of their storage and inventory so that they can make business decisions accordingly to optimize their inventory structure.
We regularly provide our clients with different reports reflecting the status of their storage and inventory so that they can make business decisions accordingly to optimize their inventory structure.
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.
For further details on our directors and senior management, see “Management.” 64 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.
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.
The term of this agreement was from September 1, 2020 to August 31, 2021. On September 1, 2021, we, through Shengfeng Logistics, renewed this agreement in which the term was from September 1, 2021 to December 31, 2023.
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.
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 203 client service representatives 10 hours a day, 7 days a week.
The SEC maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system. For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures.” B.
The SEC maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system. For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures.” B. Business Overview .
Although seasonal changes have not significantly impacted on our cash flow or affected our operations, we cannot guarantee that it will not adversely impact us in the future. 77 Insurance We, through the VIE and the VIE’s subsidiaries, maintain various insurance policies to safeguard against risks and unexpected events.
Although seasonal changes have not significantly impacted on our cash flow or affected our operations, we cannot guarantee that it will not adversely impact us in the future. 84 Insurance We, through the VIE and the VIE’s subsidiaries, maintain various insurance policies to safeguard against risks and unexpected events.
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.
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. 98 SAFE Circular 37 In July 2014, SAFE promulgated SAFE Circular 37, which replaces the previous SAFE Circular 75.
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.
Any proposal discussed and approved during the meeting will be presented to the management for further discussion and decision. 82 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.
Line-haul and Short-haul Transportation Network We, through the VIE and the VIE’s subsidiaries, operate over 600 line-haul and short-haul routes. We utilize our self-owned fleet in addition to the vehicles owned and operated by third-party transportation providers to form both our line-haul transportation network for long-distance, high-capacity transportation, and our short-haul transportation network for short-distance, low-capacity pickup and delivery.
Line-haul and Short-haul Transportation Network We, through the VIE and the VIE’s subsidiaries, operate over 650 line-haul and short-haul routes. We utilize our self-owned fleet in addition to the vehicles owned and operated by third-party transportation providers to form both our line-haul transportation network for long-distance, high-capacity transportation, and our short-haul transportation network for short-distance, low-capacity pickup and delivery.
About 30% of our freight transportation services are provided by our self-owned fleet and the rest are provided by third-party transportation providers. For further details on these transportation providers, see “— Our Transportation Providers.” To meet our clients’ different needs, we typically provide individualized transportation services on a contractual basis.
About 17% of our freight transportation services are provided by our self-owned fleet and the rest are provided by third-party transportation providers. For further details on these transportation providers, see “— Our Transportation Providers.” To meet our clients’ different needs, we typically provide individualized transportation services on a contractual basis.
We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S.
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.
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.
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. 79 Our WMS operates according to certain rules of warehouse management including rules of pick-up, quality inspection, warehouse and storage separation and arrangement.
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 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.
Business Overview Our Mission The VIE is one of the leading contract logistics service providers in China. Since the establishment of the VIE in 2001, our mission has been to provide logistics solutions to companies in need of storage and delivery assistance in China.
Our Mission The VIE is one of the leading contract logistics service providers in China. Since the establishment of the VIE in 2001, our mission has been to provide logistics solutions to companies in need of storage and delivery assistance in China.
Key Information — Our VIE Agreements . ” Our Competitive Strengths We believe we have the following competitive strengths: Contract Logistics Service Provider with Established Operating History in China Since 2001, and as of the date of this annual report, we, through the VIE and the VIE’s subsidiaries, have operated as a contract logistics service provider for 22 years.
Key Information — Our VIE Agreements . ” 62 Our Competitive Strengths We believe we have the following competitive strengths: Contract Logistics Service Provider with Established Operating History in China Since 2001, and as of the date of this annual report, we, through the VIE and the VIE’s subsidiaries, have operated as a contract logistics service provider for 23 years.
Consequently, we have disposed of more than 450 self-owned gasoline-powered trucks and vehicles and purchased 16 electric heavy-duty trucks as of the date of this annual report.
Consequently, we have disposed of more than 410 self-owned gasoline-powered trucks and vehicles and purchased 16 electric heavy-duty trucks as of the date of this annual report.
We recorded net profit of approximately $10.3 million and $7.8 million for the fiscal years ended December 31, 2023 and 2022, respectively. Shengfeng Development Limited is a holding company incorporated under the laws of the Cayman Islands and it is not a Chinese operating company.
We recorded net profit of approximately $10.8 million and $10.3 million for the fiscal years ended December 31, 2024 and 2023, respectively. Shengfeng Development Limited is a holding company incorporated under the laws of the Cayman Islands and it is not a Chinese operating company.
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.
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, 3 are located on lands that we own and the remaining 23 are located on leased lands. Cloud OFCs See “—Service Offerings by Us—Cloud Storage Services” above.
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.
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 following map shows our nationwide sorting center network as of December 31, 2023. 68 Our centralized planning team coordinates the development and expansion of new and existing regional sorting centers, including site selection, facility layout design, and equipment purchase.
The following map shows our nationwide sorting center network as of December 31, 2024. Our centralized planning team coordinates the development and expansion of new and existing regional sorting centers, including site selection, facility layout design, and equipment purchase.
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.
The following map illustrates our Cloud OFCs network as of December 31, 2024. 70 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.
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.
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 5 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.
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.
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 110,000 transportation providers, as of December 31, 2024. 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, 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).
We, through the VIE and the VIE’s subsidiaries, maintain an in-house R&D team which consists of four departments in Shengfeng Logistics as of the date of this report: 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).
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.
Our net profit amounted to approximately $10.8 million $10.3 million and $7.8 million for the fiscal years ended December 31, 2024, 2023 and 2022, respectively; our net profit margins for the fiscal years ended December 31, 2024, 2023 and 2022 were approximately 2.1%, 2.6% and 2.1%, respectively.
In addition, wholly foreign-owned enterprises in the PRC are also required to allocate at least 10% of their respective accumulated profits after tax each year, if any, to certain reserve funds unless these accumulated reserves have reached 50% of the registered capital of such enterprises. These reserves are not distributable as cash dividends.
In addition, wholly foreign-owned enterprises in the PRC are also required to allocate at least 10% of their respective accumulated profits after tax each year, if any, to certain reserve funds unless these accumulated reserves have reached 50% of the registered capital of such enterprises.
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.
For the fiscal years ended December 31, 2024, 2023, and 2022, we, through the VIE and the VIE’s subsidiaries, provided freight transportation services for 1,923, 2,160 and 2,291 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. 67 Shipment Flow The following diagram illustrates the process for the completion of a typical freight transportation order.
The land is subject to a 50-year use term. Construction is currently underway on the land for the purpose of developing warehouse storage and management services and establishing a regional sorting center. The areas of self-owned properties and leased premises are based on the figures specified in the certificates of land use or the corresponding lease agreements.
Construction is currently underway on the land for the purpose of developing warehouse storage and management services and establishing a regional sorting center. The areas of self-owned properties and leased premises are based on the figures specified in the certificates of land use or the corresponding lease agreements.
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.
We will make specific marketing plans and take different approaches based on the various industries, sizes, contract amounts and needs of our clients. 81 Employees As of December 31, 2024, 2023, and 2022, we, through the VIE and the VIE’s subsidiaries, had a total of 1,263, 1,341 and 1,550 full-time employees located in China, respectively.
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.
For the fiscal years ended December 31, 2024 and 2023, approximately 17% and 23% 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.
Our total net revenue increased by approximately 9.1% during 2023 compared to 2022. We generated operating profit of approximately $13.9 million and $9.8 million for the fiscal years ended December 31, 2023 and 2022, respectively. Our operating profit margin was approximately 3.4% and 2.7% for the fiscal years ended December 31, 2023 and 2022, respectively.
Our total net revenue increased by approximately 24.8% during 2024 compared to 2023. We generated operating profit of approximately $14.7 million and $13.9 million for the fiscal years ended December 31, 2024 and 2023, respectively. Our operating profit margin was approximately 2.9% and 3.4% for the fiscal years ended December 31, 2024 and 2023, respectively.
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.
To increase our transportation efficiency, we utilize the drop and pull transportation method. As of December 31, 2024, we, through the VIE and the VIE’s subsidiaries, also owned 131 vehicles for our short-haul transportation.
According to the Regulations for Security Protection of Critical Information Infrastructure, or the CIIO Regulation Promulgated by State Council in July 2021, effective on September 1, 2021, critical information infrastructure refers to any important network facilities or information systems of an important industry or field, such as public communication and information services, energy, transport, water conservation, finance, public services, e-government affairs, science, and technology industry for national defense, among other industries and sectors that may pose a serious threat to national security, people’s livelihood, and public interests in the event of damage, loss of function, or data leakage.
Besides, responsible persons may be subject to fines between RMB10,000 and RMB100,000. 89 According to the Regulations for Security Protection of Critical Information Infrastructure, or the CIIO Regulation Promulgated by State Council in July 2021, effective on September 1, 2021, critical information infrastructure refers to any important network facilities or information systems of an important industry or field, such as public communication and information services, energy, transport, water conservation, finance, public services, e-government affairs, science, and technology industry for national defense, among other industries and sectors that may pose a serious threat to national security, people’s livelihood, and public interests in the event of damage, loss of function, or data leakage.
In addition, although the unregistered lease agreements are considered binding agreements, in practice, some of the remedies generally available to the registered lease agreements may not be fully applicable to the unregistered lease agreements, such as specific performance of lease agreement against new purchasers of the property. Some of our leases have not completed the registration.
In addition, although the unregistered lease agreements are considered binding agreements, in practice, some of the remedies generally available to the registered lease agreements may not be fully applicable to the unregistered lease agreements, such as specific performance of lease agreement against new purchasers of the property.
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.
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 16,510,000 tons for the fiscal year ended December 31, 2024 and we have 1,263 employees as of December 31, 2024.
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.
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.
According to the EIT Law and its implementing rules, dividends paid to investors of an eligible PRC resident enterprise can be exempted from EIT and dividends paid to foreign investors are subject to a withholding tax rate of 10%, unless relevant tax agreements entered into by the PRC government provide otherwise.
These reserves are not distributable as cash dividends. 97 According to the EIT Law and its implementing rules, dividends paid to investors of an eligible PRC resident enterprise can be exempted from EIT and dividends paid to foreign investors are subject to a withholding tax rate of 10%, unless relevant tax agreements entered into by the PRC government provide otherwise.
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.
For details on third-party transportation providers, see “—Our Transportation Providers.” 75 Service Outlets As of December 31, 2024, we, through the VIE and the VIE’s subsidiaries, operated 24 service outlets across China.
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.
Through years of operation, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 382 cities across 32 provinces, as of December 31, 2024.
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.
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, 2024, we, through the VIE and the VIE’s subsidiaries, directly operated 39 Cloud OFCs across China with a total area of approximately 4,095,491 square feet, among which 13 Cloud OFCs were multistory facilities.
The following table shows pertinent information of the properties we, through three of the VIE’s subsidiaries, own as of December 31, 2023: Location Area (Square Feet) Term of Use Current Use Tong Zhou District, Beijing, China 159,901.66 October 31, 1994 to October 30, 2044 Construction has not been commenced as of the date of this annual report.
The following table shows pertinent information of the properties we, through three of the VIE’s subsidiaries, own as of December 31, 2024: Location Area (Square Feet) Term of Use Current Use Tong Zhou District, Beijing, China 159,901.66 October 31, 1994 to October 30, 2044 Construction is currently underway as of the date of this annual report.
We had an annual net profit growth of approximately 10.0% in 2021, approximately 17.8% in 2022, and approximately 31.7% in 2023.
We had an annual net profit growth of approximately 17.8% in 2022, approximately 31.7% in 2023 and approximately 5.0% in 2024.
Tong Zhou District, Beijing, China 155,027.65 October 31, 1994 to October 30, 2044 Construction has not been commenced as of the date of this annual report. Tong Zhou District, Beijing, China 12,531.02 January 23, 1995 to January 22, 2045 Construction has not been commenced as of the date of this annual report.
Tong Zhou District, Beijing, China 155,027.65 October 31, 1994 to October 30, 2044 Construction is currently underway as of the date of this annual report. Tong Zhou District, Beijing, China 12,531.02 January 23, 1995 to January 22, 2045 Construction is currently underway as of the date of this annual report.
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.
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.
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.
Through years of effort, as of December 31, 2024, we have registered 117 computer software copyrights with the PRC National Copyright Administration and 2 invention patent with the National Intellectual Property Administration.
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.
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.
Each client, based on its individual needs and recommendations from our solution design, may elect to use any combination of the various services we provide at each step of the product flow. ● Inbound Logistics.
The following diagram illustrates the product flow in a typical supply chain. Each client, based on its individual needs and recommendations from our solution design, may elect to use any combination of the various services we provide at each step of the product flow. ● Inbound Logistics.
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.
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 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.
The terms of such leases range from 1 to 5 years. As of the date of December 31, 2024, we, through the VIE and the VIE’s subsidiaries, directly operate 39 Cloud OFCs across China to provide warehouse storage and management services.
When planning routes, we prioritize the efficiency of the entire network. We dispatch freight to the regional sorting center closest to its destination even if the regional sorting center and the destination are located in different administrative regions. This reduces transportation time and lowers our and our clients’ transportation costs.
We dispatch freight to the regional sorting center closest to its destination even if the regional sorting center and the destination are located in different administrative regions. This reduces transportation time and lowers our and our clients’ transportation costs.
In addition, the tax authority may also hold the withholding agents liable and impose a penalty ranging from 50% to 300% of the unpaid tax on them. 89 Value-added Tax Pursuant to the Interim Regulations on Value-Added Tax of the PRC, which was promulgated by the State Council on December 13, 1993 and amended on November 5, 2008, February 6, 2016 and November 19, 2017, and the Implementation Rules for the Interim Regulations on Value-Added Tax of the PRC, which was promulgated by the MOF and SAT on December 15, 2008, became effective on January 1, 2009 and amended on October 28, 2011, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement services or importation of goods within the territory of the PRC shall pay value-added tax, or the VAT.
Value-added Tax Pursuant to the Interim Regulations on Value-Added Tax of the PRC, which was promulgated by the State Council on December 13, 1993 and amended on November 5, 2008, February 6, 2016 and November 19, 2017, and the Implementation Rules for the Interim Regulations on Value-Added Tax of the PRC, which was promulgated by the MOF and SAT on December 15, 2008, became effective on January 1, 2009 and amended on October 28, 2011, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement services or importation of goods within the territory of the PRC shall pay value-added tax, or the VAT.
According to the Civil Code of the PRC, the lessee may sublease the leased and occupies premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid.
Some of our leases have not completed the registration. 88 According to the Civil Code of the PRC, the lessee may sublease the leased and occupies premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid.
Interdepartmental Management Meeting – In order to connect all departments, from headquarters to our 35 operating branches, we hold monthly business meetings during which we summarize our monthly operations, provide feedbacks to market changes, track business progress, boost employee morals, and ensure meeting objectives.
Interdepartmental Management Meeting – In order to connect all departments, from headquarters to our 35 operating branches, we hold monthly business meetings during which we summarize our monthly operations, provide feedbacks to market changes, track business progress, boost employee morals, and ensure meeting objectives. 63 Scalable Integrated Network Model We believe our scalable integrated network model is best suited to support our growth.
In addition, as of December 31, 2023, 2 of the regional sorting centers operated by the VIE and the VIE’s subsidiaries with an aggregate gross floor area of approximate 64,838.16 square feet are on the land we own, and 33 of the regional sorting centers operated by the VIE and the VIE’s subsidiaries with an aggregate gross floor area of approximately 1,703,642.31 square feet are on leased land.
In addition, as of December 31, 2024, 3 of the regional sorting centers operated by the VIE and the VIE’s subsidiaries with an aggregate gross floor area of approximate 64,838.16 square feet are on the land we own, and 23 of the regional sorting centers operated by the VIE and the VIE’s subsidiaries with an aggregate gross floor area of approximately 1,097,544.06 square feet are on leased land.
As of December 31, 2023, 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 management system.
As of December 31, 2024, we, through the VIE and the VIE’s subsidiaries, have achieved strong operational efficiency through centralized control and management of 26 regional sorting centers, 39 Cloud OFCs, 24 service outlets, approximately 410 self-owned trucks and vehicles, and over 110,000 transportation providers, route planning and optimization, and transportation and management system.
Tong Zhou District, Beijing, China 12,928.10 January 23, 1995 to January 22, 2045 Construction has not been commenced as of the date of this annual report.
Tong Zhou District, Beijing, China 12,928.10 January 23, 1995 to January 22, 2045 Construction is currently underway as of the date of this annual report.
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 terms of such leases range from 1 to 3 years. As of the date of December 31, 2024, we, through the VIE and the VIE’s subsidiaries, directly operate 24 service outlets across China.
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.
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 may also initiate legal proceedings to protect our rights and interests. Regulations This section sets forth a summary of the principal laws and regulations relevant to our business and operations in the PRC and the U.S. PRC Regulations This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.
We may also initiate legal proceedings to protect our rights and interests. PRC Regulations This section sets forth a summary of the principal laws and regulations relevant to our business and operations in the PRC.
Our total transportation volume increased from approximately 7,800,000 tons for the fiscal year ended December 31, 2022 to approximately 10,170,000 tons for the fiscal year ended December 31, 2023, representing an increase of approximately 30.4%. For the fiscal years ended December 31, 2023 and 2022, net revenue generated from providing our services were approximately $404.1 million and $370.3 million, respectively.
Our total transportation volume increased from approximately 10,170,000 tons for the fiscal year ended December 31, 2023 to approximately 16,510,000 tons for the fiscal year ended December 31, 2024, representing an increase of approximately 62.3%. For the fiscal years ended December 31, 2024 and 2023, net revenue generated from providing our services were approximately $504.2 million and $404.1 million, respectively.
The following table sets forth the top three industries our clients are in by percentage as of December 31, 2023: Industry Percentage Fast moving customer goods 13.53 % Manufacturing 11.87 % New energy (vehicle) 9.43 % Total 34.83 % Client Service We believe that our client service enhances our client loyalty and brand image.
The following table sets forth the top three industries our clients are in by percentage as of December 31, 2024: Industry Percentage New energy (vehicle) 20.24 % Fast moving customer goods 13.34 % Manufacturing 8.20 % Total 41.78 % Client Service We believe that our client service enhances our client loyalty and brand image.
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.
As of December 31, 2024, the VIE and the VIE’s subsidiaries’ transportation and sorting network is comprised of 26 regional sorting centers, 39 Cloud OFCs and 24 service outlets. Our network in China covered 382 cities in over 32 provinces as of December 31, 2024. Extensive and Growing Ecosystem Our ecosystem is comprised of the Company, clients, and transportation providers.
For the years ended December 31, 2023, 2022 and 2021, the Company recorded related rent of $227,552, $305,120 and $357,613 in general and administrative expenses, respectively. For the years ended December 31, 2023, 2022 and 2021, the Company recorded related property management fee of $17,029, $35,420 and $68,503 in general and administrative expenses, respectively.
For the years ended December 31, 2024, 2023 and 2022, the Company recorded related rent of $226,870, $227,552 and $305,120 in general and administrative expenses, respectively. For the years ended December 31, 2024, 2023 and 2022, the Company recorded related property management fee of $46,744, $17,029 and $35,420 in general and administrative expenses, respectively.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNet 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.
Biggest changeForeign currency capital of a foreign-invested enterprise may be converted into Renminbi capital at its will according to the actual operation of the enterprise, as long as it is within such enterprise’s business scope. 110 Cash flows in Operating Activities For the year ended December 31, 2024, net cash provided by operating activities was approximately $15.0 million, primarily comprised of net income of approximately $10.8 million and adjusted for non-cash items such as depreciation and amortization for property and equipment of approximately $6.4 million, approximately $6.6 million for amortization of operating lease right-of-use assets and interest of operating lease liabilities, decrease of prepayments and other current assets approximately $4.8 million, increase of accounts payable approximately $29.3 million, decrease of other non-current assets of approximately $2.9 million.
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.
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.
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.
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.
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.
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.
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 % 106 Net revenues Transportation services We, primarily through the VIE and the VIE’s subsidiaries, provide transportation services to companies in mainland China.
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.
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 % 108 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.
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.
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.” 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.
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.
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.
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 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.
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.
Unfavorable changes in any of these general factors could materially and adversely affect our business and our results of operations. 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.
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.
For a description of the VIE Agreements, see “Item 3. Key Information — 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.
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.
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.
For the year ended December 31, 2023, net cash used in investing activities was approximately $18.8 million, consisting primarily of approximately $10.8 million cash used to acquire property and equipment and approximately $17.9 million cash used for purchasing intangible assets, 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.
Trend Information Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operating results or financial condition.
Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operating results or financial condition. 112 E.
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.
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 operating lease right-of-use assets and interest of operating lease liabilities, deferred income taxes expenses of approximately $1.2 million, increase of accounts payable of approximately $7.9 million.
Our major customers are in the manufacturing industry, the fast-moving consumer goods industry, the telecommunication 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.
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.
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 $55.8 million as of December 31, 2024.
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.
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 $38.6 million, $28.7 million and $7.2 million for the fiscal years ended December 31, 2024, 2023 and 2022, respectively.
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.
For the year ended December 31, 2023, net cash provided by operating activities was approximately $14.1 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 operating lease right-of-use assets and interest of operating lease liabilities, deferred income taxes expenses of approximately $1.5 million, decrease of prepayments and other current assets approximately $3.5 million, increase of accounts payable approximately $4.5 million and increase of salary and welfare payable of approximately $1.5 million.
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 recorded net income of approximately $10.8 million and $10.3 million for the years ended December 31, 2024 and 2023, respectively. 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.
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.
Subsequent to December 31, 2024 and as of the date of this annual report, we made capital expenditures of approximately $2.7 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.
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.
Since 2001, we, through the VIE and the VIE’s subsidiaries, have developed extensive and reliable transportation networks in China, covering 382 cities in over 32 provinces as of December 31, 2024.
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.
Net cash generated from operating activities was partially offset by approximately $9.4 million decrease in operating lease liabilities, approximately $10.7 million increase in account receivable and approximately $3.7 million increase in other non-current assets.
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.
Net income As a result of the foregoing, our net income increased by 5.0% from approximately $10.3 million for the year ended December 31, 2023 to approximately $10.8 million for the year ended December 31, 2024.
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.
For the fiscal years ended December 31, 2024 and 2023, our net revenue, mainly generated from providing transportation and warehouse storage management services, was approximately $504.2 million and $404.1 million, respectively. Our total net revenue increased by approximately 24.8% during 2024 compared to 2023, primarily driven by the higher net revenue from transportation services.
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.
Dollar Exchange Rate December 31, 2024 December 31, 2023 December 31, 2022 At the end of the period - USD: RMB US$1=RMB7.1884 US$1=RMB7.0827 US$1=RMB6.9646 Average rate for the period - USD: RMB US$1=RMB7.1217 US$1=RMB7.0467 US$1=RMB6.7261 We did not have any foreign currency investments hedged by currency borrowings or other hedging instruments in years ended December 31, 2024, 2023 and 2022. 109 B.
Interest 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.
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.
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.
We, through the VIE and the VIE’s subsidiaries, have achieved strong operational efficiency through centralized control and management of 26 regional sorting centers, 39 Cloud OFCs, 24 service outlets, approximately 410 self-owned trucks and vehicles, and over 110,000 transportation providers, route planning and optimization, and transportation and managements system.
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.
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. 107 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 % 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.
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.
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. Impact of Foreign Currency Fluctuations The reporting currency of the Company is USD.
Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this annual report. A. Operating Results Overview We are a holding company incorporated in the Cayman Islands and are not a Chinese operating company.
Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this annual report. 101 A. Operating Results .
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 .
Income from operations As a result of the foregoing, our profit from operations increased by approximately 5.5% from approximately $13.9 million for the year ended December 31, 2023 to approximately $14.7 million for the year ended December 31, 2024.
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.
For the year ended December 31, 2022, net cash provided by financing activities was approximately $8.2 million, consisted primarily of cash proceeds from bank loans of approximately $61.3 million and cash proceeds from notes payable of approximately $2.1 million, partially offset by repayment of bank loans of approximately $55.5 million.
As a holding company with no material operations of our own, our operations have been conducted in China by our subsidiaries and through the VIE Agreements, with the VIE and the VIE’s subsidiaries.
Overview We are a holding company incorporated in the Cayman Islands and are not a Chinese operating company. As a holding company with no material operations of our own, our operations have been conducted in China by our subsidiaries and through the VIE Agreements, with the VIE and the VIE’s subsidiaries.
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.
For the year ended December 31, 2023, net cash provided by financing activities was approximately $11.2 million, consisting primarily of cash proceeds from bank loans of approximately $37.9 million, proceeds from the initial public offering of approximately $8.5 million, proceeds from notes payable of approximately $8.5 million and advance from a third party of approximately $7.2 million, partially offset by repayment of bank loans of approximately $48.7 million and repayment of notes payable of approximately $2.0 million.
General Factors Affecting Our Results of Operations Our business and operating results are affected by a number of general factors in China’s transportation industry, including, but not limited to: ● China’s overall economic growth, level of urbanization and level of consumption; ● the development of the manufacturing industry, fast moving consumer goods industry, telecommunication industry, and publishing industry; and ● market competition.
We recorded net income of approximately $10.3 million and $7.8 million for the years ended December 31, 2023 and 2022, respectively. 102 General Factors Affecting Our Results of Operations Our business and operating results are affected by a number of general factors in China’s transportation industry, including, but not limited to: ● China’s overall economic growth, level of urbanization and level of consumption; ● the development of the manufacturing industry, fast moving consumer goods industry, telecommunication industry, and publishing industry; and ● market competition.
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.
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.
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.
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 increased by approximately 24.8% from approximately $404.1 million for the year ended December 31, 2023 to approximately $504.2 million for the year ended December 31, 2024.
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.
Cash flows in Investing Activities For the year ended December 31, 2024, net cash used in investing activities was approximately $32.6 million, consisting primarily of approximately $29.5 million cash used to acquire property and equipment, approximately $9.1 million cash used for purchasing intangible assets, approximately $9.1 million cash paid for investments deposit and approximately $5.8 million loan to a third party, partially offset by cash proceeds received from disposal of subsidiaries of approximately $9.7 million and investment deposit refund of approximately $6.8 million, loan repayment from a third party of approximately $2.8 million and cash received from disposal property and equipment of approximately $1.3 million.
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.
The following table sets forth our contractual obligations as of December 31, 2024: Payments Due by Period (Amount in thousand) Total Within 1 Year 1-3 Years 3-5 Years More than 5 Years Bank loans $ 55,791 $ 39,401 $ 2,458 $ 4,098 $ 9,834 Operating lease commitments 9,863 4,371 3,963 827 702 Total $ 65,654 $ 43,772 $ 6,421 $ 4,925 $ 10,536 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, 2024 2023 2022 (Amount in thousand) (Amount in thousand) (Amount in thousand) Net cash provided by operating activities $ 15,010 $ 14,135 $ 4,811 Net cash used in investing activities (32,629 ) (18,821 ) (6,715 ) Net cash flows provided by financing activities 29,072 11,169 8,168 Effects of exchange rate changes on cash, cash equivalent and restricted cash (533 ) (558 ) (1,814 ) Cash, cash equivalent and restricted cash, beginning of year 29,293 23,368 18,918 Cash, cash equivalent and restricted cash, end of year $ 40,213 $ 29,293 $ 23,368 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.
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 approximately $6.9 million cash used to acquire property and equipment and approximately $0.3 million cash used for purchasing intangible assets, offset by cash proceeds received from disposal of property and equipment of approximately $0.5 million. 111 Cash flows in Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was approximately $29.1 million, consisting primarily of cash proceeds from bank loans of approximately $66.8 million, proceeds from notes payable of approximately $34.0 million and cash contribution from non-controlling shareholders of approximately $2.1 million, partially offset by repayment of bank loans of approximately $46.5 million and repayment of notes payable of approximately $27.4 million.
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.
Net cash generated from operating activities was partially offset by approximately $11.3 million decrease in operating lease liabilities, approximately $1.0 million decrease in salary and welfare payables, approximately $2.0 million increase in prepayments and other current assets, approximately $17.0 million increase in account receivable and approximately $1.0 million increase in notes receivable.
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.
Net revenue generated from our warehouse storage management services decreased by approximately 9.5% from approximately $18.2 million for the year ended December 31, 2023 to approximately $16.4 million for the year ended December 31, 2024, primarily due to a shifting of focus on transportation services for the year ended December 31, 2024.
For the years ended December 31, 2022 and 2021, our overall gross margin was approximately 11.2% and 11.9%, respectively. The gross margin slightly decreased due to the same reason.
Gross profit Our overall gross profit decreased by approximately 0.5% from approximately $46.5 million for the year ended December 31, 2023 to approximately $46.3 million for the year ended December 31, 2024. For the years ended December 31, 2024 and 2023, our overall gross margin was approximately 9.2% and 11.5%, respectively.
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.
Accordingly, our total revenues had a lower proportional increase than the increase in cost of revenues during the same period, leading to a lower overall gross profit margin. 104 Years Ended December 31, 2024 2023 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Operating expenses Selling and marketing $ (5,964 ) $ (6,688 ) $ 724 (10.8 )% General and administrative (25,654 ) (25,912 ) 258 (1.0 )% Total operating expenses $ (31,618 ) $ (32,600 ) $ 982 (3.0 )% Operating expenses Our operating expenses decreased by approximately 3.0% from approximately $32.6 million for the year ended December 31, 2023 to approximately $31.6 million for the year ended December 31, 2024 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.
Our expectations regarding the future are based on available information and assumptions that we believe to be reasonable and accurate, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates.
We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations because of changes in our estimates.
E. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected.
Critical Accounting Estimates . We prepare our financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements.
Selling and marketing expenses decrease by approximately $0.3 million from approximately $7.7 million for the year ended December 31, 2021 to approximately $7.4 million for the year ended December 31, 2022, which was attributable to decreased employee wages and benefits.
Our selling and marketing expenses decreased by approximately 10.8% from approximately $6.7 million for the year ended December 31, 2023 to approximately $6.0 million for the year ended December 31, 2024, which was attributable to decreased related employee wages and benefits due to workforce optimization practices, which led to a reduction in the number of employees for related sales and marketing activities.
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) % Revenue Transportation $ 346,039 93.4 % $ 327,848 94.6 % $ 18,191 5.5 % Warehouse storage management services 20,322 5.5 % 16,885 4.9 % 3,437 20.4 % Other revenue 3,964 1.1 % 1,966 0.5 % 1,998 101.6 % Net revenue 370,325 100 % 346,699 100 % 23,626 6.8 % Cost of revenue (328,793 ) (88.8 )% (305,354 ) (88.1 )% (23,439 ) 7.7 % Gross profit $ 41,532 11.2 % $ 41,345 11.9 % $ 187 0.5 % 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, 2024 and 2023 Years Ended December 31, 2024 2023 Change Amount in thousand % Amount in thousand % (Amount in thousand) % Revenue Transportation $ 484,754 96.1 % $ 383,211 94.8 % $ 101,543 26.5 % Warehouse storage management services 16,432 3.3 % 18,160 4.5 % (1,728 ) (9.5 )% Other revenue 2,972 0.6 % 2,750 0.7 % 222 8.1 % Net revenue 504,158 100 % 404,121 100 % 100,037 24.8 % Cost of revenue (457,874 ) (90.8 )% (357,615 ) (88.5 )% (100,259 ) 28.0 % Gross profit $ 46,284 9.2 % $ 46,506 11.5 % $ (222 ) (0.5 )% 103 Net revenues Transportation services We, primarily through the VIE and the VIE’s subsidiaries, provide transportation services to companies in mainland China.
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.
Our total net revenue increased by approximately 9.1% during 2023 compared to 2022, primarily driven by the higher net revenue from transportation services.
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 do not have any variable interests in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us. 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.
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.
Years Ended December 31, 2024 2023 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Income before income taxes $ 12,493 $ 12,628 $ (135 ) (1.1 )% Provision for income taxes (1,666 ) (2,320 ) 654 (28.2 )% Net income $ 10,827 $ 10,308 $ 519 5.0 % Income before income taxes As a result of the foregoing, our income before income taxes decreased by 1.1% from approximately $12.6 million for the year ended December 31, 2023 to approximately $12.5 million for the year ended December 31, 2024.
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.
Our general and administrative expenses decreased by approximately 1.0% from approximately $25.9 million for the year ended December 31, 2023 to approximately $25.7 million for the year ended December 31, 2024, which was due to decrease of employee cost (specially for bonus) and decreased provision for credit losses, partially offset by increased professional consulting service fee.
Approximately 5.5% increase in the net revenues generated from our transportation services from approximately $327.8 million (which accounted for approximately 94.6% of our total net revenue) for the year ended December 31, 2021 to approximately $346.0 million (which accounted for approximately 93.4% of our total net revenue) for the year ended December 31, 2022, as result of the transportation services orders from Tesla increased significantly for the year ended December 31, 2022 since it became our client in fiscal year 2021.
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 26.5% from approximately $383.2 million for the year ended December 31, 2023 to approximately $484.8 million for the year ended December 31, 2024.
Gross profit Our overall gross profit increased by approximately 0.5% from approximately $41.3 million for the year ended December 31, 2021 to approximately $41.5 million for the year ended December 31, 2022. The gross profit increased by approximately $0.2 million, mainly due to stable orders offset by the increase of fuel prices, as mentioned previously for the fiscal year 2022.
Interest expense Our interest expense increased by approximately 11.1% from approximately $1.8 million for the year ended December 31, 2023 to approximately $2.0 million for the year ended December 31, 2024, due to increased borrowings during the year ended December 31, 2024.
Removed
The increase of our net revenues was primarily driven by fast growth of e-Commerce business in China since the pandemic.
Added
The growth was primarily driven by the expansion of services with new clients, particularly in the new energy (vehicle) sector. The Company saw significant growth, due to increased demand within this sector, reflecting a deepened partnership and expanded service offerings.
Removed
In addition, we obtained a new customer Meihua Holding Group Co., Ltd. in fiscal year 2022 with significant revenue.
Added
Our cost of revenues increased by approximately 28.0%, from approximately $357.6 million for the year ended December 31, 2023 to approximately $457.9 million for the year ended December 31, 2024, which was in line with the increase in revenue with a higher percentage of increase (see explanations in gross profit).
Removed
Our cost of revenues was approximately $328.8 million for the year ended December 31, 2022, compared to approximately $305.4 million for the year ended December 31, 2021, which was in line with the increase of revenue, and continuing increase of worldwide inflation has led to a sharp rise in fuel prices in 2022, which might significantly increase the Company’s operating costs in the future.
Added
The gross margin decreased mainly due to decreased average selling prices, driven by market competition, for the year ended December 31, 2024.
Removed
The gross margin of the transportation service has decreased as result of the increased costs. The Company will be considering changing the service prices if the price of fuel continues to rise. The recent inflationary pressures have not materially impacted our operations.
Added
Years Ended December 31, 2024 2023 Change (Amount in thousand) (Amount in thousand) (Amount in thousand) % Other income (expense) Interest income $ 159 $ 126 $ 33 26.2 % Interest expense (1,972 ) (1,775 ) (197 ) 11.1 % Other (expense) income, net (360 ) 371 (731 ) (197.0 )% Total other expense, net $ (2,173 ) $ (1,278 ) $ (895 ) 70.0 % 105 Our total net other expense increased by approximately 70.0% from approximately $1.3 million for the year ended December 31, 2023 to approximately $2.2 million for the year ended December 31, 2024 for the following reasons.
Removed
The management estimates that for every 1% change in fuel prices, the Company’s operating costs will increase by approximately 0.04% accordingly. As of the date of this annual report, we believe that the impact of the increased price of fuel on Company’s operating costs is not significant, and we have not identified any actions to mitigate inflationary pressures.
Added
Other (expense) income, net Our other (expense) income mainly consists of government subsidies, penalties and others. Other expense, net was approximately $0.4 million for the year ended December 31, 2024, as compared to other income, net of approximately $0.4 million for the year ended December 31, 2023.
Removed
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.
Added
The change was due to loss on disposal of property and equipment as well as decreased one-time compensation income.
Removed
As more profit made in those entities’ which has a preferential tax rate for the year ended December 31, 2022, the provision for income tax decreased slightly.
Added
Provision for income taxes The effective income tax rate decreased from approximately 18.4% for the year ended December 31, 2023 to approximately 13.3% for the year ended December 31, 2024, due to higher tax savings achieved through the subsidiaries and VIE’s subsidiaries with preferential tax treatment for the year ended December 31, 2024.
Removed
Foreign currency capital of a foreign-invested enterprise may be converted into Renminbi capital at its will according to the actual operation of the enterprise, as long as it is within such enterprise’s business scope.
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Interest 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.
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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.
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Net cash generated from operating activities was partially offset by approximately $31.2 million increase in account receivable, approximately $8.2 million decrease in accrued expenses and other current liabilities, approximately $6.8 million decrease in operating lease liabilities, and approximately $1.5 million decrease in salary and welfare payable.
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We base our estimates and assumptions on our own historical data and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates and assumptions on an ongoing basis.
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Off-Balance Sheet Commitments and Arrangements As of December 31, 2024, the Company had letters of guarantee in aggregate of approximately $6.1 million (RMB43.8 million) issued by several banks to the customers, which terms extend through 2027. The Company was required to maintain restricted cash of approximately $2.1 million (RMB14.9 million) for letters of guarantee.
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Some of our accounting policies require a higher degree of judgment than others in their application.
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As of December 31, 2024, we have not recorded any liabilities related to these letters of guarantee, as there are no indications of default. However, these commitments represent potential obligations that could result in liabilities if we fail to fulfill agreement terms.
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The critical accounting policies, judgments and estimates that we believe to have the most significant impact on our consolidated financial statements are described below, which should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
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We have not entered into any derivative contracts indexed to our shares that are classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Additionally, we do not have any retained or contingent interests in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity.
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When reviewing our financial statements, you should consider. ● our selection of critical accounting policies; ● the judgments and other uncertainties affecting the application of such policies; ● the sensitivity of reported results to changes in conditions and assumptions; Our critical accounting policies and practices include the following: (i) revenue recognition; (ii) accounts receivable, net; and (iii) income taxes.

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Item 6. [Reserved]

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

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Biggest changeLevy — — — — — 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.
Biggest changeClass 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) 500,000 1.23 % 41,880,000 100 % 91.27 % Guoping Zheng — — — — — Zhiping Yang — — — — — Dan Liu — — — — — Wen Li — — — — — Qingyan Ye — — — — — All directors, director appointees, and executive officers as a group (6 individuals): 500,000 1.23 % 41,880,000 100 % 91.27 % 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) 2,332,011 5.74 % — — 0.51 % 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) 3,412,636 8.40 % — — 0.74 % Sky Top Capital International Limited (8) 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.
Liu is the founder of Shengfeng Logistics and has served as its chairman and chief executive officer since December 2001. Mr. Liu served as the vice chairman of Fujian Province Logistics Association in 2006 and the vice chairman of Fuzhou City Logistics Association in 2007. Mr. Liu also served as the deputy to Fuzhou Municipal People’s Congress in 2011.
Mr. Liu is the founder of Shengfeng Logistics and has served as its chairman and chief executive officer since December 2001. Mr. Liu served as the vice chairman of Fujian Province Logistics Association in 2006 and the vice chairman of Fuzhou City Logistics Association in 2007. Mr. Liu also served as the deputy to Fuzhou Municipal People’s Congress in 2011.
The compensation committee is responsible for, among other things: ● reviewing and approving the total compensation package for our most senior executive officers; ● approving and overseeing the total compensation package for our executives other than the most senior executive officers; ● reviewing and recommending to the board with respect to the compensation of our directors; ● reviewing periodically and approving any long-term incentive compensation or equity plans; ● selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and ● reviewing programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
The compensation committee is responsible for, among other things: ● reviewing and approving the total compensation package for our most senior executive officers; ● approving and overseeing the total compensation package for our executives other than the most senior executive officers; 117 ● reviewing and recommending to the board with respect to the compensation of our directors; ● reviewing periodically and approving any long-term incentive compensation or equity plans; ● selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and ● reviewing programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
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.
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.
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.
He also completed a Human Resources Advanced Training Class conducted by Tsinghua University in 2014. 113 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.
The registered address of Shengfeng International Limited is 30 de Castro Street, Wickhams Cay 1, P.O. Box 4519, Road Town, Tortola, British Virgin Islands. (3) The number of Class A Ordinary Shares beneficially owned represents 8,736,000 Class A Ordinary Shares held by Everbright International Development Limited, a British Virgin Islands company.
The registered address of Shengfeng International Limited is 30 de Castro Street, Wickhams Cay 1, P.O. Box 4519, Road Town, Tortola, British Virgin Islands. 119 (3) The number of Class A Ordinary Shares beneficially owned represents 8,736,000 Class A Ordinary Shares held by Everbright International Development Limited, a British Virgin Islands company.
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.
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. Wen Li is an independent director. Ms.
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 .
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.
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.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company. F. Disclosure of a registrant’s action to recover erroneously awarded compensation. Not applicable.
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.
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. Share ownership .
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.
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. 116 We have also entered into indemnification agreements with each of our directors and executive officers.
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 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. 118 Beneficial ownership includes voting or investment power with respect to the securities.
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.
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. 115 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.
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.
A director’s office shall be terminated if 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.
The registered address of Yuansheng International Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (7) The number of Class A Ordinary Shares beneficially owned represents 3,648,000 Class A Ordinary Shares held by Mid-Castle Development Limited, a British Virgin Islands company, which is 100% owned by Qing Lin.
The registered address of Yuansheng International Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (7) The number of Class A Ordinary Shares beneficially owned represents 3,412,636 Class A Ordinary Shares held by Mid-Castle Development Limited, a British Virgin Islands company, which is 100% owned by Qing Lin.
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.
Yongxu Liu, our chief executive officer, president and chairman of the board of directors, currently beneficially owns approximately 91.27% 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.
The registered address of Everbright International Development Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (4) The number of Class A Ordinary Shares beneficially owned represents 3,928,000 Class A Ordinary Shares held by Double Sun Capital Limited, a British Virgin Islands company, which is 100% owned by Yiping Wu.
The registered address of Everbright International Development Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (4) The number of Class A Ordinary Shares beneficially owned represents 2,332,011 Class A Ordinary Shares held by Double Sun Capital Limited, a British Virgin Islands company, which is 100% owned by Yiping Wu.
The registered address of Prime Link Capital International Limited is 4th Floor, Water’s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands. (9) The number of Class A Ordinary Shares beneficially owned represents 2,880,000 Class A Ordinary Shares held by Sky Top Capital International Limited, a British Virgin Islands company, which is 100% owned by Qiang Lin.
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 2,880,000 Class A Ordinary Shares held by Sky Top Capital International Limited, a British Virgin Islands company, which is 100% owned by Qiang Lin.
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.
(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.
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.
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. Qingyan Ye is an independent director. Ms.
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.
As of the date of this annual report, approximately 42.94% of our issued and outstanding Class A Ordinary Shares are held in the United States by one record holder (CEDE & CO), representing 3.80% of the aggregated voting power.
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.
Compensation Committee . Our compensation committee consists of our three independent director appointees, Dan Liu, Wen Li, and Qingyan Ye. Dan Liu is the chairperson of our compensation committee.
Levy qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq listing rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our Company.
Our board also has determined that Wen Li qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq listing rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our Company.
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.
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.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. Wen Li is be the chairperson of our nominating and corporate governance committee.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of our three independent director appointees, Dan Liu, Wen Li, and Qingyan Ye. Qingyan Ye is the chairperson of our nominating and corporate governance committee.
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.
Our audit committee consists of our three independent director appointees, Dan Liu, Wen Li, and Qingyan Ye. Wen Li is the chairperson of our audit committee. 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.
Although we do not intend to rely on the controlled company exemptions under the Nasdaq listing rules even if we are a controlled company, we could elect to rely on these exemptions in the future, and if so, you would not have the same protection afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
Although we do not intend to rely on the controlled company exemptions under the Nasdaq listing rules even if we are a controlled company, we could elect to rely on these exemptions in the future, and if so, you would not have the same protection afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. 114 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.
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.
Name Age Position(s) Yongxu Liu 54 Chief Executive Officer, Director, President and Chairman Guoping Zheng 39 Chief Financial Officer and Vice President Zhiping Yang 43 Director Dan Liu 58 Independent Director Wen Li 58 Independent Director Qingyan Ye 40 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.
Board Practices Board of Directors Our board of directors consists of five (5) directors. Our board of directors has determined that our three independent director, Dan Liu, Wen Li, and John F. Levy, satisfy the “independence” requirements of the Nasdaq corporate governance rules.
B. Compensation . Yongxu Liu $ 92,393.85 Guoping Zheng $ 85,844.47 Zhiping Yang $ 110,065.90 C. Board practices . Board of Directors Our board of directors consists of five (5) directors. Our board of directors has determined that our three independent director, Dan Liu, Wen Li, and Qingyan Ye, satisfy the “independence” requirements of the Nasdaq corporate governance rules.
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.
Terms of Directors and Executive Officers Unless removed or re-appointed, each director shall be appointed for a term expiring at the next-following annual general meeting, if one is held. At any annual general meeting held, our directors will be elected by an ordinary resolution of our shareholders.
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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.
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Ye has been serving as the General Manager of the Investment and Financing Department at Minfa Industrial Group Limited since April 2019. She previously held the position of Deputy General Manager at the same company from April 2016 to April 2019. Ms.
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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.
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Ye also worked as a Team Leader at the Fuzhou Branch of Xiamen Rural Commercial Bank from March 2015 to March 2016 and as a Customer Manager at Ping An Bank Fuzhou Branch from August 2008 to April 2014. Ms. Ye obtained her Bachelor’s degree in Finance from Fujian Normal University, graduating in January 2015. Ms.
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Levy is a recognized corporate governance and financial reporting expert with over 30 years of progressive financial, accounting and business experience; including nine years in public accounting with three national accounting firms and having served as chief financial officer of both public and private companies for over 13 years. Mr.
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Ye has been chosen as a director appointee because of her extensive financial knowledge and extensive work experience in the investment and financing field. Family Relationships None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K. Controlled Company Mr.
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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.
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Subject to the Companies Act (Revised) of the Cayman Islands and our memorandum and articles of association, our business shall be managed by the directors who may for that purpose exercise all the powers of the Company.
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Levy 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.
Added
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. A director may be removed by ordinary resolution. A director may at any time resign or retire from the office by giving us notice in writing.
Removed
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.
Added
Unless the notice specifies a different date, the director shall be deemed to have resigned on the date that the notice is delivered to us.
Removed
Board Diversity The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
Added
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.
Removed
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.
Removed
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.
Removed
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
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
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.

Item 7. Management's Discussion & Analysis

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

3 edited+2 added−2 removed1 unchanged
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).
Biggest change(“Kunshan Changjiang”) A company under the control of Chongqing Changjiang i) Significant transactions with related parties were as follows: Year ended December 31, 2024 Year ended December 31, 2023 Year ended December 31, 2022 (All amounts in thousands) Transportation services to Fujian Bafang $ - $ - $ 18 Transportation services to Fujian Desheng 157 37 - Transportation services to Zhangwu Changjiang 24 - - Transportation services to Changjiang Modeling 539 - - Transportation services to Kunshan Changjiang 12 - - Total $ 732 $ 37 $ 18 Year ended December 31, 2024 Year ended December 31, 2023 Year ended December 31, 2022 (All amounts in thousands) Transportation services from Fujian Bafang $ 1,799 $ 1,108 $ 1,196 Lease services from Fuzhou Tianyu $ 227 $ 228 $ 305 Lease services from Fuzhou Tianyu Management $ 47 $ 17 $ 35 Catering services from Tianyu Catering $ 1 $ 2 $ - 121 ii) Guarantees The Company’s shareholder, CEO and Chairman, Yongxu Liu, his brother, Yongteng Liu, Fujian Yunlian 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, 2024 As of December 31, 2023 Due from related parties (All amounts in thousands) Fuzhou Tianyu $ 41 $ 41 Fujian Desheng 39 40 Zhangwu Changjiang 26 - Changjiang Modeling 582 - Kunshan Changjiang 13 - Total $ 701 $ 81 As of December 31, 2024 As of December 31, 2023 Due to related parties (All amounts in thousands) Fujian Bafang (a) $ 1,662 $ 1,622 Fuzhou Tianyu 18 48 Fuzhou Tianyu Management 7 34 Total $ 1,687 $ 1,704 (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. 117
Such loan is due on demand. C. Interests of experts and counsel . Not applicable.
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.
Key Information—Our VIE Agreements.” 120 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, 2024 and 2023, and for the years ended December 31, 2024, 2023 and 2022: 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 Fujian Desheng Logistics Co., Ltd (“Fujian Desheng”) A company under the control of a shareholder Yongxu Liu The Company’s CEO and Chairman Yongteng Liu CEO’s brother Fujian Yunlian Shengfeng Industry Co., Ltd., (“Fujian Yunlian”) Shengfeng VIE’s shareholder Fuzhou Puhui Technology Co., Ltd Non-controlling shareholder of Ningde Shengfeng Logistics Co.
Removed
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.
Added
Ltd. Chongqing Changjiang River Moulding Material (Group) Co., Ltd. (“Chongqing Changjiang”) Non-controlling shareholder of Liaoning Tianyu Changsheng Supply Chain Management Co., Ltd. Zhangwu Changjiang Materials Technology Co., Ltd.
Removed
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.
Added
(“Zhangwu Changjiang”) A company under the control of Chongqing Changjiang Changjiang Modeling Materials (Group) Kezuohou Banner Co., Ltd (“Changjiang Modeling”) A company under the control of Chongqing Changjiang Kunshan Changjiang Modeling Materials Co., Ltd.

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