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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.13pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.00pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.26pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
63 words
Item 1A. Risk Factors.
We are a smaller reporting company and are not required to provide the information required under this item. For risks relating to our Company and our operations, see the section titled “Risk Factors” contained in our prospectus dated April 21, 2025, filed with the Securities and Exchange Commission, or the SEC, pursuant to Rule 424(b)(4) under the Securities Act.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+8
decline+6
critical+3
downturn+3
adverse+2
Positive rising
leading+3
profitability+2
improve+2
opportunities+2
able+1
MD&A (Item 7)
7,948 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. All amounts included herein with respect to the fiscal years ended June 30, 2025 and 2024 are derived from our audited consolidated financial statements included elsewhere in this Report. Our financial statements have been prepared in accordance with the U.S. GAAP.
Overview
We are a U.S.-based integrated cross-border supply chain solution provider with a strategic focus on the Asian market including China and South Korea. We primarily provide customized cross-border ocean freight solutions and airfreight solutions in the U.S. that specifically cater to our customers’ requirements and needs in transporting goods into the U.S. We offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.
Founded in Chicago, Illinois in 2018, we are an Asian American-owned business rooted in the U.S. with in-depth understanding of both the U.S. and Asian international trading and logistics service markets. Our customers are typically Asia- and U.S.-based logistics service companies serving large e-commerce platforms, social commerce platforms and manufacturers to sell and transport consumer and industrial goods made in Asia into the U.S. As of June 30, 2025, we had served over 400 customers to fulfill over 55,000 cross-border supply chain solution orders.
We have established an extensive collaboration network of service providers, including global freight carriers for our cross-border freight consolidation and forwarding services as well as domestic ground transportation carriers for our U.S. domestic transportation services. As of June 30, 2025, we had collaborated with almost all major global ocean and air carriers to forward 35,900 TEU of container loads and 69,300 tons of air cargo. As of June 30, 2025, we had also cooperated with over 200 domestic ground transportation carriers, including almost all major U.S. domestic ground transportation carriers, on a long-term, short-term or order basis, as the case may be.
We operate three massive and hyper-busy regional warehousing and distribution centers in the U.S., in Illinois and Texas. With an aggregate gross feet area of approximately 142,484 square feet and 52 docks, our regional warehousing and distribution centers have an aggregate daily floor load of up to 3,000 cubic meters of freight. In addition to our self-operated regional centers, we maintain close contact with over 150 warehouses and distribution terminals in almost all transportation hubs in the U.S. which we have cooperated in the past to support the warehousing and distributing services of our cross-border freight in case such freight requires storage, fulfilment, transloading, palletizing, packaging or distribution in states other than Illinois and Texas. As of June 30, 2025, we had assisted with the customs clearance, in conjunction with our other service offerings, of cross-border freight of an aggregate assessed value of over $54.0 million.
Leveraging our strong cross-border supply chain service capabilities, extensive service provider network of cross-border freight carriers and U.S. domestic ground transportation carriers, massive and hyper-busy regional warehousing and distribution centers as well as deep understanding of the Asian market, we have been able to build up our brand and reputation and have achieved fast growth since our inception. As of June 30, 2025, we had fulfilled over 55,000 cross-border supply chain solution orders for freight of an aggregate assessed value of $1.0 billion, delivered to thousands of business and residential addresses in approximately 48 U.S. states.
During the year ended June 30, 2025, we had a new business segment through acquired 100% equity interest of Hupan Pharmaceutical, a comprehensive pharmaceutical distribution and supply chain service provider headquartered in Wuhan, China with verticals in brand promotion and healthcare technology support. We have partnered with some pharmaceutical manufacturers to supply infusion fluids, which are our major pharmaceutical products sold and distributed during the year.
For the year ended June 30, 2025 and 2024, our revenues amounted to $17.8 million and $18.3 million, respectively, and our gross profit amounted to $2.9 million and $3.7 million during the same periods, respectively.
Key Factors Affecting Our Results of Operations
We believe the most significant factors that affect our business and results of operations include the following:
Our Ability to Expand Our Customer Base
Our results of operations are dependent upon our ability to expand and maintain our customer base. As of June 30, 2025, we had served over 400 customers to fulfill over 55,500 cross-border supply chain solution orders. We will continue to expand our customer base to achieve a sustainable business growth. We aim to attract new customers and maintain our existing customers. We plan to improve the quality and expand the variety of our services to obtain more customers.
During fiscal year 2025, we introduced a new revenue stream through the distribution of pharmaceutical and medical products. Under this model, we purchase products directly from manufacturers, store them in designated warehouses, and deliver them to customers’ warehouses or other specified locations. While this business expansion creates opportunities to reach new customers in the healthcare sector. It also exposes us to additional risks compared with our traditional cross-border logistics services. These risks include heightened regulatory and compliance requirements for the handling and distribution of medical products, increased working capital exposure from holding inventory, and greater operational complexity in maintaining product quality and safety. Successfully expanding our customer base in this new segment will depend on our ability to manage these risks effectively while maintaining high service standards and compliance with applicable regulations.
Our Ability to Control Costs
Our results of operations are affected by our ability to control costs including transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation, which may be subject to factors, including, among other things, fluctuations in wage rates, fuel prices, toll fees, and leasing costs. Effective cost-control measures have a direct impact on our financial condition and results of operations. For example, our cross-border freight carrier and U.S. domestic ground transportation carrier services providers use large quantities of fuel to operate vehicles, and therefore, hence the higher fuel cost incurred by them may causes our higher fee rates cost charged on us by such the service providers. The availability and price of fuel and third-party transportation capacity are subject to political, economic, and market factors that are beyond our control. We also incur a significant amount of costs in relation to transportation and labor. Any unexpected increase in these costs, which is subject to factors beyond our control, could adversely impact our profitability. We have adopted, and expect to adopt, additional cost control measures. However, the measures we have adopted or will adopt in the future may not be as effective as expected. If we are not able to effectively control our costs and adjust the level of fee rates based on operating costs and market conditions, our profitability and cash flow may be adversely affected.
With the introduction of our new pharmaceutical and medical product distribution business in fiscal year 2025, our cost structure has become more complex. Unlike our traditional cross-border logistics services, which are largely variable in nature, the new business requires us to hold inventory, maintain specialized warehouse conditions, and comply with more stringent product handling standards. These factors may increase fixed operating costs, including storage, insurance, and quality control expenses. Consequently, our ability to control costs in this new business segment will depend not only on fuel and labor trends but also on our efficiency in managing inventory turnover and compliance-related expenses.
We have implemented, and expect to continue adopting, additional cost-control measures to mitigate these risks. However, such measures may not always be as effective as anticipated. If we are unable to effectively control our operating costs or adjust our pricing in response to changing market conditions, our profitability and cash flows may be adversely affected.
Our Ability to Provide High-quality Services
Our results of operations depend on our ability to maintain and further enhance our service quality. Together with our network of service providers, we provide integrated cross-border ocean and air freight supply chain solutions and services to our customers. If we or our service providers are unable to provide express delivery services in a timely, reliable, safe and secure manner, our reputation and customer loyalty could be negatively affected. In additional, if our customer service personnel fail to satisfy customer needs or respond effectively to customer complaints, we may lose potential or existing customers and experience a decrease in customer orders, which could have a material adverse effect on our business, financial condition and results of operations.
As we expand into pharmaceutical and medical product distribution, maintaining high-quality service standards becomes even more critical. This new business line involves additional operational requirements, such as temperature-controlled storage, specialized handling, and compliance with healthcare product regulations. Any lapse in these areas could result in regulatory penalties, product spoilage, or loss of customer trust. Compared to our existing logistics operations, the consequences of service failures in this segment could be more severe, given the sensitive nature of medical products and the higher expectations of healthcare customers. Ensuring consistent service quality will therefore require enhanced employee training, strengthened supplier oversight, and continuous monitoring of compliance procedures.
Strategic Acquisitions and Investments
Our results of operations also depend on our ability to pursue strategic acquisitions and investments in expanding our global footprints, diversifying our service offerings, and advancing our technologies. We may selectively pursue mergers, acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. However, we cannot assure you that we will make prudent decisions at all times. Our ability to successfully execute or effectively operate, integrate, leverage and grow these investments or strategic partnerships could impact our results of operations and financial conditions.
In response to governmental directives and recommended safety measures, we have implemented personal safety measures at all of our facilities. However, these measures may not be sufficient to mitigate the risk of infection by COVID-19. If a significant number of our employees, or third parties performing key functions, including our chief executive officer and members of our board of directors, become ill, our business may be further adversely impacted.
The impact of COVID-19 pandemic on us in the future will depend on future developments which are highly unpredictable and beyond our control, such as the frequency, duration and severity of the resurgence of COVID-19 and the emergence of new variants, as well as the measures that may be taken by governments around the world in response to these developments, the impact of the pandemic on the global economy and the measures taken by governments to stimulate the general economy. Therefore, we cannot guarantee that the pandemic will not continue to have an adverse effect on our business and results of operations in the future, which may be material.
We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, service providers and stockholders.
Uncertainty and Impacts on the Recent U.S. Tarriff Policies and Regulations
Our results of operations also depend on our ability to respond with the recent tariff and other restrictions placed on imports. Since February 2025, trade between the U.S. and China has remained under tight restrictions and elevated trade barriers. While some temporary relief measures and exemptions were granted, most U.S. tariffs on Chinese goods remain in place, particularly affecting key sectors such as agriculture, automobiles, industrial materials, and consumer goods. These trade measures have significantly disrupted U.S.-China commerce, reducing exports in certain categories and forcing companies on both sides to adjust supply chains, pricing, and sourcing strategies. Despite some ongoing negotiations, the overall trade environment remains challenging and uncertain, with cross-border business continuing to face heightened costs and operational complexities.
In May 2025, the US and China agreed to a truce to lower import taxes on goods being traded between the two countries for 90 days. Under the terms of the agreement, both countries committed to pausing the imposition of new tariffs and partially rolling back existing duties on select goods, primarily in the technology, agricultural, and consumer product sectors. Although the agreement marks a major de-escalation of the trade war between the two countries, there is still a high degree of uncertainty surrounding U.S. tariff policy, how it will be implemented, and how other countries will react to it. It also remains uncertain whether increased tariffs and trade tensions will create further disruptions and uncertainties to the international trade and lead to a downturn in the global economy.
As of August 29, 2025, the United States has permanently eliminated the $800 de minimis threshold that previously allowed low-value shipments to enter the country duty-free. This change applies to all international shipments, regardless of value, origin, or shipping method. The decision was made to strengthen trade enforcement and address concerns over illicit trade practices. All imports, including those valued under $800, are now subject to applicable duties and taxes. These changes increase the complexity of customs processing, slow clearance times, and reduce the volume of low-value parcels traditionally handled by freight forwarders.
Moreover, increasing trade protectionism may cause an increase in (i) the cost of goods exported from regions globally, particularly from the Asia-Pacific region, (ii) the length of time required to transport goods and (iii) the risks associated with exporting goods. Such increases may further reduce the quantity of goods to be shipped, extend shipping schedules, increase voyage costs, and other associated costs, which could have an adverse impact on our customers’ business, operating results and financial condition and could thereby affect their ability to make timely payments to us and their order quantities. This could have a material adverse effect on our business, operating results, cash flows and financial condition.
We will continue to actively monitor the situation and consider strategic adaptation to maintain service levels and profitability.
Key Components of Results of Operations
Revenues . We generate revenues primarily by providing customized cross-border ocean freight solutions and airfreight solutions to customers that specifically cater to their requirements and needs in transporting goods into the U.S. Under the service agreements with our customers, we offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.
From December 2024, we started to generate revenues from the distribution of pharmaceutical and medical products. We order from the manufacturer, receive and carry the products at a designated warehouse, and deliver the products to the customers’ warehouses or designated locations.
Cost of Revenues . Our cost of revenues from customized cross-border ocean and air freight solutions mainly comprises transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation which includes operating and financing lease-related costs, depreciation expenses of property and equipment and other miscellaneous expenses.
Our cost of revenues from the distribution of pharmaceutical and medical products comprises cost of pharmaceutical products from manufacturers.
Selling Expenses. Our selling expenses primarily include salaries expense, advertising expenses, and traveling expense of sales team engaged in developing potential customers and maintaining customer relationships and transportation cost for selling pharmaceutical products.
General and Administrative Expenses . Our general and administrative expenses primarily include salaries and staff benefits, repair and maintenance expenses, depreciation on property and equipment, amortization on intangible assets, lease expenses warehouses used for administrative purpose and office premises, travelling and entertainment expenses, bank charges, legal and professional fees, insurance expenses and other office expenses.
Other Income . Our other income primarily consists of rental income.
Interest Expenses. Our interest expenses primarily consist of the interest expenses incurred for finance leases, convertible debts, equipment loans, vehicle loans and other loans and interest for late credit card payment.
Income Tax Expenses . Our income tax expenses consist primarily of U.S. federal, state income taxes, replacement tax in the state of Illinois and PRC enterprise income tax.
Results of Operations
The following table summarizes the results of consolidated statements of operations and comprehensive income (loss) for the years ended June 30, 2025 and 2024 in U.S. dollars.
For the years ended June 30,
Amount
revenue
Amount
revenue
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Revenue from cross border freight solutions
Revenue from distribution of pharmaceutical products
Total revenue
Cost of revenue from cross border freight solutions
Cost of revenue from pharmaceutical products
Total cost of revenue
Gross profit from cross border freight solutions
Gross profit from pharmaceutical products
Gross profit
Operating expenses
Selling expenses
General and administrative expenses
Loss from deconsolidation of a subsidiary
Provision of allowance for expected credit loss
Total operating expenses
Loss from operations
Other income (expenses)
Other income, net
Interest expense
Total other (expenses) income, net
Loss before income taxes
Income taxes expense (credit)
Net loss
Year Ended June 30, 2025 Compared to Year Ended June 30, 2024
The following table summarizes our consolidated results of operations and percentages of certain items in relation to total revenues for the years ended June 30, 2025 and 2024, and provides information regarding the dollar and percentage increase or (decrease) during such periods. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.
For the years ended June 30,
Revenues
Amount
total
Revenues
Amount
total
Revenues
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Revenue from cross-border freight solutions
Cross-border ocean freight solutions
Cross-border airfreight solutions
Subtotal
Revenue from distribution of pharmaceutical products
Total revenues
Cost of revenues – cross-border freight solution
Cost of revenues – pharmaceutical products
Total cost of revenues
Gross profit – cross-border freight solution
Gross profit – pharmaceutical products
Total gross profit
Revenues
Our total revenues from cross-border freight solutions decreased by $3.3 million, or 17.9%, from $18.3 million for the year ended June 30, 2024, to $15.0 million for the year ended June 30, 2025. The decrease was primarily driven by a decline in the volume of shipments we handled from both of our cross-border ocean freight solution and airfreight solutions due to the U.S. policy changes: first, the termination of the $800 de minimis rule eliminated duty-free entry for low-value shipments; second, new tariffs—ranging from $50 to $150 or up to 120% of the item value—were imposed on small packages, further discouraging direct-to-consumer exports; and third, expedited customs clearance modes like T86 were discontinued, requiring more complex documentation and longer processing times. Together, these changes have led to a sharp decline in shipment volume and forced freight solution providers to rethink their logistics strategies. Additionally, a slowdown in consumer spending and business investments, caused by the overall economic downturn and high interest and inflation rates, reduced the demand for imported goods, leading to lower container volumes.
Revenues from our cross-border ocean freight solutions decreased by $2.1 million, or 26.6%, from $7.9 million for the year ended June 30, 2024, to $5.8 million for the year ended June 30, 2025. This reduction was primarily due to a decrease in the volume of cross-border ocean freight processed and forwarded, dropping from 5,458 TEU in the year ended June 30, 2024, to 4,609 TEU for the year ended June 30, 2025.
Revenues from our cross-border airfreight solutions decreased by $1.2 million or 11.4%, from $10.4 million for the year ended June 30, 2024, to $9.2 million for the year ended June 30, 2025. The decrease was primarily due to a decrease in the volume of cross-border air freight processed, from approximately 26,160 tons for the year ended June 30, 2024, to approximately 21,511 tons for the year ended June 30, 2025. Some of our customers reduced their orders due to the uncertainty in trade policies and higher tariffs since March 4, 2025, leading to a decline in our revenue.
Starting from December 2024, we established a new revenue stream through the distribution of pharmaceutical products. We procured pharmaceuticals—primarily pharmaceutical solutions—directly from manufacturers and supplied them to distributors, hospitals, and clinics. For the year ended June 30, 2025, our total revenue from pharmaceutical product distribution amounted to $2.8 million. We did not generate any revenue from this segment in the same period of the prior year.
Looking ahead, there remains significant uncertainty regarding future tariff policies, trade regulations between the U.S. and China, and the regulatory environment affecting e-commerce platforms in the U.S. We expect these factors to continue influencing cross-border freight activity in the near term. These policies may significantly reduce the volume of goods imported into the U.S. and moving through e-commerce channels due to increased import costs. Despite these headwinds, we remain committed to exploring new customer opportunities while maintaining strong relationships with our existing clients.
Revenues by Customer Geographic
For the years ended June 30,
Revenues
Amount
total
Revenues
Amount
total
Revenues
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Revenue from cross-border freight solutions
Asia-based customers
U.S.-based customers
Revenue from distribution of pharmaceuticals
Asia-based customers
Total revenues
Revenues from cross-border freight solutions for the Asia-based customers decreased by $1.0 million, or 7.8%, from $13.1 million for the year ended June 30, 2024, to $12.1 million for the year ended June 30, 2025. Revenues from cross-border freight solutions for the U.S.-based customers decreased by $2.2 million, or 43.2%, from $5.2 million for the year ended June 30, 2024 to $3.0 million for the same period in 2025.
The decrease in revenues from Asia-based customers for the year ended June 30, 2025, was due to a decrease in shipments volume from Asia-based customers serving large e-commerce platforms, driven by the discussions on the amendments to the de minimis rule and the imposition of higher tariffs on Chinese goods.
The decrease in revenue from the U.S.-based customers for the year ended June 30, 2025, compared to the same period in 2024, was primarily driven by a decrease in shipment volumes serving e-commerce platforms and concerns over a potential economic downturn and reduced consumer spending power in the U.S., which led to lower shipment volumes.
Our customers for the distribution of pharmaceutical products are located in China, as we specifically target the Chinese market. For the year ended June 30, 2025, our total revenue from pharmaceutical product distribution amounted to $2.8 million. We did not generate any revenue from this segment in the same period of the prior year.
Cost of Revenues
A breakdown of our cost of revenues for the years ended June 30, 2025 and 2024 is as follows:
For years ended June 30,
Amount
Increase
Percentage
Increase
(Decrease)
(Decrease)
Cost of revenue from cross-border freight solutions
Transportation and delivery costs
Warehouse service charges
Custom declaration and terminal charges
Freight arrangement charges
Overhead cost
Subtotal
Cost of revenue from distribution of pharmaceuticals
Cost of goods sold
Total cost of revenue
Our cost of revenues from cross-border freight solutions decreased by $0.9 million, or 6.2%, from $14.6 million for the year ended June 30, 2024, to $13.7 million for the year ended June 30, 2025. The decrease in cost of revenues was mainly due to the combined effects of:
a decrease in transportation and delivery costs, including trucking, drayage, chassis rental, freight, and delivery costs during the year ended June 30, 2025, which was primarily due to a reduction in delivery services provided to customers. Initially, our transportation and delivery costs decreased to a less extent than our revenue due to high inflation in gasoline and labor costs, as well as operational efficiencies associated with airfreights forwarding services that require strict timelines and often prevent full truckload utilization. Subsequently, cost reduction outpaced the decline in revenue as we optimized our delivery scheduling and negotiated lower delivery rates with our major vendors, resulting in lower overall operating costs. Although there was a lag in adjusting transportation costs due to the factors noted above, we ultimately achieved a lower cost level in line with the reduced delivery volume.
a decrease in customs declaration and terminal charges, consisting of customs fees, handling charges, and entry service fees charged by ports and terminals during the year ended June 30, 2025, resulting from a drop in the volume of cross-border freight we handled, particularly airfreight, during the same period;
(iii)
an increase in warehouse service charges, primarily representing labor costs at our regional warehousing and distribution centers during the year ended June 30, 2025, was mainly driven by three factors. First, industry hourly wage rates increased during the year, leading to higher overall staffing expenses. Second, we adjusted our staffing structure by reducing regular part-time positions and increasing the use of contracted labor to improve operational flexibility in response to the lower shipping volume experienced in the current year. Third, more labor was required for unpacking shipments into smaller packages to meet customer requirements, which further contributed to the increase in warehouse labor costs. This more flexible staffing model positions us to adjust more efficiently to future changes in shipment volume, and if volume decreases further, we expect to be able to reduce labor costs more promptly;
an increase in freight arrangement charges, mainly representing scheduling and booking fees for cross-border ocean freight and airfreights from the U.S. to China, during the year ended June 30, 2025, primarily due to higher business volumes for export cross-border airfreights arrangement with higher unit cost, partially offset by a slight decrease in the volume of cross-border ocean arrangements, from the U.S. to China; and
an increase in overhead costs, mainly comprising warehouse and equipment lease expenses, utilities, depreciation of property and equipment, and other direct costs during the year ended June 30, 2025. The warehouse and equipment lease expenses increased significantly, from $1,195,808 for the year ended June 30, 2024, to $2,086,549 for the year ended June 30, 2025. The increase was primarily because we entered into two more warehouse lease agreements during the year ended June 30, 2025, compared to the same period last year. These agreements were negotiated before the significant decline in our revenue. To mitigate costs and improve our gross profit margin, we plan to sublease one of the warehouses in Chicago in the next fiscal year.
Our cost of revenues from the distribution of pharmaceuticals was $1.2 million for the year ended June 30, 2025. We did not generate any revenue from this segment in the same period of the prior year.
Gross Profit
Our overall gross profit was $2.9 million for the year ended June 30, 2025, compared to $3.7 million in the same period of the prior year.
Our gross margin for cross-border freight solutions was 8.8% for the year ended June 30, 2025, compared to 20.3% for the year ended June 30, 2024. The significant decline in gross margin was primarily attributable to (i) a disproportionate decrease in our revenue from the airfreight and ocean freight solution compared to the decrease in our cost of revenue, such as transportation and delivery costs, customs declaration and terminal charges, and (ii) increased overhead costs allocated, as discussed above.
Our gross margin for the distribution of pharmaceutical was 56.1% for the year ended June 30, 2025. This comparatively high margin was primarily due to favorable purchase discounts offered by our suppliers, who extended these incentives to support the establishment of a long-term partnership as we entered this market as a new customer. Excluding the favorable purchase discounts of $489,625, the gross margin for pharmaceutical distribution would be approximately 38.4% for the current year. This is a new business segment in the current year and therefore no gross margin was reported in the same period of the prior year.
Selling Expenses
Our selling expenses amounted to $0.4 million for the year ended June 30, 2025, compared to a nominal amount for the same period in 2024. The increase was primarily driven by the salaries for our sales team and the advertising expense amounted to $138,000, both of which were incurred in connection with the launch of our new pharmaceutical distribution service during the year.
General and Administrative Expenses
Our general and administrative expenses increased by $3.3 million, or 79.1%, from $4.1 million for the year ended June 30, 2024, to $7.4 million for the year ended June 30, 2025. These expenses represented 41.7% and 22.6% of our total revenues for the years ended June 30, 2025 and 2024, respectively. The increase was primarily attributed to higher salary and employee benefit expenses and professional fees incurred in connection with operating as a listed company. Additionally, the launch of our new pharmaceutical distribution segment in the second quarter of the fiscal year ended June 30, 2025 contributed to the rise in operating costs.
Our salaries and employee benefits expenses increased by $1.2 million, or 41.6%, from $2.7 million for the year ended June 30, 2024, to $3.9 million for the year ended June 30, 2025. Our salaries and employee benefits expenses represented 52.3% and 66.1% of our total general and administrative expenses for the years ended June 30, 2025 and 2024, respectively. The increase was mainly due to the salary expenses associated with two new subsidiaries supporting operations in the new business segment beginning in the second quarter of the fiscal year in China. For our salaries and employee benefits expenses, (i) our payroll expenses increased by $1.0 million, or 43.2% from $2.3 million for the year ended June 30, 2024, to $3.3 million for the year ended June 30, 2025, and (ii) our employee benefit expenses, which mainly consist of 401(k) company contribution in U.S., employee defined contribution plan in China, meal allowance and health insurance expenses, increased by $0.1 million, or 32.1%, from $0.4 million for the year ended June 30, 2024, to $0.5 million for the year ended June 30, 2025, representing 7.3% and 9.9% of our total general and administrative expenses for the years ended June 30, 2025 and 2024, respectively. The increase was mainly due to rising employee health insurance premiums.
Our professional fees increased by $1.0 million, or 263.4%, from $0.4 million for the year ended June 30, 2024, to $1.4 million for the year ended June 30, 2025. Our professional fee represented 18.7% and 9.2% of our total general and administrative expenses for the years ended June 30, 2025 and 2024, respectively. The increase was primarily due to audit fees, legal fees, consulting expenses, investor-related expenses and financial reporting service fees for the year ended June 30, 2025. For the year ended June 30, 2024, most expenses directly related to offering that were not included in professional fees, as they were accounted for as deferred initial public offering assets.
Other Income, net
Our other income, net, increased by $0.1 million, or 23.0%, from $0.3 million for the year ended June 30, 2024, to $0.4 million for the year ended June 30, 2025. The increase was primarily due to renting out part of our warehouse space to our related party, Weship, for an additional five months and renting out part of our two warehouses to our related party, Intermodal, during the year ended June 30, 2025.
Interest Expenses
Our interest expenses increased by $0.3 million, or 271.5%, from $0.1 million for the year ended June 30, 2024, to $0.4 million for the year ended June 30, 2025. The increase in interest expense was mainly due to late credit card payments and interest expense in connection with the convertible note issued during the year ended June 30, 2025.
Loss Before Income Taxes
We had a net loss before income taxes of $4.9 million and $0.3 million for the years ended June 30, 2025 and 2024, respectively. We were in a loss position before income taxes for the year ended June 30, 2025, primarily attributable to the net effects of: (i) the decrease in gross profit, (ii) the rise in operating expenses, and (iii) the increase in interest expense for the year ended June 30, 2025 as mentioned above.
Income Tax Expense
We had income tax expenses of $0.3 million for the years ended June 30, 2025, and an income tax credit for the year ended June 30, 2024. A current income tax provision of $0.2 million was recognized for a subsidiary with net assessable income while no current income tax provision was recognized for subsidiaries in net operating loss for the year ended June 30, 2025.
In the prior fiscal year, the Company recognized deferred tax assets (DTAs) related to its net operating loss carryforwards, based on management’s assessment of future taxable income. However, during the current fiscal year ended June 30, 2025, the Company reassessed its ability to realize these DTAs and determined that it was no longer more likely than not that sufficient future taxable income would be available to utilize the deferred tax benefits. As a result, the Company recorded a full valuation allowance against its DTAs and did not recognize any deferred tax assets. This change in assessment led to the recognition of a deferred income tax expense of $89,581 in the current year. We recognized a recovery of deferred income tax credit of $13,357 due to amortization of intangible assets, resulting in a net income tax expense of $301,877 for the year ended June 30, 2025.
We recognized a current income tax provision of $46,996 for the fiscal year ended June 30, 2024, due to net assessable income, and a deferred income tax credit of $186,485 due to temporary differences recognized and a deferred income tax expense of $72,152 due to the change from an S Corporation to a C Corporation upon the completion of our reorganization on September 23, 2023.
Net loss
As a result of the foregoing, we had a net loss of $5.2 million and of $0.2 million for the years ended June 30, 2025 and 2024, respectively.
Liquidity and Capital Resources
As of June 30, 2025, we had a cash balance of $5.0 million. Our current assets were $10.3 million, and our current liabilities were $9.7 million, resulting in a current ratio of 1.06:1 and positive working capital of $0.6 million. Total stockholders’ equity as of June 30, 2025 was $2.8 million.
As of June 30, 2025 and June 30, 2024, we had accounts receivable net of allowance of $3.3 million and $2.8 million, respectively. We periodically review our accounts receivable and allowance level to ensure our methodology for determining allowances is reasonable and to accrue additional allowances if necessary. For accounts receivable as of June 30, 2025 and June 30, 2024, we provided a credit loss allowance of $87,728 and $54,066, respectively.
In assessing our liquidity, we monitor and analyze our cash on hand, our ability to generate sufficient revenues sources in the future, and our operating and capital expenditure commitments. Historically, we have funded our working capital needs primarily through operations, issuances of convertible debts, private placements, loans, initial public offerings and working capital loans from stockholders. Our working capital requirements are influenced by the efficiency of our operations, the volume and dollar value of our revenue contracts, the progress in the execution of customer contracts, and the timing of accounts receivable collections.
Cash Flows
The following table sets forth summary of our cash flows for the periods indicated:
For the years ended
June 30,
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase in cash and cash equivalent
Cash, beginning of the year
Cash, end of the year
Operating Activities
Net cash used in operating activities was $2,655,006 in the fiscal year ended June 30, 2025, which included a net loss of $5,246,136, adjusted for non-cash items of $2,601,253 and changes in working capital deficits of $10,123. The non-cash items primarily included $2,042,946 straight line lease expense of operating leases, $198,527 depreciation included in G&A and cost of revenue, $32,681 depreciation of right-of-use finance assets, $138,994 amortization of discount and bond issuance cost, $53,427 amortization of intangible assets, $39,804 interest expense on convertible debts, $28,120 interest income from a third party loan, $33,432 from provision of allowance for expected credit loss and a decrease of $68,022 from deferred tax asset due to recognition of valuation allowance. The adjustments for changes in working capital mainly included an increase of $856,634 in accounts receivable from third parties due to an increase of revenues near period end, an increase in inventory of $96,534, an increase of $141,687 in right of return asset, a decrease of $162,485 in accounts payable from related parties, an increase of $241,567 in prepayment and other receivable and a payment of $1,540,032 for operating lease liabilities, partially offset by an increase of $1,332,359 in accounts payable from third parties, a decrease of $376,728 in accounts receivable from related parties, an increase of $233,078 in tax payable, and an increase of $1,072,789 in accrued liabilities and other payables.
Net cash used in operating activities was $53,640 in the fiscal year ended June 30, 2024, which included a net loss of $228,277, adjusted for non-cash items of $1,168,010 and changes in working capital of negative $993,373. The non-cash items primarily included $1,005,686 non-cash operating lease expense, $144,637 depreciation, $30,712 depreciation of right-of-use finance assets and $28,157 from provision of allowance for expected credit loss, offset by an increase of $114,333 from deferred tax credit. The adjustments for changes in working capital mainly included an increase of $722,522 and $732,769 in accounts receivable — third parties and related parties, respectively, due to significant increase of revenues in the fiscal year ended June 30, 2024, and an increase of $846,992 in operating lease liabilities, partially offset by an increase of $468,284 in accrued liabilities and other payables due to unpaid IPO related expense, a decrease of $328,820 in other receivable — related parties because of settlement of rental income, an increase of $699,644 in accounts payable — third parties and an increase of $46,996 in tax payable.
The 2,601,366 increase in cash used in operating activities for the fiscal year ended June 30, 2025, compared to the prior year, was primarily due to an increase in net loss of $5,017,859 compared to the same period in the prior year, partly offset by a decrease of $983,250 in cash outflow from working capital due to the timing of vendor, client, and related parties payment.
Investing Activities
Net cash used in investing activities was $688,261 and $78,799 for fiscal years ended June 30, 2025 and 2024, respectively. Net cash used in investing activities for the year ended June 30, 2025, was primarily attributable to net cash outflow of $276,356 related to intangible assets through acquisition of 100% equity interest in Hupan Pharmaceutica. This amount comprises a total cash payment of $552,721, partially offset by $276,365 in cash acquired as part of assets acquisition. In addition, we provided a loan of $277,741 to two related parties, purchased property and equipment of $49,816 and conducted office renovation of $50,740 for our subsidiaries in Mainland China, and conducted warehouse renovation of $50,348 for our subsidiaries in U.S.
On August 4, 2024, we reduced our unpaid registered capital contribution in our investee company in China, namely ABL Wuhan, and concurrently, the third-party shareholders increased their registered capital contribution accordingly. Following this change, the third-party shareholders owned 80% of equity interest and we owned 20% of equity interest in ABL Wuhan. Consequently, ABL Wuhan ceased to be the Company’s subsidiary after August 4, 2024. Therefore, we had cash outflow of $48,893 upon deconsolidation of a subsidiary and payment for registered capital of $29,906 during the year ended June 30, 2024.
Financing Activities
Net cash provided by financing activities was $8,166,465 for the fiscal year ended June 30, 2025, compared to net cash provided by financing activities of $78,755 for the same period in prior year. The increase in net cash provided by financing activities was mainly due to the net proceeds of $5,351,581 from the offering, net proceeds of $2,999,700 from an offering of private placement, net proceeds of $1,170,513 from issuance of convertible debts, proceeds from loan borrowing of $1,017,919 and proceeds from a related-party loan of $124,176, partially offset by repayment of $805,345 to shareholders, advance to related parties of $715,309 and loans repayment of $533,440 during the fiscal year ended June 30, 2025. During the fiscal year ended June 30, 2024, the Company did not engage in any financing activities such as the issuance of convertible debentures, private placements, or initial public offerings. No proceeds were raised through equity or debt instruments,
Capital Expenditure
Our capital expenditures are incurred primarily in connection with the purchase of fixed assets, including machinery and equipment, furniture and fixtures, leasehold improvement and vehicles. Our capital expenditures amounted to $150,904 and $nil for the fiscal years ended June 30, 2025 and 2024, respectively.
We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We intend to fund our future capital expenditures with our existing cash balance, proceeds of loans and issuance of convertible debts and private placement offering.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, costs and expenses, and any related disclosures. Actual results could materially differ from those estimates. Critical accounting policy is both material to the presentation of financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on financial condition or results of operations. Accounting estimates and assumptions may become critical when they are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.
Critical accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting estimate were made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. The management of the Company believes the following critical accounting estimate is the most significantly affected by judgments and assumptions used in the preparation of our consolidated financial statements:
Common Stock Warrants Instruments
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company determined, upon further review of the warrant agreement and the convertible debt agreement, that the common stock warrants are qualified for equity accounting treatment. The fair value of equity-classified warrants is estimated as of the date of issuance using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model includes various assumptions, including the fair market value of our common stock, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control.
Refer to Notes 2 to the consolidated financial statements included in this report for further discussion of our significant accounting policies and the effect on our consolidated financial statements.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued, see Note 2 - Summary Of Significant Accounting Policies in the note of financial statement
