Workflow
Armlogi Holding Corp.(BTOC) - 2024 Q4 - Annual Report

PART I Business Armlogi provides warehousing and logistics for cross-border e-commerce, with FY2024 revenue of $167.0 million and 96% from PRC customers Overview Armlogi offers comprehensive logistics with nine U.S. warehouses, achieving $167.0 million revenue in FY2024, though net income declined - The company operates nine warehouses across the U.S. with an aggregate gross floor area of approximately 2,765,667 square feet, providing comprehensive logistics services to 105 active customers as of June 30, 202411 Key Financial Performance (Fiscal Years 2023-2024) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Total Revenue | $167.0 million | $135.0 million | | Net Income | $7.4 million | $13.9 million | | Revenue from PRC-based customers | 96% | 96% | Our Competitive Strengths Competitive strengths include ISO 9001 certified services, high inventory accuracy, reasonable fees, proprietary OMS, and experienced management - The company's operations achieved an average of 99.72% inventory accuracy during the fiscal year ended June 30, 2024, and its services meet ISO 9001 quality management standards1314 - Leverages its proprietary Armlogi Order Management System (OMS) built on Amazon Web Services, which enhances efficiency, reduces operating costs, and minimizes human error1618 - Offers reasonable service and delivery fees by leveraging large shipping volumes to secure discounts from third-party logistics providers like FedEx and UPS15 Our Growth Strategies Growth strategies involve expanding customer base, enhancing service offerings, investing in supply chain technology, and pursuing strategic acquisitions - Plans to expand its customer base from China to Southeast Asia (Vietnam, Thailand, Indonesia, Philippines) and Mexico, and increase its U.S. warehouse footprint in states like California, Georgia, and Florida20 - Aims to enhance supply chain efficiency by expanding services, including refining its international ocean freight services launched in January 2023, with an estimated cost of $3 to $4 million over the next two years21 - Intends to invest further in supply chain technologies, focusing on AI, data analytics, and smart systems for automated forecasting and inventory management22 - Will actively seek and pursue strategic and financially attractive acquisitions to expand its supply-chain-related business and achieve synergies23 Our Business Model The business model provides integrated warehousing and logistics, with revenue primarily from transportation, warehousing, and other services Revenue Sources and Service Fees | Service Category | Description | Typical Fee Range | | :--- | :--- | :--- | | Transportation Services | Reselling transportation services from third-party carriers | $5 to $75 per service | | Warehousing Services | Warehouse management, inventory, and storage | $3 to $50 per service | | Other Services | Primarily customs brokerage services | $20 to $200 per service | Our Customers Armlogi serves primarily PRC-based cross-border e-commerce merchants, with 96% revenue from overseas and significant customer concentration - The active customer base grew from 83 in FY2023 to 105 in FY2024. Overseas customers, primarily from the PRC, accounted for 96% of revenue in both fiscal years30 Top Customer Revenue Concentration | Customer | FY 2024 Revenue % | FY 2023 Revenue % | | :--- | :--- | :--- | | Aukey International Ltd. | 11.7% | 22.5% | | Western Post (HK) Ltd. | 11.7% | N/A | | Goldensee Ltd. | 10.9% | N/A | | Union Grand Imp. & Exp. Co., Ltd. | 10.0% | 14.5% | Our Suppliers Key suppliers include warehouse landlords and third-party logistics providers, with FedEx representing a significant portion of total purchases - FedEx is a critical supplier, accounting for a majority of the company's total purchases32 FedEx Purchase Concentration | Fiscal Year | Percentage of Total Purchases | | :--- | :--- | | 2024 | 50% | | 2023 | 62% | Services and Operational Flow The operational flow provides end-to-end logistics, from international freight and customs to warehouse management and final delivery via its OMS platform - The company launched international ocean freight services in January 2023 to offer a more comprehensive one-stop solution for its customers36 - A wholly-owned subsidiary, Andtech Customs Broker, provides licensed U.S. customs brokerage services, assisting with documentation, duties, and compliance38 - Order fulfillment is managed through the Armlogi OMS, which integrates with customer ERP systems to process orders, coordinate with warehouses, and provide tracking information from third-party carriers to end consumers4546 Employees As of June 30, 2024, Armlogi employed 200 full-time staff, primarily in warehousing, and maintains good employee relations Full-Time Employees by Department (as of June 30, 2024) | Department | Number of Employees | | :--- | :--- | | Warehousing and Logistics | 155 | | Operations | 17 | | Customer Services | 21 | | Technology | 3 | | Accounting | 4 | | Total | 200 | Governmental Regulations Operations are subject to various U.S. governmental regulations from agencies like FMC, CBP, OSHA, and DOT, with all required licenses obtained - The company is licensed by the FMC as an ocean transportation intermediary (OTI) and by the CBP as a customs broker60 - Operations must comply with OSHA workplace safety standards and DOT regulations for transportation of goods60 Risk Factors The company faces economic, political, operational, legal, and trading risks, including U.S.-China trade dependence, customer concentration, and internal control weaknesses Economic, Political, and Market Risks Business is highly vulnerable to U.S.-China trade relations, intense competition, supply chain disruptions, and macroeconomic factors - The company's financial performance is heavily dependent on PRC-based customers, who generated approximately 96% of revenue in both fiscal 2024 and 2023, making it vulnerable to U.S.-China trade conflicts and tariffs697376 - The business faces risks from global supply chain disruptions, such as port congestion and container shortages, which can reduce demand for its services and increase operating costs79 - Potential PRC government controls on currency remittance could impact the ability of Chinese customers to pay for services, adversely affecting the company's revenue and financial condition8687 Operational Risks Operational risks include customer and supplier concentration, reliance on third-party carriers, cybersecurity threats, and challenges in managing rapid growth Customer and Supplier Concentration Risk | Concentration Type | Details (FY 2024) | | :--- | :--- | | Customer | Top 4 customers accounted for 44.3% of total revenue | | Supplier | FedEx accounted for 50% of total purchases | - The company relies on third-party carriers for all transportation and distribution, making it vulnerable to service disruptions, equipment shortages, or cost increases from these providers100101 - Cybersecurity incidents could disrupt business operations and result in the loss of critical information, as the company relies heavily on its Armlogi OMS technology platform112113 - The company's historical growth rates may not be sustainable, as net income decreased significantly in FY2024 despite revenue growth, and operating expenses are expected to continue increasing131132 Legal, Regulatory, and Compliance Risks The company faces risks from complex U.S. regulatory compliance, potential third-party non-compliance, and intellectual property infringement claims - The business is subject to a complex regulatory environment in the U.S. warehousing and logistics industry, and failure to comply with laws from bodies like the FMC, CBP, and OSHA could adversely affect operations133134 - The company faces risks related to protecting its intellectual property (trademark, domain names, software) and potential claims from third parties alleging infringement of their IP rights140141 Trading Risks Trading risks include stock volatility, material weaknesses in internal controls, and reduced disclosure requirements as an emerging growth and controlled company - Material weaknesses in internal controls over financial reporting have been identified, specifically a lack of formal policies and procedures for risk assessment and the internal control environment154155 - The company is a "controlled company" as its largest stockholder, Mr. Aidy Chou, holds a majority of the voting power, allowing it to be exempt from certain Nasdaq corporate governance requirements170171 - As an "emerging growth company," the company is subject to reduced public company reporting requirements, which may make its common stock less attractive to some investors172173 Unresolved Staff Comments The company reports no unresolved staff comments - None181 Cybersecurity The company maintains a comprehensive cybersecurity risk management program overseen by the Board, with no material incidents reported - The cybersecurity program involves risk identification, assessments, mitigation through layered security controls (firewalls, encryption, MFA), and continuous monitoring184185186 - The Board of Directors provides oversight for cybersecurity risk, while management is responsible for the daily execution and supervision of the program188189 Properties The company leases all nine warehouses and executive offices across four states, totaling 2,765,667 square feet, deemed adequate for current needs - The company's principal executive offices and a large warehouse are leased in Walnut, CA, with a total area of approximately 350,000 square feet192 - The company leases a total of nine warehouses across four states: five in California, one in Georgia, one in Texas, and two in New Jersey192193194 Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect - As of the report date, the company is not involved in any material legal proceedings196 Mine Safety Disclosures This item is not applicable to the company's business - Not applicable197 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "BTOC", with 41.6 million shares outstanding, and completed its IPO in May 2024, raising $5.2 million - The company's common stock trades on the Nasdaq Global Market under the symbol "BTOC"198 - As of September 26, 2024, there were 41,634,000 shares of common stock outstanding199 - The company completed its IPO in May 2024, selling 1,600,000 shares at $5.00 per share, resulting in net proceeds of approximately $5.2 million after expenses202205 Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations FY2024 revenue grew 23.6% to $167.0 million, but net income decreased 46.7% to $7.4 million due to higher costs of sales and reduced gross margin Results of Operations FY2024 revenue increased 23.6% to $167.0 million, but gross profit and net income declined significantly due to a 36.2% surge in costs of sales Financial Performance Summary (FY 2023 vs. FY 2024) | Metric | FY 2024 | FY 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $167.0M | $135.0M | +23.6% | | Costs of Sales | $148.9M | $109.3M | +36.2% | | Gross Profit | $18.1M | $25.7M | -29.6% | | Gross Margin | 10.8% | 19.1% | -8.3pp | | Net Income | $7.4M | $13.9M | -46.7% | | Basic EPS | $0.19 | $0.35 | -45.7% | Revenue by Service (FY 2023 vs. FY 2024) | Service | FY 2024 Revenue | FY 2023 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Transportation services | $115.3M | $97.1M | +18.8% | | Warehousing services | $51.5M | $37.3M | +38.1% | | Other services | $0.15M | $0.67M | -77.4% | - The decrease in gross profit margin was primarily due to expansion into a new warehouse and temporary operational disruptions, which led to significant increases in rental expenses (+106%), salary and benefits (+68%), and temporary labor expenses (+51%) that outpaced the 38.1% growth in warehousing revenue223 Liquidity and Capital Resources Cash increased to $10.0 million by June 2024, driven by IPO financing, despite a significant decrease in operating cash flow and increased investing activities Summary of Cash Flows (FY 2023 vs. FY 2024) | Cash Flow Activity | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $3.0 million | $11.8 million | | Net cash used in investing activities | ($7.4 million) | ($4.3 million) | | Net cash from (used in) financing activities | $7.8 million | ($3.2 million) | | Net increase in cash | $3.4 million | $4.3 million | - The sharp decrease in operating cash flow was mainly due to lower net income and negative changes in working capital, including increased accounts receivable and decreased accounts payable232233234 - Financing activities provided a net inflow of $7.8 million, primarily from $7.5 million collected from the IPO238 Commitments and Contractual Obligations Primary contractual obligations are operating and finance leases, totaling $162.5 million in future minimum payments as of June 30, 2024 Total Lease Liabilities as of June 30, 2024 | Lease Type | Total Lease Liabilities | | :--- | :--- | | Operating Leases | $117,342,538 | | Finance Leases | $325,308 | | Total | $117,667,846 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Armlogi is exempt from providing quantitative and qualitative disclosures about market risk - The company is not required to provide this information as it qualifies as a smaller reporting company250 Financial Statements and Supplementary Data This section presents the audited consolidated financial statements, including the auditor's report, balance sheets, statements of operations, equity, cash flows, and accompanying notes Report of Independent Registered Public Accounting Firm The independent auditor, ZH CPA, LLC, issued an unqualified opinion on the consolidated financial statements for the two-year period ended June 30, 2024 - The auditor expressed an unqualified opinion on the company's consolidated financial statements for the fiscal years ended June 30, 2024 and 2023254 Consolidated Financial Statements Consolidated financial statements show total assets grew to $167.0 million, liabilities increased, and net income declined despite revenue growth Consolidated Balance Sheet Highlights (as of June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Assets | $167.0M | $88.6M | | Total Liabilities | $127.8M | $63.2M | | Total Stockholders' Equity | $39.2M | $25.3M | Consolidated Statement of Operations Highlights (Year Ended June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $167.0M | $135.0M | | Gross Profit | $18.1M | $25.7M | | Net Income | $7.4M | $13.9M | Notes to Consolidated Financial Statements Notes detail accounting policies, revenue disaggregation, lease obligations, significant customer and supplier concentrations, and IPO proceeds - The company's five largest customers accounted for 53.0% of total revenue in FY2024, and its top five suppliers accounted for 60% of total purchases277 - The company closed its IPO on May 15, 2024, with net proceeds of approximately $5.2 million after underwriting discounts and expenses349 - Significant related party transactions exist, primarily involving leases for five warehouses from DNA Motor Inc., a company owned by a former officer of a subsidiary358 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None367 Controls and Procedures Management concluded disclosure controls were ineffective as of June 30, 2024, with no auditor attestation on internal controls due to new public company status - Management concluded that the company's disclosure controls and procedures were not effective as of the end of the fiscal year369 - As a newly public company, this annual report does not include a report of management's assessment regarding internal control over financial reporting370 Other Information The company reports no other information - None372 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not Applicable373 PART III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's 2024 Proxy Statement Executive Compensation Information for this item is incorporated by reference from the company's 2024 Proxy Statement Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's 2024 Proxy Statement Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's 2024 Proxy Statement Principal Accounting Fees and Services Information for this item is incorporated by reference from the company's 2024 Proxy Statement PART IV Exhibit and Financial Statement Schedules This section lists financial statements filed under Item 8 and all exhibits, including corporate governance documents and material contracts Form 10-K Summary The company reports no Form 10-K summary - None385