Lakeside Holding Limited (LSH) 10-Q2025 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            .

Commission File No. 001-42140

Lakeside Holding Limited

(Exact name of registrant as specified in its charter)

1475 Thorndale Avenue, Suite A

Itasca, Illinois 60143

(Address of principal executive offices) (Zip Code)

(224) 446-9048 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes   ☒ No

As of the date of this report, the Registrant had 7,500,000 shares of common stock outstanding.

Lakeside Holding Limited

FORM 10-Q

For the Quarterly Period Ended September 30, 2024

INDEX

EXPLANATORY NOTE

As used in this Annual Report on Form 10-Q, unless otherwise indicated or the context otherwise requires, references to “Lakeside,” “the Company,” “we,” “us,” and “our” refer to Lakeside Holding Limited together with its consolidated subsidiaries.  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain statements related to future results, or states our intentions, beliefs, and expectations or predictions for the future, all of which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent management’s expectations or forecasts of future events. Forward-looking statements are typically identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “project,” “intend,” “plan,” “probably,” “potential,” “looking forward,” “continue,” and other similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will,” and “would.” You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Forward-looking statements in this Form 10-Q may include, for example, statements concerning:

Any or all of our forward-looking statements may turn out to be inaccurate, and there are no guarantees about our performance. The factors identified above are not exhaustive. We operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, readers should not place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We are under no (and expressly disclaim any) obligation to update or alter any forward-looking statement that we may make from time to time, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LAKESIDE HOLDING LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LAKESIDE HOLDING LIMITED
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LAKESIDE HOLDING LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LAKESIDE HOLDING LIMITED
CONDENSSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION

Lakeside Holding Limited (the “Company”), is a holding company established on August 28, 2023 under the laws of the State of Nevada. The Company, acting through its subsidiary, is primarily engaged in providing customized cross-border ocean freight solutions and airfreight solutions. On July 1, 2024, the Company closed its initial public offering (“IPO”) of 1,500,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $6.75 million from the offering (Note 11). In connection with the offering, the Company’s common shares began trading on the Nasdaq Capital Market under the trading symbol “LSH.”

As of September 30, 2024, the Company’s subsidiaries are as follows:

Reorganization

A reorganization of the legal structure was completed on September 23, 2023 (“The Reorganization”). The Reorganization involved the incorporation of Lakeside Holding Limited and the transfer the shares of American Bear Logistics Corp (“ABL Chicago”) to the Company.

Prior to the Reorganization, Mr. Henry Liu, the Chairman of the Board and Chief Executive Officer (“CEO”), and Mr. Shuai Li, the President and Chief Operating Officer (“COO”), each owned 50% equity interest of the ABL Chicago (collectively, the “Controlling Group”). On September 23, 2023, the Controlling Group transferred their 100% equity interest in ABL Chicago to the Company for a consideration of $1,000. Upon this Reorganization, the Company ultimately owns 100% equity interest of ABL Chicago.

As part of the series of reorganization transactions to be completed before the offering, a 120-for-1 share split was conducted by the Company on March 29, 2024. After the share split, the issued share capital of the Company consists of $600 divided into 6,000,000 common shares, par value of $0.0001 each.

Before and after the Reorganization, the Company, together with its subsidiaries, is effectively controlled by the same Controlling Group, and therefore the Reorganization is considered as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.

On July 1, 2024, the Company closed its IPO of 1,500,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $6.75 million from the offering. The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and expenses, were approximately $5.79 million (Note 11). As at July 1, 2024, 7,500,000 shares of common stock are issued and outstanding. As of the date of this report, the Controlling Group collectively holds 76.0% equity interest of the Company through H&L Logistics International LLC which holds 36.0% equity interest of the Company, and Jiushen Transport LLC, which holds 40.0% equity interest of the Company.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The condensed consolidated financial statements include the accounts of Lakeside Holding Limited and its wholly owned subsidiaries (collectively the “Company”). In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the use of management estimates. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Use of estimates and assumptions

In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the condensed consolidated financial statements. Significant accounting estimates required to be made by management include allowance for credit losses, the percentage of performance obligation completed at the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis and its estimates on historical experience, current and expected future conditions and various other assumptions that management believes are reasonable under the circumstances based on the information available to management at the time these estimates and assumptions are made. Actual results and outcomes may differ significantly from these estimates and assumptions.

Cash and cash equivalents

Cash and cash equivalents consist of unrestricted balances held with banks and deposits at banks or other financial institutions, which are available for withdrawal or use and have original maturities of three months or less. The Company maintains most of its bank accounts in the United States, which are insured by Federal Deposit Insurance Corporation (“FDIC”). The Company has one bank account in the PRC. Cash balances in bank accounts in PRC are not insured.

Accounts receivable, net

Accounts receivables are carried at the original invoiced amount less an estimated allowance for expected credit losses based on the probability of future collection. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The Company grant credit to customers, without collateral, under normal payment terms. The Company uses a loss rate method to estimate the allowance for credit losses. For those past due balances over one year and other higher risk receivables identified by the Company are reviewed individually for collectability. The Company evaluates the expected credit loss of accounts receivable based on customer financial condition and historical collection information adjusted for current market economic conditions and forecasts of future economic performance when appropriate. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected. As of September 30, 2024 and June 30, 2024, the Company recorded the allowance of credit loss of $66,903 and $54,066, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Investment in Other entity

The Company assesses its investment in ABL Wuhan and determines that no significant influence over investee existed, as defined in ASC 323-10-15-6, and therefore accounts for the investment using the cost method of accounting. Under the cost method of accounting, the investment is measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. The investment in other entity that does not report net asset value is subject to qualitative assessment for indicators of impairments.

On August 4, 2023, ABL Wuhan ceased to be the Company’s subsidiary and became the Company’s long-term investment. As of September 30, 2024 and June 30, 2024, the Company’s investment in ABL Wuhan amounted to $15,741 and no impairment charges was recorded.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in other income or expenses in the condensed consolidated statements of income (loss) and other comprehensive income (loss).

Impairment of long-lived asset

Long-lived assets, including plant, property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. The Company reviews the impairment of its right-of-use assets consistent with the approach applied for its other long-lived assets. No impairment charge was recognized for the three months ended September 30, 2024 and 2023, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Accounts payable

The account payables are derived from logistic services and forwarding service providers. The balances arise from logistics services provider are usually settled within 7 to 30 days.

Deferred offering costs

Pursuant to ASC 340-10-S99-1, incremental offering costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related to the registration preparation, audit fees, SEC filing and print related costs and exchange listing costs. The deferred offering costs are offset against additional paid-in capital upon receipts of the capital raised at IPO closing date.

Leases

The Company evaluates the contracts it entered into to determine whether such contracts contain leases at inception. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.

Operating Leases

A lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lease as an operation lease. Operating leases are included in the line items right-of-use (ROU) asset, lease liabilities, current, and lease liabilities, non-current in the consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. The Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The Company measures ROU assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.

For leases with lease term less than one year (short-term leases), the Company has elected not to recognize a lease liability or ROU asset on its consolidated balance sheet. Instead, it recognizes the lease payments as expenses on a straight-line basis over the lease term. Short-term lease costs are immaterial to its consolidated statements of operations and cash flows.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Finance leases

Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation of right-of-use finance asset” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense”. Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases. If the Company is reasonably certain to exercise the option to purchase the underlying asset at the end of lease term, the finance lease ROU assets are amortized to the end of useful life of the assets on a straight-line basis.

Related parties

The Company adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Fair value of financial instruments

ASC 820, “Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

The carrying value of cash and cash equivalent, accounts receivable from third parties and related parties, amount due from related parties, due to shareholders, other receivables, contract assets, accounts payable, other payables, dividend payable and accrued expenses and other current liabilities approximate fair value due to their short-term nature. For lease liabilities and loans payable, their carrying value approximate the fair value at the year-end, as the interest rates used to discount the host contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2024 and June 30, 2024.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue recognition

The Company adopted ASC Topic 606 “Revenue from Contracts with Customers” and all subsequent ASUs that modified ASC 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

Step 1: Identify the contract (s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Company generates revenue from providing cross-border ocean and airfreight solutions. No practical expedients were used when adoption ASC606. Revenue recognition policies are as follow:

Revenue from cross-border freights solutions

The Company provides comprehensive services in the United States for customers to transport goods from overseas to the United States and from the United States to overseas. Operating under service contracts, for goods entering the United States, after the goods arrive at a U.S. seaports or airports, the Company offers customs clearance, container unloading, storage, unpacking, packing, and transportation services to the locations specified by the customers. For customers shipping goods overseas, the Company provides cargo space arrangements, storage, packing, export customs clearance, and arranges transportation to seaports or airports for loading.

The transaction price is determined based on the range of services provided and the volume of goods. The Company considers these comprehensive services as one performance obligation since these promises are not distinct within the context of the contract, and the bundle of integrated services represents a combined output. This performance obligation is satisfied over time as customers receive the benefits of these services during the process of transporting goods from one location to another.

For goods entering the United States, the Company determines that the performance period for revenue recognition is between the pickup date and the date of completing delivery. For customers shipping goods overseas with cargo space booking service, the Company determines that the performance period for revenue recognition is between the container or cargo space confirmed date and the date of arrival at destination. For customers shipping goods overseas without cargo space booking service, the Company determines that the performance period for revenue recognition is between pickup date and the date when the goods are departed from airport or port. The performance period may be estimated if the date of completing delivery or the departure date or arrival date has not occurred by the reporting date. Determining the performance period and the progress of the transportation as of the reporting date requires management’s estimation and judgement, which may impact the timing of revenue recognition.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue recognition (cont.)

Principal and agent considerations

In the Company’s transportation business, the Company utilizes independent contractors and third-party carriers and related party carriers in the performances of some transportation services as and when needed. U.S. GAAP requires us to evaluate, using a control model, whether the Company itself promises to provide services to the customers (as a principal) or to arrange for services to be provided by another party (as an agent). Based on the Company’s evaluation using a control model, the Company determined that in all of its major business activities, it serves as a principal rather than an agent within their revenue arrangements. Revenue and the associated purchased transportation costs are both reported on a gross basis within the condensed consolidated statements of income (loss) and comprehensive income (loss).

Disaggregation of revenues

The Company disaggregates its revenue from types of services providing and the customer geographic of its customers, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors.

The Company’s disaggregation of revenues for three months ended September 30, 2024 and 2023 is disclosed as below:

By service type

By customer geographic location

Contract assets

Contract assets represent estimated amounts for which the Company has the right to consideration for the services provided while a delivery is still in-transit and has not yet invoiced the customer. Upon completion of the performance obligations, which can vary in duration based upon the method of transport and billing the customer, these amounts become classified within accounts receivable.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Cost of revenues

Cost of revenue primarily consists of the transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation, which includes operating and financing lease-related costs, the depreciation expenses of property and equipment and others miscellaneous items.

General and administrative expenses

General and administrative expenses primarily include salaries and staff benefits, repair and maintenance expense, depreciation on property and equipment, lease expenses, travelling and entertainment, bank charges, legal and professional fees, insurance expenses and other office expenses.

401(k) benefit plan

401(k) benefit plan covers substantially all employees and allows voluntary employee contributions up to the annually adjusted Inland Revenue Service (“IRS”) dollar limit. These voluntary contributions are matched equal to 100% of the first 3% of the employee’s compensation contributed and 50% of contributions exceeding 3% of eligible compensation, not to exceed 5% of the total eligible compensation. The employees’ voluntary contributions and the Company’s matching contributions are 100% vested immediately. The Company adopted the 401(k) benefit plan from April 2022. The expense related to matching employees’ contributions was $8,982 and $6,596 for the three months ended September 30, 2024 and 2023, respectively.

Rental income

The Company subleased portion of its offices area, warehouse and parking lots to third parties and related parties. The Company recognizes rental income over the sublease period. For the three months ended September 30, 2024 and 2023, the Company recognized rental income amounted to $101,067 and $50,383, respectively.

Income taxes

Before the Reorganization, the Company has elected to be taxed as an S Corporation for federal and state income tax purposes. As an S Corporation, the Company is not subject to federal income tax and state tax in Illinois. However, Illinois allows subchapter S corporations to elect to pay the Pass-through Entity (PTE) tax at entity level for tax years ending on or after December 31, 2021 and beginning prior to January 1, 2026. The PTE tax rate is equal to 4.95% of the taxpayer’s net income for the taxation year. The S corporation making the election is liable for paying the PTE tax, and the shareholders will receive credit for the amount of PTE tax credit paid but shall be liable to pay any remaining tax based on their share of the pass-through entity’s income and credits. Illinois also taxes 1.5% replacement tax on S corporation’s net taxable income and franchise tax based on the corporation’s paid-in-capital for the 12 months prior to the annual report filing date. The franchise tax is not applicable for the Company. After the Reorganization, the Company is subjected to U.S. federal income tax at 21% and the 7.0% state tax and the 2.5% replacement tax in the state of Illinois.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Income taxes (cont.)

The Company’s PRC subsidiary is governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

The Company accounts for uncertain tax positions in accordance with FASB ASC Topic No. 740, Accounting for Uncertainty in Income Taxes. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of September 30, 2024 and June 30, 2024, the Company did not have a liability for unrecognized tax benefits. It is the Company’s policy to includes penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company’s historical tax years will remain open for examination by the local authorities until the statute of limitations has passed.

Basic and diluted earnings (loss) per share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Foreign currency transactions

Our reporting currency is the U.S. dollar. The functional currency of our operations, except for Lakeside Sichuan, is the U.S. dollar. The functional currency of Lakeside Sichuan is the RMB. The assets, liabilities, revenues, and expenses of Lakeside Sichuan are remeasured in accordance with ASC 830. For the period ended September 30, 2024, assets and liabilities of Lakeside Sichuan are translated into U.S. dollars based upon exchange rates prevailing at the end of each period. Revenues and expenses of Lakeside Sichuan are translated at average exchange rates during the reporting period. The resulting translation adjustment is included in accumulated other comprehensive loss.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Foreign currency transactions (cont.)

The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:

Commitments and contingencies

In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingency liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

Segment reporting

The Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company operates and manages its business as a single segment. As the Company’s long-lived assets are substantially all located in the United States and substantially all the Company’s revenues are derived from within the United States.

Concentrations and risks

a. Concentration of credit risk

The Company estimates credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable, contract assets, other receivable and amounts due from related parties. The Company has designed their credit policies with an objective to minimize their exposure to credit risk.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Concentrations and risks (cont.)

a. Concentration of credit risk (cont.)

The maximum exposure of such assets to credit risk is their carrying amounts at the balance sheet dates. The Company maintains majority of the bank accounts at financial institutions in the United States, where there is $250,000 standard deposit insurance coverage limit per depositor, per FDIC-insured bank and per ownership category. As of September 30, 2024 and June 30, 2024, one bank balance exceeded the insured limited by $750,024 and $nil, respectively. To limit the exposure to credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in the United States.

The Company has adopted a credit policy of dealing with creditworthy counterparties to mitigate the credit risk from defaults. The management team conducts credit evaluations of its customers, and generally does not require collateral or other security from them. The Company establishes an accounting policy to provide for allowance for credit loss based on the individual customer’s financial condition, credit history, and the future economic conditions. Due from related parties’ balances are monitored on an ongoing basis with the result that the Company’s exposure to impairment is not significant. As of September 30, 2024 and June 30, 2024, none of the Company’s due from related parties are impaired.

b. Foreign exchange risk

Our subsidiary in PRC has functional currency in RMB. The value of the Chinese Yuan against the U.S. dollar is affected by the changes in China and United States economic conditions. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Also, by considering the volume of its business, the impact of foreign exchange risk is limited.

c. Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Our exposure to interest rate risk primarily relates to the interest rates from our lessors and our private lenders. The shareholder loans bear no interest. We have not been exposed to material risks due to the fact that our leasing obligations’ interest rates and private loan’s interest are fixed at commence date of the leases and loans and we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.

d. Liquidity risk

Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. The Company monitors and analyze its cash flow position, its ability to generate sufficient revenue sources in the future and its operating and capital expenditure commitments. The Company is historically funded the working capital needs primarily from operations, loans, as well as shareholder advances to the Company. The Company will use the capital from its offering closed in July 2024 to fund the further working capital needs.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Recent accounting pronouncements

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.

In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. Management is currently evaluating the provisions of this ASU and expect to adopt them for the year ending June 30, 2025.

In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited consolidated balance sheets, statements of income (loss) and comprehensive income (loss) and statements of cash flows.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:

Approximately $1.5 million or 65.3% of the accounts receivable balance has been collected as of the report date.

The movement of allowance for credit loss for the three months ended September 30, 2024 and the year ended June 30, 2024 is as follows:

The Company recorded addition of allowance for credit loss of $12,837 and $ 52,122 for the three months ended September 30, 2024 and 2023, respectively.

NOTE 4 — PROPERTY AND EQUIPMENT, NET

Property, plant and equipment, net consists of the following:

Depreciation expense recorded in general and administrative expense was $17,995 and $17,995 for the three months ended September 30, 2024 and 2023, respectively. Depreciation expense recorded in cost of revenue was $18,164 and $18,165 for the three months ended September 30, 2024 and 2023, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 — LEASES

The Company has multiple lease agreements for warehouses, warehouse machinery and equipment and offices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of September 30, 2024 and June 30, 2024, balance of lease liabilities was $4,538,474 and $3,693,211, respectively. The Company recognized additional operating lease liabilities of $845,263 as result of entering into two new operating lease agreements for the three months ended September 30, 2024. The ROU asset was recognized at the discount rate of 10.25% for one lease with a lease term of 1.6 years in the U.S. and 4.42% for another lease with a lease term of 2 years in China, resulting in a total of $1,244,140 on the commencement date.

As of September 30, 2024, the Company did not recognize any additional finance lease liabilities.

Total operating lease expenses on offices, warehouses, and warehouse equipment for the three months ended September 30, 2024 and 2023 were $466,723 and $ 219,571, respectively.

Total finance lease expenses on warehouse machinery and equipment for the three months ended September 30, 2024 and 2023 were $8,016 and $7,663, respectively. Depreciation of finance lease right-of-use assets were $7,595 and $7,332 for the three months ended September 30, 2024 and 2023, respectively.

The following table includes supplemental cash flow and non-cash information related to leases:

The weighted average remaining lease terms and discount rates for all of operating lease and finance leases is as follows:

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 — LEASES (cont.)

The following is a schedule of maturities of operating and finance lease liabilities as of September 30, 2024:

Operating leases

Financing leases

NOTE 6 — ACCRUED LIABILITIES AND OTHER PAYABLES

Accrued liabilities and other payables comprise the following amounts relating to the operation of the Company

Note (a): The balance mainly consists of accrued interest of $186,630 and $175,019 and accrued professional fee of $130,000 and $260,000 as of September 30, 2024 and June 30, 2024, respectively.

(b): The balance mainly consists of payable related to initial offering cost of $100,000 and $541,819 as of September 30, 2024 and June 30, 2024, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 — LOANS PAYABLE

The Company obtained multiple loans to finance the purchase of vehicles and warehouse machinery and obtained other loans to support its working capital needs.

The loan balance consists of the following:

Equipment loans

On December 7, 2020, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $48,033 at a fixed interest rate of 3.99% per annum with a maturity date of December 1, 2025. The loan balance was $12,920 and $15,427 as of September 30, 2024 and June 30, 2024, respectively.

On March 9, 2021, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $12,700 at a fixed interest rate of 3.99% per annum with a maturity date of July 6, 2025. The loan balance was $2,815 and $3,642 as of September 30, 2024 and June 30, 2024, respectively.

On April 7, 2021, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $12,700 at a fixed interest rate of 3.99% per annum with a maturity date of July 6, 2025. The loan was guaranteed by Mr. Henry Liu, the Chairman of the Board and CEO. The loan balance was $2,815 and $3,642 as of September 30, 2024 and June 30, 2024, respectively.

On June 4, 2021, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $26,800 at a fixed interest rate of 3.79% per annum with a maturity date of June 3, 2025. The loan balance was $5,339 and $7,085 as of September 30, 2024 and June 30, 2024, respectively.

On June 14, 2021, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $20,724 at a fixed interest rate of 6% per annum with a maturity date of August 06, 2024. The loan balance was $nil and $1,252 as of September 30, 2024 and June 30, 2024, respectively.

On July 13, 2021, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $8,465 at a fixed interest rate of 6% per annum with a maturity date of June 30, 2024. The loan balance was $nil and $256 as of September 30, 2024 and June 30, 2024, respectively.

On September 28, 2021, the Company entered into another equipment loan with Toyota Commercial Finance for a principal amount of $23,600 at a fixed interest rate of 3.54% per annum with a maturity date of June 30, 2024. The loan balance was $nil and $690 as of September 30, 2024 and June 30, 2024, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 — LOANS PAYABLE (cont.)

On February 21, 2023, the Company entered into an equipment loan with Toyota Commercial Finance for a principal amount of $29,705 at a fixed interest rate of 7.90% per annum with a maturity date of February 20, 2027. The loan balance was $19,051 and $20,823 as of September 30, 2024 and June 30, 2024, respectively.

On June 10, 2021, the Company entered into an equipment loan with Amur Equipment Finance for a principal amount of $41,239 at a fixed interest rate of 13.92% per annum with a maturity date of June 9, 2026. The loan is personally guaranteed by Henry Liu, the Chairman of the Board and CEO. The loan term was 5 years. The loan balance was $16,764 and $18,972 as of September 30, 2024 and June 30, 2024, respectively.

On September 9, 2021, the Company entered into an equipment loan with Hatachi Capital America Corp. for a principal amount of $28,450 at a fixed interest rate of 9.49% per annum with a maturity date of March 15, 2026. The loan balance was $10,898 and $12,569 as of September 30, 2024 and June 30, 2024, respectively.

The Company made the total principal repayments of $13,755 and $15,824 in connection with the above equipment loans during the three months ended September 30, 2024 and 2023, respectively. Interest expenses for the above-mentioned equipment loans amounted to $1,640 and $2,681 during the three months ended September 30, 2024 and June 30, 2024, respectively.

Vehicle loans

On May 20, 2020, the Company entered into a vehicle loan with BMW Financial Services for a principal amount of $77,844 at a fixed interest rate of 0.9% per annum with a maturity date of June 4, 2025. The loan balance was $11,902 and $15,853 as of September 30, 2024 and June 30, 2024, respectively.

On July 29, 2021, the Company entered into a vehicle loan with AutoNation Honda O’Hare for a principal amount of $41,851 at a fixed interest rate of 1.90% per annum with a maturity date of August 10, 2025. The loan was guaranteed by Mr. Henry Liu, the Chairman of the Board and CEO. The loan balance was $9,875 and $12,540 as of September 30, 2024 and June 30, 2024, respectively. 

On June 3, 2022, the Company entered into a vehicle loan with Tesla, Inc. for a principal amount of $101,050 at a fixed interest rate of 3.24% per annum with a maturity date of June 18, 2027. The loan balance was $57,637 and $62,630 as of September 30, 2024 and June 30, 2024, respectively.

On January 23, 2023, the Company entered into a vehicle loan with Tesla, Inc. for a principal amount of $68,540 at a fixed interest rate of 5.34% per annum with a maturity date of February 9, 2029. The loan balance was $52,634 and $55,259 as of September 30, 2024 and June 30, 2024, respectively.

The Company made the total principal repayments of $14,235 and $13,854 in connection with the above vehicle loans during the three months ended September 30, 2024 and 2023, respectively. Interest expenses for the above-mentioned above vehicle loans amounted to $1,308 and $1,689 during the three months ended September 30, 2024 and June 30, 2024, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 — LOANS PAYABLE (cont.)

Other loans

On October 26, 2022, both parties agreed to extend the loan term to on demand.

On April 10, 2024, the Company entered another loan agreement of $75,000 with same party. The loan is non-interest bearing, for a 6-month period, and matured on September 9, 2024.

The Company made repayment of $50,000 during the three months ended September 30, 2024. Both parties agreed to extend the remaining principal balance of $125,000 payment term to on demand

The Company made the total principal repayments of $265,456 and $122,137 in connection with the above other loans during the three months ended September 30, 2024 and 2023, respectively. Interest expenses for the above-mentioned other loans amounted to $16,515 and $18,084 during the three months ended September 30, 2024 and 2023, respectively.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 — LOANS PAYABLE (cont.)

The repayment schedule for the Company’s loans is as follows:

NOTE 8 — GENERAL AND ADMINISTRATIVE EXPENSES

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 — RELATED PARTY TRANSACTIONS

The relationship of related parties is summarized as follow:

a) Summary of balances with related parties

Due from related parties consist of mainly rent receivables from the following:

The Company has collected approximately $36,215 from Weship as of the report date, and is planning to collect the remaining receivable balance from two related parties by the end of June 2025.

b) Summary of balances payable to related parties

c) Summary of balances receivable from related parties

The Company has collected approximately $0.3 million from the related parties as of the report date.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 — RELATED PARTY TRANSACTIONS (cont.)

d) Summary of related parties’ transactions

During the three months ended September 30, 2024 and 2023, the Company had the following transactions with its related parties — Weship, ABL Wuhan, ABL Shenzhen and Intermodal

e) Due to shareholders

The balance with the shareholders is unsecured, interest free, and due on demand. The Company had balance of due to shareholder Henry Liu of $134,370 and $986,923 and Shuai Li of $3,737 and $31,358 as of September 30, 2024 and June 30, 2024, respectively.

f) Dividend payable to shareholders

No non-taxable dividend was declared to shareholders for the three months ended September 30, 2024. During the year ended June 30, 2023, ABL Chicago declared non-taxable dividend of total $200,000 to its two shareholders from its accumulated retained earnings, of which $101,150 of dividends declared was offset against balances due from shareholders.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 — RELATED PARTY TRANSACTIONS (cont.)

g) Salaries and employee benefits paid to major shareholders

NOTE 10 — TAXES

Corporate Income Taxes

Before the Reorganization, the Company was elected to be taxed as an “S Corporation” under the provisions of the Internal Revenue Code and comparable state income tax law. As an S Corporation, the Company is not subject to Federal income tax and Illinois State tax. Taxable income “pass through” to the personal tax returns of the owners. However, Illinois allows subchapter S corporations to elect to pay the Pass-through Entity (“PTE”) tax at entity level for tax years ending on or after December 31, 2021 and beginning prior to January 1, 2026. The PTE tax rate is equal to 4.95% of the taxpayer’s net income for the taxable year. The S corporation making the election is liable for paying the PTE tax, and the shareholders will receive credit for the amount of PTE tax credit paid but shall be liable to pay any remaining tax based on their share of the pass-through entity’s income and credits. Illinois also taxes 1.5% replacement tax on S corporation’s net taxable income.

The Company terminated its status as a Subchapter S Corporation as of September 23, 2023, in connection with its Reorganization. As a C Corporation, the Company combined statutory income tax rate is 28% in each period, representing a U.S. federal income tax rate of 21.0% and 7% state income tax for Illinois. Also, as a C Corporation, the Company is subjected to Illinois State replacement tax at rate of 2.5% and no PTE tax is applicable.

The Company’s PRC subsidiary, is governed by the income tax laws of the PRC and is subjected to 25% of the preferential tax rate.

In conjunction with the termination of the Subchapter S corporation status, the C Corporation deferred tax assets and liabilities were estimated for future tax consequences attributable to difference between the financial statement carrying amounts of the Company’s existing assets and liabilities and their respective tax bases. The deferred tax assets and liabilities were measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of the change in tax rates resulting from becoming a C Corporation was recognized as a $17,894 increase to the net deferred tax assets to $22,693 and an increase to the provision for income taxes of $17,894 during the three months ended September 30, 2023.

As of September 30, 2024 and June 30, 2024, the Company did not have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the period ended September 30, 2024 and 2023, no amounts were incurred for income tax uncertainties or interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examination by its major taxing authorities for all periods.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 10 — TAXES (cont.)

The provision for income tax for the three months ended September 30, 2024 and 2023 consists of the following:

The following table reconciles the statutory tax rate to the Company’s effective tax the three months ended September 30, 2024 and 2023:

The Company’s deferred tax assets and liabilities consist of the following:

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 11 — STOCKHOLDERS’ EQUITY

Common Stocks

The Company was incorporated under the laws of the State of Nevada on August 28, 2023. In accordance with the Company’s Articles of Incorporation, the Company is authorized to issue 50,000 shares of common stock with par value of $0.0001. 50,000 shares of common stocks of the Company were issued on August 28, 2023.

On October 25, 2023, the Company amended its Articles of Incorporation to increase its number of authorized common stocks from 50,000 shares to 200,000,000 shares.

On March 29, 2024, a 120-for-1 share split was conducted by the Company. After the share split and as of the date of this report, the issued share capital of the Company consists of $600 divided into 6,000,000 common shares, par value of $0.0001 each.

On July 1, 2024, the Company closed its IPO of 1,500,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $6.75 million from the offering. The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and issuance expenses of a total of $1.0 million, were approximately $5.79 million.

As of September 30, 2024 and June 30, 2024, 7,500,000 and 6,000,000 common shares were issued and outstanding, respectively, with par value of $0.0001.

Additional Paid-in Capital

The Company transferred its accumulated retained earnings as of September 23, 2023 from retained earnings to additional paid-in capital as the original owners’ contribution to the capital of the Company upon the Reorganization and the termination of S corporation for ABL Chicago. For the period ended September 30, 2024, the Company closed its IPO and net proceed from offering, deducted by the IPO deferring cost and par value was transferred to additional paid-in capital.

Representative’s Warrants

Pursuant to the Underwriting Agreement, the Company issued to the Representative and its designee warrants (the “Representative’s Warrants”) to purchase 75,000 shares of common stock. The Representative’s Warrants are exercisable at a per share exercise price of $4.50 equal to IPO price and are exercisable at any time and from time to time, in whole or in part, during the period commencing on December 30, 2024 and terminating on June 30, 2029. Neither the Representative’s Warrants nor any of the shares issued upon exercise of the Representative’s Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of six months immediately following the commencement of sales of the offering.

Management determined that these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to their own shares and meet the requirements for equity classification. The warrants were recorded at their fair value on the date of grant as a component of shareholders’ equity. The fair value of these warrants was $159,000, which was considered a direct cost of IPO and included in additional paid-in capital. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying share of $4.00, risk free rate of 4.3%, expected term of five years; exercise price of the warrants of $4.5, volatility of 61%; and expected future dividends of nil.

As of September 30, 2024, 75,000 warrants in connection with IPO funding was outstanding, with an exercise price of $4.5 and remaining life of 4.75 years.

NOTE 12 — EARNINGS PER SHARE

For the three months ended September 30, 2024, the Company has no stock option issued and its warrants are considered to be antidilutive. Thus, no impact on diluted earnings per share. For the three months ended September 30, 2023, the Company has no stock options and warrants issued and no impact on diluted earnings per share.

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 13 — CONCENTRATIONS AND CREDIT RISK

The Company had two and two third-party customers and one and no related-party customer individually generated over 10% of the Company’s total revenue for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and June 30, 2024, the Company had two and one third-party customers and one and no related-party customer individually represented over 10% of account receivables, respectively.

The Company had no and no third-party suppliers and no and one related-party suppliers individually represented over 10% of the Company’s cost of revenue for three months ended September 30, 2024 and 2023, respectively. The Company had no and one third-party supplier and no and one related-party supplier represented over 10% of the Company’s accounts payable as of September 30, 2024 and June 30, 2024, respectively.

NOTE 14 — SEGMENT REPORTING

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.

Management of the Company concludes that it has only one reporting segment. The Company is primarily engaged in the business of providing customized cross-border ocean freights solutions and airfreight solutions.

The Company’s CEO reviews consolidated results when making decisions about allocating resources and assessing performance of the Company, rather than by service types or customer geographic location; hence the Company concluded it has only one reporting segment.

The following table presents sales by service type for the three months ended September 30, 2024 and 2023, respectively:

By service type

The following table presents sales by customer geographic location for the three months ended September 30, 2024 and 2023, respectively:

By customer geographic location

LAKESIDE HOLDING LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 15 — COMMITMENTS AND CONTINGENCIES

Contractual Commitments

As of September 30, 2024, the Company’s contractual obligations consist of the following:

Contingencies

The Company may be involved in certain legal proceedings, claims and disputes arising from the commercial operations, which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity as of September 30, 2024 and June 30, 2024.

NOTE 16 — SUBSEQUENT EVENTS

The Company evaluated all events and transactions that occurred after September 30, 2024 up through the date the Company issued these consolidated financial statements, and unless disclosed below, there are not any material subsequent events that require disclosure in these consolidated financial statements.

Equity Transfer Agreement

On November 5, 2024, Sichuan Hupan Jincheng Enterprise Management Co., Ltd ("Sichuan Hupan"), a wholly owned subsidiary of Lakeside Holding Limited ("Lakeside") and a limited company incorporated in China, primarily in the business of pharmaceutical supply chain, entered into an equity transfer agreement (the "Equity Transfer Agreement") with Hubei Haoyaoshi Zhenghe Pharmacy Chain Co., Ltd and Hubei Huayao Pharmaceutical Co., Ltd to acquire 100% of the equity interests in Hupan Pharmaceutical (Hubei) Co., Ltd ("Hupan Pharmaceutical"), a comprehensive pharmaceutical distribution and supply chain service provider headquartered in Wuhan, China with verticals in brand promotion and healthcare technology support.

Hubei Haoyaoshi Zhenghe Pharmacy Chain Co., Ltd and Hubei Huayao Pharmaceutical Co., Ltd. currently hold 90.0% and 10.0% of the equity interests in Hupan Pharmaceuticals, respectively. Pursuant to the Equity Transfer Agreement, Sichuan Hupan will acquire the entirety of the equity interests that Hubei Haoyaoshi Zhenghe Pharmacy Chain Co., Ltd and Hubei Huayao Pharmaceutical Co., Ltd. hold in Hupan Pharmaceutical, for a total consideration of RMB4.0 million (US$0.6 million), which will be paid in three installments.

The first installment of RMB0.8 million (US$0.12 million) will be made in November 2024. As of this report date, the payment has not been made.

The second installment of RMB2.4 million (US$0.36 million) shall be paid within 7 working days after the day on which the preconditions for equity transfer as set forth in Article 4 in the Equity Transfer Agreement hereof are fulfilled, and the Transferors confirm and promises in writing to the Transferee.

The third installment of RMB0.8 million (US$0.12 million) shall be paid when the transfer is completed that the Parties have gone through all procedures such as company delivery and industrial and commercial registration of changes according to law.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements.

Overview

We are a U.S.-based integrated cross-border supply chain solution provider with a strategic focus on the Asian market including China and South Korea. We primarily provide customized cross-border ocean freight solutions and airfreight solutions in the U.S. that specifically cater to our customers’ requirements and needs in transporting goods into the U.S. We offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.

Founded in Chicago, Illinois in 2018, we are an Asian American-owned business rooted in the U.S. with in-depth understanding of both the U.S. and Asian international trading and logistics service markets. Our customers are typically Asia- and U.S.-based logistics service companies serving large e-commerce platforms, social commerce platforms and manufacturers to sell and transport consumer and industrial goods made in Asia into the U.S. Since inception and as of September 30, 2024, we had served over 300 customers to fulfill over 45,000 cross-border supply chain solution orders.

We have established an extensive collaboration network of service providers, including global freight carriers for our cross-border freight consolidation and forwarding services as well as domestic ground transportation carriers for our U.S. domestic transportation services. Since inception and as of September 30, 2024, we had collaborated with almost all major global ocean and air carriers to forward 32,800 TEU of container loads and 55,100 tons of air cargo. As of September 30, 2024, we had also cooperated with over 200 domestic ground transportation carriers, including almost all major U.S. domestic ground transportation carriers, on a long-term, short-term or order basis, as the case may be.

We operate three massive and hyper-busy regional warehousing and distribution centers in the U.S., in Illinois and Texas. With an aggregate gross feet area of approximately 142,484 square feet and 52 docks, our regional warehousing and distribution centers have an aggregate daily floor load of up to 3,000 cubic meters of freight. In addition to our self-operated regional centers, we maintain close contact with over 150 warehouses and distribution terminals in almost all transportation hubs in the U.S. which we have cooperated in the past to support the warehousing and distributing services of our cross-border freight in case such freight requires storage, fulfilment, transloading, palletizing, packaging or distribution in states other than Illinois and Texas. As of September 30, 2024, we had assisted with the customs clearance, in conjunction with our other service offerings, of cross-border freight of an aggregate assessed value of over $42.6 million.

Leveraging our strong cross-border supply chain service capabilities, extensive service provider network of cross-border freight carriers and U.S. domestic ground transportation carriers, massive and hyper-busy regional warehousing and distribution centers as well as deep understanding of the Asian market, we have been able to build up our brand and reputation and have achieved fast growth since our inception. For the three months ended September 30, 2024 and 2023, our revenues amounted to $4.1 million and $4.1 million, respectively, and our gross profit amounted to $0.5 million and $0.6 million during the same periods, respectively. As of September 30, 2024, we had fulfilled over 45,000 cross-border supply chain solution orders for freight of an aggregate assessed value of $1.0 billion, delivered to thousands of business and residential addresses in approximately 48 U.S. states.

Key Factors Affecting Our Results of Operations

We believe the most significant factors that affect our business and results of operations include the following:

Our Ability to Expand Our Customer Base

Our results of operations are dependent upon our ability to expand and maintain our customer base. Since inception and as of September 30, 2024, we had served over 300 customers to fulfill over 45,000 cross-border supply chain solution orders. We will continue to expand our customer base to achieve a sustainable business growth. We aim to attract new customers and maintain our existing customers. We plan to improve the quality and expand the variety of our services to obtain more customers.

Our Ability to Control Costs

Our results of operations are affected by our ability to control costs including transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation, which may be subject to factors, including, among other things, fluctuations in wage rates, fuel prices, toll fees, and leasing costs. Effective cost-control measures have a direct impact on our financial condition and results of operations. For example, our cross-border freight carrier and U.S. domestic ground transportation carrier services providers use large quantities of fuel to operate vehicles, and therefore, hence the higher fuel cost incurred by them may causes our higher fee rates cost charged on us by such the service providers. The availability and price of fuel and third-party transportation capacity are subject to political, economic, and market factors that are beyond our control. We also incur a significant amount of costs in relation to transportation and labor. Any unexpected increase in these costs, which is subject to factors beyond our control, could adversely impact our profitability. We have adopted, and expect to adopt, additional cost control measures. However, the measures we have adopted or will adopt in the future may not be as effective as expected. If we are not able to effectively control our costs and adjust the level of fee rates based on operating costs and market conditions, our profitability and cash flow may be adversely affected.

Our Ability to Provide High-quality Services

Our results of operations depend on our ability to maintain and further enhance our service quality. Together with our network of service providers, we provide integrated cross-border ocean and air freight supply chain solutions and services to our customers. If we or our service providers are unable to provide express delivery services in a timely, reliable, safe and secure manner, our reputation and customer loyalty could be negatively affected. In additional, if our customer service personnel fail to satisfy customer needs or respond effectively to customer complaints, we may lose potential or existing customers and experience a decrease in customer orders, which could have a material adverse effect on our business, financial condition and results of operations.

Strategic Acquisitions and Investments

Our results of operations also depend on our ability to pursue strategic acquisitions and investments in expanding our global footprints, diversifying our service offerings, and advancing our technologies. We may selectively pursue mergers, acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. However, we cannot assure you that we will make prudent decisions at all times. Our ability to successfully execute or effectively operate, integrate, leverage and grow these investments or strategic partnerships could impact our results of operations and financial conditions.

Impact of COVID-19

The global spread of COVID-19 and the efforts to control it have slowed global economic activity and disrupted, and reduced the efficiency of, normal business activities in much of the world. The pandemic has resulted in authorities around the world implementing numerous unprecedented measures such as travel restrictions, quarantines, shelter in place orders, and factory and office shutdowns. These measures have impacted and will likely continue to impact our workforce and operations, and those of our customers and suppliers.

Delays and congestions at various ports as a result of the COVID-19 restrictions during the pandemic also prolonged the delivery times for certain of our cross-border freight. Additionally, ocean freight carriers have consolidated with the potential for more to occur in the future. COVID-19 has placed significant stress on our global ocean and air freight carriers, U.S. domestic ground transportation carriers as well as other service providers, which may result in reduced carrier capacity or availability, pricing volatility or more limited carrier transportation schedules and other services that we utilize, which could adversely impact our business, financial condition and results of operations.

In response to governmental directives and recommended safety measures, we have implemented personal safety measures at all of our facilities. However, these measures may not be sufficient to mitigate the risk of infection by COVID-19. If a significant number of our employees, or third parties performing key functions, including our chief executive officer and members of our board of directors, become ill, our business may be further adversely impacted.

The impact of COVID-19 pandemic on us in the future will depend on future developments which are highly unpredictable and beyond our control, such as the frequency, duration and severity of the resurgence of COVID-19 and the emergence of new variants, as well as the measures that may be taken by governments around the world in response to these developments, the impact of the pandemic on the global economy and the measures taken by governments to stimulate the general economy. Therefore, we cannot guarantee that the pandemic will not continue to have an adverse effect on our business and results of operations in the future, which may be material.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, service providers and stockholders.

Key Components of Results of Operations

Revenues. We generate revenues primarily by providing customized cross-border ocean freight solutions and airfreight solutions to customers that specifically cater to their requirements and needs in transporting goods into the U.S. Under the service agreements with our customers, we offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.

Cost of Revenues. Our cost of revenues mainly comprises transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation which includes operating and financing lease-related costs, depreciation expenses of property and equipment and other miscellaneous expenses.

General and Administrative Expenses. Our general and administrative expenses primarily include salaries and staff benefits, repair and maintenance expense, depreciation on property and equipment, lease expenses, travelling and entertainment, bank charges, legal and professional fees, insurance expenses and other office expenses.

Other Income. Our other income primarily consists of rental income, if any.

Interest Expenses. Our interest expenses primarily consist of the interest expenses incurred for finance leases, equipment loans, vehicle loans and other loans and interest for late credit card payment.

Income Tax Expenses. Our income tax expenses consist primarily of U.S. federal, state income taxes, replacement tax in the state of Illinois and PRC enterprise income tax.

Results of Operations

For the Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

The following table summarizes the results of condensed consolidated statements of operations and comprehensive income (unaudited) for the three months ended September 30, 2024 and 2023 in U.S. dollars.

The following table summarizes our consolidated results of operations and percentages of certain items in relation to total revenues for the three months ended September 30, 2024 and 2023, and provides information regarding the dollar and percentage increase or (decrease) during such periods. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.

Revenues

Our total revenues decreased by $66,922, or 1.6%, from $4,148,476 for the three months ended September 30, 2023, to $4,081,554 for the three months ended September 30, 2024. The decrease was primarily driven by a decrease in revenues from our cross-border airfreight solutions, partially offset by an increase in revenues from our cross-border ocean freight solutions.

Revenues from our cross-border airfreight solutions decreased by $0.2 million or 8.2%, from $2.4 million in the three months ended September 30, 2023, to $2.2 million in the three months ended September 30, 2024. The decrease was primarily due to a decrease in the volume of cross-border air freight processed, from approximately 7,816 tons for the three months ended September 30, 2023, to approximately 7,273 tons for the three months ended September 30, 2024.

Revenues from our cross-border ocean freight solutions increased by $0.1 million, or 7.8%, from $1.7 million in the three months ended September 30, 2023, to $1.8 million in the three months ended September 30, 2024. This growth was primarily due to an increase in the volume of cross-border ocean freights processed and forwarded, rising from 1,290 TEU in the three months ended September 30, 2023, to 1,430 TEU in the three months ended September 30, 2024.

We anticipate a revenue rebound in the next quarter, driven by increased air freight demand for the upcoming holiday season as online purchases surge. In response to rising customer demand, we have expanded our production capacity and are now equipped to handle a higher volume of purchase orders. Additionally, the continued decline in ocean freight charges is stimulating import and export activities, while the ongoing trend toward online shopping highlights the need for timely and competitively priced deliveries to end consumers.

Revenues by Customer Geographic

Revenues from the Asia-based customers increased by $1.1 million, or 65.8%, from $1.7 million in the three months ended September 30, 2023, to $2.8 million in the three months ended September 30, 2024. Revenues from the U.S.-based customers decreased by $1.2 million, or 48.2%, from $2.5 million in the three months ended September 30, 2023 to $1.3 million in the same period in 2024.

The increase in revenues from Asia-based customers in the three months ended September 30, 2024, was driven by a surge in volume from these customers, particularly those serving large e-commerce platforms. This growth reflects the rising demand for our services, a direct result of the overall expansion of the U.S. e-commerce market.

The decrease in revenue from the U.S.-based customers in the three months ended September 30, 2024, compared to the same period in 2023, was primarily due to our strategic shift toward Asia-based e-commerce customers. Additionally, special projects with larger shipment volumes from U.S. customers were completed in the three months ended September 30, 2023, with no comparable projects in the same period in 2024.

Cost of Revenues

A breakdown of our cost of revenues for the three months ended September 30, 2024 and 2023 is as follows:

Our cost of revenues increased by $0.1 million, or 1.7%, from $3.5 million in the three months ended September 30, 2023, to $3.6 million in the three months ended September 30, 2024. The increase in cost of revenues was mainly due to the combined effects of:

Gross Profit

Our gross profit decreased by $0.1 million, or 19.3%, from $0.6 million in the three months ended September 30, 2023, to $0.5 million in the three months ended September 30, 2024. Our gross margin was 12.8% for the three months ended September 30, 2024, compared to 15.6% for the three months ended September 30, 2023. The decline in gross margin was primarily attributable to (i) reduced revenue from the airfreight solution, and (ii) an increase in our cost of revenue in warehouse services, custom declaration and terminal charges, frights arrange charge and overhead costs allocated, as discussed above.

General and Administrative Expenses

Our general and administrative expenses increased by $1.0 million, or 114.7%, from $0.9 million in the three months ended September 30, 2023, to $1.8 million in the three months ended September 30, 2024. These expenses represented 45.0% and 20.6% of our total revenues for the three months ended September 30, 2024 and 2023, respectively. The increase was primarily attributed to higher salary and employee benefit expenses, professional fee, office expense and traveling, insurance expense and entertainment expense:

Our salaries and employee benefits expenses increased by $0.3 million, or 116.9%, from $0.5 million in the three months ended September 30, 2023, to $0.8 million in the three months ended September 30, 2024. Our salaries and employee benefits expenses represented 50.3% and 66.8% of our total general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to the recruitment of additional sales, customer services, and back-office support personnel to support our business growth. For our salaries and employee benefits expenses, (i) our payroll expenses increased by $0.3 million, or 63.6%, from $0.5 million in the three months ended September 30, 2023, to $0.8 million in the three months ended September 30, 2024, and (ii) our employee benefit expenses, which mainly consist of 401(k) company contribution, meal allowance and health insurance expenses, increased by $0.01 million, or 53.3%, from $0.1 million in the three months ended September 30, 2023, to $0.2 million in the three months ended September 30, 2024, representing 8.9% and 12.5% of our total general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to rising employee health insurance premiums.

Our professional fee increased by $0.3 million, or 1,839.6%, from $17,535 in the three months ended September 30, 2023, to $340,114 in the three months ended September 30, 2024. Our professional fee represented 18.5% and 2.0% of our total general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively. The increase was primarily due to audit fee, legal fee, consulting expense, investor-related expenses and financial reporting service fees for the three months ended September 30, 2024. In the three months ended September 30, 2023, most of the expenses directly related to offering that were not included in professional fees, as they were accounted for as deferred initial public offering assets.

Our office expense represented 9.0% and 8.2% of our total general and administrative expenses for three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to office hardware including monitors and keyboard, printer ink, printer kits and charger purchased and more office supplies consumed due to more staff hired.

Our insurance expense increased by $68,937, or 1,452.6%, from $4,746 in the three months ended September 30, 2023, to $73,683 in the three months ended September 30, 2024. The increase was primarily due to purchasing insurance premiums for our directors and officers, as we became a public company in July 2024.

Our traveling and entertainment expense represented 6.9% and 8.4% of our total general and administrative expenses for three months ended September 30, 2024 and 2023, respectively. The increase was mainly due to higher entertainment and gift expenses related to networking with our business partners.

Other Income, Net

Our other income, net, increased by $62,839, or 133.8%, from $46,949 in the three months ended September 30, 2023, to $109,788 in the three months ended September 30, 2024. The increase was primarily due to renting out part of our office space to our related party, Weship, for an additional two months during the three months ended September 30, 2024.

Interest Expenses

Our interest expenses for the three months ended September 30, 2024, remained relatively stable compared to same period in last year.

Loss Before Income Taxes

We had loss before income taxes of $1.2 million for the three months ended September 30, 2024, compared to loss before income taxes of $0.3 million for the three months ended September 30, 2023. We were in a loss position before income taxes for the three months ended September 30, 2024, primarily attributable to the net effects of: (i) the decrease in gross profit, (ii) the rise in operating expenses; and (iii) the increase in other income for the three months ended September 30, 2024 as mentioned above.

Income Tax Expense

We had income tax expense of $89,581 and income tax recovery of $2,059 in the three months ended September 30, 2024 and 2023, respectively. We did not have current income tax provision in the three months ended September 30, 2024, due to net operating loss, and we recognized a deferred income tax asset of $373,897 due to temporary differences recognized and net operating loss carried forward. We also recognized a valuation allowance of $463,478 to write off our deferred tax asset since we are uncertain that we will be able to utilize the deferred tax asset to offset future taxable income, resulting in a net deferred tax expense of $89,581 in the three months ended September 30, 2024. We did not have current income tax provision in the three months ended September 30, 2023, due to net operating loss, and we recognized a deferred income tax asset of $2,059, due to temporary differences recognized and a deferred income tax expense of $373,897 due to the change from an S Corporation to a C Corporation upon the completion of our reorganization on September 23, 2023. Since our transition to a C Corporation on September 23, 2023, ABL Chicago, our subsidiary in the U.S. is now obligated to pay federal tax at a rate of 21% and Illinois state tax at a rate of 7.5%. This tax obligation was previously exempt for us as an S Corporation.