| Summary of Significant Accounting Policies | 2.
Summary of Significant Accounting Policies A.
Basis of Presentation and Consolidation The
consolidated financial statements and related notes include all the accounts of the Company and its wholly owned subsidiaries. The consolidated
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). All intercompany transactions have been eliminated in consolidation. B.
Use of Estimates The
preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions
that affect the amounts reported and disclosed in the consolidated financial statements and related notes. The most significant estimates
and judgments include the allowance for doubtful accounts, useful life of property, plant and equipment, income taxes and uncertain tax
positions. Actual amounts could differ from those estimates. C.
Functional Currency and Foreign Currency Translation The
functional currency of the Company and its subsidiaries is the U.S. dollar (“US$”). Foreign currency transaction gains and
losses are recognized upon settlement of foreign currency transactions. In addition, for unsettled foreign currency transactions, foreign
currency transaction gains and losses are recognized for changes between the transaction exchange rates and month-end exchange rates.
Foreign currency transaction gains and losses are included in other income (expense), net, in the accompanying consolidated statements
of income and comprehensive income in the period incurred. D.
Certain Risks and Concentration The
Company’s financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily
of cash and cash equivalents. A depositor has up to RMB 500,000 72,000 500,000 500,000 64,000 4,709,000 Major
Customers and Suppliers During
the years ended December 31, 2023 and 2022, three of the Company’s customers accounted for more than 10% of revenue: Schedules
of Concentration of Risk Percentage
2023 2022
Revenue:
Customer A 38.6 % 39.7 %
Customer B 11.0 % 11.3 % As
at December 31, 2023 and 2022, the following customers accounted for more than 10% of the Company’s accounts receivable:
2023 2022
Accounts receivable:
Customer A 7.9 % 22.4 %
Customer B 13.8 % 3.0 %
Customer I 14.7 % - %
Customer J 15.6 % - % The
top three suppliers that individually represented greater than 10% of total cost of revenue of the Company for the years ended December
31, 2023 and 2022 were as follows:
2023 2022
Cost of revenue:
Supplier A 15.7 % 30.7 %
Supplier B 2.7 % 10.4 %
Supplier C 13.4 % 17.4 % As
at December 31, 2023 and 2022, the following suppliers accounted for more than 10% of the Company’s accounts payable:
2023 2022
Accounts payable:
Supplier B 1.7 % 13.1 %
Supplier C 18.7 % 26.3 %
Supplier E 18.5 % 7.9 %
Supplier F 14.1 % - %
Supplier I - % 21.5 %
Supplier J - % 12.0 %
Concentration risk percentage - % 12.0 % E.
Cash Cash
consists of petty cash on hand, and cash held in banks which are highly liquid and are unrestricted as to withdrawal or use. F.
Accounts Receivable and Allowance for Credit Losses Accounts
receivable represent trade receivables from customers. The health of our accounts receivable is continuously monitored using a risk-based
model, taking into consideration both the timeliness and predictability of collections from our customers. We maintain a provision for
estimated credit losses based upon our historical experience with our customers, along with any specific customer collection issues that
we have identified from current financial information and business prospects, as well as any political or economic conditions or other
market factors, including certain assumptions based on reasonable forward-looking information from market sources. Principally based
on these credit risk factors. Individual
receivables written off when there is information indicating that the counterparty is in severe financial difficulty and the amounts
are deemed uncollectible. An accounts receivable written off may still be subject to enforcement activities under our recovery procedures,
taking into account legal advice where appropriate. Any subsequent recoveries made are recognized as income in the Consolidated Statements
of Income and Comprehensive Income. G.
Fair value measurements Fair
value is the price to sell an asset or transfer a liability and therefore represents an exit price in the principal market (or in the
absence of a principal market, the most advantageous market). It represents a market-based measurement that contemplates a hypothetical
transaction between market participants at the measurement date. Depending
on the type of assets, the Company calculates the fair value using the income approach (e.g., based on the present value of estimated
future cash flows), the market approach or a combination of both. The unique characteristics of an asset or liability and the availability
of observable prices affect the number of valuation approaches and/or techniques used in a fair value analysis. The Company measures
fair value using observable and unobservable inputs. The Company gives the highest priority to quoted prices (unadjusted) in active markets
for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The
Company applies the following fair value hierarchy:
Level
1 - Quoted
prices (unadjusted) in active markets for identical assets and liabilities.
Level
2 - Quoted
prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices;
and inputs that are not directly observable but are corroborated by observable market data.
Level
3 - Inputs
that are unobservable. The
Company’s financial instruments include cash, accounts receivable, derivative assets/liabilities, prepayments and other current
assets, due from related parties, accounts payable, taxes payable and accrued expenses and other current liabilities. The carrying amounts
approximate their fair values due to their short maturities as of December 31, 2023 and 2022. The
Company had 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 or non-recurring basis as of December 31, 2023 and 2022. H.
Derivatives The
Company uses derivative financial instruments to manage its exposure to market price fluctuations in future contracts which are classified
as non-designated derivatives. The Company has not applied hedge accounting to these instruments as the hedging relationship is not highly
effective and the change in fair value of these derivatives is recorded within cost of revenue. The Company presents its derivative assets
and derivative liabilities as a separate item on the consolidated balance sheets. The Company does not enter into derivative contracts
for speculative or trading purposes. I.
Property, Plant and Equipment Property
and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated by using
the straight-line method over the estimated useful lives of the assets. Costs of major additions and improvements are capitalized while
expenditures for maintenance and repairs, which do not extend the life of the asset, are expensed. Upon sale or disposition of property
and equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain
or loss is credited or charged on the income statement. Long-lived assets held and used by us (including property and equipment) are
assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Schedule
of Fixed Assets Category
Fixed
Asset Category Useful
lives
Computer
Software 3
Furniture,
Fixtures and Equipment 5
Leasehold
Improvements Lesser
of lease term or life of assets
Motor
Vehicles 5 J.
Impairment of Long-Lived Assets The
Company accounts for impairment of long-lived assets in accordance with the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 360, Property, Plant and Equipment (“ASC 360”). Long-lived assets
consist primarily of property, plant and equipment. In accordance with ASC 360, the Company evaluates the carrying value of long-lived
assets when it determines a triggering event has occurred, or whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. When indicators exist, recoverability of assets is measured by a comparison of the carrying
value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. Examples of
such triggering events include a significant disposal of a portion of such assets and adverse changes in the market involving the business
employing the related assets. If such assets are determined not to be recoverable, the Company performs an analysis of the fair value
of the asset group and will recognize an impairment loss when the fair value is less than the carrying amounts of such assets. The fair
value, based on reasonable and supportable assumptions and projections, requires subjective judgments. Depending on the assumptions and
estimates used, the appraised fair value projected in the evaluation of long-lived assets can vary within a range of outcomes. The Company
considers the likelihood of possible outcomes in determining the best estimate for the fair value of the assets. The Company did not
record any impairment charges for the years ended December 31, 2023 and 2022. Deferred
Offering Costs Deferred
offering costs consists of capitalized underwriting, legal, accounting and other expenses incurred through the balance sheet date that
are directly related the proposed Public Offering and will be charged against the proceeds received upon completion of the offering,
should the offering be unsuccessful, these deferred costs will be charged to operations. During the year ended December 31, 2023, the Company had incurred $ 1.8 1.1 K.
Related Parties Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management and other parties with which the Company may
deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one
of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related
party transactions. L.
Revenue and Cost of Revenue The
Company recognizes revenue in accordance with FASB ASC Topic 606. Based on the requirements of ASC Topic 606, revenue is recognized when
control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects
to be entitled to receive in exchange for those goods or services. The Company is primarily engaged in sales and distribution of marine
fuel. Revenue is recognized when the following 5-step revenue recognition criteria are met:
1) Identify
the contract with a customer
2) Identify
the performance obligations in the contract
3) Determine
the transaction price
4) Allocate
the transaction price to each performance obligation
5) Recognize
revenue when or as the entity satisfies a performance obligation The
Company generally recognizes sales and distribution of marine fuel revenue on a gross basis as the Company has control of the products
or services before they are delivered to the Company’s customers. In drawing this conclusion, the Company considered various factors,
including inventory risk management, latitude in establishing the sales price, discretion in the supplier selection and that the Company
is normally the primary obligor in the Company’s sales arrangements. Revenue
from the sales and distribution of marine fuel is recognized at a point in time when the Company’s customers obtain control of
the marine fuel, which is typically upon delivery of each promised gallon or barrel to an agreed-upon delivery point. Shipping and handling
activities are considered to be fulfillment activities rather than promised services and are not, therefore, considered to be separate
performance obligations. The Company’s sales terms provide no right of return outside of a standard quality policy and returns
are generally and have not been significant. Payment terms are generally set at 30 to 90 days after the delivery of the fuel. See
Note 10 for disaggregation of revenue. Cost
of revenue consists primarily of cost of marine fuel and delivery services necessary in the course of sales and distribution of marine
fuel. The change in fair value of the derivative instruments not designated as hedging instruments is also recorded in cost of revenue. M.
Earnings per Ordinary Share Earnings
per ordinary share is calculated in accordance with ASC 260, Earnings per Share. Basic earnings per ordinary share is computed by dividing
the net income (loss) attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during
the period. Diluted earnings per ordinary share is computed in accordance with the treasury stock method and based on the weighted average
number of ordinary shares plus dilutive ordinary share equivalents. Dilutive ordinary share equivalents are excluded from the computation
of diluted earnings per ordinary share if their effects would be anti-dilutive. The Company has no dilutive ordinary share equivalents. N.
Income Taxes Income
taxes are accounted for in accordance with FASB ASC Topic 740 which utilizes the asset and liability method. Under this method, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and income tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted income 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 a change in
income tax rates is recorded as a component of the provision for income taxes in the period that includes the enactment date. Regular
assessments are made on the likelihood that the Company’s deferred tax assets will be recovered from the Company’s future
taxable income. The Company’s evaluation is based on estimates, assumptions, and includes an analysis of available positive and
negative evidence. Sources of positive evidence include estimates of future taxable income, future reversal of existing taxable temporary
differences, taxable income in carryback years, and available tax planning strategies. Sources of negative evidence include current and
cumulative losses in recent years, losses expected in early future years, any history of operating losses or tax credit carryforwards
expiring unused, and unsettled circumstances that, if unfavorably resolved, would adversely affect future profit levels. The
remaining carrying value of the Company’s net deferred tax asset, after recording the valuation allowance is based on the Company’s
present belief that it is more likely than not that the Company will be able to generate sufficient future taxable income in certain
tax jurisdictions to utilize such net deferred tax asset. The amount of the remaining net deferred tax asset considered recoverable could
be adjusted if the Company’s estimates of future taxable income during the carryforward period change favorably or unfavorably.
To the extent the Company believes that it is more likely than not that some or all of the remaining net deferred tax asset will not
be realized, the Company must establish a valuation allowance against the net deferred tax asset, resulting in additional income tax
expense in the period such determination is made. To the extent a valuation allowance currently exists, the Company will continue to
monitor all positive and negative evidence until the Company believes it is more likely than not that it is no longer necessary, resulting
in an income tax benefit in the period such determination is made. Significant
judgment is required in evaluating the Company’s tax positions, and in determining the Company’s provision for income taxes,
the Company’s deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred
tax asset. O.
Segment Reporting Management,
including the chief operating decision makers, review the Company’s internal reporting in order to assess performance and allocate
resources. The Company is principally engaged in sales and distribution of marine fuel. Information reported to the chief operating decision
maker, for purposes of resources allocation and performance assessment, focuses on the operating results 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. P.
The COVID-19 Pandemic Post-COVID-19
World Economy recovery
● In
2023 and 2024, the global economy continues to gradually recover from the pandemic. According
to the OECD, the global GDP has grown at approximately 2.9% in 2023 and is projected to grow
at 2.7% in 2024 and 3.0% in 2025, with India, Indonesia, China, Saudi Arabia and Turkey being
the countries recording greatest growth in both years.
● While
the COVID-19 pandemic severely impacted international supply chains and logistics networks,
the challenges have also spurred an uptick in inventive approaches within the sector, accompanied
by a surge in funding for digital, paperless technologies, Advances in customs procedures,
port improvements, streamlined trade processes, and the adoption of electronic trading documentation
are poised to expedite operations, decrease expenses, and minimize holdups. These developments
are expected to enhance efficiency, cut down on waste, and yield improved outcomes for nations
and the environment.
● The
shipping sector emerged as one of the primary beneficiaries in the wake of COVID-19. Global
container port throughput witnessed an annual growth of 7.2% in 2021 and a slight uptick
of 0.4% in 2022. In 2023, there was a small year-on-year decline of 0.7%, signaling a mild
rebalancing after the exceptionally high demand of the previous years. The Liner Shipping
Connectivity Index in regions such as Asia, Latin America, the Caribbean, and Oceania soared
to unprecedented levels in 2023, indicating a full restoration of shipping connections and
operations. Moreover, as supply chain disruptions have largely been resolved, freight rates,
including those measured by the Shanghai Containerized Freight Index and the Baltic Dry Index,
along with the average waiting times for container ships at ports, have returned to levels
seen before the pandemic. In specific sectors and countries, China’s post-COVID-19
reopening and heightened industrial activity significantly boosted the demand for commodities
like iron ore and coal. Brazil experienced a marked increase in soybean exports, attributed
to favorable weather and the onset of the export season. Furthermore, the renewal of the
Black Sea Grain Initiative in March 2023 played a pivotal role in advancing grain trade. Q.
Leases The
Company determines if an arrangement is a lease at inception. Determining whether a contract contains a lease includes judgment regarding
whether the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. The
Company accounts leases in accordance with FASB ASC Topic 842, Leases, for the Company’s lease-related assets and liabilities based
on their classification as operating leases or finance leases. For all arrangements as a lessee, the Company has elected an accounting
policy to combine non-lease components with the related-lease components and treat the combined items as a lease for accounting purposes.
The Company measures lease related assets and liabilities based on the present value of lease payments, including in-substance fixed
payments, variable payments that depend on an index or rate measured at the commencement date, and the amount the Company believes is
probable the Company will pay the lessor under residual value guarantees when applicable. The Company discounts lease payments based
on the Company’s estimated incremental borrowing rate at lease commencement (or modification), which is primarily based on the
Company’s estimated credit rating, the lease term at commencement, and the contract currency of the lease arrangement. The Company
has elected to exclude short term leases (leases with an original lease term less than one year) from the measurement of lease-related
assets and liabilities. The
Company tests right-of-use assets in an operating or finance lease at the asset group level (because these assets are long-lived nonfinancial
assets and should be accounted for the same way as other long-lived nonfinancial assets) whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. S.
Recently adopted Accounting Standards During
the year ended December 31, 2023, there have been no accounting standards that, upon adoption, had a material impact on the Company’s
consolidated financial statements. T.
Recently Issued Accounting Standards Disclosure
of Supplier Finance Program Obligations. In September 2022, Accounting Standard Update (“ASU”) 2022-04 was issued to require
the buyer in a supplier finance program to disclose the key terms of the program, outstanding confirmed amounts as of the end of the
period, a roll forward of such amounts during each annual period, and a description of where in the financial statements outstanding
amounts are presented. The amendments do not affect the recognition, measurement or financial statement presentation of supplier finance
program obligations. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within
those fiscal years. Early adoption is permitted. The amendments should be applied retrospectively to each period in which a balance sheet
is presented, except for the roll forward, which should be applied prospectively. The Company does not expect the adoption of this ASU
to have a significant impact on its consolidated financial statements. There are no other recently issued accounting standards not yet
adopted by the Company that, upon adoption, are expected to have a material impact on the Company’s consolidated financial statements. |
