UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedJune 30, 20172023
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to___________ to ___________
Commission file number001-33997001-34024
Sino-Global Shipping America, Ltd.SINGULARITY FUTURE TECHNOLOGY LTD.
(Exact name of registrant as specified in its charter)
Virginia | 11-3588546 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
1044 Northern Boulevard, 98 Cutter Mill Road
Suite 305311
Roslyn,Great Neck, New York 11576-151411021
(Address of principal executive offices) (Zip Code)
(718) 888-1814
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on which | ||||
Common Stock, no par value | SGLY | The Nasdaq Stock Market LLC |
Securities Registered Pursuant to Section 12(g) of the Act:None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.Yes ☐ No ☒
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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒☐ No ☐☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark if disclosurewhether any of delinquent filersthose error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒§240.10D-1(b). ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting fi rm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of voting common stock held by non-affiliates of the registrant as of December 31, 2016,June 30, 2023, the last business day of the registrant’s second fiscal quarter,2023, was approximately $11,404,369.90.$8,661,987.74.
The number of shares of common stock outstanding as of September 25, 20172023 was 10,105,535.17,515,526.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
SINO-GLOBAL SHIPPING AMERICA,SINGULARITY FUTURE TECHNOLOGY LTD.
FORM 10-K
INDEX
i
INTRODUCTION
Unless the context otherwise requires, in this annual report on Form 10-K:10-K (this “Report”):
● | “We,” “us,” “our,” and “our Company” refer to |
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“Sino-China” refers to Sino-Global Shipping Agency Ltd., a Chinese legal |
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“PRC” refers to the People’s Republic of China, excluding Taiwan for the purpose of this |
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“US” or “U.S.” refers to the United States of America; |
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“RMB” or “Renminbi” refers to the legal currency of China, and “$” or “U.S. dollars” refers to the legal currency of the United States. |
Names of certain PRC companies provided in this Form 10-KReport are translated or transliterated from their original PRC legal names. Discrepancies, if any, in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding. On July 7, 2020, the Company effected a l-for-5 reverse stock split of its issued and outstanding shares of common stock. The split did not change the number of authorized shares of common stock or preferred stock, or the par value of common stock or preferred stock. As a result, all the issued and outstanding common stock share amounts included in this report have been retroactively reduced by a factor of five, and all common stock per share amounts have been increased by a factor of five.
ii
SPECIALCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-KReport contains certain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements, including but not limited to statements regarding our projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond our control. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of business risks and uncertainties we face that could cause our actual results to differ materially from those projected or anticipated, including but not limited to the following:
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the Chinese government exerts substantial influence over the manner in which we conduct our business activities in the PRC and may intervene or influence our operations at any time with little advance notice, which could result in a material change in our operations and the value of our common stock |
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● | demand for warehouse, shipping and logistics services; |
● | foreign currency exchange rate fluctuations; |
● | possible disruptions in commercial activities caused by events such as natural disasters, health epidemics, terrorist activity and armed conflict; |
● | our ability to identify and successfully execute cost control initiatives; |
● | the impact of quotas, tariffs or safeguards on our customer’s products; |
● | our ability to attract, retain and motivate qualified management team members and skilled personnel; |
● | relevant governmental policies and regulations relating to our businesses; | |
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Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update thisthe forward-looking information.statements. Nonetheless, the Company reserves the right tomay make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
iii
PART I
Item 1. Business.
Overview
Sino-Global Shipping America, Ltd. (“Sino” or the “Company”),
We are a Virginia corporation,global logistics integrated solution provider that was founded in the United States (the “U.S.”) in 2001. Sino isOn September 18, 2007, the Company merged into a non-asset based global shipping and freight logistics integrated solution provider. Sino provides tailored solutions and value-added servicesnew corporation, Sino-Global Shipping America, Ltd. in Virginia. On January 3, 2022, the Company changed its corporate name to Singularity Future Technology Ltd. to reflect its customers to drive effectiveness and control in related aspects throughoutexpanded operations into the entire shipping and freight logistic chain. Our current service offerings consist of inland transportation management services,digital assets business. Currently, we primarily focus on providing freight logistics services, which mainly include shipping, warehouse services and container trucking services. We suspendedother logistical support to steel companies ..
In 2017, we began exploring new opportunities to expand our shipping agencybusiness and ship management servicesgenerate more revenue. These opportunities ranged from the beginning ofcomplementary businesses to other new service and product initiatives. In the fiscal year 2016, primarily due2022, while we continued to changesprovide our traditional freight logistics business, we expanded our services to include warehousing services provided by our U.S. subsidiary Brilliant Warehouse Service Inc.
We are currently engaged in market condition. We also suspendedproviding freight logistics services including warehouse services, which are operated by our shippingsubsidiaries Trans Pacific Shipping Limited and chartering services primarily as a result of the termination of vessel acquisitionNingbo Saimeinuo Web Technology Ltd. in December 2015.
The Company conducts its business primarily through its wholly-owned subsidiariesChina and Gorgeous Trading Ltd. and Brilliant Warehouse Service Inc in the U.S. (New YorkUnited States. Our range of services include transportation, warehouse, collection, last-mile delivery, drop shipping, customs clearance, and Los Angeles),overseas transit delivery.
As a holding company with no material operations, conduct substantially all of our operations through subsidiaries established in the United States, the People’s Republic of China, (the “PRC” or “China”), includingthe PRC or China and Hong Kong. However, neither the holding company nor any of the Company’s Chinese subsidiaries conduct any operations through contractual arrangements with a variable interest entity based in China. Investors in our common stock should be aware that they may never directly hold equity interests in the PRC operating entities, but rather equity interests solely in Singularity, our Virginia holding company. Furthermore, shareholders may face difficulties enforcing their legal rights under United States securities laws against our directors and officers who are located outside of the United States.
The diagram below shows our corporate structure as of the date of this report.
* | Unless otherwise indicated in the diagram, all the subsidiaries of the Company are wholly owned. |
As of June 30, 2023, the Company’s subsidiaries were as follows:
Name | Background | Ownership | |||
Sino-Global Shipping New York Inc. (“SGS NY”) | ● ● ● | A New York Corporation Incorporated on May 03, 2013 Primarily engaged in freight logistics services | 100% owned by the Company | ||
Sino-Global Shipping HK Ltd. (“SGS HK”) | ● ● ● | A Hong Kong Corporation Incorporated on September 22, 2008 No material operations | 100% owned by the Company | ||
Thor Miner Inc. (“Thor Miner”) | ● ● ● | A Delaware Corporation Incorporated on October 13, 2021 Primarily engaged in sales of crypto mining machines | 51% owned by the Company | ||
Trans Pacific Shipping Ltd. (“Trans Pacific Beijing”) | ● ● ● | A PRC limited liability company Incorporated on November 13, 2007. Primarily engaged in freight logistics services | 100% owned the Company | ||
Trans Pacific Logistic Shanghai Ltd. (“Trans Pacific Shanghai”) | ● ● ● | A PRC limited liability company Incorporated on May 31, 2009 Primarily engaged in freight logistics services | 90% owned by Trans Pacific Beijing | ||
Ningbo Saimeinuo Web Technology Ltd. (“SGS Ningbo”) | ● ● ● | A PRC limited liability company Incorporated on September 11,2017 Primarily engaged in freight logistics services | 100% owned by SGS NY |
Blumargo IT Solution Ltd. (“Blumargo”) | ● ● ● | A New York Corporation Incorporated on December 14, 2020 No material operations | 100% owned by SGS NY | ||
Gorgeous Trading Ltd (“Gorgeous Trading”) | ● ● ● | A Texas Corporation Incorporated on July 01, 2021 Primarily engaged in warehouse related services | 100% owned by SGS NY | ||
Brilliant Warehouse Service Inc. (“Brilliant Warehouse”) | ● ● ● | A Texas Corporation Incorporated on April 19,2021 Primarily engaged in warehouse house related services | 51% owned by SGS NY | ||
Phi Electric Motor In. (“Phi”) | ● ● ● | A New York Corporation Incorporated on August 30, 2021 No operations | 51% owned by SGS NY | ||
SG Shipping &Risk Solution Inc(“SGSR”) | ● ● ● | A New York Corporation Incorporated on September 29, 2021 No material operations | 100% owned by the Company | ||
SG Link LLC (“SG Link”) | ● ● ● | A New York Corporation Incorporated on December 23, 2021 No operations | 100% owned by SG Shipping & Risk Solution Inc on January 25, 2022 |
Our equity structure is a direct holding structure. Within our direct holding structure, the cross-border transfer of funds within our corporate entities is legal and compliant with the laws and regulations of the PRC. After the foreign investors’ funds enter Singularity, the funds can be directly transferred to the PRC operating companies through its subsidiaries. Specifically, Singularity is permitted under the Virginia laws to provide funding to our subsidiaries in the PRC and Hong Kong Australiathrough loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and Canada. Currently,filing requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. As of the date hereof, there have not been any transfers, dividends or distributions made between the holding company, its subsidiaries, and to investors. Furthermore, as of the date hereof, no cash generated from one subsidiary is used to fund another subsidiary’s operations and we do not anticipate any difficulties or limitations on our ability to transfer cash between subsidiaries. We have also not installed any cash management policies that dictate the amount of such funds and how such funds are transferred. For the foreseeable future, we intend to use the earnings for our business operations and as a result, we do not intend to distribute earnings or pay any cash dividends.
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between Mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.
Because a significant portionpart of our operations are located in the PRC through our subsidiaries, we are subject to certain legal and operational risks associated with our operations in China, including changes in the legal, political and economic policies of the Chinese government, the relations between China and the U.S, or Chinese or U.S regulations may materially and adversely affect our business, financial condition and results of operations. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in our operations and the value of our common stock, or could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
We believe that we will not be subject to cybersecurity review with the Cyberspace Administration of China, or the “CAC,”, since we currently do not have over one million users’ personal information and do not anticipate that we will be collecting over one million users’ personal information in the foreseeable future, which we understand might otherwise subject us to the Cybersecurity Review Measures. We do not believe that our subsidiaries are directly subject to these regulatory actions or statements, as we have not implemented any monopolistic behavior and our business does not involve the collection of user data or implicate cybersecurity. As of the date hereof, no relevant laws or regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory Commission, or the CSRC, or any other PRC governmental authorities for future offerings, nor has our Virginia holding company or any of our subsidiaries received any inquiry, notice, warning or sanctions regarding previous offerings from the CSRC or any other PRC governmental authorities. However, on February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and five relevant guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial Measures also provide that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (2) the issuer’s main business activities are conducted in China, or its main place(s) of business are located in China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. In addition, the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of domestic companies through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance with the Overseas Listing Trial Measures. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.
At a press conference held for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies that have already been listed overseas on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC upon occurrences of certain subsequent matters such as follow-on offerings of securities. According to the Overseas Listing Trial Measures and the Press Conference, the existing domestic companies that have completed overseas offering and listing before March 31, 2023, such as us, will not be required to perform filing procedures for the completed overseas securities issuance and listing. However, from the effective date of the regulation, any of our subsequent securities offering in the same overseas market or subsequent securities offering and listing in other overseas markets shall be subject to the filing requirement with the CSRC within three working days after the offering is completed or after the relevant application is submitted to the relevant overseas authorities, respectively. If it is determined that any approval, filing or other administrative procedures from other PRC governmental authorities is required for any future offering or listing, we cannot assure you that we can obtain the required approval or accomplish the required filings or other regulatory procedures in a timely manner, or at all. If we fail to fulfill filing procedure as stipulated by the Trial Measures or offer and list securities in an overseas market in violation of the Trial Measures, the CSRC may order rectification, issue warnings to us, and impose a fine of between RMB1,000,000 and RMB10,000,000. Persons-in-charge and other persons that are directly liable for such failure shall be warned and each imposed a fine from RMB500,000 to RMB5,000,000. Controlling shareholders and actual controlling persons of us that organize or instruct such violations shall be imposed a fine from RMB1,000,000 and RMB10,000,000.
On February 24, 2023, the CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect on March 31, 2023. The Provisions on Confidentiality and Archives Administration requires that, in the process of overseas issuance and listing of securities by domestic entities, the domestic entities, and securities companies and securities service institutions that provide relevant securities service shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions, establish and improve rules on confidentiality and archives administration. Where the domestic entities provide or publicly disclose documents, materials or other items related to the state secrets and government work secrets to the relevant securities companies, securities service institutions, overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments with the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments at the same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state secrets, the materials shall be reported to the relevant secrecy administrative departments for determination. However, there remain uncertainties regarding the further interpretation and implementation of the Provisions on Confidentiality and Archives Administration.
As of the date of this report, our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our PRC subsidiaries. In addition, as of the date of this annual report, we and our PRC subsidiaries are not required to obtain approval or permission from the CSRC or the CAC or any other entity that is required to approve our PRC subsidiaries’ operations or required for us to offer securities to foreign investors under any currently effective PRC laws, regulations, and regulatory rules. If it is determined that we are subject to filing requirements imposed by the CSRC under the Overseas Listing Regulations or approvals from other PRC regulatory authorities or other procedures, including the cybersecurity review under the revised Cybersecurity Review Measures, for our future offshore offerings, it would be uncertain whether we can or how long it will take us to complete such procedures or obtain such approval and any such approval could be rescinded. Any failure to obtain or delay in completing such procedures or obtaining such approval for our offshore offerings, or a rescission of any such approval if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to file with the CSRC or failure to seek approval from other government authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our common stock. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the securities offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our common stock.
Since these statements and regulatory actions by the PRC government are newly published and official guidance and related implementation rules have not been issued, it is uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on an U.S. or other foreign exchange. The Standing Committee of the National People’s Congress, or the SCNPC, or other PRC regulatory authorities may in the future promulgate laws, regulations or implementing rules that requires our company or any of our subsidiaries to obtain regulatory approval from Chinese authorities before future offerings in the U.S. In other words, although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly; our ability to offer, or continue to offer, securities to investors would be potentially hindered and the value of our securities might significantly decline or be worthless, by existing or future laws and regulations relating to its business or industry or by intervene or interruption by PRC governmental authorities, if we or our subsidiaries (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, or (iv) any intervention or interruption by PRC governmental with little advance notice.
Please see “Risk Factors” beginning on page 19 of this annual report for additional information.
Holding Foreign Company Accountable Act
Our common stock may be delisted from the Nasdaq under the Holding Foreign Companies Accountable Act (“HFCAA”), if the PCAOB is unable to adequately inspect audit documentation located in China, or investigate our auditor. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law, and amends the HFCAA and requires the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to Public Company Accounting Oversight Board (“PCAOB”) inspections for two consecutive years instead of three. Our auditor, Audit Alliance LLP, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, is headquartered in Singapore and is registered with the PCAOB, and was not included in the list of PCAOB Identified Firms in the PCAOB Determination Report issued in December 2021. On August 26, 2022, the PCAOB signed the Protocol with the CSRC and the MOF of the People’s Republic of China, governing inspections and investigations of audit firms based in mainland China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control. The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. Therefore, the PCAOB in the future may determine that it is unable to inspect or investigate completely registered public accounting firms in mainland China and Hong Kong. Our auditor’s working papers related to us and our subsidiaries are located in China. If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the Nasdaq. See “Risk Factors - Our common stock may be delisted from the Nasdaq under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment.”
Recent Developments
Since the publication of the Hindenburg Report (as defined below), we have devoted substantial resources and efforts in connection with the investigations by a special committee of our Board of Directors and by U.S. governmental authorities and with respect to the defense of lawsuits and the settlement of lawsuits and claims, which are fully described below. As a result, our business operations have been materially and adversely impacted, including suspension of our business is generateddevelopment in North America. We are currently exploring new business opportunities while continuing to provide freight logistics services, which include shipping and warehouse services.
Special Committee Investigation
On May 5, 2022, an entity named Hindenburg Research issued a report (the “Hindenburg Report”) regarding the Company alleging, among other things, that the Company’s then Chief Executive Officer, Yang Jie, was a fugitive on the run from Chinese authorities for running an alleged $300 million Ponzi scheme that lured in over 20,000 victims. The report also raised questions regarding the clients locatedCompany’s joint venture to produce crypto mining equipment announced in October 2021, as well as a $200 million order purportedly received by the joint venture in January 2022. Further, the report was critical of the Company’s April 2022 announcement of a $250 million partnership with an entity named Golden Mainland Inc. On May 6, 2022, the Board of Directors of the Company (the “Board”) formed a special committee of the Board (the “Special Committee”) to investigate claims of alleged fraud, misrepresentation, and inadequate disclosure related to the Company and certain of its management personnel raised in the Hindenburg Report and other related matters. The Special Committee then retained Blank Rome LLP to serve as independent legal counsel and advise the Committee on the investigation. The Special Committee completed the fact-finding portion of its investigation prior to December 31, 2022. The Special Committee’s preliminary findings corroborated certain of the allegations made in the Hindenburg Report and the investigation resulted in the termination and resignation of certain executive officers and directors of the Company, including but not limited to, the following:
On August 9, 2022, Mr. Yang Jie tendered his resignation from his positions as Chief Executive Officer and director of the Company to the Board, following the Board’s decision on August 8, 2022, which adopted the Special Committee’s recommendation that Mr. Jie be suspended immediately, pending the Special Committee’s further investigation into allegations raised in the Hindenburg Report and other related matters.
On August 16, 2022, attorneys from Blank Rome LLP, counsel for the Special Committee, held a conference call with staff members of the Securities and Exchange Commission (the“SEC”), during which counsel represented that Yang Jie had provided documentation to the SEC that indicated that the charges against him in China had been dropped, but the Special Committee’s investigation raised questions regarding the authenticity of such documents. The Special Committee concluded at that time that Mr. Jie was in fact issued a “Red Notice” in China. In terms of remediating this issue, after being suspended by the Special Committee on August 8, 2022, Mr. Yang Jie resigned from his positions as Chief Executive Officer and as a director of the Company on August 9, 2022.
In December 2022, the Company entered into cancellation agreement and a letter confirming the rescission of the grant of the shares with each of Yang Jie and Ms. Jing Shan, our former Chief Operating Officer, pursuant to which Mr. Jie and Ms. Shan agreed to return 300,000 shares and 100,000 shares of our Common Stock, respectively, to the Company for cancellation at no cost. Such shares were previously issued to each of them for their services as officers of the Company. The shares were cancelled as of March 31, 2023.
On February 10, 2023, in response to two, now-settled, lawsuits filed by private investors, Mr. Jie filed a motion to dismiss the private investors’ suits and provided a copy of a formal legal opinion issued by the Zhonglun W&D Law Firm, PRC. The Zhonglun W&D legal opinion concluded that Mr. Jie was not charged with a crime in China, the investigation and underlying case had indeed been closed, and Mr. Jie was not formally treated as a criminal suspect in the PRC. In order to provide more clarity to the third quarterissues raised, the Company engaged Hebei Mei Dong Law Firm, of Shijiazhuang City, PRC to further investigate the authenticity of the documentation provided by Mr. Jie to the SEC and whether a “Red Notice” had been issued. On June 12, 2023, the Hebei Mei Dong Law Firm issued a report to the Company with respect to these issues. In their report, the Company’s Chinese counsel concluded after conferring with local officials, that the investigation of Mr. Jie conducted by the Baohe District Police Bureau of Hefei City, PRC was completed, that Mr. Jie was never prosecuted and there was no criminal judgment against Mr. Jie as of the date of such report. The Chinese counsel also confirmed that no “Red Notice” was issued for Mr. Jie in the PRC.
On February 23, 2023, the Board approved the dissolution of the Special Committee upon conclusion of the committee’s investigation.
On July 3, 2023, the Company entered into a Settlement and Release Agreement with Mr. Jie which fully resolved his claims against the Company.
Executive Changes
On June 16, 2022, Ms. Tuo Pan, Chief Financial Officer of the Company, without proper authorization by the Board, directed that funds be wired to satisfy an invoice for legal services that were rendered or to be rendered on her behalf. Ms. Pan was suspended by the Board for cause and without pay effective June 20, 2022. On August 31, 2022, Ms. Tuo Pan was terminated for cause as an employee of the Company and its subsidiaries and ceased to receive any salary or benefits from the Company since that date.
On January 9, 2023, the Company entered into an Executive Separation Agreement and General Release (the “Separation Agreement”), with Lei Cao, an employee of the Company and a member of the Board, setting forth the terms and conditions related to the termination of Mr. Cao’s employment with the Company and the termination of the employment agreement dated as of November 1, 2021 as well as cancellation and/or termination of certain other agreements relating to Mr. Cao’s employment with the Company. The Separation Agreement also provided for Mr. Cao’s resignation from the Board, effective as of January 9, 2023.
Pursuant to the Separation Agreement, Mr. Cao submitted a letter of resignation from the Board on January 9, 2023. In addition, he agreed to forfeit and return to the Company the 600,000 shares of Common Stock of the Company granted to him in August 2021 under the terms of the 2014 Equity Incentive Plan of the Company (the “2021 Shares”). Mr. Cao also agreed to cooperate with the Company regarding certain investigations and proceedings and other matters arising out of or related to his relationship with or service to the Company. In consideration, the Company agreed to provide the following benefits to which Mr. Cao was not otherwise entitled: (1) payment of reasonable attorneys’ fees and costs incurred by Mr. Cao through January 9, 2023 associated with Mr. Cao’s personal legal representation in matters relating to Mr. Cao’s tenure with the Company, the investigations and proceedings and the negotiation and drafting of the Separation Agreement; (2) the release of claims in Mr. Cao’s favor contained in the Separation Agreement; and (3) payment of Mr. Cao’s reasonable and necessary legal fees to the extent incurred by Mr. Cao as a result of his cooperation as required by the Company under the terms of the Separation Agreement. Additionally, the Separation Agreement contains mutual general releases and waiver of claims from Mr. Cao and the Company.
On January 17, 2023, Messrs. John Levy and Heng Wang were appointed as non-executive chairman and vice chairman of the Board, respectively.
On February 23, 2023, Mr. Levy resigned as a director and member of the Audit Committee, Compensation Committee and Nominating Committee of the Board, effective immediately. On March 30, 2023, Mr. Wang was appointed as non-executive Chairman of the Board to fill the vacancy created by Mr. Levy’s resignation.
On April 18, 2023, the Company entered into an employment agreement with Mr. Ziyuan Liu and appointed him as the chief executive officer of the Company, effective immediately, with a term of one year.
On May 1, 2023, the Company entered into an employment agreement with Mr. Dianjiang Wang and appointed him as the chief financial officer of the Company, effective immediately, with a term of one year.
On May 1, 2023, pursuant to the bylaws of the Company, our Board elected (i) Mr. Ziyuan Liu as a Class I director to serve until the annual meeting of stockholders for the fiscal year 2017,2022, to fill the vacancy on the Board resulting from the resignation of Mr. Jie, (ii) Mr. Haotian Song as a Class II director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on the Board resulting from the resignation of Mr. Cao, and (iii) Ms. Ling Jiang as a Class III independent director, Chairwoman of the Compensation Committee, a member of the Audit Committee, and a member of the Nominating and Corporate Governance Committee to serve until the annual meeting of stockholders for the fiscal year 2024, to fill the vacancy on the Board resulting from the resignation of Mr. Levy.
On May 2, 2023, the Board elected Mr. Ziyuan Liu as the new chairman of the Board.
On July 3, 2023, Mr. Tieliang Liu resigned as a director the Company established ACH Trucking Center Corp. in New Yorkand a member of the Compensation Committee, the Audit Committee, and the Nominating and Corporate Governance Committee.
On July 10, 2023, Company terminated the employment of its Chief Operating Officer, Jing Shan, with cause. The termination was effective immediately.
On July 31, 2023, the Company elected Mr. Zhongliang Xie as a Class II independent director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on the Board resulting from the resignation of Mr. Tieliang Liu. The Board appointed Mr. Xie to serve as Chair of the Audit Committee, a member of the Compensation Committee and a member of the Nominating and Corporate Governance Committee.
On September 21, 2023, Mr. Heng Wang resigned as a director of the Company and a member of the Compensation Committee, the Audit Committee, and the Nominating and Corporate Governance Committee.
On September 25, 2023, the Company elected Mr. Xu Zhao as a Class I independent director to serve until the annual meeting of stockholders for the fiscal year 2022, to fill the vacancy on the Board resulting from the resignation of Mr. Heng Wang. The Board appointed Mr. Zhao to serve as a member of the Audit Committee, a member of the Compensation Committee and Chair of the Nominating and Corporate Governance Committee.
On September 28, 2023, Ms. Ling Jiang resigned as a director of the Company and a member of the Compensation Committee, the Audit Committee, and the Nominating and Corporate Governance Committee.
Litigation
On October 3, 2021, the Company entered into a Strategic Alliance Agreement with HighSharp (Shenzhen Gaorui) Electronic Technology Co., Ltd. (“HighSharp”) to establish a joint venture with Jetta Global Logisticsfor collaborative engineering, technical development and commercialization of a bitcoin mining machine under the name Thor Miner Inc. The(“Thor Minor”) , granting Thor Miner exclusive rights covering design production, intellectual property, branding, marketing and sales. On October 11, 2021, Thor Miner was formed in Delaware and is 51% owned by the Company owns 51%and 49% owned by HighSharp.
SOS Information Technology New York, Inc. (“SOSNY”), a company incorporated under the laws of ACH Trucking Center Corp.
Company Structure and Function
The Company conducts its business primarily through its wholly-owned subsidiaries in the U.S. (Newstate of New York and Los Angeles), China (including Hong Kong), Australia, and Canada.
The Company’s subsidiary in China, Trans Pacific Shipping Limited (“Trans Pacific Beijing”), a wholly owned foreign enterprise, investedsubsidiary of SOS Ltd. (a NYSE listed holding company, which provides marketing data, technology and solutions to the emergency rescue services in one 90%-owned subsidiary, Trans Pacific Logistics Shanghai Limited (“Trans Pacific Shanghai”. Trans Pacific Beijing and Trans Pacific Shanghai areChina, filed a lawsuit in the New York State Supreme Court on December 9, 2022 against Thor Miner ( together with the Company, referred to collectively as “Trans Pacific”the “Corporate Defendants”), Lei Cao, Yang Jie, John F. Levy, Tieliang Liu, Tuo Pan, Shi Qiu, Jing Shan, and Heng Wang (jointly referred to as the “Individual Defendants”) (collectively, the Individual Defendants and the Corporate Defendants are the “Defendants”). As PRC lawsSOSNY and regulations restrict foreign ownershipThor Miner entered into a Purchase and Sale Agreement dated January 10, 2022 (the “PSA”) for the purchase of local shipping agency service businesses,$200,000,000 in crypto mining rigs, which SOSNY claims was breached by the Defendants.
SOSNY and Defendants entered into a certain settlement agreement and general mutual release with an Effective Date of December 28, 2022 (the “Settlement Agreement”). Pursuant to the Settlement Agreement, Thor Miner agreed to pay $13,000,000 (the “Settlement Payment”) to SOSNY in exchange for SOSNY dismissing the lawsuit with prejudice as to the settling Defendants and without prejudice as to all others. The full Settlement Payment was made in December 2022 and SOSNY dismissed the lawsuit with prejudice against us and the other Defendants on December 28, 2022.
The Company and Thor Miner further covenanted and agreed that if they receive additional funds from HighSharp related to the PSA, they will promptly transfer such funds to SOSNY in an amount not to exceed $40,560,569 (which is the total amount paid by SOSNY pursuant to the PSA less the price of the machines actually received by SOSNY pursuant to the PSA). The Settlement Payment and any payments subsequently received by SOSNY from HighSharp will be deducted from the total amount of $40,560,569 previously paid by, and now due and owing to SOSNY. In further consideration of the Settlement Agreement, Thor Miner provided SOSNY an assignment of all claims it may have against HighSharp or otherwise to the proceeds of the PSA.
On September 23, 2022, Hexin Global Limited and Viner Total Investments Fund filed a lawsuit against the Company provided its shipping agency servicesand other defendants in the PRC through Sino-Global Shipping Agency Ltd. (“Sino-China” or “VIE”United States District Court for the Southern District of New York (the “Hexin lawsuit”),. On December 5, 2022, St. Hudson Group LLC, Imperii Strategies LLC, Isyled Technology Limited, and Hsqynm Family Inc. filed a Chinese legal entity, which holdslawsuit against the licensesCompany and permits necessary to operate local shipping agency servicesother defendants in the PRC. Trans Pacific BeijingUnited States District Court for the Southern District of New York (the “St. Hudson lawsuit,” and Sino-China dotogether with the Hexin lawsuit, the “Investor Actions”). The plaintiffs in the Investor Actions are investors that entered into a securities purchase agreement with the Company in December 2021 as more fully described below. Each of these plaintiffs asserted causes of action for, among other things, violations of the federal securities laws, breach of fiduciary duty, fraudulent inducement, breach of contract, conversion, and unjust enrichment, and seeks monetary damages and specific performance to remove legends from certain securities sold pursuant to the Securities Purchase Agreement. The Hexin lawsuit claimed monetary damages of “at least $6 million,” plus interest, costs, fees, and attorneys’ fees. The St. Hudson lawsuit claimed monetary damages of “at least $4.4 million,” plus interest, costs, fees, and attorneys’ fees.
On October 6, 2022, Jinhe Capital Limited (“Jinhe”) filed a lawsuit against the Company in the United States District Court for the Southern District of New York, asserting causes of actions for, among other things, breach of contract, breach of the covenant of good faith and fair dealing, conversion, quantum meruit, and unjust enrichment, in connection with a financial advisory agreement entered into by and between Jinhe and the Company on November 10, 2021. Jinhe claimed monetary damages of “at least $575,000” and “potentially exceeding $1.8 million,” plus interest, costs, and attorneys’ fees.
On January 10, 2023, the St. Hudson lawsuit was consolidated with the Jinhe lawsuit and Hexin lawsuit and on February 24, 2023, all three consolidated actions were dismissed without prejudice by the court, in furtherance of the parties having reached an agreement in principle to settle their disputes. The Company, Yang Jie, Jing Shan, and the plaintiffs in the three actions entered into a certain settlement agreement and general mutual release with an effective date of March 10, 2023, pursuant to which the Company agreed to pay the plaintiffs $10,525,910.82. The plaintiffs agreed to discharge and forever release the defendants from all claims that were or could have been raised in those actions, as well as dismissal of each of the actions with prejudice. The Company has no role or knowledge as to how the settlement payment will be allocated between and among the plaintiffs. The Company made the settlement payment on March 14, 2023. The plaintiffs agreed to irrevocably forfeit 3,728,807 shares of Common Stock they hold. The cancellation of these shares has been completed. The fair value of the shares was $2,125,420 on March 10, 2023, the settlement amount over the fair value of the cancelled shares was recorded as other expenses in the Company’s consolidated statement of operations.
On December 9, 2022, Piero Crivellaro, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between February 2021 and November 2022, filed a putative class action against the Company and other defendants in the United States District Court for the Eastern District of New York, alleging violations of federal securities laws related to alleged false or misleading disclosures made by the Company in its public filings. The plaintiff seeks unspecified damages, plus interest, costs, fees, and attorneys’ fees. On February 7, 2023, two additional plaintiffs moved to be appointed as the lead class plaintiff in this action; those motions remain under the Court’s consideration. As this action is still in the early stage, the Company cannot predict the outcome.
In addition to the above litigations, the Company is also subject to additional contractual litigations as to which it is unable to estimate the outcome.
Government Investigations
Following a publication of the Hindenburg Report, the Company received subpoenas from the United States Attorney’s Office for the Southern District of New York and the United States Securities and Exchange Commission. The Company is cooperating with these governmental authorities regarding these matters. The Company is not haveable to estimate the outcome or duration of the government investigations.
Nasdaq Listing Deficiencies
On May 24, 2022, the Company received a parent-subsidiary relationship. Trans Pacific Beijingdelinquency notice from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) due to its delay in filing its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. The Company was provided 60 days to submit a plan to regain compliance. On July 25, 2022 and September 14, 2022, the Company submitted its plan to regain compliance and supplementary information related to the plan, respectively (collectively, the “Compliance Plan”). Based on the review of the Compliance Plan as well as telephone conversations with outside counsel to the Company and counsel to the Company’s Special Committee, the Staff has contractual arrangementsdetermined that the Company did not provide a definitive plan evidencing its ability to file the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and the Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (collectively, the “Reports”) within the 180 calendar day period available to the Staff under the Nasdaq Listing Rules.
On November 16, 2022, the Company received an additional staff determination notice from Nasdaq, advising that it had not received the Company’s Form 10-Q for the quarterly period ended September 30, 2022, which served as an additional basis for delisting the Company’s securities and that the Nasdaq Hearings Panel (the “Panel”) will consider the additional deficiency in rendering a determination regarding the Company’s continued listing on The Nasdaq Capital Market. The Company submitted to the Panel a plan to regain compliance with Sino-Chinathe continued listing requirements, including the filing of the Form 10-Q for the quarterly period ended September 30, 2022.
On January 5, 2023, the Company received a deficiency notice from Nasdaq informing the Company that its common stock, no par value, fails to comply with the $1 minimum bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) based upon the closing bid price of the common stock for the 30 consecutive business days prior to the date of the notice from Nasdaq. The Company has been provided an initial compliance period of 180 calendar days, or until July 5, 2023, to regain compliance with the minimum bid price requirement.
On February 21, 2023, the Company received an additional staff determination notice from Nasdaq, advising that it had not received the Company’s Form 10-Q for the quarterly period ended December 31, 2022, which served as an additional basis for delisting the Company’s securities. The notice stated that the Nasdaq Hearings Panel will consider the additional deficiency in rendering a determination regarding the Company’s continued listing on Nasdaq. The Company submitted to the Panel a plan to regain compliance with the continued listing requirements and itswas granted a grace period to file all the delinquent reports, including the filing of the Form 10-Q for the quarterly period ended December 31, 2022, on or before February 28, 2023.
On March 8, 2023, the Company received a notice from Nasdaq stating that the Company no longer complies with Nasdaq’s audit committee requirement under Nasdaq’s Listing Rule 5605 following the resignation of John Levy from the Company’s board of directors and audit committee effective February 23, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing Rule 5605(c)(4), the Company has a cure period to regain compliance (i) until the earlier of the Company’s next annual shareholders’ meeting or February 23, 2024; or (ii) if the next annual shareholders’ meeting is held before August 22, 2023, then the Company must evidence compliance no later than August 22, 2023. The Company has set the record date of September 28, 2023, for an annual meeting of shareholders scheduled to take place on October 13, 2023.
On March 16, 2023, the Company received a formal notification from Nasdaq confirming that enablethe Company had regained compliance with the Nasdaq Listing Rule 5250(c)(1), which requires the Company to substantially control Sino-China. Through Sino-China,timely file all required periodic financial reports with the SEC, and that the matter is now closed.
On July 7, 2023, the Company received an Notice of Noncompliance Letter (the “Letter”) from Nasdaq stating that the Company was ablenot in compliance with Nasdaq Listing Rules due to provide local shipping agency services in all commercial ports inits failure to timely hold an annual meeting of shareholders for the PRC. In lightfiscal year ended June 30, 2022, which is required to be held within twelve months of the Company’s decision not to pursue the local shipping agency business,fiscal year end under Nasdaq Listing Rule 5620(a) and 5810(c)(2)(G). The Letter also states that the Company has suspended its shipping agency services through its VIE45 calendar days to submit a plan to regain compliance and has not undertaken any business through or with Sino-China since June 2014. Nevertheless,if Nasdaq accepts the Plan, it can grant the Company continuesan exception of up to maintain its contractual relationship180 calendar days from the fiscal year end, or until December 27, 2023, to regain compliance. The Company complied with the VIE because Sino-China is oneNasdaq requirement that the Plan be submitted no later than August 21, 2023.
On July 13, 2023, the Company received a notice from Nasdaq stating that the Company no longer complies with Nasdaq’s independent director and audit committee requirements under Nasdaq’s Listing Rule 5605 following the resignation of Mr. Liu from the Company’s board of directors and audit committee effective July 3, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing Rule 5605(c)(4), the Company has a cure period to regain compliance (1) until the earlier of the committee membersCompany’s next annual shareholders’ meeting or July 3, 2024; or (2) if the next annual shareholders’ meeting is held before January 2, 2024, then the Company must evidence compliance no later than January 2, 2024. In response to this notice, on July 31, 2023, the Company elected Mr. Zhongliang Xie as a Class II independent director to serve until the annual meeting of China Association of Shipping Agencies & Non-Vessel-Operating Common Carriers (“CASA”). CASA was approved to form by China Ministry of Communications. Sino-China is also our only entity that is qualified to do shipping agency business in China. We keep the VIE to prepare ourselvesstockholders for the marketfiscal year 2023, to turn around. fill the vacancy on the Board resulting from the resignation of Mr. Liu. The Board appointed Mr. Xie to serve as Chair of the Audit Committee, a member of the Compensation Committee and a member of the Nominating and Corporate Governance Committee.
Currently,
On July 13, 2023, the Company received a notice from Nasdaq stating that the Company failed to regain compliance with respect to the minimum $1 bid price per share requirement under Nasdaq Listing Rules during the 180 calendar days given by Nasdaq for the Company to regain compliance, which ended on July 5, 2023. However, Nasdaq has determined that the Company is eligible for an additional 180 calendar day period, or until January 2, 2024, to regain compliance. Such determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s inland transportation management services are operatedwritten notice of its intention to cure the deficiency during the second compliance period by its subsidiaries ineffecting a reverse stock split, if necessary. The Company intends to regain compliance with Nasdaq’s bid price requirement prior to the PRC (including Hong Kong) andend of the U.S. Our freight logistic services are operated by the Company’s subsidiaries in the PRC, New York and Los Angeles. Our container trucking services are mainly operated by our subsidiaries and joint venture company in the PRC, New York and Los Angeles.
second bid price extension.
Corporate History and Our Business Segments
SinceFrom inception in 2001 and throughto our fiscal year ended June 30, 2013, our sole business was providing shipping agency services. In general, we provided two types of shipping agency services: loading/discharging services and protective agency services, in which we acted as a general agent to provide value added solutions to our customers. For loading/discharging agency services, we received the total payment from our customers in U.S. dollars and paid the port charges on behalf of our customers in RMB. For protective agency services, we charged a fixed amount as agent fee while customers arewere responsible for the payment of port costs and expenses. Under these circumstances, we generally required a portion of a customer’s payment in advance and billed the remaining balance within 30 days after the transaction were completed. We believe the most significant factors that directly or indirectly affected our shipping agency service revenues were:
While we were able to consistently generate net revenues from shipping agency business, this business was not profitable largely due to the rising operating costs associated with doing business in China including the appreciation of RMB against U.S. dollar. In light of consecutive years of operating losses and concerns raised by the U.S. regulators over our VIE structure, the Company decided to reorganize its business structure in fiscal year 2013. Commencing the later part of fiscal year 2013 and continuing in fiscal year 2014, we took various actions to restructure our business with the goal of achieving a certain level of profitability. As a result of these business reorganization efforts, we optimized our cost structure, reduced our dependency on shipping agency business, and shifted our shipping agency operation from our VIE to our wholly-owned subsidiaries in China and Hong Kong.
In June 2013, the Company executed a 5-year global logistics service agreement with TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd, which is controlled by Tianjin Zhiyuan Investment Group Co., Ltd (“Zhiyuan”). Zhiyuan is controlled by Mr. Zhong Zhang. Mr. Zhang purchased 1,800,000 shares of our common stock for approximately $3 million in April 2013 as approved by our Board of Directors and shareholders, which made Mr. Zhang our largest shareholder. Leveraging our business relationship with Zhiyuan,January 2016, we expanded our service offeringsbusiness to include shipping and chartering services and inland transportation management services to diversify our business. Leveraging our in-depth knowledge of the shipping industry, inland transportation management services are our tailored value-added solution developed for Zhiyuan to prevent high-priced bulk from damage or loss during its inland transportation from warehouses to factories. Given the industry norm of 12% of loss rate during transportation, our integrated inland transportation solution significantly reduces bulk losses and effectively addresses issues in the freight logistics chain. In August 2017, the Company entered into a supplemental agreement with Zhiyuan to extend the service period until September 1, 2018. Furthermore, after we have conducted an effective trial for Zhiyuan to reduce their bulk losses at the end of September 2014, Tengda Northwest Ferroalloy Co., Ltd. (“Tengda Northwest”) signed a contract with us to mitigate their bulk losses through our inland transportation management services. In July 2017 the Company entered into a supplemental agreement with Tengda Northwest to extend the service period until July 3, 2018.
In May 2014, the Company signed a strategic cooperation agreement with Qingdao Zhenghe Shipping Group Limited (“Zhenghe”), one of the largest shipping and transportation companies in China, to jointly explore mutually beneficial business development opportunities. In June 2014, Mr. Deming Wang, a major owner of Zhenghe, acquired 200,000 shares of the Company’s common stock. In August 2014, the Company executed an agreement to acquire all of the equity of Longhe Ship Management (Hong Kong) Co., Limited (“LSM”) through its subsidiary, Sino-Global Shipping (HK) Inc. from Mr. Wang, to further broaden our scope of services and expertise in the ship management business. Due to market condition and high operating costs associated with this business line, the Company decided to suspend the ship management business starting from the fiscal year 2016.
On April 10, 2015, the Company entered into an Asset Purchase Agreement with Rong Yao International Shipping Limited, a Hong Kong company (the “Vessel Seller”), pursuant to which the Company agreed to acquire, subject to a number of closing conditions, “Rong Zhou”, an 8,818 gross tonnage oil/chemical transportation tanker (the “Vessel”) from the Vessel Seller; and in connection therewith, the Company issued to the Vessel Seller 1.2 million shares of its restricted common stock representing $2,220,000 of the $10.5 million purchase price for the Vessel. On December 7, 2015, the Company and the Vessel Seller entered into a supplemental agreement to terminate the proposed Vessel acquisition.
The Company received $330,000 from the Vessel Seller in December 2015 in connection with the termination. The 1.2 million shares were returned to the Company on February 12, 2016 and were thereafter cancelled. In connection with the termination of the acquisition of Rong Yao International Shipping Limited (“Rong Yao”) on December 7, 2015, the Company realigned its development strategy and suspended shipping and chartering services until the economy is improved.
In January 2016, the Company formed a new subsidiary, Sino-Global Shipping LA Inc. (“Sino LA”), for the purpose of expanding its business to provide import security filing services with U.Sthe U.S. Customs and Department of Homeland Security, on behalf of importers who ship goods into the U.S. and also providingprovided inland transportation services to these importers in the U.S. On April 18, 2016, Sino LA signed a Memorandum of Understanding (“MOU”) with Yaxin International Co., Ltd. (“Yaxin”), pursuant to which Sino LA will provide logistics services to Yaxin, who ship goods via containers into the U.S. and places them onAmazon.com. The services include cargo forwarding, customs filing and declaration, trucking and other services.
In May 2016, the Company entered into a strategic partnership with Shandong Hi-speed TEU Logistics Co., LTD. (“Shandong Hi-speed TEU”), which belongs to one of China’s largest state-owned enterprises, Shandong Hi-Speed Group Co., Ltd., to jointly establish a platform for coordinated transport between China and North America. The Company and Shandong Hi-speed TEU intend to cooperate in creating a standardized network that will unite carriers of the twenty-foot equivalent units or TEUs in China via sea and rail and coordinate with parties in North America and Australia. The companies will serve both upstream and downstream customers through the platform, establish a door-to-door logistics and provide supply chain service.
During our fiscal year ended June 30, 2017, Sino continued to provide inland transportation services. In addition, Sino added freight logistics services andwe also expanded into container trucking services as new business sectors to provide related transportation logistics services to customers in the U.S. and in China. Sino
In an effort to further diversify our business, in the second quarter of the fiscal year ended June 30, 2018, we developed our bulk cargo container services segment. Bulk cargo container shipment refers to using containers to ship commodities that are traditionally shipped by freight cargo. Freight cargo rates are usually lower than container freight rates; however, the transit time is much longer and has signed cooperation agreements with COSCO Chinahigh minimum quantity requirements. We suspended this service in the fiscal year ended June 30, 2019 due to market environment factors, and Sinotrans, two state-owned enterprisesdiscontinued this service in light of China, to providethe worldwide impact of the coronavirus pandemic.
In the fiscal year ended June 30, 2018, we established a wholly owned subsidiary, Ningbo Saimeinuo Web Technology Ltd. (“Ningbo”), which is 100% owned by Sino-Global Shipping New York Inc. (“SG Shipping NY”), a New York corporation and a wholly owned subsidiary of the Company, which primarily engages in transportation management and freight logistics services, including overseas shipping.
Since the fiscal year ended June 30, 2019, trade dynamics have made it more expensive for shipping carrier clients to cost-effectively move cargo into U.S. ports, and container trucking servicesas a result, we realized lower shipping volumes, which has caused us to themshift our focus back to the shipping agency business.
On January 10, 2020, we entered into a cooperation agreement with Mr. Shanming Liang, a stockholder of the Company, to establish a joint venture named LSM Trading Ltd., in which the Company holds a 40% equity interest. For the year ended June 30, 2023, the Company invested $210,000 in the joint venture. The joint venture has not commenced operations as of the date of this report.
On December 14, 2020, we incorporated a new entity named Blumargo IT Solution Ltd. (“Blumargo”) in the U.S. To ensure effectiveSG Shipping NY held an 80% ownership interest in Blumargo, which was established in partnership with Tianjin Anboweiye Technology Co. (“Tianjin”), to build up hi-tech and high-qualityinformation-based logistics services to meet customer demand. On June 30, 2022, SG Shipping NY acquired the 20% interest held from Tianjin and increased its ownership to 100%.
From March to June 2021, the Company engaged in cryptocurrency mining in China. On March 2, 2021, the Company entered into a purchase agreement with Hebei Yanghuai Technology Co., Ltd. (“Yanghuai”) for the purchase of 2,783 digital currency mining machines for a total purchase price of RMB 30 million (approximately $4.6 million). Yanghuai agreed to manage and operate the servers after the purchase at its site with no further charge from March 10, 2021 to March 9, 2022, after which time the Company could engage Yanghuai to continue providing services for a fee. The first cash payment of approximately $0.9 million was paid within 15 days after the date of signing the Agreement.
Over the last two months of the Company’s 2021 fiscal year, national and local governments in China started to restrict and ban cryptocurrency mining operations, causing owners of mining machines to cease mining operations. Based on the amended agreement signed by the Company and Yanghuai on September 17, 2021, the Company is not liable to perform under the remainder of the contract and obtained title to half of the servers. The Company recorded an impairment for the mining equipment in the last quarter of 2021 in the amount of approximately $0.9 million. The two parties have restructured the Purchase Agreement to reduce the purchase price from RMB 30 million to RMB 6 million and to allocate the purchased servers between the Company and the Seller. The Seller transported servers representing half of the agreed 50,440 terahashes (one trillion) per second (th/s) in computing power (or a total of 25,220 th/s in computing power) to our customersNingbo subsidiary in China and then shipped them to us in the U.S.
On April 21, 2021, the Company set up a joint venture in Texas, U.S. under the name of “Brilliant Warehouse Service Inc.” to support its freight logistics services in the U.S., Sino establishedpursuant to a cooperation agreement with Mr. Bangpin Yu. SG Shipping NY has a 51% equity interest in the joint venture.
In July 2021, the Company registered a new company, Gorgeous Trading Ltd. (“Gorgeous Trading”), which is 100% owned by SG Shipping NY. Gorgeous Trading is mainly engaged in smart warehouse and related business in Texas.
On August 31, 2021, the Company formed a joint venture, ACH Trucking Center Corp.Phi Electric Motor, Inc. in New York, which is 51% owned by SG Shipping NY. Phi Electric Motor, Inc.has had no operations as of the date of this report.
On September 29, 2021, the Company formed a 100% owned subsidiary, SG Shipping & Risk Solution Inc., in the third quarter of fiscal 2017 with U.S. local freight forwarder, Jetta Global LogisticsNew York. On December 23, 2021, SG Shipping & Risk Solution Inc. This will increase our quantities of commodity transported and improve the quality of service provided to our customersformed a wholly-owned subsidiary, SG Link LLC, in the eastern regionNew York. As of the U.S.date of this report, the two companies have had no operations.
On October 3, 2021, the Company entered into a Strategic Alliance Agreement with HighSharp to establish a Delaware joint venture for collaborative engineering, technical development and commercialization of a bitcoin mining machine under the name Thor Miner Inc. which is 51% owned by the Company and 49% owned by HighSharp. Thor Miner was given exclusive rights covering design production, intellectual property, branding, marketing and sales. On October 11, 2021,
On December 31, 2021, the Company entered into a series of agreements to terminate its variable interest entity (“VIE”) structure and deconsolidated its formerly controlled entity Sino-Global Shipping Agency Ltd. (“Sino-China”). The Company controlled Sino-China through its wholly owned subsidiary Trans Pacific Shipping Limited. The Company made the decision to dissolve the VIE structure and Sino-China because Sino-China has no active operations and the Company wanted to remove any potential risks associated with any VIE structures. In addition, the Company dissolved its subsidiary Sino-Global Shipping LA, Inc.
On April 10, 2022, the Company entered into a joint venture agreement with Golden Mainland Inc., a Georgia corporation (“Golden Mainland”) to establish a joint venture to build Bitcoin mining sites in Texas, Ohio, and other states. The Company does not plan to pursue this business with Golden Mainland.
Our Strategy
Our strategy is to:
● | Provide better solutions for issues and challenges faced by the entire shipping and freight |
● | Diversify our current service offerings organically or through acquisitions and/or strategic alliance; continue to grow our business in the U.S. market; |
● | Continue to streamline our business practice, optimize our cost structure and improve our operating efficiency through effective planning, budgeting, execution and cost |
● | Continue to reduce our dependency on our legacy business and few key customers; and |
● | Continue to monetize our relationships with our strategic partners and leverage their support and our innovation to expand our business. |
Our Management Team
We believe we have a strong and experienced management team including our Chief Executive Officer and Chairman, Mr. Lei Cao; our Acting Chief Financial Officer, Ms. Tuo Pan; our Chief Operating Officer, Mr. Zhikang Huang; and our Chief Technical Officer, Mr. Yafei Li, who, together as a team, have many years of experience, extensive business connections in the shipping industry in China, and substantial experience in SEC reporting and compliance, business reorganization, mergers and acquisitions, accounting, risk management and operations of both public and private companies.
Business Segments
As of June 30, 2017, Sino-Global delivers inland transportation management services, freight logistics services and container trucking services to our customers.
Historically, the Company was in the business of solely providing shipping agency services. In fiscal year 2014, by leveraging the support of Sino-Global’s largest shareholder, Mr. Zhang and the company he controls, Zhiyuan Investment Group, the Company expanded its service platform to include shipping and chartering services during the quarter ended September 30, 2013 and inland transportation management services during the quarter ended December 31, 2013. We suspended shipping and chartering services as a result of the termination of the vessel acquisition in December 2015. With the acquisition of LSM in 2014, we added ship management services to our service platform but we suspended it together with shipping agency services in 2016 primarily due to market conditions. With the establishment of Sino-LA,our subsidiary in Los Angeles, we added cargo forwarding services to our service platform in the second quarter of fiscal 2017, which is included in our inland transportation business line atfor the end ofyear ended June 30, 2016. As we are developing our cargo forwarding services, the Company provides freight logistics services and container trucking services as two new business segments during thisin fiscal year.2017. During fiscal year 2018, the Company began to provide bulk cargo container services to the customers. On November 13, 2019, the Company entered into a cooperation agreement with Shanming Liang, a director of Guangxi Jinqiao Industrial Group Co., Ltd., to cooperate and expand the bulk cargo container services business.
Our Goals and Strategic Plan
By leveraging our fine reputation, extensive business relationships, technical ability and in-depth knowledge of the shipping industry, our goal is to further strengthen our position as a leading global logisticlogistics solution provider who offers innovative resolutions to better address complex issues in different aspects in the entire shipping and freight logisticlogistics chain.
We historically focused our business on providing our customers with customized shipping agency services. In the past, our business came predominately from our strong business relationships with our key strategic partners in China. To reduce our dependency on a single business line, we have leveraged, and will continue to leverage, our business relationships with strategic partners to introduce new service offerings to the market and to diversify our business. In light of the slowdown of the Chinese economy and its negative impact on the shipping business across Pacific Ocean, ourOur strategic plan for the next 5five years is to continue to diversify our service mix and actively seek new growth opportunities to expand our business footprint in the U.S. market to reduce our dependency on the revenue generated from China. For decades, the shipping industry has been operated under traditional business models without many meaningful changes. Today, technological innovation has already played a big role in changing every conventional industry. We believe theinternet will be a big part of the future logistics chain services and a transformative era in shipping and freight logisticlogistics business is coming. As an innovative solution provider, we plan to apply our technical ability, industry expertise andcutting-edge information technology in the conventional shipping business tobetter connect supply and demand and to develop seamless linkages in logisticlogistics chains.
After going through one and half years on
As a result of our business restructuring, Sino changed its business models from providing traditional shipping agency servicesplan to providing solutions and services focuseddiversify, we continued to provide on inland transportation management services and logistics between the U.S. and China, such as providing freight logistics services, or container trucking services. As a result of our continued restructuring efforts, we turned an operating loss for the year ended June 30, 2016 to a profit for the year ended June 30, 2017. As shown in the table below, our current business operating revenue is primarily focused on inland transportation management services as compared to the two previous fiscal years.
Fiscal Year 2017 | Fiscal Year 2016 | Fiscal Year 2015 | ||||||||||||||||||||||
Key Services | Revenue | % | Revenue | % | Revenue | % | ||||||||||||||||||
Shipping Agency & Ship Management | $ | - | - | $ | 2,507,800 | 34 | % | $ | 6,185,653 | 55 | % | |||||||||||||
Shipping & Chartering | - | - | 462,218 | 7 | % | 349,125 | 3 | % | ||||||||||||||||
Inland Transportation Management | 5,758,600 | 50 | % | 4,340,522 | 59 | % | 4,785,850 | 42 | % | |||||||||||||||
Freight Logistic Services | 4,815,450 | 42 | % | - | - | - | - | |||||||||||||||||
Container Trucking Services | 871,563 | 8 | % | - | - | - | - | |||||||||||||||||
Total | $ | 11,445,613 | 100 | % | $ | 7,310,540 | 100 | % | $ | 11,320,628 | 100 | % |
The business restructuring of Sino is gradually on track.and bulk cargo container services. During this process, we will continue to adjust and develop our strategic plans based on the change of business environment. In
However, with our decades of experience in shipping agency business and solid business relationships with Baosteel Group and Shougang Group, who are among the future,biggest importers of iron ore in China, we will providebelieve it is to the Company’s best interest to redirect our focus on this segment in 2019 based on our assessment of current global trading environments. To our understanding, we are one of few shipping agents specialized in providing a full range of general shipping agency services in China and the only shipping agency company listed on a public exchange in the U.S. while other shipping agencies are much smaller and more servicesfragmented. With the setup of the Ningbo joint venture, we are able to our customers, and we will use our internet platform to connectresources such as our worldwide businesses tocustomer base, our customers.
Our Customers
In light of our strategic relationship with Zhiyuan Investment Group that began with the signing of a 5-year global logistics service agreement in June 2013, we expandedcurrently developing IT infrastructure and our business platforminsight to include additional service offerings. We started to provide inland transportation management services tobuild a third-party customer, Tengda Northwest Ferroalloy Co., Ltd. (“Tengda Northwest”), during the quarter ended September 30, 2014. As we continue to diversifyglobal network of shipping agencies. In addition, our service platform, we have reduced our dependency on a few customers which we providecurrent business segments like freight logistics and container trucking services.can also be integrated and enable us to provide more comprehensive logistics services for our customers.
ForOur plan is to develop a shipping agency network in China and South East Asia for the next three years and expand our shipping agency network worldwide. We plan to build the network through acquisitions or strategic partnership with other shipping agencies. Our shipping agency business will be mostly conducted through our China, Hong Kong and Australia subsidiaries.
In fiscal year 2020, we entered into a general shipping agency service agreement with Mandarine Bulk Ltd. as the sole general shipping agency and a shipping management services agreement with Qingdao Lizhou Ship Management Co., Ltd. We have expanded our business to increase sales revenue in the United States and get more customers who can settle in U.S. dollars.
In fiscal 2024, while we continue to provide our current traditional logistics business, we will integrate the traditional business with modern technology to develop a brand-new business model. On September 27, 2020, we signed a MOU with EMB Technology Co., LTD (“EMB”). Our company and EMB will combine the advantages of traditional logistics business/new technology and match the marketing economic requirements of the post-covid-19 world, gathering our many years of industry experience and customer group, with big data analysis, artificial intelligence, machine learning technologies, research and development platforms for the new business model, joint business partner’s data interface, to change the traditional business model from delivery to businesses into delivery directly to customers. At the same time, we plan to strengthen the research and development force to complete the transformation of the company’s business model and profit model step by step. After deep market research and demand analysis, with the actual situation in North America, iterative developing a certain popular App of high customer coupling, easy to form the functional industrial chain and derivative products and related services. We also expect to make achievements in the remote service industry include the service industry of enterprise portal, and the service industry of ERP customization/implementation/maintenance for small and medium-sized businesses, try to create a new milestone in the company’s business.
Our Customers
Our main customers for the fiscal years ended June 30, 2017, three customers2023 and 2022 is Chongqing Iron & Steel Ltd. and SOSNY. For the years ended June 30, 2023 and 2022, Chongqing Iron & Steel Ltd. accounted for 26%, 24%52.7% and 19%45.6% of the Company’s revenues, respectively. For the yearyears ended June 30, 2016, two customers2023 and 2022, SOSNY accounted for 31%16.1% and 27%27.9% of the Company’s revenues, respectively.gross revenue.
Our Suppliers
Our operations consist of working directly with our customers to understand in detail their needs and expectations and then managing local suppliers to ensure that our customers’ needs are met. Our major suppliers include Oldendorff Carriers, Baoshan Iron and Steel Co., Ltd. and Shanghai Gangcheng Dangerous Goods Logistics Co., Ltd. For the year ended June 30, 2017,2023, two suppliers accounted for 42%approximately 19.6% and 11%19.5% of theour total cost of revenue,purchases, respectively. For the year ended June 30, 2016, three2022, two suppliers accounted for 27%, 15%approximately 26.3% and 10%24.1% of theour total cost of revenues,purchases, respectively.
Our Strengths
We believe that the following strengths differentiate us from our competitors:
● | Proven industry experience and problem-solving reputation. We are a non-asset based global shipping and freight logistics solution provider. |
● | Strong leadership and a competent professional team. Our CEO is an industry veteran with more than thirty years of extensive industry |
● | Extensive network and positive industry recognition.Doing business in China often requires a strong business network and support of key strategic partners. The Company served as one of the executive directors of China Association of Shipping Agencies & Non-Vessel-Operating Common Carriers (CASA), the authoritative industry association in China. We are the only non-state-owned enterprise represented on the CASA board guiding the development of the industry. Our good reputation and industry recognition enables us to maintain strong relationships with our business partners and have an extensive network of contacts throughout the industry, which helps us gain necessary support to execute our business plans. |
● | Lean organization and a flexible business model.Although we are a small business with limited resources, we have a cohesive and effective organizational structure with the goal of maximizing customer value while minimizing waste. Our unique flexible business model allows us to quickly respond to changing market demand and offer our customers innovative problem-solving solutions, quality customer service, and competitive prices to achieve greater market acceptance and gain additional market share. |
● | U.S.-registered and NASDAQ-listed public company. We believe our status as a U.S. corporation gives us more credibility among existing and potential customers, suppliers, and other business partners than a privately owned company would have in our industry. Our ability to raise capital through the capital market or use our common stock as “currency” to facility potential merger and acquisition transactions can also help us carry out or accelerate our growth strategies. |
Our Opportunities
For more than thirty years, the shipping and freight logisticlogistics industry has been operated under traditional business models without meaningful change. Many of these business practices are inefficient and problematic; therefore, maintaining an innovative mindset is critical to achieving continuous business success and growth. We are a value-added logistics solution provider with successful past performance and individuals that have been in the industry for a long time. Instead of playing the traditional logistics broker role, we focus on providing technology solutions and innovative leading-edge services to bridge the asset-based world with the digital world. We shape our industry practice and profit model by analyzing wider developments both in the global markets and the technology industry so we can address unique problems that are currently pervasive across the shipping and freight logistics industry.
We believe we can capture the business opportunity and grow our business organically or through acquisitions or strategic alliance by:
● | Continuing to streamline our business operations and improve our operating efficiency through innovative technology, effective planning, budgeting, execution and cost control; |
● |
● |
Our Challenges
We face significant challenges when executing our strategy, including:
● | Given the complexity and length of restructuring our business, we face the challenge of generating sufficient cash from our current business activities to support our daily operations during the transition; |
● | We may not be able to establish a separate department to solve critical issues in today’s shipping logistics industry; |
● | We may not be able to manage our growth when we form more joint ventures for our shipping agency business as we need to better our standard operating and control procedures which may pose more challenges to our management. |
● | We may not have or not be able to get the necessary funds to continue to expand our service and market our services successfully; |
● | Our ability to respond to increasing competitive pressure on our growth and margins; |
● | Our ability to gain further expertise and to serve new customers in new service areas; |
● | From time to time, we may have difficulty carrying out services effectively and in a profitable way due to the cyclical nature of the shipping industry, which could lead to a prolonged period of sluggish demand for our services; |
● | Our ability to respond promptly to a changing regulatory environment, macroeconomic conditions, industry trends, and competitive landscape; and |
● | Developing a winning business model takes time and a new business model may not be recognized by the market immediately. As a publicly traded company, management may be forced to fulfill near-term performance goals that may not be consistent with the Company’s long-term vision. |
Our Competition
The market segmentssegment that we serve donow operate in, which is freight logistics services including warehouse services, does not have high entry barriers. ThereIn terms of our competition in China, there are many companies ranging from small to large in China that provide shippingfreight logistics services, and freight-related logistics services. At present, the state-owned companies in China still dominate the industry and generate a majoritysignificant portion of the revenues in the industry. Our primary competitors in China are the China branches of international shipping companies or their exclusive agents in China. These companies include Evergreen Marine Corp., Orient Overseas Container Line, Ocean Network Express which includes Kawasaki Kisen Kaisha, Ltd, Mitsui O.S.K. Lines and Nippon Yusen Kabushiki Kaisha. The competition is intense due to the significant excess capacity. These companies have greater service capabilities, a larger customer base and more financial, marketing, network and human resources than we do. Most of them concentrate their business on shipping agency services to meet general market demand.engage in a wide range of businesses and involve many aspects of the industry chain. However, we focus on providing tailored solutions and value-added services to select high-profile customers to drive effectiveness and control in related aspects throughout the entire shipping and freight logistic chain.services. As a boutique company that provides specialized services with limited resources and history, we face intense competition in the particular market segments that we serve.competition. Our ability to be successfulgrow in our industry depends on (1) our deep understanding of the complexity of industry issues and challenges and (2) our technical ability to develop bestoptimal solutions to respond to the identified issues and provide effective problem-solving strategies to our targeted customers to achievecustomers.
In terms of our competition in the fastestUnited States, the freight logistics services industry is well developed, highly fragmented, and most cost-effective outcomes.competition is fierce nationwide. Our value-addedprimary competitors in the U.S. are local warehouse services providers and innovative approachesfreight forwarding companies in Houston, for example, Bizto LLC, Golden Eagle Guns LLC, and Smart Supply Chain. Competition in the freight logistics services industry is driven by factors such as price, service quality, technology, and geographic reach. Companies that can offer a combination of these factors are highly recognized by our customers, which helps us to gain additional market share and compete effectively withoften more competitive in the market. Additionally, companies that maycan adapt to changing customer demands and market trends, such as the shift towards e-commerce, are likely to be better capitalized than we are or may providemore successful in the long term. We aim at providing tailored and valued-added services we do not or cannot provide tofor our customers.
international clients with needs for U.S. domestic logistics services.
Employees
As of the date of this report,Report, we have 2428 full-time employees, 1412 of whom are based in China.China and 16 are based in the United States. Of the total fourfull-time employees, 9 are in management, twelve10 are in operations, five6 are in finance and accounting related and three3 are in administration and technical support. We believe that our relationship with our employees is good. We have never had a work stoppage, and our employees are not subject to a collective bargaining agreement.
Recent DevelopmentIntellectual Property
Sino has signed joint project agreements with Sinotrans Guangxi and COSFRE Beijing during the fourth quarter of fiscal year 2017. The project will involve a shift from the current bulk cargo transportation model to a containerized model. The Company has started a trial by facilitating the delivery of Sulphur from Long Beach, California, in the U.S., to Fangcheng Port, Guangxi, PRC and ultimately to the warehouseAs of the customer. At the enddate of the fiscal year 2017, there was no revenuethis Report, we do not have any registered patents, copyrights, or cost of revenue recognized from this business model. Management expects the transportation of cargo via a containerized model will become a new business segment in incoming years.trademarks other than two pending trademark applications for “Thor” and “Thor Miner.” We have seven registered domain names, including our corporate website https://www.singularity.us/.
On August 24, 2017, Sino signed a marketing promoting service agreement with COSCO Qingdao. According to this agreement, COSCO Qingdao will help Sino to promote shipping and multimodal transportation, including inland trucking container transportation services, switch bill of lading and freight collection services.
Sino plans to establish a subsidiary in Ningbo, China, to connect with local small commodities businesses to establish overseas warehouses for them. Sino will provide a service model similar to Amazon, including unloading commodities from the U.S. ports, providing transportation services, providing warehouse space in the U.S., and providing inland transportation logistics services to the door of the end customers.
Item 1A. Risk Factors.
This item is not applicable toAs a smaller reporting company, we are not required to include risk factors in this Report. However, below are a number of material risks, uncertainties and other factors that could have a material effect on the Company and its operations as a result of recent developments. You should carefully consider the risks described below before purchasing our common stock. The risks highlighted here are not the only ones that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, prospects, financial condition, or results of operations could be negatively affected, and you might lose all or part of your investment.
We are, and may continue to be, subject to litigation including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, and operating results.
As discussed in “Item 1. Business – Recent Developments,” we are, and from time to time may become, subject to litigation and various legal proceedings, including litigation and proceedings related to stockholder derivative suits, class action lawsuits and other matters, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations. In addition to this, we have been, currently are, and may from time to time become subject to, government and regulatory investigations, inquiries, actions or requests, other proceedings and enforcement actions alleging violations of laws, rules, and regulations, both foreign and domestic. The defense of these actions may be both time consuming and expensive. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the monetary amount of potential losses. Based on these assessments and estimates, we may establish reserves and/or disclose the relevant litigation claims or legal proceedings, as and when required or appropriate. These assessments and estimates are based on information available to management at the time of such assessment or estimation and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by our current assessments and estimates. Our failure to successfully defend or settle any of these litigations or legal proceedings could result in liability that, to the extent not covered by our insurance, could have an adverse effect on our business, financial condition and results of operations.
The scope, determination, and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes, and proceedings to which we are subject cannot be predicted with certainty, and may result in:
● | substantial payments to satisfy judgments, fines, or penalties; | |
● | substantial outside counsel, advisor, and consultant fees and costs; | |
● | substantial administrative costs, including arbitration fees; | |
● | loss of productivity and high demands on employee time; | |
● | criminal sanctions or consent decrees; | |
● | termination of certain employees, including members of our executive team; | |
● | barring of certain employees from participating in our business in whole or in part; | |
● | orders that restrict our business or prevent us from offering certain products or services; | |
● | changes to our business model and practices | |
● | delays to planned transactions, service launches or improvements; and | |
● | damage to our brand and reputation. |
We are, and may continue to be, subject to securities litigation, which is expensive and could divert management attention, cause harm to our reputation and result in significant damages for which we could be responsible.
We are subject to securities class action litigation, which is expensive, could divert our management’s attention, harm our reputation, and leave us liable for substantial damages. For example, as discussed in “Item 1. Business – Recent Developments,” on December 9, 2022, Piero Crivellaro, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between February 2021 and November 2022, filed a putative class action against the Company, certain of our officers and directors, and other defendants in the United States District Court for the Eastern District of New York, alleging violations of federal securities laws related to alleged false or misleading disclosures made by the Company in its public filings. The plaintiff seeks unspecified damages, plus interest, costs, fees, and attorneys’ fees. As this action is still in the early stage, the Company cannot predict the outcome, and certain of our officers in the U.S. District Court for the Eastern District of New York.
Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities.
We are responsible for the indemnification of our officers and directors.
Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our Certificate of Incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.
We depend on a limited number of major customers who are able to exert a high degree of influence over us and the loss of a major customer could adversely impact our business.
For the years ended June 30, 2023 and 2022, one customer, Chongqing Iron & Steel Ltd., accounted for 52.7%and 60.8% of our revenues, respectively. There can be no assurance that our major customer will continue to purchase our services in the same amount that it has in the past. The loss of our major customer or a material reduction in sales to a major customer could have a material adverse effect on our sales and results of operations. Additionally, given the high concentration of our customer base, a default by or a significant reduction in future transactions with our major customer could materially reduce our revenues, profitability, liquidity and growth prospects.
We depend on a limited number of suppliers who are able to exert a high degree of influence over us and the loss of our major suppliers could adversely impact our business.
For the year ended June 30, 2023, two suppliers accounted for approximately 19.6% and 19.5% of our total purchases, respectively. For the year ended June 30, 2022, two suppliers accounted for approximately 26.3% and 24.1% of our total purchases, respectively. There can be no assurance that our major suppliers will continue to supply us with the materials or services required to operate our business in the same amount that they have in the past. The loss of our major suppliers or a material reduction in the materials or services they provide to us could have a material adverse effect on our business and results of operations.
Additionally, due to the unpredictable nature of COVID-19 regulations in China, our suppliers based in China may be affected by COVID-19 related issues such as us. shutdowns and delays. This may cause us to become unable to fulfill our customer orders on a timely basis, which may cause us to cancel orders and provide refunds, as demonstrated in our settlement with SOSNY.
The restatement of our prior financial statements may affect investor confidence and raise reputational issues and may subject us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings and regulatory inquiries.
As discussed in our Current Form on Form 8-K filed on February 28, 2023, as amended by Amendment No. 1 filed on March 6, 2023, we determined to restate our financial statements as of and for the year ended June 30, 2021, three and six months ended September 30, 2021 and three and nine months ended December 31, 2021 after we identified errors related to, incorrect accounting treatment of related party loan receivable, incorrect recognition of revenue from freight shipping services and incorrect accounting treatment of recovery (provision) for doubtful accounts. As a result of these errors and the resulting restatements of our financial statements for the impacted periods, we have incurred, and may continue to incur, unanticipated costs for accounting and legal fees in connection with or related to the restatements, and have become subject to a number of additional risks and uncertainties, including the increased possibility of litigation and regulatory inquiries. Any of the foregoing may affect investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business, both of which could harm our business and financial results.
We have identified material weaknesses in our internal control over financial reporting and have determined to restate our previously issued financial statements. If our remediation of these material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired. In addition, the presence of material weaknesses increases the risk of a material misstatement of our consolidated financial statements.
As a public company, we are required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K. Effective internal control over financial reporting is necessary for reliable financial reports and, together with adequate disclosure controls and procedures, such internal controls are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause our Company to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in reported financial information, which could have a negative effect on the trading price of our common stock.
Our management’s assessment must include disclosure of any material weaknesses identified by management in our internal control over financial reporting. Our management’s assessment could detect problems with internal controls. Undetected material weaknesses in internal controls could lead to financial statement restatements and require our Company to incur the expense of remediation.
A material weakness is a deficiency or combination of deficiencies in a company’s internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its consolidated financial statements would not be prevented or detected on a timely basis. This deficiency could result in additional misstatements to its consolidated financial statements that would be material and would not be prevented or detected on a timely basis.
As discussed in “Item 9.A Controls and Procedures – Disclosure Controls and Procedures,” under the supervision and with the participation of our management, we conducted an assessment of the effectiveness of our disclosure controls and procedures as of June 30, 2023. Based on the foregoing evaluation, our Chief Operating Officer concluded that the Company’s disclosure controls and procedures were not effective due to ineffective internal controls over financial reporting that stemmed from the following material weaknesses for the year ended and as of June 30, 2023:
● | Lack of segregation of duties for accounting personnel who prepared and reviewed the journal entries in some of the subsidiaries within the consolidation, lack of supervision, coordination and communication of financial information between different entities within the Group; |
● | Lack of a full time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions which led to error in revenue recognition in previously issued financial statements; |
● | Lack of resources with technical competency to address, review and record non-routine or complex transactions under U.S. GAAP; |
● | Lack of management control reviews of the budget against actual with analysis of the variance with a precision that can be explained through the analysis of the accounts; |
● | Lack of proper procedures in identifying and recording related party transactions which led to restatement of previously issued financial statements (See Note 1 of the accompanying consolidated financial statement footnotes); |
● | Lack of proper procedures to maintain supporting documents for accounting record; and |
● | Lack of proper oversight for the Company’s cash disbursement process that led to misuse of the Company funds by its former executive. |
In order to remediate the material weaknesses stated above, we intend to implement the following policies and procedures:
● | Hiring additional accounting staff to report the internal financial timely; |
● | Reporting other material and non-routine transactions to the Board and obtain proper approval; |
● | Recruiting additional qualified professionals with appropriate levels of U.S. GAAP knowledge and experience to assist in resolving accounting issues in non-routine or complex transactions; |
● | Developing and conducting U.S. GAAP knowledge, SEC reporting and internal control training to senior executives, management personnel, accounting departments and the IT staff, so that management and key personnel understand the requirements and elements of internal control over financial reporting mandated by the U.S. securities laws; |
● | Setting up budgets and developing expectations based on understanding of the business operations, compare the actual results with the expectations periodically and document the reasons for the fluctuations with further analysis. This should be done by CFO and reviewed by CEO upon their communications with the Board; | |
● | Strengthening our corporate governance; |
● | Setting up policies and procedures for the Company’s related party identification to properly identify, record and disclose related party transactions; and |
● | Setting up proper procedures for the Company’s fund disbursement process to ensure that cash is disbursed only upon proper authorization, for valid business purposes, and that all disbursements are properly recorded. |
We cannot provide assurance that these or other measures will fully remediate our material weaknesses in a timely manner. If our remediation of these material weaknesses is not effective, it may cause our Company to become subject to investigation or sanctions by the SEC. It may also adversely affect investor confidence in our Company and, as a result, the value of our common stock. There can be no assurance that all existing material weaknesses have been identified, or that additional material weaknesses will not be identified in the future. In addition, if we are unable to continue to meet our financial reporting obligations, we may not be able to remain listed on Nasdaq.
Our ability to maintain compliance with Nasdaq continued listing requirements, including whether we are able to maintain the closing bid price of our common stock, could result in the delisting of our common stock.
Our common stock is currently listed on The Nasdaq Capital Market (“Nasdaq”). To maintain this listing, we must satisfy minimum financial and other requirements.
On May 24, 2022, the Company received a delinquency notice from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) due to its delay in filing its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. The Company was provided 60 days to submit a plan to regain compliance. On July 25, 2022 and September 14, 2022, the Company submitted its Compliance Plan. Based on the review of the Compliance Plan as well as telephone conversations with outside counsel to the Company and counsel to the Company’s Special Committee, the Staff has determined that the Company did not provide a definitive plan evidencing its ability to file the Reports within the 180 calendar day period available to the Staff under the Nasdaq Listing Rules.
On November 16, 2022, the Company received an additional staff determination notice from Nasdaq, advising that it had not received the Company’s Form 10-Q for the quarterly period ended September 30, 2022, which served as an additional basis for delisting the Company’s securities and that the Panel will consider the additional deficiency in rendering a determination regarding the Company’s continued listing on Nasdaq. The Company has submitted to the Panel a plan to regain compliance with the continued listing requirements, including the filing of the Form 10-Q for the quarterly period ended September 30, 2022.
On January 5, 2023, the Company received a deficiency notice from Nasdaq informing the Company that its common stock, no par value, fails to comply with the $1 minimum bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) based upon the closing bid price of the common stock for the 30 consecutive business days prior to the date of the notice from Nasdaq. The Company has been provided an initial compliance period of 180 calendar days, or until July 5, 2023, to regain compliance with the minimum bid price requirement.
On February 21, 2023, the Company received an additional staff determination notice from Nasdaq, advising that it had not received the Company’s Form 10-Q for the quarterly period ended December 31, 2022, which served as an additional basis for delisting the Company’s securities. The notice stated that the Panel will consider the additional deficiency in rendering a determination regarding the Company’s continued listing on Nasdaq. The Company has submitted to the Panel a plan to regain compliance with the continued listing requirements and has been granted a grace period to file all the delinquent reports, including the filing of the Form 10-Q for the quarterly period ended December 31, 2022, on or before February 28, 2023.
On March 8, 2023, the Company received a notice from Nasdaq Listing Qualifications department of Nasdaq stating that the Company no longer complies with Nasdaq’s audit committee requirement under Nasdaq’s Listing Rule 5605 following the resignation of John Levy from the Company’s board of directors and audit committee effective February 23, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing Rule 5605(c)(4), the Company has a cure period to regain compliance (i) until the earlier of the Company’s next annual shareholders’ meeting or February 23, 2024; or (ii) if the next annual shareholders’ meeting is held before August 22, 2023, then the Company must evidence compliance no later than August 22, 2023.
On March 16, 2023, the Company received a formal notification from Nasdaq confirming that the Company had regained compliance with the Nasdaq Listing Rule 5250(c)(1), which requires the Company to timely file all required periodic financial reports with the Securities and Exchange Commission, and that the matter is now closed.
On July 7, 2023, the Company received an Notice of Noncompliance Letter (the “Letter”) from Nasdaq stating that the Company was not in compliance with Nasdaq Listing Rules due to its failure to timely hold an annual meeting of shareholders for the fiscal year ended June 30, 2022, which is required to be held within twelve months of the Company’s fiscal year end under Nasdaq Listing Rule 5620(a) and 5810(c)(2)(G). The Letter also states that the Company has 45 calendar days to submit a plan to regain compliance (the “Plan”) and if Nasdaq accepts the Plan, it can grant the Company an exception of up to 180 calendar days from the fiscal year end, or until December 27, 2023, to regain compliance. Nasdaq requires the Plan to be submitted no later than August 21, 2023.
On July 13, 2023, the Company received a notice from Nasdaq stating that the Company no longer complies with Nasdaq’s independent director and audit committee requirements under Nasdaq’s Listing Rule 5605 following the resignation of Tieliang Liu from the Company’s board of directors and audit committee effective July 3, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing Rule 5605(c)(4), the Company has a cure period to regain compliance (1) until the earlier of the Company’s next annual shareholders’ meeting or July 3, 2024; or (2) if the next annual shareholders’ meeting is held before January 2, 2024, then the Company must evidence compliance no later than January 2, 2024. In response to this notice, on July 31, 2023, the Company elected Mr. Zhongliang Xie as a Class II independent director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on the Board resulting from the resignation of Mr. Tieliang Liu. The Board appointed Mr. Xie to serve as Chair of the Audit Committee, a member of the Compensation Committee and a member of the Nominating and Corporate Governance Committee.
On July 13, 2023, the Company received a notice from Nasdaq stating that the Company failed to regain compliance with respect to the minimum $1 bid price per share requirement under Nasdaq Listing Rules during the 180 calendar days given by Nasdaq for the Company to regain compliance, which ended on July 5, 2023. However, Nasdaq has determined that the Company is eligible for an additional 180 calendar day period, or until January 2, 2024, to regain compliance. Such determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. The Company intends to regain compliance with Nasdaq’s bid price requirement prior to the end of the second bid price extension.
There can be also no assurance that our stock price will meet the minimum bid price requirement or we will meet other requirements for continued listing on Nasdaq. If our common stock is delisted from Nasdaq and we are unable to list our common stock on another national securities exchange, we expect our common stock would be quoted on an over-the-counter market. If this were to occur, we and our stockholders could face significant material adverse consequences, including the limited availability of market quotations for our common stock; substantially decreased trading in our common stock; decreased market liquidity of our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws; an adverse effect on our ability to issue additional securities or obtain additional financing in the future on acceptable terms, if at all; potential loss of confidence by investors, suppliers, partners, and employees and fewer business development opportunities; and limited news and analyst coverage. Additionally, the market price of our common stock may decline further, and stockholders may lose some or all of their investment.
For additional risks relating to our operations, see the section titled “Risk Factors” contained in our Registration Statement on Form S-3, filed with the SEC on March 3, 2021 and other filings we file with the SEC from time to time.
Item 1B. Unresolved Staff Comments.
The Company does not have any unresolved or outstanding Staff Comments.staff comments.
Item 2. Properties.
We currently rent five facilities in the PRC Hong Kong and the United States. Our PRC headquarterheadquarters is in Beijing,Shanghai and our U.S. headquarterheadquarters is in New York.
Office | Address | Rental Term | Space | |||
| Expires | |||||
Texas, USA | 6161 Savoy Dr, Suite 1040 Houston, Texas 77036 | Expires 06/30/2024 | 954 ft2 | |||
Texas, USA | 12733 Stafford Road, Suite 400 Stafford, Texas 77477 | Expires 07/31/2024 | 46,463 ft2 | |||
Shanghai, PRC | Rm 12D & 12E, No.359 Dongdaming Road, Hongkou District, Shanghai, PRC 200080 | Expires | ||||
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Item 3. Legal Proceedings.
From time to time, we may becomeSee “Item 1. Business – Recent Developments” for a description of legal proceedings the Company is currently involved in, various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time and may harm our business. However, we are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.incorporated herein by reference.
Item 4. Mine Safety Disclosures.
This item is not applicable to the Company.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for Our Common Stock
Our common stock is traded on the NASDAQ StockNasdaq Capital Market under the symbol SINO. The high and low common stock sales prices per share during the periods indicated were as follows:SGLY.
Quarter Ended | Sep. 30 | Dec. 31 | Mar. 31 | June 30 | Year | |||||||||||||||
Fiscal year 2017 | ||||||||||||||||||||
Common stock price per share: | ||||||||||||||||||||
High | $ | 2.24 | $ | 6.73 | $ | 4.70 | $ | 3.45 | $ | 6.73 | ||||||||||
Low | $ | 0.64 | $ | 0.97 | $ | 2.34 | $ | 2.57 | $ | 0.64 | ||||||||||
Fiscal year 2016 | ||||||||||||||||||||
Common stock price per share: | ||||||||||||||||||||
High | $ | 1.60 | $ | 1.29 | $ | 0.88 | $ | 1.33 | $ | 1.60 | ||||||||||
Low | $ | 0.81 | $ | 0.69 | $ | 0.40 | $ | 0.58 | $ | 0.40 |
Approximate Number of Holders of Our Common Stock
As of September 12, 2017,25, 2023, there are 7were 8 holders of record of our common stock. This number does not include shareholdersstockholders who hold their shares of common stock in street name.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of Directors may deem relevant. Payments of dividends by Trans Pacificour PRC subsidiaries to our company are subject to restrictions including primarily the restriction that foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents.
Recent Sales of Unregistered Securities and Issuer Purchases of Equity Securities
Recent Sales of Unregistered Securities
In March 2017, the Company entered into a consulting and advisory services agreement with Jianwei Li, who will provide management consulting services that include marketing program, designing and implementation, and cooperative partner selection and management. The service period is from March 2017 to February 2020. The Company issued 250,000 shares of common stock as the remuneration of the service in reliance on the exemption under Section 4(2) of the Securities Act, which were issued as restricted shares on March 22, 2017.
Other InformationNone.
On July 26, 2016, the Company granted options to purchase an aggregateItem 6. [Reserved]
Item 7. Management’s Discussion and Analysis of 150,000 sharesFinancial Condition and Results of common stock to two employees with a two-year vesting period, one half of which shall vest on October 26, 2016, and the other half shall vest on July 26, 2017. The exercise price of such options was $1.10 per share. Please refer to Item 12 for the table on Equity Compensation Plan Information, which is incorporated by reference herein.Operations.
On December 14, 2016, the Company granted a total of 800,000 options to purchase an aggregate of 800,000 shares of Common Stock to seven employees, with a vesting period from one to three years. With the seven employees’ consent, the Company cancelled the 800,000 options, effective February 16, 2017 and nil was recorded as part of general and administrative expenses related to these options for the year ended June 30, 2017.
The Company is not required to provide the information required by this item because the Company is a smaller reporting company.
The following discussion and analysis of our company’sthe Company’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in the Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors.
Overview
FiscalOverview
We previously focused on providing customized freight logistics services, but starting in 2017, we began exploring new opportunities to expand our business and generate more revenue. These opportunities ranged from complementary businesses to other new service and product initiatives. In the fiscal years 2022 and 2023, while we continued to provide our freight logistics business, we expanded our services to include warehousing services provided by our US subsidiary Brilliant Warehouse Service Inc. On January 3, 2022, we changed our corporate name to Singularity Future Technology Ltd. to align with our entry into the digital assets business through our U.S. subsidiaries. During 2022, we engaged in purchases and sales of cryptocurrency mining machines through our U.S. subsidiaries.
For the fiscal year 2017 Highlightsended June 30, 2023 and 2022, we operated in two operating segments: (1) freight logistics services, through our subsidiaries in the U.S and PRC; and (2) the purchase and sales of crypto mining machines, through our subsidiary Thor Miner. The Company no longer operates in the shipping agency segment because it did not receive any new orders for its services due to the uncertainty of the shipping management market which was negatively impacted by the COVID-19 pandemic.
SalesRecent Developments
The following events had a material impact on our financial statements. For other recent developments, see “Item 1. Business – Recent Developments.”
On January 10, 2022, Thor Miner entered into a purchase agreement with HighSharp. Pursuant to the agreement, Thor Miner agreed to purchase certain cryptocurrency mining equipment from HighSharp. In January and April 2022, Thor Miner prepaid $35,406,649 for the order. Thor Miner also entered into a PSA with SOSNY for the purchase of $200,000,000 in crypto mining rigs and received a deposit form SOSNY in the amount of $48,930,000.
Due to HighSharp’s production issue, Thor Miner was unable to timely deliver the products to SOSNY according to the delivery terms of the PSA and was sued by SOSNY for breach of contract on December 9, 2022. . As of December 22, 2022, the balance of the advance made to HighSharp and deposit from SOSNY amounted to $27,927,583 and $40,560,569, respectively. On December 23, 2022, the Company entered into the Settlement Agreement with SOSNY pursuant to which the Company paid $13.0 million to SOSNY in exchange for SOSNY dismissing the lawsuit and agreed to transfer any additional funds it receives from HighSharp to SOSNY in an amount not to exceed $40,560,569. Thor Miner wrote off the balance of the deposit it received from SOSNY and the balance of its payment to HighSharp.
Impact of COVID-19
The outbreak of the COVID-19 starting from late January 2020 in the PRC spread rapidly to many parts of the world. In March 2020, the World Health Organization declared COVID-19 as a pandemic.
In early December 2022, Chinese government eased the strict control measures for COVID-19, which led to a surge in increased infections and disruption to our business operations. In 2023, our China operation continued to suffer from the impact of COVID-19, although to a lesser extent. The impact of any future spread of COVID-19 on the Company’s China operation will depend, to a large extent, on the duration and resurgence of COVID-19 variants and the actions taken by government authorities to contain COVID-19 or treat its impact, almost all of which is beyond our control.
The impact of COVID-19 on our business, financial condition, and results of operations include, but are not limited to, the following:
● | Our customers have been negatively impacted by the pandemic, which reduced their demand for freight logistics services. As a result, our revenue for the year ended June 30, 2022 was down by approximately $1.2 million, or 22.6% and our freight revenue declined slightly in the year ended June 30, 2023. |
● | Due to travel restrictions between US and China, our new business development for existing segments or new ventures has been slowed down. | |
● | Our sales of crypto mining machines were materially adversely affected by COVID-19. Specifically, Crypto mining machine manufacturers were impacted by the constrained supply of the semiconductors used in the production of the highly specialized crypto mining machines. COVID-related issues exacerbated port congestion and intermittent supplier shutdowns and delays, resulted in delayed shipments and additional expenses to expedite delivery. As a result, we were unable to fulfil our customer orders on a timely basis, resulting in the cancellation of orders and the partial refund of purchases, as evident from the SOSNY settlement. |
Although the impact of COVID-19 on our operations decreased in 2023, such impact still exists and may continue to exist for an unforeseeable period of time. The impact of any future spread of COVID-19 on the Company’s China operation will depend, to a large extent, on the duration and resurgence of COVID-19 variants and the actions taken by government authorities to contain COVID-19 or treat its impact, almost all of which is beyond our control.
Results of Operations
Comparison of the Years Ended June 30, 2023 and 2022
The following table sets forth the results of our operations for the periods indicated:
For the Years Ended June 30, | ||||||||||||||||||||||||
2023 | 2022 | Change | ||||||||||||||||||||||
US $ | % | US $ | % | US $ | % | |||||||||||||||||||
Revenues | 4,538,723 | 100 | % | 3,988,415 | 100.0 | % | 550,308 | 13.8 | % | |||||||||||||||
Cost of revenues | 3,990,654 | 87.9 | % | 4,136,474 | 103.7 | % | (145,820 | ) | (3.5 | )% | ||||||||||||||
Gross margin | 12.1 | % | N/A | (3.7 | )% | N/A | 15.8 | % | N/A | |||||||||||||||
Selling expenses | 232,569 | 5.1 | % | 385,890 | 9.7 | % | (153,321 | ) | (39.7 | )% | ||||||||||||||
General and administrative expenses | 11,572,888 | 255.0 | % | 9,301,784 | 233.2 | % | 2,271,104 | 24.4 | % | |||||||||||||||
Impairment loss of investment | 128,369 | 2.8 | % | - | - | 128,369 | 100 | % | ||||||||||||||||
Impairment loss of Cryptocurrencies | 18,279 | 0.4 | % | 170,880 | 4.3 | % | (152,601 | ) | (89.3 | )% | ||||||||||||||
Impairment loss of fixed assets and right of use asset | 33,469 | 0.7 | % | 1,006,305 | 25.2 | % | (972,836 | ) | (96.7 | )% | ||||||||||||||
Provision for doubtful accounts, net of recovery | 2,827,511 | 62.3 | % | 1,613,504 | 40.5 | % | 1,214,007 | 75.2 | % | |||||||||||||||
Stock-based compensation | 329,778 | 7.3 | % | 10,064,622 | 252.3 | % | (9,734,844 | ) | (96.7 | )% | ||||||||||||||
Total costs and expenses | 19,133,517 | 421.6 | % | 26,679,459 | 668.9 | % | (7,545,942 | ) | (28.3 | )% |
Revenues
Revenues increased by $550,308, or approximately 13.8%, to $4,538,723 for the year ended June 30, 2017 increased by $4,135,073, or 56.6%,2023 from $7,310,540$3,988,415 for the year ended June 30, 2016, to $11,445,613 for the comparable period in 2017.2022. The increase was mainly due to:
On February 16, 2017, the Company raised capital by issuing 1.5 million shares of common stock to three institutional investors at a purchase price of $3.18 per share. The aggregate gross proceeds of the sale to the Company totaled $4.77 million, and net proceeds after deducting offering expenses and placement agent fees equaled approximately $4.3 million. The Company will use the funds for working capital and general corporate purposes.
Other 2017 Highlights:
Fiscal year 2018 Trends
In the fiscal year of 2018, we will continue marketing ourselves to state-owned shipping companies in the PRC, promoting our inland transportation services in the PRC as well as freight logistics and container trucking services in both the PRC and the U.S., and using containers for our bulk shipping projects. In the interim, we will continue to establish our services network in the U.S. in order to increase our revenues and leverage our fundamentals using our new profit model, i.e., developing inland transportation services (including freight logistics and container tracking service). Since Sino began its business restructuring in 2017, the business channels between the U.S. and China have been established, and we are currently at the stage of filling in substantial business. This stage mainly involves the following three aspects:
1.) For goods exported from China to the U.S., Sino will provide inland transportation services in the U.S.
2.) For small commodity exports from China to the U.S., Sino will provide services similar to that of Amazon.com by helping small commodity traders in China establish warehouses in the U.S. and providing inland transportation services and other value-added services to them, including: the receipt of commodities at U.S. ports, transportation of commodities, providing warehouse space in the U.S., and logistical services to the door of the final customers.
3.) For those products or commodities exported from the U.S. to China, such as grain and grain by-products and petroleum by-products, Sino will provide container transportation services.
Sino plans to set up business channels between the U.S. and Australia, Singapore and Thailand during fiscal year 2018. The Company expects to provide shipping and multimodal transportation, including inland container trucking transportation services, switch bill, and freight collection services to importers and exporters between the U.S. and Australia, Singapore and Thailand.
Results of Operations
Revenues
Total revenues increased by $4,135,073, or 56.6%, from $7,310,540 for the year ended June 30, 2016 to $11,445,613 for the comparable period in 2017. This increase was primarily due to the Company’s efforts to diversify its business in the inland transportation management, freight logistic, and container trucking services, resulting in an increase in revenues since the first and second quarters of fiscal year 2017. The increase was partially offset by the decreased revenue from shipping agency and ship management services sector due to the decrease in the number of ships served, and the decreasedincreased revenue from our shipping and chartering services sector as a resultsale of the termination of a planned vessel acquisition.crypto mining equipment. The Company ceased to sell crypto-mining equipment since January 1, 2023.
The following tables present summary information by segmentsegments for the years ended June 30, 20172023 and 2016:2022:
For the year ended June 30, 2017 | ||||||||||||||||||||||||
Shipping Agency and Ship Management Services | Shipping and Chartering Services | Inland Transportation Management Services | Freight Logistic Services | Container Trucking Services | Total | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
- Related party | $ | - | $ | - | $ | 2,746,423 | $ | - | $ | - | $ | 2,746,423 | ||||||||||||
- Third parties | $ | - | $ | - | $ | 3,012,177 | $ | 4,815,450 | $ | 871,563 | $ | 8,699,190 | ||||||||||||
Cost of revenues | $ | - | $ | - | $ | 620,259 | $ | 3,710,364 | $ | 649,968 | $ | 4,980,591 | ||||||||||||
Gross profit | $ | - | $ | - | $ | 5,138,341 | $ | 1,105,086 | $ | 221,595 | $ | 6,465,022 | ||||||||||||
GM% | - | % | - | % | 89.2 | % | 22.9 | % | 25.4 | % | 56.5 | % |
For the Year Ended June 30, 2023 | ||||||||||||
Freight Logistics Services | Sales of Crypto Mining Machines | Total | ||||||||||
Net revenues* | $ | 3,806,158 | $ | 732,565 | $ | 4,538,723 | ||||||
Cost of revenues | $ | 3,990,654 | $ | - | $ | 3,990,654 | ||||||
Gross profit | $ | (184,496 | ) | $ | 732,565 | $ | 548,069 | |||||
Depreciation and amortization | $ | 163,635 | $ | 713 | $ | 164,348 | ||||||
Total capital expenditures | $ | (38,440 | ) | $ | 2,852 | $ | (35,588 | ) | ||||
Gross margin | (4.8 | )% | 100 | % | 12.1 | % |
For the year ended June 30, 2016 | ||||||||||||||||
Shipping Agency and Ship Management Services | Shipping and Chartering Services | Inland Transportation Management Services | Total | |||||||||||||
Revenues | ||||||||||||||||
- Related party | $ | - | $ | - | $ | 2,269,346 | $ | 2,269,346 | ||||||||
- Third parties | $ | 2,507,800 | $ | 462,218 | $ | 2,071,176 | $ | 5,041,194 | ||||||||
Cost of revenues | $ | 2,175,109 | $ | 212,510 | $ | 1,350,370 | $ | 3,737,989 | ||||||||
Gross profit | $ | 332,691 | $ | 249,708 | $ | 2,990,152 | $ | 3,572,551 | ||||||||
GM % | 13.3 | % | 54.0 | % | 68.9 | % | 48.9 | % |
* | Including related party revenue of $222,963 from Zhejiang Jinbang Fuel Energy Co., Ltd for the year ended June 30, 2022. |
For the Year Ended June 30, 2022 | ||||||||||||
Freight Logistics Services | Sales of Crypto Mining Machines | Total | ||||||||||
Net revenues | $ | 3,830,615 | $ | 157,800 | $ | 3,988,415 | ||||||
Cost of revenues | $ | 4,136,474 | $ | - | $ | 4,136,474 | ||||||
Gross profit | $ | (305,859 | ) | $ | 157,800 | $ | (148,059 | ) | ||||
Depreciation and amortization | $ | 512,586 | $ | 21,052 | $ | 533,638 | ||||||
Total capital expenditures | $ | 840,319 | $ | 34,199 | $ | 874,518 | ||||||
Gross margin | (8.0 | )% | 100.0 | % | (3.7 | )% |
% Changes For the Years Ended June 30, 2023 and 2022 | ||||||||||||
Freight Logistics Services | Sales of Crypto Mining Machines | Total | ||||||||||
Net revenues | (0.6 | )% | 364.2 | % | 13.8 | % | ||||||
Cost of revenues | (3.5 | )% | 100 | % | (3.5 | )% | ||||||
Gross profit | (39.7 | )% | 364.2 | % | (470.2 | )% | ||||||
Depreciation and amortization | (68.1 | )% | (96.6 | )% | (69.2 | )% | ||||||
Total capital expenditures | (104.6 | )% | (91.7 | )% | (104.1 | )% | ||||||
Gross margin | 3.2 | % | 0 | % | 15.8 | % |
RevenuesDisaggregated information of revenues by geographic locations are as follows:
For the Years Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
PRC | 2,529,449 | 2,982,691 | ||||||
U.S. | 2,009,274 | 1,005,724 | ||||||
Total revenues | $ | 4,538,723 | $ | 3,988,415 |
Revenues
(1)Freight Logistics Services
Freight logistics services primarily consist of cargo forwarding, brokerage, warehouse and other freight services. Revenues from Shipping Agency and Ship Management Services
For the years ended June 30, 2017 and June 30, 2016, our revenues generated from the shipping agency segmentfreight logistics services were nil and $2,507,800, respectively. As the Company has stated in its previous annual report for the fiscal year ended June 30, 2016, management decided to suspend the shipping agency services because the shipping industry is experiencing a downturn. The decline in revenues in this service sector was due to this suspension. As a result, there was a decrease in the total number of ships the Company served from 19 ships$3,806,158 for the year ended June 30, 20162023, a decrease of $24,457, or approximately 0.6%, as compared to nil$3,830,615 for the year ended June 30, 2017. Our decision2022. The decrease in shipping revenue of approximately $0.45 million from our PRC operation was due to suspenda decrease in demand from a major customer, offset in part to an increase of revenue from our shipping agency businessU.S. subsidiary, Brilliant Warehouse, of approximately $0.43 million.
Sales of Crypto Mining Machines
On January 10, 2022, Thor Miner entered into the PSA with SOSNY, a wholly owned subsidiary of SOS Ltd. Pursuant to the PSA, Thor Miner agreed to sell to SOSNY certain cryptocurrency mining hardware and other equipment. The total purchase price was $200,000,000 and the purchase was expected to be completed under separate purchase orders. We recognized the sales of cryptocurrency mining equipment based on reduced market demanda net basis as the manufacturer of the products was responsible for imported iron ore as a result of an across-the-board general economic slow-down, decreased manufacturing activities, rising labor costs inshipping and custom clearing for the PRCproducts. The net revenue amounted to $732,565 and intense competition in the shipping industry with established and new competitors offering rates that in many cases are lower than the rates we can offer. Rising labor costs and increased overhead costs also reduced our profitability in this segment. However, we plan to resume providing shipping agency services once the shipping industry outlook turns positive.
We did not generate any revenue from providing ship management services$157,800, respectively, for the years ended June 30, 20172023 and 20162022. We ceased to sell crypto-mining equipment since January 1, 2023.
Cost of Revenues
Cost of revenues for our freight logistics services segment mainly consisted of freight costs to various freight carriers, cost of labor, warehouse rent and other overhead and sundry costs. Cost of revenues for our freight logistics services segment was $3,990,654 for the year ended June 30, 2023, a decrease of $145,820, or approximately 3.5%, as management decidedcompared to suspend$4,136,474 for the ship management business segment at the beginning of fiscal year 2016.
(2) Revenues from Shipping and Chartering Services
In connection with the terminationended June 30, 2022 as a result of the acquisitiondecrease in freight costs of Rong Yao International Shipping Limited (“Rong Yao”) on December 7, 2015,our PRC operations caused by the Company realigned its development strategydecrease in shipping volume due to the pandemic.
Our gross margin was 12.1% and temporarily suspended its shipping and chartering services. As a result, we reported nil and $462,218 in revenue from this segment(3.7%) for the years ended June 30, 20172023 and 2016,2022, respectively.
Temporary suspensionThis increase in gross margin in freight logistics segment was mainly due to increased revenue from our sale of the two above business sectors are not treated as discontinued operations since management believes they will continue to operate through these segments once the shipping business market recovers andcrypto mining equipment. We recognized this revenue on a net basis, thus increasing the overall economy improves. Management is still actively identifying new potential relationships with targets for generating ship management service revenue, as well as developing the shipping agency sales network. The Company has also retained the employees who previous handled the business in relation to these two sectors. Although there is no current revenue from these two business sectors, the employees who previously were employed in the shipping agency and ship management business currently participate in the organization and developmentmargin of inland transportation management services, freight logistics services and container trucking services. Once the shipping agency and ship management services and shipping and chartering services restarts again, the employees who previously worked for these sectors will revert to their previous positions to service theses business segments.
our operations.
(3) Revenues
Operating Costs and Expenses
Operating costs and expenses decreased by $ 7,545,942 or approximately 28.3% from Inland Transportation Management Services
In September 2013, the Company executed an inland transportation management service contract with Zhiyuan Investment Group, a related party, whereby the Company agreed to provide certain solutions to help control the potential loss of commodities during the transportation process. The Company also began providing inland transportation management services to a third-party customer, Tengda Northwest, following the quarter ended September 2014. As a result, for the years ended June 30, 2017 and 2016, inland transportation management services revenue generated from related-party was $2,746,423 and $2,269,346, respectively, and revenue generated from third-party was $3,012,177 and $2,071,176, respectively. For the years ended June 30, 2017 and 2016, gross profits from inland transportation management services amounted to $5,138,341 and $2,990,152, respectively.
The increase in total revenues from this segment is due to the increase in the amount of commodities transported through both Zhiyuan Investment Group and Tengda Northwest. For Tengda Northwest, the service fee was RMB 32 per ton. Transported quantities were 648,739 tons$19,133,517 for the year ended June 30, 20172023 compared to 365,104 tons$26,679,459 for the year ended June 30, 2016.2022. This decrease was mainly due to the decrease in stock-based compensation, impairment loss of fixed assets and right of use assets as more fully discussed below.
Selling Expenses
Our selling expenses consisted primarily of salaries, meals and entertainment and travel expenses for our sales representatives. For Zhiyuan Investment Group, the service fee was RMB 38 per ton. Transported quantities were 498,210 tonsyear ended June 30, 2023, we had $232,569 in selling expenses, as compared to $385,890 for the year ended June 30, 20172022, which represents a decrease of $153,321 or approximately 39.7%. The decrease was mainly due to a decrease in marketing expenses for our freight logistics segment in the PRC compared to 442,757 tons for the year ended June 30, 2016.2022.
Overall gross margin for this segment increased to 89.2% for the year ended June 30, 2017 from 68.9% for the year ended June 30, 2016. The increase in gross margin is mainly due to:
|
(4) Revenues from Freight Logistic Services
Since we formed our new subsidiary, Sino-Global Shipping LA, Inc., in January 2016, we began providing freight logistic services, including cargo forwarding and truck transportation services. During the year ended June 30, 2017, the portion of revenues generated from freight logistic services has increased significantly, and the Company presents the related revenue as a separate business segment. The Company has signed agreements with non-related parties, LJC Trading New York Ltd. and Zhiyuan (Hong Kong) Chromium Group Co., to provide freight logistic services.
Pursuant to the strategic cooperation agreement with COSCO Logistics, signed in July 2016, Sino-Global Shipping LA, Inc. began to provide logistic services to COSCO Logistics beginning the third quarter of fiscal year 2017. These services include cargo forwarding, trucking and customs declaration and filings.
In the third quarter of fiscal year 2017, the Company entered into an agreement with COSFRE Beijing, pursuant to which the Company formed a new joint venture company, ACH Trucking Center, with Jetta Global to provide short-haul trucking transportation and freight logistics services to customers located in the New York and New Jersey areas. Benefitting from the Company’s new logistics platform, strategic cooperation with COSCO Logistics and the new joint venture, revenue generated from freight logistic services was $4,815,450, and the related gross profit was $1,105,086 for the year ended June 30, 2017.
(5) Revenues from Container Trucking Services
Since we completed our website version of short distance container truck service platform in December 2016, we began to generate revenue from short distance trucking and containers services through the service platform and presents this as a new segment, “Container Trucking Services” beginning in the second quarter of 2017. Since the second quarter of fiscal year 2017, the Company has provided container trucking services in the PRC, and began to provide related services in the U.S. beginning in the third quarter of fiscal year 2017. This new business segment is based on a modified and improved version of our freight logistics services business segment. For the year ended June 30, 2017, revenue generated from container trucking services was $871,563 and the related gross profit was $221,595.
Operating Costs and Expenses
Total operating costs and expenses decreased by $215,336 or 2.5%, from $8,559,767 for the year ended June 30, 2016 to $8,344,431 for the year ended June 30, 2017. This decrease was primarily due to the decrease in general and administrative expenses and selling expenses partially offset by the increase in cost of revenues as discussed below.
The following table sets forth the components of the Company’s costs and expenses for the periods indicated:
For the years ended June 30, | ||||||||||||||||||||||||
2017 | 2016 | Change | ||||||||||||||||||||||
US$ | % | US$ | % | US$ | % | |||||||||||||||||||
Revenues | 11,445,613 | 100.0 | % | 7,310,540 | 100.0 | % | 4,135,073 | 56.6 | % | |||||||||||||||
Cost of revenues | 4,980,591 | 43.5 | % | 3,737,989 | 51.1 | % | 1,242,602 | 33.2 | % | |||||||||||||||
Gross margin | 56.5 | % | 48.9 | % | 7.6 | % | ||||||||||||||||||
General and administrative expenses | 3,152,336 | 27.5 | % | 4,346,159 | 59.5 | % | (1,193,823 | ) | (27.5 | )% | ||||||||||||||
Selling expenses | 211,504 | 1.8 | % | 475,619 | 6.5 | % | (264,115 | ) | (55.5 | )% | ||||||||||||||
Total Costs and Expenses | 8,344,431 | 72.8 | % | 8,559,767 | 117.1 | % | (215,336 | ) | (2.5 | )% |
Costs of Revenues
Cost of revenues was $4,980,591 for the year ended June 30, 2017, an increase of $1,242,602, or 33.2%, as compared to $3,737,989 for the year ended June 30, 2016. The overall cost of revenues as a percentage of our revenues decreased from 51.1% for the year ended June 30, 2016, to 43.5% for the year ended June 30, 2017. The decrease in the overall costs of revenues in percentage terms for the year ended June 30, 201 7is due to the fact that the majority of our revenues during the year ended June 30, 2017 came from the more profitable inland transportation services and freight logistics services rather than the less profitable shipping agency service sector. Since revenue from shipping agency services has been decreased to nil, inland transportation management services and freight logistic services are now considered to be our essential revenue sources.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and benefits, office rent,travel expenses for our administration department, office expenses, and regulatory filing and listing fees, amortization of stock-based compensation expenses, legal, accounting and other professional service fees.fees for auditing, legal and IT consulting. For the year ended June 30, 2017,2023, we had $3,152,336$11,572,888 of general and administrative expenses, as compared to $4,346,159$9,301,784 for the year ended June 30, 2016, a decrease2022, representing an increase of $1,193,823,$2,271,104, or 27.5%approximately 24.4%. The decreaseincrease was mainly due to decreased stock-based compensation for common stock issued to consultants, decreased stock compensation for management, a recovery on allowance for doubtful accounts, and fewerthe increased professional fees of approximately $4.0 million which are mainly legal fees incurred during the year ended June 30, 2017 comparedrelating to the corresponding periodCompany’s special committee’s investigation of claims of alleged fraud, misrepresentation, and inadequate disclosure related to the Company and certain of its management personnel raised in 2016. As a resultthe Hindenburg Report and other related matters.
Impairment Loss of the substantial reduction in general and administrative expenses and the increase in revenues, our general and administrative expenses, as a percentageCryptocurrencies
We recorded an impairment loss of revenue, decreased from 59.5%$18,279 for the year ended June 30, 20162023 due to 27.5%price drops in bitcoin, which the Company deemed a triggering event for the corresponding period in 2017.impairment testing.
Impairment Loss of Fixed Assets and Right of Use Assets
Selling Expenses
The Company’s selling expenses consist primarilyWe recorded impairment losses of business development costs$33,469 and salaries and commissions for our operating staff at the ports at which we provide services. For the year ended June 30, 2017, we had $211,504 of selling expenses as compared to $475,619$1,006,305 for the year ended June 30, 2016, a decrease2023 and 2022.
We performed our annual goodwill impairment analysis as of $264,115, or 55.5%. The decrease was mainly attributable to the suspension of shipping agency services during the year ended June 30, 2017. No salaries2023 and commissions were madeconcluded we had approximately an $0.03 million impairment loss for fixed assets and right of use assets, as our carrying value exceeds the operating stafffair value. The fair values are determined by income approach where projected future cash flows discounted at rates commensurate with the ports. Onrisks involved, (“Discounted Cash Flow” or “DCF” of the other hand,income approach). Assumptions used in a DCF analysis require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows.
Impairment Loss of Investment
The Company clarified responsibilities for the sales personnel and centralized major sales activities functions in our headquarters in order to decrease selling expenses incurred in different subsidiaries in 2016. As a percentage of revenue, our selling expenses decreased from 6.5%recorded $128,369 for the year ended June 30, 2016,2023 due to 1.8% for the corresponding periodimpairment of the Company’s investment in 2017.
Operating Income (Loss)
The Company had an operating income of $3,101,182LSM Trading Ltd. No impairment loss was recorded for the year ended June 30, 2017, compared2022.
Provision for Doubtful Accounts, Net of Recovery
Our total bad debt expenses amounted to approximately $2.8 million, mostly due to a $3 million wire transfer made by our former COO, Jing Shan to Goalowen Inc. on May 5, 2023 without the Board’s authorization, as payment for the transfer by Goalowen to the Company of an operating lossincome right to be derived from fishing activities. The Company has demanded the return of $1,249,227 for the comparable period ended$3 million but has not been successful. As of June 30, 2016. The increase2023, the Company reviewed the unauthorized transfer, evaluated the collection possibility, and decided to provide 100% allowance provision with amount of USD 3 million.
Stock-based Compensation
Stock-based compensation was mainly due to increased revenue generated from inland transportation management services and freight logistic services with strong gross profit contributions, and the significant decline in general and administrative expenses and selling expenses discussed above.
Financial Income (Expense), Net
The Company’s net financial income was $30,278$329,778 for the year ended June 30, 2017,2023, a decrease of $9,734,844 or 96.7%, as compared to net financial expense of $247,530$10,064,622 for the same periodyear ended June 30, 2022, as we issued less stock compensation to employees and directors.
Loss from disposal of 2016. Wesubsidiaries and VIE
On December 31, 2021, the Company entered into a series of agreements to terminate its VIE structure and deconsolidated its formerly controlled entity Sino-China. The Company controlled Sino-China through its wholly owned subsidiary Trans Pacific Beijing. The Company made the decision to dissolve the VIE structure and Sino-China because Sino-China has no active operations and the Company wanted to remove any potential risks associated with VIE structures. The Company also dissolved its subsidiary Sino-Global Shipping LA, Inc., and on March 14, 2022, the Company discontinued its subsidiary Sino-Global Shipping Canada, Inc. The total loss related to the three disposals amounted to approximately $6.1 million for the year ended June 30, 2022. The Company also dissolved its subsidiary Sino-Global Shipping Australia Pty Ltd. (“SGS AUS”) in November 2022.
Since these entities did not have any active operations prior to their disposal, the disposal did not represent a strategic change in the U.S., Canada, Australia, Hong KongCompany’s business. As such, the disposal was not presented as a discontinued operation.
Lawsuit settlement expenses
We recorded $8.4 million in lawsuit settlement expenses for the year ended June 30, 2023, compared to nil in lawsuit settlement expenses for the year ended June 30, 2022. The expenses were related to the lawsuits in connection with the Securities Purchase Agreement and the PRC,Financial Advisory Agreement described in Item 1. Business – Litigation..
Other Expenses, Net
Other expenses, net was $0.07 million for the year ended June 30, 2023, which mainly consisted of interest expense for our convertible debt of approximately $0.25 million and the gain on disposal of right of use assets and fixed assets of $0.19 million, compared to $0.1 million of interest expenses for our financialconvertible debt and other finance charges, net of interest earned in the year ended June 30, 2022.
Taxes
Our income (expenses)tax expenses amounted to $135,855 and nil for the years ended June 30, 20172023 and 2016 mainly reflects the foreign currency transaction income expressed in USD.2022, respectively.
Taxation
We have incurred a cumulative U.S. federal net operating loss (“NOL”) of approximately $22,000,000 as of June 30, 2022, which may reduce future federal taxable income. The Company’s income tax benefit was $472,084NOL generated for the year ended June 30, 2017, compared2023 amounted to approximately $19,700,000. The Tax benefit derived from this NOL was approximately $8,775,000. As of June 30, 2023, our cumulative NOL amounted to approximately $41,700,000.
Our operations in China have incurred a cumulative NOL of approximately $1,333,000 as of June 30, 2022, which was mainly from Sino -China which was disposed of in the year ended June 30, 2022. During the year ended June 30, 2023, we generated an additional NOL of approximately $370,000 due to increased third party service cots as a result of our special committee’s investigation. Our PRC subsidiaries’ cumulative NOL amounted to approximately $1,703,000 as of June 30, 2023, which may reduce future taxable income and will expire by 2026.
We periodically evaluate the likelihood of the realization of our deferred tax expenseassets and reduce the carrying amount of $812,593the deferred tax assets by a valuation allowance to the extent we believe a portion will not be realized. Management considers new evidence, both positive and negative, that could affect our future realization of deferred tax assets including our recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors. We determined that it is more likely than not our deferred tax assets would not be realized due to uncertainty on future earnings as a result of the Company’s reorganization and venture into new businesses. We provided a 100% allowance for deferred tax assets as of June 30, 2023. The net decrease in valuation for the year ended June 30, 2016. During the year ended June 30, 2017,2023 amounted to approximately $4,696,000 based on management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized.
Net Loss
As a result of the foregoing, we had a net operating loss (“NOL”) utilized was $1,853,000 and the tax benefit derived from such NOL was $630,000; in the corresponding periodof $23,098,342 for the year ended June 30, 2016, the utilization of NOL was nil and no tax benefit was derived from NOL. During the year ended June 30, 2017, the Company provided an allowance against the deferred tax assets based on the Company’s projected taxable income and resulted in2023, compared to a net deferred tax assetloss of approximately $749,000; in the corresponding period of 2016, the Company provided a 100% valuation allowance against the deferred tax assets and no tax benefit was derived therefrom. The decrease in income tax expense was also attributable to a decrease in the taxable income of Trans Pacific during the year ended June 30, 2017 in comparison to the same period in 2016.
Net Income (Loss)
As a result of the foregoing, the Company had a net income of $3,603,544$28,928,369 for the year ended June 30, 2017, compared to a net loss of $2,301,522 for the year ended June 30, 2016.2022. After the deduction of non-controlling interest, net incomeloss attributable to Sino-Globalus was $3,624,892$22,996,846 for the year ended June 30, 2017;2023, compared to $28,257,830 for the same period in 2022. Comprehensive loss attributable to us was $22,952,349 for the year ended June 30, 2016, the Company had a net loss of $1,965,929. Comprehensive income attributable2023, as compared to the Company was $3,491,235$27,482,995 for the year ended June 30, 2017, compared to a comprehensive loss of $2,338,268 for the year ended June 30, 2016.2022.
Liquidity and Capital Resources
Cash Flows and Working Capital
As of June 30, 2017,2023, we had $8,733,742$17,390,156 in cash (including cash on hand and cash equivalents. We held approximately 28.2%in bank). The majority of our cash in banks located in New York, Los Angeles, Canada, Australia and Hong Kong and held approximately 71.8% of our cashis in banks located in the PRC.U.S.
On December 19, 2021, the Company issued two convertible notes to two non-U.S. investors for an aggregate purchase price of $10,000,000 (the “December 2021 Convertible Notes”). The December 2021 Convertible Notes bear interest at 5% annually and may be converted into shares of the Company’s common stock at a conversion price of $3.76 per share. At the investors’ request, we prepaid $5,000,000 in the aggregate principal amount, without interest, of the December 2021 Convertible Notes on March 8, 2022. Interest for the $5,000,000 principal that was repaid was waived.
As of June 30, 2023, we had the following loan outstanding:
Loans | Maturity | Interest rate | Amount | |||||||
Convertible Notes | December 2023 | 5 | % | $ | 5,000,000 |
The following table sets forth a summary of our cash flows for the periods as indicated:
For the years ended June 30, | ||||||||
2017 | 2016 | |||||||
Net cash provided by (used in) operating activities | $ | 2,994,770 | $ | (121,048 | ) | |||
Net cash provided by (used in) investing activities | $ | (62,412 | ) | $ | 294,376 | |||
Net cash provided by financing activities | $ | 4,402,488 | $ | 646,589 | ||||
Net increase in cash and cash equivalents | $ | 7,347,748 | $ | 655,672 | ||||
Cash and cash equivalents at the beginning of year | $ | 1,385,994 | $ | 730,322 | ||||
Cash and cash equivalents at the end of year | $ | 8,733,742 | $ | 1,385,994 |
For the Years Ended June 30, | ||||||||
2023 | 2022 | |||||||
Net cash (used in) provided by operating activities | $ | (33,643,405 | ) | $ | 5,918,070 | |||
Net cash used in investing activities | $ | (2,225,708 | ) | $ | (3,581,676 | ) | ||
Net cash (used in) provided by financing activities | $ | (2,125,420 | ) | $ | 8,351,964 | |||
Effect of exchange rate fluctuations on cash | $ | (448,593 | ) | $ | 307,607 | |||
Net (decrease) increase in cash | $ | (38,443,126 | ) | $ | 10,995,965 | |||
Cash at the beginning of period | $ | 55,833,282 | $ | 44,837,317 | ||||
Cash at the end of period | $ | 17,390,156 | $ | 55,833,282 |
The following table sets forth a summary of our working capital:
June 30, 2017 | June 30, 2016 | Variation | % | |||||||||||||
Total Current Assets | $ | 16,754,888 | $ | 8,651,985 | $ | 8,102,903 | 93.7 | % | ||||||||
Total Current Liabilities | $ | 3,086,496 | $ | 2,437,382 | $ | 649,114 | 26.6 | % | ||||||||
Working Capital | $ | 13,668,392 | $ | 6,214,603 | $ | 7,453,789 | 119.9 | % | ||||||||
Current Ratio | 5.43 | 3.55 | 1.88 | 53.0 | % |
June 30, | June 30, | |||||||||||||||
2023 | 2022 | Variation | % | |||||||||||||
Total Current Assets | $ | 18,192,716 | $ | 63,165,462 | $ | (44,972,746 | ) | (71 | )% | |||||||
Total Current Liabilities | $ | 5,031,769 | $ | 25,212,959 | $ | (20,181,190 | ) | (80 | )% | |||||||
Working Capital | $ | 13,160,947 | $ | 37,952,503 | $ | (24,791,556 | ) | (65 | )% | |||||||
Current Ratio | 3.62 | 2.51 | 1.11 | 44 | % |
We finance our ongoing operating activities primarily by using funds from our operations. We routinely monitor current and expected operational requirements to evaluate the use of available funding sources. In assessing the liquidity, Management monitorswe monitor and analyzes the Company’sanalyze our cash on-hand its ability to generate sufficient revenue sources in the future and the Company’sour operating and capital expenditure commitments. The Company plansOur liquidity needs are to fund continuing operations through identifying new prospective joint ventures and strategic alliance opportunities for new revenue sources, and by reducing costs to improve profitability and replenish working capital. Consideringmeet our existing working capital position and our ability to access other funding sources, management believes that the foregoing measures will provide sufficient liquidity for the Company to meet its future liquidityrequirements, operating expenses and capital expenditure obligations. As of June 30, 2023, our working capital was approximately $13.2 million and we had cash of approximately $17.4 million. We believe our current working capital is sufficient to support our operations and debt obligations as they become due within one year from the date of this Report.
Operating Activities
Our net cash derived fromused in operating activities was $2,994,770approximately $33.6 million for the year ended June 30, 2017, including net income of $3.60 million from increased revenue generated from inland transportation management services, freight logistics services with strong margin contributions and decreased general and administrative expenses and sales expenses. In addition, advances to third party suppliers- decreased by $2.09 million because we received certain freight services prepayments pursuant2023. The operating cash outflow for the year ended June 30, 2023 was primarily attributable to our Memorandumnet loss of Understanding with Singapore Metals & Minerals Pte Ltd.approximately $23.1 million which included a $8.4 million lawsuit settlement. Our cash outflow also included deferred revenue of approximately $6.9 million where we realized revenue from the sale of crypto mining equipment and Galasi Jernsih Sdn BHDa decrease in the third and fourth quarterrefund payable of 2017. However, advances to related-party suppliers increased by $3.32$13.0 million as a result of Cooperative Transportation Agreement signed with Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd. (“Zhiyuan Hong Kong”),the settlement payment to SOSNY, offset by cash inflow consisting of advance to a related party pursuant tosupplier of approximately $6.2 million which we advanced transportation paymentsrealized as the cost for the sale of cryptocurrency equipment.
Our net cash provided by operating activities was approximately $3.33$5.9 million duringfor the year ended June 30, 2017. Cash2022. The operating cash inflow for the year ended June 30, 2022 was primarily attributable to our net loss of approximately $28.9 million, adjusted by non-cash stock-based compensation of approximately $10.0 million, loss on disposal of subsidiaries and VIE of approximately $6.1 million and provision for doubtful accounts of approximately $1.6 million. We had an increase in cash inflow of other receivables of approximately $1.4 million and we received a total of $47.0 million from SOSNY, approximately $34.1 million was an advanced payment we received for the sale of cryptocurrency mining machines, while we refunded $13.0 million to SOSNY in December 2022. Our cash inflow was decreased by an advance to a related party supplier of approximately $34.1 million which was for the purchase of cryptocurrency mining machines.
Investing Activities
Net cash used in investing activities was approximately $2.2 million for the year ended June 30, 2023. This is mainly due to an amount of $3.0 million paid to Goalowen Inc. with an operating income right transfer contract. We also had cash inflows from operatingrepayment of a loan receivable of approximately $0.5 million from Qinggang Wang and Lei Cao, who are related parties, and $0.09 million from the sale of property and equipment, and repayments from related parties of approximately $0.3 million,
Net cash used in investing activities was approximately $3.5 million for the year ended June 30, 2022 due to the acquisition of property and equipment of approximately $0.9 million and an investment of approximately $0.2 million to a 40% owned joint venture. We made an additional loan of $0.5 million to Wang Qinggang, a related party to the Company, and CEO and legal representative of Trans Pacific Shanghai which is due in June 2024. We also made related party advances of approximately $1.9 million, which includes $1.3 million to Shanghai Baoyin which is 30% owned by Wang Qinggang, and approximately $0.6 million in advances to LSM Trading Ltd, of which we hold a 40% ownership interest. The outstanding personal loan owed by Wang Qinggang was fully repaid in December 2022. The Company is taking actions in order to pursue all available legal remedies including lawsuits to recover the $0.6 million advanced to LSM Trading Ltd.
Financing Activities
Financing activities for the year ended June 30, 2017 reflect the above mentioned major factors.
Net cash used in operating activities2023 was $121,048 for the year ended June 30, 2016, which included our operating loss of $2.30 million due to our decreased revenue in the shipping agency service sector and increased selling expenses. In addition, the advances to third-party suppliers increased by $2.14 million because we prepaid freight fees of RMB 14.58 million (approximately $2.2 million) based on our Memorandum of Understanding (“MOU”) with Singapore Metals & Minerals Pte Ltd. (“the Buyer”) and Galasi Jernsih Sdn BHD (“the Seller”), the accounts receivable decreased by $0.62 million because we strengthened our cash collection efforts and received amainly payment of RMB 13.4$2.1 million (approximately $2.0 million) from Tengda Northwest,for fair value of shares to be cancelled in our major third-party customer of inland transportation services, and due from related parties decreased by $1.16 million because we collected RMB 22.2 million (approximately $3.3 million) from our related party customer, Zhiyuan. The Company’s cash outflows from operating activities for the year ended June 30, 2016 reflected the above mentioned factors.legal settlement.
Investing Activities
The Company’s net cash used in investing activities was $62,412 for the year ended June 30, 2017 compared to net cash provided by investing activities of $294,376 for the same period of 2016. For the year ended June 30, 2017, we purchased a vehicle in the amount of $55,339. For the year ended June 30, 2016, the amount was mainly generated by cash collection from the termination of our $326,035 vessel acquisition.
Financing Activities
The Company’s net cash derived from financing activities was $4,402,488 for the year ended June 30, 2017, compared to $646,589 for the year ended June 30, 2016. During the year ended June 30, 2017, 75,000 stock options were exercised by the two employees of the Company with an exercise price of $1.10. As a result, net proceeds of $82,500 were recognized as net proceeds from exercise of stock options by the Company. In addition, the Company received net proceeds in the amount of $4,319,988 from a registered direct sale of 1.5 million shares of its common stock to three institutional investors.
Net cash provided by financing activities was $646,589approximately $8.3 million for the year ended June 30, 2016, of which $691,600 resulted from the proceeds from the issuance2022 due to issuances of common stock to one individual investor in a private sale transaction on July 10, 2015. During the year ended June 30, 2016, the Company repurchased 50,306 common sharesplacements of approximately $10.5 million and recorded such shares as treasury stock, with a paymentproceeds from convertible notes of $45,011.
$10 million, repayment of convertible notes of $5.0 million and warrant repurchase of approximately $7.9 million. We also had cash from warrants exercise of approximately $0.9 million and repayment of Economic Injury Disaster Loan.
Critical Accounting PoliciesEstimates
We prepare our consolidatedThe preparation of financial statements and related disclosures in accordanceconformity with U.S. GAAP. Thesegenerally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require usthe Company’s management to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledgethat affect the amounts reported. Note 2, “Summary of Significant Accounting Policies” of the notes to the financial statements included elsewhere in this Report describe the significant accounting policies and assessmentmethods used in the preparation of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.
Company’s consolidated financial statements. There have been no material changes during the year ended June 30, 2017 in our accounting policies from those previously disclosed into the Company’s annual report for the fiscal year ended June 30, 2016.
The selection of critical accounting policies,estimates since the judgments and other uncertainties affecting applicationdate of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.this Report.
Revenue RecognitionOff-Balance Sheet Arrangements
None.
Basis of Consolidation
The Company’s consolidated financial statements include the accounts of the parent, its subsidiaries and its affiliates. All inter-company transactions and balances are eliminated in consolidation. Sino-Global Shipping Agency Ltd. (“Sino-China”) is considered to be a Variable Interest Entity (VIE) and the Company is the primary beneficiary. Because of the contractual arrangements, the Company had a pecuniary interest in Sino-China that requires consolidation of our and Sino-China’s financial statements. The accounts of Sino-China are consolidated in the accompanying consolidated financial statements pursuant to Accounting Standard Codification (“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s revenues are included in our total revenues, its net loss from operations is consolidated with our net income (loss) before non-controlling interest. Our non-controlling interest in its net loss is then subtracted to calculate the net income attributable to the Company. The Company temporarily suspended its business with Sino-China in June 2014, therefore, there is no net income generated by Sino-China in the present.
Use of Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue recognition, fair value of stock based compensation, cost of revenues, allowance for doubtful accounts, deferred income taxes, and the useful lives of property and equipment. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
Accounts Receivable
Accounts receivable are recognized at net realizable value. The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments in the relevant time period. Management reviews the accounts receivable on a periodic basis and record general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, we consider many factors, including the age of the balance, the customer’s historical payment history, its current credit-worthiness and current economic trends. Receivables are considered past due after 365 days. Accounts are written off against the allowance only after exhaustive collection efforts.
Stock-based Compensation
Valuations are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.
Taxation
Because the Company and its subsidiaries and Sino-China are incorporated in different jurisdictions, they file separate income tax returns. The Company uses the liability method of accounting for income taxes in accordance with U.S. Generally Accepted Accounting Principles (“US GAAP”). Deferred taxes, if any, are recognized for the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. A valuation allowance is provided against deferred tax assets if it is more likely than not that the asset will not be utilized in the future.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions as of June 30, 2017 and 2016, respectively.
Income tax returns for the years prior to 2014 are no longer subject to examination by U.S. tax authorities. Income tax returns for the years prior to 2012 are no longer subject to examination by PRC authorities.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income determined under the PRC Generally Accepted Accounting Principles (“PRC GAAP”) at 25%. Sino-China and Trans Pacific are registered in PRC and governed by the Enterprise Income Tax Laws of the PRC.
PRC Business Tax and Surcharges
Revenues from services provided by the Company’s PRC subsidiaries and affiliates, including Sino-China and Trans Pacific are subject to the PRC business tax of 5%. Business tax and surcharges are paid on gross revenues generated from shipping agency services minus the costs of services which are paid on behalf of the customers.
Enterprises or individuals who sell commodities, engage in services or selling of goods in the PRC are subject to a value added tax (“VAT”) in accordance with PRC laws. All of the Company’s revenue generated in the PRC are subject to a VAT on the gross sales price. The VAT rates are 6% and 11%, depending on the type of services provided. The VAT may be offset by VAT paid by the Company on service.
In addition, under PRC regulations, the Company’s PRC subsidiaries and affiliates are required to pay city construction taxes (7%) and education surcharges (3%) based on calculated business tax payments.
The Company’s PRC subsidiaries and affiliates report revenues net of PRC’s VAT, business tax and surcharges for all the periods presented in the consolidated statements of operations.
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serve as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The Company’s financial statements and the related notes, together with the report of FriedmanAudit Alliance LLP, are set forth following the signature pages of this report. Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
TheAs of June 30, 2023, the Company maintainscarried out an evaluation, under the supervision of and with the participation of its management, including the Company’s Chief Operating Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing evaluation, the Chief Operating Officer concluded that the Company’s disclosure controls and procedures designed(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective to ensure that the information required to be disclosed by the issuerCompany in the reports that it files or submits under the Exchange Act (15 U.S.C. 78aet seq.) is recorded, processed, summarized and reported within the time periods specified in the Commission’sapplicable rules and forms. Disclosureforms due to ineffective internal controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
as more fully described below.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; |
● | ||
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its management and directors; and |
● | ||
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
As of June 30, 2017, the Company carried outManagement conducted an evaluation, under the supervision of and with the participation of its management, including the Company’s Chief Executive Officer and Acting Chief Financial Officer,assessment of the effectiveness of the design and operationCompany’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Company’s disclosure controls and procedures.Treadway Commission (2013 framework). Based on the foregoing evaluation, Chief Executive Officer and Acting Chief Financial OfficerCompany’s assessment, management has concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms due to ineffectiveits internal controlscontrol over financial reporting that stemmed fromwas not effective due to the following materialweaknessesfor the year ended and as of June 30, 2017:2023:
● | Lack of segregation of duties for accounting personnel who prepared and reviewed the journal |
● | ||
Lack of a full time U.S. GAAP personnel in the accounting department to monitor the recording of the |
● | Lack of resources with technical competency to address, review and record non-routine or complex transactions under U.S. GAAP; |
The
● | Lack of management control reviews of the budget against actual with analysis of the variance with a precision that can be explained through the analysis of the accounts; |
● | Lack of proper procedures in identifying and recording related party transactions which led to restatement of previously issued financial statements (See Note 1 of the accompanying consolidated financial statement footnotes); |
● | Lack of proper procedures to maintain supporting documents for accounting record; and |
● | Lack of proper oversight for the Company’s cash disbursement process that led to misuse of the Company funds by its former executive. |
A material weakness is not required to have itsa deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, assuch that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In order to remediate the material weaknesses stated above, we intend to implement the following measures, policies and procedures:
● | Hiring additional accounting staff to report the internal financial timely; |
● | Reporting other material and non-routine transactions to the Board and obtain proper approval; |
● | Recruiting additional qualified professionals with appropriate levels of U.S. GAAP knowledge and experience to assist in resolving accounting issues in non-routine or complex transactions; |
● | Developing and conducting U.S. GAAP knowledge, SEC reporting and internal control training to senior executives, management personnel, accounting departments and the IT staff, so that management and key personnel understand the requirements and elements of internal control over financial reporting mandated by the U.S. securities laws; |
● | Setting up budgets and developing expectations based on understanding of the business operations, compare the actual results with the expectations periodically and document the reasons for the fluctuations with further analysis. This should be done by CFO and reviewed by CEO upon their communications with the Board; | |
● | Strengthening our corporate governance; |
● | Setting up policies and procedures for the Company’s related party identification to properly identify, record and disclose related party transactions; and |
● | Setting up proper procedures for the Company’s fund disbursement process to ensure that cash is disbursed only upon proper authorization, for valid business purposes, and that all disbursements are properly recorded. |
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2017 audited by its auditors because it2023 that has materially affected, or is a smaller reporting company. reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Regulation S-K Item 401Ziyuan Liu
Lei Cao
Chief Executive Officer and Director
Age - 53
Director since 2001
Mr. Cao isZiyuan Liu has been our Chief Executive Officer since April 2023 and a Director.director and chairman of the Board since May 2023. Before joining the Company, Mr. Cao founded our companyLiu served as the manager of the North American market development department in 2001Fulongma Group Co., Ltd., a comprehensive environmental sanitation solutions provider in China, from July 2022 to April 2023. Prior to that, he worked for Ningbo Shunxiang Group Co., Ltd., a polyester film manufacturer in China, as the chief operating officer from July 2019 to July 2022. From July 2018 to June 2019, he served as the project manager for Shouhang New Energy, a solar photovoltaics and has beenenergy storage solutions supplier in China. Prior to that, he worked for Hongkun Group, a real estate developer based in China, as the Chief Executive Officer since that time.general manger for the Shenzhen area from July 2015 to June 2018. Mr. Liu graduated from Wuhan Institute of Technology with a major in project management.
Ying Cao
Mr. Ying Cao has been our Chief Executive officer of our companyFinancial Officer since its formation.August 2023. He has served as the department manager and quality control manager at Shaanxi Huaqiang Certified Public Accountants Co., Ltd. since 2015. Prior to founding our company,that, he served as a project manager in Sigma Accounting Firm from 2007 to 2014. Mr. Cao was a Chief Representative of Wagenborg-Lagenduk Scheepvaart BV, Holland, from 1992 to 1993, Director of the Penavico-Beijing’s shipping agency from 1987 through 1992, and a seaman for Cosco-Hong Kong from 1984 through 1987. Mr. Cao receivedobtained his EMBAbachelor’s degree in 2009accounting from Shanghai Jiao Tong University. Mr. Cao was chosen as a director because he is the founder of our company and we believe his knowledge of our company and years of experience in our industry give him the ability to guide our company as a director.
Jing Wang
Independent Director
Age - 69
Director since 2007
Mr. Wang currently serves as Chief Economist to China Minsheng Banking Corp., Ltd. and has held this position since December 2002. Mr. Wang was a Chinese Project Advisor for the World Bank from 1990 until 1994. From 1998 through 2000, Mr. Wang was the vice director of Tianjin Security and Futures Supervision Office, in charge of initial public offerings and listing companies. Mr. Wang is an independent director for Tianjin Binhai Energy & Development Co. Ltd., (Shenzhen Stock Exchange: 000695); Tianjin Marine Shipping Co., Ltd. (Shanghai Stock Exchange: 600751), and ReneSola Company (London Stock Exchange: SOLA). Mr. Wang received a Bachelor degree in Economics from TianjinXi’an University of Finance and Economics. The Board believes that Mr. Wang’s economics background and experience working with public companies qualify him to serveYing Cao is a Certified Public Accountant in China.
Xu Zhao
Mr. Xu Zhao has been a director since September 2023. Mr. Zhao has worked as the president of Shijiazhuang Juminhui Technology Co., Ltd., a Chinese trading company since March 2023. He was the regional manager for Hebei Province of Jiangsu Hengrui Pharmaceuticals Co., Ltd., a Chinese pharmaceutical company from September 2009 to July 2022. Mr. Zhao received his bachelor’s degree in marketing from Nankai University Binhai College in 2009.
Haotian Song
Mr. Haotian Song has been a director since May 2023. Mr. Song is the founder and chief executive officer of HT Processing, a cross-border payment system provider with extensive knowledge into Chinese consumer spending habits in hospitality and retail industries, from June 2017 to April 2023. Prior to that, he served as the chief operating officer of Calabash Brothers LLC, an Asian e-commerce logistics company, from November 2021 to April 2022. From August 2013 to August 2017, Mr. Song worked for Go To Travel, a travel agency company providing Asian tour operators with exclusive wholesale access to top attraction tickets in the east coast, as its general manager. Mr. Song received his bachelor’s degree in business administration from Baruch College of the Company. City University of New York in 2013.
Tieliang Liu
Independent Director
Age - 57Zhongliang Xie
Director
Mr. Zhongliang Xie has been a director since 2013
Dr. Liu currently servesJuly 2023. He has served as the General Manager of Zhongxing Cai Guanghua Certified Public Accountants, Shaanxi Branch since January 2019. He has also served as the vice president in charge of accountingShanxi NEEQ Federation since January 2017, and financean Internal Committee member of Shanxi Provincial Equity Exchange Center since August 2021. From April 2008 to China Sun-Trust Group Ltd. and has held this position since 2001. Dr. Liu was a financial controller for Huaxing Group Ltd from 1998December 2018, he worked as the General Manager of Beijing Xinghua Certified Public Accountants, Xi’an Branch. From May 2005 to 2001. From 1996 through 1998,April 2008, he was the chief accountantController of China Enterprise ConsultingZhongyi Far East Import & Export Co., Ltd. Before workingMr. Xie graduated from Bao Ji University majoring in industry, Dr. Liu taught accounting and finance in a university for more than ten years and has published dozens of books and articles. Dr. LiuEnterprise Management. He is a CPA in China. He received a PhD, master’s and bachelor’s degrees from Tianjin University of Finance and Economics. Dr. Liu has been chosen to serve as a director because of his accounting and business knowledge and experience in working with small and medium-sized companies.
Ming Zhu
Independent Director
Age - 58
Director since 2014
Mr. Zhu has been an international business consultant with RMCC Investment LLC, a Richmond, Virginia based consulting firm, since 1994. Mr. Zhu holds a master’s degree in tourism and business from Virginia Commonwealth University. Mr. Zhu has also served as an independent director at eFuture Information Technology Inc. since 2007 and as an independent director of Tri-Tech Holding, Inc. since 2012. Mr. Zhu was chosen as a director because of his experience with public companies and his knowledge of our company.
Zhikang Huang
Chief Operating Officer and Director
Age - 40
Mr. Huang has been our Chief Operating Officer since 2010. Prior to 2010, he served as Director of Sino-Global Shipping Australia, for which he was responsible for regional operations, marketing and regulation oversight. From 2006 through 2010, Mr. Huang served as our Company’s Vice President, with duties focused on company operation and strategy, international shipping and marketing. From 2004 through 2006, Mr. Huang served as our Company’s Operations Manager, and from 2002 through 2004, he served as an operator with our Company. Mr. Huang obtained his degree in English from Guangxi University in 1999.
Tuo Pan
Acting Chief Financial Officer
Age – 32
Ms. Pan is our Acting Chief Financial Officer and a seasoned Certified Public Accountant, licensedCertified Public Valuer and Registered Cost Engineer in Australia. Since 2008, Ms. Pan has overseen the finance and accounting functions of Sino-Global Shipping Australia Pty Ltd. Ms. Pan received her bachelor’s degree in Accounting and Finance and a master’s degree in Advance Accounting from the Curtin University of Technology in Western Australia. From August 2007 to July 2008, Ms. Pan worked as an auditor and project manager of Baker Tilly China Ltd., and participated in various projects from e-Future Information Technology Inc, TMC Education Corporation Ltd, China Ministry of Commerce, etc.China.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our current directors or executive officersofficer has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities or commodities laws, any laws respecting financial institutions or insurance companies, any law or regulation prohibiting mail or wire fraud in connection with any business entity or been subject to any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization, except for matters that were dismissed without sanction or settlement. None
Board Diversity Matrix
Pursuant to the Nasdaq’s Board Diversity Rules, below is the Company’s board diversity matrix outlining diversity statistics regarding our Board.
Board Diversity Matrix as of September 25, 2023 | ||||||||||||||||
Total Number of Directors | 5 | |||||||||||||||
Female | Male | Non-Binary | Did Not Disclose Gender | |||||||||||||
Part I: Gender Identity | ||||||||||||||||
Directors | 1 | 4 | ||||||||||||||
Part II: Demographic Background | ||||||||||||||||
Asian | 5 |
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that our directors, director nominees or executive officers has been involved in any transactions with us or any of ourand directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Board Leadership Structure
Mr. Lei Cao currently holds both the positions of Chief Executive Officer and Chairman of the Board. These two positions have not been consolidated into one position; Mr. Cao simply holds both positions at this time. The Board of Directors believes that Mr. Cao’s service as both Chief Executive Officer and Chairman of the Board is in the best interests of the Company and its shareholders. Mr. Cao possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its business and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s shareholders, employees, customers and suppliers.
We do not have a lead independent director because we believe our independent directors are encouraged to freely voice their opinions on a relatively small company board. We believe this leadership structure is appropriate because we are a smaller reporting company; as such, we deem it appropriate to be able to benefit from the guidance of Mr. Cao as both our Chief Executive Officer and Chairman of the Board.
Risk Oversight
Our Board of Directors plays a significant role in our risk oversight. The Board of Directors makes all relevant Company decisions. As such, it is important for us to have our Chief Executive Officer serve on the Board as he plays a key role in the risk oversight of the Company. As a smaller reporting company with a small board of directors, we believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.
Section 16(a) Beneficial Ownership Reporting Compliance (Regulation S-K Item 405)
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under 17 CFR 240.16a-3(e) during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, and any written representation referred to in paragraph (b)(1) of this section, the Company is not aware of any director, officer, beneficial owner ofpersons who own more than ten percent of any classour common stock, file reports of equity securitiesownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review of the Company registered pursuant to Section 12copies of the forms received by us and written representations from certain reporting persons that failed to file on a timely basis, as disclosed inthey have complied with the above Forms, reports required byrelevant filing requirements, we believe that, during the year ended June 30, 2023, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) duringfiling requirements, except that, due to administrative errors, the most recent fiscal year or prior years.following forms were filed late:
Regulation S-K Item 406Code of Ethics
The Company hasWe have adopted a Codecode of Ethicsbusiness conduct and has filed a copyethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. The code of business conduct and ethics is available at our website at www.singularity.us. We expect that any amendments to the code, or any waivers of its requirement, will be disclosed on our website.
Committees of the CodeBoard of Ethics withDirectors
Our Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The composition and function of each committee are described below.
Audit Committee
The Audit Committee consists of Zhongliang Xie and Xu Zhao, who are each independent. Mr. Xie chairs the Commission.
Regulation S-K Item 407(c)(3)
None.
Regulation S-K Item 407(d)(4)Audit Committee and (5)
The Company has an audit committee, consisting solely of the Company’s independent directors, Tieliang Liu, Jing Wang and Ming Zhu. Mr. Liu qualifies as the audit committee financial expert. The Company’s audit committeeOur Audit Committee has adopted a written charter, and a copy of this charter is availableposted on the Company’s website, (www.sino-global.com)at www.singularity.us. Under such charter, our Audit Committee is authorized to:
● | prepare and publish an annual Committee report as required by the SEC to be included in the Company’s annual proxy statement; | |
● | discuss with management and the independent auditor the annual audited financial statements and quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other matters required to be reviewed under applicable legal, regulatory, professional or NASDAQ requirements; | |
● | discuss with management and the independent auditor, as appropriate, any audit problems or difficulties and management’s response; |
● | discuss with management the Company’s risk assessment and risk management policies, including the Company’s major financial risk exposure and steps taken by management to monitor and mitigate such exposure; | |
● | review the Company’s financial reporting and accounting standards and principles, significant changes in such standards or principles or in their application and the key accounting decisions affecting the Company’s financial statements, including alternatives to, and the rationale for, the decisions made; | |
● | review and approve the internal corporate audit staff functions, including: (i) purpose, authority and organizational reporting lines; (ii) annual audit plans, budget and staffing; and (iii) concurrence in the appointment, termination, compensation and rotation of the audit staff; | |
● | review, with such members of management as the Committee deems appropriate, the Company’s internal system of audit and financial controls and the results of internal audits; | |
● | obtain and review at least annually a formal written report from the independent auditor delineating: the auditing firms internal quality-control procedures; any material issues raised within the preceding five years by the auditing firms internal quality-control reviews, by peer reviews of the firm, or by any governmental or other inquiry or investigation relating to any audit conducted by the firm. The Committee will also review steps taken by the auditing firm to address any findings in any of the foregoing reviews. Also, in order to assess auditor independence, the Committee will review at least annually all relationships between the independent auditor and the Company; | |
● | set policies for the hiring of employees or former employees of the Company’s independent auditor and, at least annually, evaluate the qualifications, performance and independence of the independent auditors, including an evaluation of the lead audit partner; and to assure the regular rotation of the lead audit partner at our independent auditors and consider regular rotation of the accounting firm serving as our independent auditors; | |
● | review and investigate any matters pertaining to the integrity of management, including conflicts of interest, or adherence to standards of business conduct as required in the policies of the Company. This should include regular reviews of the compliance processes in general. In connection with these reviews, the Committee will meet, as deemed appropriate, with the general counsel and other Company officers or employees; | |
● | retain such outside counsel, experts and other advisors as the Committee may deem appropriate in its sole discretion; | |
● | review at least annually the adequacy of this charter and recommend any proposed changes to the Board for approval and assume additional responsibilities and take additional actions as may be delegated to it by the Board; | |
● | establish procedures for the receipt, retention and treatment of complaints on accounting, internal accounting controls or auditing matters, as well as for confidential, anonymous submissions by Company employees of concerns regarding questionable accounting or auditing matters; | |
● | conduct any investigation appropriate to fulfilling its responsibilities contained in this charter, communicate directly with the independent audit firm and any employee of the Company, and conduct its activities in accordance with the policies and principles contained in the Company’s Corporate Governance Principles. |
Compensation Committee
The Compensation Committee is composed of three independent directors including Zhongliang Xie and Xu Zhao. Our Compensation Committee has adopted a written charter, and a copy of this charter is posted on our website, at www.singularity.us. Our Compensation Committee is authorized to:
● | review and determine the compensation arrangements for management; | |
● | establish and review general compensation policies with the objective to attract and retain superior talent, to reward individual performance and to achieve our financial goals; | |
● | review and determine our stock incentive and purchase plans; | |
● | oversee the evaluation of the board of directors and management; and | |
● | review the independence of any compensation advisers. |
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is composed of three independent directors including Zhongliang Xie and Xu Zhao. Xu Zhao serves as the chair of the Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee has adopted a written charter, and a copy of this charter is posted on our website, at www.singularity.us. The functions of our Governance Committee, among other things, include:
● | identifying individuals qualified to become board members and recommending directors; | |
● | nominating board members for committee membership; | |
● | developing and recommending to our board corporate governance guidelines; | |
● | reviewing and determining the compensation arrangements for directors; and | |
● | overseeing the evaluation of our Board and its committees and management. |
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee, at any time has at any time, been one of our officers or directly atemployees, or, during the following link: http://media.corporate-ir.net/media_files/irol/22/221375/corpgov/AuditCommCharte09272008.pdf.last two fiscal years, a participant in a related-party transaction that is required to be disclosed. None of our executive officers currently serves, or in the past year has served, as a member of our Board or Compensation Committee of any entity that has one or more executive officers on our Board or Compensation Committee.
Item 11. Executive Compensation.
The following table shows the annual compensation paid by us to Mr. Lei Cao, our Principalformer Chief Executive Officer Mrs.and Chairman, Ms. Yang Jie, our former Chief Executive Officer and director, Ms. Tuo Pan, our Actingformer Chief Financial Officer, Mr. Anthony S. Chan, our former Executive Vice President and Acting Chief Financial Officer and Mr. Zhikang Huang, our former Vice President, Mr. Jing Shan, our former Chief Operating Officer, Ziyuan Liu, our Chief Executive Officer, and Dianjiang Wang, our Chief Financial Officer for the years ended June 30, 20172023 and 2016. No other officer had total compensation during either of the previous two years of more than $100,000.2022.
Summary Compensation Table
Name | Year | Salary | Bonus | Securities- based Compensation | All other Compensation | Total | |||||||||||||||||
Lei Cao, | 2022 | $ | 426,609 | (2) | $ | 800 | - | - | $ | 427,409 | |||||||||||||
Former Chief Executive Officer (1)(6) | 2023 | 261364 | 261364 | ||||||||||||||||||||
Tuo Pan, | 2022 | $ | 302,973 | $ | 800 | - | - | $ | 303,773 | ||||||||||||||
Former Chief Financial Officer (2)(7) | 2023 | 66667 | 66667 | ||||||||||||||||||||
Zhikang Huang, | 2022 | $ | 275,000 | $ | 800 | - | - | $ | 275,800 | ||||||||||||||
Former Vice President and Director(3)(8) | 2023 | 150000 | 666 | 150666 | |||||||||||||||||||
Jing Shan, | 2022 | $ | 143,333 | $ | 800 | - | - | $ | 144,133 | ||||||||||||||
Chief Operating Officer(4) | 2023 | 223185 | 92332 | 315517 | |||||||||||||||||||
Yang Jie,(5) | 2022 | $ | 500,000 | $ | 800 | - | - | $ | 500,800 | ||||||||||||||
Former Chief Executive Officer and director(9) | 2023 | 52,536 | 52,536 | ||||||||||||||||||||
Ziyuan Liu | 2022 | ||||||||||||||||||||||
Chief Executive Officer(10) | 2023 | $ | 49,000 | $ | 49,000 | ||||||||||||||||||
Dianjiang Wang | 2022 | ||||||||||||||||||||||
Chief Financial Officer(11) | 2023 | $ | 10,000 | $ | 10,000 |
Securities- | ||||||||||||||||||||||||
based | All other | |||||||||||||||||||||||
Name | Year | Salary | Bonus | Compensation | Compensation | Total | ||||||||||||||||||
Lei Cao, | 2017 | $ | 180,000 | - | - | - | $ | 180,000 | ||||||||||||||||
Principal Executive Officer | 2016 | $ | 180,000 | - | $ | 159,000 | - | $ | 339,000 | |||||||||||||||
Tuo Pan, (1) | 2017 | $ | 60,000 | - | - | - | $ | 60,000 | ||||||||||||||||
Acting Chief Financial Officer | 2016 | $ | 60,000 | - | $ | 21,200 | - | $ | 81,200 | |||||||||||||||
Anthony S. Chan, (2) | 2017 | - | $ | - | - | - | - | |||||||||||||||||
Acting Chief Financial Officer | 2016 | $ | 83,333 | $ | 50,000 | - | - | $ | 133,333 | |||||||||||||||
Zhikang Huang, | 2017 | $ | 100,000 | - | - | - | $ | 100,000 | ||||||||||||||||
Chief Operating Officer | 2016 | $ | 100,000 | - | $ | 95,400 | - | $ | 195,400 |
(1) | According to the Employment Agreement dated January 1, 2019, Mr. Cao’s annual salary was $260,000, effective January 1, 2019. According to the Employment Agreement dated November 1, 2021, Mr. Cao’s annual salary was $500,000, effective November 1, 2021. |
According to the Employment Agreement dated January 1, 2019, Ms. Pan’s annual salary was $100,000, effective January 1, 2019. According to the Employment Agreement dated November 1, 2021, Ms. Pan’s annual salary was $400,000, effective November 1, 2021. |
(3) | According to the Employment Agreement dated January 1, 2019, Mr. Huang’s annual salary was $150,000, effective January 1, 2019. |
(4) | According to the Employment Agreement dated August 5, 2021, Ms. Shan’s annual salary was $120,000, effective August 5, 2021. According to the Employment Agreement dated February 8, 2022, Ms. Shan’s annual salary was $200,000, effective February 8, 2022 and was raised to $250,000 since August 15, 2022. Pursuant to the cancellation agreement entered into on December 28, 2022, Ms. Shan agreed to return to the Company for cancellation 100,000 shares of common stock of the Company granted to her for her services as an officer of the Company. The shares are being cancelled. |
(5) | Pursuant to the cancellation agreement entered into on December 19, 2022, Mr. Jie agreed to return to the Company for cancellation 300,000 shares of common stock of the Company granted to him for his services as an officer of the Company. The shares have been cancelled. |
(6) | On November 1, 2021, Mr. Cao, retired from his position as the Company’s Chief Executive Officer. Mr. Cao resigned from the Board on January 9, 2023. Pursuant to the separation agreement entered into on January 9, 2023, Mr. Cao agreed to forfeit and return to the Company for cancellation 600,000 shares of common stock of the Company granted to him on August 13, 2021 under the terms of the 2014 Equity Incentive Plan of the Company. The shares are being cancelled. |
(7) | On August 31, 2022, Ms. Pan was |
(8) | On November 1, 2021, Mr. Huang resigned from his position as a member of the Board of the Company. |
(9) | On August 9, 2022, Mr. Jie resigned as Chief Executive Officer and director, following the Board’s decision on |
(10) | According to the Employment Agreement dated April 18, 2023, Mr. |
(11) | According to the Employment Agreement dated May 1, 2023, Mr. Wang’s compensation consists of an annual base salary of $60,00, and a discretionary annual bonus, effective May 1, 2023. |
Outstanding Equity Awards of Named Executive Officers at Fiscal Year-End
As of June 30, 2017, we had three named executive officers, Mr. Lei Cao, our Chief Executive Officer, Ms. Tuo Pan, our Acting Chief Financial Officer, and Mr. Zhikang Huang, our Chief Operating Officer.None.
Option Awards(1)
Equity | ||||||||||||||||||
incentive plan | ||||||||||||||||||
awards: | ||||||||||||||||||
Number of | Number of | Number of | ||||||||||||||||
securities | securities | securities | ||||||||||||||||
underlying | underlying | underlying | ||||||||||||||||
unexercised | unexercised | unexercised | Option | Option | ||||||||||||||
options (#) | options (#) | unearned | Exercise | expiration | ||||||||||||||
Name | exercisable | unexercisable | options (#) | price ($) | date | |||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||
Lei Cao, | ||||||||||||||||||
Principal Executive Officer | 36,000 | - | - | $ | 7.75 | May 19, 2018 | ||||||||||||
Tuo Pan, | ||||||||||||||||||
Acting Chief Financial Officer | - | - | - | - | - | |||||||||||||
Zhikang Huang, | ||||||||||||||||||
Chief Operating Officer | - | - | - | - | - |
Director Compensation for
The table below sets forth the compensation received by our directors in the year ended June 30, 2017(1)2023.
Name | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($)(2) | All other compensation ($) | Total ($) | |||||||||||||||
Tieliang Liu | 20,000 | 0 | 0 | 0 | 20,000 | |||||||||||||||
Jing Wang | 20,000 | 0 | 0 | 0 | 20,000 | |||||||||||||||
Ming Zhu | 20,000 | 0 | 0 | 0 | 20,000 |
Name(1) | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | All other compensation ($) | Total ($) | |||||||||||||||
John Levy(3) | 37,500 | - | - | 159,565 | (2) | 197,065 | ||||||||||||||
Heng Wang | 50,000 | - | - | 167,029 | (2) | 217,029 | ||||||||||||||
Tieliang Liu(4) | 50,000 | - | - | 75,000 | 125,000 | |||||||||||||||
Haotian Song | 6,667 | - | - | - | 6,667 | |||||||||||||||
Ling Jiang(5) | 8,333 | - | - | - | 8,333 | |||||||||||||||
Ziyuan Liu | 49,000 | - | - | - | 49,000 |
(1) | This table does not include Mr. |
(2) | Represents compensation paid to Mr. |
(3) | On February 23, 2023, Mr. John Levy resigned as a director of |
(4) | On July 3, 2023, Mr. Tieliang Liu |
(5) | On September 28, 2023, Ms. Ling Jiang resigned as a director. |
Employment Agreements
The Company has an employment agreement with the Company’s NamedMr. Ziyuan Liu, our Chief Executive Officers
Sino-China hasOfficer. The employment agreementsagreement began on April 18, 2022, with eacha term of Mr. Lei Cao, Ms. Tuo Pan and Mr. Zhikang Huang. These employment agreements provideone year. The term shall automatically be extended for a one-year terms that extend automaticallyperiod in the absence of terminationnotice of non-renewal provided at least 6030 days prior to the anniversary date of the employment agreement. If we fail to provide this notice or if we wish to terminateUnder the terms of the employment agreement, Mr. Liu will receive an annual base salary of $240,000 in cash, and a discretionary annual bonus.
The Company has an employment agreement with Mr. Dianjiang Wang, our Chief Financial Officer. The employment agreement began on May 1, 2022, with a term of one year. The term shall automatically be extended for a one-year period in the absence of cause, then we are obligated to providenotice of non-renewal provided at least 30 days’days prior notice. In such case duringto the initial termanniversary date of the agreement, we would need to pay such executive (a) inemployment agreement. Under the absence of a change of control, a one-time paymentterms of the then-applicableemployment agreement, Mr. Liu will receive an annual base salary of $60,000 in cash, and a discretionary annual bonus.
The Company had an employment agreement with Jing Shan, our former Chief Operating Officer. The employment agreement began on February 8, 2022 and was scheduled to end on August 4, 2024. Under the terms of the employment agreement, Ms. Shan received a base salary of $200,000 per year. Her performance and salary were subject to review at any time, and any increases in her salary that our Board may determine, were to be made on a basis consistent with the standard practices of our Company. On August 15, 2022, the Board approved an increase of Ms. Shan’s annual salary from $200,000 to $250,000 and she was paid a cash bonus of such executive or (b) in$50,000 upon conclusion of the eventSpecial Committee investigation. On July 10, 2023, Company terminated the employment of a change of control, a one-time payment of one-and-a-half times the then-applicable annual salary of such executive. In the event of termination due to death or disability, the payment is equal to two times the executive’s salary.Ms. Shan for cause.
We are, however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding our shares of common stock beneficially owned as of September 25, 2023, for (i) each named executive officer and director, and (ii) all executive officers and directors as a group. As of September 25, 2023, there was no stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. In the table below, percentage ownership is based on 17,515,526 shares of our common stock issued and outstanding as of September 25, 2023.
(1) | The individual’s address is c/o Singularity Future Technology, Ltd., 98 Cutter Mill Road, Suite 311, Great Neck, New York 11021. |
Securities Authorized for Issuance to Our Officers, Directors, Employees and Consultants under Equity Compensation Plans
The below table reflects, as of June 30, 2017,September 25, 2023, the number of shares of common stock authorized by our shareholdersstockholders to be issued (directly or by way of issuance of securities exercisable for or convertible into) as incentive compensation to our officers, directors, employees and consultants.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans under the 2008 Incentive Plan approved by security holders | 2,000 | $ | 10.05 | 47,781 | (1) | |||||||
Equity compensation plans under the 2014 Incentive Plan approved by security holders | - | - | 110,000 | (1) | ||||||||
Equity compensation plans under the 2021 Incentive Plan approved by security holders | - | - | 9,800,000 | (1) | ||||||||
Equity compensation plans not approved by security holders | - | - | - |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans under the 2008 Incentive Plan approved by security holders | 64,000 | $ | 7.03 | 238,903 | (1) | |||||||
Equity compensation plans under the 2014 Incentive Plan approved by security holders | 75,000 | $ | 1.10 | 8,590,000 | (1) | |||||||
Equity compensation plans not approved by security holders | - | - | - |
(1) | Pursuant to our 2008 Incentive Plan, we are authorized to issue options to purchase Accordingly, we may issue options to purchase |
The below table reflects the ownership of our common stock by officers, directors and holders of more than five percent of our common stock. Percentages are based on 10,105,535 shares issued and outstanding as of September 12, 2017.
Name and Address | Title of Class | Amount of Beneficial Ownership | Percentage Ownership | |||||||
Mr. Lei Cao (1)(2) | Common | 1,465,040 | 14.5 | % | ||||||
Mrs. Tuo Pan (1) | Common | 20,000 | * | |||||||
Mr. Michael Huang (1) | Common | 80,000 | * | |||||||
Mr. Jing Wang (1)(3) | Common | 50,000 | * | |||||||
Mr. Liu Tieliang (1)(4) | Common | 48,000 | * | |||||||
Mr. Ming Zhu (1) | Common | 40,000 | * | |||||||
Mr. Yafei Li (1) | Common | 20,000 | * | |||||||
Total Officers and Directors (6 individuals) | Common | 1,723,040 | 17.1 | % | ||||||
Other Five Percent Shareholders | ||||||||||
Mr. Zhong Zhang (5) | Common | 1,800,000 | 17.8 | % |
* Less than 1%.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related Transactions
Set forth below are our transactions with related persons for the years ended June 30, 2023 and 2022.
Advance to Related Party Suppliers
The Company’s advances to related party suppliers are as follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Bitcoin mining hardware and other equipment (1) | $ | - | $ | 6,153,546 | ||||
Total Advances to suppliers-related party | $ | - | $ | 6,153,546 |
The BoardDue to production issues from HighSharp, Thor Miner was not able to timely deliver the full quantity of Directors maintains a majority of independent directors who are deemedcryptocurrency mining machines to be independentSOSNY under the definitionPSA and was sued by SOSNY for breach of independence provided by NASDAQ Stock Market Rule 4200(a)(15). Other than as described herein, no transactions requiredcontract on December 9, 2022.
The Company entered into a settlement agreement with SOSNY effective on December 28, 2022, under which the Company will repay $13.0 million to be disclosed under Item 404 of Regulation S-K have occurred sinceSOSNY and terminate the beginningprevious agreements and balance of the Company’s last fiscal year.deposits. The Company also assigned to SOSNY the right for the deposit that Thor Miner has paid to HighSharp.
On June 27, 2013, we signed a 5-year global logistic service agreement with TEWOO Chemical & Light Industry Zhiyuan Trade Co., LtdAs of December 22, 2022, the balance of advances to HighSharp and TianJin Zhi Yuan Investment Group Co., Ltd (together “Zhiyuan”). Zhiyuan is owneddeposits from SOSNY amounted to $27,927,583 and $40,560,569, respectively. Thor Miner paid $13.0 million on December 23, 2022 to SOSNY which was received by Mr. Zhang,SOSNY on December 28, 2022. Thor Miner wrote off the largest shareholderbalance of the deposit it received from SOSNY and the balance of its payment to HighSharp resulted in net bad debt expenses of $367,014.
Due from Related Party
As of June 30, 2023 and June 30, 2022, the outstanding amounts due from related parties consist of the following:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Zhejiang Jinbang Fuel Energy Co., Ltd (1) | 458,607 | 415,412 | ||||||
Shanghai Baoyin Industrial Co., Ltd (2) | 1,068,014 | 1,306,004 | ||||||
LSM Trading Ltd (3) | 570,000 | 570,000 | ||||||
Rich Trading Co. Ltd (4) | 103,424 | 103,424 | ||||||
Cao Lei (5) | 13,166 | 54,860 | ||||||
Less: allowance for doubtful accounts | (2,138,276 | ) | (2,449,700 | ) | ||||
Total | $ | 74,935 | $ | - |
(1) | As of June 30, 2023 and 2022, the Company advanced $458,607 and $415,412 to Zhejiang Jinbang Fuel Energy Co., Ltd (“Zhejiang Jinbang”) which is 30% owned by Mr. Wang Qinggang, CEO and legal representative of Trans Pacific Shanghai. The advance is non-interest bearing and due on demand. The Company provided allowance of $383,672 and $415,412 for the year ended June 30, 2023 and 2022, and the allowance changes as a result of changes in exchange rates. |
(2) | As of June 30, 2023 and 2022, the Company advanced approximately $1.1 million and $1.3 million to Shanghai Baoyin Industrial Co., Ltd. which is 30% owned by Qinggang Wang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd. The advance is non-interest bearing and due on demand. The Company provided full credit losses for the balance of the receivable. |
(3) | As of June 30, 2023, the Company advanced $570,000 to LSM Trading Ltd, which is 40% owned by the Company. The advance is non-interest bearing and due on demand. The Company provided full credit losses for the balance of the receivable. The Company is taking actions in order to pursue all available legal remedies including lawsuits to recover these funds. |
(4) | On November 16, 2021, the Company entered into a project cooperation agreement with Rich Trading Co. Ltd USA (“Rich Trading”) for the trading of computer equipment. Rich Trading’s bank account was controlled by now-terminated members of the Company’s management and was, at the time, an undisclosed related party. According to the agreement, the Company was to invest $4.5 million in the trading business operated by Rich Trading and the Company would be entitled to 90% of profits generated by the trading business. The Company advanced $3,303,424 for this project, of which $3,200,000 has been returned to the Company. The Company provided allowance of $103,424 for the year ended June 30, 2023 and 2022. |
(5) | The amount represents business advances to Mr. Lei Cao, the former Chairman of the Board. During the six months ended June 30, 2023, Lei Cao repaid approximately $54,000, of which approximately $13,000 additional payment was recognized as non-operating income. The Company provided full credit losses for the remaining balance of the receivable. |
Loan Receivable- Related Parties
As of June 30, 2023 and June 30, 2022, the outstanding loan receivable from related parties consists of the following:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Wang Qinggang (1) | $ | - | $ | 552,285 |
(1) | On June 10, 2021, the Company entered into a loan agreement with Wang Qinggang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd. The loan is was non-interest bearing for a loan amount of up to $630,805 (RMB 4 million). In February 2022, Wang Qinggang, borrowed and repaid $232,340 of the loan amount. In June 2022, an additional $552,285 (RMB 3,700,000) was loaned to Wang Qinggang with a due date of June 7, 2024. The outstanding loan was fully repaid in December 2022. |
Accounts payable- related parties
As of June 30, 2023 and June 30, 2022, the Company had accounts payable to Rich Trading Co. Ltd of $63,434.
Due to Related Party
As of June 30, 2023, the Company owed Qinggang Wang, CEO and legal representative of Trans Pacific Shanghai, of $104,962. These payments were made on behalf of the Company for the daily operational activities.
Revenue - Related Party
For the year ended June 30, 2013, we2023, the company had no business transaction with Zhiyuan. Before Mr. Zhang was a shareholder of the Company, he agreed with the Company to cause Zhiyuan to procure certain servicesrevenue from the Company. The 5-year global logistic service agreement details the nature of such cooperation between Zhiyuan and the Company. Thus, while Mr. Zhang’s initial agreement to direct business to the company was made when he was not a related party, the subsequent agreement was entered after he was a related party. During the quarter ended September 30, 2013, the Company executed a shipping and chartering services agreement with Zhiyuan whereby it assisted in the transportation of approximately 51,000 tons of chromite ore from South Africa to China. In September 2013, the Company executed an inland transportation management service contract with Zhiyuan whereby it would provide certain advisory services and help control its potential commodities loss during the transportation process. In addition, the Company executed a one-year short-term loan agreement with Zhiyuan, effective January 1, 2014, to facilitate the working capital needs of Zhiyuan on an as-needed basis. In September 2014, the Company collected approximately $2.7 million from the Zhiyuan Investment Group, representing full repayment of the short-term loan and payment of approximately $1.6 million of outstanding trade receivable. In October 2014, the Company collected approximately $384,000 from the Zhiyuan Investment Group to reduce the outstanding trade receivable. For the yearsyear ended June 30, 2016 and 2017,2022, revenue from related party, Zhejiang Jinbang, to which the Company continuedprovided logistics services including coal transportation, amounted to provide inland transportation management services to$222,963.
Director Independence
Our Board has determined that each of Zhongliang Xie and Xu Zhao is an “independent director” as defined by the Zhiyuan Investment Group. The net amount due from the Zhiyuan Investment Group at June 30, 2016applicable SEC rules and 2017 were $1,622,519 and $1,715,130.Nasdaq Listing Rules.
Item 14. Principal Accountant Fees and Services.
FriedmanSet forth below are the aggregate fees billed by Audit Alliance LLP, was appointed by the Company to serve as itsour independent registered public accounting firm, for fiscal year 2017. Audit services provided by Friedman LLP for fiscal year 2017 included the examination of the consolidated financial statements of the Company; and services related to periodic filings made with the SEC. In addition, Friedman LLP provided review services relating to the Company’s quarterly reports.
Audit Fees
During fiscal years 2017ended June 30, 2023 and 2016, Friedman LLP’sJune 30, 2022 for services rendered by them as our independent registered accounting firm for such years.
Fiscal 2023 | Fiscal 2022 | |||||||
Audit fees | $ | 390,100 | $ | 115,000 | ||||
Audit-related fees | - | - | ||||||
Total Audit & Audit-related fees | $ | 390,100 | $ | 115,000 | ||||
Tax fees | - | - | ||||||
All other fees | - | - | ||||||
Total fees | $ | 390,100 | $ | 115,000 |
Audit fees consist of fees billed for services rendered for the annual audit of our financial statements and the quarterly reviewsreview of theour financial statements included in periodicour quarterly reports were $190,000on Form 10-Q and $190,000, respectively.services provided in connection with other statutory or regulatory filings.
Tax FeesAudit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported under Audit fees. No such fees were billed in fiscal 2023 or 2022.
Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax return preparation amounted to $27,771returns and $23,690 duringtax advice. No such fees were billed by Audit Alliance LLP in fiscal year 2017 and 2016, respectively.
All Other Fees
None.
2023 or 2022. The Audit Committee Pre-Approval Policiespre-approved all Audit-related fees. After considering the provision of services encompassed within the above disclosures about fees, the Audit Committee has determined that the provision of such services is compatible with maintaining Audit Alliance’s independence.
Before Friedman LLP was engagedThe Audit Committee’s policy is to pre-approve all audit and non-audit related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.. The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the Companyindependent registered public accounting firm in accordance with this pre-approval and the fees for the services performed to render audit or non-audit services, the engagement was approved by the Company’s audit committee. All services rendered by Friedman LLP have been so approved. date.
Item 15. Exhibits, Financial Statement Schedules.
Filed herewith. |
** | Furnished herewith. |
(1) | Incorporated herein by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 27, 2014. |
(2) | Incorporated herein by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 5, 2022. |
(3) | Incorporated herein by reference to exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 5, 2022. |
(4) | Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration Nos. 333-150858 and 333-148611. |
(5) | Incorporated herein by reference to exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 12, 2018. |
(6) | Incorporated herein by reference to exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 12, 2018. |
(7) | Incorporated herein by reference to exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 18, 2020. |
(8) | Incorporated herein by reference to exhibit 4.1 to the Company’s Current Report on Form 8-K filed on Form 8-K filed on February 8, 2021. |
(9) | Incorporated by reference to exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 14, 2021. |
(10) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 9, 2021. |
(11) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 19, 2021. |
(12) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 4, 2021. |
(13) | Incorporated by reference to exhibit 99.2 to the Company’s Form S-8 filed on August 27, 2021. |
(14) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 4, 2021. |
(15) | Incorporated by reference to exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 1, 2021. |
(16) | Incorporated by reference to exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 14, 2021. |
(17) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 14, 2021. |
(18) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 23, 2021. |
(19) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 6, 2022. |
(20) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 14, 2022. |
(21) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 8, 2022. |
(22) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 10, 2022. |
(23) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 14, 2022. |
(24) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 5, 2023. |
(25) | Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 13, 2023. |
(26) | Incorporated by reference to exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 8, 2021. |
(27) | Incorporated by reference to exhibit 14.1 to the Company’s Annual Report on Form 10-KSB filed on September 29, 2008 |
Item 16. Form 10-K Summary.
We have elected not to include a summary pursuant to this Item 16.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SINGULARITY FUTURE TECHNOLOGY, LTD. | ||
September 28, 2023 | By: | /s/ Ziyuan Liu |
Ziyuan Liu | ||
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures | ||||||
Title | ||||||
| ||||||
| Director, Chairman of the Board and Chief Executive Officer | September 28, 2023 | ||||
Ziyuan Liu | (Principal Executive Officer) |
| ||||
/s/ | Director | September 28, 2023 | ||||
Haotian Song | ||||||
/s/ | Director | September 28, 2023 | ||||
Zhongliang Xie | ||||||
/s/ | Director | September 28, 2023 | ||||
Xu Zhao | ||||||
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
INDEX TO FINANCIAL STATEMENTS
/s/ Ying Cao | Chief Financial Officer | September 28, 2023 | ||
Ying Cao | (Principal Financial and Accounting Officer) |
Index to Financial Statements
F-7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and StockholdersShareholders of Singularity Future Technology Ltd.
Sino-Global Shipping America, Ltd.Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sino-Global Shipping America,Singularity Future Technology Ltd. and Affiliates (theits subsidiaries (collectively, the “Company”) as of June 30, 20172023 and 2016, and2022, the related consolidated statements of operations andincome, comprehensive income, (loss), changes inshareholders’ equity, and cash flows for eachthe years then ended, and the related notes to the consolidated financial statements and schedule (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial positions of the years inCompany as of June 30, 2023 and 2022, and the two-year periodresults of its operations and its cash flows for the years ended June 30, 2017. The2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management is responsible for these consolidated financial statements.management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2017, in conformity with accounting principles generally accepted in the United States of America.
/s/ Audit Alliance LLP
We have served as the Company’s auditor since October 28, 2020
AUDIT ALLIANCE LLP (3487)
Singapore
September 28, 2023
SINGULARITY FUTURE TECHNOLOGY, LTD. AND AFFILIATES
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 8,733,742 | $ | 1,385,994 | ||||
Accounts receivable, less allowance for doubtful accounts of $185,821 and $207,028 as of June 30, 2017 and 2016, respectively | 2,569,141 | 2,333,024 | ||||||
Other receivables, less allowance for doubtful accounts of $145,244 and $145,186 as of June 30, 2017 and 2016, respectively | 37,811 | 290,907 | ||||||
Advances to suppliers-third parties | 54,890 | 2,192,910 | ||||||
Advances to suppliers-related party | 3,333,038 | - | ||||||
Prepaid expenses and other current assets | 311,136 | 826,631 | ||||||
Due from related parties | 1,715,130 | 1,622,519 | ||||||
Total Current Assets | 16,754,888 | 8,651,985 | ||||||
Property and equipment, net | 187,373 | 176,367 | ||||||
Prepaid expenses | 6,882 | 178,982 | ||||||
Other long-term assets | 117,478 | 46,810 | ||||||
Deferred tax assets | 749,400 | - | ||||||
Total Assets | $ | 17,816,021 | $ | 9,054,144 | ||||
Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Advances from customers | $ | 369,717 | $ | 24,373 | ||||
Accounts payable | 206,211 | 489,490 | ||||||
Taxes payable | 1,886,216 | 1,637,197 | ||||||
Due to related parties | 206,323 | - | ||||||
Accrued expenses and other current liabilities | 418,029 | 286,322 | ||||||
Total Current Liabilities | 3,086,496 | 2,437,382 | ||||||
Total Liabilities | 3,086,496 | 2,437,382 | ||||||
Commitments and Contingencies | ||||||||
Equity | ||||||||
Preferred stock, 2,000,000 shares authorized, no par value, none issued. | - | - | ||||||
Common stock, 50,000,000 shares authorized, no par value; 10,281,032 and 8,456,032 shares issued as of June 30, 2017 and 2016; 10,105,535 and 8,280,535 outstanding as of June 30, 2017 and 2016, respectively | 20,535,379 | 15,500,391 | ||||||
Additional paid-in capital | 688,934 | 1,140,962 | ||||||
Treasury stock, at cost, 175,497 shares as of June 30, 2017 and 2016 | (417,538 | ) | (417,538 | ) | ||||
Accumulated deficit | (893,907 | ) | (4,518,799 | ) | ||||
Accumulated other comprehensive loss | (414,564 | ) | (280,907 | ) | ||||
Total Sino-Global Shipping America Ltd. Stockholders’ Equity | 19,498,304 | 11,424,109 | ||||||
Non-controlling Interest | (4,768,779 | ) | (4,807,347 | ) | ||||
Total Equity | 14,729,525 | 6,616,762 | ||||||
Total Liabilities and Equity | $ | 17,816,021 | $ | 9,054,144 |
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | 17,390,156 | $ | 55,833,282 | ||||
Cryptocurrencies | 72,179 | 90,458 | ||||||
Accounts receivable, net | 198,553 | 108,381 | ||||||
Other receivables, net | 76,814 | 25,057 | ||||||
Advances to suppliers - third parties | 128,032 | 36,540 | ||||||
Advances to suppliers - related party | - | 6,153,546 | ||||||
Prepaid expenses and other current assets | 252,047 | 365,913 | ||||||
Due from related party | 74,935 | - | ||||||
Loan receivable-related parties, net | - | 552,285 | ||||||
Total Current Assets | 18,192,716 | 63,165,462 | ||||||
Property and equipment, net | 426,343 | 548,956 | ||||||
Right-of-use assets | 381,982 | 732,744 | ||||||
Other long-term assets - deposits | 236,766 | 237,749 | ||||||
Investment in unconsolidated entity | - | 162,829 | ||||||
Total Assets | $ | 19,237,807 | $ | 64,847,740 | ||||
Current Liabilities | ||||||||
Deferred revenue | $ | 66,531 | $ | 6,955,577 | ||||
Refund payable | - | 13,000,000 | ||||||
Accounts payable | 494,329 | 508,523 | ||||||
Accounts payable – related party | 63,434 | 63,434 | ||||||
Lease liabilities - current | 330,861 | 471,976 | ||||||
Taxes payable | 3,334,958 | 3,457,177 | ||||||
Due to related party | 104,962 | - | ||||||
Accrued expenses and other current liabilities | 636,694 | 756,272 | ||||||
Total current liabilities | 5,031,769 | 25,212,959 | ||||||
Lease liabilities - noncurrent | 245,171 | 846,871 | ||||||
Convertible notes | 5,000,000 | 5,000,000 | ||||||
Total liabilities | 10,276,940 | 31,059,830 | ||||||
Commitments and Contingencies | ||||||||
Equity | ||||||||
Preferred stock, 2,000,000 shares authorized, no par value, no shares issued and outstanding as of June 30, 2023 and June 30, 2022, respectively | - | - | ||||||
Common stock, 50,000,000 shares authorized, no par value; 17,715,526 and 22,244,333 shares issued and outstanding as of June 30, 2023 and June 30,2022, respectively | 94,332,048 | 96,127,691 | ||||||
Additional paid-in capital | 2,334,962 | 2,334,962 | ||||||
Accumulated deficit | (85,576,438 | ) | (62,579,592 | ) | ||||
Accumulated other comprehensive income | 90,236 | 45,739 | ||||||
Total Stockholders’ Equity attributable to controlling shareholders of the Company | 11,180,808 | 35,928,800 | ||||||
Non-controlling Interest | (2,219,941 | ) | (2,140,890 | ) | ||||
Total Equity | 8,960,867 | 33,787,910 | ||||||
Total Liabilities and Equity | $ | 19,237,807 | $ | 64,847,740 |
The accompanying notes are an integral part of these audited consolidated financial statementsstatements.
SINGULARITY FUTURE TECHNOLOGY, LTD. AND AFFILIATESSUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Years Ended June 30, | ||||||||
2017 | 2016 | |||||||
Net revenues - third parties | $ | 8,699,190 | $ | 5,041,194 | ||||
Net revenues - related party | 2,746,423 | 2,269,346 | ||||||
Total revenues | 11,445,613 | 7,310,540 | ||||||
Cost of revenues | (4,980,591 | ) | (3,737,989 | ) | ||||
Gross profit | 6,465,022 | 3,572,551 | ||||||
General and administrative expenses | (3,152,336 | ) | (4,346,159 | ) | ||||
Selling expenses | (211,504 | ) | (475,619 | ) | ||||
Total operating expenses | (3,363,840 | ) | (4,821,778 | ) | ||||
Operating income (loss) | 3,101,182 | (1,249,227 | ) | |||||
Financial income (expense), net | 30,278 | (247,530 | ) | |||||
Other income, net | - | 7,828 | ||||||
Total other income (expense) | 30,278 | (239,702 | ) | |||||
Net income (loss) before provision for income taxes | 3,131,460 | (1,488,929 | ) | |||||
Income tax benefit (expense) | 472,084 | (812,593 | ) | |||||
Net income (loss) | 3,603,544 | (2,301,522 | ) | |||||
Net loss attributable to non-controlling interest | (21,348 | ) | (335,593 | ) | ||||
Net income (loss) attributable to Sino-Global Shipping America, Ltd. | $ | 3,624,892 | $ | (1,965,929 | ) | |||
Comprehensive income (loss) | ||||||||
Net income (loss) | $ | 3,603,544 | $ | (2,301,522 | ) | |||
Other comprehensive loss - foreign currency translation loss | (73,741 | ) | (134,155 | ) | ||||
Comprehensive income (loss) | 3,529,803 | (2,435,677 | ) | |||||
Less: Comprehensive income (loss) attributable to non-controlling interest | 38,568 | (97,409 | ) | |||||
Comprehensive income (loss) attributable to Sino-Global Shipping America Ltd. | $ | 3,491,235 | $ | (2,338,268 | ) | |||
Earnings (loss) per share | ||||||||
-Basic | $ | 0.41 | $ | (0.23 | ) | |||
-Diluted | $ | 0.41 | $ | (0.23 | ) | |||
Weighted average number of common shares used in computation | ||||||||
-Basic | 8,911,494 | 8,651,606 | ||||||
-Diluted | 8,949,960 | 8,651,606 |
For the Years Ended | ||||||||
June 30, | ||||||||
2023 | 2022 | |||||||
Net revenues | $ | 4,538,723 | $ | 3,988,415 | ||||
Cost of revenues | (3,990,654 | ) | (4,136,474 | ) | ||||
Gross profit | 548,069 | (148,059 | ) | |||||
Selling expenses | (232,569 | ) | (385,890 | ) | ||||
General and administrative expenses | (11,572,888 | ) | (9,301,784 | ) | ||||
Impairment loss of investment | (128,369 | ) | - | |||||
Impairment loss of cryptocurrencies | (18,279 | ) | (170,880 | ) | ||||
Impairment loss of fixed assets and intangible assets | (33,469 | ) | (1,006,305 | ) | ||||
Provision for doubtful accounts, net | (2,827,511 | ) | (1,613,504 | ) | ||||
Stock-based compensation | (329,778 | ) | (10,064,622 | ) | ||||
Total operating expenses | (15,142,863 | ) | (22,542,985 | ) | ||||
Operating loss | (14,594,794 | ) | (22,691,044 | ) | ||||
Loss from disposal of subsidiary and VIE | (42,191 | ) | (6,131,616 | ) | ||||
Lawsuit settlement expenses | (8,400,491 | ) | - | |||||
Other income (expenses), net | 74,989 | (105,709 | ) | |||||
Net loss before provision for income taxes | (22,962,487 | ) | (28,928,369 | ) | ||||
Income tax expense | (135,855 | ) | - | |||||
Net loss | (23,098,342 | ) | (28,928,369 | ) | ||||
Net loss attributable to non-controlling interest | (101,496 | ) | (670,539 | ) | ||||
Net loss attributable to controlling shareholders of the Company. | $ | (22,996,846 | ) | $ | (28,257,830 | ) | ||
Comprehensive loss | ||||||||
Net loss | $ | (23,098,342 | ) | $ | (28,928,369 | ) | ||
Other comprehensive income - foreign currency | 66,942 | 801,065 | ||||||
Comprehensive loss | (23,031,400 | ) | (28,127,304 | ) | ||||
Less: Comprehensive loss attributable to non-controlling interest | (79,051 | ) | (644,309 | ) | ||||
Comprehensive loss attributable to controlling shareholders of the Company. | $ | (22,952,349 | ) | $ | (27,482,995 | ) | ||
Loss per share | ||||||||
Basic and diluted | $ | (1.09 | ) | $ | (1.58 | ) | ||
Weighted average number of common shares used in computation | ||||||||
Basic and diluted | 21,123,252 | 17,924,098 |
The accompanying notes are an integral part of these audited consolidated financial statementsstatements.
SINGULARITY FUTURE TECHNOLOGY, LTD. AND AFFILIATES
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED JUNE 30, 2017 AND 2016
Common stock | Additional paid-in | Treasury stock | Accumulated | Accumulated other Comprehensive | Total stockholders’ | Non-controlling | Total | |||||||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | deficit | income (loss) | Equity | interest | Equity | |||||||||||||||||||||||||||||||
Balance as of June 30, 2015 | 7,996,032 | $ | 16,303,327 | $ | 1,137,082 | (125,191 | ) | $ | (372,527 | ) | $ | (2,552,870 | ) | $ | 91,432 | $ | 14,606,444 | $ | (4,709,938 | ) | $ | 9,896,506 | ||||||||||||||||||
Issuance of common stock, net of issuance costs of $59,336 | 1,000,000 | 1,067,264 | - | - | - | - | - | 1,067,264 | - | 1,067,264 | ||||||||||||||||||||||||||||||
Stock-based compensation to management | 660,000 | 349,800 | - | - | - | - | - | 349,800 | - | 349,800 | ||||||||||||||||||||||||||||||
Cancellation of common stock | (1,200,000 | ) | (2,220,000 | ) | - | - | - | - | - | (2,220,000 | ) | - | (2,220,000 | ) | ||||||||||||||||||||||||||
Purchase of common stock | - | - | - | (50,306 | ) | (45,011 | ) | - | - | (45,011 | ) | - | (45,011 | ) | ||||||||||||||||||||||||||
Amortization of stock options | - | - | 3,880 | - | - | - | - | 3,880 | - | 3,880 | ||||||||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | (372,339 | ) | (372,339 | ) | 238,184 | (134,155 | ) | |||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (1,965,929 | ) | - | (1,965,929 | ) | (335,593 | ) | (2,301,522 | ) | ||||||||||||||||||||||||||
Balance as of June 30, 2016 | 8,456,032 | $ | 15,500,391 | $ | 1,140,962 | (175,497 | ) | $ | (417,538 | ) | $ | (4,518,799 | ) | $ | (280,907 | ) | $ | 11,424,109 | $ | (4,807,347 | ) | $ | 6,616,762 | |||||||||||||||||
Issuance of common stock, net of issuance costs of $450,013 | 1,500,000 | 4,319,988 | - | - | - | - | - | 4,319,988 | - | 4,319,988 | ||||||||||||||||||||||||||||||
Exercise of stock options | 75,000 | 82,500 | - | - | - | - | - | 82,500 | - | 82,500 | ||||||||||||||||||||||||||||||
Amortization of stock options | - | - | 110,195 | - | - | - | - | 110,195 | - | 110,195 | ||||||||||||||||||||||||||||||
Shares issued for services | 250,000 | 632,500 | (562,223 | ) | - | - | - | - | 70,277 | - | 70,277 | |||||||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | (133,657 | ) | (133,657 | ) | 59,916 | (73,741 | ) | |||||||||||||||||||||||||||
Net income (loss) | - | - | - | - | - | 3,624,892 | - | 3,624,892 | (21,348 | ) | 3,603,544 | |||||||||||||||||||||||||||||
Balance as of June 30, 2017 | 10,281,032 | $ | 20,535,379 | $ | 688,934 | (175,497 | ) | $ | (417,538 | ) | $ | (893,907 | ) | $ | (414,564 | ) | $ | 19,498,304 | $ | (4,768,779 | ) | $ | 14,729,525 |
Preferred Stock | Common Stock | Additional paid-in | Shares to be | Accumulated | Accumulated other comprehensive | Noncontrolling | ||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | cancelled | deficit | loss | interest | Total | |||||||||||||||||||||||||||||||
BALANCE, June 30, 2021(Restated) | - | $ | - | 15,132,113 | $ | 82,555,700 | $ | 2,334,962 | $ | - | $ | (34,321,762 | ) | $ | (729,096 | ) | $ | (7,415,631 | ) | $ | 42,424,173 | |||||||||||||||||||
Issuance of common stock to private placement | - | - | 2,328,807 | 5,961,911 | - | - | - | - | - | 5,961,911 | ||||||||||||||||||||||||||||||
Issuance of common stock to private investors | - | - | 1,400,000 | 4,563,908 | - | - | - | - | - | 4,563,908 | ||||||||||||||||||||||||||||||
Stock based compensation to employee | - | - | 1,620,000 | 6,044,400 | - | - | - | - | - | 6,044,400 | ||||||||||||||||||||||||||||||
Stock based compensation to consultants | - | - | 900,000 | 4,020,222 | - | - | - | - | - | 4,020,222 | ||||||||||||||||||||||||||||||
Cashless exercise of stock warrants | - | - | 599,413 | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Warrant repurchase | - | - | - | (7,948,000 | ) | - | - | - | - | - | (7,948,000 | ) | ||||||||||||||||||||||||||||
Warrant exercise | - | - | 264,000 | 929,550 | - | - | - | - | - | 929,550 | ||||||||||||||||||||||||||||||
Disposal of VIE and subsidiaries | - | - | - | - | - | - | 5,919,050 | 5,919,050 | ||||||||||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | - | 774,835 | 26,230 | 801,065 | ||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (28,257,830 | ) | - | (670,539 | ) | (28,928,369 | ) | |||||||||||||||||||||||||||
BALANCE, June 30, 2022 | - | $ | - | 22,244,333 | $ | 96,127,691 | $ | 2,334,962 | $ | - | $ | (62,579,592 | ) | $ | 45,739 | $ | (2,140,890 | ) | $ | 33,787,910 | ||||||||||||||||||||
Stock based compensation to consultants | - | - | - | 329,777 | - | - | - | - | - | 329,777 | ||||||||||||||||||||||||||||||
Cancellation of stock compensation | - | - | (1,000,000 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Cancellation of shares due to settlement | - | - | (3,528,807 | ) | (2,125,420 | ) | - | (200,000 | ) | - | - | - | (2,125,420 | ) | ||||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | - | 44,497 | 22,445 | 66,942 | ||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (22,996,846 | ) | - | (101,496 | ) | (23,098,342 | ) | |||||||||||||||||||||||||||
BALANCE, June 30, 2023 | - | - | 17,715,526 | 94,332,048 | 2,334,962 | (200,000 | ) | (85,576,438 | ) | 90,236 | (2,219,941 | ) | 8,960,867 |
The accompanying notes are an integral part of these audited consolidated financial statementsstatements.
SINGULARITY FUTURE TECHNOLOGY, LTD. AND AFFILIATE
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, | ||||||||
2017 | 2016 | |||||||
Operating Activities | ||||||||
Net income (loss) | $ | 3,603,544 | $ | (2,301,522 | ) | |||
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Amortization of stock-based compensation to management | - | 349,800 | ||||||
Amortization of stock-based compensation to consultants | 599,846 | 1,327,780 | ||||||
Amortization of employee stock options | 110,195 | 3,880 | ||||||
Depreciation and amortization | 49,367 | 59,508 | ||||||
Provision for (recovery of) doubtful accounts | (18,912 | ) | 132,915 | |||||
Deferred tax provision (benefit) | (749,400 | ) | 280,600 | |||||
Changes in assets and liabilities | ||||||||
(Increase) decrease in accounts receivable | (260,165 | ) | 616,280 | |||||
Decrease (increase) in other receivables | 249,768 | (98,935 | ) | |||||
Decrease (increase) in advances to suppliers-third parties | 2,085,281 | (2,141,935 | ) | |||||
Increase in advances to suppliers-related party | (3,317,382 | ) | - | |||||
Decrease (increase) in prepaid expenses | 162,727 | (4,228 | ) | |||||
Increase in other current assets | (18,931 | ) | (30,600 | ) | ||||
Increase in other long-term assets | (70,806 | ) | - | |||||
(Increase) decrease in due from related parties | (117,772 | ) | 1,162,072 | |||||
Increase (decrease) in advances from customers | 343,790 | (101,828 | ) | |||||
Decrease in accounts payable | (272,474 | ) | (202,098 | ) | ||||
Increase in taxes payable | 278,288 | 640,549 | ||||||
Increase in due to related parties | 206,323 | - | ||||||
Increase in accrued expenses and other current liabilities | 131,483 | 186,714 | ||||||
Net cash provided by (used in) operating activities | 2,994,770 | (121,048 | ) | |||||
Investing Activities | ||||||||
Acquisition of property and equipment | (62,412 | ) | (31,659 | ) | ||||
Cash collected from the termination of vessel acquisition | - | 326,035 | ||||||
Net cash provided by (used in) investing activities | (62,412 | ) | 294,376 | |||||
Financing Activities | ||||||||
Proceeds from issuance of common stock, net | 4,319,988 | 691,600 | ||||||
Proceeds from exercise of employee stock options for common stock | 82,500 | - | ||||||
Repurchase of common stock | - | (45,011 | ) | |||||
Net cash provided by financing activities | 4,402,488 | 646,589 | ||||||
Effect of exchange rate fluctuations on cash and cash equivalents | 12,902 | (164,245 | ) | |||||
Net increase in cash and cash equivalents | 7,347,748 | 655,672 | ||||||
Cash and cash equivalents at beginning of year | 1,385,994 | 730,322 | ||||||
Cash and cash equivalents at end of year | $ | 8,733,742 | $ | 1,385,994 | ||||
Supplemental information | ||||||||
Income taxes paid | $ | 89,324 | $ | 23,286 | ||||
Non-cash investing and financing activities: | ||||||||
Return of common stock issued for vessel acquisition | $ | - | $ | (2,220,000 | ) | |||
Issuance of common stock to pay for professional services | $ | 632,500 | $ | 435,000 |
For the Years Ended | ||||||||
June 30, | ||||||||
2023 | 2022 | |||||||
Operating Activities | ||||||||
Net loss | $ | (23,098,342 | ) | $ | (28,928,369 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | 329,778 | 10,064,622 | ||||||
Depreciation and amortization | 164,348 | 533,638 | ||||||
Non-cash lease expense | 351,005 | 611,022 | ||||||
Provision for doubtful accounts, net | 2,827,511 | 1,613,504 | ||||||
Impairment loss of fixed assets and intangible asset | 33,469 | 1,006,305 | ||||||
Gain on disposal of ROU | (177,970 | ) | - | |||||
(Gain) loss on disposal of fixed assets | (12,926 | ) | 147,154 | |||||
Loss on disposal of subsidiaries | 42,191 | 6,131,616 | ||||||
Impairment loss of investment | 128,369 | - | ||||||
Impairment loss of cryptocurrencies | 18,279 | 170,880 | ||||||
Investment loss from unconsolidated subsidiary | 34,459 | 47,181 | ||||||
Changes in assets and liabilities | ||||||||
Accounts receivable | 28,362 | (39,669 | ) | |||||
Other receivables | 228,593 | 1,418,393 | ||||||
Advances to suppliers – third parties | (96,941 | ) | 543,321 | |||||
Advances to suppliers – related party | 6,153,546 | (34,081,129 | ) | |||||
Prepaid expenses and other current assets | 113,866 | (24,463 | ) | |||||
Other long-term assets – deposits | 418 | (123,869 | ) | |||||
Deferred revenue | (6,888,971 | ) | 34,047,696 | |||||
Refund payable | (13,000,000 | ) | 13,000,000 | |||||
Accounts payable | (10,948 | ) | 24,967 | |||||
Taxes payable | (114,845 | ) | 94,393 | |||||
Lease liabilities | (564,813 | ) | (633,376 | ) | ||||
Accrued expenses and other current liabilities | (131,843 | ) | 294,253 | |||||
Net cash (used in) provided by operating activities | (33,643,405 | ) | 5,918,070 | |||||
Investing Activities | ||||||||
Acquisition of property and equipment | (35,588 | ) | (874,518 | ) | ||||
Proceeds from disposal of property and equipment | 90,956 | - | ||||||
Loan receivable – related parties | 510,087 | (573,252 | ) | |||||
Investment in unconsolidated entity | - | (210,010 | ) | |||||
Advance to related parties | (74,934 | ) | (1,923,896 | ) | ||||
Repayment from related parties | 283,771 | - | ||||||
Amount paid to Goalowen | (3,000,000 | ) | - | |||||
Net cash provided by (used in) investing activities | (2,225,708 | ) | (3,581,676 | ) | ||||
Financing Activities | ||||||||
Proceeds from issuance of preferred stock | - | - | ||||||
Proceeds from issuance of common stock | - | 10,525,819 | ||||||
Warrant exercise | - | 929,550 | ||||||
Proceeds from convertible notes | - | 10,000,000 | ||||||
Repayment of convertible notes | - | (5,000,000 | ) | |||||
Warrant repurchase | - | (7,948,000 | ) | |||||
Repayment of loan payable | - | (155,405 | ) | |||||
Payment of legal settlement to cancel shares | (2,125,420 | ) | - | |||||
Net cash (used in) provided by financing activities | (2,125,420 | ) | 8,351,964 | |||||
Effect of exchange rate fluctuations on cash | (448,593 | ) | 307,607 | |||||
Net (decrease) increase in cash | (38,443,126 | ) | 10,995,965 | |||||
Cash at beginning of year | 55,833,282 | 44,837,317 | ||||||
Cash at end of year | $ | 17,390,156 | $ | 55,833,282 | ||||
Supplemental information | ||||||||
Income taxes paid | $ | - | $ | - | ||||
Interest paid | $ | - | $ | 2,404 | ||||
Non-cash transactions of operating and investing activities | ||||||||
Initial recognition of right-of-use assets and lease liabilities | $ | - | $ | 1,523,433 |
The accompanying notes are an integral part of these audited consolidated financial statementsstatements.
SINGULARITY FUTURE TECHNOLOGY, LTD. AND AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. ORGANIZATION AND NATURE OF BUSINESS
FoundedThe Company is a global logistics integrated solution provider that was incorporated in the United States (the “U.S.”) in 2001,2001. On September 18, 2007, the Company amended its Articles of Incorporation and Bylaws to merge into a new corporation, Sino-Global Shipping America, Ltd., a Virginia corporation (“Sino-Global” or the “Company”), is a non-asset based global shipping and freight logistic integrated solution provider. in Virginia. The Company provides tailored solutionsprimarily focuses on providing logistics and value-added services forsupport to businesses in the Peoples’ Republic of China (“PRC”) and the United States. On January 3, 2022, the Company changed its customerscorporate name from Sino-Global Shipping America, Ltd. to drive effectiveness and control in related links throughoutSingularity Future Technology Ltd. to reflect its expanded operations into the entire shipping and freight logistics chain. digital assets business.
The Company conducts its business primarily through its wholly-owned subsidiaries in the U.S.,PRC (including Hong Kong) and the People’s RepublicUnited States, where the majority of China, including Hong Kong (the “PRC”), Australia and Canada. Currently, a significant portion ofits clients are located. For the Company’s business is generated from clients locatedtwelve months ended June 30, 2023, the Company operated in the PRC.
The Company’s Chinese subsidiary, Trans Pacific Shipping Limited, a wholly-owned foreign enterprise (“Trans Pacific Beijing”), is the 90% owner of Trans Pacific Logistics Shanghai Limited (“Trans Pacific Shanghai”). Trans Pacific Beijing and Trans Pacific Shanghai are referred to collectively as “Trans Pacific”.
Prior to fiscal year 2016, the Company’s shipping agency business wastwo segments: (1) freight logistics services, which were operated by its subsidiaries in both the PRC. The Company’s ship management services were operated by its subsidiary in Hong Kong. The Company’s shippingUnited States and chartering servicesPRC, and (2) the sale of crypto-mining machines, which were operated by its subsidiaries in the U.S. and subsidiaryUnited States. On Feb 27, 2023, Ningbo Saimeinuo Supply Chain Management Ltd. changed its name to Ningbo Saimeinuo Web Technology Ltd. On March 30, 2023, the board of directors of the Company authorized the Company to conduct an e-commerce business in Hong Kong. Currently,China.
The outbreak of the Company’s inland transportation management services are operated by its subsidiariesnovel coronavirus (COVID-19) starting in late January 2020 in the PRC Hong Kongspread rapidly to many parts of the world. In March 2020, the World Health Organization declared the COVID-19 as a pandemic and has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities in China and the U.S. TheGiven the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of the Company’s freight logistic servicesbusiness operations and its workforce are operated by its subsidiariesconcentrated in the PRCChina and the U.S. The, the Company’s container trucking servicesbusiness, results of operations, and financial condition have been adversely affected. In early December 2022, Chinese government eased the strict control measures for COVID-19, which led to a surge in increased infections and disruption in our business operations. Any future impact of COVID-19 on our operating results in China will depend on, to a large extent, future developments and new information that may emerge regarding the duration and resurgence of COVID-19 variants and the actions taken by government authorities to contain COVID-19 or treat its impact, almost all of which are currently operated by its subsidiaries in the PRC and through a joint venture in the U.S. The Company has increased its businesses in the U.S. from third quarter of fiscal year 2017 since the website of the short haul container truck services platform has launched in December 2016.beyond our control.
In January 2016, the Company formed a subsidiary, Sino-Global Shipping LA Inc., a California corporation (“Sino LA”), for the purpose of expanding its business to provide freight logistic services to importers who ship goods into the U.S. The Company expects to generate additional revenues from providing inland transportation services and bulk cargo container services in the coming fiscal year.
In fiscal year 2016, affected by worsening market conditions in the shipping industry, the Company’s shipping agency business sector suffered a significant decrease in revenue due to a reduced number of ships served. As a result, the Company has suspended its shipping agency services business. Also, as a result of these market condition changes, the Company has suspended its ship management services business. In addition, in December 2015, the Company suspended its shipping and chartering services business, primarily as a result of the termination of a previously-contemplated vessel acquisition.
As of June 30, 2017,2023, the Company’s business segments consist of inland transportation management services, freight logistics services and container trucking services.subsidiaries included the following:
In August 2016, the Company’s Board of Directors (the “Board”) authorized management to move forward with the development of a mobile application that will provide a full-service logistics platform between the U.S. and the PRC for short-haul trucking in the U.S.
Sino-Global completed development of a full-service logistics platform as of December 2016. Upon the completion of the platform, the Company signed two significant agreements with COSCO Beijing International Freight Co., Ltd. (“COSFRE Beijing”) and Sino-Trans Guangxi in December 2016. Pursuant to the agreement with COSFRE Beijing, the Company will receive a percentage of the total amount of each transportation fee for the arrangement of inland transportation services for COSFRE Beijing’s container shipments into U.S. ports. For the strategic cooperation framework agreement with Sino-Trans Guangxi, which is a subsidiary of Sino-Trans Limited, the Company expects to utilize both parties’ existing resources and establish an integrated logistics plan to provide an end-to-end supply chain solution for customers shipping soybeans and sulfur products from the U.S. to southern PRC via container.
On January 5, 2017, the Company entered into a joint venture agreement and formed a new joint venture company named ACH Trucking Center Corp. (“ACH Center”) with Jetta Global Logistics Inc. (“Jetta Global”). Along with the establishment of ACH Center, the Company began providing short haul trucking transportation and logistics services to customers located in the New York and New Jersey areas. The Company holds a 51% ownership stake in ACH Trucking Center. The financial statements of ACH Center have been included in the consolidated financial statements of the Company.
On January 9, 2017, the Company entered into a strategic cooperation agreement with China Ocean Shipping Agency Qingdao Co. Ltd. (“COSCO Qingdao”). COSCO Qingdao will utilize the Company’s full-service logistics platform to arrange the transport of its container shipments into U.S. ports. Sino-Global will receive a percentage of the total amount of each transportation fee in exchange for the arrangement of inland transportation services for COSCO Qingdao’s container shipments into U.S. ports.
Name | Background | Ownership | |||
Sino-Global Shipping New York Inc. (“SGS NY”) | ● ● ● | A New York Corporation Incorporated on May 03, 2013 Primarily engaged in freight logistics services | 100% owned by the Company | ||
Sino-Global Shipping HK Ltd. (“SGS HK”) | ● ● ● | A Hong Kong Corporation Incorporated on September 22, 2008 No material operations | 100% owned by the Company | ||
Thor Miner Inc. (“Thor Miner”) | ● ● ● | A Delaware Corporation Incorporated on October 13, 2021 Primarily engaged in sales of crypto mining machines | 51% owned by the Company | ||
Trans Pacific Shipping Ltd. (“Trans Pacific Beijing”) | ● ● ● | A PRC limited liability company Incorporated on November 13, 2007. Primarily engaged in freight logistics services | 100% owned the Company | ||
Trans Pacific Logistic Shanghai Ltd. (“Trans Pacific Shanghai”) | ● ● ● | A PRC limited liability company Incorporated on May 31, 2009 Primarily engaged in freight logistics services | 90% owned by Trans Pacific Beijing | ||
Ningbo Saimeinuo Web Technology Ltd. (“SGS Ningbo”) | ● ● ● | A PRC limited liability company Incorporated on September 11,2017 Primarily engaged in freight logistics services | 100% owned by SGS NY | ||
Blumargo IT Solution Ltd. (“Blumargo”) | ● ● ● | A New York Corporation Incorporated on December 14, 2020 No material operations | 100% owned by SGS NY | ||
Gorgeous Trading Ltd (“Gorgeous Trading”) | ● ● ● | A Texas Corporation Incorporated on July 01, 2021 Primarily engaged in warehouse related services | 100% owned by SGS NY | ||
Brilliant Warehouse Service Inc. (“Brilliant Warehouse”) | ● ● ● | A Texas Corporation Incorporated on April 19,2021 Primarily engaged in warehouse house related services | 51% owned by SGS NY | ||
Phi Electric Motor In. (“Phi”) | ● ● ● | A New York Corporation Incorporated on August 30, 2021 No operations | 51% owned by SGS NY | ||
SG Shipping & Risk Solution Inc(“SGSR”) | ● ● ● | A New York Corporation Incorporated on September 29, 2021 No material operations | 100% owned by the Company | ||
SG Link LLC (“SG Link”) | ● ● ● | A New York Corporation Incorporated on December 23, 2021 No operations | 100% owned by SG Shipping & Risk Solution Inc on January 25, 2022 |
On February 18, 2017, the Company entered into a cooperative transportation agreement with related party, Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd. (the “Buyer” or “Zhiyuan Hong Kong”). Zhiyuan Hong Kong, jointly with China Minmetals Corporation and China Metallurgical Group Corporation, acts as the general designer, general equipment provider and general service contractor in the upgrade and renovation project of Perwaja Steel, located in Malaysia (the “Project”). The Company agreed to provide high-quality services including detailed transportation plan design, plan execution and necessary supervision of the execution at Zhiyuan Hong Kong’s demand, and the Company will receive 1% to 1.25% transportation fee incurred in the Project as commission for its services rendered (see Note 3 and Note 16). On July 7, 2017, the Company signed a supplemental agreement with the buyer, pursuant to which Sino will cooperate with Zhiyuan Hong Kong exclusively on the entire project’s transportation needs. Pursuant to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its share of packaging and transporting costs related to the project, in return the Company will receive 15% of its share of the cost incurred in the project from Zhiyuan Hong Kong as a service fee. The project is expected to complete in one to two years and the Company will collect is service fee in accordance with project completion.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“US GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of all directly, indirectly owned subsidiaries and variable interest entity. All intercompany transactions and balances have been eliminated in consolidation.
(b) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of its subsidiaries, and its affiliates.subsidiaries. All significant intercompany transactions and balances arehave been eliminated in consolidation.
Prior to December 31, 2021, Sino-Global Shipping Agency Ltd., a PRC corporation (“Sino-China”), is was considered a variable interest entityVariable Interest Entity (“VIE”), with the Company as the primary beneficiary. The Company, through Trans Pacific Beijing, entered into certain agreements with Sino-China, pursuant to which the Company receivesreceived 90% of Sino-China’s net income. The Company does not receive any payments from Sino-China unless Sino-China recognizes net income during its fiscal year. These agreements do not entitle the Company to any consideration if Sino-China incurs a net loss during its fiscal year. If Sino-China incurs a net loss during its fiscal year, the Company is not required to absorb such net loss.
As a VIE, Sino-China’s revenues arewere included in the Company’s total revenues, and any income/loss from operations iswas consolidated with that of the Company. Because of contractual arrangements between the Company and Sino-China, the Company hashad a pecuniary interest in Sino-China that requiresrequired consolidation of the financial statements of the Company and Sino-China.
The Company has consolidated Sino-China’s operating results because the entities are under common control in accordance with ASC 805-10, “Business Combinations”Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. The agency relationship between the Company and Sino-China and its branches iswas governed by a series of contractual arrangements pursuant to which the Company hashad substantial control over Sino-China. Management makes ongoing reassessments of whetherOn December 31, 2021, the Company remainsentered into a series of agreements to terminate its VIE structure and deconsolidated its formerly controlled entity Sino-China.
The Company dissolved its subsidiary Sino-Global Shipping Australia Pty Ltd. and canceled its registration with the primary beneficiary of Sino-China. As mentioned elsewhere in this report, due to the worsening market conditions in the shipping industry, Sino-China’s shipping agency business suffered a significant decrease in revenue due to a reduced number of ships served. As a result, the Company has temporarily suspended this business. Sino-China is also providing services in other related business segmentsState Administration for Industry and Commerce of the Company.People’s Republic of China on November 9, 2022.and recorded the disposal loss of $0.04 million for the year ended June 30, 2023.
The carrying amount and classification of Sino-China’s assets and liabilities included in the Company’s consolidated balance sheets were as follows:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Total current assets | $ | 9,327,990 | $ | 31,128 | ||||
Total assets | 9,472,651 | 129,463 | ||||||
Total current liabilities | 4,517 | 7,222 | ||||||
Total liabilities | 4,517 | 7,222 |
(c)(b) Fair Value of Financial Instruments
We followThe Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 1 | — | Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
Level 2 — Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 2 | — | Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
Level 3 — Unobservable inputs that reflect management’s assumptions based on the best available information.
Level 3 | — | Unobservable inputs that reflect management’s assumptions based on the best available information. |
The carrying value of accounts receivable, other receivables, other current assets, and current liabilities approximate their fair values because of the short-term nature of these instruments.
(d)
(c) Use of Estimates and Assumptions
The preparation of the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue recognition, fair value of stock basedstock-based compensation, cost of revenues, allowance for doubtful accounts, impairment loss, deferred income taxes, income tax expense and the useful lives of property and equipment. The inputs into the Company’s judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
(e)(d) Translation of Foreign Currency
The accounts of the Company and its subsidiaries including Sino-China and each of its branches are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Company’s functional currency is the U.S. dollar (“USD”) while its subsidiaries in the PRC, including Sino-China,Trans Pacific Beijing and Trans Pacific Logistic Shanghai Ltd. report their financial positions and results of operations in Renminbi (“RMB”), its subsidiary Sino-Global Shipping Australia Pty Ltd., reports its financial positions and results of operations in Australian dollar (“AUD”), its subsidiary Sino-Global Shipping (HK), Ltd. reports its financial positions and results of operations in Hong Kong dollar (“HKD”). The accompanying consolidated financial statements are presented in USD. Foreign currency transactions are translated into USD using the fixed exchange rates in effect at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations. The Company translates the foreign currency financial statements of Sino-China, Sino-Global Shipping Australia, Sino-Global Shipping Hong Kong, Sino-Global Shipping Canada, Trans Pacific Beijing and Trans Pacific Shanghai in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange rates quoted by the People’s Bank of China at the balance sheetsheets’ dates and revenues and expenses are translated at average exchange rates in effect during the year. The resulting translation adjustments are recorded as other comprehensive income (loss)loss and accumulated other comprehensive loss as a separate component of equity of the Company, and also included in non-controlling interests.
The exchange rates for the years ended June 30, 20172023 and 20162022 are as follows:
June 30, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Foreign currency | Balance Sheet | Profits/Loss | Balance Sheet | Profits/Loss | ||||||||||||
RMB:1USD | 6.7806 | 6.8126 | 6.6487 | 6.4416 | ||||||||||||
AUD:1USD | 1.3028 | 1.3267 | 1.3433 | 1.3755 | ||||||||||||
HKD:1USD | 7.8059 | 7.7651 | 7.7595 | 7.7594 | ||||||||||||
CAD:1USD | 1.2982 | 1.3270 | 1.2992 | 1.3266 |
June 30, 2023 | June 30, 2022 | June 30 | ||||||||||||||
Foreign currency | Balance Sheet | Balance Sheet | 2023 Profits/Loss | 2022 Profits/Loss | ||||||||||||
1USD: RMB | 7.2537 | 6.6994 | 6.9501 | 6.4544 | ||||||||||||
1USD: AUD | 1.5012 | 1.4484 | 1.4861 | 1.3788 | ||||||||||||
1USD: HKD | 7.8366 | 7.8474 | 7.8379 | 7.8045 |
(f)(e) Cash and Cash Equivalents
Cash and cash equivalents consistconsists of cash on hand and other highly liquid investmentscash in bank which are unrestricted as to withdrawal or use, and which have an original maturity of three months or less when purchased.use. The Company maintains cash and cash equivalents with various financial institutions mainly in the PRC, Australia, Hong Kong Canada and the U.S. As of June 30, 20172023 and 2016,June 30, 2022, cash balances of $6,246,337$183,510 and $1,333,713,$143,044, respectively, were maintained at financial institutions in the PRC, which werePRC. $ 74,533 and $nil of these balances are not covered by insurance as the deposit insurance system in China only insured by anyeach depositor at one bank for a maximum of the Chinese authorities.approximately $70,000 (RMB 500,000). As of, June 30, 20172023 and 2016,June 30, 2022, cash balancebalances of $2,462,792$919,990 and $43,760,$55,636,636, respectively, were maintained at U.S. financial institutions,institutions. $450,636 and were$53,869,575 of these balances are not covered by insurance, as each U.S. account was insured by the Federal Deposit Insurance Corporation or other programs subject to certain$250,000 limitations. The Hong Kong Deposit Protection Board pays compensation up to a limit of HKD 500,000 (approximately $64,000) if the bank with which an individual/a company holds its eligible deposit fails. As of June 30, 2023 and June 30, 2022, cash balances of $16,285,067 and $51,701, respectively, were maintained at financial institutions in Hong Kong, and $16,216,393 and $nil of these balances are not covered by insurance. As of June 30, 2023 and June 30, 2022, cash balances of $nil and $192, respectively, were maintained at Australia financial institutions, and were insured as the Australian government guarantees deposits up to AUD 250,000 (approximately $172,000). As of June 30, 2023 and June 30, 2022, amount of deposits the Company had covered by insurance amounted to $647,004 and $1,961,997, respectively.
(f) Cryptocurrencies
Cryptocurrencies, mainly bitcoin, are included in current assets in the accompanying consolidated balance sheets. Cryptocurrencies purchased are recorded at cost and cryptocurrencies awarded to the Company through its mining activities are accounted for as other income for the year ended June 30, 2022. No other income was generated for the year ended June 30, 2023. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt.
Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.
(g) Receivables and Allowance for Doubtful Accounts Receivable
Accounts receivable are presented at net realizable value. The Company maintains allowances for doubtful accounts and for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual receivable balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balances, customers’ historical payment history, their current credit-worthiness and current economic trends. Receivables are generally considered past due after 365180 days. The Company reserves 25%-50% of the customers balance aged between 181 days to 1 year, 50%-100% of the customers balance over 1 year and 100% of the customers balance over 2 years. Accounts Receivablereceivable are written off against the allowances only after exhaustive collection efforts. As the Company has focused its development on the shipping management segment, its customer base consists of more smaller privately owned companies that will pay more timely than state owned companies.
Other receivables represent mainly customer advances, prepaid employee insurance and welfare benefits, which will be subsequently deducted from the employee payroll, project advances as well as office lease deposits. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Other receivables are written off against the allowances only after exhaustive collection efforts.
(h) Property and Equipment, net
Net propertyProperty and equipment are stated at historical cost less accumulated depreciation. Historical cost comprises its purchase price and any directly attributable costs of bringing the assets to its working condition and location for its intended use. Depreciation is calculated on a straight-line basis over the following estimated useful lives:
Buildings | 20 years |
Motor vehicles | |
1-5 years | |
Furniture and fixtures | 3-5 years |
System software | 5 years |
Leasehold improvements | Shorter of lease term or useful lives |
Mining equipment | 3 years |
The carrying value of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from such asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved or based on independent appraisals. Management has determined that there wereThe Company inquired with the car dealer and obtained the following market value for similar vehicles and provide impairments to carrying value of fixed assets of $33,469. And no impairments atwere recorded for the balance sheet dates.years ended June 30, 2022.
(i) Investments in unconsolidated entity
Entities in which the Company has the ability to exercise significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence is generally considered to exist when the Company has voting shares representing 20% to 50%, and other factors, such as representation on the board of directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Dividends received from the equity method investments are recorded as reductions in the cost of such investments. The Company generally considers an ownership interest of 20% or higher to represent significant influence. The Company accounts for the investments in entities over which it has neither control nor significant influence, and no readily determinable fair value is available, using the investment cost minus any impairment, if necessary.
Investments are evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investment is less than its carrying value. An impairment loss is recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investment; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. On January 10, 2020, the Company entered into a cooperation agreement with Mr. Shanming Liang, a shareholder of the Company, to set up a joint venture in New York named LSM Trading Ltd., (“LSM”) in which the Company holds a 40% equity interest. Mr. Shanming Liang subsequently transferred his shares to Guanxi Golden Bridge Industry Group Co., Ltd in October 2021. For the year ended June 30, 2023, the Company invested $210,000 and recorded $81,640 investment loss in LSM. The joint venture has not started its operations due to COVID-19.As we could not get the financial information of the investee, we determined to provide full impairment of our equity investment. The Company recorded $128,360 impairment loss for the year ended June 30, 2023.
(j) Convertible notes
The Company evaluates its convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the fair value of the embedded derivative is recorded at fair value each reporting period and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense.
(k) Revenue Recognition
The Company recognizes revenue which represents the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company identifies contractual performance obligations and determines whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.
(j)The Company uses a five-step model to recognize revenue from customer contracts. The five-step model requires the Company to (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
For the Company’s freight logistic and shipping agency services revenue, the Company provided transportation services which included mainly shipping services. In fiscal year 2021, the Company also provided shipping agency and management services The Company derived transportation revenue from sales contracts with its customers with revenues being recognized upon performance of services. Sales price to the customer was fixed upon acceptance of the sales contract and there was no separate sales rebate, discount, or other incentive. The Company’s revenues were recognized at a point in time after all performance obligations were satisfied.
For the Company’s warehouse services, which are included in the freight logistic services, the Company’s contracts provide the customer an integrated service that includes two or more services, including but not limited to warehousing, collection, first-mile delivery, drop shipping, customs clearance packaging, etc.
Accordingly, the Company generally identifies one performance obligation in its contracts, which is a series of distinct services that remain substantially the same over time and possess the same pattern of transfer. Revenue is recognized over the period in which services are provided under the terms of the Company’s contractual relationships with its clients.
The transaction price is based on the amount specified in the contract with the customer and contains fixed and variable consideration. In general, the fixed consideration in a contract represents facility and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration is comprised of cost reimbursement determined based on the costs incurred. Revenue relating to variable pricing is estimated and included in the consideration if it is probable that a significant revenue reversal will not occur in the future. The estimate of variable consideration is determined by the expected value or most likely amount method and factors in current, past and forecasted experience with the customer. Customers are billed based on terms specified in the revenue contract and they pay us according to approved payment terms.
Revenue for the above services is recognized on a gross basis when the Company controls the services as it has the obligation to (i) provide all services (ii) bear any inventory risk for warehouse services. In addition, the Company has control to set its selling price to ensure it would generate profit for the services.
For the year ended June 30, 2023, the Company also engaged in sales of cryptocurrency mining equipment.
On January 10, 2022, the Company’s joint venture, Thor Minor, entered into a Purchase and Sale Agreement with SOS Information Technology New York Inc. (the “Buyer”). Pursuant to the Purchase and Sale Agreement, Thor agreed to sell and the Buyer agreed to purchase certain cryptocurrency mining equipment.
The Company’s performance obligation is to deliver products according to contract specifications. The Company recognizes product revenue at a point in time when the control of products or services are transferred to customers. To distinguish a promise to provide products from a promise to facilitate the sale from a third party, the Company considers the guidance of control in ASC 606-10-55-37A and the indicators in 606-10-55-39. The Company considers this guidance in conjunction with the terms in the Company’s arrangements with both suppliers and customers.
In general, revenue is recognized on a gross basis when the Company controls the products as it has the obligation to (i) fulfill the products delivery and custom clearance (ii) bear any inventory risk as legal owners. In addition, when establishing the selling prices for delivery of the resale products, the Company has control to set its selling price to ensure it would generate profit for the products delivery arrangements. If the Company is not responsible for provision of product and does not bear inventory risk, the Company recorded revenue on a net basis.
For the year ended June 30, 2023, the Company recognized the sale of cryptocurrency mining equipment based on net basis as the manufacturer of the products are responsible for shipping and custom clearing for the products.
Contract balances
The Company records receivables related to revenue when the Company has an unconditional right to invoice and receive payment.
Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied and revenue being recognized. Contract balance amounted to $66,531 and $6,955,577 for the year ended June 30, 2023 and 2022, respectively. Refund payable amounted to $nil and $13,000,000 for the year ended June 30, 2023 and 2022, respectively as a result of termination of the contract with customer (See Note 21 for details).
The Company’s disaggregated revenue streams are described as follows:
For the Years Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Sale of crypto mining machines | $ | 732,565 | $ | 157,800 | ||||
Shipping agency and management services | - | - | ||||||
Freight logistics services | 3,806,158 | 3,830,615 | ||||||
Total | $ | 4,538,723 | $ | 3,988,415 |
Disaggregated information of revenues by geographic locations are as follows:
For the Years Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
PRC | $ | 2,529,449 | $ | 2,982,691 | ||||
U.S. | 2,009,274 | 1,005,724 | ||||||
Total revenues | $ | 4,538,723 | $ | 3,988,415 |
(l) Leases
The Company adopted FASB ASU 2016-02, “Leases” (Topic 842) for the year ended June 30, 2020, and elected the practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption, the Company recognized right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 7% based on the duration of lease terms.
Operating lease ROU assets and lease liabilities are recognized at the adoption date or the commencement date, whichever is earlier, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.
(m) Taxation
Because the Company and its subsidiaries and Sino-China arewere incorporated in different jurisdictions, they file separate income tax returns. The Company uses the asset and liability method of accounting for income taxes in accordance with USU.S. GAAP. Deferred taxes, if any, are recognized for the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. A valuation allowance is provided against deferred tax assets if it is more likely than not that the asset will not be utilized in the future.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions as of June 30, 2023 and 2022.
Income tax returns for the years prior to 20142018 are no longer subject to examination by U.S. tax authorities.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income determined under the PRC Generally Accepted Accounting Principles (“PRC GAAP”) at 25%. Sino-China and Trans Pacific are registeredBeijing were incorporated in the PRC and governed byare subject to the Enterprise Income Tax Laws of the PRC.
PRC Business TaxValue Added Taxes and Surcharges
RevenuesThe Company is subject to value added tax (“VAT”). Revenue from services provided by the Company’s PRC subsidiaries, and affiliates, including Sino-China and Trans Pacific, and the VIE, and Sino-China, are subject to the PRC business tax of 5%VAT at rates ranging from 9% to 13%. Business tax and surchargesEntities that are VAT general taxpayers are allowed to offset qualified VAT paid on gross revenues generated minus the costs of services which are paid on behalf of the customers.
Enterprises or individuals who sell commodities, engageto suppliers against their VAT liability. Net VAT liability is recorded in services or selling of goods in the PRC are subject to a value added tax (“VAT”) in accordance with PRC laws. All of the Company’s revenue generated in the PRC and are subject to a VATtaxes payable on the gross sales price. The VAT rates are 6% and 11%, depending on the type of services provided. The VAT may be offset by VAT paid by the Company on service.consolidated balance sheets.
In addition, under the PRC regulations, the Company’s PRC subsidiaries and affiliatesVIE are required to pay city construction taxestax (7%) and education surcharges (3%) based on calculated business taxthe net VAT payments.
The Company’s PRC subsidiaries and affiliates report revenues net of PRC’s VAT, business tax and surcharges for all the periods presented in the consolidated statements of operations.
(k)(n) Earnings (loss) per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to holders of common sharesstock of the Company by the weighted average number of shares of common sharesstock of the Company outstanding during the applicable period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common sharesstock of the Company were exercised or converted into common sharesstock of the Company. Common sharestock equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive.
For the yearyears ended June 30, 2017, the basic average shares outstanding2023 and diluted average shares of the Company outstanding were not the same because the2022, there was no dilutive effect of potential shares of common stock of the Company was dilutive sincebecause the exercise prices for options were lower than the average market price for the related periods. For the year ended June 30, 2017, a total of 38,466 unexercised options were dilutive and were included in the computation of diluted earnings per share. For the year ended June 30, 2016, no unexercised warrants and options were dilutive.Company generated net loss.
(l)(o) Comprehensive Income (loss)(Loss)
The Company reports comprehensive income (loss) in accordance with the authoritative guidance issued by Financial Accounting Standards Board (“FASB”(the “FASB”) issued authoritative guidance which establishes standards for reporting comprehensive income (loss) and its component in financial statements. ComprehensiveOther comprehensive income (loss), refers to revenue, expenses, gains and losses that under US GAAP are recorded as defined, includes all changes inan element of stockholders’ equity duringbut are excluded from net income. Other comprehensive income (loss) consists of a periodforeign currency translation adjustment resulting from non-owner sources.the Company not using the U.S. dollar as its functional currencies.
(m)(p) Stock-based Compensation
The Company accounts for stock-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that stock-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period. The Company records stock-based compensation expense at fair value on the grant date and recognizes the expense over the employee’s requisite service period.
The Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 718 amended by ASU 2018-07. Under FASB ASC Topic 718, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.
Valuations of stock-based compensation are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.
(n)
(q) Risks and Uncertainties
The Company’s business, financial position and results of operations may be influenced by the political, economic, health and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, health and legal environmentenvironments and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Moreover,
(r) Recent Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s abilityfinancial reporting, the Company undertakes a study to grow its business and maintain its profitability could be negatively affected bydetermine the nature and extentconsequences of services providedthe change to its major customers, Tianjin Zhiyuan Investment Group Co., Ltd. (the “Zhiyuan Investment Group”)condensed consolidated financial statements and Tengda Northwest Ferroalloy Co., Ltd. (“Tengda Northwest”).
(o) Reclassifications
Certain prior year amounts have been reclassifiedassures that there are proper controls in place to conform toascertain that the current period presentation. These reclassifications have no effect onCompany’s condensed consolidated financial statements properly reflect the results of operations and cash flows.
(p) Recent Accounting Pronouncementschange.
In January 2016,May 2019, the FASB issued ASU 2016-01,2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, – Overall (Subtopic 825-10): Recognition and Measurementwhich introduced the expected credit losses methodology for the measurement of Financial Assets and Financial Liabilities, to enhance the reporting model forcredit losses on financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instrumentsassets measured at amortized cost onbasis, replacing the balance sheet.previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For publicthose entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses standard. The new effective date for these preparers is effective for the fiscal years beginning after December 15, 2017,July 1, 2023, including interim periods within those fiscal years. Management doesThe Company has not believeearly adopted this update and it will become effective on July 1, 2023 assuming the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.
In February 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (ASU) 2016-02, Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include paymentsCompany will remain eligible to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.smaller reporting company. The Company is currently evaluating the impact of this new standard on itsthe Company’s consolidated financial statements.statements and related disclosures.
In April 2016,August 2020, the FASB issued ASU 2016-10, Revenue from 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. The amendments in this Update to address issues identified as a result of the complexity associated with Customers (Topic 606): Identifying Performance Obligationsapplying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and Licensing.equity. ASU 2020-06 is effective for the Company for annual and interim reporting periods beginning July 1, 2022. The objective isCompany adopted this new standard on July 1, 2021 on its accounting for the convertible notes issued in December 2021.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Non-refundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the two aspectsCodification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning July 1, 2021. All entities should apply the amendments in this Update on a prospective basis as of Topic 606: identifying performance obligations and the licensing implementation guidance, while retainingbeginning of the related principlesperiod of adoption for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which isexisting or newly purchased callable debt securities. These amendments do not yet effective. The effective date and transition requirements for this ASU are the same aschange the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. Management does not believe thedates for Update 2017-08. The adoption of this ASU wouldnew standard did not have a material effectimpact on the Company’s consolidated financial statements.statements and related disclosures.
In May 2016,October 2020, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.2020-10, “Codification Improvements”. The object isamendments in this Update represent changes to address certain issues identified byclarify the FASB-IASB Joint Transition Resource Company for Revenue Recognition.Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), whichCodification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is not yet effective.effective for annual periods beginning after July 1, 2021 for public business entities. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. Management does not believe theshould be applied retrospectively. The adoption of this ASU wouldnew standard did not have a material effectimpact on the Company’s consolidated financial statements.statements and related disclosures.
In August 2016,On March 28, 2023, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU)(“ASU”) No. 2016-15, Statement of Cash Flows2023-01, Leases (Topic 230)842): Classification of Certain Cash Receipts and Cash Payments, to addressCommon Control Arrangements. The amendments in ASU 2023-01 improve current GAAP by clarifying the accounting for leasehold improvements associated with common control leases, thereby reducing diversity in how certain cash receipts and cash payments are presented and classified inpractice. Additionally, the statement of cash flows. The amendments provide guidance oninvestors and other allocators of capital with financial information that better reflects the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlementeconomics of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle.those transactions. The amendments arenew standard is effective for public business entitiesthe Company for its fiscal yearsyear beginning after December 15, 2017, and interim periods within those fiscal years. EarlyJanuary 1, 2024, with early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.permitted.
In January 2017, theOn June 30, 2022, FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual sale restriction prohibiting the Definitionsale of an equity security is a Business”. The amendments in this ASU clarifycharacteristic of the definition of a business withreporting entity holding the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically, these amendments provide a screen to determine when a setequity security and is not a business. Ifincluded in the screen is not met, the amendments in this ASU first require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and second, they require removalequity security’s unit of the evaluation of whether a market participant could replace missing elements. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.account. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, the ASUnew standard is effective for annual reporting periods, including interim periods within those annual reporting periods,the Company for its fiscal year beginning after December 15, 2017. EarlyJanuary 1, 2024, with early adoption is permitted, including adoption in any interim period. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.permitted.
Note 3. DISPOSAL OF VIE AND SUBSIDIAIRIES
In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260)”, Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning afterOn December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
Note 3. ADVANCES TO SUPPLIERS
The Company’s advances to third-party suppliers are as follows:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Freight fees | $ | 29,960 | $ | 2,192,910 | ||||
Others | 24,930 | - | ||||||
Total advances to suppliers-third parties | $ | 54,890 | $ | 2,192,910 |
As of June 2017, the Company is undergoing a trial on the transporting of Sulphur product as containerized bulk cargo under joint agreements with Sino-Trans Guangxi and COSFRE Beijing. As of the end of fiscal year 2017, there was no revenue or cost of revenue recognized as the service provided has not been completed. $50,020 advances payment made to suppliers (including $29,960 advanced freight fees and the remaining balance was included in other prepayment) in relation of the trial of bulk cargo containerized was included in the balance of advances to suppliers as of June 30, 2017.
The Company’s advances to suppliers – related party are as follows:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Freight fees | $ | 3,333,038 | $ | - | ||||
Total advances to suppliers-related party | $ | 3,333,038 | $ | - |
As discussed in Note 1, on February 18, 2017,31, 2021, the Company entered into a cooperative transportation agreement with Zhiyuan Hong Kong series of agreements to terminate its variable interest entity (“VIE”) structure and deconsolidated its formerly controlled entity Sino-Global Shipping Agency Ltd. (“Sino-China”). Zhiyuan Hong Kong isThe Company controlled Sino-China through its wholly owned by our largest shareholder. On July 7, 2017,subsidiary Trans Pacific Shipping Limited (“Trans Pacific Beijing”). The Company made the Company signed a supplemental agreement, pursuantdecision to which Sino will cooperate with Zhiyuan Hong Kong exclusively ondissolve the entire project’s transportation needs. Pursuant to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its share of packagingVIE structure and transporting costs related to the project, in return the Company will receive 15% of its share of the cost incurred in the project from Zhiyuan Hong Kong as a service fee. The project is expected to complete in one to two yearsSino-China because Sino-China has no active operations and the Company will collect is service feewanted to remove any potential risks associated with any VIE structures. In addition, the Company dissolved its subsidiary Sino-Global Shipping LA, Inc. On March 14, 2022, the company discontinued its subsidiary Sino-Global Shipping Canada, Inc., no gain or loss was recognized in accordance with project completion.the deconsolidation. In November 2022, the Company dissolved its subsidiary Sino-Global Shipping Australia Pty Ltd., and recorded the disposal loss of $0.04 million for the year ended June 30, 2023.
Since the disposal did not represent any strategic change of the Company’s operation, the disposal was not presented as discontinued operations.
Net assets of the entities disposed and loss on disposal was as follows:
For the Year Ended | ||||||||||||
June 30, 2023 | ||||||||||||
VIE | Subsidiaries | Total | ||||||||||
Total current assets | $ | - | $ | 376 | $ | 376 | ||||||
Total other assets | - | 5,392 | 5,392 | |||||||||
Total assets | - | 5,768 | 5,769 | |||||||||
Total current liabilities | - | - | - | |||||||||
Total net assets | - | 5,768 | 5,769 | |||||||||
Exchange rate effect | - | 36,423 | 36,422 | |||||||||
Total loss on disposal | $ | - | $ | 42,191 | $ | 42,191 |
For the Year Ended | ||||||||||||
June 30, 2022 | ||||||||||||
VIE | Subsidiaries | Total | ||||||||||
Total current assets | $ | 83,573 | $ | 20,898 | $ | 104,471 | ||||||
Total other assets | 8,723 | - | 8,723 | |||||||||
Total assets | 92,296 | 20,898 | 113,194 | |||||||||
Total current liabilities | 41,608 | 1,100 | 42,708 | |||||||||
Total net assets | 50,688 | 19,798 | 70,486 | |||||||||
Noncontrolling interests | 5,919,050 | - | 5,919,050 | |||||||||
Exchange rate effect | 142,080 | - | 142,080 | |||||||||
Total loss on disposal | $ | 6,111,818 | $ | 19,798 | $ | 6,131,616 |
Note 4. CRYPTOCURRENCIES
The following table presents additional information about cryptocurrencies:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Beginning balance | $ | 90,458 | $ | 261,338 | ||||
Receipt of cryptocurrencies from mining services | - | - | ||||||
Impairment loss | (18,279 | ) | (170,880 | ) | ||||
Ending balance | $ | 72,179 | $ | 90,458 |
Impairment loss amounted to $18,279 and $170,880 for the years ended June 30, 2023 and 2022.
Note 5. ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivable are as follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Trade accounts receivable | $ | 3,487,293 | $ | 3,521,491 | ||||
Less: allowances for doubtful accounts | (3,288,740 | ) | (3,413,110 | ) | ||||
Accounts receivable, net | $ | 198,553 | $ | 108,381 |
Movement of allowance for doubtful accounts are as follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Beginning balance | $ | 3,413,110 | $ | 3,475,769 | ||||
Provision for doubtful accounts, net of recovery | - | 257 | ||||||
Write-off/recovery | - | - | ||||||
Exchange rate effect | (124,370 | ) | (62,916 | ) | ||||
Ending balance | $ | 3,288,740 | $ | 3,413,110 |
For the years ended June 30, 2023 and 2022, the provision for doubtful accounts was $nil and $257, respectively.
Note 6. OTHER RECEIVABLES, NET
The Company’s other receivables are as follows:
June 30, 2023 | June 30, 2022 | |||||||
Advances to customers* | $ | 7,060,456 | $ | 3,943,547 | ||||
Employee business advances | 10,570 | 23,768 | ||||||
Total | 7,071,026 | 3,967,315 | ||||||
Less: allowances for doubtful accounts | (6,994,212 | ) | (3,942,258 | ) | ||||
Other receivables, net | $ | 76,814 | $ | 25,057 |
* | In fiscal year 2019 and 2020, the Company entered into contracts with several customers where the Company’s services included both freight charge and cost of commodities to be shipped to customers’ designated locations. The terms of the contracts required the Company to prepay the commodities. The Company prepaid for the commodities and reclassified the payment as other receivables as the payments were paid on behalf of the customers. These payments will be repaid to the Company when either the contract is executed or the contracts are terminated by either party. The customers were negatively impacted by the pandemic and required additional time to execute the contracts, due to significant uncertainty on whether the delayed contracts will be executed timely, the Company had provided full allowance due to contract delay during the fiscal year ended June 30, 2020. The Company subsequently recovered and $1,934,619 in fiscal year 2022. On March 23, 2023, SG Shipping & Risk Solution Inc. an indirect wholly owned subsidiary of SGLY entered into an operating income right transfer contract with Goalowen Inc. pursuant to which Goalowen agreed to transfer its rights to receive income from operating a certain tuna fishing vessel to SG Shipping for $ 3 million. Such contract was signed by the former COO Jing Shan without the Board’s authorization. On May 5, 2023, Ms. Shan made a wire transfer of $ 3 million to Goalowen without the Board’s authorization,. It was recorded as an Advance to customers. As of June 30, 2023, the Company evaluated the collection possibility, and decided to provide a 100% allowance provision in the amount of $3 million. |
Movement of allowance for doubtful accounts are as follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Beginning balance | $ | 3,942,258 | $ | 6,024,266 | ||||
Increase | 3,000,000 | |||||||
Recovery for doubtful accounts | - | (1,934,619 | ) | |||||
Less: write-off | ||||||||
Exchange rate effect | 51,954 | (147,389 | ) | |||||
Ending balance | $ | 6,994,212 | $ | 3,942,258 |
Note 4. ACCOUNTS RECEIVABLE, NET7. ADVANCES TO SUPPLIERS
The Company’s net accounts receivable isadvances to suppliers – third parties are as follows:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Trade accounts receivable | $ | 2,754,962 | $ | 2,540,052 | ||||
Less: allowances for doubtful accounts | (185,821 | ) | (207,028 | ) | ||||
Accounts receivables, net | $ | 2,569,141 | $ | 2,333,024 |
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Freight fees (1) | $ | 428,032 | $ | 336,540 | ||||
Less: allowances for doubtful accounts | (300,000 | ) | (300,000 | ) | ||||
Advances to suppliers-third parties, net | $ | 128,032 | $ | 36,540 |
For the year ended June 30, 2017, recovery of doubtful accounts receivable was $18,912. For the year ended June 30, 2016, $132,915 was charged to allowance for doubtful accounts.
(1) | The advanced freight fee is the Company’s prepayment made for various shipping costs for shipments from July 2022 to June 2023. The Company provided allowance of $300,000 for the year ended June 30, 2022, and there was no change in the fiscal year 2023. |
Note 5. OTHER RECEIVABLES
The Company’s other receivables represent mainly prepaid employee insurance and welfare benefits, which will be subsequently deducted from the employee payroll, guarantee deposits on behalf of ship owners as well as office lease deposits.
Note 6.8. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The Company’s prepaid expenses and other current assets are as follows:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Consultant fees (1) | $ | 158,150 | $ | 845,420 | ||||
Advance to employees | 64,160 | 105,137 | ||||||
Other (including prepaid web hosting , public relations services) | 95,708 | 55,056 | ||||||
Total | 318,018 | 1,005,613 | ||||||
Less : current portion | 311,136 | 826,631 | ||||||
Total noncurrent portion | $ | 6,882 | $ | 178,982 |
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Prepaid income taxes | $ | 11,929 | $ | 11,929 | ||||
Other (including prepaid professional fees, rent, listing fees) | 240,118 | 353,984 | ||||||
Total | $ | 252,047 | $ | 365,913 |
Note 9. OTHER LONG-TERM ASSETS – DEPOSITS, NET
(1) The Company entered into a management consulting services agreement with a consulting company on November 12, 2015, pursuant to which the consulting company shall assist the Company with its regulatory filings during the period from July 1, 2016 to June 30, 2018. In returnCompany’s other long-term assets – deposits are as follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Rental and utilities deposits | $ | 244,923 | $ | 246,581 | ||||
Freight logistics deposits (1) | - | - | ||||||
Total other long-term assets - deposits | $ | 244,923 | $ | 246,581 | ||||
Less: allowances for deposits | (8,157 | ) | (8,832 | ) | ||||
Other long-term assets- deposits, net | $ | 236,766 | $ | 237,749 |
(1) | On March 8, 2018, the Company entered into contract with BaoSteel Resources Co., Ltd (“BaoSteel”) to provide supply chain services for BaoSteel. The contract required the Company to pay BaoSteel approximately $3.1 million (RMB 20 million) of deposit. This refundable deposit is to cover any possible loss of merchandise, as well as any non-performance on the part of the Company and its vendors. The restricted deposit is expected be repaid to the Company when either the contract term expires by March 2023 or the contract is terminated by either party. Due to impact of COVID-19 and recent rising freight costs, the Company has not been able to fulfill the contract to BaoSteel and expect it may not be able to collect the full deposit, as such the Company provided full allowance for the $3.1 million deposit with BaoSteel in fiscal year 2021. During fiscal year 2022, the Company wrote off the $3.1 million deposit. |
Movements of allowance for its services,deposits are as approved by the Board, a total of RMB 2,100,000 ($316,298) was paid to the consulting company. The above-mentioned consulting fees have been and will be ratably charged to expense over the terms of the above-mentioned agreement.follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Beginning balance | $ | 8,832 | $ | 3,177,127 | ||||
Allowance for deposits | - | - | ||||||
Less: Write-off | - | (3,173,408 | ) | |||||
Exchange rate effect | (675 | ) | 5,113 | |||||
Ending balance | $ | 8,157 | $ | 8,832 |
Note 7.10. PROPERTY AND EQUIPMENT, NET
The Company’s net property and equipment are as follows:
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2017 | 2016 | 2023 | 2022 | |||||||||||||
Land and buildings | $ | 198,512 | $ | 202,450 | ||||||||||||
Motor vehicles | 542,471 | 497,006 | 542,904 | 715,571 | ||||||||||||
Computer equipment | 155,141 | 156,890 | 113,097 | 117,397 | ||||||||||||
Office equipment | 66,097 | 59,899 | 67,699 | 67,139 | ||||||||||||
Furniture and fixtures | 163,219 | 164,701 | 533,634 | 390,093 | ||||||||||||
System software | 117,733 | 119,964 | 103,038 | 111,562 | ||||||||||||
Leasehold improvements | 62,857 | 64,105 | 766,294 | 829,687 | ||||||||||||
Mining equipment | 922,438 | 922,438 | ||||||||||||||
Total | 1,306,030 | 1,265,015 | 3,049,104 | 3,153,887 | ||||||||||||
Less: Impairment reserve | (1,233,521 | ) | (1,236,282 | ) | ||||||||||||
Less: Accumulated depreciation and amortization | 1,118,657 | 1,088,648 | (1,389,240 | ) | (1,368,649 | ) | ||||||||||
Property and equipment, net | $ | 187,373 | $ | 176,367 | $ | 426,343 | $ | 548,956 |
Depreciation and amortization expenseexpenses for the years ended June 30, 20172023 and 20162022 were $49,367$164,348 and $59,508,$533,638, respectively. Impairment loss amounted to $33,470 and $410,552 for the years ended June 30, 2023 and 2022, respectively.
Note 8.11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Salary and reimbursement payable | $ | 117,648 | $ | 305,423 | ||||
Professional fees and other expense payable | 97,563 | 305,264 | ||||||
Interest payable | 386,378 | 136,379 | ||||||
Others | 35,105 | 9,206 | ||||||
Total | $ | 636,694 | $ | 756,272 |
Note 12. CONVERTIBLE NOTES
Accrued expenses and other current liabilities represent mainly payroll and welfare payable, accrued expenses and other miscellaneous items.
Note 9. STOCK-BASED COMPENSATIONOn December 19, 2021, the Company issued two Senior Convertible Notes (the “Convertible Notes”) to two non-U.S. investors for an aggregate purchase price of $10,000,000.
The issuanceConvertible Notes bear an interest at 5% annually and may be converted into shares of the Company’s common stock, no par value per share at a conversion price of $3.76 per share, the closing price of the common stock on December 17, 2021. The Convertible Notes are unsecured senior obligations of the Company, and the maturity date of the Convertible Notes is December 18, 2023. The Company may repay any portion of the outstanding principal, accrued and unpaid interest, without penalty for early repayment. The Company may make any repayment of principal and interest in (a) cash, (b) common stock at the conversion price or (c) a combination of cash or common stock at the conversion price.
The investors may convert any conversion amount into common stock on any date beginning on June 19, 2022.
The Company evaluated the convertible notes agreement under ASC 815 Derivatives and Hedging (“ASC 815”) amended by ASU 2020-06. ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. Based on terms of the convertible notes agreements, the Company’s notes are convertible for a fixed number of shares and do not require the Company to net settle. None of the embedded terms required bifurcation and liability classification.
On March 8, 2022, the Company issued amended and restated the terms of the notes and issued the Amended and Restated Senior Convertible Notes (the “Amended and Restated Convertible Notes”) to the investors to change the principal amount of the Convertible Notes to an aggregate principal amount of $5,000,000. There other terms of the notes remained unchanged.
The terms of the Amended and Restated Convertible Notes are the same as that of the original Convertible Notes, except for the reduced principal amount and the waiver of interest for the $5,000,000 payment made on March 8, 2022.
For the year ended June 30, 2023 and 2022, interest expenses related to the aforementioned convertible notes amounted to $250,000 and $132,977, respectively.
Note 13. LEASES
The Company determines if a contract contains a lease at inception which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All of the Company’s leases are classified as operating leases.
The Company has several lease agreements with lease terms ranging from two to five years. As of June 30, 2023, ROU assets and lease liabilities amounted to $381,982 and $576,032 (including $330,861 from lease liabilities current portion and $245,171 from lease liabilities non-current portion), respectively and weighted average discount rate was approximately 10.61%.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The leases generally do not contain options to extend at the time of expiration and the weighted average remaining lease terms are 2.15 years.
For the years ended June 30, 2023 and 2022, rent expense amounted to approximately $549,842 and $779,841, respectively.
Impairment loss amounted to $371,606 and $595,753 for the years ended June 30, 2023 and 2022.
The Company terminated several lease agreements and resulting in a gain on disposal of ROU assets of $177,970 for the years ended June 30, 2023.
The five-year maturity of the Company’s lease obligations is exemptedpresented below:
Twelve Months Ending June 30, | Operating Lease Amount | |||
2024 | $ | 382,291 | ||
2025 | 147,149 | |||
2026 | 114,523 | |||
2027 | 9,567 | |||
Total lease payments | 653,530 | |||
Less: Interest | 77,498 | |||
Present value of lease liabilities | $ | 576,032 |
Note 14. EQUITY
After the close of the stock market on July 7, 2020, the Company effected a l-for-5 reverse stock split of its common stock in order to satisfy continued listing requirements of its common stock on the NASDAQ Capital Market. The reverse stock split was approved by the Company’s board of directors and stockholders and was intended to allow the Company to meet the minimum share price requirement of $1.00 per share for continued listing on the NASDAQ Capital Market. As a result, all common stock share amounts included in this filing have been retroactively reduced by a factor of five, and all common stock per share amounts have been increased by a factor of five. Amounts affected include common stock outstanding, including those that have resulted from registration underthe stock options, and warrants exercisable for common stock.
Stock issuances:
On September 17, 2020, the Company entered into certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended, (the “Act”). The Common Stock underlyingpursuant to which the Company sold an aggregate of 720,000 shares of the Company’s options grantedcommon stock, no par value, and warrants to purchase 720,000 shares at a per share purchase price of $1.46. The net proceeds to the Company from such offering were approximately $1.05 million. The warrants became exercisable on March 16, 2021 at an exercise price of $1.825 per share. The warrants may also be exercised on a cashless basis if at any time after March 16, 2021, there is no effective registration statement registering, or no current prospectus available for, the resale of the warrant shares. The warrants will expire on March 16, 2026. The warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The warrants contain a mandatory exercise right for the Company to force exercise of the warrants if the Company’s common stock trades at or above $4.38 for 20 consecutive trading days, provided, among other things, that the shares issuable upon exercise of the warrants are registered or may be sold in compliance withpursuant to Rule 144 underand the Act. Each optiondaily trading volume exceeds 60,000 shares of common stock per trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date.
On November 2 and November 3, 2020, the Company issued an aggregate of 860,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), each convertible into one share of common stock, no par value, of Company, upon the terms and subject to the limitations and considerations set forth in the Certificate of Designation of the Series A Preferred Stock, and warrants to purchase up to 1,032,000 shares of common stock. The purchase price for each share of Series A Preferred Stock and accompanying warrants is $1.66. The net proceeds to the Company from this offering was approximately $1.43 million, not including any proceeds that may be received upon cash exercise of the warrants. The warrants became exercisable six (6) months following the date of issuance at an exercise price of $1.99 per share. The warrants may also be exercised on a cashless basis if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the warrant Shares. The warrants will expire five and a half (5.5) years from the date of issuance. The warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The warrants contain a mandatory exercise right for the Company to force exercise of the warrants if the closing price of the common stock equals or exceeds $5.97 for twenty (20) consecutive trading days, provided, among other things, that the shares issuable upon exercise of the warrants are registered or may be sold pursuant to Rule 144 and the daily trading volume exceeds 60,000 shares of common stock per trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date. In February 2021, the shareholders approved the preferred shareholders’ right to convert 860,000 shares of Series A Preferred Stock into 860,000 shares of common stock in the Company’s annual meeting of shareholders. As of June 30, 2022, the Series A Preferred Stock have been fully converted to common stock on a one-for-one basis.
On December 8, 2020, the Company entered into a securities purchase one shareagreement with certain investors thereto pursuant to which the Company sold to the investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of 1,560,000 shares of the common stock of the Company, no par value per share, (the “Common Stock”). Payment for the options may be made in cash or by exchangingat a purchase price of $3.10 per share, and warrants to purchase up to an aggregate of 1,170,000 shares of Common Stockcommon stock of the Company at their fair market value.an exercise price of $3.10 per share, for aggregate gross proceeds to the Company of $4,836,000. The fair marketwarrants are initially exercisable beginning on December 11, 2020 and will expire three and a half (3.5) years from the date of issuance. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities offerings at lower prices.
On January 27, 2021, the Company entered into a securities purchase agreement with certain non-U.S. investors thereto pursuant to which the Company sold to the investors, and the investors purchased from the Company, an aggregate of 1,086,956 shares of common stock, no par value, and warrants to purchase 5,434,780 shares. The net proceeds to the Company from this offering were approximately $4.0 million. The purchase price for each share of common stock and five warrants is $3.68, and the exercise price per warrant is $5.00. The warrants became exercisable at any time during the period beginning on or after July 27, 2021 and ending on or prior on January 27, 2026 but not thereafter; provided, however, that the total number of the Company’s issued and outstanding shares of common stock, multiplied by the NASDAQ official closing bid price of the common stock shall equal or exceed $0.3 billion for a three consecutive month period prior to an exercise.
On February 6, 2021, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company sold to the investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of 1,998,500 shares of the common stock of the Company, no par value per share, at a purchase price of $6.805 per share. Net proceeds to the Company from the sale of the shares and the warrants, after deducting estimated offering expenses and placement agent fees, were approximately $12.4 million. The Company also sold to the investors warrants to purchase up to an aggregate of 1,998,500 shares of common stock at an exercise price of $6.805 per share. The warrants are exercisable upon issuance and expire five and a half (5.5) years from the date of issuance. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities offerings at lower prices.
On February 9, 2021, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company sold to the investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of 3,655,000 shares of the common stock of the Company, no par value per share, at a purchase price of $7.80 per share. Net proceeds to the Company from the sale of the shares and the warrants, after deducting estimated offering expenses and placement agent fees, were approximately $26.1 million. The Company also sold to the investors warrants to purchase up to an aggregate of 3,655,000 shares of common stock at an exercise price of $7.80 per share. The warrants are exercisable upon issuance and expire five and a half (5.5) years from the date of issuance. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities offerings at lower prices.
On December 14, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with non-U.S. investors and accredited investors pursuant to which the Company sold to the investors, and the investors agreed to purchase from the Company, an aggregate of 3,228,807 shares of common stock, no par value, and warrants to purchase 4,843,210 shares. The purchase price for each share of common stock and one and a half warrants was $3.26, and the exercise price per warrant is $4.00. The Company received net proceed of $10,525,819 and issued 3,228,807 shares and 4,843,210 warrants. In connection with the issuance, the Company issued 500,000 shares to a consultant in assisting the Company in finding potential investors.
The warrants will be equalexercisable at any time during the Exercise Window. The “Exercise Window” means the period beginning on or after June 14, 2022 and ending on or prior to 5:00 p.m. (New York City time) on December 13, 2026 but not thereafter; provided, however, that the averagetotal number of the highestCompany’s issued and lowest registered sales pricesoutstanding shares of Company Stock oncommon stock, multiplied by the dateNASDAQ official closing bid price of the common stock shall equal or exceed $150,000,000 for a three consecutive month period prior to an exercise.
The term ofCompany’s outstanding warrants are classified as equity since they qualify for exception from derivative accounting as they are considered to be indexed to the 56,000 options granted in 2009 is for 10 yearsCompany’s own stock and the exercise price of the 56,000 options issued in 2009 is $7.75.require net share settlement. The fair value of the 56,000warrants was recorded as additional paid-in capital from common stock options
On January 6, 2022, the Company entered into Warrant Purchase Agreements with certain warrant holders (the “Sellers”) pursuant to which the Company agreed to buy back an aggregate of 3,870,800 warrants (the “Warrants”) from the Sellers, and the Sellers agreed to sell the Warrants back to the Company. These Warrants were sold to these Sellers in three previous transactions that closed on February 11, 2021, February 10, 2021, and March 14, 2018. The purchase price for each Warrant is $2.00. Following announcement of the Warrant Purchase Agreements on January 6, 2022, the Company agreed to repurchase an additional 103,200 warrants from other Sellers on the same terms as the previously announced Warrant Purchase Agreements. The aggregate number of warrants repurchased under the Warrant Purchase Agreements was estimated using3,974,000.
On January 7, 2022, the Black-Scholes option-pricing modelCompany wired the purchase price to each Seller. Each Seller has agreed to deliver the Warrant to the Company for cancellation as soon as practicable following the closing date, but in no event later than January 13, 2022. The Warrants are deemed cancelled upon the receipt by the Sellers of the purchase price.
Following is a summary of the status of warrants outstanding and exercisable as of June 30, 2023
Warrants | Weighted Average Exercise Price | |||||||
Warrants outstanding, as of June 30, 2022 | 12,191,824 | $ | 4.37 | |||||
Issued | ||||||||
Exercised | ||||||||
Repurchased | ||||||||
Warrants outstanding, as of June 30, 2023 | 12,191,824 | $ | 4.37 | |||||
Warrants exercisable, as of June 30, 2023 | 12,191,824 | $ | 4.37 |
Warrants Outstanding | Warrants Exercisable | Weighted Exercise | Average Remaining Contractual Life | |||||||
2018 Series A, 400,000 | 103,334 | $ | 8.75 | 1.21 years | ||||||
2020 warrants, 2,922,000 | 181,000 | $ | 1.83 | 3.17 years | ||||||
2021 warrants, 11,088,280 | 11,907,490 | $ | 4.94 | 4.06 years |
Stock-based compensation:
By action taken as of August 13, 2021, the Board of Directors (the “Board”) of the Company and the Compensation Committee of the Board (the “Committee”) approved a one-time award of a total of 1,020,000 shares of the common stock under the Company’s 2014 Stock Incentive Plan (the “Plan”) to, including (i) a one-time stock award grant of 600,000 shares to Chief Executive Officer, Lei Cao, (ii) a one-time stock award grant of 200,000 shares to acting Chief Financial Officer, Tuo Pan, (iii) a one-time stock award grant of 160,000 shares to Board member, Zhikang Huang, (iv) a one-time stock award grant of 20,000 shares to Board member, Jing Wang, (v) a one-time stock award grant of 20,000 shares to Board member, Xiaohuan Huang, and (vi) a one-time stock award grant of 20,000 shares to Board member, Tieliang Liu. The shares were valued at an aggregate of $2,927,400 based on the grant date fair value of such shares.
On November 18, 2021, Mr. Jing Wang retired from his position as a member of the Board, the Chairperson of the Committee, a member of Nominating/Corporate Governance Committee, and a member of the Audit Committee. In connection with Mr. Wang’s retirement, the following assumptions: volatilityCompany granted Mr. Wang 100,000 shares of 173.84%common stock under the Company’s 2021 stock incentive plan, which shares were valued at $377,000 based on the grant date fair value.
On February 4, 2022, the Company approved a one-time award of a total of 500,000 shares of common stock under the Company’s 2021 Stock Incentive Plan to certain executive officers of the Company, including Chief Executive Officer, Yang Jie (300,000 shares), risk free interest rate of 3.02%Chief Operating Officer, Jing Shan (100,000 shares), and expected life of 10 years.Chief Technology Officer, Shi Qiu (100,000 shares). The total fair value of the options was $413,107. In accordance with the vesting periods, the Company recorded no stock-based compensation expense for the years ended June 30, 2017 and 2016. The options are fully vested at June 30, 2017.
The term of the 10,000 options granted in 2013 is 10 years and the exercise price of the 10,000 options issued in 2013 is $2.01. The fair value of the 10,000 stock options was calculated atgrants amounts to $2,740,000 based on the grant date using the Black-Scholes option-pricing model with the following assumptions: volatility of 452.04%, risk free interest rate of 0.88% and expected life of 10 years. The total fair value of the options was $19,400. In accordance with the vesting periods, the Company amortized stock option expense of $3,880 for each of the years ended June 30, 2017 and 2016. As of June 30, 2017, 8,000 options were vested.
Pursuant to the Company’s 2014 Stock Incentive Plan, effective on July 26, 2016, the Company granted a total of 150,000 to two employees with a one-year vesting period, one half of which vested on October 26, 2016, and the other half will vest on July 26, 2017. The exercise price of the 150,000 options is $1.10, which was equal to the share price of $5.48.
On February 16, 2022, the Company’s Common Stock on July 26, 2016.Board approved a consulting agreement pursuant to which the Company will pay the consultant a monthly fee of $10,000 and 100,000 shares of the Company’s common stock. The shares were valued at $7.42 at grant date with a grant date fair value of such options was $0.77 per share. The fair value of the 150,000 options was calculated using the Black-Scholes options pricing model with the following assumptions: volatility of 99.68%, risk free interest rate of 1.15%, and expected life of 5 years. The total fair value of the options was $115,979. In accordance with the vesting periods, $106,315 and nil$742,000 to be amortized through October 31, 2022. Stock compensation expenses for this contract were recorded as general and administrative expenses related to these options for the years ended June 30, 2017 and 2016. In February 2017, 75,000 of these options were exercised by the two employees of the Company.
Pursuant to the Company’s 2014 Stock Incentive Plan, the Company granted a total of 800,000 options on December 14, 2016, to purchase an aggregate of 800,000 shares of Common Stock to seven employees, with a vesting period from one to three years. The grant date fair value of such options was $2.24 per option. The fair value of the 800,000 options was calculated using the Black-Scholes options pricing model with the following assumptions: volatility of 112.70%, risk free interest rate of 2.02%, and expected life of 5 years. The total fair value of the options was $1,788,985. With the seven employees’ consent, the Company cancelled the 800,000 options, effective February 16, 2017 and nil was recorded as part of general and administrative expenses related to these options$412,222 for the year ended June 30, 2017.2023.
In connection with the purchase order between SOSNY and Thor Miner (see note 2), the Company issued 800,000 restricted shares to Future Tech Business Consulting (“Future Tech”) pursuant to an Advisory Agreement under which Future Tech was to assist to the Company to find suitable buyers for cryptocurrency mining machines sold by Thor Miner. The shares were valued at approximately $3.6 million and the Company recorded the full amount as stock compensation expense for the year ended June 30, 2023.
During the years ended June 30, 2023 and 2022, $329,778 and $10,064,622 were recorded as stock-based compensation expense, respectively.
Stock Options:
A summary of the outstanding options is presented in the table below:
Shares | Weighted Average Exercise Price | |||||||
Options outstanding, as of June 30, 2016 | 66,000 | $ | 6.88 | |||||
Granted | 950,000 | 2.78 | ||||||
Exercised | (75,000 | ) | 1.10 | |||||
Cancelled | (800,000 | ) | 3.10 | |||||
Options outstanding, as of June 30, 2017 | 141,000 | $ | 3.81 | |||||
Options exercisable, as of June 30, 2017 | 64,000 | $ | 7.03 |
Options | Weighted Average Exercise Price | |||||||
Options outstanding, as of June 30, 2022 | 2,000 | $ | 10.05 | |||||
Granted | ||||||||
Exercised | ||||||||
Cancelled, forfeited or expired | ||||||||
Options outstanding, as of June 30, 2023 | 2,000 | $ | 10.05 | |||||
Options exercisable, as of June 30, 2023 | 2,000 | $ | 10.05 |
Following is a summary of the status of options outstanding and exercisable atas of June 30, 2017:2023:
Outstanding Options | Exercisable Options | |||||||||||||||||||
Exercise Price | Number | Average Remaining Contractual Life | Average Exercise Price | Number | Average Remaining Contractual Life | |||||||||||||||
$ | 7.75 | 56,000 | 0.88 years | $ | 7.75 | 56,000 | 0.88 years | |||||||||||||
$ | 2.01 | 10,000 | 5.59 years | $ | 2.01 | 8,000 | 5.59 years | |||||||||||||
$ | 1.10 | 75,000 | 4.07 years | $ | 1.10 | - | - | |||||||||||||
141,000 | 64,000 |
Following is a summary of the status of warrants outstanding and exercisable at June 30, 2017:
Warrants Outstanding | Warrants Exercisable | Weighted Average Exercise Price | Average Remaining Contractual Life | |||||||||||
139,032 | 139,032 | $ | 9.30 | 0.88 years |
Total expenses for options and warrants amounted to $110,195 and $3,880 for the year ended June 30, 2017 and 2016, respectively.
Note 10. EQUITY TRANSACTIONS
On June 6, 2014, the Company entered into management consulting and advisory services agreements with two consultants, pursuant to which the consultants assisted the Company in, among other things, financial and tax due diligence, business evaluation and integration, development of pro forma financial statements. In return for their services, as approved by the Company’s Board of Directors, a total of 600,000 shares of the Company’s common stock were to be issued to these two consultants. During June 2014, 200,000 shares of the Company’s common stock were issued to the consultants as a prepayment for their services. The value of their consulting services was determined using the fair value of the Company’s common stock of $2.34 per share when the shares were issued to the consultants. Their service agreements were for the period July 1, 2014 to December 31, 2016. The remaining 400,000 shares of the Company’s common stock were then issued to the consultants on September 30, 2014 at $1.68 per share, and the service terms are from September 2014 to November 2016. These shares were valued at $1,140,000 and the related consulting fees have been ratably charged to expense over the term of the agreements. Consulting expenses for the above services were $218,045 and $485,867 for the years ended June 30, 2017 and 2016, respectively.
On May 5, 2015, the Company entered into management consulting and advisory services agreements with three consultants, pursuant to which the consultants assisted the Company in, among other things, review of time charter agreements; crew management advisory; development of permanent and preventive maintenance standards related to dry dockings and ship repairs; development of regular technical and marine vessel inspections and quality control procedures; and development and implementation of alternative remedial actions to address technical problems that may arise. In return for their services, as approved by the Company’s Board of Directors, a total of 500,000 shares of the Company’s common stock were to be issued to these three consultants at $1.50 per share. Their service agreements are for a period of 18 months, effective May 2015. These shares were valued at $750,000 and the related consulting fees have been ratably charged to expense over the term of the agreements. Consulting expenses for the above services were $173,137 and $498,633 for the years ended June 30, 2017 and 2016, respectively
On December 9, 2015, the Company entered into a consulting and advisory services agreement with a consultant, pursuant to which the consultant will assist the Company for corporate restructuring, business evaluation and capitalization during the period from November 20, 2015 to November 19, 2016. In return for such services, the Company issued 250,000 shares of the Company’s common stock to this consultant for services to be rendered during the first half of the service period. Such shares were issued as restricted shares at $1.02 per share on December 9, 2015. On May 23, 2016, the Company issued additional 250,000 shares of common stock to this consultant at $0.72 per share to cover the services from the seventh month to November 19, 2016. These shares were valued at $435,000 and consulting expenses were $138,387 and $296,612 for the years ended June 30, 2017 and 2016, respectively.
Pursuant to the Company’s 2014 Incentive Plan (the “Plan”), the Company is authorized to issue, in the aggregate, 10,000,000 shares of common stock or other securities convertible or exercisable for common stock. Effective February 11, 2016, the Compensation Committee of the Board of Directors of the Company granted 660,000 shares of common stock to seven directors and executive officers under the Plan. Pursuant to the terms and conditions of the Plan and the plan stock award agreements, these shares vested immediately, with a total value of $349,800, at $0.53 per share based on the Company’s stock price on February 10, 2016. In addition, the Compensation Committee authorized the grant of a total of $300,000 worth of share awards under the Plan and/or the 2008 Equity Stock Incentive Plan for each fiscal year going forward to its directors and executive officers in the same proportion as they were granted for the fiscal year 2016, as long as such a director or executive officer is in his position and fulfills his duty.
Outstanding Options | Exercisable Options | |||||||||||||||
Exercise Price | Number | Average Life | Average Exercise Price | Number | Average Life | |||||||||||
$ | years | $ | years |
In March 2017, the Company entered into a consulting and advisory services agreement with Jianwei Li, who will provide management consulting services that include marketing program designing and implementation and cooperative partner selection and management. The service period is from March 2017 to February 2020. The Company issued 250,000 shares of common stock as the remuneration of the service, which were issued as restricted shares at $2.53 per share on March 22, 2017 to the consultant. These shares were valued at $632,500 and consulting expenses were $70,278 for the year ended June 30, 2017.
$599,846 and $1,327,780 were charged to expenses during the years ended June 30, 2017 and 2016, respectively.
On February 21, 2017, the Company completed a sale of 1.5 million registered shares of its common stock, no par value, at a purchase price of $3.18 per share, to three institutional investors, for aggregate gross proceeds to the Company of $4.77 million. The Company’s net proceeds from the offering, after deducting offering expenses and placement agent fees in the amount of $0.45 million, were approximately $4.32 million. Sino-Global will use the net proceeds from the offering for working capital and general corporate purposes.
Note 11.15. NON-CONTROLLING INTEREST
The Company’s non-controlling interest consists of the following:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Sino-China: | ||||||||
Original paid-in capital | $ | 356,400 | $ | 356,400 | ||||
Additional paid-in capital | 1,044 | 1,044 | ||||||
Accumulated other comprehensive income | 217,379 | 157,019 | ||||||
Accumulated deficit | (5,421,578 | ) | (5,349,210 | ) | ||||
(4,846,755 | ) | (4,834,747 | ) | |||||
Trans Pacific Logistics Shanghai Ltd. | 46,047 | 27,400 | ||||||
ACH Trucking Center Corp. | 31,929 | - | ||||||
Total | $ | (4,768,779 | ) | $ | (4,807,347 | ) |
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Trans Pacific Logistics Shanghai Ltd. | (1,522,971 | ) | (1,521,645 | ) | ||||
Thor | (814,005 | ) | (486,942 | ) | ||||
Brilliant Warehouse Service, Inc. | 117,035 | (132,303 | ) | |||||
Total | $ | (2,219,941 | ) | $ | (2,140,890 | ) |
Note 12.16. COMMITMENTS AND CONTINGENCYCONTINGENCIES
Lease ObligationsContingencies
From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.
SOS Information Technology New York, Inc. (“SOSNY”), a company incorporated under the laws of State of New York and a wholly owned subsidiary of SOS Ltd., filed lawsuit in the New York State Supreme Court on December 9, 2022 against Thor Miner, Inc., which is Singularity’s joint venture (“Thor Miner”), the Company, and, together with Thor Miner, referred to as the “Corporate Defendants”), Lei Cao, Yang Jie, John F. Levy, Tieliang Liu, Tuo Pan, Shi Qiu, Jing Shan, and Heng Wang (jointly referred to as the “Individual Defendants”) (collectively, the Individual Defendants and the Corporate Defendants are the “Defendants”). SOSNY and Thor Miner entered into a January 10, 2022 Purchase and Sale Agreement (the “PSA”) for the purchase of $200,000,000 in crypto mining rigs, which SOSNY claims was breached by the Defendants.
SOSNY and Defendants entered into a certain settlement agreement and general mutual release with an Effective Date of December 28, 2022 (“Settlement Agreement”). Pursuant to the Settlement Agreement, Thor Miner agreed to pay a sum of thirteen million in U.S. dollars ($13,000,000) (the “Settlement Payment”) to SOSNY in exchange for SOSNY dismissing the lawsuit with prejudice as to the settling Defendants and without prejudice as to all others. The full Settlement Payment was received by SOSNY on December 28, 2022. SOSNY dismissed the lawsuit with prejudice against the Company (and other Defendants) on December 28, 2022.
The Company leasesand Thor Miner further covenanted and agreed that if they receive additional funds from HighSharp (Shenzhen Gaorui) Electronic Technology Co., Ltd. (“HighSharp”) related to the PSA, they will promptly transfer such funds to SOSNY in an amount not to exceed forty million, five hundred sixty thousand, five hundred sixty-nine dollars ($40,560,569.00) (which is the total amount paid by SOSNY pursuant to the PSA less the price of the machines actually received by SOSNY pursuant to the PSA). The Settlement Payment and any payments subsequently received by SOSNY from HighSharp shall be deducted from the total amount of forty million, five hundred sixty thousand, five hundred sixty-nine dollars ($40,560,569.00) previously paid by, and now due and owing to SOSNY. In further consideration of the Settlement Agreement, Thor Miner agreed to execute and provide to SOSNY, within seven (7) business days after SOSNY’s receipt of the Settlement Payment, an assignment of all claims it may have against HighSharp or otherwise to the proceeds of the PSA. See Note 19 for further details.
Lawsuits in connection with the Securities Purchase Agreement
On September 23, 2022, Hexin Global Limited and Viner Total Investments Fund filed a lawsuit against the Company and other defendants in the United States District Court for the Southern District of New York (the “Hexin lawsuit”). On December 5, 2022, St. Hudson Group LLC, Imperii Strategies LLC, Isyled Technology Limited, and Hsqynm Family Inc. filed a lawsuit against the Company and other defendants in the United States District Court for the Southern District of New York (the “St. Hudson lawsuit,” and together with the Hexin lawsuit, the “Investor Actions”). The plaintiffs in the Investor Actions are investors that entered into a securities purchase agreement (“Securities Purchase Agreement”) with the Company in late 2021. Each of these plaintiffs asserts causes of action for, among other things, violations of federal securities laws, breach of fiduciary duty, fraudulent inducement, breach of contract, conversion, and unjust enrichment, and seeks monetary damages and specific performance to remove legends from certain office premisessecurities sold pursuant to the Securities Purchase Agreement. The Hexin lawsuit claims monetary damages of “at least $6 million,” plus interest, costs, fees, and apartmentsattorneys’ fees. The St. Hudson lawsuit claims monetary damages of “at least $4.4 million,” plus interest, costs, fees, and attorneys’ fees.
Lawsuit in connection with the Financial Advisory Agreement
On October 6, 2022, Jinhe Capital Limited (“Jinhe”) filed a lawsuit against the Company in the United States District Court for employees under operating leasethe Southern District of New York, asserting causes of actions for, among other things, breach of contract, breach of the covenant of good faith and fair dealing, conversion, quantum meruit, and unjust enrichment, in connection with a financial advisory agreement entered into by and between Jinhe and the Company on November 10, 2021. Jinhe claims monetary damages of “at least $575,000” and “potentially exceeding $1.8 million,” plus interest, costs, and attorneys’ fees.
On January 10, 2023, St. Hudson lawsuit was consolidated with this lawsuit and Hexin lawsuit and on February 24, 2023, all three consolidated actions were dismissed without prejudice by the court, in furtherance of the parties having reached an agreement in principle to settle their disputes. The Company, Yang Jie, Jing Shan, and the plaintiffs of the above three actions entered into a certain settlement agreement and general mutual release with an effective date of March 10, 2023, pursuant to which the Company agreed to pay the sum of $10,525,910.82. Plaintiffs in the actions agreed to discharge and forever release the defendants in the actions from all claims that were or could have been raised in those actions, as well as dismissal of each of the actions with prejudice. The Company has no role or knowledge as to how the settlement payment will be allocated between and among the plaintiffs. The Company paid the settlement payment on March 14, 2023.
In addition, the plaintiffs agreed to irrevocably forfeit 3,728,807 shares of Common Stock they hold. The cancellation of 3,528,807 shares has been completed, while the cancellation of the remaining 200,000 shares is still in processing for the year ended June 30, 2023. The fair value of the shares was $2,125,420 at March 10, 2023, the settlement amount over the fair value of the shares to be cancelled is recorded as other expenses in the Company’s consolidated statement of operations. The cancellation of 200,000 shares completed on July 8, 2023
Putative Class Action
On December 9, 2022, Piero Crivellaro, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between February 2021 and November 2022, filed a putative class action against the Company and other defendants in the United States District Court for the Eastern District of New York, alleging violations of federal securities laws related to alleged false or misleading disclosures made by the Company in its public filings. The plaintiff seeks unspecified damages, plus interest, costs, fees, and attorneys’ fees. As this action is still in the early stage, the Company cannot predict the outcome.
In addition to the above litigations, the Company is also subject to additional contractual litigations as to which it is unable to estimate the outcome.
Government Investigations
Following a publication issued by Hindenburg Research dated May 5, 2022, the Company received subpoenas from the United States Attorney’s Office for the Southern District of New York and the United States Securities and Exchange Commission. The Company is cooperating with the government regarding these matters. The Company is not able to estimate the outcome or duration of the government investigations.
Employee Agreement
For the year ended June 30, 2023, the Company had employment agreements with variouseach of Mr. Lei Cao, Ms. Tuo Pan and Mr. Yang Jie. Employment agreement of Mr. Lei Cao provided for a ten-year term that extended automatically in the absence of termination notice provided at least 30 days prior to the fifth anniversary date of the agreement. Employment agreements of Mr. Tuo Pan and Mr. Yang Jie provided for five-year terms that extended automatically in the absence of termination notice provided at least 30 days prior to the fifth anniversary date of the agreement. If the Company failed to provide this notice or if the Company wished to terminate an employment agreement in the absence of cause, then the Company was obligated to provide at least 30 days’ prior notice. In such case during the initial term of the agreement, the Company would need to pay such executive (i) the remaining salary through April 16, 2020. Futurethe date of October 31, 2026. In addition, to pay Mr. Lei Cao and Ms. Tuo Pan (ii) two times of the then applicable annual salary if there had been no change in control, as defined in the employment agreements or three-and-half times of the then applicable annual salary if there was a change in control. The employment agreements for Ms. Tuo Pan and Mr. Yang Jie were terminated in 2022, the Company has no remaining obligation under such agreements.
Note 17. INCOME TAXES
On March 27, 2020, the CARES Act was enacted and signed into law and includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods and alternative minimum lease payments undertax credit refunds. The Company does not at present expect the provisions of the CARES Act to have a material impact on its tax provision given the amount of net operating lease agreementslosses currently available.
The Company’s income tax expenses for years ended June 30, 2023 and 2022 are as follows:
Twelve months ending June 30, | Amount | |||
2018 | $ | 215,560 | ||
2019 | 149,081 | |||
2020 | 48,597 | |||
$ | 413,238 |
For the Years Ended June 30 | ||||||||
2023 | 2022 | |||||||
Current | ||||||||
U.S. | $ | (135,855 | ) | $ | - | |||
PRC | - | |||||||
Total income tax expenses | $ | (135,855 | ) | $ | - |
Rental expenses for the years ended June 30, 2017 and 2016 was $266,316 and $243,374, respectively.
Legal proceedings
During the quarter ended December 31, 2015, a former vice president of the Company (the “Former Officer”) filed a complaint with the U.S. Department of Labor-Occupational Safety and Health Administration (“OSHA”) against the Company and three current or former executives. The Former Officer sought $350,000 in damages plus attorney’s fees for alleged retaliation and a purported breach of his employment agreement. The Company responded to the complaint filed with OSHA and provided arguments and information supporting the Company’s position that no violation of law in connection with the Former Officer’s employment occurred. The complaint was settled on January 24, 2017, and the Company is required to pay a total of $185,000, of which $60,000 was paid on February 6, 2017 to the former officer. The settlement payment of $185,000 included the former officer’s salary, unemployment compensation and legal expenses incurred in connection with the complaint, which has been fully recorded and included in general and administrative expenses. The balance of $125,000 was paid to the Former Officer on April 26, 2017.
Contingencies
The Labor Contract Law of the PRC requires employers to insure the liability of the severance payments for terminated employees that have worked for the employers for at least two years prior to January 1, 2008. Employers are liable for one month of severance pay per year of the service provided by employees. As of June 30, 2017 and 2016, the Company has estimated its severance payments of approximately $48,713 and $62,500, respectively, which have not been reflected in its consolidated financial statements, because management cannot predict what the actual payment, if any, will be in the future.
Note 13. INCOME TAXES
Income tax expense for the years ended June 30, 20172023 and 20162022 varied from the amount computed by applying the statutory income tax rate to income before taxes. Reconciliations between the expected federal income tax rates using 21% for the federal statutory tax rate of 34%year ended June 30, 2023 and 2022 to the Company’s effective tax rate are as follows:
For the years ended June 30, | ||||||||
2017 | 2016 | |||||||
% | % | |||||||
U.S. statutory tax rate | 34.0 | 34.0 | ||||||
U.S. permanent difference | 3.9 | (11.0 | ) | |||||
Change in valuation allowance | (39.9 | ) | (105.9 | ) | ||||
Rate differential in foreign jurisdiction | (13.1 | ) | 25.0 | |||||
Other | - | 3.3 | ||||||
(15.1 | ) | (54.6 | ) |
June 30, 2023 | June 30, 2022 | |||||||
% | % | |||||||
US Statutory tax rate | $ | 21.0 | $ | 21.0 | ||||
Permanent difference* | (42.0 | ) | (5.3 | ) | ||||
Change in valuation allowance | 20.5 | (14.9 | ) | |||||
Rate differential in foreign jurisdiction | (0.1 | ) | (0.8 | ) | ||||
$ | (0.6 | ) | $ | - |
The Company’s income tax benefit (expense) for the years ended June 30, 2017 and 2016 are as follows:
For the years ended June 30, | ||||||||
2017 | 2016 | |||||||
Current | ||||||||
USA | $ | - | $ | - | ||||
Hong Kong | (70,958 | ) | 23,287 | |||||
China | (206,358 | ) | (555,280 | ) | ||||
(277,316 | ) | (531,993 | ) | |||||
Deferred | ||||||||
USA | 749,400 | (280,600 | ) | |||||
749,400 | (280,600 | ) | ||||||
Total income tax benefit (expense) | $ | 472,084 | $ | (812,593 | ) |
* | Permanent difference includes non-deductible expenses mainly stock compensation. |
The Company’s deferred tax assets are comprised of the following:
For the years ended June 30, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
June 30, 2023 | June 30, 2022 | |||||||||||||||
Allowance for doubtful accounts | $ | 106,000 | $ | 112,000 | ||||||||||||
Stock-based compensation | 790,000 | 735,000 | ||||||||||||||
U.S. | $ | 1,241,000 | $ | 617,000 | ||||||||||||
PRC | 1,655,000 | 1,830,000 | ||||||||||||||
Net operating loss | 1,464,000 | 3,752,000 | ||||||||||||||
U.S. | 8,775,000 | 4,670,000 | ||||||||||||||
PRC | 1,425,000 | 1,283,000 | ||||||||||||||
Total deferred tax assets | 2,360,000 | 4,599,000 | 13,096,000 | 8,400,000 | ||||||||||||
Valuation allowance | (1,610,600 | ) | (4,599,000 | ) | (13,096,000 | ) | (8,400,000 | ) | ||||||||
Deferred tax assets, net - long-term | $ | 749,400 | $ | - | $ | - | $ | - |
The Company’s operations in the U.S. have incurred a cumulative U.S. federal net operatingoperation loss (“NOL”) of approximately $6,205,000$22,000,000 as of June 30, 2017,2022, which may reduce future federal taxable income. ForDuring the year ended June 30, 2017,2023, approximately $1,853,000$19,700,000 of NOL was utilizedgenerated and the tax benefit derived from such NOL was approximately $630,000. For$8,775,000. As of June 30, 2023, the Company’s cumulative NOL amounted to approximately $41,700,000 which may reduce future federal taxable income.
The Company’s operations in China incurred a cumulative NOL of approximately $1,333,000 as of June 30, 2022. During the year ended June 30, 2016,2023, additional NOL of approximately $370,000 was generated. As of June 30, 2023, the utilization ofCompany’s cumulative NOL was nil and no tax benefit was derived from NOL. This carry-forwardamounted to approximately $1,730,000 which may reduce future taxable income which will expire if not utilized by 2036.2026.
The Company periodically evaluates the likelihood of the realization of deferred tax assets (“DTA”) and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The CompanyManagement considers many factors when assessingnew evidence, both positive and negative, that could affect the likelihood ofCompany’s future realization of the deferred tax assets including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors. Part of the Company’s traditional business, such as shipping agency services and shipping and chartering services,The Company determined that it is temporarily suspended. Management has provided an allowance against themore likely than not its deferred tax assets balancecould not be realized due to uncertainty on future earnings as a result of the company’s reorganization and venture into new businesses. The Company provided a 100% allowance for its DTA as of June 30, 2017.2023. The net decrease in the valuation allowance for the year ended June 30, 2017 was $2,988,000 and2023 amounted to approximately $4,696,000, based on management’s reassessment of the net increase inamount of the valuation allowance for the same period of 2016 was $2,026,600.Company’s deferred tax assets that are more likely than not to be realized.
The Company’s taxes payable consists of the following:
June 30, | June 30, | |||||||||||||||
2017 | 2016 | June 30, | June 30, | |||||||||||||
2023 | 2022 | |||||||||||||||
VAT tax payable | $ | 520,436 | $ | 475,066 | $ | 1,016,529 | $ | 1,098,862 | ||||||||
Corporate income tax payable | 1,290,832 | 1,100,380 | 2,261,131 | 2,295,803 | ||||||||||||
Others | 74,948 | 61,751 | 57,298 | 62,512 | ||||||||||||
Total | $ | 1,886,216 | $ | 1,637,197 | $ | 3,334,958 | $ | 3,457,177 |
Note 14.18. CONCENTRATIONS
Major Customers
For the year ended June 30, 2017, three2023, two customers accounted for 26%, 24%52.7% and 19%16.1% of the Company’s gross revenues. AtAs of June 30, 2017, one of these three2023, two customers accounted for 100%35.6% and 18.1% of the Company’s accounts due from related parties (See Note 16) and the remaining two customers accounted for approximately 63% of the Company’s accounts receivable.receivable, net.
For the year ended June 30, 2016,2022, two customers accounted for 31%45.6% and 27%27.9% of the Company’s gross revenues. AtAs of June 30, 2016, these2022, two customers accounted for 100%43.3% and approximately 70%10.4% of the Company’s due from related parties and accounts receivable.receivable, net.
Major Suppliers
For the year ended June 30, 2017,2023, two suppliers accounted for 42%approximately 19.6% and 11%19.5% of the total costs of revenue. gross purchases, respectively.
For the year ended June 30, 2016, three2022, two suppliers accounted for 27%, 15%approximately 26.3% and 10%24.1% of the total cost of revenues.gross purchases, respectively.
Note 15.19. SEGMENT REPORTING
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in consolidated financial statements for detailing the Company’s business segments.
The Company’s chief operating decision maker is the Chief ExecutiveOperating Officer, who reviews the financial information of the separate operating segments when making decisions about allocating resources and assessing the performance of the group. TheAs of June 30, 2023, the Company has determined that it has fivehad two operating segments: (1) freight logistics services and (2) sales of crypto-mining machines. The Company no longer operates in the shipping agency and ship management services; (2) shipping and chartering services; (3) inland transportation management services; (4) freight logistics services; and (5) container trucking services. However,segment because it did not receive any new orders for its services due to the downturn inuncertainty of the shipping industry,management market which was negatively impacted by the Company has decided to suspend to its shipping agency and ship management services and shipping and chartering services.COVID-19 pandemic.
The following tables present summary information by segment for the years ended June 30, 20172023 and 2016,2022, respectively:
For the year ended June 30, 2017 | For the Year Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||
Shipping Agency and Ship Management Services | Shipping and Chartering Services | Inland Transportation Management Services | Freight Logistic Services | Container Trucking Services | Total | Shipping Agency and Management Services | Freight Logistics Services | Sale of Crypto-mining Machines | Total | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
- Related party | $ | - | $ | - | $ | 2,746,423 | $ | - | $ | - | $ | 2,746,423 | ||||||||||||||||||||||||||||
- Third parties | $ | - | $ | - | $ | 3,012,177 | $ | 4,815,450 | $ | 871,563 | $ | 8,699,190 | ||||||||||||||||||||||||||||
Net revenues | $ | - | $ | 3,806,158 | $ | 732,565 | $ | 4,538,723 | ||||||||||||||||||||||||||||||||
Cost of revenues | $ | - | $ | - | $ | 620,259 | $ | 3,710,364 | $ | 649,968 | $ | 4,980,591 | $ | - | $ | 3,990,654 | $ | - | $ | 3,990,654 | ||||||||||||||||||||
Gross profit | $ | - | $ | - | $ | 5,138,341 | $ | 1,105,086 | $ | 221,595 | $ | 6,465,022 | $ | - | $ | (184,496 | ) | $ | 732,565 | $ | 548,069 | |||||||||||||||||||
Depreciation and amortization | $ | - | $ | - | $ | 27,857 | $ | 21,510 | $ | - | $ | 49,367 | $ | - | $ | 163,635 | $ | 713 | $ | 164,348 | ||||||||||||||||||||
Total capital expenditures | $ | - | $ | - | $ | 61,359 | $ | 1,053 | $ | - | $ | 62,412 | $ | - | $ | (38,440 | ) | $ | 2,852 | $ | (35,588 | ) | ||||||||||||||||||
Gross margin% | - | % | (4.85 | )% | 100 | % | 12.08 | % |
For the year ended June 30, 2016 | ||||||||||||||||
Shipping Agency and Ship Management Services | Shipping and Chartering Services | Inland Transportation Management Services | Total | |||||||||||||
Revenues | ||||||||||||||||
- Related party | $ | - | $ | - | $ | 2,269,346 | $ | 2,269,346 | ||||||||
- Third parties | $ | 2,507,800 | $ | 462,218 | $ | 2,071,176 | $ | 5,041,194 | ||||||||
Cost of revenues | $ | 2,175,109 | $ | 212,510 | $ | 1,350,370 | $ | 3,737,989 | ||||||||
Gross profit | $ | 332,691 | $ | 249,708 | $ | 2,990,152 | $ | 3,572,551 | ||||||||
Depreciation and amortization | $ | 45,434 | $ | 1,410 | $ | 12,664 | $ | 59,508 | ||||||||
Total capital expenditures | $ | 13,537 | $ | 2,854 | $ | 15,268 | $ | 31,659 |
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Total assets: | ||||||||
Shipping Agency and Ship Management Services | $ | - | $ | 1,271,948 | ||||
Shipping and Chartering Services | - | 534,896 | ||||||
Inland Transportation Management Services | 15,552,593 | 7,247,300 | ||||||
Freight Logistic Services | 1,704,946 | - | ||||||
Container Trucking Services | 558,482 | - | ||||||
Total Assets | $ | 17,816,021 | $ | 9,054,144 |
For the Year Ended June 30, 2022 | ||||||||||||||||
Shipping Agency and Management Services | Freight Logistics Services | Sales of Crypto-mining Machines | Total | |||||||||||||
Net revenues | $ | - | $ | 3,830,615 | $ | 157,800 | $ | 3,988,415 | ||||||||
Cost of revenues | $ | - | $ | 4,136,474 | $ | - | $ | 4,136,474 | ||||||||
Gross (loss) profit | $ | - | $ | (305,859 | ) | $ | 157,800 | $ | (148,059 | ) | ||||||
Depreciation and amortization | $ | - | $ | 512,586 | $ | 21,052 | $ | 533,638 | ||||||||
Total capital expenditures | $ | - | $ | 840,319 | $ | 34,199 | $ | 874,518 | ||||||||
Gross margin% | - | % | (8.0 | )% | 100 | % | (3.7 | )% |
Total assets as of:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Shipping Agency and Management Services | $ | - | $ | - | ||||
Freight Logistic Services | 19,075,202 | 44,058,444 | ||||||
Sales of crypto-mining machines | 162,605 | 20,789,296 | ||||||
Total Assets | 19,237,807 | $ | 64,847,740 |
The Company’s operations are primarily based in the PRC and U.S, where the Company derives all of its revenues. Management also reviews consolidated financial results by business locations.
Disaggregated information of revenues by geographic locations are as follows:
For the Years Ended | ||||||||
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
PRC | $ | 2,529,449 | $ | 2,982,691 | ||||
U.S. | 2,009,274 | 1,005,724 | ||||||
Total revenues | $ | 4,538,723 | $ | 3,988,415 |
Note 16. OTHER20. RELATED PARTY BALANCE AND TRANSACTIONS
Advance to suppliers-related party
The Company’s advances to suppliers – related party are as follows:
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Bitcoin mining hardware and other equipment (1) | $ | - | $ | 6,153,546 | ||||
Total Advances to suppliers-related party | $ | - | $ | 6,153,546 |
(1) | On January 10, 2022, the Company’s joint venture, Thor Miner, entered into a Purchase and Sales Agreement (“PSA”) with HighSharp. Pursuant to the Purchase Agreement, Thor Miner agreed to purchase certain cryptocurrency mining equipment. In January and April 2022, Thor Miner made total prepayment of $35,406,649 for the order and no prepayment as of June 30, 2023. |
Due to production issues from HighSharp, Thor Miner was not able to timely deliver the full quantity of cryptocurrency mining machines to SOSNY under the PSA and was sued by SOSNY for breach of contract on December 9, 2022.
The Company entered into a settlement agreement with SOSNY effective on December 28, 2022, under which the Company will repay $13.0 million to SOSNY and terminate the previous agreements and balance of the deposits. The Company also assigned to SOSNY the right for the deposit that Thor Miner has paid to HighSharp.
As of December 22, 2022, the balance of advances to HighSharp and deposits from SOSNY amounted to $27,927,583 and $40,560,569, respectively. Thor Miner paid $13.0 million on December 23, 2022 to SOSNY which was received by SOSNY on December 28, 2022. Thor Miner wrote off the balance of the deposit it received from SOSNY and the balance of its payment to HighSharp resulted in net bad debt expenses of $367,014.
Due from related party, net
As of June 30, 20172023 and 2016,June 30, 2022, the outstanding amounts due from related partyparties consist of the following:
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2017 | 2016 | 2023 | 2022 | |||||||||||||
Tianjin Zhiyuan Investment Group Co., Ltd. | 1,715,130 | 1,622,519 | ||||||||||||||
Zhejiang Jinbang Fuel Energy Co., Ltd (1) | 458,607 | 415,412 | ||||||||||||||
Shanghai Baoyin Industrial Co., Ltd (2) | 1,068,014 | 1,306,004 | ||||||||||||||
LSM Trading Ltd (3) | 570,000 | 570,000 | ||||||||||||||
Rich Trading Co. Ltd (4) | 103,424 | 103,424 | ||||||||||||||
Cao Lei (5) | 13,166 | 54,860 | ||||||||||||||
Less: allowance for doubtful accounts | (2,138,276 | ) | (2,449,700 | ) | ||||||||||||
Total | $ | 1,715,130 | $ | 1,622,519 | $ | 74,935 | $ | - |
(1) | As of June 30, 2023 and 2022, the Company advanced $458,607 and $415,412 to Zhejiang Jinbang Fuel Energy Co., Ltd (“Zhejiang Jinbang”) which is 30% owned by Mr. Wang Qinggang, CEO and legal representative of Trans Pacific Shanghai. The advance is non-interest bearing and due on demand. The Company provided allowance of $383,672 and $415,412 for the year ended June 30, 2023 and 2022, and the allowance changes as a result of changes in exchange rates. |
(2) | As of June 30, 2023 and 2022, the Company advanced approximately $1.1 million and $1.3 million to Shanghai Baoyin Industrial Co., Ltd. which is 30% owned by Qinggang Wang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd. The advance is non-interest bearing and due on demand. The Company provided full credit losses for the balance of the receivable. |
(3) | As of June 30, 2023, the Company advanced $570,000 to LSM Trading Ltd, which is 40% owned by the Company. The advance is non-interest bearing and due on demand. The Company provided full credit losses for the balance of the receivable. |
(4) | On November 16, 2021, the Company entered into a project cooperation agreement with Rich Trading Co. Ltd USA (“Rich Trading”) for the trading of computer equipment. Rich Trading’s bank account was controlled by now-terminated members of the Company’s management and was, at the time, an undisclosed related party. According to the agreement, the Company was to invest $4.5 million in the trading business operated by Rich Trading and the Company would be entitled to 90% of profits generated by the trading business. The Company advanced $3,303,424 for this project, of which $3,200,000 has been returned to the Company. The Company provided allowance of $103,424 for the year ended June 30, 2023 and 2022. |
(5) | The amount represents business advance to Mr. Lei Cao, the former Chairman of the Board. During the six months ended June 30, 2023, Lei Cao repaid approximately $54,000, of which approximately $13,000 additional payment was recognized as non-operating income. The Company provided full credit losses for the remaining balance of the receivable. |
In June 2013, the Company signed a five-year global logistics service agreement with Tianjin Zhiyuan Investment Group Co., Ltd. (the “Zhiyuan Investment Group”) and TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd. (together with Zhiyuan Investment Group, “Zhiyuan”). Zhiyuan Investment Group is owned by Mr. Zhang, the largest shareholder of the Company. In September 2013, the Company executed an inland transportation management service contract with the Zhiyuan Investment Group whereby it would provide certain advisory services and help control potential commodities loss during the transportation process. As a result of the inland transportation management services provided to Zhiyuan, the Company generated revenue of $2,746,423 (24% of the Company’s total revenue in 2017) and $2,269,346 (31% of the Company’s total revenue in 2016) for the years ended June 30, 2017 and 2016, respectively. The amount due from Zhiyuan Investment Group at June 30, 2016 was $1,622,519. During the year ended June 30, 2017, the Company continued to provide inland transportation management services to Zhiyuan and collected approximately $2.7 million from Zhiyuan to reduce outstanding accounts receivable. As of June 30, 2017, the amount due from Zhiyuan was $1,715,130, the aging of which is less than 180 days.Loan receivable- related parties
As of June 30, 20172023 and 2016,June 30, 2022, the outstanding amounts of advance to suppliers-related party consistloan receivable from related parties consists of the following:
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd. | 3,333,038 | - | ||||||
Total | $ | 3,333,038 | $ | - |
June 30, | June 30, | |||||||
2023 | 2022 | |||||||
Wang, Qinggang (1) | $ | $ | 552,285 |
(1) | On June 10, 2021, the Company entered into a loan agreement with Wang Qinggang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd. The loan is non-interest bearing for loan amount up to $630,805 (RMB 4 million). In February 2022, Wang Qinggang, borrowed and repaid $232,340 of the loan amount. In June 2022, additional $552,285 (RMB 3,700,000) was loaned to Wang Qinggang with due date of June 7, 2024. The outstanding loan was fully repaid in December 2022. |
On February 18, 2017, Trans Pacific Beijing (subsidiary) and Sino China (VIE) (collectively, the “Seller”), a subsidiary and VIE of the Company, entered into a Cooperative Transportation Agreement (the “Agreement”) with Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd. (the “Buyer” or “Zhiyuan Hong Kong”). The Buyer is also owned by Mr. Zhang, the largest shareholder of the Company. Pursuant to the Agreement, the Buyer jointly with China Minmetals Corporation and China Metallurgical Group Corporation acts as the general designer, general equipment provider and general service contractor in the upgrade and renovation project of Perwaja Steel Indonesia which is located in Malaysia (the “Project”). The Seller shall be appointed as general agent to handle allAccounts payable - related logistics and transportation occurring in the Project. parties
On July 7, 2017, the Company signed a supplemental agreement with the Buyer, pursuant to which Sino will cooperate with Zhiyuan Hong Kong exclusively on the entire project’s transportation needs. Pursuant to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its share of packaging and transporting costs related to the project, in return the Company will receive 15% of its share of the cost incurred in the project from Zhiyuan Hong Kong as a service fee. The project is expected to complete in one to two years and the Company will collect is service fee in accordance with project completion.
As of June 30, 20172023 and 2016,June 30, 2022, the outstanding amounts dueCompany had accounts payable to related parties consistRich Trading Co. Ltd of $63,434.
Due to Related Party
As of June 30, 2023, the Company had accounts payable to Qinggang Wang, CEO and legal representative of Trans Pacific Shanghai, of $104,962. These payments were made on behalf of the following: Company for the daily business operational activities.
June 30, | June 30, | |||||||
2017 | 2016 | |||||||
ACH Logistic Inc. | $ | 131,262 | $ | - | ||||
Jetta Global Logistics Inc. | 75,061 | - | ||||||
Total | $ | 206,323 | $ | - |
In December 2016, the Company entered into a joint venture agreement with Jetta Global to form ACH Trucking Center to provide short-haul trucking transportation and logistics services to customers located in the New York and New Jersey areas. ACH Logistic Inc. (ACH Logistic) and Jetta Global are invested by the same owner and both of the companies provided freight logistic service and container trucking service to the Company. Revenue - Related Party
For the year ended June 30, 2017, ACH Logistic and Jetta Global provided services in2023, the amount of $788,775 and $222,869company had no revenue from related party. For the year ended June 30, 2022, revenue from related party, Zhejiang Jinbang, amounted to the Company, respectively.$222,963.
Note 17.21. SUBSEQUENT EVENTS
In
On July 20173, 2023, the Company entered into a supplemental agreementSettlement and Release Agreement with Tengda Northwest to extendMr. Jie which fully resolved his claims against the global logistic service period untilCompany.On July 3, 2018. 2023, Mr. Tieliang Liu resigned as a director of Singularity Future Technology Ltd. (the “Company”) and a member of the Compensation Committee, the Audit Committee, and the Nominating and Corporate Governance Committee. Mr. Liu’s decision did not result from any disagreement with the Company relating to its operations, policies, or practice.
In
On July 10, 2023, Company terminated the employment of its Chief Operating Officer Jing Shan with cause. The termination was effective immediately.
On July 31, 2023, the Company elected Mr. Zhongliang Xie as a Class II independent director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on the Board resulting from the resignation of Mr. Tieliang Liu. The Board appointed Mr. Xie to serve as Chair of the Audit Committee, a member of the Compensation Committee and a member of the Nominating and Corporate Governance Committee.
On August 2017,15, 2023, Mr. Dianjiang Wang resigned as the Chief Financial Officer of the Company. Mr. Wang’s decision did not result from any disagreement with the Company relating to its operations, policies, or practices. On August 21, 2023, the Company entered into a supplementalan employment agreement with ZhiyuanMr. Ying Cao to extendserve as the inland transportation management serviceChief Financial Officer of the Company. Mr. Ying Cao has served as the department manager and quality control manager at Shaanxi Huaqiang Certified Public Accountants Co., Ltd. since 2015. Prior to that, he served as a project manager in Sigma Accounting Firm from 2007 to 2014. Mr. Cao obtained his bachelor’s degree in accounting from Xi’an University of Finance and Economics. Mr. Cao does not have any family relationships with any of the Company’s directors or executive officers.
Nasdaq Listing Deficiencies
On July 7, 2023, the Company received an Notice of Noncompliance Letter (the “Letter”) from Nasdaq stating that the Company was not in compliance with Nasdaq Listing Rules due to its failure to timely hold an annual meeting of shareholders for the fiscal year ended June 30, 2022, which is required to be held within twelve months of the Company’s fiscal year end under Nasdaq Listing Rule 5620(a) and 5810(c)(2)(G). The Letter also states that the Company has 45 calendar days to submit a plan to regain compliance (the “Plan”) and if Nasdaq accepts the Plan, it can grant the Company an exception of up to 180 calendar days from the fiscal year end, or until December 27, 2023, to regain compliance. Nasdaq requires the Plan to be submitted no later than August 21, 2023.
On July 13, 2023, the Company received a notice from Nasdaq stating that the Company no longer complies with Nasdaq’s independent director and audit committee requirements under Nasdaq’s Listing Rule 5605 following the resignation of Tieliang Liu from the Company’s board of directors and audit committee effective July 3, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing Rule 5605(c)(4), the Company has a cure period to regain compliance (1) until September 1, 2018.the earlier of the Company’s next annual shareholders’ meeting or July 3, 2024; or (2) if the next annual shareholders’ meeting is held before January 2, 2024, then the Company must evidence compliance no later than January 2, 2024. In response to this notice, on July 31, 2023, the Company elected Mr. Zhongliang Xie as a Class II independent director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on the Board resulting from the resignation of Mr. Tieliang Liu. The Board appointed Mr. Xie to serve as Chair of the Audit Committee, a member of the Compensation Committee and a member of the Nominating and Corporate Governance Committee.
On July 13, 2023, the Company received a notice from Nasdaq stating that the Company failed to regain compliance with respect to the minimum $1 bid price per share requirement under Nasdaq Listing Rules during the 180 calendar days given by Nasdaq for the Company to regain compliance, which ended on July 5, 2023. However, Nasdaq has determined that the Company is eligible for an additional 180 calendar day period, or until January 2, 2024, to regain compliance. Such determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. The Company intends to regain compliance with Nasdaq’s bid price requirement prior to the end of the second bid price extension.
On August 24, 2017, Sino signed30, 2023, the Company received a marketing promoting service agreementformal notification from Nasdaq confirming that the Company had regained compliance with COSCO Qingdao. Pursuantthe independent director and audit committee requirements for continued listing on The Nasdaq Capital Market set forth in Listing Rules 5605(b)(1) and 5605(c)(2) by appointing Mr. Zhongliang Xie to the agreement, COSCO Qingdao will help Sino to promote shippingCompany’s board of directors and multimodal transportation including inland trucking container transportation services, switch billaudit committee on July 31, 2023, and freight collection services. On August 24, 2017, Sino has paid $100,000 to COSCO Qingdao for first installment (September 1, 2017 to December 31, 2017) ofthat the marketing expense. matter is now closed.
F-21On August 30, 2023, the Company received a formal notification from Nasdaq stating that it has determined to grant the Company an extension until December 27, 2023, to regain compliance with Listing Rule 5620(a), which requires that the Company hold an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end.
F-38