U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the period endedDecember 31, 20172021
☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _____________________ to ___________.__________.
Commission File Number 001-34024
Sino-Global Shipping America,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 number) |
1044 Northern Boulevard, Suite 305
Roslyn, New York 11576-1514
(Address of principal executive offices and zip code)
98 Cutter Mill Road, Suite 322 Great Neck, New York | 11021 | |
| (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:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | SGLY | NASDAQ Capital Market |
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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation 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 ☐
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
IndicateAs of February 14, 2022, the number ofCompany had 21,880,333 shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date. As of February 12, 2018, the Company has 10,435,535 issued and outstanding shares of common stock.outstanding.
SINO-GLOBAL SHIPPING AMERICA,SINGULARITY FUTURE TECHNOLOGY LTD.
FORM 10-Q
INDEX
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to 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 the control of the Company.our control. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,”“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 that could cause actual results to differ materially from those projected or anticipated, including but not limited to the following:
| ● | Our ability to timely and properly deliver our services; |
| ● | Our dependence on a limited number of major customers and related parties; |
| ● | Political and economic factors in the |
| ● | Our ability to expand and grow our lines of business; |
| ● | Unanticipated changes in general market conditions or other factors, which may result in cancellations or reductions in the need for our services; |
| ● | Economic conditions which would reduce demand for services provided by |
| ● | The effect of terrorist acts, or the threat thereof, on the demand for the shipping and logistic industry which could, adversely affect |
| ● | The acceptance in the marketplace of our new lines of business; |
| ● | Foreign currency exchange rate fluctuations; |
| ● | Hurricanes, outbreak of contagious diseases or other natural disasters; and |
| ● | Our ability to attract, retain and motivate skilled personnel. |
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakesWe undertake no obligation to update this forward-looking information unless required by applicable law or regulations.
ii
PART I. FINANCIAL INFORMATION
SINO-GLOBAL SHIPPING AMERICA,SINGULARITY FUTURE TECHNOLOGY LTD. AND AFFILIATES
INDEX TO FINANCIAL STATEMENTS
SUBSIDIARIES
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 7,219,848 | $ | 8,733,742 | ||||
| Accounts receivable, less allowance for doubtful accounts of $763,984 and $185,821 as of December 31, 2017 and June 30, 2017, respectively | 4,248,363 | 2,569,141 | ||||||
| Other receivables, less allowance for doubtful accounts of $145,279 and $145,244 as of December 31, 2017 and June 30, 2017, respectively | 318,827 | 37,811 | ||||||
| Advances to suppliers-third parties | 14,611 | 54,890 | ||||||
| Advances to suppliers-related party | 3,473,717 | 3,333,038 | ||||||
| Prepaid expenses and other current assets | 230,721 | 311,136 | ||||||
| Due from related parties, net | 2,372,996 | 1,715,130 | ||||||
| Total Current Assets | 17,879,083 | 16,754,888 | ||||||
| Property and equipment, net | 217,335 | 187,373 | ||||||
| Intangible assets, net | 184,722 | - | ||||||
| Prepaid expenses | - | 6,882 | ||||||
| Other long-term assets | 119,059 | 117,478 | ||||||
| Deferred tax assets | 1,823,100 | 749,400 | ||||||
| Total Assets | $ | 20,223,299 | $ | 17,816,021 | ||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Advances from customers | $ | 360,744 | $ | 369,717 | ||||
| Accounts payable | 506,989 | 206,211 | ||||||
| Taxes payable | 2,258,737 | 1,886,216 | ||||||
| Due to related parties | - | 206,323 | ||||||
| Accrued expenses and other current liabilities | 359,748 | 418,029 | ||||||
| Total Current Liabilities | 3,486,218 | 3,086,496 | ||||||
| Income tax payable - noncurrent portion | 440,219 | - | ||||||
| Total Liabilities | 3,926,437 | 3,086,496 | ||||||
| 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; 10,611,032 and 10,281,032 shares issued as of December 31, 2017 and June 30, 2017, respectively; 10,435,535 and 10,105,535 outstanding as of December 31, 2017 and June 30, 2017, respectively | 20,535,379 | 20,535,379 | ||||||
| Additional paid-in capital | 1,032,016 | 688,934 | ||||||
| Treasury stock, at cost, 175,497 shares as of December 31, 2017 and June 30, 2017 | (417,538 | ) | (417,538 | ) | ||||
| Retained earnings (accumulated deficit) | 20,985 | (893,907 | ) | |||||
| Accumulated other comprehensive loss | (134,637 | ) | (414,564 | ) | ||||
| Total Sino-Global Shipping America Ltd. Stockholders' Equity | 21,036,205 | 19,498,304 | ||||||
| Non-controlling Interest | (4,739,343 | ) | (4,768,779 | ) | ||||
| Total Equity | 16,296,862 | 14,729,525 | ||||||
| Total Liabilities and Equity | $ | 20,223,299 | $ | 17,816,021 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
(UNAUDITED)
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 51,401,410 | $ | 44,837,317 | ||||
| Cryptocurrencies | 211,211 | 261,338 | ||||||
| Accounts receivable, net | 65,990 | 113,242 | ||||||
| Other receivables, net | 3,492,832 | 2,558 | ||||||
| Advances to suppliers - third parties | 450,239 | 880,000 | ||||||
| Prepaid expenses and other current assets | 148,878 | 341,992 | ||||||
| Due from related party, net | 1,772,677 | 430,902 | ||||||
| Total Current Assets | 57,543,237 | 46,867,349 | ||||||
| Property and equipment, net | 1,060,774 | 757,257 | ||||||
| Right-of-use assets | 1,545,550 | 417,570 | ||||||
| Other long-term assets - deposits | 133,912 | 115,971 | ||||||
| Loan receivable-related parties | 4,762,635 | 4,644,969 | ||||||
| Investment in unconsolidated entity | 210,010 | - | ||||||
| Total Assets | $ | 65,256,118 | $ | 52,803,116 | ||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Deferred revenue | $ | 72,095 | $ | 471,516 | ||||
| Accounts payable | 540,427 | 574,857 | ||||||
| Lease liabilities - current | 525,942 | 192,044 | ||||||
| Taxes payable | 3,638,541 | 3,572,419 | ||||||
| Accrued expenses and other current liabilities | 634,254 | 529,777 | ||||||
| Loan payable - current | - | 3,035 | ||||||
| Total current liabilities | 5,411,259 | 5,343,648 | ||||||
| Lease liabilities - noncurrent | 1,034,756 | 237,956 | ||||||
| Loan payable-noncurrent | - | 152,370 | ||||||
| Convertible notes | 10,000,000 | - | ||||||
| Total liabilities | 16,446,015 | 5,733,974 | ||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Preferred stock, 2,000,000 shares authorized, no par value, no shares issued and outstanding as of December 31, 2021 and June 30, 2021, respectively | - | - | ||||||
| Common stock, 50,000,000 shares authorized, no par value; 17,652,113 and 4,438,788 shares issued and outstanding as of December 31, 2021 and June 30,2021, respectively* | 90,424,008 | 82,555,700 | ||||||
| Additional paid-in capital | 2,334,962 | 2,334,962 | ||||||
| Accumulated deficit | (41,953,051 | ) | (30,244,937 | ) | ||||
| Accumulated other comprehensive loss | (843,226 | ) | (625,449 | ) | ||||
| Total Stockholders' Equity attributable to controlling shareholders of the Company | 49,962,693 | 54,020,276 | ||||||
| Non-controlling Interest | (1,152,590 | ) | (6,951,134 | ) | ||||
| Total Equity | 48,810,103 | 47,069,142 | ||||||
| Total Liabilities and Equity | $ | 65,256,118 | $ | 52,803,116 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
| * | Shares and per share data are presented on a retroactive basis to reflect the 1-for-5 reverse stock split on July 7, 2020. |
| For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net revenues - third parties | $ | 4,665,235 | $ | 1,511,624 | $ | 9,480,086 | $ | 2,606,547 | ||||||||
| Net revenues - related party | 555,246 | 616,924 | 1,120,406 | 1,466,403 | ||||||||||||
| Total revenues | 5,220,481 | 2,128,548 | 10,600,492 | 4,072,950 | ||||||||||||
| Cost of revenues | (3,375,878 | ) | (350,796 | ) | (7,041,796 | ) | (657,135 | ) | ||||||||
| Gross profit | 1,844,603 | 1,777,752 | 3,558,696 | 3,415,815 | ||||||||||||
| General and administrative expenses | (1,827,014 | ) | (776,284 | ) | (2,590,371 | ) | (1,636,198 | ) | ||||||||
| Selling expenses | (335,261 | ) | (46,875 | ) | (357,727 | ) | (112,184 | ) | ||||||||
| Total operating expenses | (2,162,275 | ) | (823,159 | ) | (2,948,098 | ) | (1,748,382 | ) | ||||||||
| Operating income (loss) | (317,672 | ) | 954,593 | 610,598 | 1,667,433 | |||||||||||
| Other income (expense) | ||||||||||||||||
| Financial income (expense), net | 137,799 | (88,470 | ) | 222,595 | (91,904 | ) | ||||||||||
| Total other income (expense) | 137,799 | (88,470 | ) | 222,595 | (91,904 | ) | ||||||||||
| Net income (loss) before provision for income taxes | (179,873 | ) | 866,123 | 833,193 | 1,575,529 | |||||||||||
| Income tax benefit (expense) | 571,121 | (73,391 | ) | 274,692 | (145,012 | ) | ||||||||||
| Net income | 391,248 | 792,732 | 1,107,885 | 1,430,517 | ||||||||||||
| Net income (loss) attributable to non-controlling interest | 93,545 | (100,169 | ) | 192,993 | (108,104 | ) | ||||||||||
| Net income attributable to Sino-Global Shipping America, Ltd. | $ | 297,703 | $ | 892,901 | $ | 914,892 | $ | 1,538,621 | ||||||||
| Comprehensive income | ||||||||||||||||
| Net income | $ | 391,248 | $ | 792,732 | $ | 1,107,885 | $ | 1,430,517 | ||||||||
| Foreign currency translation income (loss) | 97,600 | (104,312 | ) | 145,317 | (118,882 | ) | ||||||||||
| Comprehensive income | 488,848 | 688,420 | 1,253,202 | 1,311,635 | ||||||||||||
| Less: Comprehensive income attributable to non-controlling interest | 20,618 | 21,512 | 61,365 | 24,121 | ||||||||||||
| Comprehensive income attributable to Sino-Global Shipping America Ltd. | $ | 468,230 | $ | 666,908 | $ | 1,191,837 | $ | 1,287,514 | ||||||||
| Earnings per share | ||||||||||||||||
| -Basic | $ | 0.03 | $ | 0.11 | $ | 0.09 | $ | 0.19 | ||||||||
| -Diluted | $ | 0.03 | $ | 0.11 | $ | 0.09 | $ | 0.18 | ||||||||
| Weighted average number of common shares used in computation | ||||||||||||||||
| -Basic | 10,367,492 | 8,280,535 | 10,236,513 | 8,280,535 | ||||||||||||
| -Diluted | 10,415,503 | 8,342,870 | 10,286,683 | 8,318,541 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
SINO-GLOBAL SHIPPING AMERICASINGULARITY FUTURE TECHNOLOGY LTD. AND AFFILIATESUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| For the six months ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| US$ | US$ | |||||||
| Cash flows from operating Activities | ||||||||
| Net income | $ | 1,107,885 | $ | 1,430,517 | ||||
| Adjustment to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Stock - based compensation expense | 9,665 | 92,472 | ||||||
| Amortization of stock - based compensation to consultants | 333,417 | 529,569 | ||||||
| Depreciation and amortization | 31,742 | 25,407 | ||||||
| Provision for (recovery of) doubtful accounts | 837,431 | (108,344 | ) | |||||
| Deferred tax benefit | (1,073,700 | ) | - | |||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (2,210,485 | ) | 615,324 | |||||
| Other receivables | (234,751 | ) | 219,860 | |||||
| Advances to suppliers - third parties | 50,465 | (1,417,731 | ) | |||||
| Prepaid expense and other current assets | 80,952 | 42,906 | ||||||
| Other long-term assets | - | 5,693 | ||||||
| Due from related parties | (921,532 | ) | (133,713 | ) | ||||
| Advances from customers | (23,001 | ) | 369,626 | |||||
| Accounts payable | 288,283 | (309,941 | ) | |||||
| Taxes payable | 731,456 | 174,432 | ||||||
| Due to related parties | (206,323 | ) | - | |||||
| Accrued expenses and other current liabilities | (61,218 | ) | 386,381 | |||||
| Net cash provided by (used in) operating activities | (1,259,714 | ) | 1,922,458 | |||||
| Cash flows from investing Activities | ||||||||
| Acquisition of property and equipment | (50,278 | ) | - | |||||
| Acquisition of intangible assets | (190,000 | ) | - | |||||
| Prepayment for acquisition of intangible assets | (10,000 | ) | - | |||||
| Net cash used in investing activities | (250,278 | ) | - | |||||
| Effect of exchange rate fluctuations on cash and cash equivalents | (3,902 | ) | (14,999 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | (1,513,894 | ) | 1,907,459 | |||||
| Cash and cash equivalents at beginning of period | 8,733,742 | 1,385,994 | ||||||
| Cash and cash equivalents at end of period | $ | 7,219,848 | $ | 3,293,453 | ||||
| Supplemental information | ||||||||
| Income taxes paid | $ | 60,162 | $ | 6,446 | ||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net revenues (including related party revenue of $223,705 for three months ended December 31,2021 | 1,041,925 | 1,884,440 | $ | 2,838,135 | $ | 3,021,239 | ||||||||||
| Cost of revenues | (1,024,891 | ) | (1,688,464 | ) | (2,651,759 | ) | (2,783,690 | ) | ||||||||
| Gross profit | 17,034 | 195,976 | 186,376 | 237,549 | ||||||||||||
| Selling expenses | (197,225 | ) | (73,462 | ) | (271,621 | ) | (142,392 | ) | ||||||||
| General and administrative expenses | (2,151,431 | ) | (1,314,235 | ) | (4,118,000 | ) | (2,017,669 | ) | ||||||||
| Impairment loss of cryptocurrencies | (50,127 | ) | - | (50,127 | ) | - | ||||||||||
| Recovery (provision) for doubtful accounts, net | 1,876 | 15,891 | 1,931,591 | (2,462 | ) | |||||||||||
| Stock-based compensation | (377,000 | ) | - | (3,304,400 | ) | - | ||||||||||
| Total operating expenses | (2,773,907 | ) | (1,371,806 | ) | (5,812,557 | ) | (2,162,523 | ) | ||||||||
| Operating loss | (2,756,873 | ) | (1,175,830 | ) | (5,626,181 | ) | (1,924,974 | ) | ||||||||
| Loss from disposal of subsidiary and VIE | (6,131,616 | ) | - | (6,131,616 | ) | - | ||||||||||
| Other expenses, net | (29,881 | ) | 85,720 | (82,235 | ) | 86,408 | ||||||||||
| Net loss before provision for income taxes | (8,918,370 | ) | (1,090,110 | ) | (11,840,032 | ) | (1,838,566 | ) | ||||||||
| Income tax expense | - | (3,450 | ) | - | (3,450 | ) | ||||||||||
| Net loss | (8,918,370 | ) | (1,093,560 | ) | (11,840,032 | ) | (1,842,016 | ) | ||||||||
| Net loss attributable to non-controlling interest | (65,268 | ) | 9,359 | (131,918 | ) | (5,306 | ) | |||||||||
| Net loss attributable to controlling shareholders of the Company | $ | (8,853,102 | ) | (1,102,919 | ) | $ | (11,708,114 | ) | $ | (1,836,710 | ) | |||||
| Comprehensive loss | ||||||||||||||||
| Net loss | $ | (8,918,370 | ) | (1,093,560 | ) | $ | (11,840,032 | ) | $ | (1,842,016 | ) | |||||
| Other comprehensive income - foreign currency | (246,679 | ) | 31,038 | (193,197 | ) | 23,465 | ||||||||||
| Comprehensive loss | (9,165,049 | ) | (1,062,522 | ) | (12,033,229 | ) | (1,818,551 | ) | ||||||||
| Less: Comprehensive gain/(loss) attributable to non-controlling interest | 163,196 | (195,468 | ) | 87,304 | (408,957 | ) | ||||||||||
| Comprehensive loss attributable to controlling shareholders of the Company | $ | (9,328,245 | ) | (867,054 | ) | $ | (12,120,533 | ) | $ | (1,409,594 | ) | |||||
| Loss per share | ||||||||||||||||
| Basic and diluted* | $ | (0.55 | ) | (0.23 | ) | $ | (0.74 | ) | $ | (0.42 | ) | |||||
| Weighted average number of common shares used in computation | ||||||||||||||||
| Basic and diluted* | 16,201,026 | 4,828,788 | 15,836,703 | 4,328,571 | ||||||||||||
| * | Shares and per share data are presented on a retroactive basis to reflect the 1-for-5 reverse stock split on July 7, 2020. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
SINO-GLOBAL SHIPPING AMERICA,SINGULARITY FUTURE TECHNOLOGY LTD. AND AFFILIATESSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| Preferred Stock | Common Stock | Additional paid-in | Subscription | Accumulated | Accumulated other comprehensive | Noncontrolling | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount | capital | receivable | deficit | loss | interest | Total | |||||||||||||||||||||||||||||||
| BALANCE, June 30, 2020 | - | $ | - | 3,718,788 | $ | 28,414,992 | $ | 2,334,962 | $ | (59,869 | ) | $ | (23,421,594 | ) | $ | (1,084,030 | ) | $ | (6,542,361 | ) | $ | (357,900 | ) | |||||||||||||||||
| Issuance of common stock to private investor | - | - | 720,000 | 1,051,200 | - | 59,869 | - | - | - | 1,111,069 | ||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | 191,251 | (198,824 | ) | (7,573 | ) | ||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | (733,791 | ) | - | (14,665 | ) | (748,456 | ) | |||||||||||||||||||||||||||
| BALANCE, September 30, 2020 (Restated) | - | - | 4,438,788 | 29,466,192 | 2,334,962 | - | (24,155,385 | ) | (892,779 | ) | (6,755,850 | ) | (2,860 | ) | ||||||||||||||||||||||||||
| Issuance of preferred stock to private investor | 860,000 | 1,427,600 | - | - | - | - | - | - | - | 1,427,600 | ||||||||||||||||||||||||||||||
| Issuance of common stock to private investor | - | - | 1,560,000 | 4,322,330 | - | - | - | - | - | 4,322,330 | ||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | 235,865 | (204,827 | ) | 31,038 | |||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | (1,102,919 | ) | - | 9,359 | (1,093,560 | ) | ||||||||||||||||||||||||||||
| BALANCE, December 31, 2020 | 860,000 | $ | 1,427,600 | 5,998,788 | $ | 33,788,522 | $ | 2,334,962 | $ | - | $ | (25,258,304 | ) | $ | (656,914 | ) | $ | (6,951,318 | ) | $ | 4,684,548 | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional paid-in | Subscription | Accumulated | Accumulated other comprehensive | Noncontrolling | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount | capital | receivable | deficit | loss | interest | Total | |||||||||||||||||||||||||||||||
| BALANCE, June 30, 2021 | - | $ | - | 15,132,113 | $ | 82,555,700 | $ | 2,334,962 | $ | - | $ | (30,244,937 | ) | $ | (625,449 | ) | $ | (6,951,134 | ) | $ | 47,069,142 | |||||||||||||||||||
| Stock compensation issue to employee | - | - | 1,020,000 | 2,927,400 | - | - | - | - | - | 2,927,400 | ||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | 62,724 | (9,242 | ) | 53,482 | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (2,855,012 | ) | - | (66,650 | ) | (2,921,662 | ) | |||||||||||||||||||||||||||
| BALANCE, September 30, 2021 | - | - | 16,152,113 | 85,483,100 | 2,334,962 | - | (33,099,949 | ) | (562,725 | ) | (7,027,026 | ) | 47,128,362 | |||||||||||||||||||||||||||
| Stock compensation issue to former director | - | - | 100,000 | 377,000 | - | - | - | - | - | 377,000 | ||||||||||||||||||||||||||||||
| Issuance of common stock to private investors | - | - | 1,400,000 | 4,563,908 | - | - | - | - | - | 4,563,908 | ||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | - | (280,501 | ) | 87,304 | (193,197 | ) | ||||||||||||||||||||||||||||
| Disposal of VIE and subsidiaries | - | - | - | - | - | - | - | - | 5,919,050 | 5,919,050 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (8,853,102 | ) | - | (131,918 | ) | (8,985,020 | ) | |||||||||||||||||||||||||||
| BALANCE, December 31, 2021 | - | $ | - | 17,652,113 | $ | 90,424,008 | $ | 2,334,962 | $ | - | $ | (41,953,051 | ) | $ | (843,226 | ) | $ | (1,152,590 | ) | $ | 48,810,103 | |||||||||||||||||||
| * | Shares and per share data are presented on a retroactive basis to reflect the 1-for-5 reverse stock split on July 7, 2020. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
SINGULARITY FUTURE TECHNOLOGY LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED
| For the Six Months Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating Activities | - | |||||||
| Net loss | $ | (11,840,032 | ) | $ | (1,842,016 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | 3,304,400 | - | ||||||
| Depreciation and amortization | 278,517 | 165,128 | ||||||
| Non-cash lease expense | 256,218 | 76,716 | ||||||
| (Recovery) provision for doubtful accounts, net | (1,931,591 | ) | 2,462 | |||||
| Loss on disposal of fixed assets | 52,489 | - | ||||||
| Loss on disposal of subsidiaries and VIE | 6,131,616 | - | ||||||
| Impairment loss of cryptocurrencies | 50,127 | |||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (3,188 | ) | (190,033 | ) | ||||
| Other receivables | (1,722,529 | ) | (881,628 | ) | ||||
| Advances to suppliers - third parties | 431,581 | (28,770 | ) | |||||
| Prepaid expenses and other current assets | 192,841 | 27,277 | ||||||
| Other long-term assets - deposits | (18,712 | ) | (100,746 | ) | ||||
| Due from related parties | - | 86,000 | ||||||
| Deferred revenue | (398,800 | ) | 401,966 | |||||
| Accounts payable | (27,635 | ) | 57,265 | |||||
| Taxes payable | 104,305 | 140,633 | ||||||
| Lease liabilities | (253,500 | ) | (93,459 | ) | ||||
| Accrued expenses and other current liabilities | 154,090 | (788,780 | ) | |||||
| Net cash used in operating activities | (5,239,803 | ) | (2,967,985 | ) | ||||
| Investing Activities | ||||||||
| Acquisition of property and equipment | (624,086 | ) | - | |||||
| Loan to related party | (41,505 | ) | - | |||||
| Investment in unconsolidated entity | (210,000 | ) | - | |||||
| Advance to related parties | (1,470,922 | ) | - | |||||
| Repayment from related parties | 136,167 | - | ||||||
| Net cash used in investing activities | (2,210,346 | ) | - | |||||
| Financing Activities | ||||||||
| Proceeds from issuance of preferred stock | - | 1,427,600 | ||||||
| Proceeds from issuance of common stock | 4,563,908 | 5,433,399 | ||||||
| Proceeds from convertible notes | 10,000,000 | - | ||||||
| Repayment of loan payable | (155,405 | ) | - | |||||
| Net cash provided by financing activities | 14,408,503 | 6,860,999 | ||||||
| Effect of exchange rate fluctuations on cash | (394,261 | ) | 448,804 | |||||
| Net increase in cash | 6,564,093 | 4,341,818 | ||||||
| Cash at beginning of period | 44,837,317 | 131,182 | ||||||
| Cash at end of period | $ | 51,401,410 | $ | 4,473,000 | ||||
| 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 | $ | 1,384,721 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
SINGULARITY FUTURE TECHNOLOGY LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
Note 1. ORGANIZATION AND NATURE OF BUSINESS
Founded in the United States (the “U.S.”) in 2001, Sino-Global Shipping America, Ltd., a Virginia corporation (“Sino-Global” or the “Company”), is a non-asset based global shipping and freight logistics integrated solutionssolution provider. The Company provides tailored solutions and value-added services forto its customers to drive effectivenessefficiency and control in related linkssteps throughout the entire shipping and freight logistics chain. The Company conducts its business primarily through its wholly-owned subsidiaries in the U.S., the People’s Republic of China including(the “PRC” or “China”) (including Hong Kong (the “PRC”), AustraliaKong) and Canada. Currently,the U.S. where a significant portionmajority of the Company’s business is generated from clients locatedare located. The Company operates 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’stwo operating segments including (1) shipping agency business was operated by its subsidiaries in the PRC. The Company’s shippingand management services, were operated by its subsidiary in Hong Kong. The Company’s shipping and chartering services were operated by its subsidiaries in the U.S. and subsidiary in Hong Kong. Currently, the Company’s inland transportation management serviceswhich are operated by its subsidiaries in the PRC, Hong Kong and the U.S. The Company’s; (2) freight logistics services, which are operated by its subsidiaries in the PRCPRC.
On January 3, 2022, the Company filed Articles of Amendment with the Virginia State Corporation Commission to change its corporate name from Sino-Global Shipping America, Ltd. to Singularity Future Technology Ltd. The Company plans to leverage its core expertise in logistics and shipping to accelerate its diversification and growth in cryptocurrency and other new markets. The Company plans to enter into digital assets business through its US subsidiaries.
On December 14, 2020, the U.S. The Company’s container truckingCompany incorporated a new entity named “Blumargo IT Solution Ltd.” with 80% ownership in partnership with Tianjin Anboweiye Technology Co. to build up hi-tech and information-based logistic services are currently operated by its subsidiaries into meet the PRChigher and throughcomplicate demand of customers. On June 30, 2021, the Company increased the ownership to 100%.
On April 13, 2021, the Company formed a joint venture in which the Company owned 99% equity interest of Hainan Saimeinuo Trading Co., Ltd., in the free tax zone in Hainan Province, China, with a registered capital of approximately $1.5 million. This subsidiary primarily engages in freight logistics services.
On April 21, 2021, the Company entered into a cooperation agreement with Mr. Bangpin Yu to set up a joint venture in U.S. The Company’s newly added bulk cargo container truckingnamed “Brilliant Warehouse Service Inc.” to support its freight logistics services are currently operated by its subsidiary in the U.S. The Company has increased itsa 51% equity interest in the joint venture.
In July 2021, the company registered a new company Gorgeous Trading Ltd., which is 100% owned by Sino-Global Shipping New York Inc. and which will be mainly responsible for the Company’s smart warehouse and related business in the U.S. since the launch of the short haul container truck services web-based platform in December 2016.Texas.
In January 2016,On August 31, 2021, the Company formed a subsidiary,joint venture, Phi Electric Motor, Inc. in New York, which is 51% owned by Sino-Global Shipping LANew York Inc., a California corporation (“Sino LA”), for the purpose of expanding its business to provide freight logistics services to importers who ship goods into the U.S. The Company expects to generate a majority of its 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 There have been no operations as a result of these market condition changes, the Company has suspended its shipping 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 December 31, 2017, the Company’s business segments consist of inland transportation management services, freight logistics services, container trucking services and bulk cargo container services.2021.
In August 2016,On September 29, 2021, the Company’s Board of Directors (the “Board”) authorized management to move forward with the development ofCompany formed a mobile application that will provide a full-service logistics platform between the U.S. and the PRC for short-haul trucking100% owned subsidiary, SG Shipping & Risk Solution Inc. in the U.S.
Sino-Global completed development of a full-service logistics platformNew York. On December 23, 2021, SG Shipping & Risk Solution Inc. formed SG Link LLC. There have been no material operations 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.31, 2021.
On January 5, 2017,October 3, 2021, the Company entered into a Strategic Alliance Agreement (the “Agreement”) with Shenzhen Highsharp Electronic Ltd. (“Highsharp”) to establish a joint venture agreementfor collaborative engineering, technical development and commercialization of a proprietary cryptocurrency mining machine under the brand name Thor, with exclusive rights covering design production, intellectual property, branding, marketing and sales. On October 11, 2021, the Company formed a new joint venture, company named ACH Trucking Center Corp. (“ACH Center”) with Jetta Global LogisticsThor Miner 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 aDelaware, which is 51% ownership stake in ACH Center. Although the establishment of ACH Center brought benefit forowned by the Company and Jetta Global, it could not satisfy long term development for both the Company and Jetta Global. The Company signed a termination agreement with Jetta Global to terminate the joint venture agreement on December 4, 2017. As ACH center’s operating revenue was less than 1% of the Company’s consolidated revenue and the termination did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations for ACH Center was not reported as discontinued operations under the guidance of Accounting Standards Codification 205.49% owned by Highsharp.
On January 9, 2017,December 31, 2021, the Company entered into a strategic cooperation agreement with China Oceanseries of agreements to terminate its variable interest entity (“VIE”) structure and terminate the existence of its formerly controlled entity Sino-Global Shipping Agency Qingdao Co. Ltd. (“COSCO Qingdao”). COSCO Qingdao will utilize the Company’s full-service logistics platform to arrange the transportation 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.
On February 18, 2017, the Company entered into a cooperative transportation agreement with a 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”Sino-China”). The Company agreed to provide high-quality services, includingcontrolled Sino-China through its wholly owned subsidiary Trans Pacific Shipping Limited (“Trans Pacific Beijing”). The Company made its decision because Sino-China has no active operations and potential risks on VIE structures. In addition, the design of a detailed transportation plan as well as execution and necessary supervisionCompany dissolved its subsidiary Sino-Global Shipping LA, Inc.
The outbreak of the plan at Zhiyuan Hong Kong’s demand,novel coronavirus (COVID-19) starting from late January 2020 in considerationthe PRC has spread 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. Given the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of the Company’s business operations and its workforce are concentrated in China and the U.S., the Company’s business, results of operations, and financial condition have been adversely affected for whichthe year ended June 30, 2021. The situation remains highly uncertain for any further outbreak or resurgence of the COVID-19. It is therefore difficult for the Company will receive a 1% to 1.25% transportation fee incurred inestimate the Project as a commission for its services rendered (see Note 3 and Note 15). On July 7, 2017, the Company signed a supplemental agreement with the Buyer, pursuant to which the Company will cooperate with Zhiyuan Hong Kong exclusivelyimpact on the entire Project’s transportation needs. Pursuant to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its sharebusiness or operating results that might be adversely affected by any further outbreak or resurgence of packaging and transporting costs related to the Project; in return, the Company will receive 15% of the cost incurred in the Project from Zhiyuan Hong Kong as a service fee. The Project is expected to be completed in one to two years and the Company will collect its service fee in accordance with Project completion.COVID-19.
On September 11, 2017, the Company set up a new wholly-owned subsidiary, Ningbo Saimeinuo Supply Chain Management Ltd. (“Sino Ningbo”), via the wholly-owned entity, Sino-Global Shipping New York Inc. This subsidiary primarily engages in supply chain management and freight logistics services.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“US GAAP”) for information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary to give a fair presentation have been included. Interim results are not necessarily indicative of results of a full year. The information in this Form 10-Q should be read in conjunction with information included in the annual report for the fiscal year ended June 30, 2017 on Form 10-K filed with the SEC on September 27, 2017.
(b) Basis of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company itsand include the assets, liabilities, revenues and expenses of the subsidiaries and its affiliates.VIEs. All significant intercompany transactions and balances arehave been eliminated in consolidation. A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power or has the power to: govern the financial and operating policies; appoint or remove the majority of the members of the board of directors; cast a majority of votes at the meeting of the board of directors.
U.S. GAAP provides guidance on the identification of variable interest entity (“VIE”) and financial reporting for entities over which control is achieved through means other than voting interests. The Company evaluates each of its interests in an entity to determine whether or not the investee is a VIE and, if so, whether the Company is the primary beneficiary of such VIE. In determining whether the Company is the primary beneficiary, the Company considers if the Company (1) has power to direct the activities that most significantly affects the economic performance of the VIE, and (2) receives the economic benefits of the VIE that could be significant to the VIE. If deemed the primary beneficiary, the Company consolidates the VIE. Sino-Global Shipping Agency Ltd., a PRC corporation (“Sino-China”), is considered a VIE,variable interest entity (“VIE”), with the Company as the primary beneficiary. The Company, through Trans Pacific Beijing,Shipping Ltd., entered into certain agreements with Sino-China, pursuant to which the Company receives 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.
As a VIE, Sino-China’s revenues are included in the Company’s total revenues, and any income/loss from operations is consolidated with that of the Company. Because of contractual arrangements between the Company and Sino-China, the Company has a pecuniary interest in Sino-China that requires 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 is governed by a series of contractual arrangements pursuant to which the Company has substantial control over Sino-China. Management makes ongoing reassessments of whether the Company remains the primary beneficiary of Sino-China. As mentioned elsewhere in this report, dueOn December 31, 2021, the Company entered into a series of agreements to terminate its Variable Interest Entity (“VIE”) structure and terminate the worsening market conditionsexistence of its formerly controlled entity Sino-China.
Loss from disposal of Sino-China amounted to approximately $6.1 million. Since Sino-China did not have material operation prior to disposal, the disposal did not represent a strategic change in the shipping industry, Sino-China’s shipping agencyCompany’s business, suffered a significant decrease in revenue due to a reduced number of ships served. As a result,as such the Company has temporarily suspended this business. Sino-China is also providing services in other related business segments of the Company.disposal was not presented as discontinued operations.
The carrying amount and classification of Sino-China’s assets and liabilities included in the Company’s unaudited condensed consolidated balance sheets were as follows:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Total current assets | $ | 9,736,634 | $ | 9,327,990 | ||||
| Total assets | 9,877,880 | 9,472,651 | ||||||
| Total current liabilities | 6,279 | 4,517 | ||||||
| Total liabilities | 6,279 | 4,517 | ||||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Current assets: | ||||||||
| Cash | $ | - | $ | 113,779 | ||||
| Total current assets | - | 113,779 | ||||||
| Deposits | - | 56 | ||||||
| Property and equipment, net | - | - | ||||||
| Total assets | $ | - | $ | 113,835 | ||||
| Current liabilities: | ||||||||
| Other payables and accrued liabilities | $ | - | $ | 32,939 | ||||
| Total liabilities | $ | - | $ | 32,939 | ||||
(c)
As of December 31 2021, the Company also dissolved its subsidiary Sino-Global Shipping LA, Inc. The net assets of disposed VIE and subsidiaries are as follows:
| December 31, 2021 | ||||||||||||
| VIE | Subsidiary | 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 | |||||||||
| Due from noncontrolling interests | 5,919,050 | - | 5,919,050 | |||||||||
| Exchange rate effect | 142,079 | - | 142,079 | |||||||||
| Total loss on disposal | $ | 6,111,817 | $ | 19,798 | $ | 6,131,615 | ||||||
(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 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.
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 unaudited condensed consolidated financial statements in conformity with U.S.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 unaudited condensed consolidated financial statements include revenue recognition, fair value of stock 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 Shipping Ltd. 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 Hong Kong reports its financial positions and results of operations in Hong Kong dollar (“HKD”) and its subsidiary Sino-Global Shipping Canada, Inc. reports its financial positions and results of operations in Canadian Dollar (“CAD”). The accompanying unaudited condensed 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 unaudited condensed 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, Trans Pacific Shanghai and Sino Ningbo 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 as of December 31, 20172021 and June 30, 20172021 and for the three and six months ended December 31, 20172021 and 20162020 are as follows:
| December 31, | June 30, | Three months ended December 31, | Six months ended December 31, | |||||||||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
| Foreign currency | Balance Sheet | Balance Sheet | Profits/Loss | Profits/Loss | Profits/Loss | Profits/Loss | ||||||||||||||||||
| RMB:1USD | 6.5060 | 6.7806 | 6.6153 | 6.8328 | 6.6428 | 6.7498 | ||||||||||||||||||
| AUD:1USD | 1.2797 | 1.3028 | 1.3007 | 1.3357 | 1.2838 | 1.3275 | ||||||||||||||||||
| HKD:1USD | 7.8118 | 7.8059 | 7.8076 | 7.7576 | 7.8112 | 7.7571 | ||||||||||||||||||
| CAD:1USD | 1.2573 | 1.2982 | 1.2702 | 1.3351 | 1.2620 | 1.3198 | ||||||||||||||||||
| December 31, 2021 | June 30, 2021 | Three months ended December 31, | Six months ended December 31, | |||||||||||||||||||||
| Foreign currency | Balance Sheet | Balance Sheet | 2021 Profit/Loss | 2020 Profit/Loss | 2021 Profit/Loss | 2020 Profit/Loss | ||||||||||||||||||
| RMB:1USD | 6.3551 | 6.4586 | 6.3952 | 6.6254 | 6.4330 | 6.7736 | ||||||||||||||||||
| AUD:1USD | 1.3759 | 1.3342 | 1.3735 | 1.3688 | 1.3669 | 1.3840 | ||||||||||||||||||
| HKD:1USD | 7.7973 | 7.7661 | 7.7897 | 7.7520 | 7.7837 | 7.7513 | ||||||||||||||||||
| CAD:1USD | 1.2656 | 1.2404 | 1.2608 | 1.3038 | 1.2600 | 1.3181 | ||||||||||||||||||
(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 December 31, 20172021 and June 30, 2017,2021, cash balances of $6,812,501$643,160 and $6,246,337,$628,039, respectively, were maintained at financial institutions in the PRC, which werePRC. $458,784 and $201,990 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, December 31, 20172021 and June 30, 2017,2021, cash balancebalances of $364,722$50,735,018 and $2,462,792,$44,203,436, respectively, were maintained at U.S. financial institutions,institutions. $ 49,162,822 and were$ 43,507,335 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 December 31, 2021 and June 30, 2021, cash balances of $22,261 and $3,698, respectively, were maintained at financial institutions in Hong Kong and were insured by the Hong Kong Deposit Protection Board. As of December 31, 2021 and June 30, 2021, cash balances of $206 and $693, 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 December 31, 2021 and June 30, 2021, amount of deposits the Company had covered by insurance amounted to $1,779,039 and $1,125,838, 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 revenue of the Company for the three and six months ended December 31, 2021. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. Cryptocurrencies awarded to the Company through its mining activities are recorded as other income and as operating activities in the Company’s unaudited condensed consolidated financial statements.
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. The company recorded $50,127 impairment loss for the three and six months ended December 31, 2021. 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) Accounts ReceivableReceivables and Allowance for Doubtful Accounts
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-worthinesscreditworthiness and current economic trends. Receivables are generally considered past due after 180 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 in the shipping management segment, its customer base will be more from smaller privately owned companies that will pay more timely than state owned companies. The Company also considers the economic implications of COVID-19 on its estimates of the allowance and made nil and $2,609 of allowance for doubtful accounts of accounts receivable for the three months ended December 31, 2021 and 2020, nil and $33,418 of allowance for doubtful accounts of accounts receivable for the six months ended December 31, 2021 and 2020. The Company recovered nil and $2,456 of accounts receivable for the six months ended December 31, 2021 and 2020, respectively.
Other receivables represent mainly customer advances, prepaid employee insurance and welfare benefits. 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 the asset’sits purchase price and any directly attributable costs of bringing the assetassets 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 | ||
| Furniture and fixtures | 3-5 years | |
| System software | 5 years | |
| Leasehold improvements | Shorter of lease term or useful | |
| 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 areis less than the asset’sits 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. ManagementFor the three and six months ended December 31, 2021 and 2020, no impairment were recorded, respectively.
(i) Investments in unconsolidated entity
Entities in which the Company has determined that there were no impairmentsthe 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 balance sheet dates.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.
(i) Intangible Assets, net
Intangible assets
Investments are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following estimated useful lives:
The Company evaluates intangible assetsevaluated for impairment whenever eventswhen facts or changes in circumstances indicate that the assets might be impaired. There was no suchfair value of the long-term investment is less than its carrying value. An impairment as of December 31, 2017.
(j) Revenue Recognition
Revenueloss is recognized when alla 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 followinginvestment; (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., in which the Company holds a 40% equity interest. The new joint venture will facilitate the purchase agricultural related commodities in the U.S. for customers in China and the Company will provide comprehensive supply chain and logistics solutions. For the three and six months ended December 31, 2021 the Company recorded $210,010 investment in unconsolidated entity and no events have occurred:occurred that indicated other-than-temporary for the three and six months ended December 31, 2021.
(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. The Company’s revenue streams are recognized at a point in time.
The Company uses a five-step model to recognize revenue from customer contracts. The five-step model requires the Company to (i) persuasiveidentify 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.
The Company continues to derive its revenues from sales contracts with its customers with revenues being recognized upon performance of services. Persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii)is demonstrated via sales contract and invoice; and the sales price to the customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or determinable, and (iv) the ability to collect is reasonably assuredother incentive. The Company’s revenues are recognized at a point in time after all performance obligations are satisfied.
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.
The Company’s disaggregated revenue streams are described as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Shipping and management agency services | $ | - | $ | - | $ | $ | 206,845 | |||||||||
| Freight logistics services | 1,041,925 | 1,884,440 | 2,838,135 | 2,814,394 | ||||||||||||
| Total | $ | 1,041,925 | $ | 1,884,440 | $ | 2,838,135 | $ | 3,021,239 | ||||||||
| ● | Revenues from |
| ● | ||
Revenues from freight logistics services are recognized when the related contractual services are rendered. | ||
Bulk cargo container services included shippingDisaggregated information of products, arranging cargo container shipping from U.S. to China port, then from China port to end user. Revenue is recognized upon completion of shipping arrangements agreed with customers, either at customer’s designated port or final destination.revenues by geographic locations are as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| PRC | $ | 868,255 | 1,884,440 | 1,593,332 | 2,814,394 | |||||||||||
| U.S. | 173,670 | - | 1,244,803 | 206,845 | ||||||||||||
| Total revenues | $ | 1,041,925 | $ | 1,884,440 | $ | 2,838,135 | $ | 3,021,239 | ||||||||
(k)
(l) 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 U.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 unaudited condensed 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 December 31, 2021 and June 30, 2021.
Income tax returns for the years prior to 20142018 are no longer subject to examination by U.S. tax authorities.
On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of The Act, the U.S. corporate tax rate decreased from 35% to 21%. Since the Company has a June 30 fiscal year-end, the U.S. statutory federal blended rate will be approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. Additionally, the Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused the Company to re-measure all U.S. deferred income tax assets and liabilities for temporary differences using the blended rate. Net operating loss (“NOL”) carryforwards are limited to 80% of taxable income and can be carried forward indefinitely.
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 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 are subject to VAT at rates ranging from 9% to 13%. Entities that are VAT general taxpayers are allowed to offset qualified VAT paid to suppliers against their VAT liability. Net VAT liability is recorded in taxes payable on the PRC business tax of 5%. Business tax and surcharges are paid on gross revenues generated minus the costs of services which are paid on behalf of the customers.consolidated balance sheets.
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 Company is entitled to a deduction or offset for VAT paid on the services rendered by the vendors against the VAT when the Company engage in services.
In addition, under the PRC regulations, the Company’s PRC subsidiaries and affiliates are required to pay the 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.(m) Earnings (loss) per Share
(l) Earnings 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 three and six months ended December 31, 2017, the basic average shares outstanding2021 and diluted average shares of the Company outstanding were not the same because the2020, 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 three and six months ended December 31, 2017, a total of 48,011 and 50,170 unexercised options were dilutive, respectively, and were included in the computation of diluted earnings per share. For the three and six months ended December 31, 2016, a total of 62,335 and 38,006 unexercised options were dilutive, respectively, and were included in the computation of diluted EPS.Company generated net loss.
(m)(n) 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.
(n)(o) Stock-based Compensation
Stock-basedThe 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 arebe 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.
(o)(p) 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,
In March 2020, the World Health Organization declared the COVID-19 as a pandemic. Given the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of the Company’s ability to grow its business operations and maintain its profitability could be negatively affected by the natureworkforce are concentrated in China and extent of services provided to its major customers, Tianjin Zhiyuan Investment Group Co., Ltd. (the “Zhiyuan Investment Group”) and Tengda Northwest Ferroalloy Co., Ltd. (“Tengda Northwest”).
(p) Reclassification
Certain prior period amounts have been reclassified to conform toUnited States, the current period presentation, including reclassification of $125,755 amortization of stock-based compensation to consultants as prepaid expense and other current assets, and reclassification of $504,815 revenue and $390,719 cost of revenue from freight logistics service segment to bulk cargo container service segment. These reclassifications have no effect on theCompany’s business, results of operations, and cash flows.
(q) Recent Accounting Pronouncements
Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be receivedfinancial condition have been adversely affected for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company in the first quarter of fiscal year 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional unaudited condensed as defined per ASU 2014-09 (modified retrospective method). The Company is currently assessing the impact to its unaudited condensed financial statements, and has not yet selected a transition approach.
Leases: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”), which provides guidance on lease amendments to the FASB Accounting Standard Codification. This ASU will be effective for us beginning in December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-2 on unaudited condensed financial statements.
Statement of Cash Flows: In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments in this Update provide guidance on the following eight specific cash flow issues. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is still evaluating the effect that this guidance will have on the Company’s unaudited condensed financial statements and related disclosures.
Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective in the fiscal year beginning after December 15, 2017 and interim periods within those periods on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact on its consolidated financial statements.
Stock-based Compensation: In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment awards, ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2017-09 on its unaudited condensed financial statements.
Stock-based Compensation: 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 year and interim periods within those fiscal years, beginning after 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 unaudited condensed financial statements.
Revenue Recognition and Leases: In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object to certain public business entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. Management does not expect the adoption of ASU 2017-13 to have any material impact on its financial positions and results of operations or cash flows.
Except for the ASU’s described above, no ASU’s are expected to have a material impact on the unaudited condensed consolidated financial statements upon adoption.
Note 3. ADVANCES TO SUPPLIERS
The Company’s advances to third - party suppliers are as follows:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Intelligent logistics system deposit | $ | 10,000 | $ | - | ||||
| Freight fees | - | 29,960 | ||||||
| Other | 4,611 | 24,930 | ||||||
| Total advances to suppliers - third parties | $ | 14,611 | $ | 54,890 | ||||
On December 27, 2017, with the approval of the Board of Directors, the Company signed a contract with Tianjin Anboweiye Technology Ltd Co. (“Tianjin Anboweiye”), to develop a more complete and intelligent logistics system based on the Company’s current container trucking platform. The purpose is to help the Company make better connections with the system used by state-owned companies in China, and to satisfy such state-owned companies’ demand for container trucks in the United States.
As of December 31, 2017, advances to third-party suppliers were primarily related to freight logistics services.
The Company’s advances to related-party suppliers are as follows:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Freight fees | $ | 3,473,717 | $ | 3,333,038 | ||||
| Total advances to suppliers - related party | $ | 3,473,717 | $ | 3,333,038 | ||||
As discussed in Note 1, on February 18, 2017, the Company entered into a cooperative transportation agreement with Zhiyuan Hong Kong. Zhiyuan Hong Kong is owned by the Company’s largest shareholder. On July 7, 2017, the Company signed a supplemental agreement, pursuant to which the Company 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 the cost incurred in the Project from Zhiyuan Hong Kong as a service fee. The Project is expected to be completed in one to two years, and the Company will collect its service fee in accordance with Project completion. As of December 31, 2017, no cost was recognized under this Project. No additional freight fees were advanced during the three and six months ended December 31, 2017.2021. The situation remains highly uncertain for any further outbreak or resurgence of the COVID-19. It is therefore difficult for the Company to estimate the impact on the business or operating results that might be adversely affected by any further outbreak or resurgence of COVID-19.
(q) Recent Accounting Pronouncements
In May 2019, the FASB issued ASU 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, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the 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 those 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 for fiscal years beginning after July 1, 2023, including interim periods within those fiscal years. The Company has not early adopted this update and it will become effective on July 1, 2023 assuming the Company will remain eligible to be smaller reporting company. The Company is currently evaluating the impact of this new standard on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for the Company for annual and interim reporting periods beginning July 1, 2021. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The adoption of this new standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 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 applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for the Company for annual and interim reporting periods beginning July 1, 2022. Early adoption is permitted, but no earlier than fiscal years beginning after July 1, 2021, including interim periods within those fiscal years. The Company 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—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. 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. Early application is not permitted. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The adoption of this new standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the 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 Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for annual periods beginning after July 1, 2021 for public business entities. Early application is permitted. The amendments in this Update should be applied retrospectively. The adoption of this new standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
Note 3. CRYPTOCURRENCIES
The following table presents additional information about cryptocurrencies:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | 261,338 | $ | - | ||||
| Receipt of cryptocurrencies from mining services | - | 261,338 | ||||||
| Impairment loss | (50,127 | ) | ||||||
| Ending balance | $ | 211,211 | $ | 261,338 | ||||
The company recorded $50,127 impairment loss for the three and six months ended December 31, 2021.
Note 4. ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivable isare as follows:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Trade accounts receivable | $ | 5,012,347 | $ | 2,754,962 | ||||
| Less: allowances for doubtful accounts | (763,984 | ) | (185,821 | ) | ||||
| Accounts receivables, net | $ | 4,248,363 | $ | 2,569,141 | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Trade accounts receivable | $ | 3,568,513 | $ | 3,589,011 | ||||
| Less: allowances for doubtful accounts | (3,502,523 | ) | (3,475,769 | ) | ||||
| Accounts receivable, net | $ | 65,990 | $ | 113,242 | ||||
Movement of allowance for doubtful accounts isare as follows:
Six months ended December 31, 2017 | Year ended June 30, | |||||||
| Beginning balance | $ | 185,821 | $ | 207,028 | ||||
| Provision for doubtful accounts | 598,403 | - | ||||||
| Less: write-off/recovery | (24,638 | ) | (18,912 | ) | ||||
| Exchange rate effect | 4,398 | (2,295 | ) | |||||
| Ending balance | $ | 763,984 | $ | 185,821 | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | 3,475,769 | $ | 2,297,491 | ||||
| Provision for doubtful accounts, net of recovery | - | 1,030,895 | ||||||
| Exchange rate effect | 26,754 | 147,383 | ||||||
| Ending balance | $ | 3,502,523 | $ | 3,475,769 | ||||
For the three months ended December 31, 2021 and 2020, the provision for doubtful accounts was nil and $2,609, respectively. For the six months ended December 31, 2021 and 2020, the provision for doubtful accounts was nil and $33,418, respectively. The Company recovered nil and $2,456 of accounts receivable for the six months ended December 31, 2021 and 2020, respectively.
Note 5. OTHER RECEIVABLES, NET
The Company’s other receivables are as follows:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Advances to customers* | $ | 4,159,512 | $ | 6,025,670 | ||||
| Project advance** | 3,299,815 | - | ||||||
| Employee business advances | 190,702 | 1,154 | ||||||
| Total | 7,650,029 | 6,026,824 | ||||||
| Less: allowances for doubtful accounts | (4,157,197 | ) | (6,024,266 | ) | ||||
| Other receivables, net | $ | 3,492,832 | $ | 2,558 | ||||
| * | As of December 31, 2021 and June 30, 2021, the Company entered into certain contracts with customers (state-owned entities) where the Company’s services included freight costs and cost of commodities to be shipped to customers’ designated locations. The Company prepaid the costs of commodities and recognized as advance payments on behalf of its customers. These advance payments on behalf of the customers will be repaid to the Company when either the contract terms are expired or the contracts are terminated by the Company. As aforementioned customers were negatively impacted by the pandemic and required additional time to execute existing contracts, they required additional time to pay. Due to significant uncertainty on whether the delayed contracts will be executed timely, the Company had provided an allowance due to contract delay and recorded allowances of approximately $6.0 million and $10.0 million as of December 31, 2021 and June 30, 2021, respectively. For the three and six months ended December 31, 2021 and 2020, the Company recovered $1,941,054 and $nil, respectively. |
| ** | As of December 31, 2021, the Company entered into a project cooperation agreement with Rich Trading Co. Ltd USA (“Rich Trading”) for trading of computer equipment. According to the agreement, the Company is to invest $4.5 million in the trading business operated by Rich Trading and the Company will be entitled to 90% of profit generated by the trading business. As of December 31, 2021, the Company has advanced $3,299,815 for this project. |
Movement of allowance for doubtful accounts are as follows:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | 6,024,266 | $ | 10,005,193 | ||||
| Recovery for doubtful accounts | (1,941,054 | ) | (4,786,814 | ) | ||||
| Less: write-off | - | (11,665 | ) | |||||
| Exchange rate effect | 73,985 | 817,552 | ||||||
| Ending balance | $ | 4,157,197 | $ | 6,024,266 | ||||
Note 6. ADVANCES TO SUPPLIERS
The Company’s advances to suppliers – third parties are as follows:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Freight fees (1) | $ | 450,239 | $ | 880,000 | ||||
(1) | The advanced freight fee is the Company’s prepayment made for various shipping costs for shipments from July to December 2021. On December 1, 2020, the Company entered into a freight logistics services and import contract with a third party for equipment import. Per contract term, the Company will act as their freight carriers and in charge the import matter of such equipment. The Company agreed to pay a deposit of $580,000 which is based on 20% of the total carrying value of equipment on behalf of customer to secure the equipment. For the three and six months ended December 31, 2021, the Company completed the freight services and the deposit was used for its cost of revenue. |
Note 7. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The Company’s prepaid expenses and other current assets are as follows:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Consultant fees (1) | $ | 79,075 | $ | 158,150 | ||||
| Advance to employees | 57,859 | 64,160 | ||||||
| Other | 93,787 | 95,708 | ||||||
| Total | 230,721 | 318,018 | ||||||
| Less: current portion | 230,721 | 311,136 | ||||||
| Total noncurrent portion | $ | - | $ | 6,882 | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Prepaid income taxes | $ | 11,929 | $ | 11,929 | ||||
| Other (including prepaid professional fees, rent, listing fees) | 136,949 | 330,063 | ||||||
| Total | $ | 148,878 | $ | 341,992 | ||||
(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 return for its services, 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.Note 8. OTHER LONG-TERM ASSETS – DEPOSITS, NET
The Company’s other long-term assets – deposits are as follows:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Rental and utilities deposits | $ | 93,223 | $ | 111,352 | ||||
| Freight logistics deposits (1) | 50,000 | 3,181,746 | ||||||
| Total other long-term assets - deposits | $ | 143,223 | $ | 3,293,098 | ||||
| Less: allowances for deposits | (9,311 | ) | (3,177,127 | ) | ||||
| Other long-term assets- deposits, net | $ | 133,912 | $ | 115,971 | ||||
| (1) | Certain customers require the Company to pay certain deposits for the security of shipments and merchandise. These deposits are refundable at the end of their respective contract term. Approximately $3.1 million (RMB 20 million) of the balance was paid to BaoSteel Resources Co., Ltd. according to the agreement entered in March 2018. 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 terms are expired by March 2023 or the contract is terminated by the Company. Due to impact of COVID-19 and recent rising freight costs, the Company has not been able to fulfill the contracts and expects 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. For the three and six months ended December 31, 2021, the Company wrote off $ 3,173,408 of the other long term assets – deposit. |
Movement of allowance for deposits are as follows:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | 3,177,127 | $ | - | ||||
| Allowance for deposits | - | 3,098,852 | ||||||
| Less: Write-off | (3,173,408 | ) | - | |||||
| Exchange rate effect | 5,592 | 78,275 | ||||||
| Ending balance | $ | 9,311 | $ | 3,177,127 | ||||
Note 6.9. PROPERTY AND EQUIPMENT, NET
The Company’s net property and equipment as follows:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Buildings | $ | 206,891 | $ | 198,512 | ||||
| Motor vehicles | 608,862 | 542,471 | ||||||
| Computer equipment | 156,826 | 155,141 | ||||||
| Office equipment | 78,273 | 66,097 | ||||||
| Furniture and fixtures | 166,372 | 163,219 | ||||||
| System software | 122,479 | 117,733 | ||||||
| Leasehold improvements | 65,511 | 62,857 | ||||||
| Total | 1,405,214 | 1,306,030 | ||||||
| Less: Accumulated depreciation | 1,187,879 | 1,118,657 | ||||||
| Property and equipment, net | $ | 217,335 | $ | 187,373 | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Motor vehicles | 609,730 | 332,124 | ||||||
| Computer equipment | 102,058 | 86,831 | ||||||
| Office equipment | 68,874 | 34,747 | ||||||
| Furniture and fixtures | 390,808 | 205,303 | ||||||
| System software | 117,606 | 115,722 | ||||||
| Leasehold improvements | 874,642 | 860,626 | ||||||
| Total | 2,163,718 | 1,635,353 | ||||||
| Less: Accumulated depreciation and amortization | (1,102,944 | ) | (878,096 | ) | ||||
| Property and equipment, net | $ | 1,060,774 | $ | 757,257 | ||||
Depreciation expenseand amortization expenses for the three months ended December 31, 20172021 and 20162020 were $13,261$137,807 and $12,065,$70,853, respectively.
Depreciation expenseexpenses for the six months ended December 31, 20172021 and 20162020 were $26,464$278,517 and $25,407,$138,739, respectively. For the three and six months of December 31, 2021, the Company disposed vehicles with net cost of $242,035, resulting in loss on disposal of fixed assets of $52,489.
Note 10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Salary and reimbursement payable | $ | 420,391 | $ | 407,118 | ||||
| Professional fees payable | 153,197 | 64,118 | ||||||
| Credit card payable | 31,765 | 19,457 | ||||||
| Interest payable | 21,310 | - | ||||||
| Others | 7,591 | 39,084 | ||||||
| Total | $ | 634,254 | $ | 529,777 | ||||
Note 7. INTANGIBLE ASSETS, NET11. LOANS PAYABLE
Intangible assets consistedOn May 11, 2020, the Company received loan proceeds in the amount of approximately $124,570 under the following:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Full service logistics platforms | $ | 190,000 | $ | - | ||||
| Less: Accumulated amortization | 5,278 | - | ||||||
| Intangible asset, net | $ | 184,722 | $ | - | ||||
As aU.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). The PPP, established as part of the above-mentioned intelligent logistics system (see Note 3)Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), four information platforms were completedprovides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks (or an extended 24-week covered period) as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The loan forgiveness amount will be reduced for any Economic Injury Disaster Loan (“EIDL”) advance that the Company receives. The amount of loan forgiveness will be further reduced if the borrower terminates employees or reduces salaries during the eight-week period. On February 24, 2021, the full amount of PPP loan was forgiven and no principle or interest need to be repaid, so the Company record such as a gain for the year ended June 30, 2021. As of December 31, 2021 and June 30, 2021, none of PPP loan payable remains outstanding.
On May 26, 2020, the Company received an advance in the amount of $155,900 from under the SBA EIDL program administered by the Tianjin Anboweiye research teamSBA pursuant to the CARES Act. Such advance amount will reduce the Company’s PPP loan forgiveness amount described above. In accordance with the requirements of the CARES Act, the Company will use proceeds from the SBA loans primarily for working capital to alleviate economic injury caused by disaster occurring in November 2017the month of January 31, 2020 and placed into service.continuing thereafter. The platformsSBA loans are being amortized over five years.
Amortizationscheduled to mature on May 22, 2050 and have a 3.75% interest rate and are subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The monthly payable of $731, including principal and interest, commenced on May 22, 2021. The balance of principal and interest will be payable 30 years from the date of May 22, 2020. $5,900 of the loan will be forgiven. As of December 31, 2021, the Company has paid off the balance of the EIDL loan. Interest expense of intangible assets amounted to $5,278 and $nil for the three and six months ended December 31, 20172021 for this loan was $1,020 and 2016,$2,404 respectively.
Note 12. Convertible notes:
On 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 Convertible Notes bear interest at 5% annually and may be converted into shares of the Company’s common stock, no par value per share (“Common Stock”) 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 is converted on fixed number of shares and does not require the Company to net settle. None of the embedded terms required bifurcation and liability classification.
For the three and six months ended December 31, 2021, interest expenses related to the aforementioned convertible notes amounted to $16,438.
Note 13. LEASES
The Company determines if a contract contains a lease at inception. 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 vehicle lease agreements and office lease agreements with lease terms ranging from two to three years. Upon adoption of ASU 2016-02, the Company recognized lease liabilities of approximately $1.2 million, with corresponding ROU assets of approximately the same amount based on the present value of the future minimum rental payments of leases, using a weighted average discount rate of approximately 10.69%. As of December 31, 2021, ROU assets and lease liabilities amounted to $1, 545, 550 and $1,560,698 (including $525,942 from lease liabilities current portion and $1,034,756 from lease liabilities noncurrent portion), respectively and weighted average discount rate was approximately 10.69%.
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 4.39 years.
For the three months ended December 31, 2021 and 2020, rent expense amounted to approximately $138,040 and $81,000, respectively. For the six months ended December 31, 2021 and 2020, rent expense amounted to approximately $256,218 and $76,716, respectively.
Note 8. STOCK-BASED COMPENSATION
The issuancefive-year maturity of the Company’s lease obligations is presented below:
| Twelve Months Ending December 31, | Operating Lease Amount | |||
| 2022 | $ | 658,119 | ||
| 2023 | 561,673 | |||
| 2024 | 380,731 | |||
| 2025 | 166,538 | |||
| 2026 | 85,220 | |||
| Thereafter | - | |||
| Total lease payments | 1,852,281 | |||
| Less: Interest | (291,583 | ) | ||
| Present value of lease liabilities | $ | 1,560,698 | ||
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 the stock options, is exempted from registration underand warrants that convert to common stock.
Stock issuance:
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 will be exercisable on March 16, 2021 at an exercise price of $1.825 for cash. The warrants may also be exercised cashlessly 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 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 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 will be exercisable six (6) months following the date of issuance at an exercise price of $1.99 for cash. The warrants may also be exercised cashlessly 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, 2021, 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 the 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”). Paymentat a purchase price of $3.10 per share, for aggregate gross proceeds to the options mayCompany of $4,836,000. The Company also sold to the investors warrants to purchase up to an aggregate of 1,170,000 shares of common stock at an exercise price of $3.10 per share. The warrants 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 the 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 such 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 will be made in cashexercisable at any time during the period beginning on or by exchangingafter 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, at their fair market value. The fair market value will bemultiplied 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 the investors pursuant to which the Company sold to the averageinvestors, and the investors purchased from the Company, in a registered direct offering, an aggregate of 1,998,500 shares of the highestcommon 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 lowest registered sales pricesthe 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 Company Stock on1,998,500 shares of common stock at an exercise price of $6.805 per share. The warrants shall be initially exercisable upon issuance and expire five and a half (5.5) years from the date of exercise.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.
The termOn February 9, 2021, the Company entered into a securities purchase agreement with the 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 options grantedcommon 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 shall be initially 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 2009the 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 agreed to sell 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 is for 10 years$3.26, and the exercise price per Warrant is $4.00.
The Warrants will be exercisable 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 total number of the 56,000 options is $7.75 which vested over 5 yearsCompany’s issued and were fully vested asoutstanding shares of Common Stock, multiplied by the NASDAQ 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.
As of December 31, 2017.2021, the Company received net proceeds of $4,563,908 and issued 1,400,000 shares, remaining proceeds of $5,961,911 was received on January 4, 2022 and the Company issued the remaining 1,828,807 shares on January 18, 2022.
The Company’s outstanding warrants are classified as equity since they qualify for exception from derivative accounting as they are considered to be indexed to the Company’s own stock and require net share settlement. The fair value of the stock options was estimated using the Black-Scholes option-pricing model.warrants were recorded as additional paid-in capital from common stock.
The term of the 10,000 options granted in 2013 is 10 years and the exercise is $2.01. The fair value of the 10,000 stock options was calculated at 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 recorded no stock-based compensation expense for the three and six months ended December 31, 2017 and 2016. As of December 31, 2017, 8,000 options were vested.
Pursuant to the Company’s 2014 Stock Incentive Plan, effective on July 26, 2016, the Company granted options to purchase a total of 150,000 shares of the Company’s Common Stock to two employees with a one-year vesting period, one half of which vested on October 26, 2016, and the other half vested on July 26, 2017. The exercise price of the options is $1.10, which was equal to the share price of the Company’s Common Stock on July 26, 2016. The grant date fair value of such options was $0.77 per share. The fair value of the 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, $nil and $28,995 were expensed related to these options for the three months ended December 31, 2017 and 2016, respectively. $9,665 and $48,325 were expensed related to these options for the six months ended December 31, 2017 and 2016, respectively. In February 2017, 75,000 of these options were exercised by the two employees of the Company.
A summary of the options is presented in the table below:
| Shares | Weighted Average Exercise Price | |||||||
| Options outstanding, as of June 30, 2017 | 141,000 | $ | 3.81 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Cancelled | - | - | ||||||
| Options outstanding, as of December 31, 2017 | 141,000 | $ | 3.81 | |||||
| Options exercisable, as of December 31, 2017 | 139,000 | $ | 3.83 | |||||
Following is a summary of the status of options outstanding and exercisable as of December 31, 2017
| Outstanding Options | Exercisable Options | |||||||||||||||||
| Exercise Price | Number | Average Remaining Contractual Life | Average Exercise Price | Number | Average Remaining Contractual Life | |||||||||||||
| $ | 7.75 | 56,000 | 0.38 years | $ | 7.75 | 56,000 | 0.38 years | |||||||||||
| $ | 2.01 | 10,000 | 5.08 years | $ | 2.01 | 8,000 | 5.08 years | |||||||||||
| $ | 1.10 | 75,000 | 3.57 years | $ | 1.10 | 75,000 | 3.57 years | |||||||||||
| 141,000 | 139,000 | |||||||||||||||||
Following is a summary of the status of warrants outstanding and exercisable as of December 31, 2017:2021:
| Warrants Outstanding | Warrants Exercisable | Weighted Average Exercise Price | Average Remaining Contractual Life | |||||||||
| 139,032 | 139,032 | $ | 9.30 | 0.38 years | ||||||||
| Warrants | Weighted Average Exercise Price | |||||||
| Warrants outstanding, as of June 30, 2021 | 12,618,614 | $ | 5.30 | |||||
| Issued | 4,843,210 | 4.00 | ||||||
| Exercised | - | - | ||||||
| Expired | - | - | ||||||
| Warrants outstanding, as of December 31, 2021 | 17,461,824 | $ | 4.94 | |||||
| Warrants exercisable, as of December 31, 2021 | 12,618,614 | $ | 5.30 | |||||
| Warrants Outstanding | Warrants Exercisable | Weighted Average Exercise Price | Average Remaining Contractual Life | |||||||
| 2018 Series A, 400,000 | 363,334 | $ | 8.75 | 1.70 years | ||||||
| 2020 warrants, 2,922,000 | 1,447,000 | $ | 2.15 | 3.66 years | ||||||
| 2021 warrants, 11,088,280 | 10,808,280 | $ | 6.23 | 4.43 years | ||||||
Total expenses for options and warrants amounted to $Nil and $9,665 for three and six months ended December 31, 2017, respectively. Total expenses for options and warrants amounted to $28,995 and $92,472 for three and six months ended December 31, 2016, respectively.
Stock based compensation:
Note 9. 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, and developmentBy action taken as of pro forma financial statements. In return for their services, as approved byAugust 13, 2021, the Company’s Board of Directors (the “Board”) of Sino-Global Shipping America, Ltd. (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 common stock from the shares reserved under the Company’s 2014 Stock Incentive Plan (the “Plan”) as follows: (i) Chief Executive Officer, Lei Cao, is entitled to a one-time stock award grant of 600,000 shares, of the Company’s common(ii) acting Chief Financial Officer, Tuo Pan, is entitled to a one-time stock were to be issued to these two consultants. In June 2014,award grant of 200,000 shares, (iii) Board member, Zhikang Huang, is entitled to a one-time stock award grant of the Company’s common160,000 shares, (iv) Board member, Jing Wang, is entitled to a one-time stock were issuedaward grant of 20,000 shares, (v) Board member, Xiaohuan Huang, is entitled to the consultants as a prepayment for their services.one-time stock award grant of 20,000 shares, and (vi) Board member, Tieliang Liu, is entitled to a one-time stock award grant of 20,000 shares. 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$2,927,400 based on grant date fair value.
On November 18, 2021, Mr. Jing Wang retired from his position as a member of the agreements. Consulting expenses forBoard of Directors of the above servicesCompany, the Chairperson of the Compensation Committee, a member of Nominating/Corporate Governance Committee, and a member of the Audit Committee. In connection with Mr. Wang’s retirement, the Registrant granted Mr. Wang 100,000 shares of common stock under the Company’s stock incentive plans, the shares were $nil and $96,578 forvalued at $377,000 based on grant date fair value.
During the three months ended December 31, 20172021 and 2016, respectively. Consulting expenses for the above services2020, $377,000 and nil were $nil and $218,045 forrecorded as stock-based compensation expense, respectively based on grant date fair value. During the six months ended December 31, 20172021 and 2016,2020, $3,304,400 and nil were recorded as stock-based compensation expense, respectively.
On May 5, 2015,Stock Options:
A summary of the outstanding options is presented in the table below:
| Options | Weighted Average Exercise Price | |||||||
| Options outstanding, as of June 30, 2021 | 17,000 | $ | 6.05 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Cancelled, forfeited or expired | (15,000 | ) | (5.50 | ) | ||||
| Options outstanding, as of December 31, 2021 | 2,000 | $ | 10.05 | |||||
| Options exercisable, as of December 31, 2021 | 2,000 | $ | 10.05 | |||||
Following is a summary of the status of options outstanding and exercisable at December 31, 2021:
| Outstanding Options | Exercisable Options | |||||||||||||||||
| Exercise Price | Number | Average Remaining Contractual Life | Average Exercise Price | Number | Average Remaining Contractual Life | |||||||||||||
| $ | 10.05 | 2,000 | 1.59 years | $ | 10.05 | 2,000 | 1.08 years | |||||||||||
Note 15. NON-CONTROLLING INTEREST
The Company’s non-controlling interest consists of the following:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Sino-China: | ||||||||
| Original paid-in capital | $ | - | $ | 356,400 | ||||
| Additional paid-in capital | - | 1,044 | ||||||
| Accumulated other comprehensive income | - | 14,790 | ||||||
| Accumulated deficit | - | (6,266,337 | ) | |||||
| - | (5,894,103 | ) | ||||||
| Trans Pacific Logistics Shanghai Ltd. | (885,163 | ) | (1,029,806 | ) | ||||
| Brilliant Warehouse Service, Inc. | (267,427 | ) | (27,225 | ) | ||||
| Total | $ | (1,152,590 | ) | $ | (6,951,134 | ) | ||
Note 16. COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company entered into management consultingmay be subject to certain legal proceedings, claims and advisory servicesdisputes 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. As of December 31, 2021, the Company was not aware of any litigation or lawsuits against them.
The Company has employment agreements with three consultants, pursuanteach of Mr. Yang Jie, Ms. Tuo Pan, Mr. Lei Cao, Ms. Shan Jing and Mr. Shi Qiu. Mr. Lei Cao’s agreement provides ten-year term, and Mr. Shi Qiu’s agreement provides three-year term. All other above employment agreements provide for five-year terms that extend automatically in the absence of termination notice provided at least 60 days prior to which the consultants assistedanniversary date of the agreement. If the Company fails to provide this notice or if the Company wishes to terminate an employment agreement in the absence of cause, then the Company is obligated to provide at least 30 days’ prior notice.
Note 17. INCOME TAXES
On March 27, 2020, the CARES Act was enacted and signed into law and includes, among other things, reviewrefundable payroll tax credits, deferment of time charter agreements; crew management advisory; development of permanentemployer side social security payments, net operating loss carryback periods 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 byminimum tax credit refunds. The Company does not at present expect the Company’s Board of Directors, a total of 500,000 sharesprovisions of the Company’s common stock wereCARES Act to be issued to these three consultants at $1.50 per share. Their service agreements are forhave a periodmaterial impact on its tax provision given the amount 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 $nil and $48,478 for the three months ended December 31, 2017 and 2016, respectively. Consulting expenses for the above services were $nil and $173,137 for the six months ended December 31, 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 with 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 an 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. Consulting expenses were $nil and $48,387 for the three months ended December 31, 2017 and 2016, respectively. Consulting expenses were $nil and $138,387 for the six months ended December 31, 2017 and 2016, respectively.net operating losses currently available.
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 for the services, 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. Consulting expenses were $52,709 and $nil for the three months ended December 31, 2017 and 2016, respectively. Consulting expenses were $105,417 and $nil for the six months ended December 31, 2017 and 2016, respectively.
On October 23, 2017, the Company issued 130,000 shares to its employees of its restricted common stock valued at $2.80 per share. One fourth of the total number of common shares issued shall become vested on each of November 16, 2017, February 16, 2018, May 16, 2018 and August 16, 2018. These shares were valued at $364,000. $91,000 and $nil are recorded in the Company’s G&Aincome tax expenses for the three and six months ended December 31, 20172021 and 2016, respectively.
On October 27, 2017, the Company issued 200,000 shares of restricted common stock with a fair value of $548,000 to a company pursuant to a consulting agreement. The scope of services primarily covers advising on business development, strategic planning and compliance during the one-year service period from October 17, 2017 to October 16, 2018. Consulting expenses were $137,000 and $nil for the three and six months ended December 31, 2017 and 2016, respectively.
Total consulting expenses were $280,709 and $193,443 for the three months ended December 31, 2017 and 2016, and $333,417 and $529,569 for the six months ended December 31, 2017 and 2016, respectively.
Note 10. NON-CONTROLLING INTEREST
The Company’s non-controlling interest consists of the following:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Sino-China: | ||||||||
| Original paid-in capital | $ | 356,400 | $ | 356,400 | ||||
| Additional paid-in capital | 1,044 | 1,044 | ||||||
| Accumulated other comprehensive income | 82,769 | 217,379 | ||||||
| Accumulated deficit | (5,277,982 | ) | (5,421,578 | ) | ||||
| (4,837,769 | ) | (4,846,755 | ) | |||||
| Trans Pacific Logistics Shanghai Ltd. | 98,426 | 46,047 | ||||||
| ACH Trucking Center Corp. (A) | - | 31,929 | ||||||
| Total | $ | (4,739,343 | ) | $ | (4,768,779 | ) | ||
(A) The Company has terminated the joint venture agreement with Jetta Global on ACH Trucking Center Corp. on December 4, 2017
Note 11. COMMITMENTS AND CONTINGENCY
Lease Obligations
The Company leases certain office premises and apartments for employees under operating lease agreements with various terms through April 16, 2020. Future minimum lease payments under the operating lease agreements2020 are as follows:
| Amount | ||||
| Twelve months ending December 31, | ||||
| 2018 | $ | 175,651 | ||
| 2019 | 104,222 | |||
| 2020 | 15,053 | |||
| $ | 294,926 | |||
| For the three months Ended December 31 | For the six months Ended December 31 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Current | ||||||||||||||||
| U.S. | $ | - | $ | (3,450 | ) | $ | - | $ | (3,450 | ) | ||||||
| PRC | - | - | - | - | ||||||||||||
| Total income tax expenses | - | (3,450 | ) | - | (3,450 | ) | ||||||||||
Rental expense for the three months ended December 31, 2017 and 2016 were $54,445 and $65,555, respectively. Rental expense for the six months ended December 31, 2017 and 2016 were $119,307 and $127,890, respectively.
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 service provided by employees. As of December 31, 2017 and June 30, 2017, the Company has estimated its severance payments to be approximately $54,313 and $48,713, respectively. Such payments have not been reflected in its unaudited condensed consolidated financial statements because management cannot predict what the actual payment, if any, will be in the future.
Note 12. INCOME TAXES
On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from 35% to 21%. Since the Company has a June 30 fiscal year-end, a blended U.S. statutory federal rate of approximately 28% for the fiscal year ending June 30, 2018 is applied to the provision for income tax, and a 21% for subsequent fiscal years.
The Company re-measured certain deferred tax assets based on blended rate of 28% at which these deferred tax amounts are expected to reverse in the future and the re-measurement resulted in a tax expense of $120,400 being recognized during the three and six months ended December 31, 2017.
In addition, the Company recorded a provisional amount for its one-time transition tax for all of its foreign subsidiaries, resulting in an increase in income tax expense of $478,499 for the three and six months ended December 31, 2017. The one-time transition tax was calculated using the Company’s total post-1986 overseas net earnings and profits which amounted to approximately $5.7 million. The one-time transition tax is taxed at the rate of 15.5% for the Company’s cash and cash equivalents and 8% for the other assets to be paid over 8 years.
The Company’s income tax benefit (expense) for the three and six months ended December 31, 2017 and 2016 is as follows:
For the three months ended December 31, | For the six months ended December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Current | ||||||||||||||||
| USA | $ | - | $ | - | $ | (60,162 | ) | $ | - | |||||||
| Hong Kong | (5,113 | ) | (27,576 | ) | (9,422 | ) | (34,101 | ) | ||||||||
| China | (118,867 | ) | (45,815 | ) | (250,925 | ) | (110,911 | ) | ||||||||
| One-time transition tax on accumulated foreign earnings | (478,499 | ) | - | (478,499 | ) | - | ||||||||||
| (602,479 | ) | (73,391 | ) | (799,008 | ) | (145,012 | ) | |||||||||
| Deferred | ||||||||||||||||
| USA | 1,173,600 | - | 1,073,700 | - | ||||||||||||
| Total income tax benefit (expense) | $ | 571,121 | $ | (73,391 | ) | $ | 274,692 | $ | (145,012 | ) | ||||||
The Company recorded income tax benefit of $571,121 in the three months ended December 31, 2017, compared to income tax expense of $73,391 in the three months ended December 31, 2016. The Company recorded income tax benefit of $274,692 in the six months ended December 31, 2017, compared to income tax expense of $145,012 in the six months ended December 31, 2016.
The Company’s deferred tax assets are comprised of the following:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Allowance for doubtful accounts | $ | 333,000 | $ | 106,000 | ||||
| Stock-based compensation | 687,000 | 790,000 | ||||||
| Net operating loss | 1,316,000 | 1,464,000 | ||||||
| Total deferred tax assets | 2,336,000 | 2,360,000 | ||||||
| Valuation allowance | (512,900 | ) | (1,610,600 | ) | ||||
| Deferred tax assets, net - long-term | $ | 1,823,100 | $ | 749,400 | ||||
| December 31, 2021 | June 30, 2021 | |||||||
| Allowance for doubtful accounts | ||||||||
| U.S. | $ | 1,490,000 | $ | 1,706,000 | ||||
| PRC | 1,472,000 | 2,718,000 | ||||||
| Net operating loss | ||||||||
| U.S. | 4,673,000 | 3,422,000 | ||||||
| PRC | 1,507,000 | 1,507,000 | ||||||
| Total deferred tax assets | 9,142,000 | 9,353,000 | ||||||
| Valuation allowance | (9,142,000 | ) | (9,353,000 | ) | ||||
| Deferred tax assets, net - long-term | $ | - | $ | - | ||||
The Company’s operations in the U.S. for federal tax purposes have incurred a cumulative net operating loss (“NOL”)U.S. federal NOL of approximately $5,567,000$12,543,000 as of December 31, 2017,June 30, 2021, which may reduce future federal future taxable income. ForDuring the three and six months ended December 31, 2017,2021, approximately $241,000 and 637,000$1,397,000 of NOL was utilized,generated and the tax benefit derived from such NOL was approximately $293,000, respectively. As of December 31, 2021, the Company’s cumulative NOL amounted to approximately $13,940,000 which may reduce future federal taxable income, of which approximately $1,400,000 will expire in 2037 and the remaining balance carried forward indefinitely.
The Company’s operations in China incurred a cumulative NOL of approximately $5,961,000 as of June 30, 2021 which may reduce future taxable income. During the three and six months ended December 31, 2021, approximately $17,000 and nil of additional NOL was generated and the tax benefit derived from such NOL was approximately $4,000, respectively. As of December 31, 2021, the Company’s cumulative NOL amounted to approximately $6,026,000 which may reduce future taxable income, of which approximately $711, 000 start expiring from 2023 and the remaining balance of NOL will be expired by 2026.
The Company periodically evaluates the likelihood of the realization of deferred tax assets, 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. Management has provided an allowance against theThe Company determined that it is more likely than not its deferred tax assets balancecould not be realized due to uncertainty on future earnings as a result of the deterioration of trade negotiation between US and China and the outbreak of COVID-19 in 2021. The Company provided a 100% allowance for its DTA as of December 31, 2017.2021. The net increase in valuation for the three months ended December 31, 2021 amounted to approximately $785,000 and the net decrease in the valuation allowance for the three and six months ended December 31, 20172021 amounted to $1,038,600 and $1,097,700, respectivelyapproximately $211,000 based on the basis of management’s reassessment of the amount of itsthe Company’s deferred tax assets that are more likely than not to be realized. Management considers new evidence, both positive and negative, that could affect its future realization of deferred tax assets. Due to enactment of the Act, NOL could be carried forward indefinitely and the Company has pretax income resulting in utilization of the NOL in the current period, management determined that there is sufficient positive evidence to conclude that it is more likely than not that all of its NOL are realizable.
The Company’s taxes payable consists of the following:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| VAT tax payable | $ | 552,144 | $ | 520,436 | ||||
| Corporate income tax payable | 2,079,776 | 1,290,832 | ||||||
| Others | 67,036 | 74,948 | ||||||
| Total | 2,698,956 | 1,886,216 | ||||||
| Less: current portion | 2,258,737 | 1,886,216 | ||||||
| Income tax payable - noncurrent portion | $ | 440,219 | $ | - | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| VAT tax payable | $ | 1,159,026 | $ | 1,126,489 | ||||
| Corporate income tax payable | 2,414,641 | 2,377,589 | ||||||
| Others | 64,874 | 68,341 | ||||||
| Total | $ | 3,638,541 | $ | 3,572,419 | ||||
Note 18. CONCENTRATIONS
Note 13. CONCENTRATIONS
Major Customers
For the three months ended December 31, 2017,2021, four customers accounted for approximately 32.3%, 29.6%, 21.5% and 16.6% of the Company’s revenues. As of December 31, 2021, four customers accounted for 32.3%, 29.6%, 21.5% and 16.6% of the Company’s accounts receivable, net.
For the three months ended December 31, 2020, one customer accounted for approximately 99.9% of the Company’s revenues. As of December 31, 2020, two customers accounted for approximately 79.2% and 20.7% of the Company’s accounts receivable, net.
For the six months ended December 31, 2021, three customers accounted for 60%approximately 36.4%, 16%34.5% and 11%11.9% of the Company’s revenues, respectively. As of December 31, 2017, one of these2021, three customers accounted for 100%approximately 38.1%, 15.2% and 11.2% of the Company’s accounts due from related parties andreceivable, net.
For six months ended December 31, 2020, one customer accounted for approximately 92.9% of the remainingCompany’s revenues. As of December 31, 2020, two customers accounted for approximately 74%79.2% and 20.7% of the Company’s accounts receivable.receivable, net.
For the three months ended December 31, 2016, four customers accounted for 39%, 29%, 11% and 10% of the Company’s revenues, respectively. At December 31, 2016, one of these four customers accounted for 100% of the Company’s accounts due from related parties and the remaining three customers accounted for approximately 86% of the Company’s accounts receivable.
For the six months ended December 31, 2017, three customers accounted for 54%, 16% and 11% of the Company’s revenues, respectively. As of December 31, 2017, one of these three customers accounted for 100% of the Company’s accounts due from related parties and the remaining two customers accounted for approximately 74% of the Company’s accounts receivable.
For the six months ended December 31, 2016, three customers accounted for 36%, 36% and 12% of the Company’s revenues, respectively. At December 31, 2016, one of these three customers accounted for 100% of the Company’s accounts due from related parties and the remaining two customers accounted for approximately 79% of the Company’s accounts receivable.
Major Suppliers
For the three months ended December 31, 2017, two2021, three suppliers accounted for 82%approximately 54.7%, 22.8% and 15%11.7% of the total costs of revenue, respectively. revenue.
For the three months ended December 31, 2016, one supplier accounted for 47% of the total costs of revenue.
For the six months ended December 31, 2017, one supplier accounted for 71% of the total costs of revenue. For the six months ended December 31, 2016,2020, two suppliers accounted for 28%approximately 44.3% and 10%42.1% of the total costs of revenue, respectively.
For the six months ended December 31, 2021, three suppliers accounted for approximately 28.3%, 21.9% and 21.1% of the total cost of revenues.
For the six months ended December 31, 2020, two suppliers accounted for approximately 46.3% and 37.4% of the total cost of revenues.
Note 14.19. 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 unaudited condensed consolidated financial statements for detailing the Company’s business segments.
The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial information of the separate operating segments when making decisions about allocating resources and assessing the performance of the group. The Company has determined that it has sixthree operating segments: (1) shipping agency and shipping management services; (2) shipping and chartering services; (3) inland transportation management services; (4) freight logistics services; (5) container trucking services; (6) bulk cargo container services. However, due to the downturn in the shipping industry, the Company has decided to suspend to its shipping agency and shipping management services and shipping and chartering services.
As stated in Note 1, ACH Center’s operating revenue was less than 1% of the Company’s consolidated revenue and the results of operations for ACH Center was not reported as discontinued operations and was included in the container trucking services segment and freight logistics services segment below. For the three and six months ended December 31, 2017, revenue from ACH Center for container trucking services amounted to $nil and $42,968 respectively, representing 0% and 8% of the segment’s revenue. For the three and six months ended December 31, 2017, gross profit from ACH Center for container trucking services amounted to $nil and $4,297 respectively, representing 0% and 2% of the segment’ gross profit. For the three and six months ended December 31, 2017, revenue from ACH Center for freight logistics services amounted to $nil and $46,937 respectively, representing 0% and 1% of the segment’s revenue. For the three and six months ended December 31, 2017, gross profit from ACH Center for freight logistics services amounted to $nil and $13,989 respectively, representing 0% and 2% of the segment’ gross profit.
Prior to second quarter of fiscal 2018, bulk cargo container services were included in our freight logistics services segment and were operated by our New York subsidiary. Due to the growth of this business line and to enable our CODM to better assess the financial performance of the Company, we separated bulk cargo container services as a separate segment starting from this quarter. We have reclassified $504,815 of revenue from freight logistics services to bulk cargo container services for the six months ended December 31, 2017 for better comparison.
The following tables present summary information by segment for the three and six months ended December 31, 20172021 and 2016,2020, respectively:
| For the three months ended December 31, 2017 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistics Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 555,246 | $ | - | $ | - | $ | - | $ | 555,246 | ||||||||||
| - Third parties | $ | 838,595 | $ | 3,596,323 | $ | 126,865 | $ | 103,452 | $ | 4,665,235 | ||||||||||
| Total revenues | $ | 1,393,841 | $ | 3,596,323 | $ | 126,865 | $ | 103,452 | $ | 5,220,481 | ||||||||||
| Cost of revenues | $ | 174,025 | $ | 3,108,195 | $ | 49,848 | $ | 43,810 | $ | 3,375,878 | ||||||||||
| Gross profit | $ | 1,219,816 | $ | 488,128 | $ | 77,017 | $ | 59,642 | $ | 1,844,603 | ||||||||||
| Depreciation and amortization | $ | 12,736 | $ | 476 | $ | 5,327 | $ | - | $ | 18,539 | ||||||||||
| Total capital expenditures | $ | - | $ | 2,721 | $ | 42,480 | $ | - | $ | 45,201 | ||||||||||
| For the Three Months Ended December 31, 2021 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | - | $ | 1,041,925 | $ | 1,041,925 | ||||||
| Cost of revenues | $ | - | $ | 1,024,891 | $ | 1,024,891 | ||||||
| Gross profit | $ | - | $ | 17,034 | $ | 17,034 | ||||||
| Depreciation and amortization | $ | - | $ | 133,088 | $ | 133,088 | ||||||
| Total capital expenditures | $ | - | $ | 24,793 | $ | 24,793 | ||||||
| Gross margin% | 0.0 | % | 1.6 | % | 1.6 | % | ||||||
| For the three months ended December 31, 2016 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistic Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| -Related party | $ | 616,924 | $ | - | $ | - | $ | - | $ | 616,924 | ||||||||||
| -Third parties | $ | 834,679 | $ | 517,066 | $ | 159,879 | $ | - | $ | 1,511,624 | ||||||||||
| Total revenues | $ | 1,451,603 | $ | 517,066 | $ | 159,879 | $ | - | $ | 2,128,548 | ||||||||||
| Cost of revenues | $ | 87,800 | $ | 167,035 | $ | 95,961 | $ | - | $ | 350,796 | ||||||||||
| Gross profit | $ | 1,363,803 | $ | 350,031 | $ | 63,918 | $ | - | $ | 1,777,752 | ||||||||||
| Depreciation and amortization | $ | 6,695 | $ | 5,370 | $ | - | $ | - | $ | 12,065 | ||||||||||
| Total capital expenditures | $ | 45,466 | $ | - | $ | - | $ | - | $ | 45,466 | ||||||||||
| For the Three Months Ended December 31, 2020 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | - | $ | 1,884,440 | $ | 1,884,440 | ||||||
| Cost of revenues | $ | - | $ | 1,688,464 | $ | 1,688,464 | ||||||
| Gross profit | $ | - | $ | 195,976 | $ | 195,976 | ||||||
| Depreciation and amortization | $ | 77,809 | $ | 3,600 | $ | 81,409 | ||||||
| Total capital expenditures | $ | - | $ | - | $ | - | ||||||
| Gross margin% | - | % | 10.4 | % | 10.4 | % | ||||||
| For the six months ended December 31, 2017 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistics Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 1,120,406 | $ | - | $ | - | $ | - | $ | 1,120,406 | ||||||||||
| - Third parties | $ | 1,691,901 | $ | 6,600,212 | $ | 579,706 | $ | 608,267 | $ | 9,480,086 | ||||||||||
| Total revenues | $ | 2,812,307 | $ | 6,600,212 | $ | 579,706 | $ | 608,267 | $ | 10,600,492 | ||||||||||
| Cost of revenues | $ | 356,175 | $ | 5,828,108 | $ | 393,024 | $ | 464,489 | $ | 7,041,796 | ||||||||||
| Gross profit | $ | 2,456,132 | $ | 772,104 | $ | 186,682 | $ | 143,778 | $ | 3,558,696 | ||||||||||
| Depreciation and amortization | $ | 20,397 | $ | 951 | $ | 10,394 | $ | - | $ | 31,742 | ||||||||||
| Total capital expenditures | $ | - | $ | 7,798 | $ | 42,480 | $ | - | $ | 50,278 | ||||||||||
| For the six months ended December 31, 2016 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistic Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 1,466,403 | $ | - | $ | - | $ | - | $ | 1,466,403 | ||||||||||
| - Third parties | $ | 1,470,935 | $ | 975,733 | $ | 159,879 | $ | - | $ | 2,606,547 | ||||||||||
| Total revenues | $ | 2,937,338 | $ | 975,733 | $ | 159,879 | $ | - | $ | 4,072,950 | ||||||||||
| Cost of revenues | $ | 191,801 | $ | 369,373 | $ | 95,961 | $ | - | $ | 657,135 | ||||||||||
| Gross profit | $ | 2,745,537 | $ | 606,360 | $ | 63,918 | $ | - | $ | 3,415,815 | ||||||||||
| Depreciation and amortization | $ | 14,667 | $ | 10,740 | $ | - | $ | - | $ | 25,407 | ||||||||||
| Total capital expenditures | $ | 45,466 | $ | - | $ | - | $ | - | $ | 45,466 | ||||||||||
| Total assets: | December 31, | June 30, | ||||||
| 2017 | 2017 | |||||||
| Inland Transportation Management Services | $ | 18,219,884 | $ | 15,552,593 | ||||
| Freight Logistic Services | 206,190 | 1,704,946 | ||||||
| Container Trucking Services | 1,100,081 | 558,482 | ||||||
| Bulk Cargo Container Services | 697,144 | - | ||||||
| Total Assets | $ | 20,223,299 | $ | 17,816,021 | ||||
| For the Six Months Ended December 31, 2021 | ||||||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Container Trucking Services | Total | |||||||||||||
| Net revenues | $ | - | $ | 2,838,135 | $ | - | $ | 2,838,135 | ||||||||
| Cost of revenues | $ | - | $ | 2,651,759 | $ | - | $ | 2,651,759 | ||||||||
| Gross profit | $ | - | $ | 186,376 | $ | - | $ | 186,376 | ||||||||
| Depreciation and amortization | $ | - | $ | 255,358 | $ | - | $ | 255,358 | ||||||||
| Total capital expenditures | $ | - | $ | 658,999 | $ | - | $ | 658,999 | ||||||||
| Gross margin% | 0.0 | % | 6.6 | % | - | % | 6.6 | % | ||||||||
| For the Six Months Ended December 31, 2020 | ||||||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Container Trucking Services | Total | |||||||||||||
| Net revenues | $ | 206,845 | $ | 2,814,394 | $ | - | $ | 3,021,239 | ||||||||
| Cost of revenues | $ | 176,968 | $ | 2,606,722 | $ | - | $ | 2,783,690 | ||||||||
| Gross profit | $ | 29,877 | $ | 207,672 | $ | - | $ | 237,549 | ||||||||
| Depreciation and amortization | $ | 158,078 | $ | 7,050 | $ | - | $ | 165,128 | ||||||||
| Total capital expenditures | $ | - | $ | - | $ | - | $ | - | ||||||||
| Gross margin% | 14.4 | % | 7.4 | % | - | % | 7.9 | % | ||||||||
Total assets as of:
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Shipping Agency and Management Services | $ | 41,680,583 | $ | 47,347,418 | ||||
| Freight Logistic Services | 23,625,660 | 5,455,699 | ||||||
| Total Assets | $ | 65,306,245 | $ | 52,803,117 | ||||
The Company’s operations are primarily based in the PRC and U.S, where the Company derives all of their revenues. Management also reviews consolidated financial results by business locations.
Disaggregated information of revenues by geographic locations are as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| PRC | $ | 868,255 | 1,884,440 | 1,593,332 | 2,814,394 | |||||||||||
| U.S. | 173,670 | - | 1,244,803 | 206,845 | ||||||||||||
| Total revenues | $ | 1,041,925 | $ | 1,884,440 | $ | 2,838,135 | $ | 3,021,239 | ||||||||
Note 15. OTHER20. RELATED PARTY BALANCE AND TRANSACTIONS
Due from related party, net
As of December 31, 20172021 and June 30, 2017,2020, the outstanding amounts due from related partyparties consist of the following:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Tianjin Zhiyuan Investment Group Co., Ltd. | $ | 2,636,662 | $ | 1,715,130 | ||||
| Less: allowance for doubtful accounts | (263,666 | ) | - | |||||
| Total | $ | 2,372,996 | $ | 1,715,130 | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Tianjin Zhiyuan Investment Group Co., Ltd. (1) | $ | - | $ | 384,331 | ||||
| Zhejiang Jinbang Fuel Energy Co., Ltd (2) | 437,922 | 430,902 | ||||||
| Shanghai Baoyin Industrial Co., Ltd (3) | 1,334,755 | - | ||||||
| Less: allowance for doubtful accounts | - | (384,331 | ) | |||||
| Total | $ | 1,772,677 | $ | 430,902 | ||||
| (1) | In June 2013, the Company signed a five-year global logistic service agreement with Tianjin Zhiyuan Investment Group Co., Ltd. (“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. Zhong Zhang. 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. To the Company’s knowledge, Mr. Zhang does not own shares of the Company as of June 30, 2021 and is no longer a related party. Management reassessed the collectability and decided to provide full allowance for doubtful accounts as of June 30, 2021. The Company wrote off the balance for the three and six months ended December 31, 2021. |
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 $555,246 (11% of the Company’s total revenue) and $616,924 (29% of the Company’s total revenue) for the three months ended December 31, 2017 and 2016, respectively. The Company generated revenue of $1,120,406 (11% of the Company’s total revenue) and $1,466,403 (36% of the Company’s total revenue) for the six months ended December 31, 2017 and 2016, respectively. The amount due from Zhiyuan Investment Group at June 30, 2017 was $1,715,130. During the six months ended December 31, 2017, the Company continued to provide inland transportation management services to Zhiyuan and collected nil from Zhiyuan to increase outstanding accounts receivable. As of December 31, 2017, the Company provided a 10% allowance for doubtful accounts of the amount due from Zhiyuan.
| (2) | The Company advanced Zhejiang Jinbang Fuel Energy Co., Ltd (“Zhejiang Jinbang”), which is owned by Mr. Wang Qinggang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd., $477,278. Zhejiang Jinbang returned $39,356 for the year ended June 30, 2021. The advance is non-interest bearing and due on demand. |
| (3) | The Company advanced Shanghai Baoyin Industrial Co., Ltd. which is 30% owned by Wang Qinggang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd., $1,470,922 for the six months end December 31, 2021. Shanghai Baoyin Industrial Co., Ltd repaid $136,167. The advance is non-interest bearing and due on demand. The Company expects to collect the advance before March 31, 2022. |
Loan receivable- related parties
As of December 31, 20172021 and June 30, 2017,2021, the outstanding amounts of advance to suppliers-related partyloan receivable from related parties consist of the following:
| December 31, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd. | $ | 3,473,717 | $ | 3,333,038 | ||||
| Total | $ | 3,473,717 | $ | 3,333,038 | ||||
| December 31, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Wang, Qinggang (1) | $ | 629,416 | $ | 619,329 | ||||
| Shanghai Baoyin Industrial Co., Ltd (2) | 4,133,219 | 4,025,640 | ||||||
| Total | $ | 4,762,635 | $ | 4,644,969 | ||||
| (1) | On June 10, 2021, the Company entered a loan agreement with Wang Qinggang, CEO and legal representative of Trans Pacific Logistic Shanghai Ltd. The loan is non-interest bearing and amounted to $620,478 (RMB 4 million) and will be repaid in June 2023. There has been no change in the balance other than exchange difference. |
On February 18, 2017, Trans Pacific Beijing (subsidiary)
| (2) | On April 10, 2021, the Company entered into a loan agreement with Shanghai Baoyin Industrial Co., Ltd. which is 30% owned by Wang Qinggang. The loan amounted to $4,644,969 (RMB 30,000,000). $619,329 (RMB 4,000,000) has been repaid as of June 30, 2021. For the three months ended December 31, 2021, Shanghai Baoyin Industrial Co., Ltd borrowed $42,013(RMB 267,000) and the rest of the loan $4,133,219 (RMB 26,267,000) is to be repaid in April 2023. The loan is unsecured and non-interest bearing. |
Other payable related party
As of December 31, 2021, the Company had payable to CFO of $2, 000 which were included in other payable. As of June 30, 2021, the Company had payable to former CEO of $11,303 and Sino China (VIE) (collectively,to the “Seller”), a subsidiary and VIEthen acting CFO of $2,516 which were included in other current liabilities. These payments were made on behalf 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”). Mr. Zhang has also invested infor the Buyer and is 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 alldaily business operational activities.
Revenue - related logistics and transportation occurring in the Project, ranging from equipment manufacturing, assembling, processing to instalment as referenced in the Agreement. The Seller agrees to make certain advance transportation payments during the Project on the basis of current practice in China’s transportation agency industry. The Buyer agrees to repay the advances to the Seller at any time as requested and, as instructed by the Seller, to satisfy the security repayment test in light of the Seller’s listed company profile. The Seller is contracted to provide high-quality services including the design of a detailed transportation plan as well as execution and necessary supervision of the transportation plan at the Buyer’s demand, and shall receive from the Buyer 1% - 1.25% of the total transportation expense incurred in the Project as commission for its professional design and execution of transportation plan as the general agent. No additional freight fees were advanced duringparties
For the three and six months ended December 31, 2017.2021 and 2020, revenue from related party Zhejiang Jinbang amounted to $233,705 and nil, respectively.
Note 21. SUBSEQUENT EVENTS
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 Agreement, on January 6, 2022 the Company agreed to repurchase an additional 103,200 shares from other Sellers on the same terms as the previously announced Warrant Purchase Agreements. The aggregate number of shares repurchased under the Warrant Purchase Agreements was 3,974,000. On January 7, 2022, the Company 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.
The Company’s joint venture, Thor Miner Inc (“Thor”), 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 hardware and other equipment. The aggregate amount of the Purchase and Sale Agreement is $200,000,000, which is expected to be completed under separate purchase orders. Thor and the Buyer agreed that the Buyer shall make payment equal to 50% of the total purchase price within 5 days after the execution of the Purchase and Sale Agreement, and the remaining 50% for each order shall be paid at least seven (7) calendar days before the shipment.
Subsequently, Thor and the Buyer agreed that the Buyer shall make payment equal to 50% of the total purchase price of each order within 5 days, and the remaining 50% for each order shall be paid at least seven (7) calendar days before the shipment. The first order under the Purchase and Sale Agreement Thor received was a $80,000,000 order placed on January 10, 2022. As of the date of this report, Thor has already received $40,000,000 for the first order.
On February 4, 2022, the Company approved a one-time award of a total of 500,000 shares of common stock from the shares reserved under the Company’s 2021 Stock Incentive Plan to certain executive officers of the Company, including Chief Executive Officer, Yang Jie (300,000 shares), COO, Jing Shan (100,000 shares), and Chief Technology Officer, Shi Qiu (100,000 shares). The total fair value of the grants amounts to approximately $2.7 million based on grant date share price of $5.48.
On January 19, 2022, the Board of the Company approved the issuance of 1,300,000 shares of restricted common stock to two advisory firms pursuant to consulting agreements. The scope of services primarily covers advising on business development, strategic planning and corporate finance. The fair value of the services is approximately $5.9 million to be vested when the services were completed per contract terms.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in thisthe 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
Second Quarter 2018 Highlights We have focused on providing customers with customized freight logistic services but have since begun looking aggressively at diversifying our revenue and service mix by seeking new growth opportunities to expand our business due to increased margin compression. These opportunities have ranged from complementary businesses to other service and product initiatives. In fiscal year 2022, while we continue to provide our current traditional logistics business, we will integrate the traditional business with modern technology to develop new business models. On January 3, 2022, we changed our corporate name to Singularity Future Technology Ltd to enter into digital assets business through our US subsidiaries.
RevenueIn July 2021, we registered a new company Gorgeous Trading Ltd. which is 100% owned by our subsidiary Sino-Global Shipping New York Inc. (“Sino-NY”) which mainly engaged in our smart warehouse and related business in Texas.
On August 31, 2021, we formed a joint venture, Phi Electric Motor, Inc. in New York, which is 51% owned by Sino-NY. There have been no operations as of December 31, 2021.
In October 2021, we registered SG Shipping & Risk Solution Inc, which is 100% owned by Sino-NY. On December 23, 2021, SG Shipping & Risk Solution Inc. formed SG Link LLC. There have been no material operations as of December 31, 2021.
On October 3, 2021, we entered into a Strategic Alliance Agreement (the “Agreement”) with Shenzhen Highsharp Electronic Ltd. (“Highsharp”) to establish a joint venture (“JV”) for collaborative engineering, technical development and commercialization of a proprietary bitcoin mining machine under the name Thor Miner Inc. (“Thor”), with exclusive rights covering design production, intellectual property, branding, marketing and sales. Thor is 51% owned by Sino-NY.
Recent developments
Thor 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 hardware and other equipment. The aggregate amount of the Purchase and Sale Agreement is $200,000,000, which is expected to be completed under separate purchase orders. Thor and the Buyer agreed that the Buyer shall make payment equal to 50% of the total purchase price within 5 days after the execution of the Purchase and Sale Agreement, and the remaining 50% for each order shall be paid at least seven (7) calendar days before the shipment.
Subsequently, Thor and the Buyer agreed that the Buyer shall make payment equal to 50% of the total purchase price of each order within 5 days, and the remaining 50% for each order shall be paid at least seven (7) calendar days before the shipment. The first order under the Purchase and Sale Agreement Thor received was a $80,000,000 order placed on January 10, 2022. As of the date of this report, Thor has already received $40,000,000 for the first order. The completion of the order will depend on the supply of chips and timely delivery by the supplier. The Company estimates the orders will have gross margin of approximately 10%.
COVID-19
The outbreak of the novel coronavirus (“COVID-19”) starting from late January 2020 in the three months ended December 31, 2017 increasedPRC has spread rapidly to many parts of the world. In March 2020, the World Health Organization declared the COVID-19 as a pandemic. Given the continually expanding of COVID-19 pandemic in China and United States, our business, results of operations, and financial condition are still adversely affected. The situation remains highly uncertain for any further outbreak or resurgence of COVID-19. It is therefore difficult for us to estimate the impact on our business or operating results that might be adversely affected by $3,091,933,any further outbreak or 145.3%, overresurgence of COVID-19.
The impacts of COVID-19 on our business, financial condition, and results of operations include but are not limited to, the comparable period in 2016. The increase was primarily due to:following:
| ● |
|
| ● | We have been and could continue to |
The fiscal Year 2018 TrendsCompany Structure
In fiscal year 2018, we will continueWe are a non-asset based global shipping and freight logistics integrated solutions provider. We provide tailored solutions and value-added services for our customers to focus on developingdrive efficiency and control in related steps throughout the entire shipping and freight logistics chain. We conduct our business to increase revenue and cash flowprimarily through our wholly-owned subsidiaries in the United StatesPeople’s Republic of China (the “PRC” or “China”) (including Hong Kong) and continue to use bulk cargos containerized business between container shipping lines of the U.S. to China as the major part, where a majority of our growth.clients are located.
We will continueoperate in two operating segments, including (1) shipping agency and management services, operated by our cooperation with Coscosubsidiaries in the U.S.; (2) freight logistics services, operated by our subsidiaries in the PRC.
On December 31, 2021, we entered into a series of agreements to promote bulk cargo container shipping. Our goal is to promote shippingterminate our Variable Interest Entity (“VIE”) structure and terminate the existence of not only sulfur products but also others that are in high demand in China, suchits formerly controlled entity Sino-Global Shipping Agency Ltd. (“Sino-China”). We controlled Sino-China through our wholly owned subsidiary Trans Pacific Shipping Limited (“Trans Pacific Beijing”) as petroleum coke, alfalfa and DDGS. We expect to ship these bulk container products to reach 400-500 containers per month. ThroughSino-China has no active operations. In addition, the implementation of bulk cargo container transport business, more smaller truck companies can be attracted to join our short-haul container truck online service platform, so that the online service platform can be improved and further upgraded and eventually become a peer-to peer online platform that connects truckers and customers.Company dissolved its subsidiary Sino-Global Shipping LA, Inc.
Due to our new business in bulk cargo containers and the integrated freight business segment, our overall gross margin rate was affected. We expect as we gradually grow our business in these segments, our overall gross margin will improve.
Company Structure
The following diagram represents theOur corporate structure of the Companydiagram as of the date of this report: report is as below:
Results of Operations
The Three Months Ended December 31, 2017 Compared toComparison of the Three Months Endedended December 31, 20162021 and 2020
Revenues
Revenues increaseddecreased by $3,091,933,$842,151, or 145.3%approximately 44.7%, from $2,128,548$1,884,440 for the three months ended December 31, 20162020 to $5,220,481$1,041,925 for the comparablesame period in 2017. This increase2021. The decrease was primarily due to the Company’s efforts to diversify its businessdecrease in freight logisticslogistic services.
The revenues generated from freight logistics services increasedfollowing tables present summary information by $3,079,257, or 595.5%, from $517,066segments mainly regarding the top-line financial results for the three months ended December 31, 20162021 and 2020:
| For the Three Months Ended December 31, 2021 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues* | $ | - | $ | 1,041,925 | $ | 1,041,925 | ||||||
| Cost of revenues | $ | - | $ | 1,024,891 | $ | 1,024,891 | ||||||
| Gross profit | $ | - | $ | 17,034 | $ | 17,034 | ||||||
| Depreciation and amortization | $ | $ | 133,088 | $ | 133,088 | |||||||
| Total capital expenditures | $ | - | $ | 24,793 | $ | 24,793 | ||||||
| Gross margin% | - | % | 1.6 | % | 1.6 | % | ||||||
| ● | Including related party revenue from Zhejiang Jinbang Fuel Energy Co., Ltd of $223,705 for the three months ended December 31, 2021. |
| For the Three Months Ended December 31, 2020 | ||||||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Container Trucking Services | Total | |||||||||||||
| Net revenues | $ | - | $ | 1,884,440 | $ | - | $ | 1,884,440 | ||||||||
| Cost of revenues | $ | - | $ | 1,688,464 | $ | - | $ | 1,688,464 | ||||||||
| Gross profit | $ | - | $ | 195,976 | $ | - | $ | 195,976 | ||||||||
| Depreciation and amortization | $ | 77,809 | $ | 3,600 | $ | - | $ | 81,409 | ||||||||
| Total capital expenditures | $ | - | $ | - | $ | - | $ | - | ||||||||
| Gross margin% | - | % | 10.4 | % | - | % | 10.4 | % | ||||||||
| % Changes For the Three Months Ended December 31, 2021 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | 0.0 | % | (44.7 | )% | (44.7 | )% | ||||||
| Cost of revenues | 0.0 | % | (39.3 | )% | (39.3 | )% | ||||||
| Gross profit | 0.0 | % | (91.3 | )% | (91.3 | )% | ||||||
| Depreciation and amortization | (100 | )% | 3,596.9 | % | 63.5 | % | ||||||
| Total capital expenditures | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
| Gross margin% | 0.0 | % | (8.8 | )% | (8.8 | )% | ||||||
Disaggregated information of revenues by geographic locations are as follows:
| For the Three Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| PRC | 868,255 | 1,884,440 | ||||||
| U.S. | 173,670 | - | ||||||
| Total revenues | $ | 1,041,925 | $ | 1,884,440 | ||||
Revenues
(1) Shipping Agency and Management Services
For the three months ended December 31, 2021 and 2020, we did not generate any revenue from shipping agency and management services. The decrease in this segment was due to $3,596,323 for the comparableuncertainty of the shipping management market which has been negatively impacted by the COVID-19 pandemic.
(2) Revenues from Freight Logistics Services
Freight logistics services primarily consist of cargo forwarding, brokerage, warehouse and other freight services. During the three months ended December 31, 2021, revenues decreased by approximately 44.7% compared to the same period in 2017.
This quarter we ended2020. The decrease mainly due to decrease revenue from our joint venture with Jetta Global on ACH Trucking Centermajor customer due to resurgence of COVID-19 in PRC which reduced their demand. Our major customer accounted for 29.6% and created a new segment for bulk cargo container services; see more discussion in the related segments below.
The following tables present summary information by segment99.9%, respectively, of our revenue for the three months ended December 31, 20172021 and 2016:2020.
| For the three months ended December 31, 2017 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistics Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 555,246 | $ | - | $ | - | $ | - | $ | 555,246 | ||||||||||
| - Third parties | $ | 838,595 | $ | 3,596,323 | $ | 126,865 | $ | 103,452 | $ | 4,665,235 | ||||||||||
| Total revenues | $ | 1,393,841 | $ | 3,596,323 | $ | 126,865 | $ | 103,452 | $ | 5,220,481 | ||||||||||
| Cost of revenues | $ | 174,025 | $ | 3,108,195 | $ | 49,848 | $ | 43,810 | $ | 3,375,878 | ||||||||||
| Gross profit | $ | 1,219,816 | $ | 488,128 | $ | 77,017 | $ | 59,642 | $ | 1,844,603 | ||||||||||
| GM% | 87.5 | % | 13.6 | % | 60.7 | % | 57.7 | % | 35.3 | % | ||||||||||
| For the three months ended December 31, 2016 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistic Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 616,924 | $ | - | $ | - | $ | - | $ | 616,924 | ||||||||||
| - Third parties | $ | 834,679 | $ | 517,066 | $ | 159,879 | $ | - | $ | 1,511,624 | ||||||||||
| Total revenues | $ | 1,451,603 | $ | 517,066 | $ | 159,879 | $ | - | $ | 2,128,548 | ||||||||||
| Cost of revenues | $ | 87,800 | $ | 167,035 | $ | 95,961 | $ | - | $ | 350,796 | ||||||||||
| Gross profit | $ | 1,363,803 | $ | 350,031 | $ | 63,918 | $ | - | $ | 1,777,752 | ||||||||||
| GM% | 94.0 | % | 67.7 | % | 40.0 | % | - | 83.5 | % | |||||||||||
(1) Revenues 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. The fluctuation in revenue from this segment is due to the change in the quantities of commodities transported by both Zhiyuan Investment Group and Tengda Northwest.
For Tengda Northwest, the service fee charge was RMB 32 per ton. For Zhiyuan Investment Group, the service fee charge was RMB 38 per ton.
Operating Costs and Expenses
RevenueOperating costs and expenses increased by $738,528 or approximately 24.1%, from the inland transportation management services segment decreased $57,762 from $1,451,603$3,060,270 for the three months ended December 31, 20162020 to $1,393,841$3,798,798 for the three months ended December 31, 2017. Revenue from related party customers decreased $61,678 from $616,924 for the three months ended December 31, 2016 to $555,246 for the three months ended December 31, 2017 since the transported quantities decreased from 112,000 tons to 97,489 tons. Revenue from third party customers increased $3,916 from $834,679 for the three months ended December 31, 2016 to $838,595 for the three months ended December 31, 2017. The increase was primarily due to the depreciation of USD against RMB from 6.8328 for the three months ended December 31, 2016 to 6.6153 for the corresponding period in 2017.
For the three months ended December 31, 2017 and 2016, gross profit from inland transportation management services amounted to $1,219,816 and $1,363,803, respectively.
Overall gross margins for this segment decreased to 87.5% for the three months ended December 31, 2017 from 94.0% for the three months ended December 31, 2016. The decrease of gross margins in the current quarter was due to the change of product mix with different service fees per ton.
(2) Revenues from Freight Logistics Services
Since we formed our new subsidiary, Sino-Global Shipping LA, Inc., in January 2016, we began to provide freight logistics services, including cargo forwarding and truck transportation services. Since the revenue increased significantly for providing such services from period to period, the Company has presented the related revenue as a separated business segment since the first quarter of 2017 fiscal year.
During the three months ended December 31, 2017, the portion of revenues generated from freight logistics services has increased significantly. The increase was primarily due to increased orders from one of our clients, BAO-NYK Shipping PTE. Ltd. (“BAO-NYK”), during the current period, as compared to $nil in the corresponding period in 2016. The gross margin decreased to 13.6% from 67.7%, primarily due to the changing variety of services provided between the current period and the corresponding period in 2016. Every single business of freight logistics services has a unique gross margin according to a different service scope. Usually, a business in full-scale scope has a higher gross margin, and business with fragmented scope has a lower gross margin. Our fragmented scope business increased significantly, such as revenue from BAO-NYK, and contributed a much higher portion of revenue in this sector than full-scale businesses, as compared to the prior period.
The revenue generated from freight logistics services was $3,596,323, and the related gross profit was $488,128 for the three months ended December 31, 2017. For the three months ended December 31, 2016, the revenue generated from freight logistics services was $517,066, and the related gross profit was $350,031.
(3) Revenues from Container Trucking Services
Since we completed our web-based short-haul container truck service platform in December 2016, we began generating revenue from short-haul trucking and containers services through the service platform and introduced this Container Trucking Services as a new segment in the second quarter of 2017. Since the second quarter of the fiscal year 2017, the Company has provided container trucking services in the PRC regions and, as of the third quarter of the fiscal year 2017, has begun to provide related services in certain U.S. regions. This new business segment is based on a modified and improved version of our freight logistics services business segment.
On January 5, 2017, we 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, we began providing short haul trucking transportation and logistics services to customers located in the New York and New Jersey areas. We hold a 51% ownership stake in ACH Center. Although the establishment of ACH Center brought benefits for us and Jetta Global, it could not satisfy long term development for both us and Jetta Global. We signed a termination agreement with Jetta Global to terminate the joint venture agreement on December 4, 2017. As ACH center’s operating revenue was less than 1% of our consolidated revenue and the termination did not constitute a strategic shift that will have a major effect on our operations and financial results, the results of operations for ACH Center were not reported as discontinued operations. For the three months ended December 31, 2017, revenue from container trucking services decreased by $33,014 from $159,879 for the three months ended December 31, 2016, to $126,865. The decrease was primarily due to the termination of our joint venture agreement with Jetta Global.
(4) Revenues from Bulk Cargo Container Services
For the three months ended December 31, 2017, we shipped 120 containers with 18 tons per container of sulfur from Long Beach, CA in the U.S. to our customers in China. The arrangement included coordinating the customer to sign the purchase contract with sulfur suppliers in the United States, organizing the container shipping, custom clearance; all have been fulfilled when we shipped the product to our customer’s designated port, Qingdao PRC. For the three months ended December 31, 2017, gross revenue generated from bulk cargo container services was $103,452 and the related cost was $43,810 with gross profit of $59,642 or 57.7%. We were the agent in this transaction as we did not take any inventory risk; we reported revenue on a net basis less the cost of sulfur. Due to the integrated and value added services we provide to our customers, the average gross profit was higher than freight logistics.
Operating Costs and Expenses
Operating costs and expenses increased by $4,364,198 or 371.8%, from $1,173,955 for the three months ended December 31, 2016 to $5,538,153 for the three months ended December 31, 2017.2021. This increase was primarilymainly due to the increase in theselling expenses, stock-based compensation, and general and administrative expenses, which offset by decrease of cost of revenue general and administrative expense and selling expenses, as discussed below.
The following table sets forth the components of the Company’sour costs and expenses for the periods indicated:
| For the three months ended December 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | 5,220,481 | 100.0 | % | 2,128,548 | 100.0 | % | 3,091,933 | 145.3 | % | |||||||||||||||
| Cost of revenues | 3,375,878 | 64.7 | % | 350,796 | 16.5 | % | 3,025,082 | 862.3 | % | |||||||||||||||
| Gross margin | 35.3 | % | 83.5 | % | (48.2 | )% | ||||||||||||||||||
| General and administrative expenses | 1,827,014 | 35.0 | % | 776,284 | 36.5 | % | 1,050,730 | 135.4 | % | |||||||||||||||
| Selling expenses | 335,261 | 6.4 | % | 46,875 | 2.2 | % | 288,386 | 615.2 | % | |||||||||||||||
| Total Costs and Expenses | 5,538,153 | 106.1 | % | 1,173,955 | 55.2 | % | 4,364,198 | 371.8 | % | |||||||||||||||
| For the Three Months Ended December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | Change | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | 1,041,925 | 100.0 | % | 1,884,440 | 100.0 | % | (842,515 | ) | (44.7 | )% | ||||||||||||||
| Cost of revenues | 1,024,891 | 98.4 | % | 1,688,464 | 89.6 | % | (663,573 | ) | (39.3 | )% | ||||||||||||||
| Gross margin | 1.6 | % | N/A | 10.4 | % | N/A | (8.8 | )% | N/A | |||||||||||||||
| Selling expenses | 197,225 | 18.9 | % | 73,462 | 3.9 | % | 123,763 | 168.5 | % | |||||||||||||||
| General and administrative expenses | 2,151,431 | 206.5 | % | 1,314,235 | 69.7 | % | 837,196 | 63.7 | % | |||||||||||||||
| Impairment loss of Cryptocurrencies | 50,127 | 4.8 | % | - | 0.0 | % | 50,127 | 100 | % | |||||||||||||||
| Provision for doubtful accounts, net of recovery | (1,876 | ) | (0.2 | )% | (15,891 | ) | (0.8 | )% | 14,015 | (88.2 | )% | |||||||||||||
| Stock-based compensation | 377,000 | 36.2 | % | - | - | % | 377,000 | 100.0 | % | |||||||||||||||
| Total costs and expenses | 3,798,798 | 364.6 | % | 3,060,270 | 162.4 | % | 738,528 | 24.1 | % | |||||||||||||||
CostsCost of Revenues
Cost of revenues consisted primarily of freight costs to various freight carriers, cost of labor, warehouse rent and other overhead and sundry costs. Cost of revenues was $3,375,878$1,024,891 for the three months ended December 31, 2017, an increase2021, a decrease of $3,025,082,$663,573, or 862.3%approximately 39.3%, as compared to $350,796$1,688,464 for the same period in 2020. The decrease of cost of revenue mainly due to decrease of revenue of our freight logistics services. Our decrease in margin was mainly due to rising freight costs as a result of impact from COVID-19 pandemic.
Selling Expenses
Our selling expenses consisted primarily of salaries and travel expenses for our sales representatives. For the three months ended December 31, 2016. The overall cost2021, we had $197,225 of revenuesselling expenses, as a percentage of our revenues increased from 16.5%compared to $73,462 for the three months ended December 31, 2016, to 64.7% for the three months ended December 31, 2017.same period in 2020, which represents an increase of $123,763 or approximately 168.5%. The increase stemmed from the majority of the revenues during the three months ended December 31, 2017, which comes from the less profitable freight logistic services segment discussed above.
During the three months ended December 31, 2017, 69% of total revenue was from the freight logistics services segment with a gross profit margin of 14% and 27% of total revenue was from the inland transportation management services segment with a gross profit margin of 88%. During the three months ended December 31, 2016, 24% of total revenue was from the freight logistics services segment with a gross profit margin of 68%, and 68% of total revenue was from the inland transportation management service segment with a gross profit margin of 94%. The significant decrease of gross profit margin of the freight logistics services segment is due to a change in our varietyincreasing of services that caused revenue from the fragmented scope to contribute a much larger portionmarketing fee of total revenue under the freight logistics services segment in the current period in comparison with the prior period.approximately $120,000.
General and Administrative Expenses
GeneralOur general and administrative expenses consist primarily of salaries and benefits, office rent,travel expenses for administration department, office expenses, regulatory filing and listing fees, amortization of stock-based compensation, legal, accounting and other professional service fees.fees including audit, legal and IT consulting. For the three months ended December 31, 2017,2021, we had $1,827,014$2,151,431 of general and administrative expenses, as compared to $776,284$1,314,235 for the same period in 2020, representing an increase of $837,196, or approximately 63.7%. The increase was mainly due to the increase in salaries & wages and employees related cost approximately $720,000 as we hired more employees to our new companies and increase of travel expenses of approximately $160,000.
Impairment Loss of Cryptocurrencies
The company recorded $50,127 impairment loss for the three months ended December 31, 2016, an increase of $1,050,730, or 135.4%. The increase was primarily2021 due to increasesrecent price drop in labor expensebitcoin which the Company deemed a triggering event for impairment testing.
Provision for Doubtful Accounts, net of $277,981, provision for doubtful accountsrecovery
We had recovery of $598,403, consulting feesother receivable of $37,500, and legal fees of $27,258, partially offset by the complaint settlement payments made to a former vice president of the Company. As a result of the increase in general and administrative expenses of 135.4% and the increase in revenues of 145.3%, our general and administrative expenses, as a percentage of revenue, decreased from 36.5%$1,876 for the three months ended December 31, 2016 to 35.0% for the corresponding period in 2017.
Selling Expenses
Selling expenses consist primarily of business development costs, such as traveling expenses for sales purposes, and salaries and benefits for our sales staff. For the three months ended December 31, 2017, we had $335,261 of selling expenses as2021 compared to $46,875$15,891 of provision for accounts receivable and other receivable for same period of 2020.
Stock-based Compensation
Stock-based compensation was $377,000 for the three months ended December 31, 2016,2021, an increase of $288,386,$377,000 or 615.2%.100.0%, as compared to nil for the same period in 2020 for stock compensation grant to our former director.
Loss from disposal of Subsidiaries and VIE
On December 31, 2021, our wholly owned foreign subsidiary Trans Pacific Shipping Limited (“Trans Pacific Beijing”) entered into a series of agreements to terminate our Variable Interest Entity (“VIE”) structure and terminate the existence of our formerly controlled entity Sino-Global Shipping Agency Ltd. (“Sino-China”) since Sino-China has no active operations. We controlled Sino-China through Trans Pacific Beijing. In addition, the Company dissolved its subsidiary Sino-Global Shipping LA, Inc. Total loss from disposal was approximately $6.1 million mainly from write off of due from non-controlling interest of Sino-China.
Other expenses, net
Total other expenses, net was $29,881 for the three months ended December 31, 2021, a decrease of approximately $115,601 or 134.9%, as compared to $85,720 for the same period in 2020 mainly due to loss of disposal of fixed assets of $52,489.
Taxation
We recorded income tax expense nil and $3,450 for the three months ended December 31, 2021 and 2020, respectively.
We have incurred a cumulative U.S. federal NOL of approximately $12,543,000 as of June 30, 2021, which may reduce future federal taxable income. The NOL generated prior to the year ended June 30, 2017 amounted to approximately $1,400,000 will expire in 2037 and the remaining balance carried forward indefinitely. During the three months ended December 31, 2017, we increased our business development efforts to explore new business opportunities while maintaining our current customer relationships. Rising labor costs also increased our overall selling expenses as compared to2021, approximately $3,189,000 of additional NOL was generated and the same period of 2016. As a percentage of revenue, our selling expenses increasedtax benefit derived from 2.2% for the three months ended December 31, 2016, to 6.4% for the corresponding period in 2017.such NOL was approximately $670, 000.
Operating Income (loss)
The Company had an operating loss of $317,672 for the three months ended December 31, 2017, compared to an operating income of $954,593 for the comparable period ended December 31, 2016. The decrease was primarily due to the significant increase in the cost of revenues and general and administrative expenses, partially offset by increased revenue generated from freight logistics services as discussed above.
Financial Income (Expense), Net
The Company’s net financial income was $137,799 for the three months ended December 31, 2017, compared to the net financial expense of $88,470 for the same period of 2016. We haveOur operations in the U.S., Canada, Australia, Hong KongChina have incurred a cumulative a cumulative NOL of approximately $6,026,000 as of June 30, 2021, which may reduce future taxable income. The NOL amounted to approximately $711,000 start expiring from 2023 and the PRC, and our financial income (expenses) for the three months ended December 31, 2017 and 2016 primarily reflects the foreign currency transaction income or loss expressed in U.S. Dollars.remaining balance of NOL will be expired by 2026.
Taxation
The Company’s income tax benefit was $571,121 for the three months ended December 31, 2017, compared to an income tax expense of $73,391 for the three months ended December 31, 2016. The increase in income tax benefit was due to the increased allowance for doubtful accounts of approximately $598,403 and partly offset by an increased current income tax expense.
During the three months ended December 31, 2017, the Company recognized a total deferred income tax benefit of $1,173,600, which derived from the utilization of net operating loss (“NOL”) and the decrease in the valuation allowance against the deferred tax assets, based on the Company’s latest projected taxable income.
On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. Additionally, the Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure all U.S. deferred income tax assets and liabilities for temporary differences and NOL carryforwards, and record a deferred income tax expense of $120,400.
Meanwhile, we accrued a one-time transition tax on accumulated foreign earnings in the amount of $478,499, which will be paid over 8 years. The increase in current income tax expenses was also attributable to the increase in the taxable income of Trans Pacific during the three and six months ended December 31, 2017 in comparison to the same period in 2016.
We periodically evaluate the likelihood of the realization of deferred tax assets, and reducereduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. We consider many factors when assessing the likelihood ofManagement considers new evidence, both positive and negative, that could affect our future realization of the deferred tax assets including ourits recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors. We have provided an allowance against thedetermined that it is more likely than not our deferred tax assets balancecould not be realized due to uncertainty on future earnings as a result of the deterioration of trade negotiation between the U.S. and China. We provided a 100% allowance for deferred tax assets as of December 31, 2017.2021. The net decrease in the valuation allowance for the three months ended December 31, 20172021 amounted to $1,038,600approximately $785,000 based on the basis of ourmanagement’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized. We considered new evidence, both positive and negative, that could affect the future realization of deferred tax assets. Due to enactment of the Act, NOL could be carried forward indefinitely and we had pretax income resulting in utilization of NOL in the current period, we believe that there is sufficient positive evidence to conclude that it is more likely than not that all of our NOL are realizable.
Net Incomeloss
As a result of the foregoing, the Companywe had a net incomeloss of $391,248$8,918,370 for the three months ended December 31, 2017,2021, compared to a$1,093,560 for the same period in 2020. After the deduction of non-controlling interest, net income of $792,732loss attributable to us was $8,853,102 for the three months ended December 31, 2016. After2021, compared to $1,102,919 for the deduction of non-controlling interest, net incomesame period in 2020. Comprehensive loss attributable to Sino-Globalus was $297,703$9,328,245 for the three months ended December 31, 2017;2021, compared to $867,054 for the three monthssame period in 2020.
Comparison of the Six Months ended December 31, 2016, the Company had a net income of $892,901. Comprehensive income attributable to the Company was $468,230 for the three months ended December 31, 2017, compared to a comprehensive income of $666,908 for the three months ended December 31, 2016.2021 and 2020
Six Months Ended December 31, 2017 Compared to Six Months Ended December 31, 2016
Revenues
Revenues increaseddecreased by $6,527,542,$183,104, or 160.3%approximately 6.1%, from $4,072,950$3,021,239 for the six months ended December 31, 20162020 to $10,600,492$2,838,135 for the comparablesame period in 2017. This increase2021. The decrease was primarily due to decreased revenue from our shipping management services during the Company’s efforts to diversify its businessperiod from uncertainty in the freight logistics services and bulk cargo container services. shipping management market, which has been negatively impacted by the COVID-19 pandemic.
The Company separately presents bulk cargo container services as a new segment duringfollowing tables present summary information by segments mainly regarding the three months ended December 31, 2017, total $608,267 bulk cargo container service revenue, of which $474,855 was reclassified from freight logistics servicestop-line financial results for the six months ended December 31, 2017.2021 and 2020:
| For the Six Months Ended December 31, 2021 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | - | $ | 2,838,135 | $ | 2,838,135 | ||||||
| Cost of revenues | $ | - | $ | 2,651,759 | $ | 2,651,759 | ||||||
| Gross profit | $ | - | $ | 186,376 | $ | 186,376 | ||||||
| Depreciation and amortization | $ | - | $ | 255,358 | $ | 255,358 | ||||||
| Total capital expenditures | $ | - | $ | 658,999 | $ | 658,999 | ||||||
| Gross margin% | - | % | 6.6 | % | 6.6 | % | ||||||
| ● | Including related party revenue from Zhejiang Jinbang Fuel Energy Co., Ltd of $223,705 for the six months ended December 31, 2021. |
| For the Six Months Ended December 31, 2020 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | 206,845 | $ | 2,814,394 | $ | 3,021,239 | ||||||
| Cost of revenues | $ | 176,968 | $ | 2,606,722 | $ | 2,783,690 | ||||||
| Gross profit | $ | 29,877 | $ | 207,672 | $ | 237,549 | ||||||
| Depreciation and amortization | $ | 158,078 | $ | 7,050 | $ | 165,128 | ||||||
| Total capital expenditures | $ | - | $ | - | $ | - | ||||||
| Gross margin% | 14.4 | % | 7.4 | % | 7.9 | % | ||||||
| % Changes For the Six Months Ended December 31, 2021 to 2020 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | (100 | )% | 0.8 | % | (6.1 | )% | ||||||
| Cost of revenues | (100 | )% | 1.7 | % | (4.7 | )% | ||||||
| Gross profit | (100 | )% | (10.3 | )% | (21.5 | )% | ||||||
| Depreciation and amortization | (100 | )% | 3,522.1 | % | 54.6 | % | ||||||
| Total capital expenditures | 0.0 | % | 100 | % | 100.0 | % | ||||||
| Gross margin% | (100 | )% | (0.8 | )% | (1.3 | )% | ||||||
Disaggregated information of revenues by geographic locations are as follows:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| PRC | $ | 1,593,332 | $ | 2,814,394 | ||||
| U.S. | 1,224,803 | 206,845 | ||||||
| Total revenues | $ | 2,838,135 | $ | 3,021,239 | ||||
Revenues
(1) Shipping Agency and Management Services
For the six months ended December 31, 2021 and 2020, shipping agency and management services generated revenues of nil and $$206,845, respectively, representing an approximately 100% decrease in revenues. The decrease in this segment was because the shipping agency and management services agreements we entered in fiscal year 2020 have expired and were not renewed due to the uncertainty of the shipping management market which has been negatively impacted by the COVID-19 pandemic.
(2) Revenues from Freight Logistics Services
Freight logistics services primarily consist of cargo forwarding, brokerage and other freight services. The revenues generated from freight logistics services increasedfor our PRC companies decreased by $5,624,479,$1,221,062, or 576.4%43.4%, from $975,733$ 2,814,394 for the six months ended December 31, 20162020 to $6,600,212$1,593,332 for the comparablesame period in 2017.2021. The revenues generated from bulk cargo services for the six months ended December 31, 2017 were $608,267, as compareddecrease was mainly due to $nil for the comparable period in 2016.
The following tables present summary information by segment for the six months ended December 31, 2017 and 2016:
| For the six months ended December 31, 2017 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistics Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 1,120,406 | $ | - | $ | - | $ | - | $ | 1,120,406 | ||||||||||
| - Third parties | $ | 1,691,901 | $ | 6,600,212 | $ | 579,706 | $ | 608,267 | $ | 9,480,086 | ||||||||||
| Total revenues | $ | 2,812,307 | $ | 6,600,212 | $ | 579,706 | $ | 608,267 | $ | 10,600,492 | ||||||||||
| Cost of revenues | $ | 356,175 | $ | 5,828,108 | $ | 393,024 | $ | 464,489 | $ | 7,041,796 | ||||||||||
| Gross profit | $ | 2,456,132 | $ | 772,104 | $ | 186,682 | $ | 143,778 | $ | 3,558,696 | ||||||||||
| GM% | 87.3 | % | 11.7 | % | 32.2 | % | 23.6 | % | 33.6 | % | ||||||||||
| For the six months ended December 31, 2016 | ||||||||||||||||||||
| Inland Transportation Management Services | Freight Logistic Services | Container Trucking Services | Bulk Cargo Container Services | Total | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| - Related party | $ | 1,466,403 | $ | - | $ | - | $ | - | $ | 1,466,403 | ||||||||||
| - Third parties | $ | 1,470,935 | $ | 975,733 | $ | 159,879 | $ | - | $ | 2,606,547 | ||||||||||
| Total revenues | $ | 2,937,338 | $ | 975,733 | $ | 159,879 | $ | - | $ | 4,072,950 | ||||||||||
| Cost of revenues | $ | 191,801 | $ | 369,373 | $ | 95,961 | $ | - | $ | 657,135 | ||||||||||
| Gross profit | $ | 2,745,537 | $ | 606,360 | $ | 63,918 | $ | - | $ | 3,415,815 | ||||||||||
| Depreciation and amortization | $ | 14,667 | $ | 10,740 | $ | - | $ | - | $ | 25,407 | ||||||||||
| Total capital expenditures | $ | 45,466 | $ | - | $ | - | $ | - | $ | 45,466 | ||||||||||
| GM% | 93.5 | % | 62.1 | % | 40.0 | % | - | 83.9 | % | |||||||||||
(1) Revenues 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 lossdecrease 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. The fluctuation in revenue from this segment isour major customer who reduced its demand for our services due to the change in the quantitiesimpact of commodities transported by both Zhiyuan Investment GroupCOVID-19 resurgence. Our major customer accounted for 36.4% and Tengda Northwest.
For Tengda Northwest, the service fee charge was RMB 32 per ton. For Zhiyuan Investment Group, the service fee charge was RMB 38 per ton.
Revenue from the inland transportation management services segment decreased $125,031 from $2,937,338 for the six months ended December 31, 2016 to $2,812,307 for the six months ended December 31, 2017. Revenue from related-party customers decreased $345,997 from $1,466,403 for the six months ended December 31, 2016 to $1,120,406 for the six months ended December 31, 2017 since the transported quantities decreased from 262,465 tons to 197,545 tons. Revenue from third-party customers increased $220,966 from $1,470,935 for the six months ended December 31, 2016 to $1,691,901 for the six months ended December 31, 2017 since the transported quantities increased from 313,773 tons to 350,834 tons for the period indicated.
For the six months ended December 31, 2017 and 2016, gross profit from inland transportation management services amounted to $2,456,132 and $2,745,537, respectively.
Overall gross margins for this segment decreased to 87.3% for the six months ended December 31, 2017 from 93.5% for the six months ended December 31, 2016. The decrease92.9%, respectively, of gross margins in the current is due to the change of product mix with different service fee per ton.
(2) Revenues from Freight Logistics Services
Since we formed our new subsidiary, Sino-Global Shipping LA, Inc., in January 2016, we began to provide freight logistics services, including cargo forwarding and truck transportation services. Since the revenue increased significantly for providing such services from period to period, the Company has presented the related revenue as a separated business segment since the first quarter of 2017 fiscal year.
During the six months ended December 31, 2017, the portion of revenues generated from freight logistics services has increased significantly. The increase was primarily due to orders from one of our clients: approximately $5.7 million of revenue was generated from BAO-NYK Shipping PTE. Ltd. (“BAO-NYK”) during the current period, as compared to less than $2,000 in the corresponding period in 2016. The gross margin decreased to 11.7% from 62.1% primarily due to the change in the variety of services currently provided in comparison with those services provided in the corresponding period of 2016. Every single business of freight logistics services has a unique gross margin according to different service scope. Usually, a business in full-scale scope has a higher gross margin, and the business with fragmented scope has a lower gross margin. Our fragmented scope business increased significantly, such as revenue from BAO-NYK, and contributed a much higher portion of revenue in this sector than full-scale business compared to prior period.
The revenue generated from freight logistics services was $6,600,212 and the related gross profit was $772,104 for the six months ended December 31, 2017. For the six months ended December 31, 2016, the revenue generated from freight logistics services was $975,733, and the related gross profit was $606,360.
Revenue from ACH Center amounted to $46,937 or 0.7% of the segment’s revenue for the six months ended December 31, 20172021 and gross profit2020. Revenues for our U.S companies increased because we provided one-time service with a third party for equipment import. We recognized revenue of approximately $980,000 from ACH Center amounted to $13,989 representing 1.8% of the segment’ gross profit.
(3) Revenues from Container Trucking Services
Sincethis import contract with a third party for equipment import, and we completed our web-based short-haul container truck service platform in December 2016, we began generating revenue from short-haul trucking and containers services through the service platform and presented this as a new segment, "Container Trucking Services," from in the second quarter of 2017. Since the second quarter of the fiscal year 2017, the Company has provided container trucking services in PRC regions and, as of the third quarter of the fiscal year 2017, has begun to provide related services in certain U.S. regions. This new business segment is based on a modified and improved version of our freight logistics services business segment.
On January 5, 2017, we 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, we began providing short haul trucking transportation and logistics services to customers located in the New York and New Jersey areas. We hold a 51% ownership stake in ACH Center. Although the establishment of ACH Center brought benefit for us and Jetta Global, it could not satisfy long term development for both us and Jetta Global. We signed a termination agreement with Jetta Global to terminate the joint venture agreement on December 4, 2017. As ACH center’s operating revenue was less than 1% of our consolidated revenue and the termination did not constitute a strategic shift that will have a major effect on our operationssuch revenue for the same period last year. We act as their freight carriers and financial results,in charge the resultsimport matter of operations for ACH Center were not reported as discontinued operation.such equipment.
For the six months ended December 31, 2017, revenue generatedOperating Costs and Expenses
Operating costs and expenses increased by $3,518,103 or 71.1%, from container trucking services was $579,706 and the related gross profit was $186,682. Revenue from ACH Center amounted to $42,968 or 7.8% of the segment’s revenue$4,946,213 for the six months ended December 31, 2017 and gross profit from ACH Center amounted2020 to $4,297 representing 2.3% of the segment’s gross profit.
(4) Revenues from Bulk Cargo Container Services
For the six months ended December 31, 2017, we shipped 140 containers with 18 tons per container of sulfur from Long Beach, CA in the U.S. to our customers in China. The arrangement included coordinating the customer to sign the purchase contract with sulfur suppliers in the United States, organizing the container shipping, custom clearance; all have been fulfilled when we shipped the product to our customer’s designated port, Qingdao PRC. For the six months ended December 31, 2017, gross revenue generated from bulk cargo container services was $608,267 and the related cost was $464,489 with gross profit of $143,778 or 23.6%. We were the agent in this transaction as we did not take any inventory risk; we reported revenue on a net basis less the cost of sulfur. Due to the integrated and value added services we provide to our customers, the average gross profit was higher than freight logistics.
Operating Costs and Expenses
Operating costs and expenses increased by $7,584,377 or 315.3%, from $2,405,517$8,464,316 for the six months ended December 31, 2016 to $9,989,894 for the six months ended December 31, 2017.2021. This increase was primarilymainly due to the increase in the cost of revenues and general and administrative expenses and stock-based compensation, offset by recovery for doubtful accounts as discussed below.
The following table sets forth the components of the Company’s costs and expenses for the periods indicated:.
| For the six months ended December 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | 10,600,492 | 100.0 | % | 4,072,950 | 100.0 | % | 6,527,542 | 160.3 | % | |||||||||||||||
| Cost of revenues | 7,041,796 | 66.4 | % | 657,135 | 16.1 | % | 6,384,661 | 971.6 | % | |||||||||||||||
| Gross margin | 33.6 | % | 83.9 | % | (50.3 | )% | ||||||||||||||||||
| General and administrative expenses | 2,590,371 | 24.4 | % | 1,636,198 | 40.2 | % | 954,173 | 58.3 | % | |||||||||||||||
| Selling expenses | 357,727 | 3.4 | % | 112,184 | 2.8 | % | 245,543 | 218.9 | % | |||||||||||||||
| Total Costs and Expenses | 9,989,894 | 94.2 | % | 2,405,517 | 59.1 | % | 7,584,377 | 315.3 | % | |||||||||||||||
| For the Six Months Ended December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | Change | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | 2,838,135 | 100.0 | % | 3,021,239 | 100.0 | % | (183,104 | ) | (6.1 | )% | ||||||||||||||
| Cost of revenues | 2,651,759 | 93.4 | % | 2,783,690 | 92.1 | % | (131,931 | ) | (4.7 | )% | ||||||||||||||
| Gross margin | 6.6 | % | N/A | 7.9 | % | N/A | (1.3 | )% | N/A | |||||||||||||||
| Selling expenses | 271,621 | 9.6 | % | 142,392 | 4.7 | % | 129,229 | 90.8 | % | |||||||||||||||
| General and administrative expenses | 4,118,000 | 145.1 | % | 2,017,669 | 66.8 | % | 2,100,331 | 104.1 | % | |||||||||||||||
| Impairment loss of cryptocurrencies | 50,127 | 1.8 | % | - | - | % | 50,127 | 100 | % | |||||||||||||||
| Provision for doubtful accounts, net of recovery | (1,931,591 | ) | (68.1 | )% | 2,462 | 0.1 | % | (1,934,053 | ) | (78,556.2 | )% | |||||||||||||
| Stock-based compensation | 3,304,400 | 116.4 | - | - | % | 3,304,400 | 100.0 | % | ||||||||||||||||
| Total costs and expenses | 8,464,316 | 298.2 | % | 4,946,213 | 163.7 | % | 3,518,103 | 71.1 | % | |||||||||||||||
CostsCost of Revenues
Cost of revenues consisted primarily of freight costs of various freight carriers, cost of labor, and other overhead and sundry costs. Cost of revenues was $7,041,796$2,651,759 for the six months ended December 31, 2017, an increase2021, a decrease of $6,384,661,$131,931, or 971.6%approximately 4.7%, as compared to $657,135$2,783,690 for the same period in 2020. The decrease of costs was mainly due to decrease in revenue as we did not generate income from shipping agency and management service for the six months ended December 31, 2016. The overall cost of revenues as a percentage of our revenues increased2021. Our gross profit margin decreased by approximately 1.3% from 16.1%approximately 7.9% for the six months ended December 31, 2016,2020 to 66.4%approximately 6.6% for the same period in 2021 due to decrease in revenue shipping agency which has higher gross margin.
Selling Expenses
Our selling expenses consisted primarily of salaries, meals and entertainment and travel expenses for our sales representatives. For the six months ended December 31, 2017. The increase in the overall costs2020, we had $142,392 of revenues in percentage terms for the six months ended December 31, 2017 stemmed from the majority of the revenues during the six months ended December 31, 2017 coming from the less profitable freight logistics services segment, rather than the more profitable inland transportation management services segment.
During the six months ended December 31, 2017, 63% of total revenue was from the freight logistics services segment, with a gross profit margin of 12%, and 27% of total revenue was from the inland transportation management services segment with a gross profit margin of 87%. During the six months ended December 31, 2016, 24% of total revenue was from the freight logistics services segment with a gross profit margin of 62% and 72% of total revenue was from the inland transportation management service segment with a gross profit margin of 94%. The significant decrease of gross profit margin of the freight logistics services segment is due to a change in the variety of services provided, which caused revenue from the fragmented scope to contribute a much larger portion of total revenue under the freight logistics services segment in the current periodselling expenses, as compared to $271,621 for the prior period.same period in 2021, which represents an increase of $129,229 or approximately 90.8%. The increase was caused by increasing of marketing fee approximately $120,000.
General and Administrative Expenses
GeneralOur general and administrative expenses consist primarily of salaries and benefits, office rent,travel expenses for administration department, office expenses, regulatory filing and listing fees, amortization of stock-based compensation, legal, accounting and other professional service fees.fees including audit, legal and IT consulting. For the six months ended December 31, 2017,2021, we had $2,590,371$4,118,000 of general and administrative expenses, as compared to $1,636,198$2,017,669 for the same period in 2020, representing an increase of $2,100,331, or approximately 104.1%. The increase was mainly due to the increase in employees, offices and other general and administrative expense approximately of $1,400,000 we hired more employees and opened more office locations to expand our warehouse service and new business for digital assets, along with an increase of $235,000 of travel and meeting expenses and $350,000 for business development to expand our business.
Impairment Loss of Cryptocurrencies
The company recorded $50,127 impairment loss for the six months ended December 31, 2016, an increase of $954,173, or 58.3%. The increase was primarily2021 due to increasesrecent price drop in labor expensebitcoin which the Company deemed a triggering event for impairment testing.
Provision for Doubtful Accounts, net of $232,367, provision for doubtful accountsrecovery
We had a recovery of $598,403, consulting feesother receivable of $79,074, and legal fees of $54,952. As a percentage of revenue, our general and administrative expenses decreased from 40.2%$1,931,591 for the six months ended December 31, 20162021 compared to 24.4%$45,091 provision for doubtful accounts and offset by the recoveries of accounts receivable of $2,456, the recoveries of other receivable $30,173 and other receivable - related party of $10,000 for the correspondingsame period in 2017.2020.
Selling ExpensesStock-based Compensation
Selling expenses consist primarily of business development costs, such as traveling expenses for sales purposes, and salaries and benefits for our sales staff. For the six months ended December 31, 2017, we had $357,727 of sales expenses as compared to $112,184Stock-based compensation was $3,304,400 for the six months ended December 31, 2016,2021, an increase of $245,543,$3,304,400 or 218.9%.100.0%, as compared to nil for the same period in 2020 as we issued stock compensation to employees of $2,927,400 and $377,000 to a former director.
Loss from disposal of Subsidiaries and VIE
On December 31, 2021, our wholly owned foreign subsidiary Trans Pacific Shipping Limited (“Trans Pacific Beijing”) entered into a series of agreements to terminate our Variable Interest Entity (“VIE”) structure and terminate the existence of our formerly controlled entity Sino-Global Shipping Agency Ltd. (“Sino-China”) since Sino-China has no active operations. We controlled Sino-China through Trans Pacific Beijing. In addition, the Company dissolved its subsidiary Sino-Global Shipping LA, Inc. Total loss from disposal was approximately $6.1 million.
Taxation
We recorded income tax expense nil and $3,450 for the six months ended December 31, 2021 and 2020, respectively.
We have incurred a cumulative U.S. federal net operating loss (“NOL”) of approximately $12,543,000 as of June 30, 2021, which may reduce future federal taxable income. The NOL generated prior to the year ended June 30, 2017 amounted to approximately $1,400,000 will expire in 2037 and the remaining balance carried forward indefinitely. During the six months ended December 31, 2017, we increased our business development efforts to explore new business opportunities while maintaining our current customer relationships. Rising labor costs also increased our overall selling expenses as compared to2021, approximately $4,586,000 of additional NOL was generated and the same period of 2016. As a percentage of revenue, our selling expenses increasedtax benefit derived from 2.8% for the six months ended December 31, 2016, to 3.4% for the corresponding period in 2017.
Operating Income
The Company had an operating income of $610,598 for the six months ended December 31, 2017, compared to an operating income of $1,667,433 for the comparable period ended December 31, 2016. The decreasesuch NOL was primarily due to the increase in general and administrative expenses, partially offset by the increased gross profit generated from freight logistics services and bulk cargo container services as discussed above.approximately $963,000.
Our operations in China have incurred a cumulative a cumulative NOL of approximately $6,026,000 as of June 30, 2021, which may reduce future taxable income. The NOL amounted to approximately $677,000 start expiring from 2023 and the remaining balance of NOL will be expired by 2026.
Financial Income (Expense), Net
The Company’s net financial income was $222,595 for the six months ended December 31, 2017, compared to the net financial expense of $91,904 for the same period of 2016. We have operations in the U.S., Canada, Australia, Hong Kong and the PRC, and our financial income (expenses) for the six months ended December 31, 2017 and 2016 primarily reflects the foreign currency transaction income or loss expressed in U.S. Dollars.
Taxation
The Company’s income tax benefit was $274,692 for the six months ended December 31, 2017, compared to an income tax expense of $145,012 for the six months ended December 31, 2016. The increase in income tax benefit was due to the change in valuation allowance and partly offset by an increased current income tax expense.
During the six months ended December 31, 2017, the Company recognized a total deferred income tax benefit of $1,073,700, which derived from the utilization of NOL and the decrease in the valuation allowance against the deferred tax assets, based on the Company’s latest projected taxable income.
On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. Additionally, the Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to remeasure all U.S. deferred income tax assets and liabilities for temporary differences and NOL carryforwards and record a deferred income tax expense of $120,400.
Meanwhile, we accrued a one-time transition tax on accumulated foreign earnings in the amount of $478,499 which will be paid over eight years. The increase in current income tax expense was also attributable to the increase in the taxable income of Trans Pacific during the six months ended December 31, 2017 in comparison to the same period in 2016.
We periodically evaluate the likelihood of the realization of deferred tax assets, and reducereduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. We consider many factors when assessing the likelihood ofManagement considers new evidence, both positive and negative, that could affect our future realization of the deferred tax assets including ourits recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors. We have provided an allowance against thedetermined that it is more likely than not our deferred tax assets balancecould not be realized due to uncertainty on future earnings as a result of the deterioration of trade negotiation between the U.S. and China. We provided a 100% allowance for its deferred tax assets as of December 31, 2017.2021. The net decrease in the valuation allowance for the six months ended December 31, 20172021 amounted to $1,097,700approximately $211,000 based on the basis of ourmanagement’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized. We considered new evidence, both positive and negative, that could affect the future realization of deferred tax assets. Due to enactment of the Act, NOL could be carried forward indefinitely and we had pretax income resulting in utilization of NOL in the current period, we believe that there is sufficient positive evidence to conclude that it is more likely than not that all of our NOL are realizable.
Net Incomeloss
As a result of the foregoing, the Companywe had a net incomeloss of $1,107,885$11,840,032 for the six months ended December 31, 2017,2021, compared to a$1,842,016 for the same period in 2020. After the deduction of non-controlling interest, net income of $1,430,517loss attributable to the Company was $11,708,114 for the six months ended December 31, 2016. After2021, compared to $1,836,710 for the deduction of non-controlling interest, net incomesame period in 2020. Comprehensive loss attributable to Sino-Globalthe Company was $914,892$12,120,533 for the six months ended December 31, 2017;2021, compared to $1,409,594 for the six months ended December 31, 2016, the Company had a net income of $1,538,621. Comprehensive income attributable to the Company was $1,191,837 for the six months ended December 31, 2017, compared to a comprehensive income of $1,287,514 for the six months ended December 31, 2016.same period in 2020.
Liquidity and Capital Resources
Cash Flows and Working Capital
As of December 31, 2017, the Company2021, we had $7,219,848$51,401,410 in cash (cash on hand and cash equivalents.in bank). We held approximately 5.1%98.7% of our cash in banks located in New York, Los Angeles, Canada,the U.S., Australia and Hong Kong and held approximately 94.9%1.3% of our cash in banks located in the PRC.
On 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 Convertible Notes bear interest at 5% annually and may be converted into shares of the Company’s common stock, no par value per share (“Common Stock”) at a conversion price of $3.76 per share.
As of December 31, 2021, we had the following loans outstanding:
| Loans | Maturities | Interest rate | December 31, 2021 | |||||||
| Convertible notes | December 2023 | 5 | % | $ | 10,000,000 | |||||
The following table sets forth a summary of our cash flows for the periods as indicated:
| For the six months ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Net cash provided by (used in) operating activities | $ | (1,259,714 | ) | $ | 1,922,458 | |||
| Net cash used in investing activities | $ | (250,278 | ) | $ | - | |||
| Net (decrease) increase in cash and cash equivalents | $ | (1,513,894 | ) | $ | 1,907,459 | |||
| Cash and cash equivalents at the beginning of period | $ | 8,733,742 | $ | 1,385,994 | ||||
| Cash and cash equivalents at the end of period | $ | 7,219,848 | $ | 3,293,453 | ||||
| For the Six Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | (5,239,803 | ) | $ | (2,967,985 | ) | ||
| Net cash used in investing activities | $ | (2,210,346 | ) | $ | - | |||
| Net cash provided by financing activities | $ | 14,408,503 | $ | 6,860,999 | ||||
| Effect of exchange rate fluctuations on cash | $ | (394,261 | ) | $ | 448,804 | |||
| Net increase (decrease) in cash | $ | 6,564,093 | $ | 4,341,818 | ||||
| Cash at the beginning of period | $ | 44,837,317 | $ | 131,182 | ||||
| Cash at the end of period | $ | 51,401,410 | $ | 4,473,000 | ||||
The following table sets forth a summary of our working capital:
| December 31, 2017 | June 30, 2017 | Variation | % | |||||||||||||
| Total Current Assets | $ | 17,879,083 | $ | 16,754,888 | $ | 1,124,195 | 6.7 | % | ||||||||
| Total Current Liabilities | $ | 3,486,218 | $ | 3,086,496 | $ | 399,722 | 13.0 | % | ||||||||
| Working Capital | $ | 14,392,865 | $ | 13,668,392 | $ | 724,473 | 5.3 | % | ||||||||
| Current Ratio | 5.13 | 5.43 | (0.30 | ) | (5.5 | )% | ||||||||||
| December 31, | June 30, | |||||||||||||||
| 2021 | 2021 | Variation | % | |||||||||||||
| Total Current Assets | $ | 57,543,237 | $ | 46,867,349 | $ | 10,675,888 | 22.8 | % | ||||||||
| Total Current Liabilities | $ | 5,411,259 | $ | 5,343,648 | $ | 67,611 | 1.3 | % | ||||||||
| Working Capital (Deficit) | $ | 52,131,978 | $ | 41,523,701 | $ | 10,608,277 | 25.5 | % | ||||||||
| Current Ratio | 10.63 | 8.77 | 1.86 | 21.2 | % | |||||||||||
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 December 31, 2021, our working capital was approximately $52.2 million and we had cash of approximately $51.4 million. We believe our revenues and operations will continue to grow and the current working capital is sufficient to support our operations and debt obligations as they become due one year through report date.
Operating Activities
NetOur net cash used in operating activities was $1,259,714approximately $5.2 million for six months ended December 31, 2021. The operating cash outflow for the six months ended December 31, 2017,2021 was primarily attributable to our net loss of $11.8 million, adjusted by non cash stock-based compensation of approximately $3.3 million, loss on disposal of subsidiaries of approximately $6.1 million and approximately $1.9 million including net income of $1.11 million from increased revenue generated from freight logistics services, deferred tax benefit of $1.07 million, provisionrecovery for doubtful accounts. We had an increase in cash outflow of other receivables of approximately $1.7 million as we advance to a third party of approximately $3.3 million, which offset with recovery for doubtful account approximately $1.9 million. We had a decrease in advances to suppliers - third parties as we made advances to our suppliers of approximately $0.4 million, which will offset by a decrease in deferred revenue of approximately $0.4 million.
Our net cash used in operating activities was approximately $3.0 million for the six months ended December 31, 2020. The operating cash outflow for the six months ended December 31, 2020 was primarily attributable to our net loss of $1.8 million, adjusted by non-cash items of approximately $0.2 million of depreciation and amortization expenses of fixed assets and intangible asset. We had an increase in accounts receivables of $0.84approximately $0.2 million, an increase in other receivables of approximately $0.9 million, an increase in other long-term assets – deposits of approximately $0.1 million, and amortizationa decrease in accrued expenses and other current liabilities of stock-based compensation to consultantsapproximately $0.8 million offset by an increase of $0.33approximately $0.4 million in deferred revenues as reconciled. In the current period, accounts receivable increased by $2.21we signed an agreement with a new client, an increase in taxes payable of approximately $0.1 million and the amounta decrease of approximately $0.1 million due from related parties increased $0.92 million becauseas a result of increased revenuecollections made during the year.
Investing Activities
Net cash used in investing activities was $2,210,346 for the period. On the other hand, taxes payable increased by $0.73 million primarilysix months ended December 31, 2021 due to the one-time transition tax on accumulated foreign earnings. Cash outflows from operatingacquisition of property and equipment of approximately $0.6 million, investment of approximately $0.2 million to a joint venture named LSM Trading Ltd., which we hold a 40% of equity interest. On April 10, 2021, we entered into a loan agreement with Shanghai Baoyin Industrial Co., Ltd. and made advance of approximately $1.5 million. The loan is unsecured and non-interest bearing.
We did not have any investing activities for the six months ended December 31, 2017 reflect the above mentioned major factors.2020.
Financing Activities
Net cash derived from operatingprovided by financing activities was $1,922,458approximately $14.4 million for the six months ended December 31, 2016, including net income2021 due to issue of $1.43common stock to private investor approximately $4.6 million and proceeds from increased revenue generated from inland transportation management servicesconvertible notes of $10 million and freight logistics services with strong margin contributions and decreased general and administrative expenses. In addition, a significant decrease in provisions for doubtful accounts during the current period and accounts receivable decreasedrepayment of EIDL loan of $0,2 million.
Net cash provided by $0.62financing activities was approximately $6.9 million as a result of our strengthened cash collection efforts and payments received from Tengda Northwest, our major third-party customer for inland transportation management services, as well as other customers. However, advances to suppliers increased by $1.42 million because we prepaid certain freight fees pursuant to our Memorandum of Understanding with Singapore Metals & Minerals Pte Ltd. and Galasi Jernsih Sdn BHD. Cash inflows from operating activities for the six months ended December 31, 20162020 due to cash proceeds received from issuance of common stock to private investors for approximately $5.5 million and cash proceeds received from issuance of preferred stock to a private investor for approximately $1.4 million.
Critical Accounting Policies
Basis of Presentation
We prepared our unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of the subsidiaries and VIEs. All intercompany transactions and balances have been eliminated in consolidation.
Sino-Global Shipping Agency Ltd., a PRC corporation (“Sino-China”), is considered a variable interest entity (“VIE”), with us as the primary beneficiary. We, through Trans Pacific Shipping Ltd., entered into certain agreements with Sino-China, pursuant to which we receive 90% of Sino-China’s net income.
As a VIE, Sino-China’s revenues are included in our total revenues, and any income/loss from operations is consolidated with that of us. Because of contractual arrangements between us and Sino-China, we have a pecuniary interest in Sino-China that requires consolidation of the financial statements of us and Sino-China.
We have consolidated Sino-China’s operating results in accordance with Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. The agency relationship between us and Sino-China and its branches is governed by a series of contractual arrangements pursuant to which we have substantial control over Sino-China. Management makes ongoing reassessments of whether we remain the primary beneficiary of Sino-China. On December 31, 2021, we entered into a series of agreements to terminate its Variable Interest Entity (“VIE”) structure and terminate the existence of its formerly controlled entity Sino-China. Loss from disposal of Sino-China amounted to $6,131,616. Since Sino-China did not have material operations prior to disposal, the disposal did not represent a strategic change in the Company’s business, as such the disposal was not presented as discontinued operations.
Use of Estimates and Assumptions
The preparation of 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 above mentioned factors.consolidated financial statements include revenue recognition, fair value of stock 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 our judgments and estimates consider the economic implications of COVID-19 on our 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.
Investing ActivitiesRevenue Recognition
We recognize revenue which represents the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in such exchange. We identified contractual performance obligations and determine 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. Our revenue streams are recognized at a point in time.
We use a five-step model to recognize revenue from customer contracts. The Company’s net cash usedfive-step model requires that we (i) identify the contract with the customer, (ii) identify the performance obligations in investing activities was $250,278the 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) we satisfy the performance obligation.
We continue to derive revenues from sales contracts with customers with revenues being recognized upon performance of services. Persuasive evidence of an arrangement is demonstrated via sales contract and invoice; and the sales price to the customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or other incentive. Our revenues are recognized at a point in time after all performance obligations are satisfied.
Contract balances
We record receivables related to revenue when we have 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.
Cryptocurrencies
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. Due to recent price drop in bitcoin which we deemed a triggering event for impairment testing. We recorded $50,127 impairment loss for the three and six months ended December 31, 2017 compared2021. The loss establishes the new cost basis for our bitcoin and we are not allowed to net cashmark up to fair value if the price of bitcoin increases in subsequent period.
Taxation
Because we and our subsidiaries and Sino-China were incorporated in different jurisdictions, they file separate income tax returns. We use the asset and liability method of accounting for income taxes in accordance with U.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.
We recognize 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. We recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense. We had no uncertain tax positions as of December 31, 2021 and June 30, 2021.
Income tax returns for the years prior to 2016 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 registered in PRC and governed by the Enterprise Income Tax Laws of the PRC.
PRC Value Added Taxes and Surcharges
We are subject to value added tax (“VAT”). Revenue from services provided by investing activities of $nil forPRC subsidiaries and affiliates, including Sino-China and Trans Pacific are subject to VAT at rates ranging from 9% to 13%. Entities that are VAT general taxpayers are allowed to offset qualified VAT paid to suppliers against their VAT liability. Net VAT liability is recorded in taxes payable on the same period of 2016. Forconsolidated balance sheets.
In addition, under the six months ended December 31, 2017, we developed four information platforms, purchased a motor vehiclePRC regulations, our PRC subsidiaries and office equipment.affiliates are required to pay the city construction tax (7%) and education surcharges (3%) based on the net VAT payments.
Critical Accounting Policies
We prepare our unaudited condensed consolidated financial statements in accordance with U.S. GAAP. These accounting principles require us 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, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.
ThereRecent Accounting Pronouncements
In May 2019, the FASB issued ASU 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, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the 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 those 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 for fiscal years beginning after July 1, 2023, including interim periods within those fiscal years. We have not early adopted this update and it will become effective on July 1, 2023 assuming we will remain eligible to be smaller reporting company. We are currently evaluating the impact of this new standard on our consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for the Company for annual and interim reporting periods beginning July 1, 2021. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been no material changes duringissued. An entity that elects to early adopt the six months ended December 31, 2017amendments in our accounting policies from those previously disclosedan interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the Company’s annual report for the fiscal year ended June 30, 2017.
same period. The selectionadoption of critical accounting policies, the judgments and other uncertainties affecting the application 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 ofthis new standard did not have a material impact on our unaudited condensed consolidated financial statements.statements and related disclosures.
In August 2020, the FASB issued ASU 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 applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for the Company for annual and interim reporting periods beginning July 1, 2022. Early adoption is permitted, but no earlier than fiscal years beginning after July 1, 2021, including interim periods within those fiscal years. We adopted this new standard on July 1, 2021 on our accounting for the convertible notes issued in December 2021.
Revenue Recognition
RevenueIn October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is recognized when alleffective for the Company for annual and interim reporting periods beginning July 1, 2021. Early application is not permitted. All entities should apply the amendments in this Update on a prospective basis as of the followingbeginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The adoption of this new standard did not have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.
Basis of Consolidation
The Company’sa material impact on our unaudited condensed consolidated financial statements includeand related disclosures.
In October 2020, the accountsFASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the 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 Codification and apply to all reporting entities within the scope of the parent, its subsidiaries and its affiliates. All inter-company transactions and balances are eliminatedaffected accounting guidance. ASU 2020-10 is effective for annual periods beginning after July 1, 2021 for public business entities. Early application is permitted. The amendments in consolidation. Sino-Global Shipping Agency Ltd. (“Sino-China”) is considered tothis Update should be applied retrospectively. The adoption of this new standard did not have 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 ofmaterial impact on our and Sino-China's financial statements. The accounts of Sino-China are consolidated in the accompanying unaudited condensed 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 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 Assumptionsrelated disclosures.
Need company update
The preparation of the Company’s unaudited condensed 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 unaudited condensed 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Accounts Receivable and Allowance for Doubtful Accounts
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 considered past due after 180 days. Accounts Receivable are written off against the allowances only after exhaustive collection efforts.
Stock-based Compensation
Stock-based payment transactions with employees are measured on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period. 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 asset and liability method of accounting for income taxes in accordance with U.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 unaudited condensed 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.
Income tax returns for the years prior to 2014 are no longer subject to examination by U.S. tax authorities.
On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. Additionally, the Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused us to re-measure all U.S. deferred income tax assets and liabilities for temporary differences and NOL carryforwards and recorded one time income tax payable relating to “deemed repatriated tax” to be paid over 8 years.
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 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 Company is entitled to a deduction or offset for VAT paid on the services rendered by the vendors against the VAT when the Company engages in services.
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 unaudited condensed 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.
This Item is not applicable because we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintainsWe maintain controls and procedures designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure 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.
As of December 31, 2017, the Company2021, we carried out an evaluation, under the supervision of and with the participation of its management, including the Company’sour Chief Executive Officer and Acting Chief Financial Officer, of the effectiveness of the design and operation of the Company’sour disclosure controls and procedures. Based on the foregoing evaluation, our Chief Executive Officer and Acting Chief Financial Officer concluded that the Company’sour disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were not effective and adequately designed to ensure that the information required to be disclosed by the Companyus in the reports it fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to the management, including Chief Executive Officer and Acting Chief Financial Officer, in a manner that allowed for timely decisions regarding required disclosure. The assessment stemmed from the following material weaknesses –
| ● | Lack of segregation of duties for accounting personnel who prepared and reviewed the journal entries; and |
| ● | ||
| Lack of a full time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions. |
We have taken certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We have engaged an outside CPA firm with U.S. GAAP knowledge and SEC reporting experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting.
There were no changes in the Company’sour internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended December 31, 20172021 that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
This item is not applicable to a smaller reporting company such as us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as previously reported in our Current Reports on Form 8-K, we have not sold any equity securities during the quarter ended December 31, 2021 that were not registered under the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are filed herewith:
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| February | By: | /s/ |
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| February | By: | /s/ Tuo Pan |
| Tuo Pan | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
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