| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying consolidated
financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America
(“US GAAP”). The consolidated financial statements include the accounts of all directly, indirectly owned subsidiaries
and variable interest entity. All intercompany transactions and balances have been eliminated in consolidation. (b) Basis of Consolidation The consolidated financial
statements include the accounts of the Company, its subsidiaries, and its affiliates. All significant intercompany transactions
and balances are eliminated in consolidation. Sino-Global Shipping Agency Ltd., a PRC corporation (“Sino-China”), is
considered a variable interest entity (“VIE”), with the Company as the primary beneficiary. The Company, through Trans
Pacific Beijing, entered into certain agreements with Sino-China, pursuant to which the Company 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. These agreements do not entitle the Company to any consideration if Sino-China incurs a net loss during its fiscal year.
If Sino-China incurs a net loss during its fiscal year, the Company is not required to absorb such net loss. As a VIE, Sino-China’s
revenues are included in the Company’s total revenues, and any 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”. 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. The carrying amount
and classification of Sino-China's assets and liabilities included in the Company’s consolidated balance sheets were as follows:
June 30, June 30,
2018 2017
Total current assets $ 3,434,850 $ 9,327,990
Total assets 3,992,131 9,472,651
Total current liabilities 21,979 4,517
Total liabilities 21,979 4,517 (c) Fair Value of Financial Instruments The 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) Use of Estimates and Assumptions The preparation of
the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted
to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial
statements include revenue recognition, fair value of stock based compensation, cost of revenues, allowance for doubtful accounts,
deferred income taxes, income tax expense 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. (e) 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, report their financial positions and results
of operations in Renminbi (“RMB”). The accompanying consolidated financial statements are presented in USD. Foreign
currency transactions are translated into USD using the fixed exchange rates in effect at the time of the transaction. Generally,
foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements
of operations. The Company translates the foreign currency financial statements of Sino-China, Sino-Global Shipping Australia,
Sino-Global Shipping Hong Kong, Sino-Global Shipping Canada, Trans Pacific Beijing and Trans Pacific Shanghai in accordance with
ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange rates quoted by the
People’s Bank of China at the balance sheet 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) and accumulated other
comprehensive loss as a separate component of equity of the Company, and also included in non-controlling interests. The exchange rates for
the years ended June 30, 2018 and 2017 are as follows:
June 30,
2018 2017
Foreign currency Balance Sheet Profits/Loss Balance Sheet Profits/Loss
RMB:1USD 6.6186 6.5047 6.7806 6.8126
AUD:1USD 1.3505 1.2903 1.3028 1.3267
HKD:1USD 7.8442 7.8243 7.8059 7.7651
CAD:1USD 1.3141 1.2697 1.2982 1.3270 (f) Cash and Cash Equivalents Cash and cash equivalents
consist of cash on hand and other highly liquid investments which are unrestricted as to withdrawal or use, and which have an original
maturity of three months or less when purchased. The Company maintains cash and cash equivalents with various financial institutions
mainly in the PRC, Australia, Hong Kong, Canada and the U.S. As of June 30, 2018, and 2017, cash balances of $6,205,960 and 6,246,337,
respectively, were maintained at financial institutions in the PRC, which were not insured by any of the Chinese authorities. As
of June 30, 2018, and 2017, cash balance of $848,657 and $2,462,792, respectively, were maintained at U.S. financial institutions,
and were insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations. (g) Receivables 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. Other receivables represent
mainly prepaid employee insurance and welfare benefits, which will be subsequently deducted from the employee payroll, guarantee
deposits on behalf of ship owners as well as office lease deposits. (h) Property and Equipment, net Net property and equipment
are stated at historical cost less accumulated depreciation. Historical cost comprises its purchase price and any directly attributable
costs of bringing the assets to its working condition and location for its intended use. Depreciation is calculated on a straight-line
basis over the following estimated useful lives:
Buildings 20 years
Motor vehicles 5-10 years
Furniture and office equipment 3-5 years
Leasehold improvements Shorter of lease term or useful
lives The carrying value
of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from such asset is less
than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying value exceeds
the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved or based on independent appraisals. Management has determined that there were no impairments
at the balance sheet dates. (i) Intangible Assets, net Intangible assets
are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following estimated
useful lives:
Logistics
platform 3 years The Company evaluates
intangible assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. There
was no such impairment as of June 30, 2018. (j) Revenue Recognition
● Revenues from inland transportation management services are recognized when commodities are being released from the customers’ warehouse.
● Revenues from ship management services are recognized when the related contractual services are rendered.
● Revenues from freight logistics services are recognized when the related contractual services are rendered.
● Revenues from container trucking services are recognized when the related contractual services are rendered. (k) Taxation Because the Company
and its subsidiaries and Sino-China are incorporated in different jurisdictions, they file separate income tax returns. The Company
uses the liability method of accounting for income taxes in accordance with US Generally Accepted Accounting Principles (“US
GAAP”). Deferred taxes, if any, are recognized for the future tax consequences of temporary differences between the tax basis
of assets and liabilities and their reported amounts in the consolidated financial statements. A valuation allowance is provided
against deferred tax assets if it is more likely than not that the asset will not be utilized in the future. The Company recognizes
the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties, if any,
related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions as of June 30, 2018 and
2017, respectively. Income tax returns
for the years prior to 2014 are no longer subject to examination by US 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 the Company to re-measure
all U.S. deferred income tax assets and liabilities for temporary differences and net operating loss (“NOL”) carryforwards
and recorded a one-time transition tax expense. PRC Enterprise Income Tax PRC enterprise income
tax is calculated based on taxable income determined under the PRC Generally Accepted Accounting Principles (“PRC GAAP”)
at 25%. Sino-China and Trans Pacific are registered in PRC and governed by the Enterprise Income Tax Laws of the PRC. PRC Business Tax and Surcharges Revenues from services
provided by the Company’s PRC subsidiaries and affiliates, including Sino-China and Trans Pacific are subject to the PRC
business tax of 5%. Business tax and surcharges are paid on gross revenues generated from shipping agency services minus the costs
of services which are paid on behalf of the customers. In addition, under
the PRC regulations, the Company’s PRC subsidiaries and affiliates are required to pay the city construction tax (7%) and
education surcharges (3%) based on the calculated business tax payments. The Company’s
PRC subsidiaries and affiliates report revenues net of PRC’s business tax and surcharges for all the periods presented in
the consolidated statements of operations. (l) Earnings (loss) per Share Basic earnings (loss)
per share is computed by dividing net income (loss) attributable to holders of common shares of the Company by the weighted average
number of common shares of the Company outstanding during the applicable period. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue common shares of the Company were exercised or converted into
common shares of the Company. Common share equivalents are excluded from the computation of diluted earnings per share if their
effects would be anti-dilutive. For the year ended June
30, 2018 and 2017, the effect of potential shares of common stock of the Company was dilutive since the exercise prices for options
and warrants were lower than the average market price for the related periods. As a result, a total of 985,693 and 38,466 of unexercised
options and warrants were dilutive for the year ended June 30, 2018 and 2017, respectively, and were included in the computation
of diluted EPS. (l) Comprehensive Income (loss) The Company reports
comprehensive income (loss) in accordance with the FASB issued authoritative guidance which establishes standards for reporting
comprehensive income (loss) and its component in financial statements. Comprehensive income (loss), as defined, includes all changes
in equity during a period from non-owner sources. (m) Stock-based Compensation Valuations are based
upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of
share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical
volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee terminations.
The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free
rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the
grant. (n) Risks and Uncertainties The Company’s
business, financial position and results of operations may be influenced by the political, economic, 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 and legal environment 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, the Company’s ability to grow its business and maintain
its profitability could be negatively affected by the nature 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”). (0) Recent Accounting Pronouncements In May 2014, the FASB
issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic In February 2016, the
FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”) which revises accounting for operating leases by a lessee,
among other changes, and requires a lessee to recognize a liability to make lease payments and an asset representing its right
to use the underlying asset for the lease term in the balance sheet. This update will be effective for public entities for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU
2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard.
The amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease
classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain
transition adjustments, among other issues. In addition, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842),
Targeted Improvements, In August 2016, the
FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to
address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The
amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs;
(2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation
to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds
from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including
Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization
Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective
for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition
method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments
for those issues would be applied prospectively as of the earliest date practicable. The Company does not believe the adoption
of this ASU would have a material effect on the Company’s financial statements. 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 does not believe the
adoption of this ASU would have a material effect on the Company’s financial statements. 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 re-characterize the indefinite deferral of certain provisions of Topic 480
that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting
effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods
within those fiscal years, beginning 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 consolidated financial statements. In March 2018, the
FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin
No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax
Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB
118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate
tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for
many companies that operate internationally. The Company has evaluated the impact of the Act as well as the guidance of SAB 118
and incorporated the changes into the determination of a reasonable estimate of its deferred tax liability and appropriate disclosures
in the notes to its consolidated financial statements (See Note 9). In June 2018, the FASB
issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
The guidance largely aligns the accounting for share-based payment awards issued to employees and nonemployees, whereby the existing
employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing),
with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue
to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be
used in lieu of an expected term in the option-pricing model for nonemployee awards. The ASU is effective for fiscal years beginning
after December 15, 2018, including interim periods within that fiscal year. The ASU is required to be applied on a prospective
basis to all new awards granted after the date of adoption. The Company is still evaluating the effect that this guidance
but does not expect the standard to have a material impact on its consolidated financial statements. 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 consolidated financial statements. |
