☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (?232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes ☒ No ☐
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.
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 Act). Yes ☐ No ☒
The aggregate market value of voting common
stock held by non-affiliates of the registrant as of December 31, 2018, the last business day of the registrant’s second
fiscal quarter, was approximately $7,913,031.
The number of shares of common stock outstanding as of September
20, 2019 was 16,659,037.
Unless the context otherwise requires, in
this annual report on Form 10-K (this “Report”):
Names of certain PRC
companies provided in this Report are translated or transliterated from their original PRC legal names. Discrepancies, if any,
in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.
This Report contains
certain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Such forward-looking statements, including but not limited to statements regarding our projected growth,
trends and strategies, future operating and financial results, financial expectations and current business indicators are based
upon current information and expectations and are subject to change based on factors beyond our control. Forward-looking statements
typically are identified by the use of terms such as “look,” “may,” “will,” “should,”
“might,” “believe,” “plan,” “expect,” “anticipate,” “estimate”
and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted
by a number of business risks and uncertainties we face that could cause our actual results to differ materially from those projected
or anticipated, including but not limited to the following:
Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes
no obligation to update this forward-looking information. Nonetheless, the Company reserves the right to make such updates from
time to time by press release, periodic report or other method of public disclosure without the need for specific reference to
this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create
an obligation to provide any other updates.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 solution provider. The Company
provides tailored solutions and value-added services to its customers to drive efficiency and control in related steps throughout
the entire shipping and freight logistics chain. The Company conducts its business primarily through its wholly-owned subsidiaries
in the People’s Republic of China (the “PRC”) (including Hong Kong) and the U.S. where a majority of the Company’s
clients are located.
The
Company operates in four operating segments including (1) shipping agency services, which are operated by its subsidiary in Hong
Kong; (2) inland transportation management services, which are operated by its subsidiaries in the U.S.; (3) freight logistics
services, which are operated by its subsidiaries in the PRC and the U.S.; (4) container trucking services, which are operated
by its subsidiaries in the PRC and the U.S.
The Company
developed a mobile application which provides a full-service logistics platform for shipping operations between the U.S. and
the PRC for short-haul trucking in the U.S. and in December, 2016, it signed a significant agreement with Sino-Trans
Guangxi Logistics Co. Ltd. with service period from July 1, 2017 to December 31, 2020. The Company has
increased its business in the U.S. since the launch of the short haul container truck services web-based platform. The Board
subsequently authorized the Company to upgrade its enterprise resource planning system (“ERP”) in order to manage
its operations in real time throughout its multiple locations and to integrate with web applications.
On
September 11, 2017, the Company set up a wholly-owned subsidiary, Ningbo Saimeinuo Supply Chain Management Ltd. (“Sino Ningbo”),
via its wholly-owned entity, Sino-Global Shipping New York Inc. This subsidiary primarily engages in transportation management
and freight logistics services. Sino Ningbo’s operating results were included in the consolidated financial statements starting
with the fourth quarter of fiscal year 2018.
Starting
with fiscal year 2019, current trade dynamics make it more expensive for shipping carrier clients to cost-effectively move cargo
into U.S. ports, and as a result, the Company realized a lower shipping volumes and less utilization of its online platform, which
has caused the Company to shift its focus back to shipping agency business. The shipping agency industry in China has improved
and the number of shipping agencies in overall in the country has decreased, due to both price and the inability of competitors
to embrace technology as a resource in serving client needs.
On
September 3, 2018, the Company entered into a co-operation agreement with Ningbo Far-East Universal Shipping Agency Co., Ltd to
set up a joint venture in Hong Kong named Bright Far East International Shipping Agency Co., Ltd., to engage in worldwide shipping
agency operations. The Company has a 51% equity interest in the joint venture. On May 23, 2019, Bright Far East International
Shipping Agency Co., Ltd. incorporated in New York and terminated its registration in Hong Kong. There has been no major operation
of the joint venture for the year ended June 30, 2019. Currently the Company is conducting the shipping agency business through
its wholly-owned Hong Kong subsidiary.
On
April 10, 2019, the Company entered into a cooperation agreement with Mr. Weijun Qin, the Chief Executive Officer of a shipping
management company in China, to set up a joint venture in New York named State Priests Management Ltd., which the Company will
hold a 20% equity interest. On July 26, 2019, the Company signed a revised cooperation agreement with Mr. Weijun Qin which changed
the Company’s equity interest in State Priests Management Ltd., from 20% to 90%. The joint venture does not have any operations
for the year ended June 30, 2019. The Company also has not provided any cash contribution to the joint venture as of the date
of filing of this report.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
16,474
|
|
|
$
|
3,434,850
|
|
Total assets
|
|
|
113,894
|
|
|
|
3,992,131
|
|
Total current liabilities
|
|
|
30,175
|
|
|
|
21,979
|
|
Total liabilities
|
|
|
30,175
|
|
|
|
21,979
|
|
(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.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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, impairment loss, 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, 2019 and 2018 are as follows:
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Foreign currency
|
|
Balance Sheet
|
|
|
Profits/Loss
|
|
|
Balance Sheet
|
|
|
Profits/Loss
|
|
RMB:1USD
|
|
|
6.8657
|
|
|
|
6.8223
|
|
|
|
6.6186
|
|
|
|
6.5047
|
|
AUD:1USD
|
|
|
1.4238
|
|
|
|
1.3984
|
|
|
|
1.3505
|
|
|
|
1.2903
|
|
HKD:1USD
|
|
|
7.8130
|
|
|
|
7.8387
|
|
|
|
7.8442
|
|
|
|
7.8243
|
|
CAD:1USD
|
|
|
1.3092
|
|
|
|
1.3238
|
|
|
|
1.3141
|
|
|
|
1.2697
|
|
(f)
Cash
Cash
consists 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 with various financial institutions
mainly in the PRC, Australia, Hong Kong, Canada and the U.S. As of June 30, 2019, and 2018, cash balances of $2,993,913 and 6,205,960,
respectively, were maintained at financial institutions in the PRC, which were not insured by any of the Chinese authorities.
As of June 30, 2019, and 2018, a cash balance of $122,017 and $848,657, respectively, were maintained at U.S. financial institutions,
and were insured by the Federal Deposit Insurance Corporation or other programs subject to certain 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 hold its eligible deposit fails. As of June 30, 2019 and 2018, a cash balance of $4,384 and $9,601, respectively, were
maintained at financial institutions in Hong Kong and were insured by the Hong Kong Deposit Protection Board.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(g)
Notes receivable
Notes
receivable represents trade accounts receivable due from various customers where the customers’ banks have guaranteed the
payment. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit
request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and
a processing fee.
(h)
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 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 receivable are written off against the allowances only after exhaustive collection efforts
or over three years. As of June 30, 2019, the Company wrote off approximately $90,000 of accounts receivables.
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.
(i)
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
|
3-10
years
|
Computer
and office equipment
|
1-5
years
|
Furniture
and fixtures
|
3-5
years
|
System
software
|
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.
(j)
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, 2019.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(k)
Revenue Recognition
On
July 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with
Customers (FASB ASC Topic 606) using the modified retrospective method for contracts that were not completed as of June 30,
2018. This did not result in an adjustment to the retained earnings upon adoption of this new guidance as the Company’s
revenue was recognized based on the amount of consideration expected to receive in exchange for satisfying the performance
obligations.
The
core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent 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. This will require the Company to identify 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. The Company’s
revenue streams are recognized at a point in time.
The
ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that
the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will
not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue
when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared
to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company
evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using
the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.
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 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. The
Company’s revenues are recognized at a point in time after all performance obligations are satisfied.
As
of June 30, 2019, the Company had outstanding contracts amounting to approximately $2.0 million, all of which is expected
to be completed within 12 months from June 30, 2019.
Revenues
by segments:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Shipping agency services
|
|
$
|
2,093,680
|
|
|
$
|
-
|
|
Inland transportation management services
|
|
|
1,469,799
|
|
|
|
5,500,407
|
|
Freight logistics services
|
|
|
37,725,136
|
|
|
|
16,467,671
|
|
Container trucking services
|
|
|
482,432
|
|
|
|
1,096,485
|
|
Total
|
|
$
|
41,771,047
|
|
|
$
|
23,064,563
|
|
|
●
|
Revenues
from shipping agency services are recognized upon completion of services, which coincides with the date of departure of
the relevant vessel from port. Advance payments and deposits received from customers prior to the provision of services
and recognition of the related revenues are presented as advances from customers.
|
|
●
|
Revenues
from inland transportation management services are recognized when commodities are being released from the customers’
warehouse.
|
|
●
|
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.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(l)
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, 2019 and 2018, respectively.
Income
tax returns for the years prior to 2015 are no longer subject to examination by US tax authorities.
On
December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act”) was enacted. Under the provisions of
the Tax 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 was phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal
year ended 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.
(m)
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.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended June 30, 2019 there was no dilutive effect of potential shares of common stock of the Company because the Company
generated a net loss. For the year ended June 30, 2018, 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 of unexercised options and warrants were dilutive for the year ended June 30, 2018 and was included in the
computation of diluted EPS.
(n)
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.
(o)
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.
(p)
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 environments 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.
(q)
Recent Accounting Pronouncements
Pronouncements
adopted
In
August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments (“ASU No. 2016-15”), 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. On July 1, 2018, the Company adopted ASU No. 2016-15 and determined the adoption of ASU No. 2016-15
did not have a material effect on the Company’s audited consolidated financial statements.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED 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. On July 1, 2018,
the Company has adopted this ASU. The Company determined the adoption of this ASU did not have a material effect on the Company’s
audited consolidated financial statements.
Pronouncements
not yet adopted
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase the transparency and comparability about
leases among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually
all lease contracts. It also requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for interim
and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption assuming
the Company will remain an emerging growth company at that date. Early adoption is permitted. In September 2017, the FASB issued
ASU No. 2017-13, which to clarify effective dates that public business entities and other entities were required to adopt
ASC Topic 842 for annual reporting. A public business entity that otherwise would not meet the definition of a public business
entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s
filing with the SEC adopting ASC Topic 842 for annual reporting periods beginning after December 15, 2019, and interim reporting
periods within annual reporting periods beginning after December 15, 2020. ASU No. 2017-13 also amended that all components
of a leveraged lease be recalculated from inception of the lease based on the revised after tax cash flows arising from the change
in the tax law, including revised tax rates. The difference between the amounts originally recorded and the recalculated amounts
must be included in income of the year in which the tax law is enacted. The Company plans to adopt this update in the first quarter
of fiscal year 2020. The Company adopted ASU 2016-02 on July 1, 2019. The adoption of ASU 2016-02 will recognize additional operating
labilities of approximately $0.1 million, with corresponding right of use (“ROU”) assets of the same amount based
on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases with
a term longer than 12 months.
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 Company plans to adopt
this update in the first quarter of fiscal year 2020. 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 audited consolidated financial statements.
In
August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds
certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures
related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value,
clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU
2018-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company does not
believe the adoption of this ASU will not have a material effect on the Company’s audited consolidated financial statements.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
July 13, 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2017-11, Earnings Per Share (Topic
260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial
Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies
to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down
round features. Part II does not accounting impact. The ASU is effective for the Company for annual and interim reporting periods
beginning July 1, 2019. The Company does not believe the adoption of this ASU will not have a material effect on the Company’s
audited consolidated financial statements.
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 Update 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. ASU
2019-05 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company is currently
evaluating the impact of this new standard on its 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 audited consolidated financial statements.
(r)
Reclassification
Certain
prior year amounts have been reclassified to conform to the current year presentation mainly reclassifying advance to suppliers
to prepaid expenses – long term (see Note 4 and 5). These reclassifications have no effect on the reported revenues, net
income or total assets.
Note
3. ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivable is as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
12,716,120
|
|
|
$
|
10,111,081
|
|
Less: allowances for doubtful accounts
|
|
|
(5,670,274
|
)
|
|
|
(1,682,228
|
)
|
Accounts receivables, net
|
|
$
|
7,045,846
|
|
|
$
|
8,428,853
|
|
Movement
of allowance for doubtful accounts is as follows:
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,682,228
|
|
|
$
|
185,821
|
|
Provision for doubtful accounts
|
|
|
4,091,056
|
|
|
|
1,519,122
|
|
Less: write-off/recovery
|
|
|
(88,882
|
)
|
|
|
(24,101
|
)
|
Exchange rate effect
|
|
|
(14,128
|
)
|
|
|
1,386
|
|
Ending balance
|
|
$
|
5,670,274
|
|
|
$
|
1,682,228
|
|
For
the years ended June 30, 2019 and 2018, the provision for doubtful accounts was $4,091,056 and $1,519,122, respectively.
Note
4. ADVANCES TO SUPPLIERS
The
Company’s advances to suppliers – third parties are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Freight fees (1)
|
|
$
|
4,361,037
|
|
|
$
|
564,365
|
|
Port fees
|
|
|
373
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
140,513
|
|
Total advances to suppliers-third parties
|
|
$
|
4,361,410
|
|
|
$
|
704,878
|
|
(1)
|
The
prepaid freight fee is the Company’s advances made for various shipping costs for shipments from July to September 2019.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s advances to suppliers – related party are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Freight fees
|
|
$
|
-
|
|
|
$
|
3,414,619
|
|
Total advances to suppliers-related party
|
|
$
|
-
|
|
|
$
|
3,414,619
|
|
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, which is jointly owned by the Company’s largest shareholder along with China Minmetals Corporation and China Metallurgical
Group Corporation, acts as the general designer, general equipment provider and general service contractor in the upgrade and
renovation project of Perwaja Steel, located in Malaysia (the “Project”). The Company agreed to provide high-quality
services, including the design of a detailed transportation plan as well as execution and necessary supervision of the plan at
Zhiyuan Hong Kong’s demand, for which the Company will receive 1% to 1.25% of the transportation fees incurred in the Project
as a commission for its services rendered. On July 7, 2017, the Company signed a supplemental agreement with the Buyer, in which
the Company agreed to cooperate exclusively with Zhiyuan Hong Kong on the entire Project’s transportation needs with respect
to transporting construction materials from manufacturers to the port of Malaysia and to the factory site. Pursuant to the supplemental
agreement, the Company agreed to make prepayments to Zhiyuan Hong Kong for its share of packaging and transporting costs related
to the Project; in return, the Company received 15% of the costs incurred in the Project from Zhiyuan Hong Kong as a service fee.
The Company has completed its services pursuant to the supplemental agreement and received a $575,115 service fee in June 2018.
The entire advance was reimbursed to the Company in September 2018.
Note
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The
Company’s prepaid expenses and other assets are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Advance to employees
|
|
$
|
-
|
|
|
$
|
355,294
|
|
Prepaid income taxes
|
|
|
35,129
|
|
|
|
800
|
|
Other (including prepaid insurance, rent, listing fees)
|
|
|
69,925
|
|
|
|
232,345
|
|
Deposit for leasehold improvement on IT infrastructure facility (1)
|
|
|
-
|
|
|
|
438,151
|
|
Deposit for ERP (2)
|
|
|
218,678
|
|
|
|
437,357
|
|
Prepaid leasing and service fees (3)
|
|
|
300,825
|
|
|
|
1,002,750
|
|
Total
|
|
|
624,557
|
|
|
|
2,466,697
|
|
Less: current portion
|
|
|
(105,054
|
)
|
|
|
(588,439
|
)
|
Total noncurrent portion
|
|
$
|
519,503
|
|
|
$
|
1,878,258
|
|
(1)
|
The
Company paid a $422,381 deposit for leasehold improvements on its IT infrastructure facility including upgrading the server
room of its Shanghai office. The design plan for the leasehold improvement was not approved by the building management due
to power supply issues and the Company planned to move the IT infrastructure facility to its Ningbo office. The Company is
currently in discussion with the vendor for a partial refund of the deposit. Since there is no guarantee when or if any deposit
will be refunded to the Company, the Company recorded a $425,068 impairment loss on the deposit for the year ended June 30,
2019.
|
|
|
(2)
|
On
December 27, 2017, with the approval of the Board, the Company signed a contract with Tianjin Anboweiye Technology Ltd Co.
(“Tianjin Anboweiye”), to develop a more complete ERP system based on the Company’s current operations and
projected future growth. In March 2018, the Company paid a deposit to start phase one of the development which includes upgraded
accounting and human resources modules, new order processing and customer relationship management system. The Company paid
a $437,357 deposit to Tianjin Anboweiye. The total contract price for phase one amounted to RMB 4,000,000, approximately $583,000.
For the year ended June 30, 2019, the Company expensed $218,679 of software development costs incurred during the preliminary
project stage, which included planning and determining the functionality of the software. The Company integrated the shipping
agencies business with the current ERP platform and the first phase of the ERP system was placed in use in July 2019 to be
amortized over 3 years.
|
(3)
|
On
June 22, 2018, the Company entered into a contract to improve its IT infrastructure. The total contract consideration for
the services is $1.2 million and the Company paid a deposit of approximately $1.0 million. The consideration is allocated
as follows: $420,000 for hardware leasing of twelve months; $480,000 for onsite services and IT consulting for a two-year
period; $60,000 for operating system set up and $240,000 for continuing integration with the ERP system and data management
for two years. For the year ended June 30, 2019, the Company incurred $350,962 in hardware leasing costs, $200,550 in IT in
consulting costs, $50,137 in system set up costs, and $100,275 for continuing integration of the ERP system and data management
costs.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
6. OTHER LONG-TERM ASSETS - DEPOSITS
The
Company’s other long-term assets – deposits are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Rental and utilities deposits
|
|
$
|
60,435
|
|
|
$
|
59,777
|
|
Freight logistic deposits (1)
|
|
|
2,994,271
|
|
|
|
83,526
|
|
Total other long-term assets - deposits
|
|
$
|
3,054,706
|
|
|
$
|
143,303
|
|
(1)
|
Certain
customers require the Company to pay deposits for the security of shipments and merchandise. These deposits are refundable
at the end of their respective contract term. Approximately $2.9 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.
|
Note
7. PROPERTY AND EQUIPMENT, NET
The
Company’s net property and equipment as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
196,050
|
|
|
$
|
203,371
|
|
Motor vehicles
|
|
|
700,724
|
|
|
|
598,094
|
|
Computer equipment
|
|
|
162,865
|
|
|
|
165,561
|
|
Office equipment
|
|
|
69,278
|
|
|
|
76,065
|
|
Furniture and fixtures
|
|
|
167,143
|
|
|
|
165,047
|
|
System software
|
|
|
116,339
|
|
|
|
120,485
|
|
Leasehold improvements (1)
|
|
|
807,078
|
|
|
|
828,365
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,219,477
|
|
|
|
2,156,988
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(1,229,567
|
)
|
|
|
(1,200,559
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
989,910
|
|
|
$
|
956,429
|
|
(1)
|
The
Company completed its leasehold improvement for its new Ningbo office in June 2018. The Company subsequently entered into
a renegotiation of the lease term with the lessor and the leasehold improvement is subject to inspection and approval by the
lessor. The Company signed a three year lease agreement starting July 1, 2019. The office was in use beginning July 1, 2019
and thus no amortization expense for the leasehold improvement was recorded for the year ended June 30, 2019.
|
Depreciation
and amortization expense for the years ended June 30, 2019 and 2018 were $67,587 and $57,975, respectively.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
8. INTANGIBLE ASSETS, NET
Net
intangible assets consisted of the following at:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Full service logistics platforms
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(100,278
|
)
|
|
|
(36,944
|
)
|
|
|
|
|
|
|
|
|
|
Intangible asset, net
|
|
$
|
89,722
|
|
|
$
|
153,056
|
|
As
part of the above-mentioned intelligent logistics platform (see Note 5), four information applications were completed by Tianjin
Anboweiye in November 2017 and placed into service, including route planning and route execution for customers in China. The platforms
are being amortized over three years. Amortization expense amounted to $63,333 and $36,944 for the years ended June 30, 2019 and
2018, respectively.
Note
9. EQUITY
Stock
issuance:
On
March 12, 2018, the Company entered into a Securities Purchase Agreement with investors pursuant to which the Company sold to
the investors in a registered direct offering, an aggregate of 2,000,000 shares of the Company’s common stock, no par value
per share, at a price of $1.50 per share for aggregate gross proceeds of $3 million. The placement agent received a cash commission
fee equal to 7.5% of the gross proceeds. The offering closed on March 14, 2018. The offering of the 2 million shares was made
pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-222098), which was originally
filed with the SEC on December 15, 2017, and was declared effective by the SEC on February 16, 2018. The Company agreed in the
purchase agreement that it would not issue any common stock for 60 calendar days following the closing of the offering and each
of the Company’s executive officers and directors agreed to a lock-up period of 60 days from the date of the purchase agreement.
Concurrently
with the registered direct offering closed on March 14, 2018, the Company sold the investors Series “A” warrants to
purchase up to an aggregate of 2,000,000 shares of common stock at an exercise price of $1.75 per share and Series “B”
warrants to purchase up to an aggregate of 2,000,000 shares of common stock at an exercise price of $1.75 per share. The sale
of the Series “A” warrants and Series “B” warrants is a private placement in reliance upon an exemption
afforded under Regulation D of the Securities Act. The Series “A” warrants are exercisable as of September 14, 2018,
and expire five and a half (5.5) years from the date of issuance. The Series B warrants are exercisable as of September 14, 2018,
and expire thirteen (13) months 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. Net proceeds to the Company from the sale of the shares and
the warrants after deducting offering expenses and placement agent fees were $2,585,091.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
April 26, 2018, the Company filed a registration statement on Form S-1 (the “S-1”) to register the resale
of an aggregate of 4,000,000 shares of common stock underlying the Series A and B Warrants mentioned above. The S-1 was
declared effective by the SEC on May 8, 2018.
The
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 warrants of $1,074,140 is valued based
on the Black-Scholes-Merton model and is recorded as additional paid-in capital from common stock based on the relative fair value
of proceeds received using the following assumptions:
|
|
Series A
|
|
|
Series B
|
|
Annual dividend yield
|
|
|
-
|
|
|
|
-
|
|
Expected life (years)
|
|
|
5.5
|
|
|
|
1.08
|
|
Risk-free interest rate
|
|
|
2.72
|
%
|
|
|
2.16
|
%
|
Expected volatility
|
|
|
110.31
|
%
|
|
|
73.88
|
%
|
Following
is a summary of the status of warrants outstanding and exercisable as of June 30, 2019:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of June 30, 2018
|
|
|
4,000,000
|
|
|
$
|
1.75
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(2,000,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of June 30, 2019
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable, as of June 30, 2019
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
Warrants Outstanding
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Average
Remaining
Contractual
Life
|
2018 Series A, 2,000,000
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
4.21 years
|
The
Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Mr. Xiangbin Huang, an accredited
investor based in the People’s Republic of China (the “Investor”) on November 8, 2018, pursuant to which the
Company agreed to sell to the Investor and the Investor agreed to purchase from the Company, through a private placement, such
number of shares of the common stock, that shall be issuable at a purchase price per share equal to 120% of the average closing
price of the common stock on NASDAQ Stock Market over the five consecutive trading day period immediately prior to the closing
of the transaction for aggregate gross proceeds to the Company of $1,000,000. On December 10, 2018, the Company and the Investor
entered into an Amended Agreement (the “Amendment Agreement”, together with the Purchase Agreement, the “Agreements”)
pursuant to which the parties reduced the aggregate gross proceeds to the Company to $500,000 (the “Reduced Purchase Price”)
in the transaction. The private placement closed (the “Closing”) on December 10, 2018. As a result, the Investor owns
a total of 420,168 shares of the common stock, on a $1.19 per share purchase price, or approximately 3.1% of the Company’s
issued and outstanding shares of common stock on a pre-transaction basis. The Agreements set forth a one-year restrictive period.
An appropriate legend has been affixed to the certificate for such shares.
On
May 9, 2019, the Company entered into a cooperation agreement with Xuben Lu, a major shareholder of Fangchenggang China Global
International Shipping Agency Co., Ltd., to cooperate and expand the shipping agency services business. Xuben Lu purchased 66,667
shares of the Company’s common stock at a purchase price of $1.5 per share for aggregate proceeds of $100,000.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
May 29, 2019, the Company entered into an operation management cooperation agreement with Yueliang Pan, owner of multiple shipping
agency companies in China, to cooperate and expand the shipping agency services business. Yueliang Pan purchased 166,667 shares
of the Company’s common stock at a purchase price of $1.5 per share for aggregate proceeds of $250,000.
Stock
based compensation:
In
March 2017, the Company entered into a consulting and advisory services agreement with a consulting entity, which provides management
consulting services that include marketing program design and implementation and cooperative partner selection and management.
The service period began in March 2017 and will end in February 2020. The Company issued 250,000 shares of common stock as 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 and the consulting expense were $210,833 and $210,834 for the years ended June 30, 2019 and 2018,
respectively.
On
October 23, 2017, the Company issued to its employees 130,000 shares of its restricted common stock valued at $2.80 per share.
One quarter of the total number of common shares became 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 $273,000 were recorded as compensation expense for the
years ended June 30, 2019 and 2018, respectively.
On
October 27, 2017, the Company issued 200,000 shares of restricted common stock on the grant date with a fair value of $548,000
to a consulting company pursuant to a consulting agreement. The scope of services primarily covered advising on business development,
strategic planning and compliance during the one-year service period from October 17, 2017 to October 16, 2018. $137,000 and $411,000
were recorded as compensation expense for the years ended June 30, 2019 and 2018, respectively.
On
June 7, 2018, the Company issued 400,000 shares of common stock with a fair value of $508,000 to a consulting entity pursuant
to a service agreement. The scope of services primarily covers legal consultation in PRC during the two-year service period from
July 2018 to June 2020. The consulting entity is entitled to be granted the common stock on a quarterly basis in eight equal instalments.
The Company recorded legal expense of $254,000 for the year ended June 30, 2019.
On
September 21, 2018, the Company issued 430,000 shares of common stock valued at $1.10 per share on the grant date with a fair
value of $473,000 under the 2014 Stock Incentive Plan to three employees, vesting immediately. The Company recorded compensation
expense of $473,000 for the year ended June 30, 2019.
On
November 7, 2018, the Board of the Company issued 50,000 shares of restricted common stock to a consultant pursuant
to an existing consulting agreement. The scope of services primarily covers advising on business development, strategic planning
and corporate finance. The grant’s fair value of approximately $65,000 was amortized during the remaining service period
from November 3, 2018 to May 2, 2019. The Company recorded compensation expense of $65,000 for the year ended June 30, 2019.
On
December 11, 2018, the Company issued 200,000 shares of common stock valued at $0.89 per share on the grant date with a fair
value of $178,000 under the 2014 Stock Incentive Plan (the “Plan”) to three employees, vesting immediately. The
Company recorded compensation expense of $178,000 for the year ended June 30, 2019.
On
December 31, 2018, the Board of the Company and the Compensation Committee of the Board (the “Committee”)
approved (i) an increase in the annual salaries of Lei Cao, Chief Executive Officer, Tuo Pan, acting Chief Financial Officer,
and Zhikang Huang, Chief Operating Officer (the “C-Level Executives”), effective January 1, 2019, and (ii) a
one-time award of a total of 950,000 of the common stock from the shares reserved under the Plan to the C-Level Executives,
Chief Technology Officer, Yafei Li and the following members of the Board, effective December 31, 2018, for their valuable
contributions to the Company in fiscal 2018: Jing Wang, Tieliang Liu and Bradley A. Haneberg (Mr. Haneberg resigned from
the Board on March 20, 2019). The Committee recommended and the Board determined to make the following stock grants under the
Plan: (i) Chief Executive Officer, Lei Cao, is entitled to a one-time stock award grant of 400,000 shares, (ii) acting Chief
Financial Officer, Tuo Pan, is entitled to a one-time stock award grant of 140,000 shares, (iii) Chief Operating Officer,
Zhikang Huang, is entitled to a one-time stock award grant of 180,000 shares, (iv) Chief Technology Officer, Yafei Li is
entitled to a one-time stock award grant of 80,000 shares, (v) Board member Jing Wang is entitled to a one-time stock award
grant of 50,000 shares, (vi) Board member Tieliang Liu is entitled to a one-time stock award grant of 50,000 shares and (vii)
Former Board member Bradley A. Haneberg is entitled to a one-time stock award grant of 50,000 shares. The Company recorded
compensation expense of $731,500 for the year ended June 30, 2019.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
April 8, 2019, the Company entered into a consulting services agreement with a consulting entity, which
provides management consulting and advisory services. The scope of services primarily covered advising on business development,
strategic planning and compliance during the six months service period from April 8, 2019 to October 7, 2019. The Company issued
300,000 shares of common stock as remuneration for the services, which were issued as restricted shares at $0.85 per share on
April 16, 2019 to the consulting entity. These shares were valued at $255,000. The Company recorded compensation expense of $127,500
for the year ended June 30, 2019.
During
the years ended June 30, 2019 and 2018, $2,267,833 and $1,653,834 were charged to stock-based compensation expense, respectively.
Stock
Options:
On
January 31, 2013, the Company issued 10,000 stock options to a member of the audit committee, to purchase the Company’s
common stock. The term of the 10,000 options granted in 2013 is 10 years and the exercise price is $2.01. The total fair value
of the options was $19,400. All options were vested as of June 30, 2019. Each option may be exercised to purchase one share of
the common stock. Payment for the options may be made in cash or by exchanging shares of common stock at their fair market value.
The fair market value will be equal to the average of the highest and lowest registered sales prices of Company common stock on
the date of exercise.
Pursuant
to the Plan, effective on July 26, 2016, the Company granted options to purchase 150,000
shares of common stock to two employees with a one-year vesting period, one half of which vested on October 26, 2016, and the
other half on July 26, 2017. The exercise price of the 150,000 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 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. 75,000 of these options were exercised in February
2017. In accordance with the vesting periods, $0 and $9,665 were expensed related to these options for the years ended June 30,
2019 and 2018, respectively.
A
summary of the options is presented in the table below:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2018
|
|
|
85,000
|
|
|
$
|
1.21
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled, forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2019
|
|
|
85,000
|
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, as of June 30, 2019
|
|
|
85,000
|
|
|
$
|
1.21
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Following
is a summary of the status of options outstanding and exercisable at June 30, 2019:
Outstanding
Options
|
|
Exercisable
Options
|
Exercise
Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
$
|
2.01
|
|
|
|
10,000
|
|
|
3.59
years
|
|
$
|
2.01
|
|
|
|
10,000
|
|
|
3.59
years
|
$
|
1.10
|
|
|
|
75,000
|
|
|
2.07
years
|
|
$
|
1.10
|
|
|
|
75,000
|
|
|
2.07
years
|
|
|
|
|
|
85,000
|
|
|
|
|
|
|
|
|
|
85,000
|
|
|
|
Note
10. NON-CONTROLLING INTEREST
The
Company’s non-controlling interest consists of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Sino-China:
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
268,297
|
|
|
|
142,902
|
|
Accumulated deficit
|
|
|
(6,066,145
|
)
|
|
|
(5,521,640
|
)
|
|
|
|
(5,440,404
|
)
|
|
|
(5,021,294
|
)
|
Trans Pacific Logistics Shanghai Ltd.
|
|
|
266,782
|
|
|
|
208,466
|
|
Total
|
|
$
|
(5,173,622
|
)
|
|
$
|
(4,812,828
|
)
|
Note
11. COMMITMENTS AND CONTINGENCIES
Lease
Obligations
The
Company leases certain office premises and apartments for employees under various operating lease agreements with terms through
June 30, 2022. Rental expense for the years ended June 30, 2019 and 2018 were $228,380 and $236,033, respectively.
Contractual
Obligations:
The
Company entered into a contract to upgrade its ERP system. The total contract costs amounted to RMB 4,000,000, or approximately
$583,000, of which the Company made a deposit of $437,357 during the year ended June 30, 2018. The remaining balance will be settled
upon the completion of services during fiscal year 2021.
On
June 22, 2018, the Company entered into a contract to improve its IT infrastructure. The total contract price for the services
is $1.2 million and the Company paid a deposit of $1.0 million during the year ended June 30, 2018. The remaining $0.2 million
will be paid upon completion of services during fiscal year 2020.
|
|
Leases
|
|
|
Contractual
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ending June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
157,568
|
|
|
$
|
200,000
|
|
|
$
|
357,568
|
|
2021
|
|
|
62,285
|
|
|
|
145,643
|
|
|
|
207,928
|
|
2022
|
|
|
29,903
|
|
|
|
-
|
|
|
|
29,903
|
|
|
|
$
|
249,756
|
|
|
$
|
345,643
|
|
|
$
|
595,399
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. The employers will be liable for one month for
severance pay for each year of the service provided by the employees. As of June 30, 2019 and 2018, the Company has estimated
its severance payments of approximately $94,000 and $59,000, respectively, which have not been reflected in its consolidated financial
statements, because management cannot predict what the actual payment, if any, will be in the future.
Sino-Global
has employment agreements with each of Mr. Lei Cao, Ms. Tuo Pan and Mr. Zhikang Huang. These employment agreements provide for
five-year terms that extend automatically in the absence of termination provided at least 60 days prior to the anniversary 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. In such case during the initial
term of the agreement, the Company would need to pay such executive (i) the remaining salary through the date of December 31,
2023, (ii) two times of the then applicable annual salary if there has been no Change in Control, as defined in the employment
agreements or three-and-half times of the then applicable annual salary if there is a Change in Control.
From time to time,
the Company is involved in routine litigation that arises in the ordinary course of business. The Company was named as a defendant
in a breach of service contract lawsuit in the amount of $225,000 filed with the California Superior Court on January 19, 2018.
The Company filed a motion with the court to force the plaintiff into arbitration rather than to litigate the dispute in court
based on the arbitration provision in the contract. The California Superior Court approved its motion to stay the case pending
the resolution of the arbitration. In Indianapolis, this matter was settled in exchange for 40,000 restrictive shares of common
stock of the Company to the plaintiff, by the execution of a settlement agreement by both parties on August 23, 2019 and the issuance
of 40,000 restricted shares on August 26, 2019. As a result, the arbitration in Indianapolis and the litigation in California has
been dismissed respectively. The Company estimates the accrued liability to be approximately $34,000 and believes it will not likely
have a material effect on the Company’s audited consolidated operations or financial position.
Note
12. INCOME TAXES
On
December 22, 2017, the U.S. enacted the Tax Act. Under the provisions of the Tax 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 ended June 30, 2018 was applied to the provision for income tax and a 21% rate for
subsequent fiscal years. The Tax Act also created a new requirement that certain income earned by foreign subsidiaries, known
as global intangible low-tax income (GILTI), must be included in the gross income of their U.S. shareholder. The FASB allows an
accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future
years or recognizing such taxes as a current-period expense when incurred. For the year ended June 30, 2019, the Company elected
to treat the tax effect of GILTI as a current-period expense when incurred.
As
of June 30, 2019, the Company re-measured its deferred tax assets based on the current effective rate of 21% at which these deferred
tax amounts are expected to reverse in the future.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s income tax expense for the years ended June 30, 2019 and 2018 are as follows:
|
|
For the Years Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
U.S.
|
|
$
|
(33,113
|
)
|
|
$
|
(120,448
|
)
|
Hong Kong
|
|
|
(2,792
|
)
|
|
|
(91,545
|
)
|
PRC
|
|
|
(250,464
|
)
|
|
|
(622,765
|
)
|
|
|
|
(286,369
|
)
|
|
|
(834,758
|
)
|
Deferred
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
(634,500
|
)
|
|
|
(114,901
|
)
|
PRC
|
|
|
-
|
|
|
|
-
|
|
Total income tax expense
|
|
$
|
(920,869
|
)
|
|
$
|
(949,659
|
)
|
Income tax expense for the years ended June 30, 2019 and 2018 varied from the amount computed by applying the statutory income
tax rate to income before taxes. Reconciliations between the expected federal income tax rates using 21% for the year ended June
30, 2019 and a blended rate of 28% for the year ended June 30, 2018 to the Company’s effective tax rate are as follows:
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
US Statutory tax rate
|
|
|
21.0
|
|
|
|
28.0
|
|
Permanent difference*
|
|
|
5.1
|
|
|
|
70.4
|
|
Change in valuation allowance
|
|
|
(40.2
|
)
|
|
|
(28.9
|
)
|
Rate differential in foreign jurisdiction
|
|
|
(1.0
|
)
|
|
|
(5.0
|
)
|
|
|
|
(15.1
|
)
|
|
|
64.5
|
|
*
|
Permanent
difference includes non-deductible stock compensation expenses and transition tax.
|
The
Company’s deferred tax assets are comprised of the following:
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
1,121,000
|
|
|
$
|
540,000
|
|
Net operating loss
|
|
|
1,024,000
|
|
|
|
355,000
|
|
Total deferred tax assets
|
|
|
2,145,000
|
|
|
|
895,000
|
|
Valuation allowance
|
|
|
(2,145,000
|
)
|
|
|
(260,500
|
)
|
Deferred tax assets, net - long-term
|
|
$
|
-
|
|
|
$
|
634,500
|
|
The
Company’s operations in the U.S. incurred a cumulative pre-2017 NOL of approximately $1,421,000 as of June 30,
2018 which may reduce future federal taxable income. The NOL will expire in 2037 for the net operating losses generated prior
to the year ended June 30, 2019. During the year ended June 30, 2019, approximately $2,744,000 of additional NOL
was generated. As a result of approximately $384,000 of GILTI as taxable income, the current year’s
net operating loss was reduced to approximately $2,360,000 for the year ended June 30, 2019. For the year ended June 30,
2019, the tax benefit as a result of the use of the NOL for GILTI tax was approximately $81,000 leaving the Company with a
cumulative NOL of approximately $3,781,000 which may reduce future federal taxable income, of which approximately 1,421,000
will expire in 2037 and the remaining balance carried forward indefinitely.
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. Management considers new
evidence, both positive and negative, that could affect the Company’s future realization of 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. The Company determined that it is more likely than not its deferred tax assets could not
be realized due to uncertainty on future earnings as a result of the deterioration of trade negotiation between US and China in
2019. The Company provided a 100% allowance for its DTA as of June 30, 2019. The net increase in valuation for the year ended
June 30, 2019 amounted to approximately $1,884,500 based on management’s reassessment of the amount of the Company’s
deferred tax assets that are more likely than not to be realized.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s taxes payable consists of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
VAT tax payable
|
|
$
|
1,045,513
|
|
|
$
|
531,337
|
|
Corporate income tax payable
|
|
|
2,075,248
|
|
|
|
2,104,232
|
|
Others
|
|
|
64,134
|
|
|
|
65,050
|
|
Total
|
|
$
|
3,184,895
|
|
|
$
|
2,700,619
|
|
Note 13.
CONCENTRATIONS
Major
Customer
For
the year ended June 30, 2019, three customers accounted for approximately 35%, 16% and 13% of the Company’s revenues, respectively.
As of June 30, 2019, all of these customers accounted for approximately 26% of the Company’s accounts receivable.
For
the year ended June 30, 2018, four customers accounted for approximately 50%, 16%, 15% and 9% of the Company’s revenues,
respectively. At June 30, 2018, one of these four customers accounted for 100% of the Company’s accounts due from related
parties (See Note 15) and the remaining three customers accounted for approximately 92% of the Company’s accounts receivable.
Major
Suppliers
For
the year ended June 30 2019, three suppliers accounted for approximately 23%, 12% and 10% of the total costs of revenue,
respectively.
For
the year ended June 30, 2018, two suppliers accounted for 64% and 18% of the total costs of revenue, respectively.
Note 14.
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 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 four operating segments: (1) shipping agency services; (2) inland transportation management services; (3)
freight logistics services; and (4) container trucking services. The Company combined freight logistics services and bulk cargo
container services into one segment starting from first quarter of 2019 as both segments have similar nature of services (cargo
freight) and was provided to the same customer base. Due to the current economic trade dynamic, the Company has not generated
any revenue from bulk cargo container services for the year ended June 30, 2019. Revenue from bulk cargo container services accounted
for 3% of total revenue for the year ended June 30, 2018.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
following tables present summary information by segment for the years ended June 30, 2019 and 2018, respectively:
|
|
For the Year Ended June 30, 2019
|
|
|
|
Shipping
Agency Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
433,383
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
433,383
|
|
- Third parties
|
|
$
|
2,093,680
|
|
|
$
|
1,036,416
|
|
|
$
|
37,725,136
|
|
|
$
|
482,432
|
|
|
$
|
41,337,664
|
|
Total revenues
|
|
$
|
2,093,680
|
|
|
$
|
1,469,799
|
|
|
$
|
37,725,136
|
|
|
$
|
482,432
|
|
|
$
|
41,771,047
|
|
Cost of revenues
|
|
$
|
1,894,332
|
|
|
$
|
128,624
|
|
|
$
|
33,556,109
|
|
|
$
|
427,445
|
|
|
$
|
36,006,510
|
|
Gross profit
|
|
$
|
199,348
|
|
|
$
|
1,341,175
|
|
|
$
|
4,169,027
|
|
|
$
|
54,987
|
|
|
$
|
5,764,537
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
110,821
|
|
|
$
|
1,902
|
|
|
$
|
18,197
|
|
|
$
|
130,920
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
125,817
|
|
|
$
|
17,675
|
|
|
$
|
143,493
|
|
Gross margin%
|
|
|
9.5
|
%
|
|
|
91.2
|
%
|
|
|
11.1
|
%
|
|
|
11.4
|
%
|
|
|
13.8
|
%
|
|
|
For the Year Ended June 30, 2018
|
|
|
|
Shipping
Agency
Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
2,059,406
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,059,406
|
|
- Third parties
|
|
$
|
-
|
|
|
$
|
3,441,001
|
|
|
$
|
16,467,671
|
|
|
$
|
1,096,485
|
|
|
$
|
21,005,157
|
|
Total revenues
|
|
$
|
-
|
|
|
$
|
5,500,407
|
|
|
$
|
16,467,671
|
|
|
$
|
1,096,485
|
|
|
$
|
23,064,563
|
|
Cost of revenues
|
|
$
|
-
|
|
|
$
|
874,760
|
|
|
$
|
14,013,935
|
|
|
$
|
696,998
|
|
|
$
|
15,585,693
|
|
Gross profit
|
|
$
|
-
|
|
|
$
|
4,625,647
|
|
|
$
|
2,453,736
|
|
|
$
|
399,487
|
|
|
$
|
7,478,870
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
72,954
|
|
|
$
|
1,902
|
|
|
$
|
20,063
|
|
|
$
|
94,919
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
778,182
|
|
|
$
|
44,595
|
|
|
$
|
822,777
|
|
Gross margin%
|
|
|
-
|
|
|
|
84.1
|
%
|
|
|
14.9
|
%
|
|
|
36.4
|
%
|
|
|
32.4
|
%
|
Total
assets as of:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Shipping Agency Services
|
|
$
|
274,130
|
|
|
$
|
-
|
|
Inland Transportation Management Services
|
|
|
10,821,088
|
|
|
|
18,338,099
|
|
Freight Logistic Services
|
|
|
153,048
|
|
|
|
591,519
|
|
Container Trucking Services
|
|
|
9,350,737
|
|
|
|
7,228,209
|
|
Total Assets
|
|
$
|
20,599,003
|
|
|
$
|
26,157,827
|
|
Note
15. RELATED PARTY TRANSACTIONS
As
of June 30, 2019 and 2018, the outstanding amounts due from a related party consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Tianjin Zhiyuan Investment Group Co., Ltd.
|
|
$
|
897,739
|
|
|
$
|
2,319,993
|
|
Less: allowance for doubtful accounts
|
|
|
(89,774
|
)
|
|
|
(231,999
|
)
|
Total
|
|
$
|
807,965
|
|
|
$
|
2,087,994
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In
June 2013, the Company signed a five-year global logistic 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 $433,383 (1.0% of the Company’s total revenue for the year ended June 30, 2019). The amount due
from Zhiyuan Investment Group as of June 30, 2019 was $897,739. As of June 30, 2019, the Company provided a 10% allowance for
doubtful accounts of the amount due from Zhiyuan. The Company entered into a supplemental service agreement with Zhiyuan to
extend the service period to September 1, 2019. The Company ceased cooperation with Zhiyuan after the expiration of the
service agreement in September 2019. The company expects to collect the outstanding balance by December 31, 2019.
As
of June 30, 2019 and 2018, the outstanding amounts advances to suppliers-related party consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd.
|
|
$
|
-
|
|
|
$
|
3,414,619
|
|
Total
|
|
$
|
-
|
|
|
$
|
3,414,619
|
|
On
February 18, 2017, the Company entered into a cooperative transportation agreement with a related party, Zhiyuan Hong Kong (the
“Buyer”) which is owned by the Company’s largest shareholder, jointly with China Minmetals Corporation and China
Metallurgical Group Corporation. Zhiyuan Hong Kong acted as the general designer, general equipment provider and general service
contractor in the upgrade and renovation project of a facility owned by Perwaja Steel, located in Malaysia (the “Project”).
The Company agreed to provide high-quality services, including the design of a detailed transportation plan as well as execution
and necessary supervision of the plan at Zhiyuan Hong Kong’s demand, for which the Company received a 1% to 1.25% transportation
fee incurred in the Project as a commission for its services rendered. On July 7, 2017, the Company signed a supplemental agreement
with the Buyer, in which the Company agreed to cooperate with the Buyer exclusively on the entire Project’s transportation
needs with respect to transporting construction materials from manufacturers to the port of Malaysia and to the factory site.
Pursuant to the supplemental agreement, the Company agreed to make prepayments to the Buyer for its share of packaging and transporting
costs related to the Project; in return, the Company received 15% of the costs incurred in the Project from the Buyer as a service
fee. The Company has completed its services pursuant to the supplemental agreement and received a $575,115 service fee in June
2018. The entire advance was reimbursed in September 2018.
Note
16. SUBSEQUENT EVENTS
As of July 1, 2019,
the Company issued 600,000 shares of common stock with a fair value of $432,000 to a China based company that specializes in the
port agency business and/or its designees pursuant to a consulting service agreement. The scope of services primarily covers business
consultation for one year from July 1, 2019 to June 30, 2020. The Company started amortizing the value of these shares to consulting
expense from July 1, 2019.
Under a board
resolution dated January 30, 2016, the CEO is authorized to grant to the employees up to one million shares for the Company’s
stock incentive plan. On July 22, 2019, the Company granted 90,000 shares of restricted common stock valued at $0.7 per share on
the grant date with a fair value of $63,000 under the Plan to one employee, vesting immediately.
F-26