NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
1. ORGANIZATION AND NATURE OF BUSINESS
Founded
in the United States (the “U.S.”) in 2001, Sino-Global Shipping America, Ltd., a Virginia corporation (“Sino-Global”
or the “Company”), is a non-asset based global shipping and freight logistics integrated solution provider. The Company
provides tailored solutions and value-added services to its customers to drive effectiveness 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 U.S., the People’s Republic of China (the “PRC”) (including Hong Kong), Australia and Canada. The majority
of the Company’s business is generated from clients located in the PRC and the U.S.
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 signed two significant
agreements with COSCO Beijing International Freight Co., Ltd. (“COSFRE Beijing”) and Sino-Trans Guangxi Logistics
Co. Ltd., respectively, in December 2016. Pursuant to the agreement with COSFRE Beijing, the Company receives a percentage of
the transportation fees for the arrangement of inland transportation services for COSFRE Beijing’s container shipments into
U.S. ports. 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
the fourth quarter of fiscal year 2018.
There was no operation for the three and six months ended December 31, 2018.
Starting
with fiscal year 2019, current trade dynamics make it more expensive for the shipping carrier clients to cost-effectively move
cargo into U.S. ports, and as a result, the Company saw a lower shipping volumes and less utilization of our online platform,
which has caused the Company to shift its focus to shipping agency business. The shipping agency industry in China has improved
and the number of shipping agencies 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 and management operations. The Company has 51% ownership stake in the joint venture.
There was no operation for
the three and six months ended December 31, 2018.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States of America (“US GAAP”). The unaudited condensed 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
unaudited condensed 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 unaudited condensed
consolidated balance sheets were as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
15,833
|
|
|
$
|
3,434,850
|
|
Total assets
|
|
|
120,028
|
|
|
|
3,992,131
|
|
Total current liabilities
|
|
|
31,430
|
|
|
|
21,979
|
|
Total liabilities
|
|
|
31,430
|
|
|
|
21,979
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(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 unaudited condensed 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, the useful lives of property and equipment
and intangible assets. 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 unaudited condensed consolidated financial
statements are presented in USD. Foreign currency transactions are translated into USD using the fixed exchange rates in effect
at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions
are recognized in the 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.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
exchange rates as of December 31, 2018 and June 30, 2018 and for the three and six months ended December 31, 2018 and 2017 are
as follows:
|
|
|
|
|
Three months ended
December 31,
|
|
|
Six months ended
December 31,
|
|
Foreign currency
|
|
December 31, 2018
Balance
Sheet
|
|
|
June 30,
2018
Balance Sheet
|
|
|
2018
Profits/Loss
|
|
|
2017
Profits/Loss
|
|
|
2018
Profits/Loss
|
|
|
2017
Profits/Loss
|
|
RMB:1USD
|
|
|
6.8783
|
|
|
|
6.6186
|
|
|
|
6.9162
|
|
|
|
6.6153
|
|
|
|
6.8595
|
|
|
|
6.6428
|
|
AUD:1USD
|
|
|
1.4193
|
|
|
|
1.3505
|
|
|
|
1.3945
|
|
|
|
1.3007
|
|
|
|
1.3812
|
|
|
|
1.2838
|
|
HKD:1USD
|
|
|
7.8304
|
|
|
|
7.8442
|
|
|
|
7.8294
|
|
|
|
7.8076
|
|
|
|
7.8373
|
|
|
|
7.8112
|
|
CAD:1USD
|
|
|
1.3644
|
|
|
|
1.3141
|
|
|
|
1.3215
|
|
|
|
1.2702
|
|
|
|
1.3142
|
|
|
|
1.2620
|
|
(f)
Cash
Cash
consists of cash on hand and deposits placed with banks which are unrestricted as to withdrawal and use or have a term deposit
of three months or less. The Company maintains cash with various financial institutions mainly in the PRC, Australia, Hong Kong,
Canada and the U.S. As of December 31, 2018 and June 30, 2018, cash balances of $2,266,282 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 December 31,
2018 and June 30, 2018, cash balance of $102,303 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 December 31, 2018 and June 30, 2018, cash balance of $75,865 and $9,601, respectively,
were maintained at financial institutions in Hong Kong and approximately $64,000 were insured by the Hong Kong Deposit Protection
Board.
(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.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(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 December 31, 2018.
(j)
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.
|
●
|
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(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 unaudited condensed consolidated financial statements.
A valuation allowance is provided against deferred tax assets if it is more likely than not that the asset will not be utilized
in the future.
The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes interest
and penalties, if any, related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions
as of December 31, 2018 and June 30 2018, respectively.
Income
tax returns for the years prior to 2015 are no longer subject to examination by U.S. tax authorities.
On
December 22, 2017, the U.S. enacted the “Tax Cuts and Jobs Act” (the “Act”). 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 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 three and six months ended December 31, 2018 there was no dilutive effect of potential shares of common stock of the Company
because the Company generated a net loss. For the three and six months ended December 31, 2017, the basic average shares outstanding
and diluted average shares of the Company outstanding were not the same because the effect of potential shares of common stock
of the Company was dilutive since the exercise prices for options were lower than the average market price for the related periods.
For the three and six months ended December 31, 2017, a total of 48,011 and 50,170 unexercised options were dilutive, respectively,
and were included in the computation of diluted earnings per share.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(m)
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.
(n)
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.
(o)
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”).
(p)
Recent Accounting Pronouncements
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,
which provides an additional (and optional) transition method to adopt the new leases
standard. Under the new transition method, a reporting entity would initially apply the new lease requirements at the effective
date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, continue
to report comparative periods presented in the financial statements in the period of adoption in accordance with current U.S.
GAAP (i.e., ASC 840, Leases) and provide the required disclosures under ASC 840 for all periods presented under current U.S.
GAAP. A modified retrospective transition approach is required for lessees for capital and operating leases existing
at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain
practical expedients available. The Company plans to adopt these new guidance in the first quarter of fiscal year 2019 and is
still evaluating the effect that this guidance will have on the Company’s unaudited condensed consolidated financial statements
and related disclosures.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 does not believe the adoption of ASU No. 2016-15
will have a material effect on the Company’s unaudited condensed 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 does not believe the adoption of this ASU would have a material effect on the Company’s
unaudited condensed consolidated financial statements.
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 unaudited condensed 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 unaudited condensed consolidated financial statements.
(q)
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.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
3. ACCOUNTS RECEIVABLE, NET
The
Company’s net accounts receivable is as follows:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
15,229,262
|
|
|
$
|
10,111,081
|
|
Less: allowances
for doubtful accounts
|
|
|
(3,080,328
|
)
|
|
|
(1,682,228
|
)
|
Accounts receivables,
net
|
|
$
|
12,148,934
|
|
|
$
|
8,428,853
|
|
Movement
of allowance for doubtful accounts is as follows:
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,682,228
|
|
|
$
|
185,821
|
|
Provision for doubtful accounts
|
|
|
1,401,540
|
|
|
|
1,519,122
|
|
Less: write-off/recovery
|
|
|
-
|
|
|
|
(24,101
|
)
|
Exchange rate
effect
|
|
|
(3,440
|
)
|
|
|
1,386
|
|
Ending balance
|
|
$
|
3,080,328
|
|
|
$
|
1,682,228
|
|
For
the three months ended December 31, 2018, provision for doubtful accounts was $445,119. For the same period in 2017, provision
for doubtful accounts was $598,301. For the six months ended December 31, 2018, provision for doubtful accounts was $1,396,951.
For the same period in 2017, provision for doubtful accounts was $573,765.
Note
4. ADVANCES TO SUPPLIERS
The
Company’s advances to suppliers – third parties are as follows:
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Freight fees (1)
|
|
$
|
934,824
|
|
|
$
|
564,365
|
|
Other
|
|
|
-
|
|
|
|
140,513
|
|
Total advances
to suppliers-third parties
|
|
$
|
934,824
|
|
|
$
|
704,878
|
|
(1)
|
The
prepaid freight fee is the Company’s advances made for various shipping costs for shipments from January to March 2019.
|
The
Company’s advances to suppliers – related party are as follows:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Freight
fees
|
|
$
|
-
|
|
|
$
|
3,414,619
|
|
Total advances
to suppliers-related party
|
|
$
|
-
|
|
|
$
|
3,414,619
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 a 1% to 1.25% of the 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 Zhiyuan Hong Kong 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 Zhiyuan Hong Kong for its share of packaging and transporting costs related
to the Project; in return, the Company received 15% of the cost 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 assets
The
Company’s prepaid expenses and other assets are as follows:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Advance to employees
|
|
$
|
168,737
|
|
|
$
|
355,294
|
|
Prepaid income taxes
|
|
|
-
|
|
|
|
800
|
|
Other (including prepaid insurance,
rent, listing fees)
|
|
|
186,232
|
|
|
|
232,345
|
|
Deposit for leasehold improvement on
IT infrastructure facility (1)
|
|
|
421,608
|
|
|
|
438,151
|
|
Deposit for ERP (2)
|
|
|
218,678
|
|
|
|
437,357
|
|
Deposit for IT
infrastructure (3)
|
|
|
626,719
|
|
|
|
1,002,750
|
|
Total
|
|
|
1,621,974
|
|
|
|
2,466,697
|
|
Less: current
portion
|
|
|
(354,969
|
)
|
|
|
(588,439
|
)
|
Total noncurrent
portion
|
|
$
|
1,267,005
|
|
|
$
|
1,878,258
|
|
(1)
|
The
Company paid a $421,608 deposit for leasehold improvements on its IT infrastructure facility including upgrading the server
room of its Shanghai office. The total project cost is approximately $580,000 and is expected to be completed in October 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 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
$580,000. For the three months ended December 31, 2018, the Company expensed $218,679
of software development cost incurred during the preliminary project stage, which included
planning and determining the functionality of the software. The Company plans to integrate
the shipping agencies business with the current ERP platform.
|
(3)
|
On
June 22, 2018, the Company entered into 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 and data management for two years. For the
three months ended December 31, 2018, the Company incurred $175,481 in hardware leasing costs, $100,275 IT in consulting costs,
$50,137 in system set up costs, and $50,137 for continuing integration of the ERP and data management costs.
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
6. OTHER LONG-TERM ASSETS - DEPOSITS
The
Company’s other long-term assets – deposits are as follows:
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Rental and utilities deposits
|
|
$
|
59,763
|
|
|
$
|
59,777
|
|
Freight logistic
deposits (1)
|
|
|
2,988,823
|
|
|
|
83,526
|
|
Total other long-term
assets - deposits
|
|
$
|
3,048,586
|
|
|
$
|
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 $2.91 million (RMB 20 million) 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:
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
195,963
|
|
|
$
|
203,371
|
|
Motor vehicles
|
|
|
574,603
|
|
|
|
598,094
|
|
Computer equipment
|
|
|
162,690
|
|
|
|
165,561
|
|
Office equipment
|
|
|
74,033
|
|
|
|
76,065
|
|
Furniture and fixtures
|
|
|
162,158
|
|
|
|
165,047
|
|
System software
|
|
|
116,136
|
|
|
|
120,485
|
|
Leasehold improvements
(1)
|
|
|
805,599
|
|
|
|
828,365
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,090,912
|
|
|
|
2,156,988
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated
depreciation and amortization
|
|
|
(1,190,457
|
)
|
|
|
(1,200,559
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
$
|
900,455
|
|
|
$
|
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 office is not currently in use and thus no amortization expense for the leasehold improvement was recorded for
the period ended December 31, 2018.
|
Depreciation
and amortization expense for the three months ended December 31, 2018 and 2017 were $9,731 and $13,261, respectively. Depreciation
and amortization expense for the six months ended December 31, 2018 and 2017 were $19,613 and $26,464, respectively.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
8. INTANGIBLE ASSETS, NET
Net
intangible assets consisted of the following at:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Full
service logistics platforms
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated
amortization
|
|
|
(68,611
|
)
|
|
|
(36,944
|
)
|
|
|
|
|
|
|
|
|
|
Intangible asset,
net
|
|
$
|
121,389
|
|
|
$
|
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 $15,834 and $5,278 for the three months ended December
31, 2018 and 2017, respectively. Amortization expense amounted to $31,667 and $5,278 for the six months ended December 31, 2018
and 2017, 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 common stock of the Company, 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.
On
April 26, 2018, the Company filed a registration statement on Form S-1 (“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.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 December 31, 2018:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Warrants
outstanding, as of June 30, 2018
|
|
|
4,000,000
|
|
|
$
|
1.75
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding, as of December 31, 2018
|
|
|
4,000,000
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable, as of December 31, 2018
|
|
|
4,000,000
|
|
|
$
|
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
|
|
|
4.70
years
|
2018
Series B 2,000,000
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
0.28
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, no par value per share, of the Company (“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 (the “Shares”), 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 the Shares.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Stock
based compensation:
In
March 2017, the Company entered into a consulting and advisory services agreement with a consulting entity, who 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 the remuneration for the services, which were issued as restricted shares at $2.53 per share on March 22, 2017 to
the consultant. These shares were valued at $632,500 and consulting expense were $52,708 and $52,709 for three
months ended December 31, 2018 and 2017, respectively. Consulting expense was $105,417 for both six months ended December 31,
2018 and 2017.
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. $0 and $91,000 were recorded as compensation expense for the three
and six months ended December 31, 2018, respectively. $91,000 was recorded as compensation expense for both of the three and six
months ended December 31, 2017.
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. $0 and $137,000
were recorded as compensation expense for the three and six months ended December 31, 2018, respectively. $137,000 was recorded
as compensation expense for both of the three and six months ended December 31, 2017.
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 $63,500 and $127,000 for the three and six months ended December 31, 2018, respectively.
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 $0 and $473,000 for the three and six months ended December 31, 2018, respectively.
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 to three employees, vesting immediately. The Company recorded compensation expense
of $178,000 for both of the three and six months ended December 31, 2018.
On
November 7, 2018, the Board of the Company approved the issuance of 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 will be amortized during the remaining service period
from November 3, 2018 to May 2, 2019. The Company recorded compensation expense of $21,667 for the three and six months ended
December 31, 2018.
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 Company’s 2014 Stock Incentive Plan (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. 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) 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 three and six months ended December 31,
2018.
During
the three and six months ended December 31, 2018, $1,047,376 and $1,864,584 were charged to general and administrative expenses,
respectively. During the three and six months ended December 31, 2017, $280,709 and $333,417 were charged to general and administrative
expenses, respectively.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Stock
Options:
The
issuance of the Company’s options is exempted from registration under the Securities Act of 1933, as amended (the “Securities
Act”). The common stock underlying the Company’s options granted may be sold in compliance with Rule 144 of the Securities
Act. 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.
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, 2018.
Pursuant
to the Company’s 2014 Stock Incentive 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 was expensed related to these options for the three and six months ended December
31, 2018. $0 and $9,665 were expensed related to these options for the three and six months ended December 31, 2017, 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 December 31, 2018
|
|
|
85,000
|
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable, as of December 31, 2018
|
|
|
85,000
|
|
|
$
|
1.21
|
|
Following
is a summary of the status of options outstanding and exercisable at December 31, 2018:
Outstanding
Options
|
|
Exercisable
Options
|
Exercise
Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
$
|
2.01
|
|
|
|
10,000
|
|
|
4.08
years
|
|
$
|
2.01
|
|
|
|
10,000
|
|
|
4.08
years
|
$
|
1.10
|
|
|
|
75,000
|
|
|
2.57
years
|
|
$
|
1.10
|
|
|
|
75,000
|
|
|
2.57
years
|
|
|
|
|
|
85,000
|
|
|
|
|
|
|
|
|
|
85,000
|
|
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
10. NON-CONTROLLING INTEREST
The
Company’s non-controlling interest consists of the following:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Sino-China:
|
|
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
271,024
|
|
|
|
142,902
|
|
Accumulated deficit
|
|
|
(5,588,362
|
)
|
|
|
(5,521,640
|
)
|
|
|
|
(4,959,894
|
)
|
|
|
(5,021,294
|
)
|
Trans Pacific
Logistics Shanghai Ltd.
|
|
|
280,721
|
|
|
|
208,466
|
|
Total
|
|
$
|
(4,679,173
|
)
|
|
$
|
(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
April 16, 2020. Rental expenses for the three and six months ended December 31, 2018 were $56,675 and $113,033, respectively.
Rental expense for the three and six months ended December 31, 2017 were $54,445 and $119,307, respectively.
Contractual
Obligations:
The
Company entered into a contract to upgrade its ERP. The total contract costs amounted to RMB 4,000,000, or approximately $580,000,
and on 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 December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
$
|
159,075
|
|
|
$
|
-
|
|
|
$
|
159,075
|
|
2020
|
|
|
13,463
|
|
|
|
200,000
|
|
|
|
213,463
|
|
2021
|
|
|
-
|
|
|
|
142,643
|
|
|
|
142,643
|
|
|
|
$
|
172,538
|
|
|
$
|
342,643
|
|
|
$
|
515,181
|
|
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 December 31, 2018 and June 30, 2018, the Company has
estimated its severance payments of approximately $56,700 and $58,543, respectively, which have not been reflected in its unaudited
condensed consolidated financial statements, because management cannot predict what the actual payment, if any, will be in the
future.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause,
then we are obligated to provide at least 30 days’ prior notice. In such case during the initial term of the agreement,
we 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 to arbitration rather than to litigate the dispute
in court based on the arbitration provision in the contract. The California Superior Court approved to stay the case pending the
resolution of the arbitration and has scheduled a status conference for March 19, 2019 to get another update about the status
of the arbitration. In Indianapolis, this matter is currently set for a hearing before the arbitrator on May 14, 2019. Management
believes it is premature to assess the outcome of the pending arbitration, but believes it will not likely have a material effect
on the Company’s consolidated operations or financial position.
Note
12. INCOME TAXES
On
December 22, 2017, the U.S. enacted the “Tax Cuts and Jobs Act” (the “Act”). Under the provisions of the
Act, the U.S. corporate tax rate decreased from 35% to 21%. Since the Company has a June 30 fiscal year-end, a blended U.S. statutory
federal rate of approximately 28% for the fiscal year ending June 30, 2018 is applied to the provision for income tax and a 21%
rate for subsequent fiscal years.
As
of December 31, 2018, the Company re-measured deferred tax assets based on the current effective rate of 21% at which these deferred
tax amounts are expected to reverse in the future.
The
Company’s income tax benefit (expense) for the three and six months ended December 31, 2018 and 2017 are as follows:
|
|
For
the three months Ended December 31
|
|
|
For
the six months Ended December 31
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
282
|
|
|
$
|
-
|
|
|
$
|
(30,315
|
)
|
|
$
|
(60,162
|
)
|
Hong Kong
|
|
|
(881
|
)
|
|
|
(5,113
|
)
|
|
|
(881
|
)
|
|
|
(9,422
|
)
|
PRC
|
|
|
(170,380
|
)
|
|
|
(118,867
|
)
|
|
|
(267,817
|
)
|
|
|
(250,925
|
)
|
One-time
transition tax on accumulated foreign earnings
|
|
|
-
|
|
|
|
(478,499
|
)
|
|
|
-
|
|
|
|
(478,499
|
)
|
|
|
|
(170,979
|
)
|
|
|
(602,479
|
)
|
|
|
(299,013
|
)
|
|
|
(799,008
|
)
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
(74,000
|
)
|
|
|
1,173,600
|
|
|
|
120,500
|
|
|
|
1,073,700
|
|
Total income tax
benefit (expense)
|
|
$
|
(244,979
|
)
|
|
$
|
571,121
|
|
|
$
|
(178,513
|
)
|
|
$
|
274,692
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The
Company’s deferred tax assets are comprised of the following:
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
891,000
|
|
|
$
|
540,000
|
|
Net operating
loss
|
|
|
552,000
|
|
|
|
355,000
|
|
Total deferred tax assets
|
|
|
1,443,000
|
|
|
|
895,000
|
|
Valuation allowance
|
|
|
(688,000
|
)
|
|
|
(260,500
|
)
|
Deferred tax assets,
net - long-term
|
|
$
|
755,000
|
|
|
$
|
634,500
|
|
The
Company’s operations in the U.S. have 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 2036. During the three and six months ended December 31,
2018, a total of approximately $495,000 and $725,000 of NOL were generated, respectively. Tax benefit derived from such NOL were
approximately $104,000 and $152,000 during the three and six months ended December 31, 2018, respectively.
The
Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the
deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many
factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings
experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors.
Management has provided an allowance against the deferred tax assets balance as of December 31, 2018. The net increase in valuation
for the three and six months ended December 31, 2018 amounted to approximately $308,000 and $427,500, respectively, based on management’s
reassessment of the amount of the Company’s deferred tax assets that are more likely than not to be realized. Management
considers new evidence, both positive and negative, that could affect the Company’s future realization of deferred tax assets.
Due to the Company’s forecasted pretax income and continuing utilization of its NOL, management determined that there is
sufficient positive evidence to conclude that it is more likely than not that all of the Company’s deferred taxes are realizable.
The
Company’s taxes payable consists of the following:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
VAT tax payable
|
|
$
|
723,563
|
|
|
$
|
531,337
|
|
Corporate income tax payable
|
|
|
2,227,580
|
|
|
|
2,104,232
|
|
Others
|
|
|
63,961
|
|
|
|
65,050
|
|
Total
|
|
$
|
3,015,104
|
|
|
$
|
2,700,619
|
|
Note 13.
CONCENTRATIONS
Major
Customer
For
the three months ended December 31, 2018, one customer accounted for 62.9% of the Company’s revenues. At December 31, 2018,
this customers accounted for approximately 10.4% of the Company’s accounts receivable.
For
the three months ended December 31, 2017, three customers accounted for 60%, 16% and 11% of the Company’s revenues, respectively.
As of December 31, 2017, one of these three customers accounted for 100% of the Company’s accounts due from related parties
and the remaining two customers accounted for approximately 74% of the Company’s accounts receivable.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For
the six months ended December 31, 2018, three customers accounted for 38.9%, 15.6% and 10.6% of the Company’s revenues,
respectively. At December 31, 2018, these three customers accounted for approximately 25.3% of the Company’s accounts receivable.
For
the six months ended December 31, 2017, three customers accounted for 54%, 16% and 11% of the Company’s revenues, respectively.
As of December 31, 2017, one of these three customers accounted for 100% of the Company’s accounts due from related parties
and the remaining two customers accounted for approximately 74% of the Company’s accounts receivable.
Major
Suppliers
For
the three months ended December 31, 2018, two suppliers accounted for 41.2% and 19.9% of the total costs of revenue, respectively.
For
the three months ended December 31, 2017, two suppliers accounted for 82% and 15% of the total costs of revenue, respectively.
For
the six months ended December 31, 2018, four suppliers accounted for 25.8%, 16.9%, 12.5% and 10.4% of the total costs of revenue,
respectively.
For
the six months ended December 31, 2017, one supplier accounted for 71% of the total costs of revenue.
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 logistic services; and (4) container trucking services.
The Company combined freight logistic 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 three and six months ended December 31, 2018 and expects revenue from bulk container trucking to generate less than 5% of its
revenue for fiscal year 2019. Revenue from bulk cargo container services accounted for 1.9% and 5.7% of total revenue for the three
and six months ended December 31, 2017, respectively.
The
following tables present summary information by segment for the three and six months ended December 31, 2018 and 2017, respectively:
|
|
|
|
|
For
the three months ended December 31, 2018
|
|
|
|
Shipping
Agency Services
|
|
|
Inland
Transportation
Management Services
|
|
|
Freight
Logistic
Services
|
|
|
Container
Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related
party
|
|
$
|
-
|
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
75,000
|
|
- Third parties
|
|
$
|
889,070
|
|
|
$
|
345,000
|
|
|
$
|
8,978,923
|
|
|
$
|
227,294
|
|
|
$
|
10,440,287
|
|
Total revenues
|
|
$
|
889,070
|
|
|
$
|
420,000
|
|
|
$
|
8,978,923
|
|
|
$
|
227,294
|
|
|
$
|
10,515,287
|
|
Cost of revenues
|
|
$
|
809,040
|
|
|
$
|
20,000
|
|
|
$
|
7,497,666
|
|
|
$
|
229,891
|
|
|
$
|
8,556,597
|
|
Gross profit
|
|
$
|
80,030
|
|
|
$
|
400,000
|
|
|
$
|
1,481,256
|
|
|
$
|
(2,596
|
)
|
|
$
|
1,958,690
|
|
Depreciation and
amortization
|
|
$
|
-
|
|
|
$
|
20,339
|
|
|
$
|
475
|
|
|
$
|
4,751
|
|
|
$
|
25,565
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,534
|
|
|
$
|
8,534
|
|
Gross margin%
|
|
|
9.0
|
%
|
|
|
95.2
|
%
|
|
|
16.5
|
%
|
|
|
(1.1
|
%)
|
|
|
18.6
|
%
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
For
the three months ended December 31, 2017
|
|
|
Shipping
Agency Services
|
|
|
Inland
Transportation
Management Services
|
|
|
Freight
Logistic
Services
|
|
|
Container
Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related
party
|
|
$
|
-
|
|
|
$
|
555,246
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
555,246
|
|
- Third parties
|
|
$
|
-
|
|
|
$
|
838,595
|
|
|
$
|
3,699,775
|
|
|
$
|
126,865
|
|
|
$
|
4,665,235
|
|
Total revenues
|
|
$
|
-
|
|
|
$
|
1,393,841
|
|
|
$
|
3,699,775
|
|
|
$
|
126,865
|
|
|
$
|
5,220,481
|
|
Cost of revenues
|
|
$
|
-
|
|
|
$
|
174,025
|
|
|
$
|
3,152,005
|
|
|
$
|
49,848
|
|
|
$
|
3,375,878
|
|
Gross profit
|
|
$
|
-
|
|
|
$
|
1,219,816
|
|
|
$
|
547,770
|
|
|
$
|
77,017
|
|
|
$
|
1,844,603
|
|
Depreciation and
amortization
|
|
$
|
-
|
|
|
$
|
12,736
|
|
|
$
|
476
|
|
|
$
|
5,327
|
|
|
$
|
18,539
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,721
|
|
|
$
|
42,480
|
|
|
$
|
45,201
|
|
Gross margin%
|
|
|
-
|
|
|
|
87.5
|
%
|
|
|
14.8
|
%
|
|
|
60.7
|
%
|
|
|
35.3
|
%
|
|
|
For
the six months ended December 31, 2018
|
|
|
Shipping
Agency Services
|
|
|
Inland
Transportation
Management Services
|
|
|
Freight
Logistic
Services
|
|
|
Container
Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related
party
|
|
$
|
-
|
|
|
$
|
397,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
397,000
|
|
- Third parties
|
|
$
|
889,070
|
|
|
$
|
943,000
|
|
|
$
|
14,466,476
|
|
|
$
|
319,274
|
|
|
$
|
16,617,820
|
|
Total revenues
|
|
$
|
889,070
|
|
|
$
|
1,340,000
|
|
|
$
|
14,466,476
|
|
|
$
|
319,274
|
|
|
$
|
17,014,820
|
|
Cost of revenues
|
|
$
|
809,040
|
|
|
$
|
79,874
|
|
|
$
|
12,463,658
|
|
|
$
|
287,857
|
|
|
$
|
13,640,429
|
|
Gross profit
|
|
$
|
80,030
|
|
|
$
|
1,260,126
|
|
|
$
|
2,002,818
|
|
|
$
|
31,417
|
|
|
$
|
3,374,391
|
|
Depreciation and
amortization
|
|
$
|
-
|
|
|
$
|
40,826
|
|
|
$
|
951
|
|
|
$
|
9,503
|
|
|
$
|
51,280
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,357
|
|
|
$
|
9,357
|
|
Gross margin%
|
|
|
9.0
|
%
|
|
|
94.0
|
%
|
|
|
13.8
|
%
|
|
|
9.8
|
%
|
|
|
19.8
|
%
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
For
the six months ended December 31, 2017
|
|
|
Shipping
Agency Services
|
|
|
Inland
Transportation
Management Services
|
|
|
Freight
Logistic
Services
|
|
|
Container
Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related
party
|
|
$
|
-
|
|
|
$
|
1,120,406
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,120,406
|
|
- Third parties
|
|
$
|
-
|
|
|
$
|
1,691,901
|
|
|
$
|
7,208,479
|
|
|
$
|
579,706
|
|
|
$
|
9,480,086
|
|
Total revenues
|
|
$
|
-
|
|
|
$
|
2,812,307
|
|
|
$
|
7,208,479
|
|
|
$
|
579,706
|
|
|
$
|
10,600,492
|
|
Cost of revenues
|
|
$
|
-
|
|
|
$
|
356,175
|
|
|
$
|
6,292,597
|
|
|
$
|
393,024
|
|
|
$
|
7,041,796
|
|
Gross profit
|
|
$
|
-
|
|
|
$
|
2,456,132
|
|
|
$
|
915,882
|
|
|
$
|
186,682
|
|
|
$
|
3,558,696
|
|
Depreciation and
amortization
|
|
$
|
-
|
|
|
$
|
20,397
|
|
|
$
|
951
|
|
|
$
|
10,394
|
|
|
$
|
31,742
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,798
|
|
|
$
|
42,480
|
|
|
$
|
50,278
|
|
Gross margin%
|
|
|
-
|
|
|
|
87.3
|
%
|
|
|
12.7
|
%
|
|
|
32.2
|
%
|
|
|
33.6
|
%
|
Total
assets as of:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Shipping Agency Services
|
|
$
|
587,700
|
|
|
$
|
-
|
|
Inland Transportation Management Services
|
|
|
13,316,748
|
|
|
|
18,338,099
|
|
Freight Logistic Services
|
|
|
409,622
|
|
|
|
591,519
|
|
Container Trucking Services
|
|
|
8,812,133
|
|
|
|
7,228,209
|
|
Total Assets
|
|
$
|
23,126,203
|
|
|
$
|
26,157,827
|
|
Note
15. RELATED PARTY TRANSACTIONS
As
of December 31, 2018 and June 30, 2018, the outstanding amounts due from a related party consist of the following:
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Tianjin Zhiyuan Investment
Group Co., Ltd.
|
|
$
|
1,228,639
|
|
|
$
|
2,319,993
|
|
Less: allowance
for doubtful accounts
|
|
|
(122,864
|
)
|
|
|
(231,999
|
)
|
Total
|
|
$
|
1,105,775
|
|
|
$
|
2,087,994
|
|
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 $397,000 (2.3%
of the Company’s total revenue for the six months ended December 31, 2018). The amount due from Zhiyuan Investment Group
as of December 31, 2018 was $1,228,639. As of December 31, 2018, 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.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As
of December 31, 2018 and June 30, 2018, the outstanding amounts advances to suppliers-related party consist of the following:
|
|
December 31,
|
|
|
June
30,
|
|
|
|
2018
|
|
|
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, and which 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, in consideration 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 cost 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
On January 1, 2019, the Company signed a shipment service agreement with Chongqing Iron and Steel
Company (“Chongqing Iron and Steel”) which appointed the Company to ship 1 million tons of iron ore and coal to
their designated port with service period from January 1, 2019 to December 31, 2019.
On January 30, 2019, the Company signed
an agency agreement with Zhejiang Baoming International Shipping Agency Co., Ltd. and assigned them as the port agent.