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 logistic integrated solution provider. The Company
provides tailored solutions and value-added services for its customers to drive effectiveness and control in related links throughout
the entire shipping and freight logistics chain. The Company conducts its business primarily through its wholly-owned subsidiaries
in the U.S., the People’s Republic of China, including Hong Kong (the “PRC”), Australia and Canada. Currently,
a significant portion of the Company’s business is generated from clients located in the PRC.
The
Company’s Chinese subsidiary, Trans Pacific Shipping Limited, a wholly-owned foreign enterprise (“Trans Pacific Beijing”),
is the 90% owner of Trans Pacific Logistics Shanghai Limited (“Trans Pacific Shanghai”). Trans Pacific Beijing and
Trans Pacific Shanghai are referred to collectively as “Trans Pacific”.
Prior
to fiscal year 2016, the Company’s shipping agency business was operated by its subsidiaries in the PRC. The Company’s
ship management services were operated by its subsidiary in Hong Kong. The Company’s shipping and chartering services were
operated by its subsidiaries in the U.S. and subsidiary in Hong Kong. Currently, the Company’s inland transportation management
services are operated by its subsidiaries in the PRC, Hong Kong and the U.S. The Company’s freight logistic services are
operated by its subsidiaries in the PRC and the U.S. The Company’s container trucking services are currently operated by
its subsidiaries in the PRC and through a joint venture in the U.S. The Company has increased its businesses in the U.S. from
third quarter of fiscal year 2017 since the website of the short haul container truck services platform has launched in December
2016.
In
January 2016, the Company formed a subsidiary, Sino-Global Shipping LA Inc., a California corporation (“Sino LA”),
for the purpose of expanding its business to provide freight logistic services to importers who ship goods into the U.S. The Company
expects to generate additional revenues from providing inland transportation services and bulk cargo container services in the
coming fiscal year.
In
fiscal year 2016, affected by worsening market conditions in the shipping industry, the Company’s shipping agency business
sector suffered a significant decrease in revenue due to a reduced number of ships served. As a result, the Company has suspended
its shipping agency services business. Also, as a result of these market condition changes, the Company has suspended its ship
management services business. In addition, in December 2015, the Company suspended its shipping and chartering services business,
primarily as a result of the termination of a previously-contemplated vessel acquisition. As of June 30, 2017, the Company’s
business segments consist of inland transportation management services, freight logistics services and container trucking services.
In
August 2016, the Company’s Board of Directors (the “Board”) authorized management to move forward with the development
of a mobile application that will provide a full-service logistics platform between the U.S. and the PRC for short-haul trucking
in the U.S.
Sino-Global
completed development of a full-service logistics platform as of December 2016. Upon the completion of the platform, the Company
signed two significant agreements with COSCO Beijing International Freight Co., Ltd. (“COSFRE Beijing”) and Sino-Trans
Guangxi in December 2016. Pursuant to the agreement with COSFRE Beijing, the Company will receive a percentage of the total amount
of each transportation fee for the arrangement of inland transportation services for COSFRE Beijing’s container shipments
into U.S. ports. For the strategic cooperation framework agreement with Sino-Trans Guangxi, which is a subsidiary of Sino-Trans
Limited, the Company expects to utilize both parties’ existing resources and establish an integrated logistics plan to provide
an end-to-end supply chain solution for customers shipping soybeans and sulfur products from the U.S. to southern PRC via container.
On
January 5, 2017, the Company entered into a joint venture agreement and formed a new joint venture company named ACH Trucking
Center Corp. (“ACH Center”) with Jetta Global Logistics Inc. (“Jetta Global”). Along with the establishment
of ACH Center, the Company began providing short haul trucking transportation and logistics services to customers located in the
New York and New Jersey areas. The Company holds a 51% ownership stake in ACH Trucking Center. The financial statements of ACH
Center have been included in the consolidated financial statements of the Company.
On
January 9, 2017, the Company entered into a strategic cooperation agreement with China Ocean Shipping Agency Qingdao Co. Ltd.
(“COSCO Qingdao”). COSCO Qingdao will utilize the Company’s full-service logistics platform to arrange the transport
of its container shipments into U.S. ports. Sino-Global will receive a percentage of the total amount of each transportation fee
in exchange for the arrangement of inland transportation services for COSCO Qingdao’s container shipments into U.S. ports.
On
February 18, 2017, the Company entered into a cooperative transportation agreement with related party, Zhiyuan International Investment
& Holding Group (Hong Kong) Co., Ltd. (the “Buyer” or “Zhiyuan Hong Kong”). Zhiyuan Hong Kong, jointly
with China Minmetals Corporation and China Metallurgical Group Corporation, acts as the general designer, general equipment provider
and general service contractor in the upgrade and renovation project of Perwaja Steel, located in Malaysia (the “Project”).
The Company agreed to provide high-quality services including detailed transportation plan design, plan execution and necessary
supervision of the execution at Zhiyuan Hong Kong’s demand, and the Company will receive 1% to 1.25% transportation fee
incurred in the Project as commission for its services rendered (see Note 3 and Note 16). On July 7, 2017, the Company signed
a supplemental agreement with the buyer, pursuant to which Sino will cooperate with Zhiyuan Hong Kong exclusively on the entire
project’s transportation needs. Pursuant to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan
Hong Kong for its share of packaging and transporting costs related to the project, in return the Company will receive 15% of
its share of the cost incurred in the project from Zhiyuan Hong Kong as a service fee. The project is expected to complete in
one to two years and the Company will collect is service fee in accordance with project completion.
Note
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
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. As mentioned elsewhere in this
report, due to the worsening market conditions in the shipping industry, Sino-China’s shipping agency business suffered
a significant decrease in revenue due to a reduced number of ships served. As a result, the Company has temporarily suspended
this business. Sino-China is also providing services in other related business segments of the Company.
The
carrying amount and classification of Sino-China’s assets and liabilities included in the Company’s consolidated balance
sheets were as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
9,327,990
|
|
|
$
|
31,128
|
|
Total assets
|
|
|
9,472,651
|
|
|
|
129,463
|
|
Total current liabilities
|
|
|
4,517
|
|
|
|
7,222
|
|
Total liabilities
|
|
|
4,517
|
|
|
|
7,222
|
|
(c)
Fair Value of Financial Instruments
We
follow the provisions of ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as
follows:
Level
1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at
the measurement date.
Level
2 — Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for
identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable,
and inputs derived from or corroborated by observable market data.
Level
3 — Unobservable inputs that reflect management’s assumptions based on the best available information.
The
carrying value of accounts receivable, other receivables, other current assets, and current liabilities approximate their fair
values because of the short-term nature of these instruments.
(d)
Use of Estimates and Assumptions
The
preparation of the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates
are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated
financial statements include revenue recognition, fair value of stock based compensation, cost of revenues, allowance for doubtful
accounts, deferred income taxes, 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, 2017 and 2016 are as follows:
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Foreign currency
|
|
Balance
Sheet
|
|
|
Profits/Loss
|
|
|
Balance
Sheet
|
|
|
Profits/Loss
|
|
RMB:1USD
|
|
|
6.7806
|
|
|
|
6.8126
|
|
|
|
6.6487
|
|
|
|
6.4416
|
|
AUD:1USD
|
|
|
1.3028
|
|
|
|
1.3267
|
|
|
|
1.3433
|
|
|
|
1.3755
|
|
HKD:1USD
|
|
|
7.8059
|
|
|
|
7.7651
|
|
|
|
7.7595
|
|
|
|
7.7594
|
|
CAD:1USD
|
|
|
1.2982
|
|
|
|
1.3270
|
|
|
|
1.2992
|
|
|
|
1.3266
|
|
(f)
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash on hand and other highly liquid investments which are unrestricted as to withdrawal or
use, and which have an original maturity of three months or less when purchased. The Company maintains cash and cash
equivalents with various financial institutions mainly in the PRC, Australia, Hong Kong, Canada and the U.S. As of June 30,
2017 and 2016, cash balances of $6,246,337 and $1,333,713, respectively, were maintained at financial institutions in the
PRC, which were not insured by any of the Chinese authorities. As of June 30, 2017 and 2016, cash balance of $2,462,792 and
$43,760, respectively, were maintained at U.S. financial institutions, and were insured by the Federal Deposit
Insurance Corporation or other programs subject to certain limitations.
(g)
Accounts Receivable
Accounts
receivable are presented at net realizable value. The Company maintains allowances for doubtful accounts and for estimated losses.
The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt
as to the collectability of individual receivable balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balances, customers’ historical payment history, their current
credit-worthiness and current economic trends. Receivables are considered past due after 365 days. Accounts Receivable is written
off against the allowances only after exhaustive collection efforts.
(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
|
The
carrying value of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from such
asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying
value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved or based on independent appraisals. Management has determined that there were no
impairments at the balance sheet dates.
(i)
Revenue Recognition
|
●
|
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 shipping and chartering services are recognized upon performance of services as stipulated in the underlying contracts.
|
|
●
|
Revenues
from inland transportation management services are recognized when commodities are being released from the customers’
warehouse.
|
|
●
|
Revenues
from ship management services are recognized when the related contractual services are rendered.
|
|
●
|
Revenues
from freight logistics services are recognized when the related contractual services are rendered.
|
|
●
|
Revenues
from container trucking services are recognized when the related contractual services are rendered.
|
(j)
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 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.
Income
tax returns for the years prior to 2014 are no longer subject to examination by U.S. tax authorities.
PRC
Enterprise Income Tax
PRC
enterprise income tax is calculated based on taxable income determined under the PRC Generally Accepted Accounting Principles
(“PRC GAAP”) at 25%. Sino-China and Trans Pacific are registered in PRC and governed by the Enterprise Income Tax
Laws of the PRC.
PRC
Business Tax and Surcharges
Revenues from services
provided by the Company’s PRC subsidiaries and affiliates, including Sino-China and Trans Pacific are subject to the PRC
business tax of 5%. Business tax and surcharges are paid on gross revenues generated minus the costs of services which are paid
on behalf of the customers.
Enterprises or individuals
who sell commodities, engage in services or selling of goods in the PRC are subject to a value added tax (“VAT”) in
accordance with PRC laws. All of the Company’s revenue generated in the PRC and are subject to a VAT on the gross sales price.
The VAT rates are 6% and 11%, depending on the type of services provided. The VAT may be offset by VAT paid by the Company on service.
In addition, under PRC
regulations, the Company’s PRC subsidiaries and affiliates are required to pay city construction taxes (7%) and education
surcharges (3%) based on calculated business tax payments.
The
Company’s PRC subsidiaries and affiliates report revenues net of PRC’s VAT, business tax and surcharges for all
the periods presented in the consolidated statements of operations.
(k)
Earnings (loss) per Share
Basic
earnings (loss) per share is computed by dividing net income (loss) attributable to holders of common shares of the Company by
the weighted average number of common shares of the Company outstanding during the applicable period. Diluted earnings per share
reflect the potential dilution that could occur if securities or other contracts to issue common shares of the Company were exercised
or converted into common shares of the Company. Common share equivalents are excluded from the computation of diluted earnings
per share if their effects would be anti-dilutive.
For
the year ended June 30, 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 year ended June 30, 2017, a total of 38,466
unexercised options were dilutive and were included in the computation of diluted earnings per share. For the year ended June
30, 2016, no unexercised warrants and options were dilutive.
(l)
Comprehensive Income (loss)
The
Company reports comprehensive income (loss) in accordance with the Financial Accounting Standards Board (“FASB”) issued
authoritative guidance which establishes standards for reporting comprehensive income (loss) and its component in financial statements.
Comprehensive income (loss), as defined, includes all changes in equity during a period from non-owner sources.
(m)
Stock-based Compensation
Valuations
are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair
value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based
on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee
terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding.
The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the
time of the grant.
(n)
Risks and Uncertainties
The
Company’s business, financial position and results of operations may be influenced by the political, economic, and legal
environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject
to special considerations and significant risks not typically associated with companies in North America and Western Europe. These
include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The
Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and
by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation, among other things. Moreover, the Company’s ability to
grow its business and maintain its profitability could be negatively affected by the nature and extent of services provided to
its major customers, Tianjin Zhiyuan Investment Group Co., Ltd. (the “Zhiyuan Investment Group”) and Tengda Northwest
Ferroalloy Co., Ltd. (“Tengda Northwest”).
(o)
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect
on the results of operations and cash flows.
(p)
Recent Accounting Pronouncements
In January 2016, the FASB
issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities, to enhance the reporting model for financial instruments to provide users of financial statements with
more decision-useful information. The update requires equity investments (except those accounted for under the equity method or
those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net
income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate
the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For
public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated
financial statements.
In
February 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (ASU) 2016-02,
Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising
from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee
(and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an
option to extend the lease or not to exercise an option to terminate the lease. Within twelve months or less lease term, a lessee
is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election,
it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for
public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company
is currently evaluating the impact of this new standard on its consolidated financial statements.
In April 2016, the
FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.
The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation
guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same
as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue
from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year.
Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial
statements.
In May 2016, the
FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.
The object is to address certain issues identified by the FASB-IASB Joint Transition Resource Company for Revenue Recognition.
The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers
(Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are
the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). Accounting
Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective
date of Update 2014-09 by one year. Management does not believe the adoption of this ASU would have a material effect on the Company’s
consolidated financial statements.
In August 2016, the
FASB issued Accounting Standards Update (ASU) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in
the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment
or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates
That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made
after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned
Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees;
(8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance
Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should
be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively
for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. Management
does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.
In
January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”.
The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically, these
amendments provide a screen to determine when a set is not a business. If the screen is not met, the amendments in this ASU first
require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly
contribute to the ability to create output, and second, they require removal of the evaluation of whether a market participant
could replace missing elements. These amendments take effect for public businesses for fiscal years beginning after December 15,
2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning
after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company does not expect
that the adoption of this guidance will have a material impact on its consolidated financial statements.
In
May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for
share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment
awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, the ASU is effective
for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017.
Early adoption is permitted, including adoption in any interim period. The Company does not expect that the adoption of this guidance
will have a material impact on its consolidated financial statements.
In
July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260)”, Distinguishing Liabilities from Equity (Topic
480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain
equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial
instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification
when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure
requirements for equity-classified instruments. The amendments in Part II of this Update recharacterize the indefinite deferral
of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those
amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted
for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any
adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company does not
expect that the adoption of this guidance will have a material impact on its consolidated financial statements
.
Note
3. ADVANCES TO SUPPLIERS
The
Company’s advances to third-party suppliers are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Freight fees
|
|
$
|
29,960
|
|
|
$
|
2,192,910
|
|
Others
|
|
|
24,930
|
|
|
|
-
|
|
Total advances to suppliers-third parties
|
|
$
|
54,890
|
|
|
$
|
2,192,910
|
|
As
of June 2017, the Company is undergoing a trial on the transporting of Sulphur product as containerized bulk cargo under joint
agreements with Sino-Trans Guangxi and COSFRE Beijing. As of the end of fiscal year 2017, there was no revenue or cost of revenue
recognized as the service provided has not been completed. $50,020 advances payment made to suppliers (including $29,960 advanced
freight fees and the remaining balance was included in other prepayment) in relation of the trial of bulk cargo containerized
was included in the balance of advances to suppliers as of June 30, 2017.
The
Company’s advances to suppliers – related party are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Freight fees
|
|
$
|
3,333,038
|
|
|
$
|
-
|
|
Total advances to suppliers-related party
|
|
$
|
3,333,038
|
|
|
$
|
-
|
|
As discussed in Note
1, on February 18, 2017, the Company entered into a cooperative transportation agreement with Zhiyuan Hong Kong .
Zhiyuan Hong Kong is owned by our largest shareholder. On July 7, 2017, the Company signed a supplemental agreement, pursuant
to which Sino will cooperate with Zhiyuan Hong Kong exclusively on the entire project’s transportation needs. Pursuant to
the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its share of packaging and transporting
costs related to the project, in return the Company will receive 15% of its share of the cost incurred in the project from Zhiyuan
Hong Kong as a service fee. The project is expected to complete in one to two years and the Company will collect is service fee
in accordance with project completion.
Note
4. ACCOUNTS RECEIVABLE, NET
The
Company’s net accounts receivable is as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Trade accounts receivable
|
|
$
|
2,754,962
|
|
|
$
|
2,540,052
|
|
Less: allowances for doubtful accounts
|
|
|
(185,821
|
)
|
|
|
(207,028
|
)
|
Accounts receivables, net
|
|
$
|
2,569,141
|
|
|
$
|
2,333,024
|
|
For
the year ended June 30, 2017, recovery of doubtful accounts receivable was $18,912. For the year ended June 30, 2016, $132,915
was charged to allowance for doubtful accounts.
Note
5. OTHER RECEIVABLES
The
Company’s other receivables represent mainly prepaid employee insurance and welfare benefits, which will be subsequently
deducted from the employee payroll, guarantee deposits on behalf of ship owners as well as office lease deposits.
Note
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The
Company’s prepaid expenses and other current assets are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Consultant fees (1)
|
|
$
|
158,150
|
|
|
$
|
845,420
|
|
Advance to employees
|
|
|
64,160
|
|
|
|
105,137
|
|
Other (including prepaid web hosting , public relations services)
|
|
|
95,708
|
|
|
|
55,056
|
|
Total
|
|
|
318,018
|
|
|
|
1,005,613
|
|
Less : current portion
|
|
|
311,136
|
|
|
|
826,631
|
|
Total noncurrent portion
|
|
$
|
6,882
|
|
|
$
|
178,982
|
|
(1)
The Company entered into a management consulting services agreement with a consulting company on November 12, 2015, pursuant to
which the consulting company shall assist the Company with its regulatory filings during the period from July 1, 2016 to June
30, 2018. In return for its services, as approved by the Board, a total of RMB 2,100,000 ($316,298) was paid to the consulting
company. The above-mentioned consulting fees have been and will be ratably charged to expense over the terms of the above-mentioned
agreement.
Note
7. PROPERTY AND EQUIPMENT, NET
The
Company’s net property and equipment as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
198,512
|
|
|
$
|
202,450
|
|
Motor vehicles
|
|
|
542,471
|
|
|
|
497,006
|
|
Computer equipment
|
|
|
155,141
|
|
|
|
156,890
|
|
Office equipment
|
|
|
66,097
|
|
|
|
59,899
|
|
Furniture and fixtures
|
|
|
163,219
|
|
|
|
164,701
|
|
System software
|
|
|
117,733
|
|
|
|
119,964
|
|
Leasehold improvements
|
|
|
62,857
|
|
|
|
64,105
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,306,030
|
|
|
|
1,265,015
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
1,118,657
|
|
|
|
1,088,648
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
187,373
|
|
|
$
|
176,367
|
|
Depreciation
and amortization expense for the years ended June 30, 2017 and 2016 were $49,367 and $59,508, respectively.
Note
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities represent mainly payroll and welfare payable, accrued expenses and other miscellaneous
items.
Note
9. STOCK-BASED COMPENSATION
The
issuance of the Company’s options is exempted from registration under of the Securities Act of 1933, as amended (the “Act”).
The Common Stock underlying the Company’s options granted may be sold in compliance with Rule 144 under the Act. Each option
may be exercised to purchase one share of the common stock of the Company, no par value per share (the “Common Stock”).
Payment for the options may be made in cash or by 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 Stock on the date of exercise.
The
term of the 56,000 options granted in 2009 is for 10 years and the exercise price of the 56,000 options issued in 2009 is $7.75.
The fair value of the 56,000 stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:
volatility of 173.84%, risk free interest rate of 3.02% and expected life of 10 years. The total fair value of the options was
$413,107. In accordance with the vesting periods, the Company recorded no stock-based compensation expense for the years ended
June 30, 2017 and 2016. The options are fully vested at June 30, 2017.
The
term of the 10,000 options granted in 2013 is 10 years and the exercise price of the 10,000 options issued in 2013 is $2.01. The
fair value of the 10,000 stock options was calculated at the grant date using the Black-Scholes option-pricing model with the
following assumptions: volatility of 452.04%, risk free interest rate of 0.88% and expected life of 10 years. The total fair value
of the options was $19,400. In accordance with the vesting periods, the Company amortized stock option expense of $3,880 for each
of the years ended June 30, 2017 and 2016. As of June 30, 2017, 8,000 options were vested.
Pursuant
to the Company’s 2014 Stock Incentive Plan, effective on July 26, 2016, the Company granted a total of 150,000 to two employees
with a one-year vesting period, one half of which vested on October 26, 2016, and the other half will vest on July 26, 2017. The
exercise price of the 150,000 options is $1.10, which was equal to the share price of the Company’s Common Stock on July
26, 2016. The grant date fair value of such options was $0.77 per share. The fair value of the 150,000 options was calculated
using the Black-Scholes options pricing model with the following assumptions: volatility of 99.68%, risk free interest rate of
1.15%, and expected life of 5 years. The total fair value of the options was $115,979. In accordance with the vesting periods,
$106,315 and nil were recorded as general and administrative expenses related to these options for the years ended June 30, 2017
and 2016. In February 2017, 75,000 of these options were exercised by the two employees of the Company.
Pursuant
to the Company’s 2014 Stock Incentive Plan, the Company granted a total of 800,000 options on December 14, 2016, to purchase
an aggregate of 800,000 shares of Common Stock to seven employees, with a vesting period from one to three years. The grant date
fair value of such options was $2.24 per option. The fair value of the 800,000 options was calculated using the Black-Scholes
options pricing model with the following assumptions: volatility of 112.70%, risk free interest rate of 2.02%, and expected life
of 5 years. The total fair value of the options was $1,788,985. With the seven employees’ consent, the Company cancelled
the 800,000 options, effective February 16, 2017 and nil was recorded as part of general and administrative expenses related to
these options for the year ended June 30, 2017.
A
summary of the options is presented in the table below:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2016
|
|
|
66,000
|
|
|
$
|
6.88
|
|
Granted
|
|
|
950,000
|
|
|
|
2.78
|
|
Exercised
|
|
|
(75,000
|
)
|
|
|
1.10
|
|
Cancelled
|
|
|
(800,000
|
)
|
|
|
3.10
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2017
|
|
|
141,000
|
|
|
$
|
3.81
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, as of June 30, 2017
|
|
|
64,000
|
|
|
$
|
7.03
|
|
Following
is a summary of the status of options outstanding and exercisable at June 30, 2017:
Outstanding Options
|
|
Exercisable Options
|
|
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise
Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
$
|
7.75
|
|
|
|
56,000
|
|
|
0.88 years
|
|
$
|
7.75
|
|
|
|
56,000
|
|
|
|
0.88
years
|
|
$
|
2.01
|
|
|
|
10,000
|
|
|
5.59 years
|
|
$
|
2.01
|
|
|
|
8,000
|
|
|
|
5.59
years
|
|
$
|
1.10
|
|
|
|
75,000
|
|
|
4.07 years
|
|
$
|
1.10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
141,000
|
|
|
|
|
|
|
|
|
|
64,000
|
|
|
|
|
|
Following
is a summary of the status of warrants outstanding and exercisable at June 30, 2017:
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
Average
Remaining
Contractual Life
|
|
|
139,032
|
|
|
|
139,032
|
|
|
$
|
9.30
|
|
|
|
0.88
years
|
|
Total
expenses for options and warrants amounted to $110,195 and $3,880 for the year ended June 30, 2017 and 2016, respectively.
Note
10. EQUITY TRANSACTIONS
On
June 6, 2014, the Company entered into management consulting and advisory services agreements with two consultants, pursuant to
which the consultants assisted the Company in, among other things, financial and tax due diligence, business evaluation and integration,
development of pro forma financial statements. In return for their services, as approved by the Company’s Board of Directors,
a total of 600,000 shares of the Company’s common stock were to be issued to these two consultants. During June 2014, 200,000
shares of the Company’s common stock were issued to the consultants as a prepayment for their services. The value of their
consulting services was determined using the fair value of the Company’s common stock of $2.34 per share when the shares
were issued to the consultants. Their service agreements were for the period July 1, 2014 to December 31, 2016. The remaining
400,000 shares of the Company’s common stock were then issued to the consultants on September 30, 2014 at $1.68 per share,
and the service terms are from September 2014 to November 2016. These shares were valued at $1,140,000 and the related consulting
fees have been ratably charged to expense over the term of the agreements. Consulting expenses for the above services were $218,045
and $485,867 for the years ended June 30, 2017 and 2016, respectively.
On
May 5, 2015, the Company entered into management consulting and advisory services agreements with three consultants, pursuant
to which the consultants assisted the Company in, among other things, review of time charter agreements; crew management advisory;
development of permanent and preventive maintenance standards related to dry dockings and ship repairs; development of regular
technical and marine vessel inspections and quality control procedures; and development and implementation of alternative remedial
actions to address technical problems that may arise. In return for their services, as approved by the Company’s Board of
Directors, a total of 500,000 shares of the Company’s common stock were to be issued to these three consultants at $1.50
per share. Their service agreements are for a period of 18 months, effective May 2015. These shares were valued at $750,000 and
the related consulting fees have been ratably charged to expense over the term of the agreements. Consulting expenses for the
above services were $173,137 and $498,633 for the years ended June 30, 2017 and 2016, respectively
On
December 9, 2015, the Company entered into a consulting and advisory services agreement with a consultant, pursuant to which the
consultant will assist the Company for corporate restructuring, business evaluation and capitalization during the period from
November 20, 2015 to November 19, 2016. In return for such services, the Company issued 250,000 shares of the Company’s
common stock to this consultant for services to be rendered during the first half of the service period. Such shares were issued
as restricted shares at $1.02 per share on December 9, 2015. On May 23, 2016, the Company issued additional 250,000 shares of
common stock to this consultant at $0.72 per share to cover the services from the seventh month to November 19, 2016. These shares
were valued at $435,000 and consulting expenses were $138,387 and $296,612 for the years ended June 30, 2017 and 2016, respectively.
Pursuant
to the Company’s 2014 Incentive Plan (the “Plan”), the Company is authorized to issue, in the aggregate, 10,000,000
shares of common stock or other securities convertible or exercisable for common stock. Effective February 11, 2016, the Compensation
Committee of the Board of Directors of the Company granted 660,000 shares of common stock to seven directors and executive officers
under the Plan. Pursuant to the terms and conditions of the Plan and the plan stock award agreements, these shares vested immediately,
with a total value of $349,800, at $0.53 per share based on the Company’s stock price on February 10, 2016. In addition,
the Compensation Committee authorized the grant of a total of $300,000 worth of share awards under the Plan and/or the 2008 Equity
Stock Incentive Plan for each fiscal year going forward to its directors and executive officers in the same proportion as they
were granted for the fiscal year 2016, as long as such a director or executive officer is in his position and fulfills his duty.
In
March 2017, the Company entered into a consulting and advisory services agreement with Jianwei Li, who will provide management
consulting services that include marketing program designing and implementation and cooperative partner selection and management.
The service period is from March 2017 to February 2020. The Company issued 250,000 shares of common stock as the remuneration
of the service, which were issued as restricted shares at $2.53 per share on March 22, 2017 to the consultant. These
shares were valued at $632,500 and consulting expenses were $70,278 for the year ended June 30, 2017.
$599,846
and $1,327,780 were charged to expenses during the years ended June 30, 2017 and 2016, respectively.
On
February 21, 2017, the Company completed a sale of 1.5 million registered shares of its common stock, no par value, at a purchase
price of $3.18 per share, to three institutional investors, for aggregate gross proceeds to the Company of $4.77 million. The
Company’s net proceeds from the offering, after deducting offering expenses and placement agent fees in the amount of $0.45
million, were approximately $4.32 million. Sino-Global will use the net proceeds from the offering for working capital and general
corporate purposes.
Note
11. NON-CONTROLLING INTEREST
The
Company’s non-controlling interest consists of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Sino-China:
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
217,379
|
|
|
|
157,019
|
|
Accumulated deficit
|
|
|
(5,421,578
|
)
|
|
|
(5,349,210
|
)
|
|
|
|
(4,846,755
|
)
|
|
|
(4,834,747
|
)
|
Trans Pacific Logistics Shanghai Ltd.
|
|
|
46,047
|
|
|
|
27,400
|
|
ACH Trucking Center Corp.
|
|
|
31,929
|
|
|
|
-
|
|
Total
|
|
$
|
(4,768,779
|
)
|
|
$
|
(4,807,347
|
)
|
Note
12. COMMITMENTS AND CONTINGENCY
Lease
Obligations
The
Company leases certain office premises and apartments for employees under operating lease agreements with various terms through
April 16, 2020. Future minimum lease payments under the operating lease agreements are as follows:
Twelve months ending June 30,
|
|
Amount
|
|
2018
|
|
$
|
215,560
|
|
2019
|
|
|
149,081
|
|
2020
|
|
|
48,597
|
|
|
|
$
|
413,238
|
|
Rental
expenses for the years ended June 30, 2017 and 2016 was $266,316 and $243,374, respectively.
Legal
proceedings
During
the quarter ended December 31, 2015, a former vice president of the Company (the “Former Officer”) filed a complaint
with the U.S. Department of Labor-Occupational Safety and Health Administration (“OSHA”) against the Company and three
current or former executives. The Former Officer sought $350,000 in damages plus attorney’s fees for alleged retaliation
and a purported breach of his employment agreement. The Company responded to the complaint filed with OSHA and provided arguments
and information supporting the Company’s position that no violation of law in connection with the Former Officer’s
employment occurred. The complaint was settled on January 24, 2017, and the Company is required to pay a total of $185,000, of
which $60,000 was paid on February 6, 2017 to the former officer. The settlement payment of $185,000 included the former officer’s
salary, unemployment compensation and legal expenses incurred in connection with the complaint, which has been fully recorded
and included in general and administrative expenses. The balance of $125,000 was paid to the Former Officer on April 26, 2017.
Contingencies
The
Labor Contract Law of the PRC requires employers to insure the liability of the severance payments for terminated employees that
have worked for the employers for at least two years prior to January 1, 2008. Employers are liable for one month of severance
pay per year of the service provided by employees. As of June 30, 2017 and 2016, the Company has estimated its severance payments
of approximately $48,713 and $62,500, respectively, which have not been reflected in its consolidated financial statements, because
management cannot predict what the actual payment, if any, will be in the future.
Note
13. INCOME TAXES
Income
tax expense for the years ended June 30, 2017 and 2016 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 the federal statutory tax rate of
34% to the Company’s effective tax rate are as follows:
|
|
For the years ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
U.S. statutory tax rate
|
|
|
34.0
|
|
|
|
34.0
|
|
U.S. permanent difference
|
|
|
3.9
|
|
|
|
(11.0
|
)
|
Change in valuation allowance
|
|
|
(39.9
|
)
|
|
|
(105.9
|
)
|
Rate differential in foreign jurisdiction
|
|
|
(13.1
|
)
|
|
|
25.0
|
|
Other
|
|
|
-
|
|
|
|
3.3
|
|
|
|
|
(15.1
|
)
|
|
|
(54.6
|
)
|
The
Company’s income tax benefit (expense) for the years ended June 30, 2017 and 2016 are as follows:
|
|
For the years ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
USA
|
|
$
|
-
|
|
|
$
|
-
|
|
Hong Kong
|
|
|
(70,958
|
)
|
|
|
23,287
|
|
China
|
|
|
(206,358
|
)
|
|
|
(555,280
|
)
|
|
|
|
(277,316
|
)
|
|
|
(531,993
|
)
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
USA
|
|
|
749,400
|
|
|
|
(280,600
|
)
|
|
|
|
749,400
|
|
|
|
(280,600
|
)
|
|
|
|
|
|
|
|
|
|
Total income tax benefit (expense)
|
|
$
|
472,084
|
|
|
$
|
(812,593
|
)
|
The
Company’s deferred tax assets are comprised of the following:
|
|
For the years ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
106,000
|
|
|
$
|
112,000
|
|
Stock-based compensation
|
|
|
790,000
|
|
|
|
735,000
|
|
Net operating loss
|
|
|
1,464,000
|
|
|
|
3,752,000
|
|
Total deferred tax assets
|
|
|
2,360,000
|
|
|
|
4,599,000
|
|
Valuation allowance
|
|
|
(1,610,600
|
)
|
|
|
(4,599,000
|
)
|
Deferred tax assets, net - long-term
|
|
$
|
749,400
|
|
|
$
|
-
|
|
The
Company’s operations in the U.S. have incurred a cumulative net operating loss (“NOL”) of approximately
$6,205,000 as of June 30, 2017, which may reduce future taxable income. For the year ended June 30, 2017, approximately
$1,853,000 of NOL was utilized and the tax benefit derived from such NOL was
approximately $630,000. For the year ended June 30, 2016, the utilization of NOL was nil and no tax benefit was derived from
NOL. This carry-forward will expire if not utilized by 2036.
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.
Part of the Company’s traditional business, such as shipping agency services and shipping and chartering services, is temporarily
suspended. Management has provided an allowance against the deferred tax assets balance as of June 30, 2017. The net decrease in the valuation allowance for the
year ended June 30, 2017 was $2,988,000 and the net increase in the valuation allowance for the same period of 2016 was $2,026,600.
The
Company’s taxes payable consists of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
VAT tax payable
|
|
$
|
520,436
|
|
|
$
|
475,066
|
|
Corporate income tax payable
|
|
|
1,290,832
|
|
|
|
1,100,380
|
|
Others
|
|
|
74,948
|
|
|
|
61,751
|
|
Total
|
|
$
|
1,886,216
|
|
|
$
|
1,637,197
|
|
Note 14.
CONCENTRATIONS
Major
Customers
For
the year ended June 30, 2017, three customers accounted for 26%, 24% and 19% of the Company’s revenues. At June 30, 2017,
one of these three customers accounted for 100% of the Company’s accounts due from related parties (See Note 16) and the
remaining two customers accounted for approximately 63% of the Company’s accounts receivable.
For
the year ended June 30, 2016, two customers accounted for 31% and 27% of the Company’s revenues. At June 30, 2016, these
two customers accounted for 100% and approximately 70% of the Company’s due from related parties and accounts receivable.
Major
Suppliers
For
the year ended June 30, 2017, two suppliers accounted for 42% and 11% of the total costs of revenue. For the year ended June 30,
2016, three suppliers accounted for 27%, 15% and 10% of the total cost of revenues.
Note 15.
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 five operating segments: (1) shipping agency and ship management services; (2) shipping and chartering
services; (3) inland transportation management services; (4) freight logistics services; and (5) container trucking services.
However, due to the downturn in the shipping industry, the Company has decided to suspend to its shipping agency and ship management
services and shipping and chartering services.
The
following tables present summary information by segment for the years ended June 30, 2017 and 2016, respectively:
|
|
For the year ended June
30, 2017
|
|
|
|
Shipping
Agency and Ship
Management
Services
|
|
|
Shipping and
Chartering
Services
|
|
|
Inland
Transportation
Management
Services
|
|
|
Freight
Logistic
Services
|
|
|
Container
Trucking
Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,746,423
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,746,423
|
|
- Third parties
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,012,177
|
|
|
$
|
4,815,450
|
|
|
$
|
871,563
|
|
|
$
|
8,699,190
|
|
Cost of revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
620,259
|
|
|
$
|
3,710,364
|
|
|
$
|
649,968
|
|
|
$
|
4,980,591
|
|
Gross profit
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,138,341
|
|
|
$
|
1,105,086
|
|
|
$
|
221,595
|
|
|
$
|
6,465,022
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,857
|
|
|
$
|
21,510
|
|
|
$
|
-
|
|
|
$
|
49,367
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
61,359
|
|
|
$
|
1,053
|
|
|
$
|
-
|
|
|
$
|
62,412
|
|
|
|
For the year ended June
30, 2016
|
|
|
|
Shipping
Agency and Ship
Management
Services
|
|
|
Shipping and
Chartering
Services
|
|
|
Inland
Transportation
Management
Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,269,346
|
|
|
$
|
2,269,346
|
|
- Third parties
|
|
$
|
2,507,800
|
|
|
$
|
462,218
|
|
|
$
|
2,071,176
|
|
|
$
|
5,041,194
|
|
Cost of revenues
|
|
$
|
2,175,109
|
|
|
$
|
212,510
|
|
|
$
|
1,350,370
|
|
|
$
|
3,737,989
|
|
Gross profit
|
|
$
|
332,691
|
|
|
$
|
249,708
|
|
|
$
|
2,990,152
|
|
|
$
|
3,572,551
|
|
Depreciation and amortization
|
|
$
|
45,434
|
|
|
$
|
1,410
|
|
|
$
|
12,664
|
|
|
$
|
59,508
|
|
Total capital expenditures
|
|
$
|
13,537
|
|
|
$
|
2,854
|
|
|
$
|
15,268
|
|
|
$
|
31,659
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Total assets:
|
|
|
|
|
|
|
Shipping Agency and Ship Management Services
|
|
$
|
-
|
|
|
$
|
1,271,948
|
|
Shipping and Chartering Services
|
|
|
-
|
|
|
|
534,896
|
|
Inland Transportation Management Services
|
|
|
15,552,593
|
|
|
|
7,247,300
|
|
Freight Logistic Services
|
|
|
1,704,946
|
|
|
|
-
|
|
Container Trucking Services
|
|
|
558,482
|
|
|
|
-
|
|
Total Assets
|
|
$
|
17,816,021
|
|
|
$
|
9,054,144
|
|
Note
16. OTHER RELATED PARTY TRANSACTIONS
As
of June 30, 2017 and 2016, the outstanding amounts due from related party consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Tianjin Zhiyuan Investment Group Co., Ltd.
|
|
|
1,715,130
|
|
|
|
1,622,519
|
|
Total
|
|
$
|
1,715,130
|
|
|
$
|
1,622,519
|
|
In
June 2013, the Company signed a five-year global logistics service agreement with Tianjin Zhiyuan Investment Group Co., Ltd. (the
“Zhiyuan Investment Group”) and TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd. (together with Zhiyuan
Investment Group, “Zhiyuan”). Zhiyuan Investment Group is owned by Mr. Zhang, the largest shareholder of the Company.
In September 2013, the Company executed an inland transportation management service contract with the Zhiyuan Investment Group
whereby it would provide certain advisory services and help control potential commodities loss during the transportation process.
As a result of the inland transportation management services provided to Zhiyuan, the Company generated revenue of $2,746,423
(24% of the Company’s total revenue in 2017) and $2,269,346 (31% of the Company’s total revenue in 2016) for the years
ended June 30, 2017 and 2016, respectively. The amount due from Zhiyuan Investment Group at June 30, 2016 was $1,622,519. During
the year ended June 30, 2017, the Company continued to provide inland transportation management services to Zhiyuan and collected
approximately $2.7 million from Zhiyuan to reduce outstanding accounts receivable. As of June 30, 2017, the amount due from Zhiyuan
was $1,715,130, the aging of which is less than 180 days.
As
of June 30, 2017 and 2016, the outstanding amounts of advance to suppliers-related party consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Zhiyuan International Investment & Holding Group (Hong
Kong) Co., Ltd.
|
|
|
3,333,038
|
|
|
|
-
|
|
Total
|
|
$
|
3,333,038
|
|
|
$
|
-
|
|
On
February 18, 2017, Trans Pacific Beijing (subsidiary) and Sino China (VIE) (collectively, the “Seller”), a subsidiary
and VIE of the Company, entered into a Cooperative Transportation Agreement (the “Agreement”) with Zhiyuan International
Investment & Holding Group (Hong Kong) Co., Ltd. (the “Buyer” or “Zhiyuan Hong Kong”). The Buyer is
also owned by Mr. Zhang, the largest shareholder of the Company. Pursuant to the Agreement, the Buyer jointly with China Minmetals
Corporation and China Metallurgical Group Corporation acts as the general designer, general equipment provider and general service
contractor in the upgrade and renovation project of Perwaja Steel Indonesia which is located in Malaysia (the “Project”).
The Seller shall be appointed as general agent to handle all related logistics and transportation occurring in the Project.
On
July 7, 2017, the Company signed a supplemental agreement with the Buyer, pursuant to which Sino will cooperate with Zhiyuan Hong
Kong exclusively on the entire project’s transportation needs. Pursuant to the supplemental agreement, the Company agrees
to make prepayments to Zhiyuan Hong Kong for its share of packaging and transporting costs related to the project, in return the
Company will receive 15% of its share of the cost incurred in the project from Zhiyuan Hong Kong as a service fee. The project
is expected to complete in one to two years and the Company will collect is service fee in accordance with project completion.
As
of June 30, 2017 and 2016, the outstanding amounts due to related parties consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
ACH Logistic Inc.
|
|
$
|
131,262
|
|
|
$
|
-
|
|
Jetta Global Logistics Inc.
|
|
|
75,061
|
|
|
|
-
|
|
Total
|
|
$
|
206,323
|
|
|
$
|
-
|
|
In
December 2016, the Company entered into a joint venture agreement with Jetta Global to form ACH Trucking Center to provide short-haul
trucking transportation and logistics services to customers located in the New York and New Jersey areas. ACH Logistic Inc. (ACH
Logistic) and Jetta Global are invested by the same owner and both of the companies provided freight logistic service and container
trucking service to the Company. For the year ended June 30, 2017, ACH Logistic and Jetta Global provided services in the amount
of $788,775 and $222,869 to the Company, respectively.
Note
17. SUBSEQUENT EVENTS
In
July 2017 the Company entered into a supplemental agreement with Tengda Northwest to extend the global logistic service period
until July 3, 2018.
In
August 2017, the Company entered into a supplemental agreement with Zhiyuan to extend the inland transportation management service
period until September 1, 2018.
On
August 24, 2017, Sino signed a marketing promoting service agreement with COSCO Qingdao. Pursuant to the agreement, COSCO Qingdao
will help Sino to promote shipping and multimodal transportation including inland trucking container transportation services,
switch bill and freight collection services. On August 24, 2017, Sino has paid $100,000 to COSCO Qingdao for first installment
(September 1, 2017 to December 31, 2017) of the marketing expense.
F-21