The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
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 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 logistics 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 business in the U.S. since the launch of the short
haul container truck services web-based platform 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 logistics 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 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 a related party, Zhiyuan International Investment & Holding
Group (Hong Kong) Co., Ltd. (the “Buyer” or “Zhiyuan Hong Kong”). Zhiyuan Hong Kong, jointly with China
Minmetals Corporation and China Metallurgical Group Corporation, acts as the general designer, general equipment provider and general
service contractor in the upgrade and renovation project of Perwaja Steel, located in Malaysia (the “Project”). 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 a 1% to 1.25% transportation fee incurred in
the Project as a 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 the Company will cooperate with Zhiyuan Hong Kong exclusively on the entire Project’s
transportation needs. Pursuant to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its
share of packaging and transporting costs related to the Project; in return, the Company will receive 15% of the cost incurred
in the Project from Zhiyuan Hong Kong as a service fee. The Project is expected to be completed in one to two years and the Company
will collect its service fee in accordance with Project completion.
On September 11, 2017,
the Company set up a new wholly-owned subsidiary, Sino-Global Supply Chain Management Ningbo Ltd., via the wholly-owned entity,
Sino-Global Shipping New York Inc. This subsidiary primarily engages in supply chain management and freight logistics services.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying 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:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
9,504,400
|
|
|
$
|
9,327,990
|
|
Total assets
|
|
|
9,646,254
|
|
|
|
9,472,651
|
|
Total current liabilities
|
|
|
13,491
|
|
|
|
4,517
|
|
Total liabilities
|
|
|
13,491
|
|
|
|
4,517
|
|
(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 as
of September 30, 2017 and June 30, 2017 and for the three months ended September 30, 2017 and 2016 are as follows:
|
|
September 30,
|
|
|
June 30,
|
|
|
Three months ended September 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
Foreign currency
|
|
Balance Sheet
|
|
|
Balance Sheet
|
|
|
Profits/Loss
|
|
|
Profits/Loss
|
|
RMB:1USD
|
|
|
6.6549
|
|
|
|
6.7806
|
|
|
|
6.6704
|
|
|
|
6.6668
|
|
AUD:1USD
|
|
|
1.2764
|
|
|
|
1.3028
|
|
|
|
1.2669
|
|
|
|
1.3194
|
|
HKD:1USD
|
|
|
7.8115
|
|
|
|
7.8059
|
|
|
|
7.8147
|
|
|
|
7.7565
|
|
CAD:1USD
|
|
|
1.2468
|
|
|
|
1.2982
|
|
|
|
1.2537
|
|
|
|
1.3045
|
|
(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 September 30, 2017 and June 30, 2017, cash balances of $6,628,679
and $6,246,337, respectively, were maintained at financial institutions in the PRC, which were not insured by any of the Chinese
authorities. As of September 30, 2017 and June 30, 2017, cash balance of $1,257,246 and $2,462,792, respectively, were maintained
at U.S. financial institutions, and were insured by the Federal Deposit Insurance Corporation or other programs subject to certain
limitations.
(g) 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 are 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 the asset’s purchase price and any
directly attributable costs of bringing the asset 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 are less
than the asset’s 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 as of 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 are subject to a VAT on the gross sales price.
The VAT rates are 6% and 11%, depending on the type of services provided. The Company is entitled to a deduction or offset for
VAT paid on the services rendered by the vendors against the VAT when the Company engage in services.
In addition, under 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 three months
ended September 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 three months ended September 30, 2017, a total of 52,090 unexercised
options were dilutive and were included in the computation of diluted earnings per share. For the three months ended September
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) Recent Accounting Pronouncements
Revenue Recognition:
In
May 2014, the FASB issued Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers: Topic
606
(ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09
is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration
that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle
and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required
under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration
to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is
effective for the Company in the first quarter of fiscal year 2018 using either of two methods: (i) retrospective to each
prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 (full retrospective
method); or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial
application and providing certain additional unaudited condensed as defined per ASU 2014-09 (modified retrospective method). The
Company is currently assessing the impact to its unaudited condensed financial statements, and have not yet selected a transition
approach.
Leases
:
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-2”), which provides guidance on lease
amendments to the FASB Accounting Standard Codification. This ASU will be effective for us beginning in May 1, 2019. The Company
is currently in the process of evaluating the impact of the adoption of ASU 2016-2 on unaudited condensed financial statements.
Statement of Cash
Flows:
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): The amendments in this Update
apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of
cash flows under Topic 230. The amendments in this Update provide guidance on the following eight specific cash flow issues. The
amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current
and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in
an interim period. The Company is still evaluating the effect that this guidance will have on the Company’s unaudited condensed
financial statements and related disclosures.
Business Combination
:
In January 2017, the FASB issued Accounting Standards Update No. 2017-01,
Business Combinations (Topic 805): Clarifying
the Definition of a Business
(ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating
when a set of transferred assets and activities is a business. This guidance will be effective for us in the fiscal year beginning
after December 15, 2017 and interim periods within those periods on a prospective basis, and early adoption is permitted. The Company
does not expect the standard to have a material impact on its consolidated financial statements.
Stock-based Compensation
:
In
May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock compensation (Topic 718): Scope of modification
accounting” (“ASU 2017-09”). The purpose of the amendment is to clarify which changes to the terms or conditions
of a share-based payment award require an entity to apply modification accounting. For all entities that offer share based payment
awards, ASU 2017-09 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company
is currently assessing the impact of ASU 2017-09 on its
unaudited condensed
financial
statements.
Stock-based Compensation
:
In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260)”, Distinguishing Liabilities from Equity
(Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of
certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial
instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification
when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure
requirements for equity-classified instruments. The amendments in Part II of this Update recharacterize the indefinite deferral
of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments
do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal
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 unaudited condensed financial statements.
Revenue Recognition
and Leases
: In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases
(Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC
Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that
a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after
December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC
Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting
periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified
entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods
within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object to certain public
business entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13,
however, limits such election to certain public business entities that “otherwise would not meet the definition of a public
business entity except for a requirement to include or inclusion of its financial statements or financial information in another
entity’s filings with the SEC”. Management does not expect the adoption of ASU 2017-13 to have any material impact
on its financial positions and results of operations or cash flows.
Except for the ASU’s
above, any other ASU’s not expected to have a material impact on the consolidated financial statements upon adoption.
Note 3. ADVANCES TO SUPPLIERS
The Company’s
advances to third-party suppliers are as follows:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Freight fees
|
|
$
|
30,053
|
|
|
$
|
29,960
|
|
Others
|
|
|
4,508
|
|
|
|
24,930
|
|
Total advances to suppliers-third parties
|
|
$
|
34,561
|
|
|
$
|
54,890
|
|
As of September 2017,
the advance to third-party suppliers was primarily related to freight logistics services.
The Company’s
advances to suppliers – related party are as follows:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Freight fees
|
|
$
|
3,395,994
|
|
|
$
|
3,333,038
|
|
Total advances to suppliers-related party
|
|
$
|
3,395,994
|
|
|
$
|
3,333,038
|
|
As discussed in Note
1, on February 18, 2017, the Company entered into a cooperative transportation agreement with Zhiyuan Hong Kong. Zhiyuan Hong
Kong is owned by the Company’s largest shareholder. On July 7, 2017, the Company signed a supplemental agreement, pursuant
to which the Company will cooperate with Zhiyuan Hong Kong exclusively on the entire Project’s transportation needs. Pursuant
to the supplemental agreement, the Company agrees to make prepayments to Zhiyuan Hong Kong for its share of packaging and transporting
costs related to the Project; in return the Company will receive 15% of the cost incurred in the Project from Zhiyuan Hong Kong
as a service fee. The Project is expected to be completed in one to two years, and the Company will collect its service fee in
accordance with Project completion. As of September 30, 2017, no cost was recognized under this Project.
Note 4. ACCOUNTS RECEIVABLE, NET
The Company’s
net accounts receivable is as follows:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
4,482,768
|
|
|
$
|
2,754,962
|
|
Less: allowances for doubtful accounts
|
|
|
(163,950
|
)
|
|
|
(185,821
|
)
|
Accounts receivables, net
|
|
$
|
4,318,818
|
|
|
$
|
2,569,141
|
|
For the three months
ended September 30, 2017, recovery of doubtful accounts receivable was $24,536, due to collection of accounts receivable the Company
made a provision for during the previous period. For the three months ended September 30, 2016, recovery of doubtful accounts receivable
was $109,693, because the Company reserved for collected the balance from Tengda Northwest Ferroalloy Co., Ltd, previously.
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:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Consultant fees (1)
|
|
$
|
118,612
|
|
|
$
|
158,150
|
|
Advance to employees
|
|
|
95,044
|
|
|
|
64,160
|
|
Other (including prepaid web hosting , public relation services)
|
|
|
147,919
|
|
|
|
95,708
|
|
Total
|
|
|
361,575
|
|
|
|
318,018
|
|
Less : current portion
|
|
|
358,069
|
|
|
|
311,136
|
|
Total noncurrent portion
|
|
$
|
3,506
|
|
|
$
|
6,882
|
|
(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 rateably 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:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
202,261
|
|
|
$
|
198,512
|
|
Motor vehicles
|
|
|
553,172
|
|
|
|
542,471
|
|
Computer equipment
|
|
|
154,718
|
|
|
|
155,141
|
|
Office equipment
|
|
|
74,348
|
|
|
|
66,097
|
|
Furniture and fixtures
|
|
|
164,630
|
|
|
|
163,219
|
|
System software
|
|
|
119,857
|
|
|
|
117,733
|
|
Leasehold improvements
|
|
|
64,044
|
|
|
|
62,857
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,333,030
|
|
|
|
1,306,030
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
1,150,925
|
|
|
|
1,118,657
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
182,105
|
|
|
$
|
187,373
|
|
Depreciation and amortization
expense for the three months ended September 30, 2017 and 2016 were $13,203 and $ 13,342, respectively.
Note 8. ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES
Accrued expenses and
other current liabilities represent mainly payroll and welfare payable 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 options
granted in 2009 is for 10 years and the exercise price of the 56,000 options is $7.75 which vested over 5 years and were fully
vested as of September 30, 2017. The fair value of the stock options was estimated using the Black-Scholes option-pricing model.
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 recorded no stock-based compensation expense for the three months
ended September 30, 2017 and 2016. As of September 30, 2017, 8,000 options were vested.
Pursuant to the Company’s
2014 Stock Incentive Plan, effective on July 26, 2016, the Company granted options to purchase a total of 150,000 shares of the
Company’s Common Stock to two employees with a one-year vesting period, one half of which vested on October 26, 2016, and
the other half vested on July 26, 2017. The exercise price of the options is $1.10, which was equal to the share price of the Company’s
Common Stock on July 26, 2016. The grant date fair value of such options was $0.77 per share. The fair value of the options was
calculated using the Black-Scholes options pricing model with the following assumptions: volatility of 99.68%, risk free interest
rate of 1.15%, and expected life of 5 years. The total fair value of the options was $115,979. In accordance with the vesting periods,
$9,665 and $19,330 were expensed related to these options for the three months ended September 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 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%, with an 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 three months ended
September 30, 2017 and 2016.
A summary of the options
is presented in the table below:
|
|
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2017
|
|
|
141,000
|
|
|
$
|
3.81
|
|
Granted
|
|
|
-
|
|
|
|
0.00
|
|
Exercised
|
|
|
-
|
|
|
|
0.00
|
|
Cancelled
|
|
|
-
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, as of September 30, 2017
|
|
|
141,000
|
|
|
$
|
3.81
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, as of September 30, 2017
|
|
|
139,000
|
|
|
$
|
3.83
|
|
Following is a summary
of the status of options outstanding and exercisable as of September 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
|
|
|
0.63 years
|
|
$
|
7.75
|
|
|
|
56,000
|
|
|
0.63 years
|
$
|
2.01
|
|
|
|
10,000
|
|
|
5.34 years
|
|
$
|
2.01
|
|
|
|
8,000
|
|
|
5.34 years
|
$
|
1.10
|
|
|
|
75,000
|
|
|
3.82 years
|
|
$
|
1.10
|
|
|
|
75,000
|
|
|
3.82 years
|
|
|
|
|
|
141,000
|
|
|
|
|
|
|
|
|
|
139,000
|
|
|
|
Following is a summary
of the status of warrants outstanding and exercisable as of September 30, 2017:
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
Average
Remaining
Contractual Life
|
|
|
139,032
|
|
|
|
139,032
|
|
|
$
|
9.30
|
|
|
|
0.63 years
|
|
Total expenses for options
and warrants amounted to $9,665 and $19,330 for the three months ended September 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
rateably charged to expense over the term of the agreements. Consulting expenses for the above services were $nil and $121,467
for the three months ended September 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
rateably charged to expense over the term of the agreements. Consulting expenses for the above services were $nil and $124,658
for the three months ended September 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 with corporate restructuring, business evaluation and capitalization during the period from November 20, 2015
to November 19, 2016. In return for such services, the Company issued 250,000 shares of the Company’s common stock to this
consultant for services to be rendered during the first half of the service period. Such shares were issued as restricted shares
at $1.02 per share on December 9, 2015. On May 23, 2016, the Company issued an additional 250,000 shares of common stock to this
consultant at $0.72 per share to cover the services from the seventh month to November 19, 2016. These shares were valued at $435,000
and consulting expenses were $nil and $90,000 for the years ended September 30, 2017 and 2016, respectively.
In March 2017, the
Company entered into a consulting and advisory services agreement with Jianwei Li, who will provide management consulting
services that include marketing program designing and implementation and cooperative partner selection and management. The
service period is from March 2017 to February 2020. The Company issued 250,000 shares of common stock as the remuneration for
the services, which were issued as restricted shares at $2.53 per share on March 22, 2017 to the consultant. These
shares were valued at $632,500 and consulting expenses were $52,709 and $nil for the three months ended September 30, 2017
and 2016, respectively. The total consulting expenses were $52,709 and $336,125 for the three months ended September 30, 2017
and 2016, respectively.
Note 11. NON-CONTROLLING INTEREST
The Company’s
non-controlling interest consists of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Sino-China:
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
157,726
|
|
|
|
217,379
|
|
Accumulated deficit
|
|
|
(5,368,955
|
)
|
|
|
(5,421,578
|
)
|
|
|
|
(4,853,785
|
)
|
|
|
(4,846,755
|
)
|
Trans Pacific Logistics Shanghai Ltd.
|
|
|
82,071
|
|
|
|
46,047
|
|
ACH Trucking Center Corp.
|
|
|
43,682
|
|
|
|
31,929
|
|
Total
|
|
$
|
(4,728,032
|
)
|
|
$
|
(4,768,779
|
)
|
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 September 30,
|
|
Amount
|
|
2018
|
|
$
|
195,183
|
|
2019
|
|
|
130,568
|
|
2020
|
|
|
26,176
|
|
|
|
$
|
351,927
|
|
Rental expenses for
three months ended September 30, 2017 and 2016 were $64,862 and $62,335, respectively.
Contingencies
The Labor Contract Law
of the PRC requires employers to insure the liability of the severance payments for terminated employees that have worked for the
employers for at least two years prior to January 1, 2008. Employers are liable for one month of severance pay per year of the
service provided by employees. As of September 30, 2017 and June 30, 2017, the Company has estimated its severance payments to
be approximately $51,953 and $48,713, 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
The Company’s
income tax benefit (expense) for the three months ended September 30, 2017 and 2016 is as follows:
|
|
For the Three Months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
USA
|
|
$
|
(60,162
|
)
|
|
$
|
-
|
|
Hong Kong
|
|
|
(4,309
|
)
|
|
|
(6,525
|
)
|
China
|
|
|
(132,058
|
)
|
|
|
(65,096
|
)
|
|
|
|
(196,529
|
)
|
|
|
(71,621
|
)
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
USA
|
|
|
(99,900
|
)
|
|
|
-
|
|
|
|
|
(99,900
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit (expense)
|
|
$
|
(296,429
|
)
|
|
|
(71,621
|
)
|
The Company recorded
income tax expense of $296,429 in the three months ended September 30, 2017, compared to income tax expense of $71,621 in the three
months ended September 30, 2016. The effective tax rate was 29.3% in the first quarter of 2017, compared to 10.1% in the first
quarter of 2016.
The
Company’s deferred tax assets are comprised of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
101,000
|
|
|
$
|
106,000
|
|
Stock-based compensation
|
|
|
798,000
|
|
|
|
790,000
|
|
Net operating loss
|
|
|
1,302,000
|
|
|
|
1,464,000
|
|
Total deferred tax assets
|
|
|
2,201,000
|
|
|
|
2,360,000
|
|
Valuation allowance
|
|
|
(1,551,500
|
)
|
|
|
(1,610,600
|
)
|
Deferred tax assets, net – long-term
|
|
$
|
649,500
|
|
|
$
|
749,400
|
|
The Company’s operations
in the U.S. for the federal purpose have incurred a cumulative net operating loss (“NOL”) of approximately $5,808,000
as of September 30, 2017, which may reduce federal future taxable income. For the period ended September 30, 2017, approximately
$396,000 of NOL was utilized.
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 September 30, 2017. The net decrease in the valuation allowance
for the year ended September 30, 2017 was $59,100 and the net decrease in the valuation allowance for the same period of 2016 was
$174,000.
The Company’s
taxes payable consists of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
VAT tax payable
|
|
$
|
541,967
|
|
|
$
|
520,436
|
|
Corporate income tax payable
|
|
|
1,459,235
|
|
|
|
1,290,832
|
|
Others
|
|
|
65,594
|
|
|
|
74,948
|
|
Total
|
|
$
|
2,066,796
|
|
|
$
|
1,886,216
|
|
Note 14. CONCENTRATIONS
Major Customers
For the three months
ended September 30, 2017, three customers accounted for 47%, 16% and 11% of the Company’s revenues, respectively. As of September
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 64% of the Company’s accounts receivable.
For the three months
ended September 30, 2016, three customers accounted for 44%, 33% and 13% of the Company’s revenues. As of September 30, 2016,
one of these three customers accounted for 100% of the Company’s accounts due from related parties and the remaining two
customers accounted for approximately 83% of the Company’s accounts receivable.
Major Suppliers
For the three months
ended September 30, 2017, one supplier accounted for 61% of the total costs of revenue. For the three months ended September 30,
2016, two suppliers accounted for 18% 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 three months ended September 30, 2017 and 2016, respectively:
|
|
For the three months ended September 30, 2017
|
|
|
|
Inland Transportation
Management Services
|
|
|
Freight Logistic
Services
|
|
|
Container Trucking
Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
565,160
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
565,160
|
|
- Third parties
|
|
$
|
853,306
|
|
|
$
|
3,508,704
|
|
|
$
|
452,841
|
|
|
$
|
4,814,851
|
|
Cost of revenues
|
|
$
|
182,150
|
|
|
$
|
3,140,592
|
|
|
$
|
343,176
|
|
|
$
|
3,665,918
|
|
Gross profit
|
|
$
|
1,236,316
|
|
|
$
|
368,112
|
|
|
$
|
109,665
|
|
|
$
|
1,714,093
|
|
Depreciation and amortization
|
|
$
|
7,661
|
|
|
$
|
475
|
|
|
$
|
5,067
|
|
|
$
|
13,203
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
5,077
|
|
|
$
|
-
|
|
|
$
|
5,077
|
|
|
|
For the three months ended September 30, 2016
|
|
|
|
Inland Transportation
Management Services
|
|
|
Freight Logistic
Services
|
|
|
Container Trucking
Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
857,635
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
857,635
|
|
- Third parties
|
|
$
|
628,100
|
|
|
$
|
458,667
|
|
|
$
|
-
|
|
|
$
|
1,086,767
|
|
Cost of revenues
|
|
$
|
104,001
|
|
|
$
|
202,338
|
|
|
$
|
-
|
|
|
$
|
306,339
|
|
Gross profit
|
|
$
|
1,381,734
|
|
|
$
|
256,329
|
|
|
$
|
-
|
|
|
$
|
1,638,063
|
|
Depreciation and amortization
|
|
$
|
7,972
|
|
|
$
|
5,370
|
|
|
$
|
-
|
|
|
$
|
13,342
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Total assets:
|
|
|
|
|
|
|
Inland Transportation Management Services
|
|
$
|
16,572,627
|
|
|
$
|
9,331,229
|
|
Freight Logistics Services
|
|
|
2,029,724
|
|
|
|
163,112
|
|
Container Trucking Services
|
|
|
835,497
|
|
|
|
|
|
Total Assets
|
|
$
|
19,437,848
|
|
|
$
|
9,494,341
|
|
Note 16. OTHER RELATED PARTY TRANSACTIONS
As of September
30, 2017 and June 30, 2017, the outstanding amounts due from related party consist of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
Tianjin Zhiyuan Investment Group Co., Ltd.
|
|
|
2,285,130
|
|
|
|
1,715,130
|
|
Total
|
|
$
|
2,285,130
|
|
|
$
|
1,715,130
|
|
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 $565,160 (11% of the Company’s total revenue) and
$857,635 (44% of the Company’s total revenue) for the three months ended September 30, 2017 and 2016, respectively. The amount
due from Zhiyuan Investment Group at June 30, 2017 was $1,715,130. During the three months ended September 30, 2017, the Company
continued to provide inland transportation management services to Zhiyuan and collected nil from Zhiyuan to increase outstanding
accounts receivable. As of September 30, 2017, the amount due from Zhiyuan was $2,285,130, the aging of which is less than 180
days.
As of September 30,
2017 and June 30, 2017, the outstanding amounts of advance to suppliers-related party consist of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
Zhiyuan International Investment & Holding Group (Hong Kong) Co., Ltd.
|
|
|
3,395,994
|
|
|
|
3,333,038
|
|
Total
|
|
$
|
3,395,994
|
|
|
$
|
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”). Mr. Zhang has also invested in the Buyer
and is the largest shareholder of the Company. Pursuant to the Agreement, the Buyer, jointly with China Minmetals Corporation and
China Metallurgical Group Corporation, acts as the general designer, general equipment provider and general service contractor
in the upgrade and renovation project of Perwaja Steel Indonesia, which is located in Malaysia (the “Project”). The
Seller shall be appointed as general agent to handle all related logistics and transportation occurring in the Project, ranging
from equipment manufacturing, assembling, processing to instalment as referenced in the Agreement. The Seller agrees to make certain
advance transportation payments during the Project on the basis of current practice in China transportation agency industry; while
the Buyer agrees to repay the advances to the Seller at any time as requested and instructed by the Seller, to satisfy the security
repayment test in light of the Seller’s listed company profile. The Seller is contracted to provide high-quality services
including detailed transportation plan design, plan execution and necessary supervision of the execution at the Buyer’s demand,
and shall receive from the Buyer 1% - 1.25% of the total transportation expense incurred in the Project as commission for its professional
design and execution of transportation plan as the general agent. As of September 30, 2017, the amount of advances to suppliers
– related party was $3,395,994 (see Note 1 and Note 3).
As of September 30,
2017 and June 30, 2017, the outstanding amounts due to related parties consist of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
Jetta Global Logistics Inc.
|
|
$
|
122,752
|
|
|
$
|
75,061
|
|
ACH Logistics Inc.
|
|
|
10,109
|
|
|
|
131,262
|
|
Total
|
|
$
|
132,861
|
|
|
$
|
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 Logistics Inc. (ACH Logistics) and Jetta Global
are owned by the same owner and both of the companies provided container trucking platform services to the Company. For the three
months ended September 30, 2017, ACH Logistics and Jetta Global provided services in the amount of $84,799 and $55,631 to the Company,
respectively.
Note 17. SUBSEQUENT EVENTS
On October 23, 2017,
the Company issued 130,000 shares to its employees of its restricted common stock valued at $2.80 per share. quarter of the total
number of common shares shall become vested on each of November 16, 2017, February 16, 2018, May 16, 2018 and August 16, 2018.
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 covers advising on business development, strategic planning
and compliance during the one-year service period from October 17, 2017 to October 16, 2018.