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 global shipping and freight logistics integrated solution provider. The Company provides tailored
solutions and value-added services to its customers to drive efficiency and control in related steps throughout the entire shipping
and freight logistics chain. The Company conducts its business primarily through its wholly-owned subsidiaries in the People’s
Republic of China (the “PRC”) (including Hong Kong) and the U.S. where a majority of the Company’s clients are
located.
The
Company operates in four operating segments including (1) shipping agency and management services, which are operated by its subsidiary
in Hong Kong and the U.S.; (2) inland transportation management services, which are operated by its subsidiaries in the U.S.;
(3) freight logistics services, which are operated by its subsidiaries in the PRC and the U.S.; (4) container trucking services,
which are operated by its subsidiaries in the PRC and the U.S.
Prior
to fiscal year 2019, the Company mainly focused on freight logistics and inland transportation management services. Starting with
fiscal year 2019, current trade dynamics made it more expensive for shipping carrier clients to cost-effectively move cargo into
U.S. ports, which has caused the Company to shift its focus back to shipping agency and management business. The shipping agency
industry in China has improved and the number of shipping agencies overall the country has decreased, due to both price
and the inability of competitors to embrace technology as a resource in serving client needs.
On
September 3, 2018, the Company entered into a cooperation agreement with Ningbo Far-East Universal Shipping Agency Co., Ltd. to
set up a joint venture in Hong Kong named Bright Far East International Shipping Agency Co., Ltd., to engage in worldwide shipping
agency operations. The Company has a 51% equity interest in the joint venture. On May 23, 2019, Bright Far East International
Shipping Agency Co., Ltd. incorporated in New York and terminated its registration in Hong Kong. There has been no major operation
of the joint venture for the year ended June 30, 2020 and 2019. Currently the Company is conducting the shipping agency business
through its wholly-owned Hong Kong subsidiary.
On
April 10, 2019, the Company entered into a cooperation agreement with Mr. Weijun Qin, the Chief Executive Officer of a shipping
management company in China, to set up a joint venture in New York named State Priests Management Ltd. (“State Priests”),
in which the Company will hold a 20% equity interest. On July 26, 2019, the Company signed a revised cooperation agreement with
Mr. Weijun Qin which changed the Company’s equity interest in State Priests from 20% to 90%. The Company has not provided
any cash contribution to the joint venture and there has been no operation of the joint venture pending the International Ship
Safety Management Certificate from the China Classification Society (the “Certificate”). Sino-Global Shipping New
York Inc. started providing shipping management related services that do not require certification which includes arranging and
coordinating for ship maintenance and inspection this quarter.
On
November 6, 2019, the Company signed a revised cooperation agreement with Mr. Weijun Qin to restructure their equity interest
in State Priests. Given that State Priests failed to timely obtain the necessary approval from related authorities, Mr. Weijun
Qin agreed to exchange 80% equity interest in Sea Continent Management Ltd. (“Sea Continent”), another New York entity
Mr. Qin owns for the Company’s 90% equity interest in State Priests. The equity transfer has been consummated. Sea Continent
already has the Certificate but has no operations as of June 30, 2020. There has been no capital injection nor operations of State
Priests and Sea Continent as of June 30, 2020, therefore no gain or loss has been recognized in the transaction.
On January 10, 2020, the
Company entered into a cooperation agreement with Mr. Shanming Liang, a shareholder of the Company, to set up a joint venture
in New York named LSM Trading Ltd., in which the Company holds a 40% equity interest. No investment has been made by the Company
as of the date of this report. The new joint venture will facilitate the purchase agricultural related commodities in the U.S.
for customers in China and the Company will provide comprehensive supply chain and logistics solutions.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
outbreak of the novel coronavirus (COVID-19) starting from late January 2020 in the PRC has spread rapidly to many parts of the
world. In March 2020, the World Health Organization declared the COVID-19 as a pandemic and has resulted in quarantines, travel
restrictions, and the temporary closure of stores and business facilities in China and the U.S. for the past few months. Given
the rapidly expanding nature of the COVID-19 pandemic, and because substantially all of the Company’s business operations
and its workforce are concentrated in China and the U.S., the Company’s business, results of operations, and financial condition
have been adversely affected for the year ended June 30, 2020.
After
the close of the stock market on July 7, 2020, the Company effected a l-for-5 reverse stock split of its common stock in
order to satisfy continued listing requirements of its common stock on the NASDAQ Capital Market. The reverse stock split was
approved by the Company’s board of directors and stockholders and was intended to allow the company to meet the minimum
share price requirement of $1.00 per share for continued listing on the NASDAQ Capital Market. As a result all common stock
share amounts included in this filing have been retroactively reduced by a factor of five, and all common stock per share
amounts have been increased by a factor of five. Amounts affected include common stock outstanding, including those that have
resulted from the stock options, and warrants that convert to common stock.
Note
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”). The consolidated financial statements include the accounts of the Company and include the assets, liabilities,
revenues and expenses of the subsidiaries and VIEs. All intercompany transactions and balances have been 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 Shipping Ltd., entered into certain agreements
with Sino-China, pursuant to which the Company receives 90% of Sino-China’s net income.
As
a VIE, Sino-China’s revenues are included in the Company’s total revenues, and any income/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 in accordance with Accounting Standards Codification (“ASC”)
810-10, “Consolidation”. The agency relationship between the Company and Sino-China and its branches is governed by
a series of contractual arrangements pursuant to which the Company has substantial control over Sino-China. Management makes ongoing
reassessments of whether the Company remains the primary beneficiary of Sino-China.
The
carrying amount and classification of Sino-China’s assets and liabilities included in the Company’s consolidated balance
sheets were as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
5,022
|
|
|
$
|
11,691
|
|
Other receivables
|
|
|
-
|
|
|
|
309
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
4,474
|
|
Total current assets
|
|
|
5,022
|
|
|
|
16,474
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,608
|
|
|
|
1,655
|
|
Property and equipment, net
|
|
|
41,171
|
|
|
|
95,765
|
|
Total assets
|
|
$
|
47,801
|
|
|
$
|
113,894
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Other payables and accrued liabilities
|
|
$
|
39,919
|
|
|
$
|
30,175
|
|
Total liabilities
|
|
$
|
39,919
|
|
|
$
|
30,175
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Fair Value of Financial Instruments
The
Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value,
prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair
value as follows:
Level
1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at
the measurement date.
Level
2 — Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for
identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable,
and inputs derived from or corroborated by observable market data.
Level
3 — Unobservable inputs that reflect management’s assumptions based on the best available information.
The
carrying value of accounts receivable, other receivables, other current assets, and current liabilities approximate their fair
values because of the short-term nature of these instruments.
(c)
Use of Estimates and Assumptions
The
preparation of the Company’s consolidated financial statements in conformity with US GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates
are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated
financial statements include revenue recognition, fair value of stock based compensation, cost of revenues, allowance for doubtful
accounts, impairment loss, deferred income taxes, income tax expense and the useful lives of property and equipment. The inputs
into the Company’s judgments and estimates consider the economic implications of COVID-19 on the Company’s critical
and significant accounting estimates. Since the use of estimates is an integral component of the financial reporting process,
actual results could differ from those estimates.
(d)
Translation of Foreign Currency
The
accounts of the Company and its subsidiaries 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, Trans Pacific Shipping Ltd. and Trans Pacific Logistic Shanghai Ltd.
report their financial positions and results of operations in Renminbi (“RMB”), its subsidiary Sino-Global Shipping
Australia Pty Ltd., reports its financial positions and results of operations in Australian dollar (“AUD”), its subsidiary
Sino-Global Shipping Hong Kong reports its financial positions and results of operations in Hong Kong dollar (“HKD”)
and its subsidiary Sino-Global Shipping Canada, Inc. reports its financial positions and results of operations in Canadian Dollar
(“CAD”). 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 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 sheets’
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 loss and accumulated other comprehensive loss as a separate component of equity
of the Company, and also included in non-controlling interests.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
exchange rates for the years ended June 30, 2020 and 2019 are as follows:
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Foreign currency
|
|
Balance Sheet
|
|
|
Profits/Loss
|
|
|
Balance Sheet
|
|
|
Profits/Loss
|
|
RMB:1USD
|
|
|
7.0651
|
|
|
|
7.0312
|
|
|
|
6.8657
|
|
|
|
6.8223
|
|
AUD:1USD
|
|
|
1.4514
|
|
|
|
1.4924
|
|
|
|
1.4238
|
|
|
|
1.3984
|
|
HKD:1USD
|
|
|
7.7505
|
|
|
|
7.7948
|
|
|
|
7.8130
|
|
|
|
7.8387
|
|
CAD:1USD
|
|
|
1.3617
|
|
|
|
1.3421
|
|
|
|
1.3092
|
|
|
|
1.3238
|
|
(e)
Cash
Cash consists of cash
on hand and cash in bank which are unrestricted as to withdrawal or use. The Company maintains cash with various financial institutions
mainly in the PRC, Australia, Hong Kong, Canada and the U.S. As of June 30, 2020 and 2019, cash balances of $97,836 and $2,993,913,
respectively, were maintained at financial institutions in the PRC. $8,780 and $2,923,972 of these balances are not covered by
insurance as the deposit insurance system in China only insured each depositor at one bank for a maximum of approximately $70,000
(RMB 500,000). As of June 30, 2020 and 2019, cash balances of $25,739 and $122,017, respectively, were maintained at U.S. financial
institutions, and were insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations. The
Hong Kong Deposit Protection Board pays compensation up to a limit of HKD 500,000 (approximately $64,000) if the bank with which
an individual/a company holds its eligible deposit fails. As of June 30, 2020 and 2019, cash balances of $2,029 and $4,386, respectively,
were maintained at financial institutions in Hong Kong and were insured by the Hong Kong Deposit Protection Board. As of June 30,
2020 and 2019, cash balances of $1,116 and $1,821, respectively, were maintained at Australia financial institutions, and were
insured as the Australian government guarantees deposits up to AUD 250,000 (approximately $172,000). As of June 30, 2020 and 2019,
amount of deposits the Company had covered by insurance amounted to $117,940 and $198,165, respectively.
(f)
Notes receivable
Notes
receivable represents trade accounts receivable due from various customers where the customers’ banks have guaranteed the
payment. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit
request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and
a processing fee.
(g)
Receivables and Allowance for Doubtful Accounts
Accounts
receivable are presented at net realizable value. The Company maintains allowances for doubtful accounts and for estimated losses.
The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt
as to the collectability of individual receivable balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balances, customers’ historical payment history, their current
credit-worthiness and current economic trends. Receivables are generally considered past due after 180 days. The Company reserves
25%-50% of the customers balance aged between 181 days to 1 year, 50%-100% of the customers balance over 1 year and 100% of the
customers balance over 2 years. Accounts receivable are written off against the allowances only after exhaustive collection efforts.
As the Company has focused its development in the shipping management segment, its customer base will be more from smaller privately
owned companies that will pay more timely than state owned companies. The Company also considers the economic implications of
COVID-19 on its estimates of the allowance and made additional $4,996,006 of allowance for doubtful accounts and wrote off $8,220,754
of accounts receivable for the year ended June 30, 2020. There was no write off for year ended June 30, 2019. The Company recovered
$99,366 of accounts receivable for the year ended June 30, 2020. There was no recovery for year ended June 30, 2019.
Other receivables represent mainly customer advances, 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. Management reviews its receivables on a regular basis to determine if the bad
debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance
for doubtful accounts after management has determined that the likelihood of collection is not probable. Other receivables are
written off against the allowances only after exhaustive collection efforts. The Company also considers the economic implications
of COVID-19 on its estimates of the allowance and made additional $10,055,203 of allowance for doubtful accounts for the year ended
June 30, 2020. For the year ended June 30, 2020, $1,763 was written off against other receivables, respectively. There was no write
off for the year ended June 30, 2019.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(h)
Property and Equipment, net
Property
and equipment are stated at historical cost less accumulated depreciation. Historical cost comprises its purchase price and any
directly attributable costs of bringing the assets to its working condition and location for its intended use. Depreciation is
calculated on a straight-line basis over the following estimated useful lives:
Buildings
|
20 years
|
Motor vehicles
|
3-10 years
|
Computer and office
equipment
|
1-5 years
|
Furniture and fixtures
|
3-5 years
|
System software
|
5 years
|
Leasehold improvements
|
Shorter of lease term or useful lives
|
The
carrying value of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from such
asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying
value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved or based on independent appraisals. For the years ended June 30, 2020 and 2019,
an impairment of $127,177 and nil were recorded, respectively.
(i)
Intangible Assets, net
Intangible
assets are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following
estimated useful lives:
Logistics
platform
|
3 years
|
The
Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the assets might
be impaired. For the years ended June 30, 2020 and 2019, an impairment of $200,455 and nil were recorded, respectively.
(j)
Revenue Recognition
The
Company recognizes revenue which represents the transfer of goods and services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in such exchange. The Company identifies contractual performance obligations and determines
whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to
a customer. The Company’s revenue streams are recognized at a point in time.
The
Company uses a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i)
identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction
price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv)
allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as)
the Company satisfies the performance obligation.
The
Company continues to derive its revenues from sales contracts with its customers with revenues being recognized upon performance
of services. Persuasive evidence of an arrangement is demonstrated via sales contract and invoice; and the sales price to the
customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or other incentive. The
Company’s revenues are recognized at a point in time after all performance obligations are satisfied.
Contract
balances
The
Company records receivables related to revenue when the Company has an unconditional right to invoice and receive payment.
Deferred revenue consists
primarily of customer billings made in advance of performance obligations being satisfied and revenue being recognized.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
As
of June 30, 2020, the Company had outstanding contracts amounting to approximately $1.6 million, all of which is expected to be
completed within 6 months from June 30, 2020.
The Company’s disaggregated revenue streams are described
as follows:
|
|
For the Years Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Shipping and management agency services
|
|
$
|
2,105,651
|
|
|
$
|
2,093,680
|
|
Inland transportation management services
|
|
|
-
|
|
|
|
1,469,799
|
|
Freight logistics services
|
|
|
4,368,596
|
|
|
|
37,725,136
|
|
Container trucking services
|
|
|
61,709
|
|
|
|
482,432
|
|
Total
|
|
$
|
6,535,956
|
|
|
$
|
41,771,047
|
|
|
●
|
Revenues
from shipping and management 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 deferred revenue.
|
|
●
|
Revenues from inland
transportation management services are recognized when commodities are being released from the customers’ warehouse.
|
|
●
|
Revenues
from freight logistics services are recognized when the related contractual services are rendered.
For
certain freight logistics contracts that the Company entered into with customers starting in the first quarter of fiscal
year 2020, the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service
provider and (ii) does not control the services rendered to the customers, revenues related to this contracts are presented
net of related costs. For the year ended June 30, 2020, gross revenue and gross cost of revenue related to these contracts
amounted to approximately $25.8 million and $24.3 million, respectively.
|
|
●
|
Revenues from container
trucking services are recognized when the related contractual services are rendered.
|
Disaggregated information of revenues by
geographic locations are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
PRC
|
|
$
|
4,368,596
|
|
|
$
|
37,755,310
|
|
U.S.
|
|
|
2,167,360
|
|
|
|
1,922,057
|
|
Hong Kong
|
|
|
-
|
|
|
|
2,093,680
|
|
Total revenues
|
|
$
|
6,535,956
|
|
|
$
|
41,771,047
|
|
(k)
Taxation
Because
the Company and its subsidiaries and Sino-China were incorporated in different jurisdictions, they file separate income tax returns.
The Company uses the asset and liability method of accounting for income taxes in accordance with U.S. GAAP. Deferred taxes, if
any, are recognized for the future tax consequences of temporary differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements. A valuation allowance is provided against deferred tax assets
if it is more likely than not that the asset will not be utilized in the future.
The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes interest
and penalties, if any, related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions
as of June 30, 2020 and 2019.
Income
tax returns for the years prior to 2016 are no longer subject to examination by U.S. tax authorities.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
Value Added Taxes and Surcharges
The
Company is subject to value added tax (“VAT”). Revenue from services provided by the Company’s PRC subsidiaries
and affiliates, including Sino-China and Trans Pacific are subject to VAT at rates ranging from 9% to 13%. Entities that are VAT
general taxpayers are allowed to offset qualified VAT paid to suppliers against their VAT liability. Net VAT liability is recorded
in taxes payable on the consolidated balance sheets.
In
addition, under the PRC regulations, the Company’s PRC subsidiaries and affiliates are required to pay the city construction
tax (7%) and education surcharges (3%) based on the net VAT payments.
(l)
Earnings (loss) per Share
Basic
earnings (loss) per share is computed by dividing net income (loss) attributable to holders of common stock of the Company by
the weighted average number of shares of common stock of the Company outstanding during the applicable period. Diluted earnings
(loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock of the
Company were exercised or converted into common stock of the Company. Common stock equivalents are excluded from the computation
of diluted earnings per share if their effects would be anti-dilutive.
For
the years ended June 30, 2020 and 2019, there was no dilutive effect of potential shares of common stock of the Company because
the Company generated a net loss.
(m)
Comprehensive Income (Loss)
The
Company reports comprehensive income (loss) in accordance with the authoritative guidance issued by Financial Accounting Standards
Board (the “FASB”) which establishes standards for reporting comprehensive income (loss) and its component in financial
statements. Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under US GAAP are recorded as
an element of Stockholders’ equity but are excluded from net income. Other comprehensive income (loss) consists of a foreign
currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
(n)
Stock-based Compensation
The
Company accounts for stock-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation –
Stock Compensation”, which requires that stock-based payment transactions with employees be measured based on the grant-date
fair value of the equity instrument issued and recognized as compensation expense over the requisite service period. The Company
records stock-based compensation expense at fair value on the grant date and recognizes the expense over the employee’s
requisite service period.
The
Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 718 amended by ASU 2018-07.
Under FASB ASC Topic 718, stock compensation granted to non-employees has been determined as the fair value of the consideration
received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as
the goods or services are received.
Valuations
of stock based compensation 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.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(o)
Risks and Uncertainties
The
Company’s business, financial position and results of operations may be influenced by the political, economic, health 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, health and legal environments and foreign currency
exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions
in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary
measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.
In
March 2020, the World Health Organization declared the COVID-19 as a pandemic. Given the rapidly expanding nature of the COVID-19
pandemic, and because substantially all of the Company’s business operations and our workforce are concentrated in China
and United States, the Company’s business, results of operations, and financial condition have been adversely affected for
the rest of fiscal year 2020 and beyond.
(p)
Liquidity
In
assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital
expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses
and capital expenditure obligations. As of June 30, 2020, the Company’s working capital deficit was approximately $3.9
million and the Company had cash of approximately $0.1 million. The Company plans to fund continuing operations through
identifying new prospective joint venture partners and strategic alliance opportunities for new revenue sources, and by
reducing costs to improve profitability and replenish working capital. The Company’s ability to fulfill its current
obligations will depend on the future realization of its current assets and the future revenues generated from its
operations.
The
Company expects to realize the balance of its current assets within the normal operating cycle of a twelve month period. If the
Company is unable to realize its current assets within the normal operating cycle of a twelve month period, the Company had considered supplementing its available sources of funds through the following sources:
|
●
|
the Company will continuously seek equity
financing to support its working capital; On November 13, 2019, the Company entered into a cooperation agreement with Shanming
Liang, a director of Guangxi Jinqiao Industrial Group Co., Ltd., to cooperate and expand the bulk cargo container services business.
Shanming Liang agreed to purchase 200,000 shares of the Company’s common stock at a purchase price of $5.00 per share for
aggregate proceeds of $1.0 million pursuant to a stock purchase agreement dated November 14, 2019. The company received gross proceeds
of $940,131 for fiscal year 2020. From July to September 2020, the Company received remaining proceeds of $59,869. The full amount
of subscription receivable have been paid off.
On September 17, 2020, the Company entered
into certain securities purchase agreement with certain non-U.S. Persons to purchase 720,000 Shares at a per share purchase price
of $1.46 for aggregate proceeds of approximately $1.05 million. On September 21 and September 22, 2020, the Company received total
gross proceeds of approximately $1.05 million.
|
|
|
|
|
●
|
other available sources of financing from PRC banks and other financial institutions; and
|
|
|
|
|
●
|
financial support and credit guarantee commitments from the Company’s shareholders and directors.
|
Based
on the above considerations, the Company’s management is of the opinion that it will not have sufficient funds to meet
the Company’s working capital requirements and current liabilities as they become due one year from issuance of these
consolidated financial statements. There is no assurance that management will be successful in their plans. There are a
number of factors that could potentially arise that could undermine the Company’s plans, such as changes in the PRC
government policy, economic conditions, and competitive pricing in the industries that the Company operates in. In addition,
the recent outbreak of new coronavirus pandemic posed disruption and restrictions on its operations and those of the
Company’s customers which not only negatively impact the Company’s financial conditions but also slowed down the
macro-economic development worldwide. If management is unable to execute this plan, there would likely be a material adverse
effect on the Company’s business.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The management has considered whether there is substantial doubt
about its ability to continue as a going concern due to 1) the Company’s recurring losses from operations, including approximately
$16.5 million net loss attributable to the Company’s stockholders for the year ended June 30, 2020, 2) accumulated deficit
of approximately $23.4 million as of June 30, 2020, and 3) has negative operating cash flows of approximately $3.9 million for
the year ended June 30, 2020. All of these factors raise substantial doubt about the ability of the Company to continue as a going
concern.
q)
Recent Accounting Pronouncements
Pronouncements
adopted
In
February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), to increase the
transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability and
a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements.
ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective
approach to adoption assuming the Company will remain an emerging growth company at that date. In
September 2017, the FASB issued ASU No. 2017-13, which to clarify effective dates that public business entities and other entities
were required to adopt ASC Topic 842 for annual reporting. A public business entity that otherwise would not meet the definition
of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information
in another entity’s filing with the SEC adopting ASC Topic 842 for annual reporting periods beginning after December 15,
2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. ASU No. 2017-13 also amended
that all components of a leveraged lease be recalculated from inception of the lease based on the revised after tax cash flows
arising from the change in the tax law, including revised tax rates. The difference between the amounts originally recorded and
the recalculated amounts must be included in income of the year in which the tax law is enacted. The Company adopted this ASU
in the first quarter of fiscal year 2020 using modified retrospective transition approach at the beginning of the period of adoption.
The Company recognized lease liabilities of approximately $0.3 million, with corresponding right-of use (“ROU”) assets
of approximately the same amount based on the present value of the future minimum rental payments of leases, using a weighted
average discount rate of approximately 8.98%.
On
July 1, 2019, the Company adopted ASU 2018-07 where awards to nonemployees are measured by estimating the fair value of the equity
instruments to be issued. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor
acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards which
superseded ASU 505-50. The ASU is required to be applied on a prospective basis to all new awards granted after the date of adoption.
The Company adopted this ASU on July 1, 2019 and the adoption has no significant impact to the Company’s consolidated financial
statements as a whole.
Pronouncements
not yet adopted
In
August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds
certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures
related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value,
clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU
2018-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company does not believe
the adoption of this ASU will have a material effect on the Company’s consolidated financial statements.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date
of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit
losses standard. The new effective date for these preparers is for fiscal years beginning after July 1, 2023, including interim
periods within those fiscal years. The Company has not early adopted this update and it will become effective on July 1, 2023
assuming the Company will remain eligible to be smaller reporting company. The Company is currently evaluating the impact of this
new standard on Company's consolidated financial statements and related disclosures. The Company is currently evaluating the impact
of this new standard on its consolidated financial statements and related disclosures.
In
December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”.
The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles
in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying
and amending existing guidance. ASU 2019-12 is effective for the Company for annual and interim reporting periods beginning July
1, 2021. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities
for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an
interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally,
an entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating the
impact of this new standard on Company’s consolidated financial statements and related disclosures.
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a
material effect on the Company’s consolidated financial statements.
(r)
Reclassification
Certain
prior year amounts have been reclassified to conform to the current year presentation mainly reclassifying advances to suppliers
to other receivables (see Note 4 and 5). These reclassifications have no effect on the reported revenues, net loss or total assets.
Note
3. ACCOUNTS RECEIVABLE, NET
The
Company’s net accounts receivable are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Trade accounts receivable
|
|
$
|
3,453,439
|
|
|
$
|
12,716,120
|
|
Less: allowances for doubtful accounts
|
|
|
(2,297,491
|
)
|
|
|
(5,670,274
|
)
|
Accounts receivable, net
|
|
$
|
1,155,948
|
|
|
$
|
7,045,846
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Movement
of allowance for doubtful accounts are as follows:
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
Beginning balance
|
|
$
|
5,670,274
|
|
|
$
|
1,682,228
|
|
Provision for doubtful accounts, net of recovery
|
|
|
4,896,640
|
|
|
|
4,091,056
|
|
Less: write-off
|
|
|
(8,220,754
|
)
|
|
|
(88,882
|
)
|
Exchange rate effect
|
|
|
(48,669
|
)
|
|
|
(14,128
|
)
|
Ending balance
|
|
$
|
2,297,491
|
|
|
$
|
5,670,274
|
|
For
the years ended June 30, 2020 and 2019, the provision for doubtful accounts was $4,996,006 and $4,091,056, respectively. The Company
recovered $99,366 and nil of accounts receivable for the years ended June 30, 2020 and 2019, respectively. The Company wrote off
$8,220,754 and nil of accounts receivable for the years ended June 30, 2020 and 2019, respectively.
Note
4. OTHER RECEIVABLES, NET
The
Company’s other receivables are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Advances to customers*
|
|
$
|
10,004,893
|
|
|
$
|
4,237,270
|
|
Employee business advances
|
|
|
51,334
|
|
|
|
54,953
|
|
Security deposit
|
|
|
-
|
|
|
|
43,492
|
|
Total
|
|
|
10,056,227
|
|
|
|
4,335,715
|
|
Less: allowances for doubtful accounts
|
|
|
(10,005,193
|
)
|
|
|
-
|
|
Other receivables, net
|
|
$
|
51,034
|
|
|
$
|
4,335,715
|
|
*
|
As of June 30, 2020, the Company entered into certain contracts with customers (state-owned entities) where the Company’s services included freight costs and cost of commodities to be shipped to customers’ designated locations. The Company prepaid the costs of commodities and recognized as advance payments on behalf of its customers. These advance payments on behalf of the customers will be repaid to the Company when either the contract terms are expired or the contracts are terminated by the Company. As our customers were negatively impacted by the pandemic and required additional time to execute existing contracts, they required additional time to pay. Due to significant uncertainty on whether the delayed contracts will be executed timely. As such, the Company provided an allowance due to contract delay and recorded allowances of approximately $10.0 million.
|
Movement of allowance
for doubtful accounts are as follows:
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Provision for doubtful accounts
|
|
|
10,055,203
|
|
|
|
-
|
|
Less: write-off
|
|
|
(1,763
|
)
|
|
|
-
|
|
Exchange rate effect
|
|
|
(48,247
|
)
|
|
|
-
|
|
Ending balance
|
|
$
|
10,005,193
|
|
|
$
|
-
|
|
For the years ended June 30, 2020 and 2019, the provision for
doubtful accounts was $10,055,203 and nil, respectively. The Company wrote off $1,763 and nil of other receivables for the years
ended June 30, 2020 and 2019, respectively.
Note
5. ADVANCES TO SUPPLIERS
The
Company’s advances to suppliers – third parties are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Freight fees (1)
|
|
$
|
48,875
|
|
|
$
|
123,767
|
|
Port fees
|
|
|
-
|
|
|
|
373
|
|
Total advances to suppliers-third parties
|
|
$
|
48,875
|
|
|
$
|
124,140
|
|
|
(1)
|
The advanced freight
fee is the Company’s prepayment made for various shipping costs for shipments from July to September 2020.
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The
Company’s prepaid expenses and other assets are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Prepaid income taxes
|
|
$
|
48,924
|
|
|
$
|
35,129
|
|
Other (including prepaid insurance, rent, listing fees)
|
|
|
41,458
|
|
|
|
69,925
|
|
Deposit for ERP (1)
|
|
|
-
|
|
|
|
218,678
|
|
Prepaid leasing and service fees (2)
|
|
|
-
|
|
|
|
300,825
|
|
Total
|
|
|
90,382
|
|
|
|
624,557
|
|
Less: current portion
|
|
|
(90,382
|
)
|
|
|
(105,054
|
)
|
Total noncurrent portion
|
|
$
|
-
|
|
|
$
|
519,503
|
|
(1)
|
On December 27,
2017, with the approval of the Board, the Company signed a contract with Tianjin Anboweiye Technology Ltd Co. (“Tianjin
Anboweiye”), to develop a more complete ERP system based on the Company’s existing operations and projected future
growth. In March 2018, the Company paid a deposit to start phase one of the development which includes upgraded accounting
and human resources modules, new order processing and customer relationship management system. The Company paid a $437,357
deposit to Tianjin Anboweiye. The total contract price for phase one amounted to RMB 4,000,000, approximately $583,000. For
the year ended June 30, 2019, the Company utilized $218,679 of software development costs incurred during the preliminary
project stage, which included planning and determining the functionality of the software. The Company integrated the shipping
agencies business with the current ERP platform and the first phase of the ERP system was placed in use in July 2019 and to
be amortized over three years (See Note 9). As of June 30, 2020, all executed portion of the contract has been fully paid.
On March 31, 2020, the Company and the vendor agreed to terminate the unexecuted portions of the contract, as such, no payable
nor contractual obligation existed as of June 30, 2020.
|
(2)
|
On June 22, 2018,
the Company entered into a contract to improve its IT infrastructure. The total contract consideration for the services is
$1.2 million and the Company paid a deposit of approximately $1.0 million. The consideration is allocated as follows: $420,000
for operating hardware leasing of twelve months; $480,000 for onsite services and IT consulting for a two-year period; $60,000
for operating system set up and $240,000 for continuing integration with the ERP system and data management for two years.
For the year ended June 30, 2020, the Company incurred $200,550 in IT for consulting costs, and $100,275 for continuing integration
of the ERP system and data management costs. As of June 30, 2020, all executed portion of the contract has been fully paid.
On March 31, 2020, the Company and the vendor agreed to terminate the unexecuted portions of the contract, as such, no payable
nor contractual obligation existed as of June 30, 2020.
|
Note
7. OTHER LONG-TERM ASSETS - DEPOSITS
The
Company’s other long-term assets – deposits are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Rental and utilities deposits
|
|
$
|
64,663
|
|
|
$
|
60,435
|
|
Freight logistics deposits (1)
|
|
|
2,910,327
|
|
|
|
2,994,271
|
|
Total other long-term assets - deposits
|
|
$
|
2,974,990
|
|
|
$
|
3,054,706
|
|
(1)
|
Certain
customers require the Company to pay certain deposits for the security of shipments and merchandise. These deposits are
refundable at the end of their respective contract term. Approximately $2.8 million (RMB 20 million) of the balance was paid
to BaoSteel Resources Co., Ltd. according to the agreement entered in March 2018. This refundable deposit is to cover any
possible loss of merchandise, as well as any non-performance on the part of the Company and its vendors. The restricted
deposit is expected be repaid to the Company when either the contract terms are expired by March 2023 or the contract is
terminated by the Company.
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
8. PROPERTY AND EQUIPMENT, NET
The
Company’s net property and equipment as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Buildings
|
|
$
|
190,518
|
|
|
$
|
196,050
|
|
Motor vehicles*
|
|
|
516,999
|
|
|
|
700,724
|
|
Computer equipment*
|
|
|
97,172
|
|
|
|
162,865
|
|
Office equipment*
|
|
|
43,587
|
|
|
|
69,278
|
|
Furniture and fixtures*
|
|
|
71,697
|
|
|
|
167,143
|
|
System software*
|
|
|
107,911
|
|
|
|
116,339
|
|
Leasehold improvements
|
|
|
786,745
|
|
|
|
807,078
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,814,629
|
|
|
|
2,219,477
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(1,291,339
|
)
|
|
|
(1,229,567
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
523,290
|
|
|
$
|
989,910
|
|
Depreciation
and amortization expenses for the years ended June 30, 2020 and 2019 were $320,737 and $67,587, respectively.
*
|
For the year ended
June 30, 2020, an impairment of $127,177 was recorded due to continued decrease in revenues from the
inland transportation management segment, no impairment was recorded for same period 2019.
|
Note
9. INTANGIBLE ASSETS, NET
Net
intangible assets consisted of the following:
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
Full service logistics platforms
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
Less: Accumulated amortization
|
|
|
(163,611
|
)
|
|
|
(100,278
|
)
|
Intangible assets, net
|
|
$
|
26,389
|
|
|
$
|
89,722
|
|
The
full service logistics platform was placed in services in December 2017. The platforms are being amortized over three years. Amortization
expenses amounted to $81,557 and $63,333 for the years ended June 30, 2020 and 2019, respectively.
In
addition, first phase of the ERP system (see more details in Note 6) was placed in use in July 2019 and is being amortized over
three years. However, due to the continued decrease in revenues from the inland transportation management segment, the Company
recorded an impairment of $200,455 for the year ended June 30, 2020.
Note 10. ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Salary and reimbursement payable
|
|
$
|
795,855
|
|
|
$
|
906,007
|
|
Professional fees payable
|
|
|
629,524
|
|
|
|
340,727
|
|
Credit card payable
|
|
|
217,940
|
|
|
|
171,395
|
|
Total
|
|
$
|
1,643,319
|
|
|
$
|
1,418,129
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
11. LOANS PAYABLE
On
May 11, 2020, the Company received loan proceeds in the amount of approximately $124,570 under the U.S. Small Business Administration
(“SBA”) Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief
and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of
the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks
(or an extended 24-week covered period) as long as the borrower uses the loan proceeds for eligible purposes, including payroll,
benefits, rent and utilities, and maintains its payroll levels. The loan forgiveness amount will be reduced for any Economic Injury
Disaster Loan (“EIDL”) advance that the Company receives. The amount of loan forgiveness will be further reduced if
the borrower terminates employees or reduces salaries during the eight-week period. The Company intends to use the proceeds for
purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds will meet the conditions
for forgiveness of the loan and intends to file for loan forgiveness before December 2020, there can be no assurance that the
full amount of the loan will be forgiven. As of June 30, 2020, $124,570 of loan payable remains outstanding.
On
May 26, 2020, the Company received an advance in the amount of $155,900 from under the SBA EIDL program administered by the
SBA pursuant to the CARES Act. Such advance amount will reduce the Company’s PPP loan forgiveness amount described
above. In accordance with the requirements of the CARES Act, the Company will use proceeds from the SBA loans primarily for
working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing
thereafter. The SBA loans are scheduled to mature on May 22, 2050 and have a 3.75% interest rate and are subject to the terms
and conditions applicable to loans administered by the SBA under the CARES Act. The monthly payable including principal and
interest, of $731 commencing on May 22, 2021. The balance of principal and interest will be payable 30 years from the date of
May 22, 2020. $5,900 of the loan will be forgiven. As of June 30, 2020, $155,900 of loan payable remains outstanding.
Interest expense for the year ended June 30, 2020 for this loan was immaterial.
Loan
repayment schedule for the EIDL loans is as follows:
Twelve Months Ending June 30,
|
|
Loan Amount
|
|
|
|
|
|
2021
|
|
$
|
1,462
|
|
2022
|
|
|
8,772
|
|
2023
|
|
|
8,772
|
|
2024
|
|
|
8,772
|
|
2025
|
|
|
8,772
|
|
Thereafter
|
|
|
217,838
|
|
Total loan payments
|
|
$
|
254,388
|
|
Note
12. LEASES
The
Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated
and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement
date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use
the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure
to exercise such option which result in an economic penalty. All of the Company’s leases are classified as operating leases.
The
Company has several vehicle lease agreements and office lease agreements with lease terms ranging from two to three years. Upon
adoption of ASU 2016-02, the Company recognized lease liabilities of approximately $0.3 million, with corresponding ROU assets
of approximately the same amount based on the present value of the future minimum rental payments of leases, using a weighted
average discount rate of approximately 8.98%. As of June 30, 2020, ROU assets and lease liabilities amounted to $300,114 and $337,090
(including $204,391 from lease liabilities current portion and $132,699 from lease liabilities noncurrent portion), respectively.
The
Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The
leases generally do not contain options to extend at the time of expiration and the weighted average remaining lease terms are
1.93 years.
For
the years ended June 30, 2020 and 2019, rent expense amounted to approximately $284,000 and $171,000, respectively.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
three-year maturity of the Company’s lease obligations is presented below:
Twelve Months Ending June 30,
|
|
Operating Lease Amount
|
|
|
|
|
|
2021
|
|
$
|
214,062
|
|
2022
|
|
|
135,771
|
|
2023
|
|
|
18,382
|
|
Total lease payments
|
|
|
368,215
|
|
Less: Interest
|
|
|
(31,125
|
)
|
Present value of lease liabilities
|
|
$
|
337,090
|
|
Note
13. EQUITY
Stock
issuance:
The
Company’s outstanding warrants are classified as equity since they qualify for exception from derivative accounting as they
are considered to be indexed to the Company’s own stock and require net share settlement. The fair value of the warrants
of $881,750 is valued based on the Black-Scholes-Merton model and is recorded as additional paid-in capital from common stock
based on the relative fair value of proceeds received using the following assumptions:
|
|
Series A
|
|
Annual dividend yield
|
|
|
-
|
|
Expected life (years)
|
|
|
5.5
|
|
Risk-free interest rate
|
|
|
2.72
|
%
|
Expected volatility
|
|
|
110.31
|
%
|
Following
is a summary of the status of warrants outstanding and exercisable as of June 30, 2020:
|
|
Warrants
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of June 30, 2019
|
|
|
400,000
|
|
|
$
|
8.75
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of June 30, 2020
|
|
|
400,000
|
|
|
$
|
8.75
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable, as of June 30, 2020
|
|
|
400,000
|
|
|
$
|
8.75
|
|
Warrants Outstanding
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Average
Remaining
Contractual
Life
|
2018 Series A, 400,000
|
|
|
400,000
|
|
|
$
|
8.75
|
|
|
3.21 years
|
On November 13, 2019,
the Company entered into a cooperation agreement with Shanming Liang, a director of Guangxi Jinqiao Industrial Group Co., Ltd.,
to cooperate and expand the bulk cargo container services business. Shanming Liang agreed to purchase 200,000 shares of the Company’s
common stock at a purchase price of $5.00 per share for aggregate proceeds of $1.0 million. The Company and Mr. Liang further entered
into a Share Purchase Agreement on November 14, 2019 to memorialize the transaction aforementioned. Pursuant to the aforementioned
agreement, the Company received proceeds of $940,131 for fiscal year 2020. From July to September 2020, the Company received remaining
proceeds of $59,869. The full amount of subscription receivable has been paid off.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
December 9, 2019, the Company authorized the cancellation of the 35,099 of the Company’s treasury shares. The shares were
cancelled as of June 30, 2020. The cancellation has no effect on the Company's total shareholders' equity and earnings per share.
After
the close of the stock market on July 7, 2020, the Company effected a l-for-5 reverse stock split of its common stock in
order to satisfy continued listing requirements of its common stock on the NASDAQ Capital Market. The reverse stock split was
approved by the Company’s board of directors and stockholders and was intended to allow the company to meet the minimum
share price requirement of $1.00 per share for continued listing on the NASDAQ Capital Market. As a result all common stock
share amounts included in this filing have been retroactively reduced by a factor of five, and all common stock per share
amounts have been increased by a factor of five. Amounts affected include common stock outstanding, including those that have
resulted from the stock options, and warrants that convert to common stock.
Stock
based compensation:
In
March 2017, the Company entered into a consulting and advisory services agreement with a consulting entity, which provides management
consulting services that include marketing program design and implementation and cooperative partner selection and management.
The service period began in March 2017 and will end in February 2020. The Company issued 50,000 shares of common stock as remuneration
for the services, which were issued as restricted shares at $12.65 per share on March 22, 2017 to the consultant. These
shares were valued at $632,500 and the consulting expense were $140,556 and $210,833 for the years ended June 30, 2020 and 2019,
respectively.
On
October 23, 2017, the Company issued to its employees 26,000 shares of its restricted common stock valued at $14.00 per share.
One quarter of the total number of common stock became vested on each of November 16, 2017, February 16, 2018, May 16, 2018 and
August 16, 2018. $91,000 was recorded as compensation expense for the year ended June 30, 2019.
On
October 27, 2017, the Company issued 40,000 shares of restricted common stock on the grant date with an aggregated fair value
of $548,000 to a consulting company pursuant to a consulting agreement. The scope of services primarily covered advising on business
development, strategic planning and compliance during the one-year service period from October 17, 2017 to October 16, 2018. $137,000
was recorded as compensation expense for the year ended June 30, 2019.
On
June 7, 2018, the Company issued 80,000 shares of common stock with a fair value of $508,000 to a consulting entity pursuant to
a service agreement. The scope of services primarily covers legal consultation in PRC during the two-year service period from
July 2018 to June 2020. The consulting entity is entitled to be granted the common stock on a quarterly basis in eight equal installments.
The Company recorded compensation expense of $254,000 for both years ended June 30, 2020 and 2019.
On
September 21, 2018, the Company issued 86,000 shares of common stock valued at $5.50 per share on the grant date with an aggregated
fair value of $473,000 under the 2014 Stock Incentive Plan (the “Plan”) to three employees, vesting immediately. The
Company recorded compensation expense of $473,000 for the year ended June 30, 2019, respectively.
On
December 11, 2018, the Company issued 40,000 shares of common stock valued at $4.45 per share on the grant date with a fair value
of $178,000 under the 2014 Stock Incentive Plan to three employees, vesting immediately. The Company recorded compensation expense
of $178,000 for the year ended June 30, 2019.
On
November 7, 2018, the Board of the Company approved the issuance of 10,000 shares of restricted common stock to a consultant pursuant
to an existing consulting agreement. The scope of services primarily covers advising on business development, strategic planning
and corporate finance. The grant’s fair value of approximately $65,000 was amortized during the remaining service period
from November 3, 2018 to May 2, 2019. The Company recorded compensation expense of $65,000 for the year ended June 30, 2019.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
December 31, 2018, the Board of the Company and the Compensation Committee of the Board (the “Committee”) approved
(i) an increase in the annual salaries of Lei Cao, Chief Executive Officer, Tuo Pan, acting Chief Financial Officer, and Zhikang
Huang, Chief Operating Officer (the “C-Level Executives”), effective January 1, 2019, and (ii) a one-time award of
a total of 190,000 of the common stock from the shares reserved under the Company’s 2014 Stock Incentive Plan (the “Plan”)
to the C-Level Executives, Chief Technology Officer, Yafei Li and the following members of the Board, effective December 31, 2018,
for their valuable contributions to the Company in fiscal 2018: Jing Wang, Tieliang Liu and Bradley A. Haneberg. The Committee
recommended and the Board determined to make the following stock grants under the Plan: (i) Chief Executive Officer, Lei Cao,
is entitled to a one-time stock award grant of 80,000 shares, (ii) acting Chief Financial Officer, Tuo Pan, is entitled to a one-time
stock award grant of 28,000 shares, (iii) Chief Operating Officer, Zhikang Huang, is entitled to a one-time stock award grant
of 36,000 shares, (iv) Chief Technology Officer, Yafei Li is entitled to a one-time stock award grant of 16,000 shares, (v) Board
member Jing Wang is entitled to a one-time stock award grant of 10,000 shares, (vi) Board member Tieliang Liu is entitled to a
one-time stock award grant of 10,000 shares and (vii) Board member Bradley A. Haneberg is entitled to a one-time stock award grant
of 10,000 shares. The Company recorded compensation expense of $731,500 for the year ended June 30, 2019.
On
April 8, 2019, the Company entered into a consulting services agreement with a consulting entity, which provides management consulting
and advisory services. The scope of services primarily covered advising on business development, strategic planning and compliance
during the six months service period from April 8, 2019 to October 7, 2019. The Company issued 60,000 shares of common stock as
remuneration for the services, which were issued as restricted shares at $4.25 per share on April 16, 2019 to the consulting entity.
These shares were valued at $255,000. The Company recorded compensation expense of $127,500 for both years ended June 30, 2020
and 2019.
On
July 1, 2019, the Company issued 120,000 restricted shares of common stock with a fair value of $432,000 to a China-based company
that specializes in the port agency business and/or its designees pursuant to a consulting service agreement. The scope of services
primarily covers business consultation for one year from July 1, 2019 to June 30, 2020. The Company can terminate the agreement
if they are not satisfy with the performance of the consulting firm and the consulting firm should return all the issued shares.
The Company recorded compensation expense of $432,000 for the year ended June 30, 2020.
Included
in a Board resolution dated January 30, 2016, the Company’s CEO is authorized to grant to the employees up to one million
shares under the Plan. On July 22, 2019, the Company granted 18,000 shares of restricted common stock valued at $3.50 per share
on the grant date with an aggregated fair value of $63,000 under the Plan to one employee, vesting immediately. The Company recorded
compensation expense of $63,000 for the year ended June 30, 2020.
On
August 26, 2019, the Company issued 8,000 shares of common stock valued at $3.60 per share on the grant date with an aggregated
fair value of $28,800 to Chineseinvestors.com as settlement of a breach of service contract lawsuit. The Company recorded compensation
expense of $28,800 for the year ended June 30, 2020.
On
October 3, 2019, the Company issued 46,000 shares of common stock valued at $3.40 per share on the grant date with an aggregated
fair value of $156,400 under the Plan to one employee, vesting immediately. The Company recorded compensation expense of $156,400
for the year ended June 30, 2020.
On
October 14, 2019, the Company entered into a consulting services agreement with a consulting entity, which provides management
consulting and advisory services. The scope of services primarily covered advising on business development, strategic planning
and compliance during the six months service period from October 14, 2019 to April 13, 2020. The Company issued 60,000 shares
of common stock valued at $222,000 as remuneration for the services. The shares bear a standard restrictive legend under
the Securities Act of 1933, as amended. The Company recorded compensation expense of $222,000 for the year ended June 30, 2020.
On
June 30, 2020, the Company issued 50,000 shares of common stock valued at $3.05 per share on the grant date with a fair value
of $152,500 under the 2014 Stock Incentive Plan to two employees, vesting immediately. The Company recorded compensation expense
of $152,500 for the year ended June 30, 2020.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
During
the years ended June 30, 2020 and 2019, $1,576,756 and $2,267,833 were recorded as stock-based compensation expense, respectively.
Stock
Options:
A
summary of the outstanding options is presented in the table below:
|
|
Options
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2019
|
|
|
17,000
|
|
|
$
|
6.05
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled, forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2020
|
|
|
17,000
|
|
|
$
|
6.05
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, as of June 30, 2020
|
|
|
17,000
|
|
|
$
|
6.05
|
|
Following
is a summary of the status of options outstanding and exercisable at June 30, 2020:
Outstanding
Options
|
|
Exercisable
Options
|
Exercise
Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
$
|
10.05
|
|
|
|
2,000
|
|
|
2.59
years
|
|
$
|
10.05
|
|
|
|
2,000
|
|
|
2.59
years
|
$
|
5.50
|
|
|
|
15,000
|
|
|
1.07 years
|
|
$
|
5.50
|
|
|
|
15,000
|
|
|
1.07 years
|
|
|
|
|
|
17,000
|
|
|
|
|
|
|
|
|
|
17,000
|
|
|
|
Note
14. NON-CONTROLLING INTEREST
The
Company’s non-controlling interest consists of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Sino-China:
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
376,398
|
|
|
|
268,297
|
|
Accumulated deficit
|
|
|
(6,199,188
|
)
|
|
|
(6,066,145
|
)
|
|
|
|
(5,465,346
|
)
|
|
|
(5,440,404
|
)
|
Trans Pacific Logistics Shanghai Ltd.
|
|
|
(1,077,015
|
)
|
|
|
266,782
|
|
Total
|
|
$
|
(6,542,361
|
)
|
|
$
|
(5,173,622
|
)
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
15. COMMITMENTS AND CONTINGENCIES
Contractual
Obligations:
Contingencies
The
Labor Contract Law of the PRC requires employers to insure the liability of the severance payments for terminated employees that
have worked for the employers for at least two years prior to January 1, 2008. The employers will be liable for one month for
severance pay for each year of the service provided by the employees. As of June 30, 2020 and 2019, the Company has estimated
its severance payments of approximately $84,000 and $94,000, respectively, which have not been reflected in its consolidated financial
statements, because management cannot predict what the actual payment, if any, will be in the future.
Sino-Global
has employment agreements with each of Mr. Lei Cao, Ms. Tuo Pan and Mr. Zhikang Huang. These employment agreements provide for
five-year terms that extend automatically in the absence of termination notice provided at least 60 days prior to the anniversary
date of the agreement. If the Company fails to provide this notice or if the Company wishes to terminate an employment agreement
in the absence of cause, then the Company is obligated to provide at least 30 days’ prior notice. In such case during the
initial term of the agreement, the Company would need to pay such executive (i) the remaining salary through the date of December
31, 2023, (ii) two times of the then applicable annual salary if there has been no Change in Control, as defined in the employment
agreements or three-and-half times of the then applicable annual salary if there is a Change in Control.
From
time to time, the Company is involved in routine litigation that arises in the ordinary course of business. The Company was named
as a defendant in a breach of service contract lawsuit in the amount of $225,000 filed with the California Superior Court on January
19, 2018. The Company filed a motion with the court to force the plaintiff into arbitration rather than to litigate the dispute
in court based on the arbitration provision in the contract. The California Superior Court approved its motion to stay the case
pending the resolution of the arbitration. In Indianapolis, this matter was settled in exchange for 8,000 restrictive shares of
common stock of the Company to the plaintiff, by the execution of a settlement agreement by both parties on August 23, 2019 and
the issuance of 8,000 restricted shares on August 26, 2019. As a result, the arbitration in Indianapolis and the litigation in
California has been dismissed respectively.
On
January 22, 2019, Nasdaq notified the Company that it did not comply with the minimum bid price of $1.00 per share (the “Minimum
Bid Price”) requirement in Listing Rule 5550(a)(2), and in accordance with Listing Rule 5810(c)(3)(A), was granted 180 calendar
days, until July 22, 2019, to regain compliance. Subsequently, on July 23, 2019, the Company was provided an additional 180 calendar
day compliance period, or until January 20, 2020, to demonstrate compliance. On January 21, 2020, the Company was notified of
Nasdaq’s delist determination as it had not regained compliance. On January 28, 2020, the Company requested a hearing, which
was held on February 27, 2020. On March 10, 2020, the Company received a letter from Nasdaq stating that the Nasdaq Hearings Panel
(the “Panel”) granted an exception to permit the Company to demonstrate compliance on or before May 8, 2020.
In
response to current volatile stock market conditions and decreases in the stock price of many companies, Nasdaq announced on April
17, 2020 that it has temporarily provided relief from certain of its continued listing requirements for common stock and other
securities. Among other things, Nasdaq is tolling until June 30, 2020, the period for any non-compliant company to regain compliance
with the requirement to maintain a minimum closing bid price of $1 for at least 30 consecutive business days. As a result, the
Company automatically received an extension to demonstrate its compliance with the Nasdaq Minimum Bid Price requirement on or
before July 23, 2020. The shares of the Company continue to be listed on the Nasdaq Capital Market, subject to the condition listed
above. The temporary relief the Company received was based on Nasdaq Issuer Notification 2020-2, which provides additional time
to issuers to return to compliance with pricing related listing rules, including the Minimum Bid Price requirement.
On
July 7, 2020, the Company effected a reverse stock split of the Company’s common stock at the ratio of one-for-five. Nasdaq
has determined that for 11 consecutive trading days from July 7 through July 21, 2020, the closing bid price of the Company’s
common stock has been closed above $1.00 per share. On July 22, 2020, the Panel notified the Company that it has regained compliance
with the requirement to maintain a minimum closing bid price of $1 and this matter is now closed.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
16. INCOME TAXES
On
March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted and signed into law
and includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating
loss carryback periods and alternative minimum tax credit refunds. The Company does not at present expect the provisions of the
CARES Act to have a material impact on its tax provision given the amount of net operating losses currently available.
The
Company’s income tax expenses for the year ended June 30, 2020 and 2019 are as follows:
|
|
For the Years Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
U.S.
|
|
$
|
-
|
|
|
$
|
(33,113
|
)
|
Hong Kong
|
|
|
-
|
|
|
|
(2,792
|
)
|
PRC
|
|
|
(186,021
|
)
|
|
|
(250,464
|
)
|
|
|
|
(186,021
|
)
|
|
|
(286,369
|
)
|
Deferred
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
-
|
|
|
|
(634,500
|
)
|
PRC
|
|
|
-
|
|
|
|
-
|
|
Total income tax expense
|
|
$
|
(186,021
|
)
|
|
$
|
(920,869
|
)
|
Income
tax expense for the years ended June 30, 2020 and 2019 varied from the amount computed by applying the statutory income tax rate
to income before taxes. Reconciliations between the expected federal income tax rates using 21% for the year ended June 30, 2020
and 2019 to the Company’s effective tax rate are as follows:
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
US Statutory tax rate
|
|
|
21.0
|
|
|
|
21.0
|
|
Permanent difference*
|
|
|
0.4
|
|
|
|
5.1
|
|
Change in valuation allowance
|
|
|
(21.4
|
)
|
|
|
(40.2
|
)
|
Rate differential in foreign jurisdiction
|
|
|
(1.0
|
)
|
|
|
(1.0
|
)
|
|
|
|
(1.0
|
)
|
|
|
(15.1
|
)
|
*
|
Permanent
difference includes non-deductible stock compensation expenses.
|
The
Company’s deferred tax assets are comprised of the following:
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,329,000
|
|
|
$
|
1,121,000
|
|
PRC
|
|
|
2,888,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
1,756,000
|
|
|
|
1,024,000
|
|
PRC
|
|
|
1,490,000
|
|
|
|
1,457,000
|
|
Total deferred tax assets
|
|
|
7,463,000
|
|
|
|
3,602,000
|
|
Valuation allowance
|
|
|
(7,463,000
|
)
|
|
|
(3,602,000
|
)
|
Deferred tax assets, net - long-term
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company’s operations
in the U.S. incurred a cumulative U.S. federal NOL of approximately $3,781,000 as of June 30, 2019 which may reduce future federal
taxable income. During the year ended June 30, 2020, approximately $2,675,000 of additional NOL was generated and the tax benefit
derived from such NOL was approximately $562,000, respectively. As of June 30, 2020, the Company’s cumulative NOL amounted
to approximately $6,456,000 which may reduce future federal taxable income, of which approximately $1,400,000 will expire in
2037 and the remaining balance carried forward indefinitely.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s
operations in China incurred a cumulative NOL of approximately $5,828,000 as of June 30, 2019 which may reduce future taxable income.
During the year ended June 30, 2020, approximately $133,000 of additional NOL was generated and the tax benefit derived from such
NOL was approximately $33,000. As of June 30, 2020, the Company’s cumulative NOL amounted to approximately $5,961,000 which
may reduce future taxable income, of which approximately $281,000 start expiring from 2021 and the remaining balance of NOL will
be expired by 2025.
The Company periodically evaluates the likelihood of the realization
of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes
a portion will not be realized. Management considers new evidence, both positive and negative, that could affect the Company’s
future realization of deferred tax assets including its recent cumulative earnings experience, expectation of future income, the
carry forward periods available for tax reporting purposes and other relevant factors. The Company determined that it is more likely
than not its deferred tax assets could not be realized due to uncertainty on future earnings as a result of the deterioration of
trade negotiation between US and China in 2019. The Company provided a 100% allowance for its DTA as of June 30, 2020. The net
increase in valuation for the year ended June 30, 2020 amounted to approximately $3,861,000, respectively based on management’s
reassessment of the amount of the Company’s deferred tax assets that are more likely than not to be realized.
The
Company’s taxes payable consists of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
VAT tax payable
|
|
$
|
1,037,620
|
|
|
$
|
1,045,513
|
|
Corporate income tax payable
|
|
|
2,180,727
|
|
|
|
2,075,248
|
|
Others
|
|
|
62,001
|
|
|
|
64,134
|
|
Total
|
|
$
|
3,280,348
|
|
|
$
|
3,184,895
|
|
Note 17.
CONCENTRATIONS
Major
Customers
For the year ended
June 30, 2020, three customers accounted for approximately 42%, 23% and 22% of the Company’s revenues, respectively. As
of June 30, 2020, one customer accounted for approximately 87% of the Company’s accounts receivable, net.
For the year ended
June 30, 2019, three customers accounted for approximately 35%, 16% and 13% of the Company’s revenues, respectively. As
of June 30, 2019, all of these customers accounted for approximately 26% of the Company’s accounts receivable, net.
Major
Suppliers
For the year ended June
30, 2020, three suppliers accounted for approximately 26%, 18% and 16% of the total costs of revenue, respectively.
For the year ended June
30, 2019, three suppliers accounted for approximately 23%, 12% and 10% of the total costs of revenue, respectively.
Note 18.
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 consolidated financial statements for detailing the Company’s business segments.
The
Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial information of the separate
operating segments when making decisions about allocating resources and assessing the performance of the group. The Company has
determined that it has four operating segments: (1) shipping agency and management services; (2) inland transportation management
services; (3) freight logistics services and (4) container trucking services.
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
following tables present summary information by segment for the years ended June 30, 2020 and 2019, respectively:
|
|
For the Year Ended June 30, 2020
|
|
|
|
Shipping
Agency and Management
Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
- Third parties
|
|
$
|
2,105,651
|
|
|
$
|
-
|
|
|
$
|
4,368,596
|
*
|
|
$
|
61,709
|
|
|
$
|
6,535,956
|
|
Total revenues
|
|
$
|
2,105,651
|
|
|
$
|
-
|
|
|
$
|
4,368,596
|
|
|
$
|
61,709
|
|
|
$
|
6,535,956
|
|
Cost of revenues
|
|
$
|
827,690
|
|
|
$
|
-
|
|
|
$
|
2,795,859
|
*
|
|
$
|
55,314
|
|
|
$
|
3,678,863
|
|
Gross profit
|
|
$
|
1,277,961
|
|
|
$
|
-
|
|
|
$
|
1,572,737
|
|
|
$
|
6,395
|
|
|
$
|
2,857,093
|
|
Depreciation and amortization
|
|
$
|
340,421
|
|
|
$
|
-
|
|
|
$
|
7,684
|
|
|
$
|
54,189
|
|
|
$
|
402,294
|
|
Total capital expenditures
|
|
$
|
6,984
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,984
|
|
Gross margin%
|
|
|
60.7
|
%
|
|
|
-
|
%
|
|
|
36.0
|
%
|
|
|
10.4
|
%
|
|
|
43.7
|
%
|
*
|
For certain freight
logistics contracts that the Company entered into with customers starting from first quarter of fiscal year 2020, the Company
(i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does
not control the services rendered to the customers, revenues related to these contracts are presented net of related costs.
For the year ended June 30, 2020, gross revenues and gross cost of revenues related to these contracts amounted to approximately
$25.8 million and $24.3 million, respectively.
|
|
|
For
the Year Ended June 30, 2019
|
|
|
|
Shipping
Agency Services
|
|
|
Inland
Transportation
Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container
Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related
party
|
|
$
|
-
|
|
|
$
|
433,383
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
433,383
|
|
- Third parties
|
|
$
|
2,093,680
|
|
|
$
|
1,036,416
|
|
|
$
|
37,725,136
|
|
|
$
|
482,432
|
|
|
$
|
41,337,664
|
|
Total revenues
|
|
$
|
2,093,680
|
|
|
$
|
1,469,799
|
|
|
$
|
37,725,136
|
|
|
$
|
482,432
|
|
|
$
|
41,771,047
|
|
Cost of revenues
|
|
$
|
1,894,332
|
|
|
$
|
128,624
|
|
|
$
|
33,556,109
|
|
|
$
|
427,445
|
|
|
$
|
36,006,510
|
|
Gross profit
|
|
$
|
199,348
|
|
|
$
|
1,341,175
|
|
|
$
|
4,169,027
|
|
|
$
|
54,987
|
|
|
$
|
5,764,537
|
|
Depreciation and
amortization
|
|
$
|
-
|
|
|
$
|
110,821
|
|
|
$
|
1,902
|
|
|
$
|
18,197
|
|
|
$
|
130,920
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
125,817
|
|
|
$
|
17,675
|
|
|
$
|
143,492
|
|
Gross margin%
|
|
|
9.5
|
%
|
|
|
91.2
|
%
|
|
|
11.1
|
%
|
|
|
11.4
|
%
|
|
|
13.8
|
%
|
Total
assets as of:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Shipping Agency and Management Services
|
|
$
|
2,531,074
|
|
|
$
|
3,549,093
|
|
Freight Logistic Services
|
|
|
3,176,165
|
|
|
|
17,017,695
|
|
Container Trucking Services
|
|
|
30,863
|
|
|
|
32,215
|
|
Total Assets
|
|
$
|
5,738,102
|
|
|
$
|
20,599,003
|
|
The Company’s operations are primarily
based in the PRC, U.S, and Hong Kong, where the Company derives all of their revenues. Management also review consolidated financial
results by business locations.
Disaggregated information of revenues by
geographic locations are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
PRC
|
|
$
|
4,368,596
|
|
|
$
|
37,755,310
|
|
U.S.
|
|
|
2,167,360
|
|
|
|
1,922,057
|
|
Hong Kong
|
|
|
-
|
|
|
|
2,093,680
|
|
Total revenues
|
|
$
|
6,535,956
|
|
|
$
|
41,771,047
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
19. RELATED PARTY TRANSACTIONS
As
of June 30, 2020 and 2019, the outstanding amounts due from a related party consist of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Tianjin Zhiyuan Investment Group Co., Ltd.
|
|
$
|
484,331
|
|
|
$
|
897,739
|
|
Less: allowance for doubtful accounts
|
|
|
(48,433
|
)
|
|
|
(89,774
|
)
|
Total
|
|
$
|
435,898
|
|
|
$
|
807,965
|
|
In
June 2013, the Company signed a five-year global logistic service agreement with Tianjin Zhiyuan Investment Group Co., Ltd. (the
“Zhiyuan Investment Group”) and TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd. (together with Zhiyuan
Investment Group, “Zhiyuan”). Zhiyuan Investment Group is owned by Mr. Zhang, the largest shareholder of the Company.
In September 2013, the Company executed an inland transportation management service contract with the Zhiyuan Investment Group
whereby it would provide certain advisory services and help control potential commodities loss during the transportation process.
The amount due from Zhiyuan Investment Group as of June 30, 2020 was $484,331 and the Company provided a 10% allowance for doubtful
accounts of the amount due from Zhiyuan. For the year ended June 30, 2020, the Company recovered $41,341 of allowance for doubtful
accounts of the amount due from Zhiyuan.
As of June 30, 2020,
the Company had payable to the CEO of $6,279 and to the Acting CFO of $26,570 which were included in other payable. These payments
were made on behalf of the Company for the daily business operational activities.
Note
20. SUBSEQUENT EVENTS
On July 31, 2020,
the Company deregistered Longhe Ship Management (Hong Kong) Co., Limited (“LSM”) which is 100% own by Sino-Global
Shipping (HK) Ltd. (Hong Kong). LSM has not been in operation or carried on business after June 30, 2018. The result of operations
of LSM was immaterial for the years ended June 30, 2020 and 2019.
From July to September
2020, the Company received a total proceeds of $59,869 related to the 1,000,000 shares of the Company’s common stock issuance
to Mr. Shanming Liang (see Note 12). The full amount of subscription receivable has been paid off.
On
April 6, 2020, the Company entered into a share purchase agreement (the “Agreement”) with Mr. Kelin Wu (the “Seller”)
and Mandarine Ocean Ltd, a shipping company registered in the Marshall Islands (“Hanyang Shipping”), to acquire 75%
of the capital stock of Hanyang Shipping held by the Seller for an aggregate consideration of up to $3.75 million to be paid in
cash and the Company’s restricted shares of common stock. On June 17, 2020, the Company and Mr. Wu entered into the First
Amended and Restated Share Purchase Agreement (the “Amendment”) to amend the purchase price to an aggregate consideration
of up to $1.5 million and the Company’s restricted shares.
On
September 3, 2020, the Company and Mr. Wu signed a Termination Agreement to terminate the Amendment mutually. Neither party will
owe the other party any termination penalty in connection with the Termination Agreement.
On
September 17, 2020, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S.
Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended, pursuant to
which the Company agreed to sell an aggregate of 720,000 shares (the “Shares”) of the Company’s common stock,
no par value (“Common Stock”), and warrants (the “Warrants”) to purchase 720,000 Shares at a per share
purchase price of $1.46 (the “Offering”). The net proceeds to the Company from such Offering will be approximately
$1.05 million. The Warrants will be exercisable six (6) months following the date of issuance at an exercise price of $1.825 for
cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six-month anniversary
of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale
of the Warrant Shares. The Warrants will expire five and a half (5.5) years from its date of issuance. The Warrants are subject
to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The Warrants contain a mandatory
exercise right for the Company to force exercise the Warrants if the Company’s common stock trades at or above $4.38 for
20 consecutive trading days, provided, among other things, that the shares issuable upon exercise of the are registered or may
be sold pursuant to Rule 144 and the daily trading volume exceeds 60,000 shares of Common Stock per trading day on each trading
day in a period of 20 consecutive trading days prior to the applicable date. On September 21 and September 22, 2020, the Company
received total gross proceeds of $1.05 million.
F-28