U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For the period ended
For the transition period from ___________ to ___________.
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. employer | |
| Incorporation or organization) | identification number) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 12,
2021, the Company had
SINO-GLOBAL SHIPPING AMERICA, LTD.
FORM 10-Q
INDEX
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond our control. Forward-looking statements typically are identified by the use of terms such as “look”, “may”, “will”, “should”, “might”, “believe”, “plan”, “expect”, “anticipate”, “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to the following:
| ● | Our ability to timely and properly deliver our services; |
| ● | Our dependence on a limited number of major customers and related parties; |
| ● | Political and economic factors in the People’s Republic of China (“PRC”); |
| ● | Our ability to expand and grow our lines of business; |
| ● | Unanticipated changes in general market conditions or other factors, which may result in cancellations or reductions in the need for our services; |
| ● | Economic conditions which would reduce demand for services provided by us and could adversely affect profitability; |
| ● | The effect of terrorist acts, or the threat thereof, on the demand for the shipping and logistic industry which could, adversely affect our operations and financial performance; |
| ● | The acceptance in the marketplace of our new lines of business; |
| ● | Foreign currency exchange rate fluctuations; |
| ● | Hurricanes, outbreak of contagious diseases or other natural disasters; and |
| ● | Our ability to attract, retain and motivate skilled personnel. |
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update this forward-looking information unless required by applicable law or regulations.
ii
PART I. FINANCIAL INFORMATION
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED BALANCE SHEETS
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Cryptocurrencies | ||||||||
| Accounts receivable, net | ||||||||
| Other receivables, net | ||||||||
| Advances to suppliers - third parties | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Due from related party, net | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Other long-term assets - deposits | ||||||||
| Loan receivable-related parties | ||||||||
| Investment in unconsolidated entity | - | |||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Deferred revenue | $ | $ | ||||||
| Accounts payable | ||||||||
| Lease liabilities - current | ||||||||
| Taxes payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Loan payable - current | ||||||||
| Total current liabilities | ||||||||
| Lease liabilities - noncurrent | ||||||||
| Loan payable - noncurrent | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Preferred stock, | ||||||||
| Common stock, | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Sino-Global Shipping America Ltd. Stockholders' Equity | ||||||||
| Non-controlling Interest | ( | ) | ( | ) | ||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these audited consolidated financial statements.
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SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| (Restated) | ||||||||
| Net revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Selling expenses | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Recovery (provision) for doubtful accounts, net | ( | ) | ||||||
| Stock-based compensation | ( | ) | - | |||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Operating loss | ( | ) | ( | ) | ||||
| Other expenses, net | ( | ) | ||||||
| Net loss before provision for income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
| Net loss attributable to Sino-Global Shipping America, Ltd. | $ | ( | ) | $ | ( | ) | ||
| Comprehensive loss | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss) - foreign currency | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Less: Comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to Sino-Global Shipping America, Ltd. | $ | ( | ) | $ | ( | ) | ||
| Loss per share | ||||||||
| Basic and diluted* | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares used in computation | ||||||||
| Basic and diluted* | ||||||||
| * |
The accompanying notes are an integral part of these audited consolidated financial statements.
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SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| Additional | Accumulated other | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | paid-in | Treasury Stock | Subscription | Accumulated | comprehensive | Noncontrolling | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount | capital | Shares | Amount | receivable | deficit | loss | interest | Total | |||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common stock to private investor | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, September 30, 2020 (Restated) | $ | $ | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Additional | Accumulated other | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | paid-in | Treasury Stock | Subscription | Accumulated | comprehensive | Noncontrolling | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount | capital | Shares | Amount | receivable | deficit | loss | interest | Total | |||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| Stock compensation issue to employee | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| BALANCE, September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these audited consolidated financial statements.
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SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating Activities | (Restated) | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Non-cash lease expense | ||||||||
| (Recovery) provision for doubtful accounts, net | ( | ) | ||||||
| Loss on disposal of fixed assets | ||||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Other receivables | ( | ) | ||||||
| Advances to suppliers - third parties | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Other long-term assets - deposits | ( | ) | ( | ) | ||||
| Due from related parties | ||||||||
| Deferred revenue | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Taxes payable | ||||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Investing Activities | ||||||||
| Acquisition of property and equipment | ( | ) | ||||||
| Investment in unconsolidated entity | ( | ) | ||||||
| Advance to related parties | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Financing Activities | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Repayment of loan payable | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Effect of exchange rate fluctuations on cash | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental information | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Non-cash transactions of operating and investing activities | ||||||||
| Transfer of prepayment to intangible asset | $ | $ | ||||||
| Initial recognition of right-of-use assets and lease liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
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SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
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 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” or “China”) (including Hong Kong) and the U.S. where a majority of the Company’s clients are located.
The Company operates in three operating segments including (1) shipping agency and management services, which are operated by its subsidiaries in the U.S.; (2) freight logistics services, which are operated by its subsidiaries in the PRC; (3) container trucking services, which are operated by its subsidiaries in the U.S.
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. (“LSM”) , in which the Company holds a
On July 31, 2020, the Company deregistered Longhe
Ship Management (Hong Kong) Co., Limited (“LSM”) which is
On December 14, 2020, the Company incorporated
a new entity named “Blumargo IT Solution Ltd.” with
Starting from March 2021, the Company started
cryptocurrency mining. The Company plans to leverage information technology and other innovative technologies in its business platform.
These types of technology may be helpful in expanding its traditional logistics service expertise.
On April 13, 2021, the Company formed a joint
venture in which the Company owned
5
On April 21, 2021, the Company entered into a
cooperation agreement with Mr. Bangpin Yu to set up a joint venture in U.S. named “Brilliant Warehouse Service Inc.”
to support its freight logistics services in the U.S. The Company has a
In July 2021, the company registered a new company
Gorgeous Trading Ltd. Which is
On August 31, 2021, the company formed
a joint venture, Phi Electric Motor, Inc. in New York, which is
On September 29, 2021, 2021, the
company formed a
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.. 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, 2021. The situation remains highly uncertain for any further outbreak or resurgence of the COVID-19. It is therefore difficult for the Company to estimate the impact on the business or operating results that might be adversely affected by any further outbreak or resurgence of COVID-19.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Restatements
This condensed consolidated financial statements as of and for the three months September 30, 2020 contain restatements to correct an error in accounting estimate of allowance for other receivable.
The impact of these restatements on the financial statements is reflected in the following table:
| Consolidated Balance Sheets: | Original | Restatement | Restated | |||||||||
| Other receivables, net - non current | ( | ) | - | |||||||||
| Total Assets | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Non-controlling Interest | ( | ) | ( | ) | ( | ) | ||||||
| Total Equity (Deficiency) | ( | ) | ( | ) | ||||||||
| Consolidated Statements of Operations: | Original | Restatement | Restated | |||||||||
| Provision for doubtful accounts, net of recovery | ( | ) | ( | ) | ||||||||
| Total operating income (expenses) | ( | ) | ( | ) | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to non-controlling interest | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to Sino-Global Shipping America, Ltd. | ( | ) | ( | ) | ||||||||
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(b) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed 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
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:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Total current assets | ||||||||
| Deposits | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Other payables and accrued liabilities | $ | $ | ||||||
| Total liabilities | $ | $ | ||||||
(c) Fair Value of Financial Instruments
The Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 — Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 — Unobservable inputs that reflect management’s assumptions based on the best available information.
7
The carrying value of accounts receivable, other receivables, other current assets, and current liabilities approximate their fair values because of the short-term nature of these instruments.
(d) Use of Estimates and Assumptions
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s unaudited condensed 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.
(e) 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 unaudited condensed consolidated financial statements are presented in USD. Foreign currency transactions are translated into USD using the fixed exchange rates in effect at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations. The Company translates the foreign currency financial statements 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.
The exchange rates as of September 30, 2021 and June 30, 2021 and for the three months ended September 30, 2021 and 2020 are as follows:
| Three Months ended September 30, | ||||||||||||||||
| Foreign currency | September 30, Balance Sheet | June 30, 2021 Balance Sheet | 2021 Profits/Loss | 2020 Profits/Loss | ||||||||||||
| RMB:1USD | ||||||||||||||||
| AUD:1USD | ||||||||||||||||
| HKD:1USD | ||||||||||||||||
| CAD:1USD | ||||||||||||||||
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(f) 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 September 30, 2021 and June 30, 2021, cash balances of $
(g) Cryptocurrencies
Cryptocurrencies, mainly bitcoin, are included in current assets in the accompanying consolidated balance sheets. Cryptocurrencies purchased are recorded at cost and cryptocurrencies awarded to the Company through its mining activities are accounted for as other revenue of the Company for the three months ended September 30, 2021. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. Cryptocurrencies awarded to the Company through its mining activities are recorded as other income and as operating activities in the Company’s unaudited condensed consolidated financial statements.
Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.
(h) Receivables and Allowance for Doubtful Accounts
Accounts receivable are presented at net realizable
value. The Company maintains allowances for doubtful accounts and for estimated losses. The Company reviews the accounts receivable on
a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual receivable balances.
In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balances,
customers’ historical payment history, their current credit-worthiness and current economic trends.
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.
9
(i) 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 | |
| Motor vehicles | |
| Computer and office equipment | |
| Furniture and fixtures | |
| System software | |
| Leasehold improvements | |
| Mining equipment |
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 three months ended September 30, 2021 and 2020, no impairment were recorded, respectively.
(j) Investments in unconsolidated entity
Entities in which the Company has the ability
to exercise significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence
is generally considered to exist when the Company has voting shares representing
Investments are evaluated for impairment when
facts or circumstances indicate that the fair value of the long-term investment is less than its carrying value. An impairment loss is
recognized when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether
a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration
of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investment;
and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. 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
(k) 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.
10
The Company uses a five-step model to recognize revenue from customer contracts. The five-step model requires the Company to (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.
The Company’s disaggregated revenue streams are described as follows:
| For the Three Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| Shipping and management agency services | $ | $ | ||||||
| Freight logistics services | ||||||||
| Total | $ | $ | ||||||
| ● | 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 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. |
Disaggregated information of revenues by geographic locations are as follows:
| For the Three Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| PRC | ||||||||
| U.S. | ||||||||
| Total revenues | $ | $ | ||||||
(l) 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 unaudited condensed consolidated financial statements. A valuation allowance is provided against deferred tax assets if it is more likely than not that the asset will not be utilized in the future.
11
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 September 30, 2021 and 2020.
Income tax returns for the years prior to 2018 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
PRC Value Added Taxes and Surcharges
In addition, under the PRC regulations,
the Company’s PRC subsidiaries and affiliates are required to pay the city construction tax (
(m) 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 three months ended September 30, 2021 and 2020, there was no dilutive effect of potential shares of common stock of the Company because the Company generated net loss.
(n) 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.
(o) 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.
12
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.
(p) 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 the workforce are concentrated in China and United States, the Company’s business, results of operations, and financial condition have been adversely affected for the three months ended September 30, 2021. The situation remains highly uncertain for any further outbreak or resurgence of the COVID-19. It is therefore difficult for the Company to estimate the impact on the business or operating results that might be adversely affected by any further outbreak or resurgence of COVID-19.
(q) Recent Accounting Pronouncements
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 the Company’s unaudited condensed consolidated financial statements and related disclosures.
13
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 adoption of this new standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. The amendments in this Update to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for the Company for annual and interim reporting periods beginning July 1, 2022. Early adoption is permitted, but no earlier than fiscal years beginning after July 1, 2021, including interim periods within those fiscal years. 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. The Company believes the adoption of this new standard will not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning July 1, 2021. Early application is not permitted. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The adoption of this new standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for annual periods beginning after July 1, 2021 for public business entities. Early application is permitted. The amendments in this Update should be applied retrospectively. The adoption of this new standard did not have a material impact on the Company’s unaudited condensed 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 unaudited condensed consolidated financial statements.
Note 3. CRYPTOCURRENCIES
The following table presents additional information about cryptocurrencies:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | $ | - | |||||
| Receipt of cryptocurrencies from mining services | - | |||||||
| Ending balance | $ | $ | ||||||
14
Note 4. ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivable are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Less: allowances for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
Movement of allowance for doubtful accounts are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Provision for doubtful accounts, net of recovery | ||||||||
| Less: write-off | ||||||||
| Exchange rate effect | ||||||||
| Ending balance | $ | $ | ||||||
For
the three months ended September 30, 2021 and 2020, the provision for doubtful accounts was and $
Note 5. OTHER RECEIVABLES, NET
The Company’s other receivables are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Advances to customers* | $ | $ | ||||||
| Employee business advances | ||||||||
| Total | ||||||||
| Less: allowances for doubtful accounts | ( | ) | ( | ) | ||||
| Other receivables, net – continuing operations | $ | $ | ||||||
| * | As of September30, 2021 and June 30, 2021, 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 aforementioned 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 had provided an allowance due to contract delay and recorded allowances of approximately $ |
15
Movement of allowance for doubtful accounts are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Provision (Recovery) for doubtful accounts | ( | ) | ( | ) | ||||
| Less: write-off | - | ( | ) | |||||
| Exchange rate effect | ||||||||
| Ending balance | $ | $ | ||||||
Note 6. ADVANCES TO SUPPLIERS
The Company’s advances to suppliers – third parties are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Freight fees (1) | $ | $ | ||||||
| (1) |
Note 7. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The Company’s prepaid expenses and other assets are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Prepaid income taxes | $ | $ | ||||||
| Other (including prepaid professional fees, rent, listing fees) | ||||||||
| Total | $ | $ | ||||||
Note 8. OTHER LONG-TERM ASSETS – DEPOSITS, NET
The Company’s other long-term assets – deposits are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Rental and utilities deposits | $ | $ | ||||||
| Freight logistics deposits (1) | ||||||||
| Total other long-term assets - deposits | $ | $ | ||||||
| Less: allowances for deposits | ( | ) | ( | ) | ||||
| Other long-term assets- deposits, net | $ | $ | ||||||
| (1) |
Movement of allowance for deposits are as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Allowance for deposits | ||||||||
| Less: Write-off | ( | ) | ||||||
| Exchange rate effect | ||||||||
| Ending balance | $ | $ | ||||||
16
Note 9. PROPERTY AND EQUIPMENT, NET
The Company’s net property and equipment as follows:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Motor vehicles | ||||||||
| Computer equipment | ||||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| System software | ||||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
and amortization expenses for the three months ended September, 2021 and 2020 were $
Note 10. LOAN RECEIVABLE
On
April 10, 2021, the Company entered into a loan agreement with Shanghai Baoyin Industrial Co., Ltd. which amounted to $
Note 11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Salary and reimbursement payable | $ | $ | ||||||
| Professional fees payable | ||||||||
| Credit card payable | ||||||||
| Others | ||||||||
| Total | $ | $ | ||||||
17
Note 12. LOANS PAYABLE
On
May 11, 2020, the Company received loan proceeds in the amount of approximately $
On
May 26, 2020, the Company received an advance in the amount of $
Loan repayment schedule for the EIDL loans is as follows:
| Twelve Months Ending September 30, | Loan Amount | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total loan payments | $ | |||
Note 13. 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
18
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
For
the three months ended September 30, 2021 and 2020, rent expense amounted to approximately $
The five-year maturity of the Company’s lease obligations is presented below:
| Twelve Months Ending September 30, | Operating Lease Amount | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: Interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
Note 14. EQUITY
Stock issuance:
On
September 17, 2020, the Company entered into certain securities purchase agreement with certain “non-U.S. Persons” as defined
in Regulation S of the Securities Act of 1933, as amended, pursuant to which the Company sold an aggregate of
On
November 2 and November 3, 2020, the Company issued an aggregate of
19
On
December 8, 2020, the Company entered into a securities purchase agreement with the investors thereto pursuant to which the Company sold
to the investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of
On
January 27, 2021, the Company entered into a securities purchase agreement with the non-U.S. investors thereto pursuant to which the
Company sold to the investors, and the investors purchased from the Company, an aggregate of
On
February 6, 2021, the Company entered into a securities purchase agreement with the investors pursuant to which the Company sold to the
investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of
On
February 9, 2021, the Company entered into a securities purchase agreement with the investors pursuant to which the Company sold to the
investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of
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 were recorded as additional paid-in capital from common stock.
20
Following is a summary of the status of warrants outstanding and exercisable as of September 30, 2021:
| Warrants | Weighted Average Exercise Price | |||||||
| Warrants outstanding, as of June 30, 2021 | $ | |||||||
| Issued | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Warrants outstanding, as of September 30, 2021 | $ | |||||||
| Warrants exercisable, as of September30, 2021 | $ | |||||||
| Warrants Outstanding | Warrants Exercisable |
Weighted Average Exercise Price |
Average Remaining Contractual Life | |||||||
| 2018 Series A, |
$ | |||||||||
| 2020 warrants, |
$ | |||||||||
| 2021 warrants, |
$ | |||||||||
Stock based compensation:
By
action taken as of August 13, 2021, the Board of Directors (the “Board”) of Sino-Global Shipping America, Ltd.
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, 2021 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Cancelled, forfeited or expired | ( | ) | ( | ) | ||||
| Options outstanding, as of September 30, 2021 | $ | |||||||
| Options exercisable, as of September 30, 2021 | $ | |||||||
21
Following is a summary of the status of options outstanding and exercisable at September 30, 2021:
| Outstanding Options | Exercisable Options | |||||||||||||||||
| Exercise Price | Number | Average Remaining Contractual Life |
Average Exercise Price |
Number | Average Remaining Contractual Life | |||||||||||||
| $ | $ | |||||||||||||||||
Note 15. NON-CONTROLLING INTEREST
The Company’s non-controlling interest consists of the following:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Sino-China: | ||||||||
| Original paid-in capital | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Trans Pacific Logistics Shanghai Ltd. | ( | ) | ( | ) | ||||
| Brilliant Warehouse Service, Inc. | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
Note 16. COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity. As of September 30, 2021, the Company was not aware of any litigations or lawsuits against them.
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.
Note 17. INCOME TAXES
On March 27, 2020, the 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 three months ended September 30, 2021 and 2020 are as follows:
| For the Years Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Current | ||||||||
| U.S. | $ | $ | ||||||
| PRC | ||||||||
| Total income tax expense | $ | $ | ||||||
22
The Company’s deferred tax assets are comprised of the following:
| September 30, 2021 | June 30, 2021 | |||||||
| Allowance for doubtful accounts | ||||||||
| U.S. | $ | $ | ||||||
| PRC | ||||||||
| Net operating loss | ||||||||
| U.S. | ||||||||
| PRC | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net - long-term | $ | $ | ||||||
The
Company’s operations in the U.S. incurred a cumulative U.S. federal NOL of approximately $
The
Company’s operations in China incurred a cumulative NOL of approximately $
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 and the outbreak of COVID-19 in 2021. The Company
provided a
The Company’s taxes payable consists of the following:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| VAT tax payable | $ | $ | ||||||
| Corporate income tax payable | ||||||||
| Others | ||||||||
| Total | $ | $ | ||||||
23
Note 18. CONCENTRATIONS
Major Customers
For
the three months ended September 30, 2021,
For
the three months ended September, 2020,
Major Suppliers
For
the three months ended September 30, 2021,
For
the three months ended September 30, 2020,
Note 19. 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 unaudited condensed 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 three operating segments: (1) shipping agency and management services; (2) freight logistics services and (3) container trucking services.
The following tables present summary information by segment for the three months ended September 30, 2021 and 2020, respectively:
| For the Three Months Ended September 30, 2021 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | $ | $ | |||||||||
| Cost of revenues | $ | $ | $ | |||||||||
| Gross profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Total capital expenditures | $ | $ | $ | |||||||||
| Gross margin% | % | % | % | |||||||||
| For the Three Months Ended September 30, 2020 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | $ | $ | |||||||||
| Cost of revenues | $ | $ | $ | |||||||||
| Gross profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Total capital expenditures | $ | $ | $ | |||||||||
| Gross margin% | % | % | % | |||||||||
24
Total assets as of:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Shipping Agency and Management Services | $ | $ | ||||||
| Freight Logistic Services | ||||||||
| Container Trucking Services | ||||||||
| Total Assets | $ | $ | ||||||
The Company’s operations are primarily based in the PRC and U.S, 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:
| For the Three Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| PRC | ||||||||
| U.S. | ||||||||
| Total revenues | $ | $ | ||||||
Note 20. RELATED PARTY BALANCE AND TRANSACTIONS
Due from related party, net
As of September 30, 2021 and June 30, 2020, the outstanding amounts due from related parties consist of the following:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Tianjin Zhiyuan Investment Group Co., Ltd. (1) | $ | $ | ||||||
| Zhejiang Jinbang Fuel Energy Co., Ltd (2) | ||||||||
| Shanghai Baoyin Industrial Co., Ltd (3) | ||||||||
| Less: allowance for doubtful accounts | - | ( | ) | |||||
| Total | $ | $ | ||||||
| (1) | In June 2013, the Company signed a five-year global logistic service agreement with Tianjin Zhiyuan Investment Group Co., Ltd. (“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. Zhong Zhang. 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. Starting in late 2020, Mr, Zhang started selling off his shares of the Company and does not own shares of the Company as of June 30, 2021 and no longer a related party. Management’s reassessed the collectability and decided to provide full allowance for doubtful accounts as of June 30, 2021. The Company wrote off the balance for the three months ended September 30, 2021. |
| (2) |
| (3) |
25
Loan receivable- related parties
As of September 30, 2021 and June 30, 2020, the outstanding amounts loan receivable from related parties consist of the following:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Wang, Qinggang (1) | $ | $ | ||||||
| Shanghai Baoyin Industrial Co., Ltd (2) | ||||||||
| Total | $ | $ | ||||||
| (1) |
| (2) |
Other payable related party
As
of September 30, 2021, the Company had payable to the CEO of $
Note 21. SUBSEQUENT EVENTS
On
Oct 11, 2021, the company formed a joint venture, Thor Miner Inc. in Delaware, which is
On
October 3, 2021, Sino-Global Shipping America, Ltd. entered into a Strategic Alliance Agreement (the “Agreement”) with Shenzhen
Highsharp Electronic Ltd. (“Highsharp”) to establish a joint venture for collaborative engineering, technical development
and commercialization of a proprietary bitcoin mining machine under the name Thor, with exclusive rights covering design production,
intellectual property, branding, marketing and sales. On Oct 11, 2021,
On November 1, 2021, Mr. Lei Cao retired from his position as CEO and the Board approved the appointment of Mr. Lei Cao as Vice President and Head of Research and Development. On the same day, the Board appointed Mr. Yang Jie as the Company’s CEO.
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our company’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors.
Overview
Sino-Global has focused on providing customers with customized shipping agency and freight logistic services but has since begun looking aggressively at diversifying its revenue and service mix by seeking new growth opportunities to expand its business due to increased margin compression. These opportunities have ranged from complementary businesses to other service and product initiatives. In fiscal year 2021, while we continue to provide our current traditional logistics business, we will integrate the traditional business with modern technology to develop new business model.
On December 14, 2020, we incorporated a new entity named “Blumargo IT Solution Ltd.” with 80% ownership in partnership with Tianjin Anboweiye Technology Co. to build up hi-tech and information-based logistic services to meet the higher and complicate demand of customers. On June 30, 2021, we increased the ownership to 100%.
On April 13, 2021, we formed a joint venture in which the Company owned 99% equity interest of Hainan Saimeinuo Trading Co., Ltd., in the free tax zone in Hainan Province, China, with a register capital of approximately $1.5 million. This subsidiary primarily engages in freight logistics services.
On April 21, 2021, we entered into a cooperation agreement with Mr. Bangpin Yu to set up a 51% owned joint venture in U.S. named “Brilliant Warehouse Service Inc.” to support our freight logistics services in the U.S.
In July 2021, we registered a new company Gorgeous Trading Ltd. Which is 100% owned by Sino-Global Shipping New York Inc. This company will be mainly responsible for our smart warehouse and related business in Texas.
On August 31, 2021, the company formed a joint venture, Phi Electric Motor, Inc. in New York, which is 51% owned by Sino-Global Shipping New York Inc. for development and sales of electric motors. There has been no operations as of September 30, 2021.
On September 29, 2021, 2021, the company formed a 100% owned subsidiary, SG Shipping & Risk Solution Inc. in New York to support the Company’s logistic services. There has been no operations as of September 30, 2021.
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. Given the continually expanding of COVID-19 pandemic in China and United States, our business, results of operations, and financial condition are still adversely affected. The situation remains highly uncertain for any further outbreak or resurgence of COVID-19. It is therefore difficult for us to estimate the impact on our business or operating results that might be adversely affected by any further outbreak or resurgence of COVID-19.
The impacts of COVID-19 on our business, financial condition, and results of operations include but are not limited to, the following:
| ● | Our customers have been negatively impacted by the pandemic, which decreased demand for freight logistics services in fiscal year 2021. For fiscal year 2022, our customers are still impacted by the continuing resurgence of the Pandemic but has seen gradual recovery from first fiscal quarter of 2021. As a result, our revenue and gross profit for the three months ended September 30, 2021 were increased by approximately $0.7 million, or 58%, and $0.2 million, or 368.1%, respectively. |
| ● | Our suppliers have been and could continue to be negatively impacted by the COVID-19 outbreak, which may continually impact our cost of freight, or result in higher cost of revenue, which may in turn materially adversely affect our financial condition and operating results in coming months. |
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Recent developments:
In October 2021, we registered a new company SG Shipping & Risk Solution Inc, which is 100% owned by Sino-Global Shipping New York In.
On October 3, 2021, we entered into a Strategic Alliance Agreement (the “Agreement”) with Shenzhen Highsharp Electronic Ltd. (“Highsharp”) to establish a joint venture (“JV”) for collaborative engineering, technical development and commercialization of a proprietary bitcoin mining machine under the name Thor, with exclusive rights covering design production, intellectual property, branding, marketing and sales. Thor Miner Inc is 51% owned by Sino-Global Shipping New York Inc.
Company Structure
We, founded in 2001, are a non-asset based global shipping and freight logistics integrated solutions provider. We provide tailored solutions and value-added services for our customers to drive efficiency and control in related steps throughout the entire shipping and freight logistics chain. We conduct our business primarily through our wholly-owned subsidiaries in the People’s Republic of China (the “PRC” or “China”) (including Hong Kong) and the U.S., where a majority of our clients are located.
We operate in three operating segments, including (1) shipping agency and management services, operated by our subsidiaries in the U.S.; (2) freight logistics services, operated by our subsidiaries in the PRC; and (3) container trucking services, operated by our subsidiaries in the U.S.
Our corporate structure diagram as of the date of this report is as below:
Results of Operations
Comparison of the Three Months ended September 30, 2021 and 2020
Revenues
Revenues increased by $659,411, or approximately 58.0%, from $1,136,799 for the three months ended September 30, 2020 to $1,796,210 for the same period in 2021. The increase was primarily due to the increase of revenue from our freight logistic services of approximately $1,071,000 due to we provided logistic services for equipment import and also we started providing warehouse services. The increase was offset by a decrease in shipping management services of $210,000 we didn’t have for the three months ended September 30, 2021. One of our shipping management services contracts we entered into with customers starting in the first quarter of fiscal year 2020 expired during the year.
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The following tables present summary information by segments mainly regarding the top-line financial results for the three months ended September 30, 2021 and 2020:
| For the Three Months Ended September 30, 2021 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | - | $ | 1,796,210 | $ | 1,796,210 | ||||||
| Cost of revenues | $ | - | $ | 1,626,868 | $ | 1,626,868 | ||||||
| Gross profit | $ | - | $ | 169,342 | $ | 169,342 | ||||||
| Depreciation and amortization | $ | - | $ | 122,270 | $ | 122,270 | ||||||
| Total capital expenditures | $ | - | $ | 634,206 | $ | 634,206 | ||||||
| Gross margin% | - | % | 9.4 | % | 9.4 | % | ||||||
| For the Three Months Ended September 30, 2020 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | $ | 206,845 | $ | 929,954 | $ | 1,136,799 | ||||||
| Cost of revenues | $ | 176,968 | $ | 918,258 | $ | 1,095,226 | ||||||
| Gross profit | $ | 29,877 | $ | 11,696 | $ | 41,573 | ||||||
| Depreciation and amortization | $ | 80,269 | $ | 3,450 | $ | 83,719 | ||||||
| Total capital expenditures | $ | - | $ | - | $ | - | ||||||
| Gross margin% | 14.4 | % | 1.3 | % | 3.7 | % | ||||||
| % Change For the Three Months Ended September 30, 2021 and 2020 | ||||||||||||
| Shipping Agency and Management Services | Freight Logistics Services | Total | ||||||||||
| Net revenues | (100 | )% | 93.2 | % | 58.0 | % | ||||||
| Cost of revenues | (100 | )% | 77.2 | % | 48.5 | % | ||||||
| Gross profit | (100 | )% | 1,347.9 | % | 307.3 | % | ||||||
| Depreciation and amortization | (100 | )% | 3,444.1 | % | 46.0 | % | ||||||
| Total capital expenditures | 0.0 | % | 100.0 | % | 1,000 | % | ||||||
| Gross margin% | (14.4 | )% | 8.2 | % | 5.8 | % | ||||||
Disaggregated information of revenues by geographic locations are as follows:
| For the Three Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| PRC | 725,078 | 929,954 | ||||||
| U.S. | 1,071,132 | 206,845 | ||||||
| Total revenues | $ | 1,796,210 | $ | 1,136,799 | ||||
Revenues
(1) Shipping Agency and Management Services
For the three months ended September 30, 2021 and 2020, shipping agency and management services generated revenues of nil and $206,845, respectively, representing an approximately 100% decrease in revenues. The decrease in this segment was because the shipping agency and management services agreements we entered in fiscal year 2020 have expired and were not renewed due to the uncertainty of the shipping management market which has been negatively impacted by the COVID-19 pandemic.
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(2) Revenues from Freight Logistics Services
Freight logistics services primarily consist of cargo forwarding, brokerage, warehouse and other freight services. During the three months ended September 30, 2021, revenues increased by approximately 93.2% compared to the same period in 2020. We established a wholly owned entity in July 2021 and formed two joint ventures in April 2021 to support our freight logistics services. We recognized revenue approximately $980,000 from the certain import contract with a third party for equipment import. We act as their freight carriers and in charge the import matter of such equipment. We generated approximately $91,000 for warehouse storage services while we did not have such revenue for the same period last year. The revenue from Trans Pacifics Logistic Shanghai Ltd. remains the same compare to the three months ended September 30, 2021 and 2020. We believe our revenues from freight logistics services will continue to grow with the operations of these three entities.
Operating Costs and Expenses
Operating costs and expenses increased by $2,779,575 or approximately 147.4%, from $1,885,943 for the three months ended September 30, 2020 to $4,665,518 for the three months ended September 30, 2021. This increase was mainly due to the increase in selling expenses, stock-based compensation, cost of revenues and general and administrative expenses as discussed below.
The following table sets forth the components of our costs and expenses for the periods indicated:
| For the Three Months Ended September 30, | ||||||||||||||||||||||||
| 2021 | 2020 | Change | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | 1,796,210 | 100.0 | % | 1,136,799 | 100.0 | % | 659,411 | 58.0 | % | |||||||||||||||
| Cost of revenues | 1,626,868 | 90.6 | % | 1,095,226 | 96.3 | % | 531,642 | 48.5 | % | |||||||||||||||
| Gross margin | 9.4 | % | N/A | 3.7 | % | N/A | 5.8 | % | N/A | |||||||||||||||
| Selling expenses | 74,396 | 4.1 | % | 68,930 | 6.1 | % | 5,466 | 7.9 | % | |||||||||||||||
| General and administrative expenses | 1,966,569 | 109.5 | % | 703,434 | 61.9 | % | 1,263,135 | 179.6 | % | |||||||||||||||
| Provision for doubtful accounts, net of recovery | (1,929,715 | ) | (107.4 | )% | 18,353 | 1.6 | % | (1,948,068 | ) | (10,614.4 | )% | |||||||||||||
| Stock-based compensation | 2,927,400 | 163.0 | % | - | - | % | 2,927,400 | 100.0 | % | |||||||||||||||
| Total costs and expenses | 4,665,518 | 259.8 | % | 1,885,943 | 165.9 | % | 2,779,575 | 147.4 | % | |||||||||||||||
Cost of Revenues
Cost of revenues consisted primarily of freight costs to various freight carriers, cost of labor, warehouse rent and other overhead and sundry costs. Cost of revenues was $1,626,868 for the three months ended September 30, 2021, an increase of $531,642, or approximately 48.5%, as compared to $1,095,226 for the same period in 2020. The increase of cost of revenue mainly due to we had cost of revenue approximately $580,000 from certain import contract with a third party for equipment import, and approximately $199,000 for warehouse storage services while we did not have such cost of revenue for the same period last year. The increase was offset by approximately $177,000 of shipping management services that we entered in the first quarter of fiscal year 2020 expired during the year. The cost of revenue for Trans Pacifics Logistic Shanghai Ltd. had slightly increase compare to the three months ended September 30, 2021 and 2020. As a result, our gross profit margin increased by approximately 5.8% from approximately 3.7% for the three months ended September 30, 2020 to approximately 9.4% for the same period in 2021, because of the new warehouse storage services and freight services provided for equipment.
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Selling Expenses
Our selling expenses consisted primarily of salaries and travel expenses for our sales representatives. For the three months ended September 30, 2021, we had $74,396 of selling expenses, as compared to $68,930 for the same period in 2020, which represents an increase of $5,466 or approximately 7.9%.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and benefits, travel expenses for administration department, office expenses, regulatory filing and professional service fees including audit, legal and IT consulting. For the three months ended September 30, 2021, we had $1,966,569 of general and administrative expenses, as compared to $703,434 for the same period in 2020, representing an increase of $1,263,135, or approximately 179.6%. The increase was mainly due to the increase in professional expenses of approximately $500,000 as we spend more resources on business development to expand our business, with expenses including due diligence and professional fees for seeking potential acquisition target, and consulting expenses for new business development, the increase in employees, offices and other general and administrative expenses of approximately $640,000 as we hired more employees and opened more office locations to expand our freight logistics service
Provision for Doubtful Accounts, net of recovery
We had recovery of other receivable of $1,929,715 for the three months ended September 30, 2021 compared to $18,383 of provision for accounts receivable and other receivable, a decrease of $1,948,068, or approximately 10,614.4%. This change is mainly due to collection of other receivables.
Stock-based Compensation
Stock-based compensation was $2,927,400 for the three months ended September 30, 2021, an increase of $2,927,400 or 100.0%, as compared to nil for the same period in 2020. Stock-based compensation increased significantly from the three months ended September 30, 2020 to the same period in 2021 due to stock award was granted.
Operating loss
We had an operating loss of $2,869,308 for the three months ended September 30, 2021, compared to $749,144 for the same period in 2020. Such change was the result of the combination of the changes discussed above.
Other expenses, net
Total other expenses, net was $52,354 for the three months ended September 30, 2021, an increase of approximately $53,042 or 7,709.6%, as compared to $688 for the same period in 2020. The change was loss of disposal of fixed assets.
Taxation
We didn’t recorded income tax expense for the three months ended September 30, 2021 and 2020, respectively.
We have incurred a cumulative U.S. federal NOL of approximately $12,543,000 as of June 30, 2021, which may reduce future federal taxable income. The NOL generated prior to the year ended June 30, 2017 amounted to approximately $1,400,000 will expire in 2037 and the remaining balance carried forward indefinitely. During the three months ended September 30, 2021, approximately $1,397,000 of additional NOL was generated and the tax benefit derived from such NOL was approximately $293,000.
Our operations in China have incurred a cumulative a cumulative NOL of approximately $6,026,000 as of June 30, 2021, which may reduce future taxable income. The NOL amounted to approximately $711,000 start expiring from 2023 and the remaining balance of NOL will be expired by 2026. During the three months ended September 30, 2021, approximately $17,000 of additional NOL was generated and the tax benefit derived from such NOL was approximately $4,000.
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We 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 our 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. We determined that it is more likely than not our deferred tax assets could not be realized due to uncertainty on future earnings as a result of the deterioration of trade negotiation between the U.S. and China. We provided a 100% allowance for its deferred tax assets as of September 30, 2021. The net decrease in valuation for the three months ended September 30, 2021 amounted to approximately $996,000 based on management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized.
Net loss
As a result of the foregoing, we had a net loss of $2,921,662 for the three months ended September 30, 2021, compared to $748,456 for the same period in 2020. After the deduction of non-controlling interest, net loss attributable to us was $2,855,012 for the three months ended September 30, 2021, compared to $733,791 for the same period in 2020. Comprehensive loss attributable to us was $2,792,288 for the three months ended September 30, 2021, compared to $542,450 for the same period in 2020.
Liquidity and Capital Resources
Cash Flows and Working Capital
As of September 30, 2021, we had $42,948,874 in cash (cash on hand and cash in bank). We held approximately 97.3% of our cash in banks located in the U.S., Australia and Hong Kong and held approximately 2.7% of our cash in banks located in the PRC.
As of September 30, 2021, we had the following loans outstanding:
| Loans | Maturities | Interest rate | September 30, 2021 | |||||||
| Small business administration loan | May 2050 | 3.75 | % | $ | 155,405 | |||||
The following table sets forth a summary of our cash flows for the periods as indicated:
| For the Three Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | 271,241 | $ | (397,477 | ) | |||
| Net cash used in investing activities | $ | (2,302,448 | ) | $ | - | |||
| Net cash (used in) provided by financing activities | $ | (1,776 | ) | $ | 1,111,069 | |||
| Effect of exchange rate fluctuations on cash | $ | 144,540 | $ | 179,015 | ||||
| Net increase (decrease) in cash | $ | (1,888,443 | ) | $ | 892,607 | |||
| Cash at the beginning of period | $ | 44,837,317 | $ | 131,182 | ||||
| Cash at the end of period | $ | 42,948,874 | $ | 1,023,789 | ||||
The following table sets forth a summary of our working capital:
| September 30, | June 30, | |||||||||||||||
| 2021 | 2021 | Variation | % | |||||||||||||
| Total Current Assets | $ | 45,831,667 | $ | 46,867,349 | $ | (1,035,682 | ) | (2.2 | )% | |||||||
| Total Current Liabilities | $ | 5,216,069 | $ | 5,343,648 | $ | (127,579 | ) | (2.4 | )% | |||||||
| Working Capital (Deficit) | $ | 40,615,598 | $ | 41,523,701 | $ | (908,103 | ) | (2.2 | )% | |||||||
| Current Ratio | 8.79 | 8.77 | 0.02 | 0.2 | % | |||||||||||
In assessing the liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. As of September 30, 2021, our working capital was approximately $40.6 million and we had cash of approximately $42.9 million. We believe our revenues and operations will continue to grow and the current working capital is sufficient to support our operations and debt obligations as they become due one year through report date.
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Operating Activities
Our net cash provided by operating activities was approximately $0.3 million for three months ended September 30, 2021. The operating cash inflow for the three months ended September 30, 2021 was primarily attributable to our net loss of $2.9 million, adjusted by non cash stock-based compensation of approximately $2.9 million and approximately $1.9 million including recovery for doubtful accounts. We had an increase in cash inflow of other receivables of approximately $1.7 million as we collected our outstanding balances. We had an increase in advances to suppliers - third parties as we made advances to our suppliers of approximately $0.6 million, which will offset by a decrease in deferred revenue of approximately $0.4 million.
Our net cash used in operating activities was approximately $0.4 million for the three months ended September 30, 2020. The operating cash outflow for the three months ended September 30, 2020 was primarily attributable to our net loss of $0.7 million, adjusted by non-cash items of approximately $0.1 million of depreciation and amortization expenses of fixed assets and intangible asset. We had an increase in other receivables of approximately $0.1 million offset by an increase of approximately $0.2 million in accrued expenses and other current liabilities as we have more salary and reimbursement payable, and a decrease approximately $0.1 million of due from related parties as a result of collections made during the year.
Investing Activities
Net cash used in investing activities was $2,302,448 for the three months ended September 30, 2021 due to the acquisition of property and equipment of approximately $0.6 million, investment approximately $0.2 million to a joint venture named LSM Trading Ltd., which we hold a 40% of equity interest, and advance to related party of approximately $1.5 million.
We did not have any investing activities for the three months ended September 30, 2020.
Financing Activities
Net cash used in financing activities was approximately $2,000 for the three months ended September 30, 2021 due to repayment of loan payable.
Net cash provided by financing activities was approximately $1.1 million for the three months ended September 30, 2020 due to cash proceeds received from issuance of common stock to a private investor for approximately $1.1 million.
Critical Accounting Policies
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 us 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 us as the primary beneficiary. We, through Trans Pacific Shipping Ltd., entered into certain agreements with Sino-China, pursuant to which we receive 90% of Sino-China’s net income.
As a VIE, Sino-China’s revenues are included in our total revenues, and any income/loss from operations is consolidated with that of us. Because of contractual arrangements between us and Sino-China, we have a pecuniary interest in Sino-China that requires consolidation of the financial statements of us and Sino-China.
We have consolidated Sino-China’s operating results in accordance with Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. The agency relationship between us and Sino-China and its branches is governed by a series of contractual arrangements pursuant to which we have substantial control over Sino-China. Management makes ongoing reassessments of whether we remain the primary beneficiary of Sino-China.
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Use of Estimates and Assumptions
The preparation of 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 our 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 our judgments and estimates consider the economic implications of COVID-19 on our 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.
Revenue Recognition
We recognize revenue which represents the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in such exchange. We identified contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. Our revenue streams are recognized at a point in time.
We use a five-step model to recognize revenue from customer contracts. The five-step model requires that we (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) we satisfy the performance obligation.
We continue to derive revenues from sales contracts with 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. Our revenues are recognized at a point in time after all performance obligations are satisfied.
Contract balances
We record receivables related to revenue when we have 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.
Taxation
Because we and our subsidiaries and Sino-China were incorporated in different jurisdictions, they file separate income tax returns. We use 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.
We recognize 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. We recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense. We 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.
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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
We are subject to value added tax (“VAT”). Revenue from services provided by the our 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, our PRC subsidiaries and affiliates are required to pay the city construction tax (7%) and education surcharges (3%) based on the net VAT payments.
We prepare our consolidated financial statements in accordance with U.S. GAAP. These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.
Recent Accounting Pronouncements
Pronouncements 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. We adopted this ASU on July 1, 2020 and the adoption has no significant impact to our consolidated financial statements as a whole.
Pronouncements not yet adopted
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. We have not early adopted this update and it will become effective on July 1, 2023 assuming we will remain eligible to be smaller reporting company. We are currently evaluating the impact of this new standard on our consolidated financial statements and related disclosures.
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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 adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. The amendments in this Update to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for the Company for annual and interim reporting periods beginning July 1, 2022. Early adoption is permitted, but no earlier than fiscal years beginning after July 1, 2021, including interim periods within those fiscal years. 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. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning July 1, 2021. Early application is not permitted. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for annual periods beginning after July 1, 2021 for public business entities. Early application is permitted. The amendments in this Update should be applied retrospectively. We are currently evaluating the impact of this new standard onour consolidated financial statements and related disclosures. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
This Item is not applicable because we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain controls and procedures designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As of September 30, 2021, we carried out an evaluation, under the supervision of and with the participation of its management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing evaluation, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were not effective and adequately designed to ensure that the information required to be disclosed by us in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to the management, including Chief Executive Officer and Chief Financial Officer, in a manner that allowed for timely decisions regarding required disclosure. The assessment stemmed from the following material weaknesses –
| ● | Lack of segregation of duties for accounting personnel who prepared and reviewed the journal entries; and |
| ● | Lack of a full time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions. |
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
This item is not applicable to a smaller reporting company such as us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as previously reported in our Current Reports on Form 8-K, we have not sold any equity securities during the quarter ended September 30, 2021 that were not registered under the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are filed herewith:
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SINO-GLOBAL SHIPPING AMERICA, LTD. | ||
| November 12, 2021 | By: | /s/ Yang Jie |
| Yang Jie | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| November 12, 2021 | By: | /s/ Tuo Pan |
| Tuo Pan | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
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