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”) (including Hong Kong) and the U.S. where a majority of the Company’s clients are
located.
The
Company operates in four operating segments including (1) shipping agency and management services, which are operated by its subsidiary
in Hong Kong and the U.S.; (2) inland transportation management services, which are operated by its subsidiaries in the U.S.;
(3) freight logistics services, which are operated by its subsidiaries in the PRC and the U.S.; (4) container trucking services,
which are operated by its subsidiaries in the PRC and the U.S.
The
Company developed a mobile application which provides a full-service logistics platform for shipping operations between the U.S.
and the PRC for short-haul trucking in the U.S. and in December, 2016, it signed a significant agreement with Sino-Trans Guangxi
Logistics Co. Ltd. with a service period from July 1, 2017 to December 31, 2020. The Company has increased its business in the
U.S. since the launch of the short haul container truck services web-based platform. The board of the directors (the “Board”)
of the Company subsequently authorized the Company to upgrade its enterprise resource planning system (“ERP”) in order
to manage its operations in real time throughout its multiple locations and to integrate with web applications.
On
September 11, 2017, the Company set up a wholly-owned subsidiary, Ningbo Saimeinuo Supply Chain Management Ltd. (“Sino Ningbo”),
via its wholly-owned entity, Sino-Global Shipping New York Inc. This subsidiary primarily engages in transportation management
and freight logistics services.
Starting
with fiscal year 2019, current trade dynamics make it more expensive for shipping carrier clients to cost-effectively move cargo
into U.S. ports, and as a result, the Company realized a lower shipping volumes and less utilization of its online platform, which
has caused the Company to shift its focus back to shipping agency business. The shipping agency industry in China has improved
and the number of shipping agencies in overall in the country has decreased, due to both price and the inability of competitors
to embrace technology as a resource in serving client needs.
On
September 3, 2018, the Company entered into a cooperation agreement with Ningbo Far-East Universal Shipping Agency Co., Ltd. to
set up a joint venture in Hong Kong named Bright Far East International Shipping Agency Co., Ltd., to engage in worldwide shipping
agency operations. The Company has a 51% equity interest in the joint venture. On May 23, 2019, Bright Far East International
Shipping Agency Co., Ltd. incorporated in New York and terminated its registration in Hong Kong. There has been no major operation
of the joint venture for the three and six months ended December 31, 2019. Currently the Company is conducting the shipping agency
business through its wholly-owned Hong Kong subsidiary.
On
April 10, 2019, the Company entered into a cooperation agreement with Mr. Weijun Qin, the Chief Executive Officer of a shipping
management company in China, to set up a joint venture in New York named State Priests Management Ltd. (“State Priests”),
in which the Company will hold a 20% equity interest. On July 26, 2019, the Company signed a revised cooperation agreement with
Mr. Weijun Qin which changed the Company’s equity interest in State Priests from 20% to 90%. The Company has not provided
any cash contribution to the joint venture and there has been no operation of the joint venture pending the International Ship
Safety Management Certificate from the China Classification Society (the “Certificate”). Sino-Global Shipping New
York Inc. started providing shipping management related services that do not require certification which includes arranging and
coordinating for ship maintenance and inspection this quarter.
On
November 6, 2019, the Company signed a revised cooperation agreement with Mr. Weijun Qin to restructure their equity interest
in State Priests. Due to State Priests failed to timely obtain the necessary approval from related authorities, Mr. Weijun Qin
agreed to exchange 80% equity interest in Sea Continent Management Ltd. (“Sea Continent”), another entity Mr. Qin
owns for the Company’s 90% equity interest in State Priests. The equity transfer has been consummated. Sea Continent already
has the Certificate but has no operations as of December 31, 2019. There has been no capital injection nor operations of State
Priests and Sea Continent as of November 6, 2019, therefore no gain or loss will be recognized in the transaction.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
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 will hold a 40% equity interest. No investment has
been made by the Company as of the date of this report. The new joint venture will facilitate the purchase agricultural related
commodities in U.S. for customers in China and the Company will provide comprehensive supply chain and logistics solutions.
Note
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States of America (“US GAAP”) for interim financial information pursuant to the rules and
regulations of the Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements
include the accounts of all directly, indirectly owned subsidiaries and variable interest entity. All intercompany transactions
and balances have been eliminated in consolidation. Interim results are not necessarily indicative of results to be expected for
the full year. The information included in this Form 10-Q should be read in conjunction with the information included in the annual
report on Form 10-K for the fiscal year ended June 30, 2019 filed on September 30, 2019.
(b)
Basis of Consolidation
The
unaudited condensed consolidated financial statements include the accounts of the Company, its subsidiaries, and its affiliates.
All significant intercompany transactions and balances are eliminated in consolidation. Sino-Global Shipping Agency Ltd., a PRC
corporation (“Sino-China”), is considered a variable interest entity (“VIE”), with the Company as the
primary beneficiary. The Company, through Trans Pacific Shipping Ltd., entered into certain agreements with Sino-China, pursuant
to which the Company receives 90% of Sino-China’s net income.
As
a VIE, Sino-China’s revenues are included in the Company’s total revenues, and any income/loss from operations is
consolidated with that of the Company. Because of contractual arrangements between the Company and Sino-China, the Company has
a pecuniary interest in Sino-China that requires consolidation of the financial statements of the Company and Sino-China.
The
Company has consolidated Sino-China’s operating results because the entities are under common control in accordance with
Accounting Standards Codification (“ASC”) 805-10, “Business Combinations”. The agency relationship
between the Company and Sino-China and its branches is governed by a series of contractual arrangements pursuant to which the
Company has substantial control over Sino-China. Management makes ongoing reassessments of whether the Company remains the primary
beneficiary of Sino-China.
The
carrying amount and classification of Sino-China’s assets and liabilities included in the Company’s unaudited condensed
consolidated balance sheets were as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Current assets
|
|
$
|
38,518
|
|
|
$
|
16,474
|
|
Deposits
|
|
|
1,631
|
|
|
|
1,655
|
|
Property and equipment, net
|
|
|
48,632
|
|
|
|
95,765
|
|
Total assets
|
|
$
|
88,781
|
|
|
$
|
113,894
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Other payables and accrued liabilities
|
|
$
|
43,034
|
|
|
$
|
30,175
|
|
Total liabilities
|
|
$
|
43,034
|
|
|
$
|
30,175
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
(c)
Fair Value of Financial Instruments
The
Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value,
prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair
value as follows:
Level
1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at
the measurement date.
Level
2 — Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for
identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable,
and inputs derived from or corroborated by observable market data.
Level
3 — Unobservable inputs that reflect management’s assumptions based on the best available information.
The
carrying value of accounts receivable, other receivables, other current assets, and current liabilities approximate their fair
values because of the short-term nature of these instruments.
(d)
Use of Estimates and Assumptions
The
preparation of the Company’s unaudited condensed consolidated financial statements in conformity with US GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the
Company’s 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. Since the use of estimates is an integral component of the financial reporting process, actual results
could differ from those estimates.
(e)
Translation of Foreign Currency
The
accounts of the Company and its subsidiaries, including Sino-China and each of its branches are measured using the currency of
the primary economic environment in which the entity operates (the “functional currency”). The Company’s functional
currency is the U.S. dollar (“USD”) while its subsidiaries in the PRC, including Sino-China, report their financial
positions and results of operations in Renminbi (“RMB”). The accompanying unaudited condensed consolidated financial
statements are presented in USD. Foreign currency transactions are translated into USD using the fixed exchange rates in effect
at the time of the transaction. Generally, foreign exchange gains and losses resulting from the settlement of such transactions
are recognized in the consolidated statements of operations. The Company translates the foreign currency financial statements
of Sino-China, Sino-Global Shipping Australia Pty Ltd., Sino-Global Shipping Hong
Kong, Sino-Global Shipping Canada, Inc., Trans Pacific Shipping Ltd. (“Trans Pacific Beijing”) and Trans Pacific Logistic
Shanghai Ltd. (“Trans Pacific Shanghai,” collectively with Trans Pacific Beijing, “Trans Pacific”) in
accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange
rates quoted by the People’s Bank of China at the balance sheets’ dates and revenues and expenses are translated at
average exchange rates in effect during the year. The resulting translation adjustments are recorded as other comprehensive loss
and accumulated other comprehensive loss as a separate component of equity of the Company, and also included in non-controlling
interests.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
exchange rates as of December 31, 2019 and June 30, 2019 and for the three and six months ended December 31, 2019 and 2018 are
as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
Three months ended
December 31,
|
|
|
Six months ended
December 31,
|
|
Foreign currency
|
|
2019
Balance
Sheet
|
|
|
2019
Balance Sheet
|
|
|
2019
Profits/Loss
|
|
|
2018
Profits/Loss
|
|
|
2019
Profits/Loss
|
|
|
2018
Profits/Loss
|
|
RMB:1USD
|
|
|
6.9630
|
|
|
|
6.8657
|
|
|
|
7.0446
|
|
|
|
6.9162
|
|
|
|
7.0296
|
|
|
|
6.8595
|
|
AUD:1USD
|
|
|
1.4226
|
|
|
|
1.4238
|
|
|
|
1.4630
|
|
|
|
1.3945
|
|
|
|
1.4611
|
|
|
|
1.3812
|
|
HKD:1USD
|
|
|
7.7890
|
|
|
|
7.8130
|
|
|
|
7.8256
|
|
|
|
7.8294
|
|
|
|
7.8278
|
|
|
|
7.8373
|
|
CAD:1USD
|
|
|
1.2962
|
|
|
|
1.3092
|
|
|
|
1.3200
|
|
|
|
1.3215
|
|
|
|
1.3200
|
|
|
|
1.3142
|
|
(f)
Cash
Cash
consists of cash on hand and other highly liquid investments which are unrestricted as to withdrawal or use, and which have an
original maturity of three months or less when purchased. The Company maintains cash with various financial institutions mainly
in the PRC, Australia, Hong Kong, Canada and the U.S. As of December 31, 2019 and June 30, 2019, cash balances of $34,910 and
$2,993,913, respectively, were maintained at financial institutions in the PRC. Nil and $2,923,972 of these balances are not covered
by insurance as the deposit insurance system in China only insured each depositor at one bank for a maximum of approximately $70,000
(RMB 500,000). As of December 31, 2019 and June 30, 2019, cash balances of $79,203 and $122,017, respectively, were maintained
at U.S. financial institutions, and were insured by the Federal Deposit Insurance Corporation or other programs subject to certain
limitations. The Hong Kong Deposit Protection Board pays compensation up to a limit of HKD $500,000 (approximately $64,000) if
the bank with which an individual/a company holds its eligible deposit fails. As of December 31, 2019 and June 30, 2019, cash
balances of $3,140 and $4,386, respectively, were maintained at financial institutions in Hong Kong and were insured by the Hong
Kong Deposit Protection Board. As of December 31, 2019 and June 30, 2019, amount of deposits the Company had covered by insurance
amounted to $118,711 and $198,165, respectively.
(g)
Notes receivable
Notes
receivable represents trade accounts receivable due from various customers where the customers’ banks have guaranteed the
payment. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit
request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and
a processing fee.
(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. Receivables are generally considered past due after 180 days. The Company reserves
25%-50% of the customers balance aged between 181 days to 1 year, 50%-100% of the customers balance over 1 year and 100% of the
customers balance over 2 years. Accounts receivable are written off against the allowances only after exhaustive collection efforts.
The Company recovered $22,869 of accounts receivable for the three and six months ended December 31, 2019 and nil of accounts
receivable for the three and six months ended December 31, 2018, respectively. There was no write off for the three months ended
December 31, 2019 and 2018. For the six months ended December 31, 2019 and 2018, the Company wrote off $99,366 and nil of accounts
receivable, respectively.
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.
For the three and six months ended December 31, 2019, nil and $1,763 was written off of against other receivables, respectively.
There was no write off for the three and six months ended December 31, 2018.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
(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
|
20 years
|
Motor vehicles
|
3-10 years
|
Computer and office
equipment
|
1-5 years
|
Furniture and fixtures
|
3-5 years
|
System software
|
5 years
|
Leasehold improvements
|
Shorter of lease term or useful lives
|
The
carrying value of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from such
asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying
value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved or based on independent appraisals. There was no impairment for the three months
ended December 31, 2019 and 2018. For the six months ended December 31, 2019 and 2018, an impairment of $127,177 and nil were
recorded, respectively.
(j)
Intangible Assets, net
Intangible
assets are recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the following
estimated useful lives:
Logistics
platform
|
3 years
|
The
Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the assets might
be impaired. There was no impairment for the three months ended December 31, 2019 and 2018. For the six months ended December
31, 2019 and 2018, an impairment of $200,455 and nil were recorded, respectively.
(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.
The
Company uses a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i)
identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction
price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv)
allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as)
the Company satisfies the performance obligation.
The
Company continues to derive its revenues from sales contracts with its customers with revenues being recognized upon performance
of services. Persuasive evidence of an arrangement is demonstrated via sales contract and invoice; and the sales price to the
customer is fixed upon acceptance of the sales contract and there is no separate sales rebate, discount, or other incentive. The
Company’s revenues are recognized at a point in time after all performance obligations are satisfied.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
As
of December 31, 2019, the Company had outstanding contracts amounting to approximately $1.9 million, all of which is expected
to be completed within 6 months from December 31, 2019.
Revenues
by segments:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Shipping and management agency services
|
|
$
|
500,000
|
|
|
$
|
889,070
|
|
|
$
|
1,000,000
|
|
|
$
|
889,070
|
|
Inland transportation management services
|
|
|
-
|
|
|
|
420,000
|
|
|
|
-
|
|
|
|
1,340,000
|
|
Freight logistics services
|
|
|
1,503,500
|
|
|
|
8,978,923
|
|
|
|
2,745,641
|
|
|
|
14,466,476
|
|
Container trucking services
|
|
|
17,624
|
|
|
|
227,294
|
|
|
|
61,709
|
|
|
|
319,274
|
|
Total
|
|
$
|
2,021,124
|
|
|
$
|
10,515,287
|
|
|
$
|
3,807,350
|
|
|
$
|
17,014,820
|
|
|
●
|
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 advances from customers.
|
|
|
|
|
●
|
Revenues from inland
transportation management services are recognized when commodities are being released from the customers’ warehouse.
|
|
●
|
Revenues
from freight logistics services are recognized when the related contractual services are rendered.
For
certain freight logistics contracts that the Company entered into with customers starting in the first quarter of fiscal
year 2020, the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service
provider and (ii) does not control the services rendered to the customers, revenues related to this contracts are presented
net of related costs. For the three months ended December 31, 2019, gross revenue and gross cost of revenue related to
these contracts not presented in the table above amounted to approximately $12.9 million and $12.0 million, respectively.
For the six months ended December 31, 2019, gross revenue and gross cost of revenue not presented in the table above related
to these contracts amounted to approximately $22.0 million and $20.5 million, respectively.
|
|
●
|
Revenues from container
trucking services are recognized when the related contractual services are rendered.
|
(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 US GAAP. Deferred taxes, if
any, are recognized for the future tax consequences of temporary differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements. A valuation allowance is provided against deferred tax assets
if it is more likely than not that the asset will not be utilized in the future.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes interest
and penalties, if any, related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions
as of December 31, 2019 and June 30, 2019, respectively.
Income
tax returns for the years prior to 2015 are no longer subject to examination by US tax authorities.
PRC
Enterprise Income Tax
PRC
enterprise income tax is calculated based on taxable income determined under the PRC Generally Accepted Accounting Principles
(“PRC GAAP”) at 25%. Sino-China and Trans Pacific are registered in PRC and governed by the Enterprise Income Tax
Laws of the PRC.
PRC
Business Tax and Surcharges
Revenues
from services provided by the Company’s PRC subsidiaries and affiliates, including Sino-China and Trans Pacific are subject
to the PRC business tax of 5%. Business tax and surcharges are paid on gross revenues generated from shipping agency services
minus the costs of services which are paid on behalf of the customers.
In
addition, under the PRC regulations, the Company’s PRC subsidiaries and affiliates are required to pay the city construction
tax (7%) and education surcharges (3%) based on the calculated business tax payments.
The
Company’s PRC subsidiaries and affiliates report revenues net of PRC’s business tax and surcharges for all the periods
presented in the accompanying condensed consolidated statements of operations.
(m)
Earnings (loss) per Share
Basic
earnings (loss) per share is computed by dividing net income (loss) attributable to holders of common shares of the Company by
the weighted average number of common shares of the Company outstanding during the applicable period. Diluted earnings (loss)
per share reflect the potential dilution that could occur if securities or other contracts to issue common shares of the Company
were exercised or converted into common shares of the Company. Common share equivalents are excluded from the computation of diluted
earnings per share if their effects would be anti-dilutive.
For
the three and six months ended December 31, 2019 and 2018, there was no dilutive effect of potential shares of common stock of
the Company because the Company generated a 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.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
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.
(q)
Liquidity and Going concern
In
assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure
commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital
expenditure obligations. As of December 31, 2019, the Company’s working capital was approximately $10.4 million and the
Company had cash of approximately $0.1 million. The Company plans to fund continuing operations through identifying new prospective
joint venture partners and strategic alliance opportunities for new revenue sources, and by reducing costs to improve profitability
and replenish working capital. The Company’s ability to fulfill its current obligations will depend on the future realization
of its current assets and the future revenues generated from its operations.
The
Company expects to realize the balance of its current assets within the normal operating cycle of a twelve month period. If the
Company is unable to realize its current assets within the normal operating cycle of a twelve month period, the Company may have
to consider supplementing its available sources of funds through the following sources:
|
●
|
the Company will
continuously seek equity financing to support its working capital; On November 13, 2019, the Company entered into a cooperation
agreement with Shanming Liang, a director of Guangxi Jinqiao Industrial Group Co., Ltd., to cooperate and expand the bulk
cargo container services business. Shanming Liang agreed to purchase 1,000,000 shares of the Company’s common stock
at a purchase price of $1.00 per share for aggregate proceeds of $1.0 million pursuant to a stock purchase agreement dated
November 14, 2019. The company received a gross proceeds of $500,500 in second quarter of fiscal year 2020. The rest of the
payment is expected to be received by the end of the third quarter of fiscal year 2020.
|
|
|
|
|
●
|
other available
sources of financing from PRC banks and other financial institutions; and
|
|
|
|
|
●
|
financial support
and credit guarantee commitments from the Company’s shareholders and directors.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Based on the above considerations,
the Company’s management is of the opinion that it may not have sufficient funds to meet the Company’s working capital
requirements and current liabilities as they become due one year from issuance of these financial statements. There is no assurance
that management will be successful in their plans. There are a number of factors that could potentially arise that could undermine
the Company’s plans, such as changes in the PRC government policy, economic conditions, and competitive pricing in the industries
that the Company operates in. In addition, the recent outbreak of new coronavirus pandemic in China posed disruption and restrictions
on our operations and those of our customers which not only negatively impact our financial conditions but also slowed down the
macro-economic development in China. If management is unable to execute this plan, there would likely be a material adverse effect
on the Company’s business.
The
management has considered whether there is substantial doubt about its ability to continue as a going concern due to 1) the Company’s
recurring losses from operations, including approximately $2.0 million net loss attributable to the Company’s stockholders
for the six months ended December 31, 2019, 2) accumulated deficit of approximately $9.0 million as of December 31, 2019 and 3)
has negative operating cash flows of approximately $3.0 million for the six months ended December 31, 2019. All of these factors
raise substantial doubt about the ability of the Company to continue as a going concern.
(r)
Recent Accounting Pronouncements
Pronouncements
adopted
In
February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), to increase
the transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability
and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements.
ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective
approach to adoption assuming the Company will remain an emerging growth company at that date. Early adoption is permitted. In
September 2017, the FASB issued ASU No. 2017-13, which to clarify effective dates that public business entities and other
entities were required to adopt ASC Topic 842 for annual reporting. A public business entity that otherwise would not meet the
definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial
information in another entity’s filing with the SEC adopting ASC Topic 842 for annual reporting periods beginning after
December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020.
ASU No. 2017-13 also amended that all components of a leveraged lease be recalculated from inception of the lease based on
the revised after tax cash flows arising from the change in the tax law, including revised tax rates. The difference between the
amounts originally recorded and the recalculated amounts must be included in income of the year in which the tax law is enacted.
The Company adopted this ASU in the first quarter of fiscal year 2020 using modified retrospective transition approach at the
beginning of the period of adoption. The Company recognized lease labilities of approximately $0.4 million, with corresponding
right-of use (“ROU”) assets of approximately the same amount based on the present value of the future minimum rental
payments of leases, using a weighted average discount rate of approximately 9.01%.
On
July 1, 2019, the Company adopted ASU 2018-07 where awards to nonemployees are measured by estimating the fair value of the equity
instruments to be issued. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor
acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards which
superseded ASU 505-50. The ASU is required to be applied on a prospective basis to all new awards granted after the date of adoption. The
Company adopted this ASU on July 1, 2019 and the adoption has no significant impact to the Company’s unaudited condensed
consolidated financial statements as a whole.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
On
July 13, 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as
warrants, convertible debt or convertible preferred stock that contain down round features. Part II does not have accounting impact.
The ASU is effective for the Company for annual and interim reporting periods beginning July 1, 2019. The Company adopted
this ASU on July 1, 2019 and determined the adoption of this ASU did not have a material effect on the Company’s unaudited
condensed consolidated financial statements.
Pronouncements
not yet adopted
In
August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds
certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures
related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value,
clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU
2018-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company does not
believe the adoption of this ASU will have a material effect on the Company’s unaudited condensed consolidated financial
statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this ASU address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning
July 1, 2020. The Company is currently evaluating the impact of this new standard on its unaudited condensed consolidated financial
statements and related disclosures.
In
December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”.
The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles
in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying
and amending existing guidance. ASU 2019-12 is effective for the Company for annual and interim reporting periods beginning July
1, 2021. Early adoption of the amendments is permitted, including adoption in any interim period for public business entities
for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an
interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally,
an entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating the
impact of this new standard on Company’s 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.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
(t)
Reclassification
Certain
prior year amounts have been reclassified to conform to the current year presentation mainly reclassifying advances to suppliers
to other receivables (see Note 4 and 5). These reclassifications have no effect on the reported revenues, net loss or total assets.
Note
3. ACCOUNTS RECEIVABLE, NET
The
Company’s net accounts receivable are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Trade accounts receivable
|
|
$
|
11,192,245
|
|
|
$
|
12,716,120
|
|
Less: allowances for doubtful accounts
|
|
|
(6,861,694
|
)
|
|
|
(5,670,274
|
)
|
Accounts receivable, net
|
|
$
|
4,330,551
|
|
|
$
|
7,045,846
|
|
Movement
of allowance for doubtful accounts is as follows:
|
|
December 31,
2019
|
|
|
June 30,
2019
|
|
Beginning balance
|
|
$
|
5,670,274
|
|
|
$
|
1,682,228
|
|
Provision for doubtful accounts
|
|
|
1,282,492
|
|
|
|
4,091,056
|
|
Less: write-off/recovery
|
|
|
(76,497
|
)
|
|
|
(88,882
|
)
|
Exchange rate effect
|
|
|
(14,575
|
)
|
|
|
(14,128
|
)
|
Ending balance
|
|
$
|
6,861,694
|
|
|
$
|
5,670,274
|
|
For
the three months ended December 31, 2019 and 2018, the provision for doubtful accounts was $258,561 and $445,119, respectively.
For the six months ended December 31, 2019 and 2018, the provision for doubtful accounts was $1,282,492 and $1,396,951, respectively.
Note
4. OTHER RECEIVABLES
The
Company’s other receivables are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Advances to customers*
|
|
$
|
10,216,897
|
|
|
$
|
4,237,270
|
|
Cash advances
|
|
|
99,331
|
|
|
|
54,953
|
|
Security deposit
|
|
|
-
|
|
|
|
43,492
|
|
Other receivables
|
|
$
|
10,316,228
|
|
|
$
|
4,335,715
|
|
*
|
As of December 31,
2019, 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. The Company is expected to deliver its services under all such contracts by December 31, 2020.
|
Note
5. ADVANCES TO SUPPLIERS
The
Company’s advances to suppliers – third parties are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Freight fees (1)
|
|
$
|
193,450
|
|
|
$
|
123,767
|
|
Port fees
|
|
|
-
|
|
|
|
373
|
|
Total advances to suppliers-third parties
|
|
$
|
193,450
|
|
|
$
|
124,140
|
|
|
(1)
|
The advanced freight
fee is the Company’s prepayment made for various shipping costs for shipments from January to March 2020.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The
Company’s prepaid expenses and other assets are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Prepaid income taxes
|
|
$
|
48,924
|
|
|
$
|
35,129
|
|
Other (including prepaid insurance, rent, listing fees)
|
|
|
45,988
|
|
|
|
69,925
|
|
Deposit for ERP (1)
|
|
|
-
|
|
|
|
218,678
|
|
Prepaid leasing and service fees (2)
|
|
|
150,412
|
|
|
|
300,825
|
|
Total
|
|
|
245,324
|
|
|
|
624,557
|
|
Less: current portion
|
|
|
(94,912
|
)
|
|
|
(105,054
|
)
|
Total noncurrent portion
|
|
$
|
150,412
|
|
|
$
|
519,503
|
|
|
(1)
|
On December 27,
2017, with the approval of the Board, the Company signed a contract with Tianjin Anboweiye Technology Ltd Co. (“Tianjin
Anboweiye”), to develop a more complete ERP system based on the Company’s existing operations and projected future
growth. In March 2018, the Company paid a deposit to start phase one of the development which includes upgraded accounting
and human resources modules, new order processing and customer relationship management system. The Company paid a $437,357
deposit to Tianjin Anboweiye. The total contract price for phase one amounted to RMB 4,000,000, approximately $583,000. For
the year ended June 30, 2019, the Company prepaid $218,679 of software development costs incurred during the preliminary project
stage, which included planning and determining the functionality of the software. The Company integrated the shipping agencies
business with the current ERP platform and the first phase of the ERP system was placed in use in July 2019 and to be amortized
over three years (See Note 9).
|
|
(2)
|
On June 22, 2018,
the Company entered into a contract to improve its IT infrastructure. The total contract consideration for the services is
$1.2 million and the Company paid a deposit of approximately $1.0 million. The consideration is allocated as follows: $420,000
for operating hardware leasing of twelve months; $480,000 for onsite services and IT consulting for a two-year period; $60,000
for operating system set up and $240,000 for continuing integration with the ERP system and data management for two years.
For the three months ended December 31, 2019, the Company incurred $50,137 in IT for consulting costs, and $25,069 for continuing
integration of the ERP system and data management costs. For the six months ended December 31, 2019, the Company incurred
$100,275 in IT for consulting costs, and $50,138 for continuing integration of the ERP system and data management costs.
|
Note
7. OTHER LONG-TERM ASSETS - DEPOSITS
The
Company’s other long-term assets – deposits are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Rental and utilities deposits
|
|
$
|
52,880
|
|
|
$
|
60,435
|
|
Freight logistics deposits (1)
|
|
|
2,952,709
|
|
|
|
2,994,271
|
|
Total other long-term assets - deposits
|
|
$
|
3,005,589
|
|
|
$
|
3,054,706
|
|
|
(1)
|
Certain customers
require the Company to pay certain deposits for the security of shipments and merchandise. These deposits are refundable at
the end of their respective contract term. Approximately $2.8 million (RMB 20 million) of the balance was paid to BaoSteel
Resources Co., Ltd. according to the agreement entered in March 2018. This refundable deposit is to cover any possible loss
of merchandise, as well as any non-performance on the part of the Company and its vendors. The deposit is expected be repaid
to the Company when either the contract terms are expired or the contract is terminated by the Company.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note
8. PROPERTY AND EQUIPMENT, NET
The
Company’s net property and equipment as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Buildings
|
|
$
|
193,312
|
|
|
$
|
196,050
|
|
Motor vehicles*
|
|
|
524,932
|
|
|
|
700,724
|
|
Computer equipment*
|
|
|
98,464
|
|
|
|
162,865
|
|
Office equipment*
|
|
|
44,226
|
|
|
|
69,278
|
|
Furniture and fixtures*
|
|
|
72,749
|
|
|
|
167,143
|
|
System software*
|
|
|
109,493
|
|
|
|
116,339
|
|
Leasehold improvements
|
|
|
798,282
|
|
|
|
807,078
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,841,458
|
|
|
|
2,219,477
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(1,175,178
|
)
|
|
|
(1,229,567
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
666,280
|
|
|
$
|
989,910
|
|
Depreciation
and amortization expenses for the three months ended December 31, 2019 and 2018 were $66,601 and $9,731, respectively. Depreciation
and amortization expenses for the six months ended December 31, 2019 and 2018 were $187,121 and $19,613, respectively.
|
*
|
For
the three months ended December 31, 2019 and 2018, no impairment of fixed assets were recorded. For the six months ended December
31, 2019 and 2018, an impairment of $127,177 and nil were recorded, respectively due to continued decrease in revenues from the
inland transportation management segment.
|
Note
9. INTANGIBLE ASSETS, NET
Net
intangible assets consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Full service logistics platforms
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
Less: Accumulated amortization
|
|
|
(131,944
|
)
|
|
|
(100,278
|
)
|
Intangible assets, net
|
|
$
|
58,056
|
|
|
$
|
89,722
|
|
As
part of the above-mentioned intelligent logistics platform (see Note 6), four information applications were completed by Tianjin
Anboweiye in December 2017 and placed into service, including route planning and route execution for customers in China. The platforms
are being amortized over three years. Amortization expenses amounted to $15,833 and $15,834 for the three months ended December
31, 2019 and 2018, respectively. Amortization expenses amounted to $49,890 and $31,667 for the six months ended December 31, 2019
and 2018, respectively.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
In
addition, first phase of the ERP system was placed in use in July 2019 and is being amortized over three years. However, due to
the continued decrease in revenues from the inland transportation management segment, the Company recorded an impairment of nil
and $200,455 for the three and six months ended December 31, 2019.
Note
10 – 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 real estate leases are classified as operating
leases.
The
Company has several vehicle lease agreements and office lease agreements with lease terms ranging from two to three years. Upon
adoption of ASU 2016-02, the Company recognized lease labilities of approximately $0.4 million, with corresponding ROU assets
of approximately the same amount based on the present value of the future minimum rental payments of leases, using a weighted
average discount rate of approximately 9.01%. As of December 31, 2019, ROU assets and lease labilities amounted to $384,794 and
$386,082, respectively.
The
Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The
leases generally do not contain options to extend at the time of expiration and the weighted average remaining lease terms are
2.41 years.
For
the three months ended December 31, 2019 and 2018, rent expense amounted to approximately $80,000 and $57,000, respectively. For
the six months ended December 31, 2019 and 2018, rent expense amounted to approximately $160,000 and $113,000, respectively.
The
three-year maturity of the Company’s lease obligations is presented below:
Twelve Months Ending December 31,
|
|
Operating Lease Amount
|
|
|
|
|
|
2020
|
|
$
|
184,902
|
|
2021
|
|
|
166,175
|
|
2022
|
|
|
82,447
|
|
Total lease payments
|
|
|
433,524
|
|
Less: Interest
|
|
|
(47,442
|
)
|
Present value of lease liabilities
|
|
$
|
386,082
|
|
Note
11. EQUITY
Stock
issuance:
The
Company’s outstanding warrants are classified as equity since they qualify for exception from derivative accounting as they
are considered to be indexed to the Company’s own stock and require net share settlement. The fair value of the warrants
of $1,074,140 is valued based on the Black-Scholes-Merton model and is recorded as additional paid-in capital from common stock
based on the relative fair value of proceeds received using the following assumptions:
|
|
Series A
|
|
Annual dividend yield
|
|
|
-
|
|
Expected life (years)
|
|
|
5.5
|
|
Risk-free interest rate
|
|
|
2.72
|
%
|
Expected volatility
|
|
|
110.31
|
%
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Following
is a summary of the status of warrants outstanding and exercisable as of December 31, 2019:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of June 30, 2019
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of December 31, 2019
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable, as of December 31, 2019
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
Warrants Outstanding
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Average
Remaining
Contractual
Life
|
|
2018 Series A, 2,000,000
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
|
3.70 years
|
|
On
November 13, 2019, the Company entered into a cooperation agreement with Shanming Liang, a director of Guangxi Jinqiao Industrial
Group Co., Ltd., to cooperate and expand the bulk cargo container services business. Shanming Liang agreed to purchase 1,000,000
shares of the Company’s common stock at a purchase price of $1.00 per share for aggregate proceeds of $1 million. The Company
and Mr. Liang further entered into a Share Purchase Agreement on November 14, 2019 to memorialize the transaction aforementioned.
Pursuant to the aforementioned agreement, the Company received proceeds of $500,500 in the second quarter of fiscal year 2020.
The rest of the payment is expected to receive by the end of the third quarter of fiscal year 2020.
On
December 9, 2019, the Company authorized the cancellation of the 175,497 of the Company’s treasury shares. The shares were
cancelled as of December 31, 2019. The cancellation has no effect on the Company’s total shareholders’ equity and earnings per
share.
Stock
based compensation:
In
March 2017, the Company entered into a consulting and advisory services agreement with a consulting entity, which provides management
consulting services that include marketing program design and implementation and cooperative partner selection and management.
The service period began in March 2017 and will end in February 2020. The Company issued 250,000 shares of common stock as remuneration
for the services, which were issued as restricted shares at $2.53 per share on March 22, 2017 to the consultant. These
shares were valued at $632,500 and the consulting expense was $52,708 and $105,417 for the three and six months ended December
31, 2019 and 2018, respectively.
On
October 23, 2017, the Company issued to its employees 130,000 shares of its restricted common stock valued at $2.80 per share.
One quarter of the total number of common shares became vested on each of November 16, 2017, February 16, 2018, May 16, 2018 and
August 16, 2018. $0 and $91,000 were recorded as compensation expense for the three and six months ended December 31, 2018, respectively.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
On
October 27, 2017, the Company issued 200,000 shares of restricted common stock on the grant date with an aggregated fair value
of $548,000 to a consulting company pursuant to a consulting agreement. The scope of services primarily covered advising on business
development, strategic planning and compliance during the one-year service period from October 17, 2017 to October 16, 2018. $0
and $137,000 were recorded as compensation expense for the three and six months ended December 31, 2018, respectively.
On
June 7, 2018, the Company issued 400,000 shares of common stock with a fair value of $508,000 to a consulting entity pursuant
to a service agreement. The scope of services primarily covers legal consultation in PRC during the two-year service period from
July 2018 to June 2020. The consulting entity is entitled to be granted the common stock on a quarterly basis in eight equal instalments.
The Company recorded legal expense of $63,500 and $127,000 for the three and six months ended December 31, 2019 and 2018, respectively.
On
September 21, 2018, the Company issued 430,000 shares of common stock valued at $1.10 per share on the grant date with an aggregated
fair value of $473,000 under the 2014 Stock Incentive Plan (the “Plan”) to three employees, vesting immediately. The
Company recorded compensation expense of $0 and $473,000 for the three and six months ended December 31, 2018, respectively.
On
December 11, 2018, the Company issued 200,000 shares of common stock valued at $0.89 per share on the grant date with a fair value
of $178,000 under the 2014 Stock Incentive Plan to three employees, vesting immediately. The Company recorded compensation expense
of $178,000 for both the three and six months ended December 31, 2018.
On
November 7, 2018, the Board of the Company approved the issuance of 50,000 shares of restricted common stock to a consultant pursuant
to an existing consulting agreement. The scope of services primarily covers advising on business development, strategic planning
and corporate finance. The grant’s fair value of approximately $65,000 was amortized during the remaining service period
from November 3, 2018 to May 2, 2019. The Company recorded compensation expense of $21,667 for the three and six months ended
December 31, 2018.
On
December 31, 2018, the Board of the Company and the Compensation Committee of the Board (the “Committee”) approved
(i) an increase in the annual salaries of Lei Cao, Chief Executive Officer, Tuo Pan, acting Chief Financial Officer, and Zhikang
Huang, Chief Operating Officer (the “C-Level Executives”), effective January 1, 2019, and (ii) a one-time award of
a total of 950,000 of the common stock from the shares reserved under the Company’s 2014 Stock Incentive Plan (the “Plan”)
to the C-Level Executives, Chief Technology Officer, Yafei Li and the following members of the Board, effective December 31, 2018,
for their valuable contributions to the Company in fiscal 2018: Jing Wang, Tieliang Liu and Bradley A. Haneberg. The Committee
recommended and the Board determined to make the following stock grants under the Plan: (i) Chief Executive Officer, Lei Cao,
is entitled to a one-time stock award grant of 400,000 shares, (ii) acting Chief Financial Officer, Tuo Pan, is entitled to a
one-time stock award grant of 140,000 shares, (iii) Chief Operating Officer, Zhikang Huang, is entitled to a one-time stock award
grant of 180,000 shares, (iv) Chief Technology Officer, Yafei Li is entitled to a one-time stock award grant of 80,000 shares,
(v) Board member Jing Wang is entitled to a one-time stock award grant of 50,000 shares, (vi) Board member Tieliang Liu is entitled
to a one-time stock award grant of 50,000 shares and (vii) Board member Bradley A. Haneberg is entitled to a one-time stock award
grant of 50,000 shares. The Company recorded compensation expense of $731,500 for the three and six months ended December 31,
2018.
On
April 8, 2019, the Company entered into a consulting services agreement with a consulting entity, which provides management consulting
and advisory services. The scope of services primarily covered advising on business development, strategic planning and compliance
during the six months service period from April 8, 2019 to October 7, 2019. The Company issued 300,000 shares of common stock
as remuneration for the services, which were issued as restricted shares at $0.85 per share on April 16, 2019 to the consulting
entity. These shares were valued at $255,000. The Company recorded compensation expense of $0 and $127,500 for the three and six
months ended December 31, 2019, respectively.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
On
July 1, 2019, the Company issued 600,000 restricted shares of common stock with a fair value of $432,000 to a China-based company
that specializes in the port agency business and/or its designees pursuant to a consulting service agreement. The scope of services
primarily covers business consultation for one year from July 1, 2019 to June 30, 2020. The Company can terminate the agreement
if they are not satisfy with the performance of the consulting firm and the consulting firm should return all the issued shares.
The Company recorded compensation expense of $108,000 and $216,000 for the three and six months ended December 31, 2019, respectively.
Included
in a Board resolution dated January 30, 2016, the Company’s CEO is authorized to grant to the employees up to one million
shares under the Plan. On July 22, 2019, the Company granted 90,000 shares of restricted common stock valued at $0.70 per share
on the grant date with an aggregated fair value of $63,000 under the Plan to one employee, vesting immediately. The Company recorded
compensation expense of $0 and $63,000 for the three and six months ended December 31, 2019, respectively.
On
October 3, 2019, the Company issued 230,000 shares of common stock valued at $0.68 per share on the grant date with an aggregated
fair value of $156,400 under the Plan to one employee, vesting immediately. The Company recorded compensation expense of $156,400
for the three and six months ended December 31, 2019.
On
October 14, 2019, the Company entered into a consulting services agreement with a consulting entity, which provides management
consulting and advisory services. The scope of services primarily covered advising on business development, strategic planning
and compliance during the six months service period from October 14, 2019 to April 13, 2020. The Company issued 300,000 shares
of common stock valued at $222,000 as remuneration for the services. The shares bear a standard restrictive legend under
the Securities Act of 1933, as amended. The Company recorded compensation expense of $111,000 for the three and six months ended
December 31, 2019.
During
the three months ended December 31, 2019 and 2018, $491,609 and $1,047,376 were recorded as stock-based compensation expense,
respectively. During the six months ended December 31, 2019 and 2018, $906,317 and $1,864,584 were recorded as stock-based
compensation expense, respectively.
Stock
Options:
A
summary of the outstanding options is presented in the table below:
|
|
Options
|
|
|
Weighted Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Options outstanding, as of June 30, 2019
|
|
|
85,000
|
|
|
$
|
1.21
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled, forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, as of December 31, 2019
|
|
|
85,000
|
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, as of December 31, 2019
|
|
|
85,000
|
|
|
$
|
1.21
|
|
Following
is a summary of the status of options outstanding and exercisable at December 31, 2019:
Outstanding
Options
|
|
Exercisable
Options
|
Exercise
Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
$
|
2.01
|
|
|
|
10,000
|
|
|
3.08
years
|
|
$
|
2.01
|
|
|
|
10,000
|
|
|
3.08
years
|
$
|
1.10
|
|
|
|
75,000
|
|
|
1.57 years
|
|
$
|
1.10
|
|
|
|
75,000
|
|
|
1.57 years
|
|
|
|
|
|
85,000
|
|
|
|
|
|
|
|
|
|
85,000
|
|
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note
12. NON-CONTROLLING INTEREST
The
Company’s non-controlling interest consists of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Sino-China:
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
320,622
|
|
|
|
268,297
|
|
Accumulated deficit
|
|
|
(6,157,826
|
)
|
|
|
(6,066,145
|
)
|
|
|
|
(5,479,760
|
)
|
|
|
(5,440,404
|
)
|
Trans Pacific Logistics Shanghai Ltd.
|
|
|
277,580
|
|
|
|
266,782
|
|
Total
|
|
$
|
(5,202,180
|
)
|
|
$
|
(5,173,622
|
)
|
Note
13. COMMITMENTS AND CONTINGENCIES
Contractual
Obligations:
The
Company entered into a contract to upgrade its ERP system on December 27, 2017. The total contract costs amounted to RMB 4,000,000,
or approximately $560,000, of which the Company made a deposit of $437,357 during the year ended June 30, 2018. The remaining
balance will be settled upon the completion of services during fiscal year 2021.
On
June 22, 2018, the Company entered into a contract to improve its IT infrastructure. The total contract price for the services
is $1.2 million and the Company paid a deposit of $1.0 million during the year ended June 30, 2018. The remaining $0.2 million
will be paid upon completion of services during fiscal year 2020.
|
|
Amount
|
|
|
|
|
|
Twelve Months Ending December 31,
|
|
|
|
2020
|
|
$
|
200,000
|
|
2021
|
|
|
132,643
|
|
Total
|
|
$
|
332,643
|
|
Contingencies
The
Labor Contract Law of the PRC requires employers to insure the liability of the severance payments for terminated employees that
have worked for the employers for at least two years prior to January 1, 2008. The employers will be liable for one month for
severance pay for each year of the service provided by the employees. As of December 31, 2019 and June 30, 2019, the Company has
estimated its severance payments of approximately $96,000 and $94,000, respectively, which have not been reflected in its unaudited
condensed consolidated financial statements, because management cannot predict what the actual payment, if any, will be in the
future.
Sino-Global
has employment agreements with each of Mr. Lei Cao, Ms. Tuo Pan and Mr. Zhikang Huang. These employment agreements provide for
five-year terms that extend automatically in the absence of termination notice provided at least 60 days prior to the anniversary
date of the agreement. If the Company fails to provide this notice or if the Company wishes to terminate an employment agreement
in the absence of cause, then the Company is obligated to provide at least 30 days’ prior notice. In such case during the
initial term of the agreement, the Company would need to pay such executive (i) the remaining salary through the date of December
31, 2023, (ii) two times of the then applicable annual salary if there has been no Change in Control, as defined in the employment
agreements or three-and-half times of the then applicable annual salary if there is a Change in Control.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
From
time to time, the Company is involved in routine litigation that arises in the ordinary course of business. The Company was named
as a defendant in a breach of service contract lawsuit in the amount of $225,000 filed with the California Superior Court on January
19, 2018. The Company filed a motion with the court to force the plaintiff into arbitration rather than to litigate the dispute
in court based on the arbitration provision in the contract. The California Superior Court approved its motion to stay the case
pending the resolution of the arbitration. In Indianapolis, this matter was settled in exchange for 40,000 restrictive shares
of common stock of the Company to the plaintiff, by the execution of a settlement agreement by both parties on August 23, 2019
and the issuance of 40,000 restricted shares on August 26, 2019. As a result, the arbitration in Indianapolis and the litigation
in California has been dismissed respectively.
On
January 21, 2020, the Company received a notification letter from the Nasdaq Listing Qualifications department stating that Company
has not regained compliance with Nasdaq Continued Listing Rule, which requires the Company’s listed securities to maintain
a minimum bid price of $1.00 per share for a second 180-day grace period. Accordingly, the Company’s securities will be
delisted from the Nasdaq Capital Market. The Company made the request to appeal Nasdaq’s determination by requesting a hearing
before the Hearing Panel to seek continued listing. The hearing will be held on February 27, 2020. Accordingly, the delisting
action has been stayed, pending a final written decision by the Hearing Panel.
Note
14. INCOME TAXES
The
Company’s income tax benefit (expenses) for the three and six months ended December 31, 2019 and 2018 are as follows:
|
|
For the three months
Ended
December 31
|
|
|
For the six months
Ended
December 31
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
-
|
|
|
$
|
282
|
|
|
$
|
-
|
|
|
$
|
(30,315
|
)
|
Hong Kong
|
|
|
-
|
|
|
|
(881
|
)
|
|
|
-
|
|
|
|
(881
|
)
|
PRC
|
|
|
(14,747
|
)
|
|
|
(170,380
|
)
|
|
|
(14,747
|
)
|
|
|
(267,817
|
)
|
|
|
|
(14,747
|
)
|
|
|
(170,979
|
)
|
|
|
(14,747
|
)
|
|
|
(299,013
|
)
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
-
|
|
|
|
(74,000
|
)
|
|
|
-
|
|
|
|
120,500
|
|
Total income tax benefit (expense)
|
|
$
|
(14,747
|
)
|
|
$
|
(244,979
|
)
|
|
$
|
(14,747
|
)
|
|
$
|
(178,513
|
)
|
The
Company’s deferred tax assets are comprised of the following:
|
|
December 31,
2019
|
|
|
June 30,
2019
|
|
Allowance for doubtful accounts
|
|
$
|
1,177,000
|
|
|
$
|
1,121,000
|
|
Net operating loss
|
|
|
1,424,000
|
|
|
|
1,024,000
|
|
Total deferred tax assets
|
|
|
2,601,000
|
|
|
|
2,145,000
|
|
Valuation allowance
|
|
|
(2,601,000
|
)
|
|
|
(2,145,000
|
)
|
Deferred tax assets, net - long-term
|
|
$
|
-
|
|
|
$
|
-
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
The
Company’s operations in the U.S. incurred a cumulative NOL of approximately $3,781,000 as of June 30, 2019 which may reduce
future federal taxable income. The NOL will expire in 2037 for the net operating losses generated prior to the year ended June
30, 2019. During the three and six months ended December 31, 2019, approximately $480,000 and $1,465,000 of additional NOL was
generated and the tax benefit derived from such NOL was approximately $101,000 and $308,000, respectively. As of December 31,
2019, the Company’s cumulative NOL amounted to approximately $5,246,000 which may reduce future federal taxable income,
of which approximately $3,781,000 will expire in 2037 and the remaining balance carried forward indefinitely.
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 the U.S. and China in 2019. The Company provided a 100%
allowance for its DTA as of December 31, 2019. The net increase in valuation for the three and six months ended December 31, 2019
amounted to approximately $181,000 and $455,000, respectively based on management’s reassessment of the amount of the Company’s
deferred tax assets that are more likely than not to be realized.
The
Company’s taxes payable consists of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
VAT tax payable
|
|
$
|
1,055,448
|
|
|
$
|
1,045,513
|
|
Corporate income tax payable
|
|
|
2,038,129
|
|
|
|
2,075,248
|
|
Others
|
|
|
64,134
|
|
|
|
64,134
|
|
Total
|
|
$
|
3,157,711
|
|
|
$
|
3,184,895
|
|
Note 15.
CONCENTRATIONS
Major
Customers
For
the three months ended December 31, 2019, three customers accounted for approximately 39.0%, 33.6% and 24.7% of the Company’s
revenues, respectively. As of December 31, 2019, three customers accounted for approximately 93.1% of the Company’s gross
accounts receivable.
For
the three months ended December 31, 2018, one customer accounted for 62.9% of the Company’s revenues. As of December 31,
2018, this customers accounted for approximately 10.4% of the Company’s gross accounts receivable.
For
the six months ended December 31, 2019, three customers accounted for approximately 38.3%, 32.0% and 26.2% of the Company’s
revenues, respectively. As of December 31, 2019, three customers accounted for approximately 93.1% of the Company’s gross
accounts receivable.
For
the six months ended December 31, 2018, three customers accounted for 38.9%, 15.6% and 10.6% of the Company’s revenues,
respectively. As of December 31, 2018, these three customers accounted for approximately 25.3% of the Company’s gross accounts
receivable.
Major
Suppliers
For
the three months ended December 31, 2019, four suppliers accounted for approximately 27.0%, 23.0%, 15.8% and 13.0% of the total
cost of revenues, respectively.
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
For
the three months ended December 31, 2018, two suppliers accounted for 41.2% and 19.9% of the total costs of revenue, respectively.
For
the six months ended December 31, 2019, five suppliers accounted for approximately 39.9%, 14.2%, 12.1%, 11.3% and 11.1% of the
total cost of revenues, respectively
For
the six months ended December 31, 2018, four suppliers accounted for 25.8%, 16.9%, 12.5% and 10.4% of the total costs of revenue,
respectively.
Note 16.
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 four operating segments: (1) shipping agency and management services; (2) inland transportation management
services; (3) freight logistics services and (4) container trucking services.
The
following tables present summary information by segment for the three and six months ended December 31, 2019 and 2018, respectively:
|
|
For the Three Months Ended December 31, 2019
|
|
|
|
Shipping
Agency and Management Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
- Third parties
|
|
$
|
500,000
|
|
|
$
|
-
|
|
|
$
|
1,503,500
|
*
|
|
$
|
17,624
|
|
|
$
|
2,021,124
|
|
Total revenues
|
|
$
|
500,000
|
|
|
$
|
-
|
|
|
$
|
1,503,500
|
|
|
$
|
17,624
|
|
|
$
|
2,021,124
|
|
Cost of revenues
|
|
$
|
66,584
|
|
|
$
|
-
|
|
|
$
|
673,646
|
*
|
|
$
|
15,415
|
|
|
$
|
755,645
|
|
Gross profit
|
|
$
|
433,416
|
|
|
$
|
-
|
|
|
$
|
829,854
|
|
|
$
|
2,209
|
|
|
$
|
1,265,479
|
|
Depreciation and amortization
|
|
$
|
79,144
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,389
|
|
|
$
|
82,533
|
|
Total capital expenditures
|
|
$
|
2,482
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,482
|
|
Gross margin%
|
|
|
86.7
|
%
|
|
|
-
|
%
|
|
|
55.2
|
%
|
|
|
12.5
|
%
|
|
|
62.6
|
%
|
|
*
|
For certain freight
logistics contracts that the Company entered into with customers starting from first quarter of fiscal year 2020, the Company
(i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does
not control the services rendered to the customers, revenues related to these contracts are presented net of related costs.
For the three months ended December 31, 2019, gross revenues and gross cost of revenues related to these contracts amounted
to approximately $12.9 million and $12.0 million, respectively.
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
|
|
For the Three Months Ended December 31, 2018
|
|
|
|
Shipping
Agency and Management
Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
75,000
|
|
- Third parties
|
|
$
|
889,070
|
|
|
$
|
345,000
|
|
|
$
|
8,978,923
|
|
|
$
|
227,294
|
|
|
$
|
10,440,287
|
|
Total revenues
|
|
$
|
889,070
|
|
|
$
|
420,000
|
|
|
$
|
8,978,923
|
|
|
$
|
227,294
|
|
|
$
|
10,515,287
|
|
Cost of revenues
|
|
$
|
809,040
|
|
|
$
|
20,000
|
|
|
$
|
7,497,666
|
|
|
$
|
229,891
|
|
|
$
|
8,556,597
|
|
Gross profit
|
|
$
|
80,030
|
|
|
$
|
400,000
|
|
|
$
|
1,481,257
|
|
|
$
|
(2,597
|
)
|
|
$
|
1,958,690
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
20,339
|
|
|
$
|
475
|
|
|
$
|
4,751
|
|
|
$
|
25,565
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,534
|
|
|
$
|
8,534
|
|
Gross margin%
|
|
|
9.0
|
%
|
|
|
95.2
|
%
|
|
|
16.5
|
%
|
|
|
(1.1
|
)%
|
|
|
18.6
|
%
|
|
|
For the Six Months Ended December 31, 2019
|
|
|
|
Shipping
Agency and Management
Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
- Third parties
|
|
$
|
1,000,000
|
|
|
$
|
-
|
|
|
$
|
2,745,641
|
*
|
|
$
|
61,709
|
|
|
$
|
3,807,350
|
|
Total revenues
|
|
$
|
1,000,000
|
|
|
$
|
-
|
|
|
$
|
2,745,641
|
|
|
$
|
61,709
|
|
|
$
|
3,807,350
|
|
Cost of revenues
|
|
$
|
162,406
|
|
|
$
|
-
|
|
|
$
|
1,221,329
|
*
|
|
$
|
55,314
|
|
|
$
|
1,439,049
|
|
Gross profit
|
|
$
|
837,594
|
|
|
$
|
-
|
|
|
$
|
1,524,312
|
|
|
$
|
6,395
|
|
|
$
|
2,368,301
|
|
Depreciation and amortization
|
|
$
|
181,918
|
|
|
$
|
-
|
|
|
$
|
7,686
|
|
|
$
|
47,407
|
|
|
$
|
237,011
|
|
Total capital expenditures
|
|
$
|
7,020
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,020
|
|
Gross margin%
|
|
|
83.8
|
%
|
|
|
-
|
%
|
|
|
55.5
|
%
|
|
|
10.4
|
%
|
|
|
62.2
|
%
|
|
*
|
For certain freight
logistics contracts that the Company entered into with customers starting from first quarter of fiscal year 2020, the Company
(i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does
not control the services rendered to the customers, revenues related to these contracts are presented net of related costs.
For the six months ended December 31, 2019, gross revenues and gross cost of revenues related to these contracts amounted
to approximately $22.0 million and $20.5 million, respectively.
|
|
|
For the Six Months Ended December 31, 2018
|
|
|
|
Shipping
Agency and Management
Services
|
|
|
Inland
Transportation Management Services
|
|
|
Freight
Logistics
Services
|
|
|
Container Trucking Services
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Related party
|
|
$
|
-
|
|
|
$
|
397,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
397,000
|
|
- Third parties
|
|
$
|
889,070
|
|
|
$
|
943,000
|
|
|
$
|
14,466,476
|
|
|
$
|
319,274
|
|
|
$
|
16,617,820
|
|
Total revenues
|
|
$
|
889,070
|
|
|
$
|
1,340,000
|
|
|
$
|
14,466,476
|
|
|
$
|
319,274
|
|
|
$
|
17,014,820
|
|
Cost of revenues
|
|
$
|
809,040
|
|
|
$
|
79,874
|
|
|
$
|
12,463,658
|
|
|
$
|
287,857
|
|
|
$
|
13,640,429
|
|
Gross profit
|
|
$
|
80,030
|
|
|
$
|
1,260,126
|
|
|
$
|
2,002,818
|
|
|
$
|
31,417
|
|
|
$
|
3,374,391
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
40,826
|
|
|
$
|
951
|
|
|
$
|
9,503
|
|
|
$
|
51,280
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,357
|
|
|
$
|
9,357
|
|
Gross margin%
|
|
|
9.0
|
%
|
|
|
94.0
|
%
|
|
|
13.8
|
%
|
|
|
9.8
|
%
|
|
|
19.8
|
%
|
Total
assets as of:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2019
|
|
Shipping Agency and Management Services
|
|
$
|
3,184,159
|
|
|
$
|
3,549,093
|
|
Freight Logistic Services
|
|
|
16,546,296
|
|
|
|
17,017,696
|
|
Container Trucking Services
|
|
|
25,382
|
|
|
|
32,215
|
|
Total Assets
|
|
$
|
19,755,837
|
|
|
$
|
20,599,003
|
|
SINO-GLOBAL SHIPPING AMERICA, LTD. AND
AFFILIATES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note
17. RELATED PARTY TRANSACTIONS
As
of December 31, 2019 and June 30, 2019, the outstanding amounts due from a related party consist of the following:
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2019
|
|
|
2019
|
|
Tianjin Zhiyuan Investment
Group Co., Ltd.
|
|
$
|
484,331
|
|
|
$
|
897,739
|
|
Less: allowance for doubtful accounts
|
|
|
(48,433
|
)
|
|
|
(89,774
|
)
|
Total
|
|
$
|
435,898
|
|
|
$
|
807,965
|
|
In
June 2013, the Company signed a five-year global logistic service agreement with Tianjin Zhiyuan Investment Group Co., Ltd. (the
“Zhiyuan Investment Group”) and TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd. (together with Zhiyuan
Investment Group, “Zhiyuan”). Zhiyuan Investment Group is owned by Mr. Zhang, the largest shareholder of the Company.
In September 2013, the Company executed an inland transportation management service contract with the Zhiyuan Investment Group
whereby it would provide certain advisory services and help control potential commodities loss during the transportation process.
The amount due from Zhiyuan Investment Group as of December 31, 2019 was $484,331and the Company provided a 10% allowance for
doubtful accounts of the amount due from Zhiyuan. For the three months ended December 31, 2019, the Company recovered $4,091 of
allowance for doubtful accounts of the amount due from Zhiyuan. For the six months ended December 31, 2019, the Company recovered
$41,341 of allowance for doubtful accounts of the amount due from Zhiyuan.
Note
18. SUBSEQUENT EVENTS
On
January 10, 2020, the Company entered into a cooperation agreement with Mr. Shanming Liang, a director of Guangxi Jinqiao Industrial
Group Co., Ltd., to set up a joint venture in New York named LSM Trading Ltd., in which the Company will hold a 40% equity interest.
No investment has been made by the Company as of the date of this report. The new joint venture will facilitate the purchase agricultural
related commodities in the U.S. for customers in China and the Company will provide comprehensive supply chain and logistics solutions.
On
January 21, 2020, the Company received a notification letter from the Nasdaq Listing Qualifications department stating that Company
has not regained compliance with Nasdaq Continued Listing Rule, which requires the Company’s listed securities to maintain
a minimum bid price of $1.00 per share for a second 180-day grace period. Accordingly, the Company’s securities will be
delisted from the Nasdaq Capital Market. The Company made the request to appeal Nasdaq’s determination by requesting a hearing
before the Hearing Panel to seek continued listing. The hearing will be held on February 27, 2020. Accordingly, the delisting
action has been stayed, pending a final written decision by the Hearing Panel.
On
January 29, 2020, the Company issued an aggregate of 1,000,000 shares of the common stock to Mr. Shanming Liang at a purchase
price of $1.00 per share. The Company received a gross proceeds of $500,500 in second quarter of fiscal year 2020. The rest of
the payment is expected to be received by the end of the third quarter of fiscal year 2020.