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 subsidiary in the U.S.; (2) freight
logistics services, which are operated by its subsidiary in the PRC; (3) container trucking services, which are operated by its
subsidiary in the U.S.
The outbreak of the novel coronavirus
(COVID-19) starting from late January 2020 in the PRC has spread rapidly to many parts of the world. In March 2020, the World
Health Organization declared the COVID-19 as a pandemic and has resulted in quarantines, travel restrictions, and the temporary
closure of stores and business facilities in China and the U.S. for the past few months. Given the rapidly expanding nature of
the COVID-19 pandemic, and because substantially all of the Company’s business operations and its workforce are concentrated
in China and the U.S., the Company’s business, results of operations, and financial condition have been adversely affected
for the six months ended December 31, 2020. 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.
After the close of the stock market on
July 7, 2020, the Company effected a l-for-5 reverse stock split of its common stock in order to satisfy continued listing requirements
of its common stock on the NASDAQ Capital Market. The reverse stock split was approved by the Company’s board of directors
and stockholders and was intended to allow the Company to meet the minimum share price requirement of $1.00 per share for continued
listing on the NASDAQ Capital Market. As a result all common stock share amounts included in this filing have been retroactively
reduced by a factor of five, and all common stock per share amounts have been increased by a factor of five. Amounts affected
include common stock outstanding, including those that have resulted from the stock options, and warrants that convert to common
stock.
On December 14, 2020, the Company incorporated
a new entity named “Blumargo IT Solution Ltd.” with 80% ownership in partner with Tianjin Anboweiye Technology Co.
to build up hi-tech and information-based logistic services enhance to meet the higher and complicate demand of customers.
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”) 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 90% of Sino-China’s net income. Sino-China was designed to operate in China for the benefit
of the Company. The Company does not receive any payment from Sino-China unless Sino-China recognizes net income during its fiscal
year. These agreements do not entitle the Company to any consideration if Sino-China incurs a net loss during its fiscal year.
If Sino-China incurs a net loss during its fiscal year, the Company is not required to absorb such net loss.
As a VIE, Sino-China’s revenues
are included in the Company’s total revenues, and any 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 unaudited condensed consolidated balance sheets were
as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
5,183
|
|
|
$
|
5,022
|
|
Total current assets
|
|
|
5,183
|
|
|
|
5,022
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,740
|
|
|
|
1,608
|
|
Property and equipment, net
|
|
|
37,241
|
|
|
|
41,171
|
|
Total assets
|
|
$
|
44,164
|
|
|
$
|
47,801
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Other payables and accrued liabilities
|
|
$
|
43,406
|
|
|
$
|
39,919
|
|
Total liabilities
|
|
$
|
43,406
|
|
|
$
|
39,919
|
|
(b) Fair Value of Financial Instruments
The Company follows the provisions of
ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value, prescribes methods for measuring
fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 — Observable inputs such
as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 — Inputs other than quoted
prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by
observable market data.
Level 3 — Unobservable inputs that
reflect management’s assumptions based on the best available information.
The carrying value of accounts receivable,
other receivables, other current assets, and current liabilities approximate their fair values because of the short-term nature
of these instruments.
(c) Use of Estimates and Assumptions
The preparation of the Company’s
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.
(d) Translation of Foreign Currency
The accounts of the Company and its subsidiaries
are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”).
The Company’s functional currency is the U.S. dollar (“USD”) while its subsidiaries in the PRC, including Sino-China,
Trans Pacific Shipping Ltd. and Trans Pacific Logistic Shanghai Ltd. report their financial positions and results of operations
in Renminbi (“RMB”), its subsidiary Sino-Global Shipping Australia Pty Ltd., reports its financial positions and results
of operations in Australian dollar (“AUD”), its subsidiary Sino-Global Shipping Hong Kong reports its financial positions
and results of operations in Hong Kong dollar (“HKD”) and its subsidiary Sino-Global Shipping Canada, Inc. reports
its financial positions and results of operations in Canadian Dollar (“CAD”). The accompanying 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 December 31,
2020 and June 30, 2020 and for the three and six months ended December 31, 2020 and 2019 are as follows:
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
|
Three months ended
December 31,
|
|
|
Six months ended
December 31,
|
|
Foreign currency
|
|
Balance
Sheet
|
|
|
Balance Sheet
|
|
|
2020
Profits/Loss
|
|
|
2019
Profits/Loss
|
|
|
2020
Profits/Loss
|
|
|
2019
Profits/Loss
|
|
RMB:1USD
|
|
|
6.5286
|
|
|
|
7.0651
|
|
|
|
6.6254
|
|
|
|
7.0446
|
|
|
|
6.7736
|
|
|
|
7.0296
|
|
AUD:1USD
|
|
|
1.2974
|
|
|
|
1.4514
|
|
|
|
1.3688
|
|
|
|
1.4630
|
|
|
|
1.3840
|
|
|
|
1.4611
|
|
HKD:1USD
|
|
|
7.7536
|
|
|
|
7.7505
|
|
|
|
7.7520
|
|
|
|
7.8256
|
|
|
|
7.7513
|
|
|
|
7.8278
|
|
CAD:1USD
|
|
|
1.2754
|
|
|
|
1.3617
|
|
|
|
1.3038
|
|
|
|
1.3200
|
|
|
|
1.3181
|
|
|
|
1.3200
|
|
(e) Cash
Cash consists of cash on hand and cash
in bank which are unrestricted as to withdrawal or use. The Company maintains cash with various financial institutions mainly
in the PRC, Australia, Hong Kong, Canada and the U.S. As of December 31, 2020 and June 30, 2020, cash balances of $4,462,063 and
$126,720, respectively, were maintained at financial institutions. In China, the deposit insurance system only insured each depositor
at one bank for a maximum of approximately $70,000 (RMB 500,000). For the balance maintained at U.S. financial institutions, the
Federal Deposit Insurance Corporation as it only insured deposits up to $250,000. 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, 2020 and June 30, 2020, amount of deposits the Company had not covered by insurance amounted
to $3,881,953 and $8,780, respectively.
(f) Receivables and Allowance for Doubtful
Accounts
Accounts receivable are presented at net
realizable value. The Company maintains allowances for doubtful accounts and for estimated losses. The Company reviews the accounts
receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual
receivable balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including
the age of the balances, customers’ historical payment history, their current credit-worthiness and current economic trends.
Receivables are generally considered past due after 180 days. The Company reserves 25%-50% of the customers balance aged between
181 days to 1 year, 50%-100% of the customers balance over 1 year and 100% of the customers balance over 2 years. Accounts receivable
are written off against the allowances only after exhaustive collection efforts. As the Company has focused its development in
the shipping management segment, its customer base will be more from smaller privately owned companies that will pay more timely
than state owned companies. The Company also considers the economic implications of COVID-19 on its estimates of the allowance
and made additional $2,609 and $258,561 of allowance for doubtful accounts of accounts receivable for the three months ended December
31, 2020 and 2019, $33,418 and $1,282,492 of allowance for doubtful accounts of accounts receivable for the six months ended December
31, 2020 and 2019. The Company recovered nil and $22,869 of accounts receivable for the three months ended December 31, 2020 and
2019, respectively. The Company recovered $2,456 and $22,869 of accounts receivable for the six months ended December 31, 2020
and 2019, respectively. For the three and six months ended December 31, 2019 the Company wrote off nil and $99,366. There was
no write off for the three and six months ended December 31, 2020.
Other receivables represent mainly customer
advances, prepaid employee insurance and welfare benefits, which will be subsequently deducted from the employee payroll, guarantee
deposits on behalf of ship owners as well as office lease deposits. Management reviews its receivables on a regular basis to determine
if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against
allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Other receivables
are written off against the allowances only after exhaustive collection efforts. The Company made $11,673 allowance for doubtful
accounts of other receivables for the three and six months ended December 31, 2020. There was no allowance of other receivables
for the three and six months ended December 31, 2019. For the three and six months ended December 31, 2020, $11,673 was written
off against other receivables. For the three and six months ended December 31, 2019, nil and $1,763 was written off against other
receivables, respectively. The Company recovered $30,173 of other receivables for the three and six months ended December 31,
2020. There was no recovery against other receivables for the three and six months ended December 31, 2019.
(g) 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, 2020 and 2019. For the six months
ended December 31, 2020 and 2019, an impairment of nil and $127,177 were recorded, respectively.
(h) 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, 2020 and 2019. For the six months ended December 31, 2020 and 2019, an impairment of nil and $200,455 were
recorded, respectively.
(i) Revenue Recognition
The Company recognizes revenue which represents
the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be
entitled in such exchange. The Company identifies contractual performance obligations and determines whether revenue should be
recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s
revenue streams are recognized at a point in time.
The Company uses a five-step model to
recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration
to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the
respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance
obligation.
The Company
continues to derive its revenues from sales contracts with its customers with revenues being recognized upon performance of services.
Persuasive evidence of an arrangement is demonstrated via sales contract and invoice; and the sales price to the customer is fixed
upon acceptance of the sales contract and there is no separate sales rebate, discount, or other incentive. The Company’s
revenues are recognized at a point in time after all performance obligations are satisfied.
Contract balances
The Company records receivables related
to revenue when the Company has an unconditional right to invoice and receive payment.
Deferred revenue consists primarily of
customer billings made in advance of performance obligations being satisfied and revenue being recognized.
The Company’s disaggregated revenue
streams are described as follows:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Shipping and management agency services
|
|
$
|
-
|
|
|
$
|
500,000
|
|
|
$
|
206,845
|
|
|
$
|
1,000,000
|
|
Freight logistics services
|
|
|
1,884,440
|
|
|
|
1,503,500
|
|
|
|
2,814,394
|
|
|
|
2,745,641
|
|
Container trucking services
|
|
|
-
|
|
|
|
17,624
|
|
|
|
-
|
|
|
|
61,709
|
|
Total
|
|
$
|
1,884,440
|
|
|
$
|
2,021,124
|
|
|
$
|
3,021,239
|
|
|
$
|
3,807,350
|
|
|
●
|
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.
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 related to these contracts amounted to approximately $22.0 million and $20.5 million, respectively.
There was no such transaction for the three and six months ended December 31, 2020.
|
|
●
|
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
|
|
|
For the Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
PRC
|
|
$
|
1,884,440
|
|
|
|
1,503,500
|
|
|
|
2,814,394
|
|
|
|
2,745,641
|
|
U.S.
|
|
|
-
|
|
|
|
517,624
|
|
|
|
206,845
|
|
|
|
1,061,709
|
|
Total revenues
|
|
$
|
1,884,440
|
|
|
$
|
2,021,124
|
|
|
$
|
3,021,239
|
|
|
$
|
3,807,350
|
|
(j) 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.
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, 2020 and June
30, 2020.
Income tax returns for the years prior
to 2017 are no longer subject to examination by U.S. tax authorities.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated
based on taxable income determined under the PRC Generally Accepted Accounting Principles (“PRC GAAP”) at 25%. Sino-China
and Trans Pacific are registered in PRC and governed by the Enterprise Income Tax Laws of the PRC.
PRC Value Added Taxes and Surcharges
The Company is subject to value added
tax (“VAT”). Revenue from services provided by the Company’s PRC subsidiaries and affiliates, including Sino-China
and Trans Pacific are subject to VAT at rates ranging from 9% to 13%. Entities that are VAT general taxpayers are allowed to offset
qualified VAT paid to suppliers against their VAT liability. Net VAT liability is recorded in taxes payable on the unaudited condensed
consolidated balance sheets.
In addition, under the PRC regulations,
the Company’s PRC subsidiaries and affiliates are required to pay the city construction tax (7%) and education surcharges
(3%) based on the net VAT payments.
(k) 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 and six months ended December
31, 2020 and 2019, there was no dilutive effect of potential shares of common stock of the Company because the Company generated
a net loss.
(l) 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.
(m) Stock-based Compensation
The Company accounts for stock-based compensation
awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires
that stock-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued
and recognized as compensation expense over the requisite service period. The Company records stock-based compensation expense
at fair value on the grant date and recognizes the expense over the employee’s requisite service period.
The Company accounts for stock-based compensation
awards to non-employees in accordance with FASB ASC Topic 718 amended by ASU 2018-07. Under FASB ASC Topic 718, stock compensation
granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument
issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.
Valuations of stock based compensation
are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair
value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based
on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee
terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding.
The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the
time of the grant.
(n) 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,
2020. 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.
(o) Liquidity
In assessing the Company’s liquidity,
the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s
liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. As of December
31, 2020, the Company’s working capital was approximately $1.1 million and the Company had cash of approximately $4.5 million.
The Company believes its revenues and operations will continue to grow and the current working capital is sufficient to support
its operations and debt obligations as they become due one year through report date.
The Company expects to realize the balance
of its current assets within the normal operating cycle of a twelve month period. If the Company is unable to realize its current
assets within the normal operating cycle of a twelve month period, the Company had considered supplementing its available sources
of funds through the following sources:
|
●
|
the Company will continuously seek equity financing to support its working capital. On January 27, 2021, the Company entered into a securities purchase agreement with the non-U.S. persons to purchase 1,086,956 shares at a per share purchase price of $3.68 for aggregate proceeds of approximately $4.0 million. The Company has received the full amount of payment in January 2021. On February 6, 2021, the Company entered into a securities purchase agreement with the investors to purchase an aggregate of 1,998,500 shares at a per share purchase price of $6.805 for aggregate net proceeds of approximately $12.3 million after deducting estimated offering expenses and placement agent fees. The Company has received the full amount of payment in February 2021. On February 9, 2021, the Company entered into a securities purchase agreement with the investors to purchase an aggregate of 3,655,000 shares at a per share purchase price of $7.80 for aggregate net proceeds of approximately $26.2 million after deducting estimated offering expenses and placement agent fees. The Company has received the full amount of payment in February 2021;
|
|
|
|
|
●
|
other available sources of financing from PRC banks and other financial institutions; and
|
|
|
|
|
●
|
financial support and credit guarantee commitments from the Company’s shareholders and directors.
|
Based on the above considerations, the
Company’s management is of the opinion that it has sufficient funds to meet the Company’s future liquidity requirements
for at least twelve months from issuance of these unaudited condensed consolidated financial statements.
(p) 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. The Company adopted this ASU on July 1, 2020 and the adoption has no significant
impact to the Company’s unaudited condensed 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. The Company has not early
adopted this update and it will become effective on July 1, 2023 assuming the Company will remain eligible to be smaller reporting
company. The Company is currently evaluating the impact of this new standard on Company’s 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.
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 is currently evaluating the impact of this new standard on 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 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.
Note 3. ACCOUNTS RECEIVABLE, NET
The Company’s net accounts receivable
are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Trade accounts receivable
|
|
$
|
3,720,087
|
|
|
$
|
3,453,439
|
|
Less: allowances for doubtful accounts
|
|
|
(2,457,949
|
)
|
|
|
(2,297,491
|
)
|
Accounts receivable, net
|
|
$
|
1,262,138
|
|
|
$
|
1,155,948
|
|
Movement of allowance for doubtful accounts
are as follows:
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
Beginning balance
|
|
$
|
2,297,491
|
|
|
$
|
5,670,274
|
|
Provision for doubtful accounts, net of recovery
|
|
|
30,962
|
|
|
|
4,896,640
|
|
Less: write-off
|
|
|
-
|
|
|
|
(8,220,754
|
)
|
Exchange rate effect
|
|
|
129,496
|
|
|
|
(48,669
|
)
|
Ending balance
|
|
$
|
2,457,949
|
|
|
$
|
2,297,491
|
|
For the three months ended December 31,
2020 and 2019, the provision for doubtful accounts was $2,609 and $258,561, respectively. For the six months ended December 31,
2020 and 2019, the provision for doubtful accounts was $33,418 and $1,282,492, respectively. The Company recovered $2,456 and
$76,497 of accounts receivable for the six months ended December 31, 2020 and 2019, respectively.
Note 4. OTHER RECEIVABLES, NET
The Company’s other receivables are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Advances to customers*
|
|
$
|
11,375,759
|
|
|
$
|
10,004,893
|
|
Employee business advances
|
|
|
4,241
|
|
|
|
51,334
|
|
Total
|
|
|
11,380,000
|
|
|
|
10,056,227
|
|
Less: allowances for doubtful accounts
|
|
|
(10,796,084
|
)
|
|
|
(10,005,193
|
)
|
Other receivables, net
|
|
$
|
583,916
|
|
|
$
|
51,034
|
|
*
|
As of December 31, 2020 and June 30, 2020, the Company entered
into certain contracts with customers (state-owned entities) where the Company’s services included freight costs and
cost of commodities to be shipped to customers’ designated locations. The Company prepaid the costs of commodities and
recognized as advance payments on behalf of its customers. These advance payments on behalf of the customers will be repaid
to the Company when either the contract terms are expired or the contracts are terminated by the Company. As 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 $11.0 million. On December
31, 2020, the Company entered another contract to advance $580,000 as deposit on behalf of customer and it will be repaid
to the Company when the contract is fulfilled.
|
Movement of allowance for doubtful accounts
are as follows:
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
Beginning balance
|
|
$
|
10,005,193
|
|
|
$
|
-
|
|
Provision for doubtful accounts, net of recovery
|
|
|
(18,500
|
)
|
|
|
10,055,203
|
|
Less: write-off
|
|
|
(11,673
|
)
|
|
|
(1,763
|
)
|
Exchange rate effect
|
|
|
821,064
|
|
|
|
(48,247
|
)
|
Ending balance
|
|
$
|
10,796,084
|
|
|
$
|
10,005,193
|
|
For the three and six months ended December
31, 2020, the provision for doubtful accounts of other receivables was $11,673 with recovery of $30,173. There was no additional
allowance or recovery of other receivables for the three and six months ended December 31, 2019. The Company wrote off $11,673
and nil of other receivables for the three months ended December 31, 2020 and 2019, respectively. The Company wrote off $11,673
and $1,763 of other receivables for the six months ended December 31, 2020 and 2019, respectively.
Note 5. ADVANCES TO SUPPLIERS
The Company’s advances to suppliers – third parties
are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Freight fees (1)
|
|
$
|
80,804
|
|
|
$
|
48,875
|
|
(1)
|
The advanced freight fee is the Company’s prepayment made
for various shipping costs for shipments from January to March 2021.
|
Note 6. PREPAID EXPENSES AND OTHER
CURRENT ASSETS
The Company’s prepaid expenses and
other assets are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Prepaid income taxes
|
|
$
|
11,929
|
|
|
$
|
48,924
|
|
Other (including prepaid professional fees, rent, listing fees)
|
|
|
51,196
|
|
|
|
41,458
|
|
Total
|
|
$
|
63,125
|
|
|
$
|
90,382
|
|
Note 7. OTHER LONG-TERM ASSETS - DEPOSITS
The Company’s other long-term assets
– deposits are as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Rental and utilities deposits
|
|
$
|
56,478
|
|
|
$
|
64,663
|
|
Freight logistics deposits (1)
|
|
|
3,147,845
|
|
|
|
2,910,327
|
|
Total other long-term assets - deposits
|
|
$
|
3,204,323
|
|
|
$
|
2,974,990
|
|
(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 $3.1 million (RMB 20 million) of the balance was paid to BaoSteel Resources Co., Ltd. according to the agreement
entered in March 2018. This refundable deposit is to cover any possible loss of merchandise, as well as any non-performance
on the part of the Company and its vendors. The restricted deposit is expected be repaid to the Company when either the contract
terms are expired by March 2023 or the contract is terminated by the Company.
|
Note 8. PROPERTY AND EQUIPMENT, NET
The Company’s net property and equipment
as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Buildings
|
|
$
|
206,174
|
|
|
$
|
190,518
|
|
Motor vehicles*
|
|
|
561,462
|
|
|
|
516,999
|
|
Computer equipment*
|
|
|
104,638
|
|
|
|
97,172
|
|
Office equipment*
|
|
|
47,169
|
|
|
|
43,587
|
|
Furniture and fixtures*
|
|
|
77,589
|
|
|
|
71,697
|
|
System software*
|
|
|
116,778
|
|
|
|
107,911
|
|
Leasehold improvements
|
|
|
851,398
|
|
|
|
786,745
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,965,208
|
|
|
|
1,814,629
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(1,540,882
|
)
|
|
|
(1,291,339
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
424,326
|
|
|
$
|
523,290
|
|
Depreciation and amortization expenses
for the three months ended December 31, 2020 and 2019 were $70,853 and $66,601, respectively. Depreciation and amortization expenses
for the six months ended December 31, 2020 and 2019 were $138,739 and $187,121, respectively.
*
|
For the three and six months ended December 31, 2019, an impairment
of $127,177 was recorded due to continued decrease in revenues from the inland transportation management segment, no impairment
was recorded for same period 2020.
|
Note 9. INTANGIBLE ASSETS, NET
Net intangible assets consisted of the
following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Full service logistics platforms
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
Less: Accumulated amortization
|
|
|
(190,000
|
)
|
|
|
(163,611
|
)
|
Intangible assets, net
|
|
$
|
-
|
|
|
$
|
26,389
|
|
The full service logistics platform was
placed in services in December 2017. The platforms are being amortized over three years. Amortization expenses amounted to $10,556
and $15,833 for the three months ended December 31, 2020 and 2019, respectively. Amortization expenses amounted to $26,389 and
$49,890 for the six months ended December 31, 2020 and 2019, respectively.
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 $200,455 for the three and six months ended
December 31, 2019. No impairment was recorded for same period 2020.
Note 10. ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Salary and reimbursement payable
|
|
$
|
504,022
|
|
|
$
|
795,855
|
|
Professional fees payable
|
|
|
345,631
|
|
|
|
629,524
|
|
Credit card payable
|
|
|
5,535
|
|
|
|
217,940
|
|
Total
|
|
$
|
855,188
|
|
|
$
|
1,643,319
|
|
Note 11. LOANS PAYABLE
On May 11, 2020, the Company received
loan proceeds in the amount of approximately $124,570 under the U.S. Small Business Administration (“SBA”) Paycheck
Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act
(“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll
expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks (or an extended 24-week covered
period) as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities,
and maintains its payroll levels. The loan forgiveness amount will be reduced for any Economic Injury Disaster Loan (“EIDL”)
advance that the Company receives. The amount of loan forgiveness will be further reduced if the borrower terminates employees
or reduces salaries during the eight-week period. The Company intends to use the proceeds for purposes consistent with the PPP.
While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan and
intends to file for loan forgiveness in fiscal year of 2021, there can be no assurance that the full amount of the loan will be
forgiven. As of December 31, 2020, $124,570 of loan payable remains outstanding.
On May 26, 2020, the Company received
an advance in the amount of $155,900 from under the SBA EIDL program administered by the SBA pursuant to the CARES Act. Such advance
amount will reduce the Company’s PPP loan forgiveness amount described above. In accordance with the requirements of the
CARES Act, the Company will use proceeds from the SBA loans primarily for working capital to alleviate economic injury caused
by disaster occurring in the month of January 31, 2020 and continuing thereafter. The SBA loans are scheduled to mature on May
22, 2050 and have a 3.75% interest rate and are subject to the terms and conditions applicable to loans administered by the SBA
under the CARES Act. The monthly payable including principal and interest, of $731 commencing on May 22, 2021. The balance of
principal and interest will be payable 30 years from the date of May 22, 2020. $5,900 of the loan will be forgiven. As of December
31, 2020, $155,900 of loan payable remains outstanding. Interest expense for the three and six months ended December 31, 2020
for this loan was $1,418 and $2,820, respectively.
Loan repayment schedule for the EIDL loans
is as follows:
Twelve Months Ending December 31,
|
|
Loan Amount
|
|
|
|
|
|
2021
|
|
$
|
7,898
|
|
2022
|
|
|
3,092
|
|
2023
|
|
|
3,210
|
|
2024
|
|
|
3,332
|
|
2025
|
|
|
3,460
|
|
Thereafter
|
|
|
134,908
|
|
Total loan payments
|
|
$
|
155,900
|
|
Note 12. LEASES
The Company determines if a contract contains
a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases
for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the
evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with
renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which
result in an economic penalty. All of the Company’s leases are classified as operating leases.
The Company has several vehicle lease
agreements and office lease agreements with lease terms ranging from two to three years. Upon adoption of ASU 2016-02, the Company
recognized lease liabilities of approximately $0.2 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
9.38%. As of December 31, 2020, ROU assets and lease liabilities amounted to $224,950 and $245,232 (including $166,572 from lease
liabilities current portion and $78,660 from lease liabilities noncurrent portion), respectively.
The Company’s lease agreements do
not contain any material residual value guarantees or material restrictive covenants. The leases generally do not contain options
to extend at the time of expiration and the weighted average remaining lease terms are 1.49 years.
For the three months ended December 31,
2020 and 2019, rent expense amounted to approximately $81,000 and $80,000, respectively. For the six months ended December 31,
2020 and 2019, rent expense amounted to approximately $157,000 and $160,000, respectively.
The three-year maturity of the Company’s
lease obligations is presented below:
Twelve Months Ending December 31,
|
|
Operating Lease Amount
|
|
|
|
|
|
2021
|
|
$
|
181,667
|
|
2022
|
|
|
81,596
|
|
Total lease payments
|
|
|
263,263
|
|
Less: Interest
|
|
|
(18,031
|
)
|
Present value of lease liabilities
|
|
$
|
245,232
|
|
Note 13. 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 agreed to sell an aggregate of 720,000 shares of the Company’s common
stock, no par value, and warrants to purchase 720,000 Shares at a per share purchase price of $1.46. The net proceeds to the Company
from such Offering were approximately $1.05 million. The warrants will be exercisable on March 16, 2021 at an exercise price of
$1.825 for cash. The warrants may also be exercised cashlessly if at any time after March 16, 2021, there is no effective registration
statement registering, or no current prospectus available for, the resale of the warrant shares. The warrants will expire on March
16, 2026. The warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions.
The warrants contain a mandatory exercise right for the Company to force exercise the warrants if the Company’s common stock
trades at or above $4.38 for 20 consecutive trading days, provided, among other things, that the shares issuable upon exercise
of the are registered or may be sold pursuant to Rule 144 and the daily trading volume exceeds 60,000 shares of common stock per
trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date.
On November 2 and November 3, 2020, the
Company issued an aggregate of 860,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”),
each convertible into one share of common stock, no par value, of Company, upon the terms and subject to the limitations and considerations
set forth in the Certificate of Designation of the Series A Preferred Stock, and warrants to purchase up to 1,032,000 shares of
common stock. The purchase price for each share of Series A Preferred Stock and accompanying warrants is $1.66. The net proceeds
to the Company from this offering was approximately $1.43 million, not including any proceeds that may be received upon cash exercise
of the warrants. The warrants will be exercisable six (6) months following the date of issuance at an exercise price of $1.99
for cash. The warrants may also be exercised cashlessly if at any time after the six-month anniversary of the issuance date, there
is no effective registration statement registering, or no current prospectus available for, the resale of the warrant Shares.
The warrants will expire five and a half (5.5) years from the date of issuance. The warrants are subject to anti-dilution provisions
to reflect stock dividends and splits or other similar transactions. The warrants contain a mandatory exercise right for the Company
to force exercise of the warrants if the closing price of the common stock equals or exceeds $5.97 for twenty (20) consecutive
trading days, provided, among other things, that the shares issuable upon exercise of the warrants are registered or may be sold
pursuant to Rule 144 and the daily trading volume exceeds 60,000 shares of common stock per trading day on each trading day in
a period of 20 consecutive trading days prior to the applicable date. As of December 31, 2020, the Series A Preferred Stock have
not been converted to common stock of the Company.
On December 8, 2020, the Company entered
into a securities purchase agreement with the investors specified on the signature page thereto pursuant to which the Company agreed
to sell to the investors, and the investors agreed to purchase from the Company, in a registered direct offering, an aggregate
of 1,560,000 shares of the common stock of the Company, no par value per share, at a purchase price of $3.10 per share, for aggregate
gross proceeds to the Company of $4,836,000. The Company also agreed to sell to the Investors warrants to purchase up to an aggregate
of 1,170,000 shares of common stock at an exercise price of $3.10 per share. The warrants shall be initially exercisable beginning
on December 11, 2020 and expire three and a half (3.5) years from the date of issuance. The exercise price and the number of shares
of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or
other similar transactions, but not as a result of future securities offerings at lower prices.
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
Following is a summary of the status of
warrants outstanding and exercisable as of December 31, 2020:
|
|
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of June 30, 2020
|
|
|
400,000
|
|
|
$
|
8.75
|
|
Issued
|
|
|
2,922,000
|
|
|
|
2.39
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding, as of December 31, 2020
|
|
|
3,322,000
|
|
|
$
|
3.16
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable, as of December 31, 2020
|
|
|
3,322,000
|
|
|
$
|
3.16
|
|
Warrants Outstanding
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Average
Remaining
Contractual
Life
|
2018 Series A, 400,000
|
|
|
400,000
|
|
|
$
|
8.75
|
|
|
2.70 years
|
2020 warrants, 720,000
|
|
|
720,000
|
|
|
$
|
1.825
|
|
|
5.21 years
|
2020 warrants, 1,032,000
|
|
|
1,032,000
|
|
|
$
|
1.99
|
|
|
5.34 years
|
2020 warrants, 1,170,000
|
|
|
1,170,000
|
|
|
$
|
3.10
|
|
|
3.44 years
|
On December 9, 2019, the Company authorized
the cancellation of the 35,099 of the Company’s treasury shares. The shares were cancelled as of June 30, 2020. The cancellation
has no effect on the Company’s total shareholders’ equity and earnings per share.
After the close of the stock market on
July 7, 2020, the Company effected a l-for-5 reverse stock split of its common stock in order to satisfy continued listing requirements
of its common stock on the NASDAQ Capital Market. The reverse stock split was approved by the Company’s board of directors
and stockholders and was intended to allow the company to meet the minimum share price requirement of $1.00 per share for continued
listing on the NASDAQ Capital Market. As a result all common stock share amounts included in this filing have been retroactively
reduced by a factor of five, and all common stock per share amounts have been increased by a factor of five. Amounts affected
include common stock outstanding, including those that have resulted from the stock options, and warrants that convert to common
stock.
Stock based compensation:
In March 2017, the Company entered into
a consulting and advisory services agreement with a consulting entity, which provides management consulting services that include
marketing program design and implementation and cooperative partner selection and management. The service period began in March
2017 and will end in February 2020. The Company issued 50,000 shares of common stock as remuneration for the services, which were
issued as restricted shares at $12.65 per share on March 22, 2017 to the consultant. These shares were valued at $632,500
and the consulting expense was $52,709 and $105,417 for the three and six months ended December 31, 2019, respectively.
On June 7, 2018, the Company issued 80,000
shares of common stock with a fair value of $508,000 to a consulting entity pursuant to a service agreement. The scope of services
primarily covers legal consultation in PRC during the two-year service period from July 2018 to June 2020. The consulting entity
is entitled to be granted the common stock on a quarterly basis in eight equal installments. The Company recorded legal expense
of $63,500 and $127,000 for the three and six months ended December 31, 2019, respectively.
On April 8, 2019, the Company entered
into a consulting services agreement with a consulting entity, which provides management consulting and advisory services. The
scope of services primarily covered advising on business development, strategic planning and compliance during the six months
service period from April 8, 2019 to October 7, 2019. The Company issued 60,000 shares of common stock as remuneration for the
services, which were issued as restricted shares at $4.25 per share on April 16, 2019 to the consulting entity. These shares were
valued at $255,000. The Company recorded compensation expense of $0 and $127,500 for the three and six months ended December 31,
2019, respectively.
On July 1, 2019, the Company issued 120,000
restricted shares of common stock with a fair value of $432,000 to a China-based company that specializes in the port agency business
and/or its designees pursuant to a consulting service agreement. The scope of services primarily covers business consultation
for one year from July 1, 2019 to June 30, 2020. The Company can terminate the agreement if they are not satisfy with the performance
of the consulting firm and the consulting firm should return all the issued shares. The Company recorded compensation expense
of $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 18,000 shares of restricted common stock valued at $3.50 per share on the grant date with an aggregated
fair value of $63,000 under the Plan to one employee, vesting immediately. The Company recorded compensation expense of $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, 2020 and 2019, nil and $491,609 were recorded as stock-based compensation expense, respectively. During the six months
ended December 31, 2020 and 2019, nil and $906,317 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, 2020
|
|
|
17,000
|
|
|
$
|
6.05
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled, forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, as of December 31, 2020
|
|
|
17,000
|
|
|
$
|
6.05
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, as of December 31, 2020
|
|
|
17,000
|
|
|
$
|
6.05
|
|
Following is a summary of the status of
options outstanding and exercisable at December 31, 2020:
Outstanding Options
|
|
Exercisable Options
|
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
|
Average
Exercise Price
|
|
|
Number
|
|
|
Average
Remaining
Contractual
Life
|
$
|
10.05
|
|
|
|
2,000
|
|
|
2.08 years
|
|
$
|
10.05
|
|
|
|
2,000
|
|
|
2.08 years
|
$
|
5.50
|
|
|
|
15,000
|
|
|
0.56 years
|
|
$
|
5.50
|
|
|
|
15,000
|
|
|
0.56 years
|
|
|
|
|
|
17,000
|
|
|
|
|
|
|
|
|
|
17,000
|
|
|
|
Note 14. NON-CONTROLLING INTEREST
The Company’s non-controlling interest
consists of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Sino-China:
|
|
|
|
|
|
|
Original paid-in capital
|
|
$
|
356,400
|
|
|
$
|
356,400
|
|
Additional paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
Accumulated other comprehensive income
|
|
|
61,176
|
|
|
|
376,398
|
|
Accumulated deficit
|
|
|
(6,206,533
|
)
|
|
|
(6,199,188
|
)
|
|
|
|
(5,787,913
|
)
|
|
|
(5,465,346
|
)
|
Trans Pacific Logistics Shanghai Ltd.
|
|
|
(1,163,405
|
)
|
|
|
(1,077,015
|
)
|
Total
|
|
$
|
(6,951,318
|
)
|
|
$
|
(6,542,361
|
)
|
Note 15. COMMITMENTS AND CONTINGENCIES
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, 2020 and June 30, 2020, the Company has estimated its severance payments of approximately
$101,000 and $84,000, 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.
Note 16. 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 and six months ended December 31, 2020 and 2019 are as follows:
|
|
For the three months Ended December 31
|
|
|
For the six months Ended December 31
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
(3,450
|
)
|
|
$
|
-
|
|
|
$
|
(3,450
|
)
|
|
$
|
-
|
|
PRC
|
|
|
-
|
|
|
|
(14,747
|
)
|
|
|
-
|
|
|
|
(14,747
|
)
|
Total income tax expenses
|
|
|
(3,450
|
)
|
|
|
(14,747
|
)
|
|
|
(3,450
|
)
|
|
|
(14,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s deferred tax assets
are comprised of the following:
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,332,000
|
|
|
$
|
1,329,000
|
|
PRC
|
|
|
3,118,000
|
|
|
|
2,888,000
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
2,220,000
|
|
|
|
1,756,000
|
|
PRC
|
|
|
1,492,000
|
|
|
|
1,490,000
|
|
Total deferred tax assets
|
|
|
8,162,000
|
|
|
|
7,463,000
|
|
Valuation allowance
|
|
|
(8,162,000
|
)
|
|
|
(7,463,000
|
)
|
Deferred tax assets, net - long-term
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company’s operations in the
U.S. incurred a cumulative U.S. federal net operating loss (“NOL”) of approximately $6,456,000 as of June 30, 2020
which may reduce future federal taxable income. During the three and six months ended December 31, 2020, approximately $1,147,000
and $1,696,000 of additional NOL was generated and the tax benefit derived from such NOL was approximately $241,000 and $356,000,
respectively. As of December 31, 2020, the Company’s cumulative NOL amounted to approximately $8,152,000 which may reduce
future federal taxable income, of which approximately $1,400,000 will expire in 2037 and the remaining balance carried forward
indefinitely.
The Company’s operations in China
incurred a cumulative NOL of approximately $5,961,000 as of June 30, 2020 which may reduce future taxable income. During the three
and six months ended December 31, 2020, approximately $4,000 and $7,000 of additional NOL was generated and the tax benefit derived
from such NOL was approximately $1,000 and $2,000, respectively. As of December 31, 2020, the Company’s cumulative NOL amounted
to approximately $5,968,000 which may reduce future taxable income, of which approximately $677,000 start expiring from 2023 and
the remaining balance of NOL will be expired by 2026.
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 2020. The Company provided
a 100% allowance for its DTA as of December 31, 2020. The net increase in valuation for the three and six months ended December
31, 2020 amounted to approximately $429,000 and $699,000, 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,
|
|
|
|
2020
|
|
|
2020
|
|
VAT tax payable
|
|
$
|
1,139,486
|
|
|
$
|
1,037,620
|
|
Corporate income tax payable
|
|
|
2,353,113
|
|
|
|
2,180,727
|
|
Others
|
|
|
68,952
|
|
|
|
62,001
|
|
Total
|
|
$
|
3,561,551
|
|
|
$
|
3,280,348
|
|
Note 17. CONCENTRATIONS
Major Customers
For the three months ended December 31,
2020, one customer accounted for approximately 99.9% of the Company’s revenues. As of December 31, 2020, two customers
accounted for approximately 79.2% and 20.7% of the Company’s accounts receivable, net.
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 six months ended December 31, 2020,
one customer accounted for approximately 92.9% of the Company’s revenues. As of December 31, 2020, two customers accounted
for approximately 79.2% and 20.7% of the Company’s accounts receivable, net.
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.
Major Suppliers
For the three months ended December 31,
2020, two suppliers accounted for approximately 44.3% and 42.1% of the total costs of revenue, respectively.
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.
For the six months ended December 31,
2019, two suppliers accounted for approximately 46.3% and 37.4% of the total cost of revenues.
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
Note 18. SEGMENT REPORTING
ASC 280, “Segment Reporting”,
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal
organizational structure as well as information about geographical areas, business segments and major customers in 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 and six months ended December 31, 2020 and 2019, respectively:
|
|
For the Three Months Ended December 31, 2020
|
|
|
|
Shipping
Agency and
Management
Services
|
|
|
Freight
Logistics
Services
|
|
|
Container
Trucking
Services
|
|
|
Total
|
|
Net revenues
|
|
$
|
-
|
|
|
$
|
1,884,440
|
|
|
$
|
-
|
|
|
$
|
1,884,440
|
|
Cost of revenues
|
|
$
|
-
|
|
|
$
|
1,688,464
|
|
|
$
|
-
|
|
|
$
|
1,688,464
|
|
Gross profit
|
|
$
|
-
|
|
|
$
|
195,976
|
|
|
$
|
-
|
|
|
$
|
195,976
|
|
Depreciation and amortization
|
|
$
|
77,809
|
|
|
$
|
3,600
|
|
|
$
|
-
|
|
|
$
|
81,409
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Gross margin%
|
|
|
-
|
%
|
|
|
10.4
|
%
|
|
|
-
|
%
|
|
|
10.4
|
%
|
|
|
For the Three Months Ended December 31, 2019
|
|
|
|
Shipping
Agency and
Management
Services
|
|
|
Freight
Logistics
Services
|
|
|
Container
Trucking
Services
|
|
|
Total
|
|
Net 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. There
was no such transaction for the three months ended December 31, 2020.
|
|
|
For the six Months Ended December 31, 2020
|
|
|
|
Shipping
Agency and
Management
Services
|
|
|
Freight
Logistics
Services
|
|
|
Container
Trucking
Services
|
|
|
Total
|
|
Net revenues
|
|
$
|
206,845
|
|
|
$
|
2,814,394
|
|
|
$
|
-
|
|
|
$
|
3,021,239
|
|
Cost of revenues
|
|
$
|
176,968
|
|
|
$
|
2,606,722
|
|
|
$
|
-
|
|
|
$
|
2,783,690
|
|
Gross profit
|
|
$
|
29,877
|
|
|
$
|
207,672
|
|
|
$
|
-
|
|
|
$
|
237,549
|
|
Depreciation and amortization
|
|
$
|
158,078
|
|
|
$
|
7,050
|
|
|
$
|
-
|
|
|
$
|
165,128
|
|
Total capital expenditures
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Gross margin%
|
|
|
14.4
|
%
|
|
|
7.4
|
%
|
|
|
-
|
%
|
|
|
7.9
|
%
|
|
|
For the Six Months Ended December 31, 2019
|
|
|
|
Shipping
Agency and
Management
Services
|
|
|
Freight
Logistics
Services
|
|
|
Container
Trucking
Services
|
|
|
Total
|
|
Net 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. There was
no such transaction for the six months ended December 31, 2020.
|
Total assets as of:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Shipping Agency and Management Services
|
|
$
|
6,809,748
|
|
|
$
|
2,531,074
|
|
Freight Logistic Services
|
|
|
3,830,485
|
|
|
|
3,176,165
|
|
Container Trucking Services
|
|
|
22,247
|
|
|
|
30,863
|
|
Total Assets
|
|
$
|
10,662,480
|
|
|
$
|
5,738,102
|
|
The Company’s operations are primarily
based in the PRC and U.S, where the Company derives all of their revenues. Management also review unaudited condensed consolidated
financial results by business locations.
Disaggregated information of revenues
by geographic locations are as follows:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
PRC
|
|
$
|
1,884,440
|
|
|
|
1,503,500
|
|
|
|
2,814,394
|
|
|
|
2,745,641
|
|
U.S.
|
|
|
-
|
|
|
|
517,624
|
|
|
|
206,845
|
|
|
|
1,061,709
|
|
Total revenues
|
|
$
|
1,884,440
|
|
|
$
|
2,021,124
|
|
|
$
|
3,021,239
|
|
|
$
|
3,807,350
|
|
Note 19. RELATED PARTY TRANSACTIONS
As of December 31, 2020 and 2019,
the outstanding amounts due from related parties consist of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Tianjin Zhiyuan Investment Group Co., Ltd.
|
|
$
|
384,331
|
|
|
$
|
484,331
|
|
Less: allowance for doubtful accounts
|
|
|
(38,433
|
)
|
|
|
(48,433
|
)
|
Total
|
|
$
|
345,898
|
|
|
$
|
435,898
|
|
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, 2020 was $384,331 and the Company provided a 10% allowance for doubtful accounts of the amount due from
Zhiyuan. For the three months ended December 31, 2020 and 2019, the Company recovered nil and $4,091, respectively, of allowance
for doubtful accounts of the amount due from Zhiyuan. For the six months ended December 31, 2020 and 2019, the Company recovered
$10,000 and $41,341, respectively, of allowance for doubtful accounts of the amount due from Zhiyuan.
As of December
31, 2020, the Company had payable to the Acting CFO of $2,132 which was included in other
payable. As of June 30, 2020, the Company had payable to the CEO of $6,279 and to the Acting CFO of $26,570 which were included
in other payable. These payments were made on behalf of the Company for the daily business operational activities.
Note 20. SUBSEQUENT EVENTS
On January 27, 2021, the Company entered
into a securities purchase agreement with the non-U.S. investors specified on the signature page thereto pursuant to which the
Company agreed to sell to the investors, and the Investors agreed to purchase from the Company, an aggregate of 1,086,956 shares
of common stock, no par value, and warrants to purchase 5,434,780 shares, for aggregate gross proceeds to the Company of approximately
$4.0 million. The purchase price for each share of common stock and five warrants is $3.68, and the exercise price per warrant
is $5.00. The Company has received the full amount of payment in January 2021.
On February 6, 2021, the Company entered
into a Securities Purchase Agreement with the investors pursuant to which the Company agreed to sell to the Investors, and the
investors agreed to purchase from the Company, in a registered direct offering, an aggregate of 1,998,500 shares of the common
stock of the Company, no par value per share, at a purchase price of $6.805 per share, for aggregate gross proceeds to the Company
of approximately $13.6 million. The Company also agreed to sell to the investors warrants to purchase up to an aggregate of 1,998,500
shares of common stock at an exercise price of $6.805 per share. The warrants shall be initially exercisable upon issuance and
expire five and a half (5.5) years from the date of issuance. The exercise price and the number of shares of common stock issuable
upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions,
but not as a result of future securities offerings at lower prices. Net proceeds to the Company from the sale of the shares and
the warrants, after deducting estimated offering expenses and placement agent fees, are approximately $12.3 million. The offering
is closed on February 10, 2021. The Company has received the full amount of payment in February 2021.
On February 9, 2021, the Company entered into a securities purchase
agreement with the investors pursuant to which the Company agreed to sell to the investors, and the Investors agreed to purchase
from the Company, in a registered direct offering, an aggregate of 3,655,000 shares of the common stock of the Company, no par
value per share, at a purchase price of $7.80 per share, for aggregate gross proceeds to the Company of $28,509,000. The Company
also agreed to sell to the Investors warrants to purchase up to an aggregate of 3,655,000 shares of common stock at an exercise
price of $7.80 per share. The warrants shall be initially exercisable upon issuance and expire five and a half (5.5) years from
the date of issuance. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject
to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities
offerings at lower prices. Net proceeds to the Company from the sale of the shares and the warrants, after deducting estimated
offering expenses and placement agent fees, are approximately $26.2 million. The offering is closed on February 11, 2021. The Company
has received the full amount of payment in February 2021.