Item 1. Business
Item
1. Business.
Overview
Sino-Global Shipping America, Ltd. (“Sino,” the “Company,”
or “we”), a Virginia corporation, was founded in 2001. Sino is a non-asset based global shipping and freight logistics integrated
solution provider. Sino provides tailored solutions and value-added services to its customers to drive effectiveness and control in related
aspects throughout the entire shipping and freight logistics chain. We operate in four operating segments, including (1) shipping agency
and management services, operated by our subsidiary in Hong Kong and the U.S.; (2) inland transportation management services, operated
by our subsidiaries in the U.S.; (3) freight logistics services, operated by our subsidiaries in the PRC and the U.S.; and (4) container
trucking services, operated by our subsidiaries in the PRC and the U.S. In addition to its shipping services, the Company has recently
entered the cryptocurrency industry.
We
conduct our business primarily through our wholly-owned subsidiaries in the People’s Republic of China (the “PRC”)
(including Hong Kong) and the U.S., where a majority of our clients are located.
Company
Structure
The
Company conducts its business primarily through its subsidiaries and contractually controlled affiliates (“VIEs”) in the
People’s Republic of China (the “PRC”) (including Hong Kong) and the U.S., where a majority of its clients are located.
Our
subsidiary in China, Trans Pacific Shipping Limited (“Trans Pacific Beijing”), a wholly owned foreign enterprise, invested
in one 90%-owned subsidiary, Trans Pacific Logistics Shanghai Limited (“Trans Pacific Shanghai”. Trans Pacific Beijing and
Trans Pacific Shanghai are referred to collectively as “Trans Pacific”). As PRC laws and regulations restrict foreign ownership
of local shipping agency service businesses, we provided our shipping agency services in the PRC through Sino-Global Shipping Agency
Ltd. (“Sino-China” or “VIE”), a Chinese legal entity, which holds the licenses and permits necessary to operate
local shipping agency services in the PRC. Trans Pacific Beijing and Sino-China do not have a parent-subsidiary relationship. Trans Pacific
Beijing has contractual arrangements with Sino-China and its shareholders that enable us to substantially control Sino-China. Through
Sino-China, we were able to provide local shipping agency services in all commercial ports in the PRC. Sino-China is one of the committee
members of China Association of Shipping Agencies & Non-Vessel-Operating Common Carriers (“CASA”). CASA was approved
to form by China Ministry of Communications. Sino-China is also our only entity that is qualified to do shipping agency business in China.
We keep the VIE to prepare ourselves for the market to turn around.
1
Corporate
History and Our Business Segments
Since
inception in 2001 and through our fiscal year ended June 30, 2013, our sole business was providing shipping agency services. In general,
we provided two types of shipping agency services: loading/discharging services and protective agency services, in which we acted as
a general agent to provide value added solutions to our customers. For loading/discharging agency services, we received the total payment
from our customers in U.S. dollars and paid the port charges on behalf of our customers in RMB. For protective agency services, we charged
a fixed amount as agent fee while customers are responsible for the payment of port costs and expenses. Under these circumstances, we
generally required a portion of a customer’s payment in advance and billed the remaining balance within 30 days after the transaction
was completed. We believe the most significant factors that directly or indirectly affected our shipping agency service revenues were:
●
the
number of ship-times to which we provide port loading/discharging services;
●
the
size and types of ships we serve;
●
the
type of services we provide;
●
the
rate of service fees we charge;
●
the
number of ports at which we provide services; and
●
the
number of customers we serve.
In
January 2016, we expanded our business to freight logistics service to provide import security filing services with U.S. Customs and
Department of Homeland Security, on behalf of importers who ship goods into the U.S. and also providing inland transportation services
to these importers in the U.S.
In
fiscal year 2017, we also expanded into container trucking services as new business sectors to provide related transportation logistics
services to customers in the U.S. and in China. We have signed a cooperation agreement with Sino-Trans Guangxi Logistics Co. Ltd. (“Sinotrans”),
which is a state-owned enterprise of China, with a service period from July 1, 2017 to December 31, 2020, to provide freight logistics
services and container trucking services to them in the U.S. To ensure effective and high-quality services provided to our customers
in the U.S., we established a joint venture, ACH Trucking Center Corp., in the third quarter of fiscal 2017 with a U.S. local freight
forwarder, Jetta Global Logistics Inc. The joint venture ended in December 2017 and we continue to operate our trucking business through
our other subsidiaries. Since ACH Center’s operating revenue was less than 1% of the Company’s consolidated revenue and the
termination did not constitute a strategic shift that would have a major effect on the Company’s operations and financial results,
the results of operations for ACH Center was not reported as discontinued operations in the financial statements.
As an effort to further diversify our business, in the second quarter
of fiscal 2018, we developed our bulk cargo container services segment. Bulk cargo container shipment refers to using containers to ship
commodities that traditionally are shipped by freight cargo. Freight cargo rate is usually lower than that of container freight rate;
however, the transit time is much longer and has high minimum quantity requirements. With the Chinese government banning the import of
environmental wastes by the end of 2017, the empty container rate of COSCO Group’s container shipping from the United States to
China has been further reduced. We temporarily suspended this service in fiscal year 2019 due to market environment factors in 2019 and
have continued this suspension in light of the worldwide impact of the coronavirus pandemic.
In
the first quarter of fiscal 2018, we established a wholly-owned subsidiary, Ningbo Saimeinuo Supply Chain Management Ltd. which primarily
engages in transportation management and freight logistics services.
Starting with fiscal year 2019, trade dynamics have made it more expensive
for shipping carrier clients to cost-effectively move cargo into U.S. ports, and as a result, we realized lower shipping volumes and less
utilization of its online platform, which has caused us to shift our focus back to the 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.
2
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. was incorporated in New York and its registration in Hong Kong was terminated.
There were no major operations of the joint venture for the year ended June 30, 2020. Currently, we are conducting the shipping agency
business through our 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”). As of the date of this filing, the Company has not yet received the
Certificate. Sino-Global Shipping New York Inc. started providing shipping management related services that do not require certification,
which include arranging and coordinating for ship maintenance and inspection this quarter.
On
November 6, 2019, the Company signed a revised cooperation agreement with Mr. Weijun Qin to restructure their equity interest in State
Priests. Given that State Priests failed to timely obtain the necessary approval from related authorities, Mr. Weijun Qin agreed to exchange
80% equity interest in Sea Continent Management Ltd. (“Sea Continent”), another New York entity Mr. Qin owns for the Company’s
90% equity interest in State Priests. The equity transfer has been consummated. Sea Continent already has the Certificate but has no
operations as of June 30, 2020. There has been no capital injection nor operations of State Priests and Sea Continent as of June 30,
2020; therefore, no gain or loss has been recognized in the transaction.
On
January 10, 2020, the Company entered into a cooperation agreement with Mr. Shanming Liang, a shareholder of the Company, to set up a
joint venture in New York named LSM Trading Ltd., in which the Company holds a 40% equity interest. No investment has been made by the
Company as of the date of this report. The new joint venture will facilitate the purchase agricultural related commodities in the U.S.
for customers in China and the Company will provide comprehensive supply chain and logistics solutions.
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 to maintain its
listing of its common stock 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 partnership
with Tianjin Anboweiye Technology Co. to build up hi-tech and information-based logistic services to meet the higher and complicate demand
of customers.
On
March 19, 2021, the Company established a wholly owned subsidiary, Cullinan Global Logistics Inc, to support its freight logistics services
in the U.S.
Starting
from March 2021, the Company entered the cryptocurrency sector. The Company plans to leverage information technology and other innovative
technologies in its business platform. These types of technology may be helpful in expanding its traditional logistics service expertise.
Starting from March 2, 2021, the Company accepts Bitcoin as a form of payment for its global shipping, freight, and logistics services.
Payments made in Bitcoin will be made at the rate applicable at the payment date.
On
March 2, 2021, the Company entered into a purchase agreement (the “Agreement”) with Hebei Yanghuai Technology Co., Ltd. (“Yanghuai”)
for the purchase of 2,783 digital currency mining servers. The total gross purchase price was $4.6 million. The total computing power
will reach 50,440 t/s. After the transaction is completed, Yanghuai will manage and operate the servers at Yanghuai’s site with
no further charge from March 10, 2021 through March 9, 2022, after which time Sino-Global may engage Yanghuai to continue providing service
for a fee. The first cash payment of approximately $0.9 million was paid within 15 days after the date of signing the Agreement. The
second cash payment of approximately $0.9 million will be paid within 15 days after the date of acceptance of the servers and a special
VAT invoice provided by Yanghuai.
On September 17, 2021, Sino-Global Shipping America, Ltd. (the “Company”) entered into a Digital
Currency Mining Server Purchase Price Adjustment Agreement (the “Agreement”) with Hebei Yanghuai Technology Co., Ltd. (the
“Seller”) to restructure the Purchase and Entrusted Management Agreement entered into between two parties on March 2, 2021
(the “Purchase Agreement”) to buy 2,783 digital currency mining servers from the Seller. Due to a subsequent change in Chinese
regulatory policy that prevented the Seller from operating the servers as needed to meet agreed upon performance targets under the Purchase
Agreement, the two parties have restructured the Purchase Agreement to reduce the purchase price from RMB 30 million to RMB 6 million
and to allocate the purchased mining equipment between the Company and the Seller. The Seller has agreed to transport digital currency
mining servers representing half of the agreed 50,440 t/s in computing power (or a total of 25,220 t/s in computing power) to Ningbo,
China.
3
On
March 18, 2021, Sino-Global Shipping America, Ltd. (the “Company”) announced the launch of a new exchange for NFTs (non-fungible
tokens) in collaboration with e-commerce public chain CyberMiles.
On
March 24, 2021, the Company agreed to acquire a 60% ownership of Super Node LLC, which is a blockchain infrastructure developer and
service provider, in cash or stock transaction for $5.0 million subject to valuation. The transaction is subject to the satisfaction
of warranties and representations under the purchase agreement. This deal is ongoing and is expected to close later this year.
Acquiring equity interest in Super Node LLC can further strengthens the Company’s capabilities and accelerates the buildout of
its business as it pursues major opportunities in the rapidly growing cryptocurrency market and digital economy.
Our
Strategy
Our
strategy is to:
●
Provide
better solutions for issues and challenges faced by the entire shipping and freight logistics chain to better serve our customers
and explore additional growth avenues.
●
Diversify
our current service offerings organically or through acquisitions and/or strategic alliance; continue to grow our business in the
U.S. market;
●
Continue
to streamline our business practice, optimize our cost structure and improve our operating efficiency through effective planning,
budgeting, execution and cost control and strengthening our IT infrastructure;
●
Continue
to reduce our dependency on our legacy business and few key customers; and
●
Continue
to monetize our relationships with our strategic partners and leverage their support and our innovation to expand our business.
With the establishment of our subsidiary in Los Angeles, we added cargo
forwarding services to our service platform in the second quarter of fiscal 2017, which is included in our inland transportation business
line for the year ended June 30, 2016. As we are developing our cargo forwarding services, the Company provides freight logistics services
and container trucking services as two new business segments in fiscal 2017. During fiscal year 2018, the Company began to provide bulk
cargo container services to the customers. 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. Subsequent
to our execution of a restructured agreement with Hebei Yanghuai, our partnership will allow us to expand our capacity in the U.S. It
remains our intent to grow our business in the U.S. In addition, we plan to switch to a direct mining business rather than contract with
third parties in order to have greater control over this growth segment and to optimize our gross margin.
Our
Goals and Strategic Plan
By leveraging our reputation, extensive business relationships, technical
ability and in-depth knowledge of the shipping industry, our goal is to further strengthen our position as a leading global logistics
solution provider that offers innovative resolutions to better address complex issues in different aspects in the entire shipping and
freight logistics chain.
We
historically focused our business on providing our customers with customized shipping agency services. In the past, our business came
predominately from our strong business relationships with our key strategic partners in China. To reduce our dependency on a single business
line, we have leveraged, and will continue to leverage, our business relationships with strategic partners to introduce new service offerings
to the market and to diversify our business. Our strategic plan for the next five years is to continue to diversify our service mix and
actively seek new growth opportunities to expand our business footprint in the U.S. market to reduce our dependency on the revenue generated
from China. For decades, the shipping industry has been operated under traditional business models without many meaningful changes. Today,
technological innovation has already played a big role in changing every conventional industry. We believe the internet will be a big
part of the future logistics chain services and a transformative era in shipping and freight logistics business is coming. As an innovative
solution provider, we plan to apply our technical ability, industry expertise and cutting-edge information technology in the conventional
shipping business to better connect supply and demand and to develop seamless linkages in logistics chains.
4
As
a result of our plan to diversify, we continued to provide on inland transportation management services and logistics between the U.S.
and China, such as providing freight logistics services, container trucking services and bulk cargo container services. During this process,
we will continue to adjust and develop our strategic plans based on the change of business environment.
In
fiscal 2021, while we continued to provide our current traditional logistics business, we integrated the traditional business with modern
technology to develop a brand-new business model. On September 27, 2020, we signed a MOU with EMB Technology Co., LTD (“EMB”).
Our company and EMB will combine the advantages of traditional logistics business/new technology and match the marketing economic requirements
of the post-covid-19 world, gathering our many years of industry experience and customer group, with big data analysis, artificial intelligence,
machine learning technologies, research and development platforms for the new business model, joint business partner’s data interface,
to change the traditional business model from delivery to businesses into delivery directly to customers.
Starting from March 2021, the Company entered the cryptocurrency sector.
The Company plans to leverage information technology and other innovative technologies in its business platform. These types of technology
may be helpful in expanding its traditional logistics service expertise. On March 18, 2021, we announced the launch of a new exchange
for NFTs (non-fungible tokens) in collaboration with e-commerce public chain CyberMiles.
Our
Customers
In
light of our strategic relationship with Zhiyuan Investment Group that began with the signing of a 5-year global logistics service agreement
in June 2013, we expanded our business platform to include additional service offerings. We started to provide inland transportation
management services to a third-party customer, Tengda Northwest Ferroalloy Co., Ltd. (“Tengda Northwest”), during the quarter
ended September 30, 2014. As we continue to diversify our service platform, we endeavor to reduce our dependency on a few customers for
which we provide freight logistics, container trucking services, and shipping agency services. Our main customers in the freight logistic
service segment include Shanghai Baoding Energy Ltd. and Chongqing Iron & Steel Ltd. Our main customer of shipping agency and management
service are Mandarine Bulk Ltd. and Qingdao Lizhou Ship Management Co., Ltd. We began to provide services to Mandarine Bulk Ltd. and
Qingdao Lizhou Ship Management Co., Ltd. since fiscal year 2020.
For
the year ended June 30, 2021, one customer accounted for approximately 89.7% of the Company’s revenues. As of June 30, 2021,
one customer accounted for approximately 87.6% of the Company’s accounts receivable, net. For the year ended June 30, 2020, three
customers accounted for approximately 42%, 23% and 22% of the Company’s revenues, respectively. As of June 30, 2020, all of these
customers accounted for approximately 87% of the Company’s accounts receivable, net.
Our
Suppliers
Our
operations consist of working directly with our customers to understand in detail their needs and expectations and then managing local
suppliers to ensure that our customers’ needs are met.
For
the year ended June 30, 2021, two suppliers accounted for approximately 55.4% and 28.6% of the total costs of revenue, respectively.
For the year ended June 30, 2020, three suppliers accounted for 26%, 18% and 16% of the total costs of revenue, respectively.
5
Our
Strengths
We
believe that the following strengths differentiate us from our competitors:
●
Proven
industry experience and problem-solving reputation . We are a non-asset based global shipping and freight logistics solution provider.
We provide tailored solutions and value-added services to our customers to drive effectiveness and control in related aspects throughout
the entire shipping and freight logistic chain. We believe that our years of successful track record of applying integrated solutions
to complex issues in the global shipping logistics business gives us a competitive advantage in attracting large clients and helps
us maintain strong long terms business relationship with them.
●
Strong
leadership and a competent professional team . Our CEO is an industry veteran with more than thirty years of extensive industry
experience including ten years working for COSCO, one of the largest shipping companies in the world. Most of our employees have
marine business experience, and many of our managers/chief operators served in other large Chinese shipping companies prior to joining
us. With these professionals and experienced staff, we believe that we provide the best services to our customers at competitive
prices.
●
Extensive
network and positive industry recognition. Doing business in China often requires a strong business network and support of key
strategic partners. The Company served as one of the executive directors of China Association of Shipping Agencies & Non-Vessel-Operating
Common Carriers (CASA), the authoritative industry association in China. We are the only non-state-owned enterprise represented on
the CASA board guiding the development of the industry. Our good reputation and industry recognition enables us to maintain strong
relationships with our business partners and have an extensive network of contacts throughout the industry, which helps us gain necessary
support to execute our business plans.
●
Lean
organization and a flexible business model. Although we are a small business with limited resources, we have a cohesive and effective
organizational structure with the goal of maximizing customer value while minimizing waste. Our unique flexible business model allows
us to quickly respond to changing market demand and offer our customers innovative problem-solving solutions, quality customer service,
and competitive prices to achieve greater market acceptance and gain additional market share.
●
U.S.-registered
and NASDAQ-listed public company . We believe our status as a U.S. corporation gives us more credibility among existing and potential
customers, suppliers, and other business partners than a privately owned company would have in our industry. Our ability to raise
capital through the capital market or use our common stock as “currency” to facility potential merger and acquisition
transactions can also help us carry out or accelerate our growth strategies.
Our
Opportunities
For
more than thirty years, the shipping and freight logistics industry has been operated under traditional business models without meaningful
change. Many of these business practices are inefficient and problematic; therefore, maintaining an innovative mindset is critical to
achieving continuous business success and growth. We are a value-added logistics solution provider with successful past performance and
individuals that have been in the industry for a long time. Instead of playing the traditional logistics broker role, we focus on providing
technology solutions and innovative leading-edge services to bridge the asset-based world with the digital world. We shape our industry
practice and profit model by analyzing wider developments both in the global markets and the technology industry so we can address unique
problems that are currently pervasive across the shipping and freight logistics industry.
We
believe we can capture the business opportunity and grow our business organically or through acquisitions or strategic alliance by:
●
Continuing
to streamline our business operations and improve our operating efficiency through innovative technology, effective planning, budgeting,
execution and cost control;
●
Diversifying
our business to focus on providing innovative technology based solution to our customers to promote our sustainable business growth;
6
●
The current market of China’s shipping agency industry is mature
comparing to what it was ten years ago when the shipping agency industry was fueled by the massive construction of China’s infrastructure,
yet the over-supply of shipping agencies has also shrunk the profits of the industry. Many shipping agencies were constrained by the small
size and the limited services. SINO is a NASDAQ-listed company that already has more flexibility in capital raising comparing to companies
that are not on a U.S. major stock exchange or private companies. We already have a network that covers the US East coast, West coast,
Canada, Australia, Hong Kong, Beijing, and Ningbo. We maintain strong relationships with customers and market resources. The current shipping
agency market is more competitive yet enables companies like us who have better resources in this market niche to expand.
Our
Challenges
We
face significant challenges when executing our strategy, including:
●
Given
the complexity and length of restructuring our business, we face the challenge of generating sufficient cash from our current business
activities to support our daily operations during the transition;
●
We
may not be able to establish a separate department to solve critical issues in today’s shipping logistics industry;
●
We
may not be able to manage our growth when we form more joint ventures for our shipping agency business as we need to better our standard
operating and control procedures which may pose more challenges to our management.
●
We
may not have or not be able to get the necessary funds to continue to expand our service and market our services successfully;
●
Our
ability to respond to increasing competitive pressure on our growth and margins;
●
Our
ability to gain further expertise and to serve new customers in new service areas;
●
From
time to time, we may have difficulty carrying out services effectively and in a profitable way due to the cyclical nature of the
shipping industry, which could lead to a prolonged period of sluggish demand for our services;
●
Our
ability to respond promptly to a changing regulatory environment, macroeconomic conditions, industry trends, and competitive landscape;
and
●
Developing
a winning business model takes time and a new business model may not be recognized by the market immediately. As a publicly traded
company, management may be forced to fulfill near-term performance goals that may not be consistent with the Company’s long-term
vision.
● Our recent expansion into the
cryptocurrency industry has been hampered by changes in Chinese regulations.
Our
Competition
The market segments that we serve do not have high entry barriers.
There are many companies ranging from small to large in China that provide shipping and freight-related logistics services. At present,
the state-owned companies in China still dominate the industry and generate a majority of the revenues in the industry. These companies
have greater service capabilities, a larger customer base and more financial, marketing, network and human resources than we do. Most
of them engage in a wide range of businesses and involve many aspects of the industry chain. However, we focus on providing tailored solutions
and value-added services to select high-profile customers to drive effectiveness and control in related aspects throughout the entire
shipping and freight logistic chain. As a boutique company that provides specialized services with limited resources and history, we face
intense competition in the particular market segments that we serve. Our ability to be successful in our industry depends on our deep
understanding of the complexity of industry issues and challenges and our technical ability to develop best solutions to respond to the
identified issues and provide effective problem-solving strategies to our targeted customers to achieve the fastest and most cost-effective
outcomes. Our value-added services and innovative approaches are recognized by our customers, which helps us to gain additional market
share and compete effectively with the companies that may be better capitalized than we are or may provide services we do not or cannot
provide to our customers.
7
Employees
As
of the date of this report, we have 42 full-time employees and one part-time employee, 19 of whom are based in China. Of the total
full time employees, 10 are in management, 13 are in operations, 9 are in finance and accounting and 10 are in administration and
technical support. We believe that our relationship with our employees is good. We have never had a work stoppage, and our employees
are not subject to a collective bargaining agreement.
Recent
Development
On September 17, 2021, we entered into a Digital Currency Mining Server
Purchase Price Adjustment Agreement (the “Agreement”) with Hebei Yanghuai Technology Co., Ltd. (the “Seller”)
to restructure the Purchase and Entrusted Management Agreement entered into between two parties on March 2, 2021 (the “Purchase
Agreement”) to buy 2,783 digital currency mining servers from the Seller. Due to a subsequent change in Chinese regulatory policy
that prevented the Seller from operating the servers as needed to meet agreed upon performance targets under the Purchase Agreement, the
two parties have restructured the Purchase Agreement to reduce the purchase price from RMB 30 million to RMB 6 million and to allocate
the purchased mining equipment between the Company and the Seller. The Seller has agreed to transport digital currency mining servers
representing half of the agreed 50,440 t/s in computing power (or a total of 25,220 t/s in computing power) to Ningbo, China first, and
then ship to the U.S.
Coronavirus
(COVID-19) Update
In
December 2019, a novel strain of coronavirus (COVID-19) was first identified in China and has since spread rapidly globally. The outbreak
of COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities globally. In
March 2020, the World Health Organization declared the COVID-19 a pandemic. In 2020, COVID-19 had a material impact on our business,
financial condition, and results of operations. including, but not limited to, the following:
● We
temporally closed our offices in early 2020, as required by relevant PRC and U.S. regulatory
authorities. Our offices were subsequently reopened pursuant to local guidelines. In 2020,
the pandemic caused disruptions in our operations and supply chains, which resulted in delays
in the shipment of products to certain of our customers.
● A
large number of our employees were in mandatory self-quarantine and the entire business operations
of the Company halted for several months the Spring of 2020.
● Our
customers were negatively impacted by the pandemic, which reduced the demand of our services.
As a result, our revenue and income were negatively impacted in 2020.
After
the second quarter of 2020, the COVID outbreak in China has gradually been controlled. Our business has also returned to normal operations,
although management assessed that our results of operations had been negatively impacted for the year. COVID-19 could adversely affect
our business and results of operations in 2021 if any COVID resurgence causes significant disruptions to our operations or the business
of our supply chain, logistics and service providers. We cannot predict the severity and duration of the impact from such resurgence,
if any. If any new outbreak of COVID-19 is not effectively and timely controlled, or if government responses to outbreaks or potential
outbreaks are severe or long-lasting, our business operations and financial condition may be materially and adversely affected as a result
of the deteriorating market outlook, the slowdown in regional and national economic growth, weakened liquidity and financial condition
of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse
effect on the overall business environment, cause uncertainties in the regions where we conduct business, and could materially and adversely
impact our business, financial condition and results of operations.
Item 1A.
Risk Factors.
This
item is not applicable to a smaller reporting company such as us.
Item 1B.
Unresolved Staff Comments.
The
Company does not have any unresolved or outstanding staff comments.
8
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