Singularity Future Technology Ltd. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in the Report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. Overview We previously focused on providing customized freight logistics services, but starting in 2017, we began exploring new opportunities to expand our business and generate more revenue. These opportunities ranged from complementary businesses to other new service and product initiatives. In the fiscal years 2021 and 2022, while we continued to provide our freight logistics business, we expanded our services to include warehousing services provided by our US subsidiary Brilliant Warehouse Service Inc. On January 3, 2022, we changed our corporate name to Singularity Future Technology Ltd. to align with our entry into the digital assets business through our U.S. subsidiaries. During 2022, we engaged in purchases and sales of cryptocurrency mining machines through our U.S. subsidiaries. For the fiscal year ended June 30, 2022, we operated in two operating segments, including (1) freight logistics services, through our subsidiaries in the U.S and PRC; and (2) purchase and sales of crypto mining machines, through our subsidiary Thor Miner. For the year ended June 30, 2021, the Company also engaged in shipping agency and management services, which were carried out by its subsidiary in the U.S. The Company no longer operates in the shipping agency segment because it did not receive any new orders for its services due to the uncertainty of the shipping management market which was negatively impacted by the COVID-19 pandemic. Recent Developments The following events had a material impact on our financial statements. For other recent developments, see “Item 1. Business – Recent Developments.” 13 On January 10, 2022, Thor Miner entered into a purchase agreement with HighSharp. Pursuant to the agreement, Thor Miner agreed to purchase certain cryptocurrency mining equipment from HighSharp. In January and April 2022, Thor Miner made a total prepayment of $35,406,649 for the order. Thor Miner also entered into a PSA with SOSNY for the purchase of $200,000,000 in crypto mining rigs and received deposit form SOSNY in the amount of $48,930,000. Due to production issue from HighSharp, Thor Miner was not able to timely deliver the products to SOSNY according to the delivery terms of the PSA and was sued by SOSNY for breach of contract on December 9, 2022. On December 23, 2022, the Company entered into the Settlement Agreement with SOSNY pursuant to which the Company paid $13.0 million to SOSNY in exchange for SOSNY dismissing the lawsuit and will transfer any additional funds it receives from HighSharp to SOSNY in an amount not to exceed $40,560,569. As of December 22, 2022, the balance of advance to HighSharp and deposit from SOSNY amounted to $27,927,583 and $40,560,569, respectively. Thor Miner paid $13.0 million on December 28, 2022 to SOSNY and wrote off the balance of the deposit it received from SOSNY and the balance of its payment to HighSharp. Restatement of Previously Issued Financial Statements From March to June 2019, the Company’s subsidiary Trans Pacific Logistic Shanghai Ltd (“Trans Pacific Shanghai”) received approximately $6.2 million (RMB 40 million) from a related party, Shanghai Baoyin Industrial Co., Ltd. (“Shanghai Baoyin”), to pay for accounts receivable of six different customers totaling RMB 40 million. Shanghai Baoyin is 30% owned by Wang Qinggang, the CEO and legal representative of Trans Pacific Shanghai. Trans Pacific Shanghai subsequently paid RMB 20 million and RMB 10 million to Zhangjiakou Baoyu Trading Co. Ltd. (“Baoyu”), a third party, in April 2019 and July 2019, respectively, and it made an additional payment of RMB 10 million to Hebei Baoxie Trading Co., Ltd. (“Hebei Baoxie”), a third party, in July 2019. As such, for the fiscal year ended June 30, 2019, accounts receivable was understated by RMB 40 million, advance to supplier was overstated by RMB 20 million, and other payables from Shanghai Baoyin, a related party, were understated by RMB 20 million. There was an overstatement of RMB 20 million in total assets and an understatement of total liabilities of RMB 20 million. During the fiscal year ended June 30, 2021, Hebei Baoxie repaid a total of RMB 10 million to Trans Pacific Shanghai, and Trans Pacific Shanghai advanced the RMB 10 million to Shanghai Baoyin. The RMB 10 million paid to Shanghai Baoyin was recorded as other receivable, and the RMB 30 million advance to Baoyu was reclassified from an advance to supplier to other receivable. The Company provided a full allowance of its receivables totaling RMB 40 million. The Company evaluated this transaction and determined there is no impact on its assets, liabilities, or retained earnings as of June 30, 2020. During the fiscal year ended June 30, 2021, Baoyu repaid a total of RMB 30 million to Trans Pacific Shanghai. The RMB 30 million received was recorded as recovery of bad debt. Trans Pacific Shanghai then loaned the same amount to Shanghai Baoyin. Shanghai Baoyin subsequently repaid RMB 4 million to Trans Pacific Shanghai, and Trans Pacific Shanghai loaned the same amount to Wang Qinggang. The RMB 30 million received was recorded as recovery of bad debt for other receivable and the RMB 30 million paid was recorded as a related party loan receivable. The Company analyzed the transactions and determined the RMB 30 million was originally from Shanghai Baoyin and eventually paid back to the same related parties. Recovery of bad debt and related party loan receivable was overstated by RMB 30 million for the fiscal year 2021. The Company restated its fiscal year 2021 financial statements to restate related party loans receivable and bad debt recovery. Effects of the restatement are as follows: As Previously Reported Adjustments As Restated Consolidate balance sheet as of June 30, 2021 Loan receivable - related parties $ 4,644,969 $ (4,644,969 ) $ - Total assets $ 52,803,116 $ (4,644,969 ) $ 48,158,147 14 As Previously Reported Adjustments As Restated Consolidated Statement of Stockholder’s Equity as of June 30, 2021 Accumulated deficit $ (30,244,937 ) $ (4,076,825 ) $ (34,321,762 ) Accumulated other comprehensive income (loss) (625,449 ) (103,647 ) (729,096 ) Non-controlling Interest (6,951,134 ) (464,497 ) (7,415,631 ) Total equity $ 47,069,142 $ (4,644,969 ) $ 42,424,173 As Previously Reported Adjustments As Restated Consolidated statement of oeprations for the year ended June 30, 2021 Recovery (provision) for doubtful accounts, net $ 321,168 $ (4,529,806 ) $ (4,208,638 ) Net loss $ (6,773,047 ) $ (4,529,806 ) $ (11,302,853 ) Other comprehensive loss - foreign currency (488 ) (115,163 ) $ (115,651 ) Comprehensive loss $ (6,773,535 ) $ (4,644,969 ) $ (11,418,504 ) As Previously Reported Adjustments As Restated Consolidated statement of cash flow for the year ended June 30, 2021 Cash flows from operating activities: Net loss $ (6,773,047 ) $ (4,529,806 ) $ (11,302,853 ) (Recovery)/ Provision for doubtful accounts (321,168 ) 4,529,806 4,208,638 Other receivable 4,227,239 (4,529,806 ) (302,567 ) Cash flows from investing activities: Loan receivable - related parties $ (4,529,806 ) $ 4,529,806 $ - Impact of COVID-19 The outbreak of the COVID-19 starting from late January 2020 in the PRC has spread rapidly to many parts of the world. In March 2020, the World Health Organization declared the COVID-19 as a pandemic. Given the continually expanding of COVID-19 pandemic in China and United States, our business, results of operations, and financial condition are still adversely affected. In early December 2022, Chinese government eased the strict control measure for COVID-19, which has led to surge in increased infections and disruption in our business operations. Any future impact of COVID-19 on the Company’s China operation results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and resurgence of COVID-19 variants and the actions taken by government authorities to contain COVID-19 or treat its impact, almost all of which are beyond our control. The impacts of COVID-19 on our business, financial condition, and results of operations include, but are not limited to, the following: ● Our customers have been negatively impacted by the pandemic, which reduced their demand for freight logistics services. As a result, our revenue for the year ended June 30, 2022 was down by approximately $1.2 million, or 22.6%. ● Due to travel restrictions between US and China, our new business development for existing segments or new ventures has been slowed down. ● Our sales of crypto mining machines were materially adversely affected by COVID-19. Specifically, Crypto mining machine manufacturers have been impacted by the constrained supply of the semiconductors used in the production of the highly specialized crypto mining machines; COVID-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in delayed shipments and additional expenses to expedite delivery; as a result, we were unable to fulfil our customer orders on a timely basis, resulting cancellation of orders and partial refund of purchase price, as evident from the settlement in SOSNY. 15 We have been, and may continue to be, negatively impacted by the ongoing COVID-19, which may continually impact our cost of freight, or result in higher cost of revenue, which may in turn materially adversely affect our financial condition and operating results in coming months. Any future impact of COVID-19 on the Company’s operation results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and resurgence of COVID-19 variants and the actions taken by government authorities to contain COVID-19 or treat its impact, almost all of which are beyond our control. Results of Operations Comparison of the Years Ended June 30, 2022 and 2021 The following table sets forth the results of our operations for the periods indicated: For the Years Ended June 30, 2022 2021(restated) Change US $ % US $ % US $ % Revenues 3,988,415 100.0 % 5,151,032 100.0 % （1,162,617 ） (22.6 )% Cost of revenues 4,136,474 103.7 % 4,974,394 96.6 % (837,920 ) (16.8 )% Gross margin (3.7 )% N/A 3.4 % N/A (7.1 )% N/A Selling expenses 385,890 9.7 % 297,906 5.8 % 87,984 29.5 % General and administrative expenses 9,301,784 233.2 % 5,605,670 108.8 % 3,696,114 65.9 % Impairment loss of Cryptocurrencies 170,880 4.3 % - 0.0 % 170,880 100.0 % Impairment loss of fixed assets and right of use asset 1,006,305 25.2 % 855,230 16.6 % 151,075 17.7 % Provision for doubtful accounts, net of recovery 1,613,504 40.5 % 4,208,638 81.7 % (2,595,134 ) (61.7 )% Stock-based compensation 10,064,622 252.3 % - 0.0 % 10,064,622 100.0 % Total costs and expenses 26,679,459 668.9 % 15,941,838 309.5 % 10,737,621 67.4 % Revenues Revenues decreased by $1,162,617, or approximately 22.6%, to $3,988,415 for the year ended June 30, 2022 from $5,151,032 for the year ended June 30, 2021. The decrease was primarily due to decrease in shipping agency and management services and freight logistics services. The following tables present summary information by segments for the years ended June 30, 2022 and 2021: For the Year Ended June 30, 2022 Shipping Agency and Management Services Freight Logistics Services Sales of Crypto Mining Machines Total Net revenues* $ - $ 3,830,615 $ 157,800 $ 3,988,415 Cost of revenues $ - $ 4,136,474 $ - $ 4,136,474 Gross profit $ - $ (305,859 ) $ 157,800 $ (148,059 ) Depreciation and amortization $ - $ 512,586 $ 21,052 $ 533,638 Total capital expenditures $ - $ 840,319 $ 34,199 $ 874,518 Gross margin - % (8.0 )% 100.0 % (3.7 )% * Including related party revenue of $222,963 from Zhejiang Jinbang Fuel Energy Co., Ltd for the year ended June 30, 2022. 16 For the Year Ended June 30, 2021 Shipping Agency and Management Services Freight Logistics Services Sales of Crypto Mining Machines Total Net revenues $ 206,845 $ 4,944,187 $ - $ 5,151,032 Cost of revenues $ 176,968 $ 4,797,427 $ - $ 4,974,394 Gross profit $ 29,878 $ 146,760 $ - $ 176,638 Depreciation and amortization $ 299,934 $ 36,300 $ - $ 336,234 Total capital expenditures $ 136,076 $ 407,954 $ - $ 554,030 Gross margin 14.4 % 3.0 - % 3.4 % % Changes For the Years Ended June 30, 2022 and 2021 Shipping Agency and Management Services Freight Logistics Services Sales of Crypto Mining Machines Total Net revenues (100.0 )% (22.5 )% - (22.6 )% Cost of revenues (100.0 )% (13.8 )% - (16.8 )% Gross profit (100.0 )% (308.4 )% - (183.8 )% Depreciation and amortization (100.0 )% 1312.1 % - 58.7 % Total capital expenditures (100.0 )% 106.0 % 100.0 % 57.8 % Gross margin (14.4 )% (11.0 )% 100.0 % (7.1 )% Disaggregated information of revenues by geographic locations are as follows: For the Years Ended June 30, June 30, 2022 2021 PRC 2,982,691 4,921,022 U.S. 1,005,724 230,010 Total revenues $ 3,988,415 $ 5,151,032 Revenues Shipping Agency and Management Services For the years ended June 30, 2022 and 2021, we did not generate any revenue from shipping agency and management services as we did not receive any new orders for our services due to the uncertainty of the shipping management market which was negatively impacted by the COVID-19 pandemic. Freight Logistics Services Freight logistics services primarily consist of cargo forwarding, brokerage, warehouse and other freight services. Revenues from freight logistics services were $3,830,615 for the year ended June 30, 2022, a decrease of $1,113,572, or approximately 22.5%, as compared to $4,944,187 for the year ended June 30, 2021. This decrease in revenue was mainly due to a decrease of approximately $1.9 million from the transportation services of our PRC operations where demand was impacted by various business disruptions due to the resurgence of COVID-19 variants which caused a decrease in spending by our major customers. The decrease was offset by approximately $0.8 million of warehouse and logistics services that we started to provide in the fiscal year 2022 through our subsidiaries, Gorgeous Trading Ltd. and Brilliant Warehouse Service, Inc. 17 Sales of Crypto Mining Machines On January 10, 2022, Thor Miner entered into the PSA with SOSNY, a wholly owned subsidiary of SOS Ltd. Pursuant to the PSA, Thor Miner agreed to sell to SOSNY certain cryptocurrency mining hardware and other equipment. The total purchase price was $200,000,000 and the purchase was expected to be completed under separate purchase orders. Thor Miner made two shipments in June 2022 and we recognized net revenue of $157,800. We recognized the sales of cryptocurrency mining equipment based on a net basis as the manufacturer of the products is responsible for shipping and custom clearing for the products. Gross revenue and the gross cost of revenue amounted to $1,483,320 and $1,325,520, respectively, for the year ended June 30, 2022. Cost of Revenues Cost of revenues for our freight logistics services segment mainly consisted of freight costs to various freight carriers, cost of labor, warehouse rent and other overhead and sundry costs. Cost of revenues for our freight logistics services segment was $4,136,474 for the year ended June 30, 2022, a decrease of $660,953, or approximately 13.8%, as compared to $4,797,427 for the year ended June 30, 2021 as a result of the decrease in freight costs of our PRC operations caused by the decrease in shipping volume due to the pandemic. Our gross margin was (3.7%) and 3.4% for the years ended June 30, 2022 and 2021, respectively. This decrease in gross margin in freight logistics segment was mainly due to rising costs for our PRC operations as we are not able to negotiate better price with our freight carrier due to decrease in volume. In addition, we started our warehouse services this year and we have higher fixed costs including warehouse rent and salaries when we are developing the business. Our cost of revenue for the sale of crypto-mining equipment was nil as we recognized revenue on a net basis and hence the higher margin which increased the Company’s margin of (8.0)% from freight logistics segment to (3.7%). Operating Costs and Expenses Operating costs and expenses increased by $10,737,621 or approximately 67.4% from $26,679,459 for the year ended June 30, 2022 compared to $15,941,838 for the year ended June 30, 2021. This increase was mainly due to the increase in selling expenses, stock-based compensation, general and administrative expenses and impairment expenses as more fully discussed below. Selling Expenses Our selling expenses consisted primarily of salaries and travel expenses for our sales representatives. For the year ended June 30, 2022, we had $385,890 in selling expenses, as compared to $297,906 for the year ended June 30, 2021, which represents an increase of $87,984 or approximately 29.5%. The increase was due to an increase of marketing expenses of approximately $0.2 million to promote our freight logistics business. General and Administrative Expenses Our general and administrative expenses consist primarily of salaries and benefits, travel expenses for our administration department, office expenses, and regulatory filing and professional service fees for auditing, legal and IT consulting. For the year ended June 30, 2022, we had $9,301,784 general and administrative expenses, as compared to $5,605,670 for the year ended June 30, 2021, representing an increase of $3,696,114, or approximately 65.9%. This significant increase was mainly due to the increase in salaries, wages and office related costs of approximately $3.0 million as we hired more employees and rented new warehouses for our subsidiaries Gorgeous Trading Ltd. and Brilliant Warehouse Service, Inc. This was also due to additional professional fees of approximately $0.5 million mainly fees made for the Company’s special investigation. Impairment Loss of Cryptocurrencies We recorded $170,880 in impairment loss for the year ended June 30, 2022 due to a recent price drop in bitcoin, which the Company deemed a triggering event for impairment testing. 18 Impairment Loss of Fixed Assets and Right of Use Assets We performed our annual goodwill impairment analysis as of June 30, 2022 and concluded we had approximately $1.0 million in impairment loss for fixed assets and right of use assets, as our carrying value exceeds the fair value. The fair values are determined by income approach where projected future cash flows discounted at rates commensurate with the risks involved, (“Discounted Cash Flow” or “DCF” of the income approach). Assumptions used in a DCF analysis require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. We recorded impairment loss of $855,230 for the year ended June 30, 2021 primarily for our mining equipment due to a regulation change in China that banned cryptocurrency mining. Provision for Doubtful Accounts, Net of Recovery Our total bad debt expenses amounted to approximately $2.0 million, mostly because we estimated that we cannot timely collect the advances we made to certain related parties, which includes approximately $1.3 million to Shanghai Baoyin which is 30% owned by Wang Qinggang, and approximately $0.6 million in advances to LSM trading Ltd, of which we hold a 40% ownership interest . The advances were non-interest bearing and due on demand. We had net recovery of other receivable of approximately $0.4 million from other receivable as we continued collection of the receivables that were previously reserved. We had approximately $4.2 million of provision for the fiscal year 2021 for our accounts receivable and long-term deposits, representing a decrease of $2,595,134, or approximately 61.7%. Stock-based Compensation Stock-based compensation was $10,064,622 for the year ended June 30, 2022, an increase of $10,064,622 or 100.0%, as compared to nil for the year ended June 30, 2021 due to stock grants to our directors, employees and consultants in the fiscal year 2022. Loss from disposal of subsidiaries and VIE On December 31, 2021, the Company entered into a series of agreements to terminate its VIE structure and deconsolidated its formerly controlled entity Sino-China. The Company controlled Sino-China through its wholly owned subsidiary Trans Pacific Beijing. The Company made the decision to dissolve the VIE structure and Sino-China because Sino-China has no active operations and the Company wanted to remove any potential risks associated with any VIE structures. The Company also dissolved its subsidiary Sino-Global Shipping LA, Inc., and on March 14, 2022, the Company discontinued its subsidiary Sino-Global Shipping Canada, Inc. The total loss of three disposals amounted to approximately $6.1 million. Since these entities did not have any active operations prior to their disposal, the disposal did not represent a strategic change in the Company’s business. As such, the disposal was not presented as a discontinued operation. Other Expenses, Net Other expenses, net for the year ended June 30, 2022 mainly consists of interest expenses for our convertible debts of approximately $0.1 million and other finance charges, net of interest earned. Total other expenses, net was approximately $ 0.5 million for the year ended June 30, 2021 which mainly consisted of a settlement payment loss of a dispute on cooperative profit sharing of approximately $0.8 million, offset by the PPP loan forgiveness which we recorded as a gain of approximately $0.1 million and the income generated from cryptocurrencies mining of approximately $0.3 million. Taxes Our income tax expenses amounted to nil and $3,450 for the years ended June 30, 2022 and 2021, respectively. We have incurred a cumulative U.S. federal net operating loss (“NOL”) of approximately $12,543,000 as of June 30, 2021, which may reduce future federal taxable income. During the year ended June 30, 2022, approximately $9,700,000 of NOL was generated and the tax benefit derived from such NOL was approximately 2,000,000. Our operations in China incurred a cumulative a cumulative NOL of approximately $6,026,000 as of June 30, 2021, which was mainly from Sino-China which we disposed of during the year ended June 30, 2022. During the year ended June 30, 2022, we generated an additional NOL of approximately $4,845,000. As of June 30, 2022, our PRC subsidiaries’ cumulative NOL amounted to approximately $1,283,000 which may reduce future taxable income and will expire by 2026. 19 We periodically evaluate the likelihood of the realization of deferred tax assets and reduce the carrying amount of the deferred tax assets by a valuation allowance to the extent we believe a portion will not be realized. Management considers new evidence, both positive and negative, that could affect our future realization of deferred tax assets, including our recent cumulative earnings experience, expectations of future income, the carry forward periods available for tax reporting purposes and other relevant factors. We determined that it is more likely than not that our deferred tax assets would not be realized due to uncertainty for future earnings due to the Company’s reorganization and venture into new businesses. We provided a 100% allowance for deferred tax assets as of June 30, 2022. The net decrease in valuation for the year ended June 30, 2022 amounted to approximately $1.0 million based on management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized. Net Loss As a result of the foregoing, we had a net loss of $28,928,369 for the year ended June 30, 2022, compared to $11,302,853 for the year ended June 30, 2021. After the deduction of non-controlling interest, net loss attributable to us was $28,257,830 for the year ended June 30, 2022, compared to $10,900,168 for the same period in 2021. Comprehensive loss attributable to us was $27,482,995 for the year ended June 30, 2022, as compared to $10,545,234 for the year ended June 30, 2021. Liquidity and Capital Resources Cash Flows and Working Capital As of June 30, 2022, we had $55,833,282 in cash (including cash on hand and cash in bank). The majority of our cash is in banks located in the U.S. On December 19, 2021, the Company issued two convertible notes to two non-U.S. investors for an aggregate purchase price of $10,000,000 (the “December 2021 Convertible Notes”). The December 2021 Convertible Notes bear interest at 5% annually and may be converted into shares of the Company’s common stock at a conversion price of $3.76 per share. At the investors’ request, we prepaid $5,000,000 in the aggregate principal amount, without interest, of the December 2021 Convertible Notes on March 8, 2022. Interest for the principal of $5,000,000 repaid was waived. As of June 30, 2022, we had the following loans outstanding: Loans Maturities Interest rate June 30, 2022 Convertible Notes December 2023 5 % $ 5,000,000 The following table sets forth a summary of our cash flows for the periods as indicated: For the Years Ended June 30, 2022 2021 Net cash provided by (used in) operating activities $ 5,918,070 $ (8,679,918 ) Net cash used in investing activities $ (3,581,676 ) $ (1,510,379 ) Net cash provided by financing activities $ 8,351,964 $ 54,200,082 Effect of exchange rate fluctuations on cash $ 307,607 $ 696,350 Net increase in cash $ 10,995,965 $ 44,706,135 Cash at the beginning of period $ 44,837,317 $ 131,182 Cash at the end of period $ 55,833,282 $ 44,837,317 The following table sets forth a summary of our working capital: June 30, June 30, 2022 2021 Variation % Total Current Assets $ 63,165,462 $ 46,867,350 $ 16,298,112 34.8 % Total Current Liabilities $ 25,212,959 $ 5,343,649 $ 19,869,310 371.8 % Working Capital $ 37,952,503 $ 41,523,701 $ (3,571,198 ) (8.6 )% Current Ratio 2.51 8.77 (6.26 ) (71.4 )% 20 In assessing the liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. As of June 30, 2022, our working capital was approximately $38.0 million and we had cash of approximately $55.8 million. We believe our current working capital is sufficient to support our operations and debt obligations as they become due within one year from the date of this Report. Operating Activities Our net cash provided by operating activities was approximately $5.9 million for the year ended June 30, 2022. The operating cash outflow for the year ended June 30, 2022 was primarily attributable to our net loss of approximately $28.9 million, adjusted by non-cash stock-based compensation of approximately $10.0 million, loss on disposal of subsidiaries and VIE of approximately $6.1 million and provision for doubtful accounts of approximately $1.6 million. We had an increase in cash inflow of other receivables of approximately $1.4 million and we received a total of $47.0 million from SOSNY, approximately $34.1 million was advanced payment for the sale of cryptocurrency mining machines while we are to refund SOSNY $13.0 million in December 2022. Our cash inflow was decreased by an advance to a related party supplier of approximately $34.1 million which was for the purchase of cryptocurrency mining machines. Our net cash used in operating activities was approximately $8.7 million for the year ended June 30, 2021. The operating cash outflow for the year ended June 30, 2021 was primarily attributable to our net loss of approximately $11.3 million, consisting of non-cash items including approximately $0.4 million in depreciation and amortization, approximately $0.9 million in impairment and approximately $4.2 million in allowance for deposit. We had an increase in advances to suppliers - third parties as we made deposits to our freight carriers of approximately $0.8 million, and a decrease in accrued expenses and other current liabilities of approximately $1.1 million offset by a decrease in other receivables of approximately $0.3 million as we collected our outstanding balances. Investing Activities Net cash used in investing activities was approximately $3.5 million for the year ended June 30, 2022 due to the acquisition of property and equipment of approximately $0.9 million and an investment of approximately $0.2 million to a 40% owned joint venture. We made an additional loan of $0.5 million to Wang Qinggang, a related party to the Company, and CEO and legal representative of Trans Pacific Shanghai which is due in June 2024. We also made related party advances of approximately $1.9 million, which includes $1.3 million to Shanghai Baoyin which is 30% owned by Wang Qinggang, and approximately $0.6 million in advances to LSM Trading Ltd, of which we hold a 40% ownership interest. Net cash used in investing activities was approximately $1.5 million for the year ended June 30, 2021 due to the acquisition of property and equipment. Financing Activities Net cash provided by financing activities was approximately $8.3 million for the year ended June 30, 2022 due to issuances of common stock in private placements of approximately $10.5 million and proceeds from convertible notes of $10 million, repayment of convertible notes of $5.0 million and warrant repurchase of approximately $7.9 million. We also had cash from warrants exercise of approximately $0.9 million and repayment of Economic Injury Disaster Loan. Net cash provided by financing activities was approximately $54.2 million for the year ended June 30, 2021 due to cash proceeds received from issuances of common stock to private investors of approximately $52.8 million and cash proceeds received from issuances of preferred stock to a private investor of approximately $1.4 million. 21 Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 2, “Summary of Significant Accounting Policies” of the notes to the financial statements included elsewhere in this Report describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the date of this Report. Off-Balance Sheet Arrangements None. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. The Company’s financial statements and the related notes, together with the report of Audit Alliance LLP, are set forth following the signature pages of this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.