Item 1. Business
Item 1. Business.
Overview
We
are a global logistics integrated solution provider that was founded in the United States in 2001. On September 18, 2007, the Company
merged into a new corporation, Sino-Global Shipping America, Ltd. in Virginia. On January 3, 2022, the Company changed its corporate name
to Singularity Future Technology Ltd. to reflect its expanded operations into the digital assets business. Currently, we primarily focus
on providing freight logistics services, which mainly include shipping, warehouse services and other logistical support to steel companies
.
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 year 2022, while we continued to provide our traditional freight logistics business,
we expanded our services to include warehousing services provided by our U.S. subsidiary Brilliant Warehouse Service Inc.
We are currently engaged in
providing freight logistics services including warehouse services, which are operated by our subsidiaries Trans Pacific Shipping Limited
and Ningbo Saimeinuo Web Technology Ltd. in China and Gorgeous Trading Ltd. and Brilliant Warehouse Service Inc in the United States.
Our range of services include transportation, warehouse, collection, last-mile delivery, drop shipping, customs clearance, and overseas
transit delivery.
As a holding company with
no material operations, conduct substantially all of our operations through subsidiaries established in the United States, the People’s
Republic of China, or the PRC or China and Hong Kong. However, neither the holding company nor any of the Company’s Chinese subsidiaries
conduct any operations through contractual arrangements with a variable interest entity based in China. Investors in our common stock
should be aware that they may never directly hold equity interests in the PRC operating entities, but rather equity interests solely
in Singularity, our Virginia holding company. Furthermore, shareholders may face difficulties enforcing their legal rights under United
States securities laws against our directors and officers who are located outside of the United States.
The diagram below shows our
corporate structure as of the date of this report.
*
Unless otherwise indicated in the diagram, all the subsidiaries of the Company are wholly owned.
1
As
of June 30, 2023, the Company’s subsidiaries were as follows:
Name
Background
Ownership
Sino-Global Shipping New York Inc. (“SGS NY”)
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A New York Corporation
Incorporated on May 03, 2013
Primarily engaged in freight logistics services
100% owned by the Company
Sino-Global Shipping HK Ltd. (“SGS HK”)
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A Hong Kong Corporation
Incorporated on September 22, 2008
No material operations
100% owned by the Company
Thor Miner Inc. (“Thor Miner”)
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A Delaware Corporation
Incorporated on October 13, 2021
Primarily engaged in sales of crypto mining machines
51% owned by the Company
Trans Pacific Shipping Ltd. (“Trans Pacific Beijing”)
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A PRC limited liability company
Incorporated on November 13, 2007.
Primarily engaged in freight logistics services
100% owned the Company
Trans Pacific Logistic Shanghai Ltd. (“Trans Pacific Shanghai”)
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A PRC limited liability company
Incorporated on May 31, 2009
Primarily engaged in freight logistics services
90% owned by Trans Pacific Beijing
Ningbo Saimeinuo Web Technology Ltd. (“SGS Ningbo”)
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A PRC limited liability company
Incorporated on September 11,2017
Primarily engaged in freight logistics services
100% owned by SGS NY
Blumargo IT Solution Ltd. (“Blumargo”)
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A New York Corporation
Incorporated on December 14, 2020
No material operations
100% owned by SGS NY
Gorgeous Trading Ltd (“Gorgeous Trading”)
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A Texas Corporation
Incorporated on July 01, 2021
Primarily engaged in warehouse related services
100% owned by SGS NY
Brilliant Warehouse Service Inc. (“Brilliant Warehouse”)
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A Texas Corporation
Incorporated on April 19,2021
Primarily engaged in warehouse house related services
51% owned by SGS NY
Phi Electric Motor In. (“Phi”)
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A New York Corporation
Incorporated on August 30, 2021
No operations
51% owned by SGS NY
SG Shipping &Risk Solution Inc(“SGSR”)
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A New York Corporation
Incorporated on September 29, 2021
No material operations
100% owned by the Company
SG Link LLC (“SG Link”)
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A New York Corporation
Incorporated on December 23, 2021
No operations
100% owned by SG Shipping & Risk Solution Inc on January 25, 2022
2
Our
equity structure is a direct holding structure. Within our direct holding structure, the cross-border transfer of funds within our corporate
entities is legal and compliant with the laws and regulations of the PRC. After the foreign investors’ funds enter Singularity,
the funds can be directly transferred to the PRC operating companies through its subsidiaries. Specifically, Singularity is permitted
under the Virginia laws to provide funding to our subsidiaries in the PRC and Hong Kong through loans or capital contributions without
restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements.
Current PRC regulations permit our PRC subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined
in accordance with Chinese accounting standards and regulations. As of the date hereof, there have not been any transfers, dividends
or distributions made between the holding company, its subsidiaries, and to investors. Furthermore, as of the date hereof, no cash generated
from one subsidiary is used to fund another subsidiary’s operations and we do not anticipate any difficulties or limitations on
our ability to transfer cash between subsidiaries. We have also not installed any cash management policies that dictate the amount of
such funds and how such funds are transferred. For the foreseeable future, we intend to use the earnings for our business operations
and as a result, we do not intend to distribute earnings or pay any cash dividends.
To address persistent capital
outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and
the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months,
including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments
and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends
and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion
of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing
the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore,
if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to
pay dividends or make other payments.
In addition, the Enterprise
Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by
Chinese companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and
the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between
Mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC
enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine
that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities
may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply
to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends
we may receive from our PRC subsidiaries.
Because a significant part
of our operations are located in the PRC through our subsidiaries, we are subject to certain legal and operational risks associated with
our operations in China, including changes in the legal, political and economic policies of the Chinese government, the relations between
China and the U.S, or Chinese or U.S regulations may materially and adversely affect our business, financial condition and results of
operations. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these
risks may result in a material change in our operations and the value of our common stock, or could significantly limit or completely
hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline
or be worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations
in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over
China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement.
3
We
believe that we will not be subject to cybersecurity review with
the Cyberspace Administration of China, or the “CAC,”, since we currently do not have over one million users’ personal
information and do not anticipate that we will be collecting over one million users’ personal information in the foreseeable future,
which we understand might otherwise subject us to the Cybersecurity Review Measures. We do not believe that our subsidiaries are
directly subject to these regulatory actions or statements, as we have not implemented any monopolistic behavior and our business does
not involve the collection of user data or implicate cybersecurity. As of the date hereof, no relevant laws or regulations in the PRC
explicitly require us to seek approval from the China Securities Regulatory Commission, or the CSRC, or any other PRC governmental authorities
for future offerings, nor has our Virginia holding company or any of our subsidiaries received any inquiry, notice, warning or sanctions
regarding previous offerings from the CSRC or any other PRC governmental authorities. However, on February 17, 2023, the CSRC promulgated
Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial
Measures”) and five relevant guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial
Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required
to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas
listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited
by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger
national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic
company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed
relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market
economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under
investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof;
or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s)
that are controlled by the controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial
Measures also provide that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by
such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating
revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal
year is accounted for by domestic companies; and (2) the issuer’s main business activities are conducted in China, or its main place(s)
of business are located in China, or the majority of senior management staff in charge of its business operations and management are PRC
citizens or have their usual place(s) of residence located in China. Where an issuer submits an application for initial public offering
to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted.
In addition, the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of domestic companies
through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance
with the Overseas Listing Trial Measures. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC
on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings
and listings.
At a press conference held
for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies that have already
been listed overseas on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers
are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC upon occurrences of
certain subsequent matters such as follow-on offerings of securities. According to the Overseas Listing Trial Measures and the Press Conference,
the existing domestic companies that have completed overseas offering and listing before March 31, 2023, such as us, will not be required
to perform filing procedures for the completed overseas securities issuance and listing. However, from the effective date of the regulation,
any of our subsequent securities offering in the same overseas market or subsequent securities offering and listing in other overseas
markets shall be subject to the filing requirement with the CSRC within three working days after the offering is completed or after the
relevant application is submitted to the relevant overseas authorities, respectively. If it is determined that any approval, filing or
other administrative procedures from other PRC governmental authorities is required for any future offering or listing, we cannot assure
you that we can obtain the required approval or accomplish the required filings or other regulatory procedures in a timely manner, or
at all. If we fail to fulfill filing procedure as stipulated by the Trial Measures or offer and list securities in an overseas market
in violation of the Trial Measures, the CSRC may order rectification, issue warnings to us, and impose a fine of between RMB1,000,000
and RMB10,000,000. Persons-in-charge and other persons that are directly liable for such failure shall be warned and each imposed a fine
from RMB500,000 to RMB5,000,000. Controlling shareholders and actual controlling persons of us that organize or instruct such violations
shall be imposed a fine from RMB1,000,000 and RMB10,000,000.
4
On February 24, 2023, the
CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering
and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect
on March 31, 2023. The Provisions on Confidentiality and Archives Administration requires that, in the process of overseas issuance and
listing of securities by domestic entities, the domestic entities, and securities companies and securities service institutions that provide
relevant securities service shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions,
establish and improve rules on confidentiality and archives administration. Where the domestic entities provide or publicly disclose documents,
materials or other items related to the state secrets and government work secrets to the relevant securities companies, securities service
institutions, overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments
with the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments
at the same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state
secrets, the materials shall be reported to the relevant secrecy administrative departments for determination. However, there remain uncertainties
regarding the further interpretation and implementation of the Provisions on Confidentiality and Archives Administration.
As of the date of this report,
our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business
operations of our PRC subsidiaries. In addition, as of the date of this annual report, we and our PRC subsidiaries are not required
to obtain approval or permission from the CSRC or the CAC or any other entity that is required to approve our PRC subsidiaries’
operations or required for us to offer securities to foreign investors under any currently effective PRC laws, regulations, and regulatory
rules. If it is determined that we are subject to filing requirements imposed by the CSRC under the Overseas Listing Regulations
or approvals from other PRC regulatory authorities or other procedures, including the cybersecurity review under the revised Cybersecurity
Review Measures, for our future offshore offerings, it would be uncertain whether we can or how long it will take us to complete such
procedures or obtain such approval and any such approval could be rescinded. Any failure to obtain or delay in completing such procedures
or obtaining such approval for our offshore offerings, or a rescission of any such approval if obtained by us, would subject us to sanctions
by the CSRC or other PRC regulatory authorities for failure to file with the CSRC or failure to seek approval from other government authorization
for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability
to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our
offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results
of operations, and prospects, as well as the trading price of our common stock. The CSRC or other PRC regulatory authorities also may
take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the securities
offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery,
they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate
new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for
our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established
to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect
our business, prospects, financial condition, reputation, and the trading price of our common stock.
Since these statements and
regulatory actions by the PRC government are newly published and official guidance and related implementation rules have not been issued,
it is uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations
or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new
laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on an U.S. or other
foreign exchange. The Standing Committee of the National People’s Congress, or the SCNPC, or other PRC regulatory authorities may
in the future promulgate laws, regulations or implementing rules that requires our company or any of our subsidiaries to obtain regulatory
approval from Chinese authorities before future offerings in the U.S. In other words, although the Company is currently not required to
obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on
the U.S. exchange, our operations could be adversely affected, directly or indirectly; our ability to offer, or continue to offer, securities
to investors would be potentially hindered and the value of our securities might significantly decline or be worthless, by existing or
future laws and regulations relating to its business or industry or by intervene or interruption by PRC governmental authorities, if we
or our subsidiaries (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or
approvals are not required, (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions
or approvals in the future, or (iv) any intervention or interruption by PRC governmental with little advance notice.
Please
see “Risk Factors” beginning on page 19 of this annual report for additional information.
5
Holding Foreign Company Accountable Act
Our common stock may be delisted from the Nasdaq under the Holding Foreign Companies Accountable Act (“HFCAA”), if the
PCAOB is unable to adequately inspect audit documentation located in China, or investigate our auditor. Furthermore, on June 22,
2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law, and amends
the HFCAA and requires the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor
is not subject to Public Company Accounting Oversight Board (“PCAOB”) inspections for two consecutive years instead of
three. Our auditor, Audit Alliance LLP, the independent registered public accounting firm that
issues the audit report included elsewhere in this annual report, is headquartered in Singapore and is registered with the
PCAOB, and was not included in the list of PCAOB Identified Firms in the PCAOB Determination
Report issued in December 2021. On August 26, 2022, the PCAOB signed
the Protocol with the CSRC and the MOF of the People’s Republic of China, governing inspections and investigations of audit
firms based in mainland China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and
implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent
discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer information to the
SEC. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate
PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022. The PCAOB Board vacated
its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms
headquartered in China mainland and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct
inspections of PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong is subject to uncertainty and
depends on a number of factors out of our, and our auditor’s control. The PCAOB is continuing to demand complete access in
China mainland and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as
well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will
act immediately to consider the need to issue new determinations with the HFCAA if needed. Therefore, the PCAOB in the future may
determine that it is unable to inspect or investigate completely registered public accounting firms in mainland China and Hong Kong.
Our auditor’s working papers related to us and our subsidiaries are located in China. If our auditor is not permitted to
provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s
oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital
markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from
the Nasdaq. See “ Risk Factors - Our common stock may be delisted from the Nasdaq under the Holding Foreign Companies
Accountable Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our common
stock, or the threat of their being delisted, may materially and adversely affect the value of your
investment .”
Recent Developments
Since the publication of the
Hindenburg Report (as defined below), we have devoted substantial resources and efforts in connection with the investigations by a special
committee of our Board of Directors and by U.S. governmental authorities and with respect to the defense of lawsuits and the settlement
of lawsuits and claims, which are fully described below. As a result, our business operations have been materially and adversely impacted,
including suspension of our business development in North America. We are currently exploring new business opportunities while continuing
to provide freight logistics services, which include shipping and warehouse services.
6
Special Committee Investigation
On May 5, 2022, an entity
named Hindenburg Research issued a report (the “Hindenburg Report”) regarding the Company alleging, among other things, that
the Company’s then Chief Executive Officer, Yang Jie, was a fugitive on the run from Chinese authorities for running an alleged
$300 million Ponzi scheme that lured in over 20,000 victims. The report also raised questions regarding the Company’s joint venture
to produce crypto mining equipment announced in October 2021, as well as a $200 million order purportedly received by the joint venture
in January 2022. Further, the report was critical of the Company’s April 2022 announcement of a $250 million partnership with an
entity named Golden Mainland Inc. On May 6, 2022, the Board of Directors of the Company (the “Board”) formed a special committee
of the Board (the “Special Committee”) to investigate claims of alleged fraud, misrepresentation, and inadequate disclosure
related to the Company and certain of its management personnel raised in the Hindenburg Report and other related matters. The Special
Committee then retained Blank Rome LLP to serve as independent legal counsel and advise the Committee on the investigation. The Special
Committee completed the fact-finding portion of its investigation prior to December 31, 2022. The Special Committee’s preliminary
findings corroborated certain of the allegations made in the Hindenburg Report and the investigation resulted in the termination and resignation
of certain executive officers and directors of the Company, including but not limited to, the following:
On August 9, 2022, Mr. Yang
Jie tendered his resignation from his positions as Chief Executive Officer and director of the Company to the Board, following the Board’s
decision on August 8, 2022, which adopted the Special Committee’s recommendation that Mr. Jie be suspended immediately, pending
the Special Committee’s further investigation into allegations raised in the Hindenburg Report and other related matters.
On August 16, 2022, attorneys
from Blank Rome LLP, counsel for the Special Committee, held a conference call with staff members of the Securities and Exchange Commission
(the“SEC”), during which counsel represented that Yang Jie had provided documentation to the SEC that indicated that the charges
against him in China had been dropped, but the Special Committee’s investigation raised questions regarding the authenticity of
such documents. The Special Committee concluded at that time that Mr. Jie was in fact issued a “Red Notice” in China. In terms
of remediating this issue, after being suspended by the Special Committee on August 8, 2022, Mr. Yang Jie resigned from his positions
as Chief Executive Officer and as a director of the Company on August 9, 2022.
In December 2022, the Company
entered into cancellation agreement and a letter confirming the rescission of the grant of the shares with each of Yang Jie and Ms. Jing
Shan, our former Chief Operating Officer, pursuant to which Mr. Jie and Ms. Shan agreed to return 300,000 shares and 100,000 shares of
our Common Stock, respectively, to the Company for cancellation at no cost. Such shares were previously issued to each of them for their
services as officers of the Company. The shares were cancelled as of March 31, 2023.
On February 10, 2023, in response
to two, now-settled, lawsuits filed by private investors, Mr. Jie filed a motion to dismiss the private investors’ suits and provided
a copy of a formal legal opinion issued by the Zhonglun W&D Law Firm, PRC. The Zhonglun W&D legal opinion concluded that Mr. Jie
was not charged with a crime in China, the investigation and underlying case had indeed been closed, and Mr. Jie was not formally treated
as a criminal suspect in the PRC. In order to provide more clarity to the issues raised, the Company engaged Hebei Mei Dong Law Firm,
of Shijiazhuang City, PRC to further investigate the authenticity of the documentation provided by Mr. Jie to the SEC and whether a “Red
Notice” had been issued. On June 12, 2023, the Hebei Mei Dong Law Firm issued a report to the Company with respect to these issues.
In their report, the Company’s Chinese counsel concluded after conferring with local officials, that the investigation of Mr. Jie
conducted by the Baohe District Police Bureau of Hefei City, PRC was completed, that Mr. Jie was never prosecuted and there was no criminal
judgment against Mr. Jie as of the date of such report. The Chinese counsel also confirmed that no “Red Notice” was issued
for Mr. Jie in the PRC.
7
On February 23, 2023, the
Board approved the dissolution of the Special Committee upon conclusion of the committee’s investigation.
On July 3, 2023, the Company
entered into a Settlement and Release Agreement with Mr. Jie which fully resolved his claims against the Company.
Executive Changes
On June 16, 2022, Ms.
Tuo Pan, Chief Financial Officer of the Company, without proper authorization by the Board, directed that funds be wired to satisfy
an invoice for legal services that were rendered or to be rendered on her behalf. Ms. Pan was suspended by the Board for cause and
without pay effective June 20, 2022. On August 31, 2022, Ms. Tuo Pan was terminated for cause as an employee of the Company and its
subsidiaries and ceased to receive any salary or benefits from the Company since that date.
On January 9, 2023, the Company
entered into an Executive Separation Agreement and General Release (the “Separation Agreement”), with Lei Cao, an employee
of the Company and a member of the Board, setting forth the terms and conditions related to the termination of Mr. Cao’s employment
with the Company and the termination of the employment agreement dated as of November 1, 2021 as well as cancellation and/or termination
of certain other agreements relating to Mr. Cao’s employment with the Company. The Separation Agreement also provided for Mr. Cao’s
resignation from the Board, effective as of January 9, 2023.
Pursuant to the Separation
Agreement, Mr. Cao submitted a letter of resignation from the Board on January 9, 2023. In addition, he agreed to forfeit and return to
the Company the 600,000 shares of Common Stock of the Company granted to him in August 2021 under the terms of the 2014 Equity Incentive
Plan of the Company (the “2021 Shares”). Mr. Cao also agreed to cooperate with the Company regarding certain investigations
and proceedings and other matters arising out of or related to his relationship with or service to the Company. In consideration, the
Company agreed to provide the following benefits to which Mr. Cao was not otherwise entitled: (1) payment of reasonable attorneys’
fees and costs incurred by Mr. Cao through January 9, 2023 associated with Mr. Cao’s personal legal representation in matters relating
to Mr. Cao’s tenure with the Company, the investigations and proceedings and the negotiation and drafting of the Separation Agreement;
(2) the release of claims in Mr. Cao’s favor contained in the Separation Agreement; and (3) payment of Mr. Cao’s reasonable
and necessary legal fees to the extent incurred by Mr. Cao as a result of his cooperation as required by the Company under the terms of
the Separation Agreement. Additionally, the Separation Agreement contains mutual general releases and waiver of claims from Mr. Cao and
the Company.
On January 17, 2023, Messrs.
John Levy and Heng Wang were appointed as non-executive chairman and vice chairman of the Board, respectively.
On February 23, 2023, Mr.
Levy resigned as a director and member of the Audit Committee, Compensation Committee and Nominating Committee of the Board, effective
immediately. On March 30, 2023, Mr. Wang was appointed as non-executive Chairman of the Board to fill the vacancy created by Mr. Levy’s
resignation.
On April 18, 2023, the Company
entered into an employment agreement with Mr. Ziyuan Liu and appointed him as the chief executive officer of the Company, effective immediately,
with a term of one year.
On May 1, 2023, the Company
entered into an employment agreement with Mr. Dianjiang Wang and appointed him as the chief financial officer of the Company, effective
immediately, with a term of one year.
8
On May 1, 2023, pursuant to
the bylaws of the Company, our Board elected (i) Mr. Ziyuan Liu as a Class I director to serve until the annual meeting of stockholders
for the fiscal year 2022, to fill the vacancy on the Board resulting from the resignation of Mr. Jie, (ii) Mr. Haotian Song as a Class
II director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on the Board resulting from
the resignation of Mr. Cao, and (iii) Ms. Ling Jiang as a Class III independent director, Chairwoman of the Compensation Committee, a
member of the Audit Committee, and a member of the Nominating and Corporate Governance Committee to serve until the annual meeting of
stockholders for the fiscal year 2024, to fill the vacancy on the Board resulting from the resignation of Mr. Levy.
On May 2, 2023, the Board
elected Mr. Ziyuan Liu as the new chairman of the Board.
On July 3, 2023, Mr. Tieliang
Liu resigned as a director the Company and a member of the Compensation Committee, the Audit Committee, and the Nominating and Corporate
Governance Committee.
On July 10, 2023, Company
terminated the employment of its Chief Operating Officer, Jing Shan, with cause. The termination was effective immediately.
On July 31, 2023, the
Company elected Mr. Zhongliang Xie as a Class II independent director to serve until the annual meeting of stockholders for the
fiscal year 2023, to fill the vacancy on the Board resulting from the resignation of Mr. Tieliang Liu. The Board appointed Mr. Xie
to serve as Chair of the Audit Committee, a member of the Compensation Committee and a member of the Nominating and Corporate
Governance Committee.
On September 21, 2023, Mr. Heng Wang resigned
as a director of the Company and a member of the Compensation Committee, the Audit Committee, and the Nominating and Corporate Governance
Committee.
On September
25, 2023, the Company elected Mr. Xu Zhao as a Class I independent director to serve until the annual meeting of stockholders for the
fiscal year 2022, to fill the vacancy on the Board resulting from the resignation of Mr. Heng Wang. The Board appointed Mr. Zhao to serve
as a member of the Audit Committee, a member of the Compensation Committee and Chair of the Nominating and Corporate Governance Committee.
On September
28, 2023, Ms. Ling Jiang resigned as a director of the Company and a member of the Compensation Committee, the Audit Committee, and the
Nominating and Corporate Governance Committee.
Litigation
On October 3, 2021, the Company
entered into a Strategic Alliance Agreement with HighSharp (Shenzhen Gaorui) Electronic Technology Co., Ltd. (“HighSharp”)
to establish a joint venture for collaborative engineering, technical development and commercialization of a bitcoin mining machine under
the name Thor Miner Inc. (“Thor Minor”) , granting Thor Miner exclusive rights covering design production, intellectual property,
branding, marketing and sales. On October 11, 2021, Thor Miner was formed in Delaware and is 51% owned by the Company and 49% owned
by HighSharp.
SOS Information Technology
New York, Inc. (“SOSNY”), a company incorporated under the laws of state of New York and a wholly owned subsidiary of SOS
Ltd. (a NYSE listed holding company, which provides marketing data, technology and solutions to the emergency rescue services in China,
filed a lawsuit in the New York State Supreme Court on December 9, 2022 against Thor Miner ( together with the Company, referred to as
the “Corporate Defendants”), Lei Cao, Yang Jie, John F. Levy, Tieliang Liu, Tuo Pan, Shi Qiu, Jing Shan, and Heng Wang (jointly
referred to as the “Individual Defendants”) (collectively, the Individual Defendants and the Corporate Defendants are the
“Defendants”). SOSNY and Thor Miner entered into a Purchase and Sale Agreement dated January 10, 2022 (the “PSA”)
for the purchase of $200,000,000 in crypto mining rigs, which SOSNY claims was breached by the Defendants.
SOSNY and Defendants entered
into a certain settlement agreement and general mutual release with an Effective Date of December 28, 2022 (the “Settlement Agreement”).
Pursuant to the Settlement Agreement, Thor Miner agreed to pay $13,000,000 (the “Settlement Payment”) to SOSNY in exchange
for SOSNY dismissing the lawsuit with prejudice as to the settling Defendants and without prejudice as to all others. The full Settlement
Payment was made in December 2022 and SOSNY dismissed the lawsuit with prejudice against us and the other Defendants on December 28, 2022.
The Company and Thor Miner
further covenanted and agreed that if they receive additional funds from HighSharp related to the PSA, they will promptly transfer such
funds to SOSNY in an amount not to exceed $40,560,569 (which is the total amount paid by SOSNY pursuant to the PSA less the price of the
machines actually received by SOSNY pursuant to the PSA). The Settlement Payment and any payments subsequently received by SOSNY from
HighSharp will be deducted from the total amount of $40,560,569 previously paid by, and now due and owing to SOSNY. In further consideration
of the Settlement Agreement, Thor Miner provided SOSNY an assignment of all claims it may have against HighSharp or otherwise to the proceeds
of the PSA.
9
On September 23, 2022, Hexin
Global Limited and Viner Total Investments Fund filed a lawsuit against the Company and other defendants in the United States District
Court for the Southern District of New York (the “Hexin lawsuit”). On December 5, 2022, St. Hudson Group LLC, Imperii Strategies
LLC, Isyled Technology Limited, and Hsqynm Family Inc. filed a lawsuit against the Company and other defendants in the United States District
Court for the Southern District of New York (the “St. Hudson lawsuit,” and together with the Hexin lawsuit, the “Investor
Actions”). The plaintiffs in the Investor Actions are investors that entered into a securities purchase agreement with the Company
in December 2021 as more fully described below. Each of these plaintiffs asserted causes of action for, among other things, violations
of the federal securities laws, breach of fiduciary duty, fraudulent inducement, breach of contract, conversion, and unjust enrichment,
and seeks monetary damages and specific performance to remove legends from certain securities sold pursuant to the Securities Purchase
Agreement. The Hexin lawsuit claimed monetary damages of “at least $6 million,” plus interest, costs, fees, and attorneys’
fees. The St. Hudson lawsuit claimed monetary damages of “at least $4.4 million,” plus interest, costs, fees, and attorneys’
fees.
On October 6, 2022, Jinhe
Capital Limited (“Jinhe”) filed a lawsuit against the Company in the United States District Court for the Southern District
of New York, asserting causes of actions for, among other things, breach of contract, breach of the covenant of good faith and fair dealing,
conversion, quantum meruit, and unjust enrichment, in connection with a financial advisory agreement entered into by and between Jinhe
and the Company on November 10, 2021. Jinhe claimed monetary damages of “at least $575,000” and “potentially exceeding
$1.8 million,” plus interest, costs, and attorneys’ fees.
On
January 10, 2023, the St. Hudson lawsuit was consolidated with the Jinhe lawsuit and Hexin lawsuit and on February 24, 2023, all
three consolidated actions were dismissed without prejudice by the court, in furtherance of the parties having reached an agreement
in principle to settle their disputes. The Company, Yang Jie, Jing Shan, and the plaintiffs in the three actions entered into a
certain settlement agreement and general mutual release with an effective date of March 10, 2023, pursuant to which the Company
agreed to pay the plaintiffs $10,525,910.82. The plaintiffs agreed to discharge and forever release the defendants from all
claims that were or could have been raised in those actions, as well as dismissal of each of the actions with prejudice. The Company
has no role or knowledge as to how the settlement payment will be allocated between and among the plaintiffs. The Company made the
settlement payment on March 14, 2023. The plaintiffs agreed to irrevocably forfeit 3,728,807 shares of Common Stock they hold. The
cancellation of these shares has been completed. The fair
value of the shares was $2,125,420 on March 10, 2023, the settlement amount over the fair value of the cancelled shares was recorded as other expenses in the Company’s consolidated statement of operations.
On December 9, 2022, Piero
Crivellaro, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between
February 2021 and November 2022, filed a putative class action against the Company and other defendants in the United States District
Court for the Eastern District of New York, alleging violations of federal securities laws related to alleged false or misleading disclosures
made by the Company in its public filings. The plaintiff seeks unspecified damages, plus interest, costs, fees, and attorneys’ fees.
On February 7, 2023, two additional plaintiffs moved to be appointed as the lead class plaintiff in this action; those motions remain
under the Court’s consideration. As this action is still in the early stage, the Company cannot predict the outcome.
In addition to the above litigations,
the Company is also subject to additional contractual litigations as to which it is unable to estimate the outcome.
Government Investigations
Following a publication of
the Hindenburg Report, the Company received subpoenas from the United States Attorney’s Office for the Southern District of New
York and the United States Securities and Exchange Commission. The Company is cooperating with these governmental authorities regarding
these matters. The Company is not able to estimate the outcome or duration of the government investigations.
10
Nasdaq Listing Deficiencies
On May 24, 2022, the Company
received a delinquency notice from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) due to
its delay in filing its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. The Company was provided 60 days to submit
a plan to regain compliance. On July 25, 2022 and September 14, 2022, the Company submitted its plan to regain compliance and supplementary
information related to the plan, respectively (collectively, the “Compliance Plan”). Based on the review of the Compliance
Plan as well as telephone conversations with outside counsel to the Company and counsel to the Company’s Special Committee, the
Staff has determined that the Company did not provide a definitive plan evidencing its ability to file the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2022 and the Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (collectively, the “Reports”)
within the 180 calendar day period available to the Staff under the Nasdaq Listing Rules.
On November 16, 2022, the
Company received an additional staff determination notice from Nasdaq, advising that it had not received the Company’s Form 10-Q
for the quarterly period ended September 30, 2022, which served as an additional basis for delisting the Company’s securities and
that the Nasdaq Hearings Panel (the “Panel”) will consider the additional deficiency in rendering a determination regarding
the Company’s continued listing on The Nasdaq Capital Market. The Company submitted to the Panel a plan to regain compliance with
the continued listing requirements, including the filing of the Form 10-Q for the quarterly period ended September 30, 2022.
On January 5, 2023, the Company
received a deficiency notice from Nasdaq informing the Company that its common stock, no par value, fails to comply with the $1 minimum
bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) based upon the closing bid
price of the common stock for the 30 consecutive business days prior to the date of the notice from Nasdaq. The Company has been provided
an initial compliance period of 180 calendar days, or until July 5, 2023, to regain compliance with the minimum bid price requirement.
On February 21, 2023, the
Company received an additional staff determination notice from Nasdaq, advising that it had not received the Company’s Form 10-Q
for the quarterly period ended December 31, 2022, which served as an additional basis for delisting the Company’s securities. The
notice stated that the Nasdaq Hearings Panel will consider the additional deficiency in rendering a determination regarding the Company’s
continued listing on Nasdaq. The Company submitted to the Panel a plan to regain compliance with the continued listing requirements and
was granted a grace period to file all the delinquent reports, including the filing of the Form 10-Q for the quarterly period ended December
31, 2022, on or before February 28, 2023.
On
March 8, 2023, the Company received a notice from Nasdaq stating that the Company no longer complies with Nasdaq’s audit committee
requirement under Nasdaq’s Listing Rule 5605 following the resignation of John Levy from the Company’s board of directors
and audit committee effective February 23, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing Rule 5605(c)(4),
the Company has a cure period to regain compliance (i) until the earlier of the Company’s next annual shareholders’ meeting
or February 23, 2024; or (ii) if the next annual shareholders’ meeting is held before August 22, 2023, then the Company must evidence
compliance no later than August 22, 2023. The Company has set the record date of September 28, 2023, for an annual meeting of shareholders
scheduled to take place on October 13, 2023.
On
March 16, 2023, the Company received a formal notification from Nasdaq confirming that the Company had regained compliance with the Nasdaq
Listing Rule 5250(c)(1), which requires the Company to timely file all required periodic financial reports with the SEC, and that the
matter is now closed.
11
On
July 7, 2023, the Company received an Notice of Noncompliance Letter (the “Letter”) from Nasdaq stating that the Company was
not in compliance with Nasdaq Listing Rules due to its failure to timely hold an annual meeting of shareholders for the fiscal year ended
June 30, 2022, which is required to be held within twelve months of the Company’s fiscal year end under Nasdaq Listing Rule 5620(a)
and 5810(c)(2)(G). The Letter also states that the Company has 45 calendar days to submit a plan to regain compliance and if Nasdaq accepts
the Plan, it can grant the Company an exception of up to 180 calendar days from the fiscal year end, or until December 27, 2023, to regain
compliance. The Company complied with the Nasdaq requirement that the Plan be submitted no later than August 21, 2023.
On
July 13, 2023, the Company received a notice from Nasdaq stating that the Company no longer complies with Nasdaq’s independent director
and audit committee requirements under Nasdaq’s Listing Rule 5605 following the resignation of Mr. Liu from the Company’s
board of directors and audit committee effective July 3, 2023. Nasdaq advised the Company that in accordance with Nasdaq’s Listing
Rule 5605(c)(4), the Company has a cure period to regain compliance (1) until the earlier of the Company’s next annual shareholders’
meeting or July 3, 2024; or (2) if the next annual shareholders’ meeting is held before January 2, 2024, then the Company must evidence
compliance no later than January 2, 2024. In response to this notice, on July 31, 2023, the Company elected Mr. Zhongliang Xie
as a Class II independent director to serve until the annual meeting of stockholders for the fiscal year 2023, to fill the vacancy on
the Board resulting from the resignation of Mr. Liu. The Board appointed Mr. Xie to serve as Chair of the Audit Committee, a member of
the Compensation Committee and a member of the Nominating and Corporate Governance Committee.
On
July 13, 2023, the Company received a notice from Nasdaq stating that the Company failed to regain compliance with respect to the minimum
$1 bid price per share requirement under Nasdaq Listing Rules during the 180 calendar days given by Nasdaq for the Company to regain compliance,
which ended on July 5, 2023. However, Nasdaq has determined that the Company is eligible for an additional 180 calendar day period, or
until January 2, 2024, to regain compliance. Such determination is based on the Company meeting the continued listing requirement for
market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception
of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance
period by effecting a reverse stock split, if necessary. The Company intends to regain compliance with Nasdaq’s bid price requirement
prior to the end of the second bid price extension.
Corporate History and Our Business Segments
From inception in 2001 to
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 were responsible for the payment of port costs and expenses.
In January 2016, we expanded
our business to include freight logistics services to provide import security filing services with the U.S. Customs and Department of
Homeland Security, on behalf of importers who ship goods into the U.S. and also provided inland transportation services to these importers
in the U.S.
In the fiscal year ended June
30, 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.
In an effort to further diversify
our business, in the second quarter of the fiscal year ended June 30, 2018, we developed our bulk cargo container services segment. Bulk
cargo container shipment refers to using containers to ship commodities that are traditionally shipped by freight cargo. Freight cargo
rates are usually lower than container freight rates; however, the transit time is much longer and has high minimum quantity requirements.
We suspended this service in the fiscal year ended June 30, 2019 due to market environment factors, and discontinued this service in light
of the worldwide impact of the coronavirus pandemic.
12
In the fiscal year ended June
30, 2018, we established a wholly owned subsidiary, Ningbo Saimeinuo Web Technology Ltd. (“Ningbo”), which is 100% owned by
Sino-Global Shipping New York Inc. (“SG Shipping NY”), a New York corporation and a wholly owned subsidiary of the Company,
which primarily engages in transportation management and freight logistics services, including overseas shipping.
Since the fiscal year ended
June 30, 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, which has caused us to shift our focus back to the shipping agency business.
On
January 10, 2020, we entered into a cooperation agreement with Mr. Shanming Liang, a stockholder of the Company, to establish a joint
venture named LSM Trading Ltd., in which the Company holds a 40% equity interest. For the year ended June 30, 2023, the Company invested
$210,000 in the joint venture. The joint venture has not commenced operations as of the date of this report.
On December 14, 2020, we incorporated
a new entity named Blumargo IT Solution Ltd. (“Blumargo”) in the U.S. SG Shipping NY held an 80% ownership interest in Blumargo,
which was established in partnership with Tianjin Anboweiye Technology Co. (“Tianjin”), to build up hi-tech and information-based
logistics services to meet customer demand. On June 30, 2022, SG Shipping NY acquired the 20% interest held from Tianjin and increased
its ownership to 100%.
From
March to June 2021, the Company engaged in cryptocurrency mining in China. On March 2, 2021, the Company entered into a purchase agreement
with Hebei Yanghuai Technology Co., Ltd. (“Yanghuai”) for the purchase of 2,783 digital currency mining machines for a total
purchase price of RMB 30 million ( approximately $4.6 million). Yanghuai agreed
to manage and operate the servers after the purchase at its site with no further charge from March 10, 2021 to March 9, 2022, after which
time the Company could engage Yanghuai to continue providing services for a fee. The first cash payment of approximately $0.9 million
was paid within 15 days after the date of signing the Agreement.
Over
the last two months of the Company’s 2021 fiscal year, national and local governments in China started to restrict and ban
cryptocurrency mining operations, causing owners of mining machines to cease mining operations. Based on the amended agreement
signed by the Company and Yanghuai on September 17, 2021, the Company is not liable to perform under the remainder of the contract
and obtained title to half of the servers. The Company recorded an impairment for the mining equipment in the last quarter of 2021
in the amount of approximately $0.9 million. 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 servers between the Company and the Seller. The
Seller transported servers representing half of the agreed 50,440 terahashes (one trillion) per second (th/s) in computing power (or
a total of 25,220 th/s in computing power) to our Ningbo subsidiary in China and then shipped them to us in the U.S.
On April 21, 2021, the Company
set up a joint venture in Texas, U.S. under the name of “Brilliant Warehouse Service Inc.” to support its freight logistics
services in the U.S., pursuant to a cooperation agreement with Mr. Bangpin Yu. SG Shipping NY has a 51% equity interest in the joint venture.
In July 2021, the Company
registered a new company, Gorgeous Trading Ltd. (“Gorgeous Trading”), which is 100% owned by SG Shipping NY. Gorgeous Trading
is mainly engaged in smart warehouse and related business in Texas.
On August 31, 2021, the
Company formed a joint venture, Phi Electric Motor, Inc. in New York, which is 51% owned by SG Shipping NY. Phi Electric Motor, Inc.has
had no operations as of the date of this report.
On September 29, 2021, the
Company formed a 100% owned subsidiary, SG Shipping & Risk Solution Inc., in New York. On December 23, 2021, SG Shipping & Risk
Solution Inc. formed a wholly-owned subsidiary, SG Link LLC, in New York. As of the date of this report, the two companies have had no
operations.
13
On October 3, 2021, the
Company entered into a Strategic Alliance Agreement with HighSharp to establish a Delaware joint venture for collaborative
engineering, technical development and commercialization of a bitcoin mining machine under the name Thor Miner Inc. which is 51%
owned by the Company and 49% owned by HighSharp. Thor Miner was given exclusive rights covering design production, intellectual
property, branding, marketing and sales. On October 11, 2021,
On December 31, 2021, the
Company entered into a series of agreements to terminate its variable interest entity (“VIE”) structure and deconsolidated
its formerly controlled entity Sino-Global Shipping Agency Ltd. (“Sino-China”). The Company controlled Sino-China through
its wholly owned subsidiary Trans Pacific Shipping Limited. 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. In
addition, the Company dissolved its subsidiary Sino-Global Shipping LA, Inc.
On April 10, 2022, the Company
entered into a joint venture agreement with Golden Mainland Inc., a Georgia corporation (“Golden Mainland”) to establish a
joint venture to build Bitcoin mining sites in Texas, Ohio, and other states. The Company does not plan to pursue this business with
Golden Mainland.
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.
Our Goals and Strategic Plan
By leveraging our 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 who offers innovative resolutions to better address complex issues in different aspects
in the entire shipping and freight logistics chain.
14
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.
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.
However, with our decades
of experience in shipping agency business and solid business relationships with Baosteel Group and Shougang Group, who are among the biggest
importers of iron ore in China, we believe it is to the Company’s best interest to redirect our focus on this segment in 2019 based
on our assessment of current global trading environments. To our understanding, we are one of few shipping agents specialized in providing
a full range of general shipping agency services in China and the only shipping agency company listed on a public exchange in the U.S.
while other shipping agencies are much smaller and more fragmented. With the setup of the Ningbo joint venture, we are able to use our
resources such as our customer base, our currently developing IT infrastructure and our business insight to build a global network of
shipping agencies. In addition, our current business segments like freight logistics and container trucking can also be integrated and
enable us to provide more comprehensive logistics services for our customers.
Our plan is to develop a
shipping agency network in China and South East Asia for the next three years and expand our shipping agency network worldwide. We plan
to build the network through acquisitions or strategic partnership with other shipping agencies. Our shipping agency business will be
mostly conducted through our China, Hong Kong and Australia subsidiaries.
In fiscal year 2020, we entered
into a general shipping agency service agreement with Mandarine Bulk Ltd. as the sole general shipping agency and a shipping management
services agreement with Qingdao Lizhou Ship Management Co., Ltd. We have expanded our business to increase sales revenue in the United
States and get more customers who can settle in U.S. dollars.
In fiscal 2024, while we
continue to provide our current traditional logistics business, we will integrate 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. At the same time, we plan to
strengthen the research and development force to complete the transformation of the company’s business model and profit model step by
step. After deep market research and demand analysis, with the actual situation in North America, iterative developing a certain popular
App of high customer coupling, easy to form the functional industrial chain and derivative products and related services. We also expect
to make achievements in the remote service industry include the service industry of enterprise portal, and the service industry of ERP
customization/implementation/maintenance for small and medium-sized businesses, try to create a new milestone in the co mpany’s
bus iness.
15
Our Customers
Our main customers for
the fiscal years ended June 30, 2023 and 2022 is Chongqing Iron & Steel Ltd. and SOSNY. For the years ended June 30, 2023 and
2022, Chongqing Iron & Steel Ltd. accounted for 52.7% and 45.6% of the Company’s revenues, respectively. For the
years ended June 30, 2023 and 2022, SOSNY accounted for 16.1% and 27.9% of the Company’s gross revenue.
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, 2023, two suppliers accounted for approximately
19.6% and 19.5% of our total purchases, respectively. For
the year ended June 30, 2022, two suppliers accounted for approximately 26.3% and 24.1% of our total purchases, respectively.
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.
16
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;
● 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. We have the professionalism and
are the pioneers and leaders in the shipping agency industry in China. SINO is a NASDAQ-listed company that already has more flexibility
in capital raise 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 enable companies like us who has 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.
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Our Competition
The market segment that we
now operate in, which is freight logistics services including warehouse services, does not have high entry barriers. In terms of our competition
in China, there are many companies ranging from small to large that provide freight logistics services, and the state-owned companies
in China generate a significant portion of the revenues in the industry. Our primary competitors in China are the China branches of international
shipping companies or their exclusive agents in China. These companies include Evergreen Marine Corp., Orient Overseas Container Line,
Ocean Network Express which includes Kawasaki Kisen Kaisha, Ltd, Mitsui O.S.K. Lines and Nippon Yusen Kabushiki Kaisha. The competition
is intense due to the significant excess capacity. 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 customers in freight logistic services.
As a boutique company with limited resources and history, we face intense competition. Our ability to grow in our industry depends on
(1) our deep understanding of the complexity of industry issues and challenges and (2) our ability to develop optimal solutions to respond
to the identified issues and provide effective problem-solving strategies to our targeted customers.
In terms of our competition
in the United States, the freight logistics services industry is well developed, highly fragmented, and competition is fierce nationwide.
Our primary competitors in the U.S. are local warehouse services providers and freight forwarding companies in Houston, for example, Bizto
LLC, Golden Eagle Guns LLC, and Smart Supply Chain. Competition in the freight logistics services industry is driven by factors such as
price, service quality, technology, and geographic reach. Companies that can offer a combination of these factors are often more competitive
in the market. Additionally, companies that can adapt to changing customer demands and market trends, such as the shift towards e-commerce,
are likely to be more successful in the long term. We aim at providing tailored and valued-added services for our international clients
with needs for U.S. domestic logistics services.
Employees
As
of the date of this Report, we have 28 full-time employees, 12 of whom are based in China and 16 are based in the United States. Of the
total full-time employees, 9 are in management, 10 are in operations, 6 are in finance and accounting related and 3 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.
Intellectual Property
As
of the date of this Report, we do not have any registered patents, copyrights, or trademarks other than two pending trademark applications
for “Thor” and “Thor Miner.” We have seven registered domain names, including our corporate website https://www.singularity.us/.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.