Singularity Future Technology .(SGLY) - 2021 Q4 - Annual Report

PART I Business Sino-Global, a non-asset based logistics provider, operates four segments and recently diversified into cryptocurrency amid regulatory and pandemic-related challenges - The company operates in four segments: shipping agency and management services, inland transportation management services, freight logistics services, and container trucking services[17] - In March 2021, the company entered the cryptocurrency sector by accepting Bitcoin as payment and purchasing 2,783 digital currency mining servers for $4.6 million[34][35] - Due to changes in Chinese regulatory policy, a purchase agreement for mining servers was restructured in September 2021, reducing the price from RMB 30 million to RMB 6 million and reallocating computing power to the U.S[36][56] - The company's strategic plan includes diversifying its service mix, expanding its business footprint in the U.S, and applying technology to modernize logistics services[42] Customer and Supplier Concentration (FY 2021) | Category | Concentration Details | | :--- | :--- | | Customers | One customer accounted for 89.7% of revenues | | | One customer accounted for 87.6% of accounts receivable | | Suppliers | Two suppliers accounted for 55.4% and 28.6% of total costs of revenue | - The COVID-19 pandemic materially impacted business in 2020, causing operational disruptions and reduced demand, with the risk of resurgence posing an ongoing threat[57][58] Risk Factors This item is not applicable as the company is classified as a smaller reporting company - Item 1A is not applicable because the registrant is a smaller reporting company[59] Unresolved Staff Comments The company reports no unresolved or outstanding staff comments - The Company has no unresolved staff comments[60] Properties The company does not own any real estate and rents eight office and warehouse facilities across the United States and the PRC Leased Office and Warehouse Facilities | Location | Country | Number of Facilities | | :--- | :--- | :--- | | New York | USA | 3 | | Texas | USA | 3 | | Shanghai | PRC | 1 | | Ningbo | PRC | 1 | Legal Proceedings As of the report date, the company is not a party to any material pending legal proceedings - The company is not aware of any material pending legal proceedings to which it or its subsidiaries are a party[63] Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the Company[64] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on NASDAQ, and it has conducted several sales of unregistered securities to raise capital while not anticipating paying dividends - The company's common stock is traded on the NASDAQ Stock Market under the symbol SINO[66] - A 1-for-5 reverse stock split was effected on July 7, 2020, to regain compliance with NASDAQ's minimum bid price rule[67][68] - The company has never declared or paid cash dividends and does not expect to in the foreseeable future, intending to retain earnings for growth[70] - The company conducted multiple offerings of common stock, preferred stock, and warrants between September 2020 and February 2021, raising significant capital[72][74][76] Selected Financial Data This item is not applicable as the company is classified as a smaller reporting company - The Company is not required to provide this information as it is a smaller reporting company[77] Management's Discussion and Analysis of Financial Condition and Results of Operations FY2021 revenues decreased 21.2%, but the net loss improved to $6.8 million, while the company's cash position strengthened significantly from financing activities Results of Operations Revenues decreased 21.2% in FY2021, but the net loss narrowed to $6.8 million, driven by a significant reduction in the provision for doubtful accounts Financial Performance Summary (FY2021 vs. FY2020) | Metric | FY 2021 | FY 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $5,151,032 | $6,535,956 | (21.2)% | | Gross Profit | $176,638 | $2,857,093 | (93.8)% | | Gross Margin | 3.4% | 43.7% | (40.3) p.p. | | Operating Loss | ($6,261,000) | ($17,738,104) | 64.7% | | Net Loss | ($6,773,047) | ($17,928,647) | 62.2% | Revenue by Segment (FY2021 vs. FY2020) | Segment | FY 2021 Revenue | FY 2020 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Shipping Agency & Management | $206,845 | $2,105,651 | (90.2)% | | Freight Logistics | $4,944,187 | $4,368,596 | 13.2% | | Container Trucking | $0 | $61,709 | (100.0)% | - Cost of revenues increased by 35.2% to $4.97 million, causing the gross profit margin to decrease from 43.7% to 3.4%[99] - General and administrative expenses increased by 65.5% to $5.6 million, driven by higher professional fees and increased employee and office costs[101] - An impairment loss of $855,230 was recorded in FY2021 for mining equipment following a change in Chinese regulations[102] - Provision for doubtful accounts saw a net recovery of $321,168 in FY2021, a stark contrast to the $14.9 million provision in FY2020[103] Liquidity and Capital Resources The company's liquidity improved dramatically, with cash increasing to $44.8 million, primarily driven by $54.2 million in net cash from financing activities Cash and Working Capital (as of June 30) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Cash | $44,837,317 | $131,182 | | Working Capital (Deficit) | $41,523,701 | ($3,895,546) | Summary of Cash Flows (for the year ended June 30) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,150,112) | ($3,896,534) | | Net cash used in investing activities | ($6,040,185) | ($1,358) | | Net cash provided by financing activities | $54,200,082 | $1,220,601 | - Net cash from financing activities of $54.2 million in FY2021 was primarily due to proceeds from the issuance of common and preferred stock[119] Critical Accounting Policies Key accounting policies include the consolidation of a VIE, point-in-time revenue recognition, and significant management estimates for allowances and impairments - The company consolidates Sino-Global Shipping Agency Ltd, a PRC corporation, as a Variable Interest Entity (VIE)[122][123] - Significant accounting estimates include revenue recognition, allowance for doubtful accounts, impairment loss, and deferred income taxes[125] - Revenue is recognized at a point in time based on a five-step model after all performance obligations are satisfied[126][127] - The company provided a 100% valuation allowance for its deferred tax assets as of June 30, 2021, due to uncertainty on future earnings[110] Quantitative and Qualitative Disclosures about Market Risk This item is not applicable - This item is not applicable[143] Financial Statements and Supplementary Data The company's financial statements and the report from its independent auditor are included following the signature pages of the report - The Company's financial statements and the report of Audit Alliance LLP are set forth following the signature pages of this Report[144] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None[145] Controls and Procedures Management concluded that disclosure controls were not effective as of June 30, 2021, due to several material weaknesses in internal control - Management concluded that as of June 30, 2021, the Company's disclosure controls and procedures were not effective[147] - Material weaknesses identified include lack of segregation of duties, insufficient U.S. GAAP personnel, and inadequate management control reviews[149] - The company's remediation plan includes hiring additional accounting staff, improving the internal audit function, and conducting personnel training[153] Other Information The company reports no other information - None[152] PART III Directors, Executive Officers and Corporate Governance This section details the company's leadership, board structure, risk oversight, and the composition of its independent audit committee - The report lists the key executive officers and directors, including Lei Cao (CEO and Director), Tuo Pan (Acting CFO), Jing Shan (COO), and Xintang You (CTO)[156][161][162][163] - CEO Lei Cao also serves as the Chairman of the Board, a structure the company believes enables decisive leadership[165] - The company has an audit committee consisting of independent directors, with Mr. Tieliang Liu qualifying as the audit committee financial expert[171] Executive Compensation Executive compensation for fiscal 2021 was heavily weighted towards securities-based awards, with the board also approving a one-time stock award Executive Compensation Summary (FY 2021) | Name and Title | Salary | Bonus | Securities-based Compensation | Total Compensation | | :--- | :--- | :--- | :--- | :--- | | Lei Cao, CEO | $425,000 | $300,000 | $1,722,000 | $2,447,000 | | Tuo Pan, Acting CFO | $171,454 | $100,000 | $574,000 | $845,454 | | Zhikang Huang, VP | $125,000 | $50,000 | $459,200 | $634,200 | - On August 13, 2021, the Board approved a one-time award of 1,020,000 shares of common stock to officers and directors[176] - The company has employment agreements with its named executive officers that include five-year terms and specific severance provisions[181][182] Security Ownership of Certain Beneficial Owners and Management CEO Lei Cao is the largest insider shareholder with 6.32% ownership, while all officers and directors as a group own 10.18% of the company Beneficial Ownership of Key Insiders (as of Sept 28, 2021) | Name | Shares Owned | Percentage Ownership | | :--- | :--- | :--- | | Lei Cao (CEO) | 1,021,008 | 6.32% | | All Officers and Directors (as a group) | 1,643,808 | 10.18% | - The company has three equity compensation plans, with 10,000,000 shares available for future issuance under the 2021 Incentive Plan[186] Certain Relationships and Related Transactions, and Director Independence The Board of Directors maintains a majority of independent directors, and the company discloses minor payables to executives for business expenses - The Board of Directors maintains a majority of independent directors[191] - As of June 30, 2021, the Company had payables to the CEO ($10,303) and Acting CFO ($2,314) for reimbursement of business expenses[193] Principal Accountant Fees and Services Audit Alliance LLP was appointed as the independent auditor in October 2020, with audit fees totaling $225,000 for fiscal year 2021 - Audit Alliance LLP was appointed as the Company's independent auditor on October 26, 2020, replacing Friedman LLP[195] Accountant Fees | Fiscal Year | Firm | Audit Fees | Tax Fees | | :--- | :--- | :--- | :--- | | 2021 | Audit Alliance LLP | $225,000 | - | | 2020 | Friedman LLP | $254,000 | $24,779 | | 2020 | Rich and Bander LLP | - | $25,000 | Exhibits, Financial Statement Schedules Exhibits This section lists all exhibits filed with the Form 10-K, including corporate documents, agreements, incentive plans, and executive certifications - The exhibits include foundational corporate documents, securities purchase agreements, employment agreements, and the company's stock incentive plans[205] - Certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906 are included as exhibits[205] Financial Statements and Supplementary Data Consolidated Financial Statements The company's balance sheet strengthened significantly in FY2021 due to financing activities, while the net loss improved from the prior year Consolidated Balance Sheet Highlights (as of June 30) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $44,837,317 | $131,182 | | Total Current Assets | $46,867,349 | $1,913,319 | | Total Assets | $52,803,116 | $5,738,102 | | Liabilities & Equity | | | | Total Current Liabilities | $5,343,648 | $5,808,865 | | Total Liabilities | $5,733,974 | $6,096,002 | | Total Equity (Deficiency) | $47,069,142 | ($357,900) | Consolidated Statement of Operations Highlights (for the year ended June 30) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Net Revenues | $5,151,032 | $6,535,956 | | Gross Profit | $176,638 | $2,857,093 | | Operating Loss | ($6,261,000) | ($17,738,104) | | Net Loss | ($6,773,047) | ($17,928,647) | | Loss Per Share (Basic & Diluted) | ($0.79) | ($4.78) | Notes to the Consolidated Financial Statements The notes detail key accounting policies, the impact of the new cryptocurrency venture, significant financing activities, and major customer concentrations - The company entered the cryptocurrency mining business in March 2021 but recorded an impairment of approximately $0.9 million on mining equipment due to restrictive Chinese regulations[251][253] - A 1-for-5 reverse stock split was effected on July 7, 2020, to maintain NASDAQ listing compliance, with all share data retroactively adjusted[246] - The company consolidates Sino-Global Shipping Agency Ltd as a Variable Interest Entity (VIE)[259] - Cryptocurrencies are accounted for as indefinite-lived intangible assets, recorded at cost and assessed for impairment[271] - The company raised significant capital through multiple issuances of common stock, preferred stock, and warrants between September 2020 and February 2021[327][328][333] - For FY2021, one customer accounted for 89.7% of revenues, and two suppliers accounted for a combined 84% of cost of revenues, indicating significant concentration risk[358][359]