U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2010
Commission File Number 001-34024
Sino-Global Shipping America, Ltd.
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
11-3588546
(I.R.S. employer
identification number)
136-56 39th Avenue,
Room #305
Flushing, NY 11354
(Address of principal executive offices and zip code)
(718) 888-1814
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
Common Stock, without par value per share
Name of each exchange on which registered
NASDAQ Capital Market
Securities registered under Section 12(g) of the Exchange Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1) No
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No (cid:1)
Indicate by check mark if there is disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and
no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. (cid:1)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
(cid:1)
Accelerated filer
Non-accelerated filer
(cid:1) (Do not check if a smaller reporting company)
Smaller reporting company
(cid:1)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1) No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.45 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes (cid:1) No (cid:1) N/A The registrant is
a smaller reporting company.
The aggregate market value of the shares of common stock, without par value (“Common Stock”), of the registrant held by non-affiliates
on December 31, 2009 was approximately $5,027,864, based on the closing sales price of $3.31 per share, as reported on the NASDAQ Capital
Market, multiplied by the number of outstanding shares held by non-affiliates on that date (1,518,992 shares).
The Company is authorized to issue 10,000,000 shares of common stock, without par value per share, and 1,000,000 shares of preferred
stock, without par value per share. As of the date of this report, the Company has issued and outstanding 2,903,841 shares of common stock
and no shares of preferred stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into Parts I, II and III of this Form 10-K: the Definitive Proxy
Statement for the Registrant’s 2010 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission within
120 days after the end of the Registrant’s fiscal year (the “Proxy”); and the registration statements filed with the Commission on January 11
and May 12, 2008, as amended (file nos. 333-150858 and 333-148611) (the “Registration Statements”) and prospectus filed pursuant to Rule
424(b)(3) of the Securities Act of 1933 (the “Securities Act”) on May 21, 2008 (the “IPO Prospectus”).
SINO-GLOBAL SHIPPING AMERICA, LTD.
FORM 10-K
INDEX
Business.
Properties.
Legal Proceedings.
PART I
Item 1.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2.
Item 3.
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 5.
Selected Financial Data
Item 6.
Item 7.
Management’s Discussion and Analysis or Plan of Operation.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Financial Statements and Supplementary Data.
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11.
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14.
Item 15.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Principal Accountant Fees and Services.
Exhibits, Financial Statement Schedules.
1
1
6
6
6
7
8
8
9
9
18
18
18
18
19
20
20
20
21
21
21
22
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to
projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based
upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking
statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,”
“anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such
statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those
projected or anticipated, including but not limited to the following:
the ability to timely and accurately provide shipping agency services;
its dependence on a limited number of larger customers;
•
•
• political and economic factors in the People’s Republic of China (“PRC”);
•
• unanticipated changes in general market conditions or other factors, which may result in cancellations or reductions in need for the
the Company’s ability to expand and grow its lines of business;
Company’s services;
•
• a weakening of economic conditions which would reduce demand for services provided by the Company and could adversely affect
profitability;
the effect of terrorist acts, or the threat thereof, on consumer confidence and spending, or the production and distribution of product
and raw materials which could, as a result, adversely affect the Company’s shipping agency services, operations and financial
performance;
the acceptance in the marketplace of the Company’s new lines of services;
foreign currency exchange rate fluctuations;
•
•
• hurricanes or other natural disasters;
•
•
• other risks outlined above and in the Company’s other filings made periodically by the Company.
the Company’s ability to attract, retain and motivate skilled personnel to serve the Company.
•
the Company’s ability to identify and successfully execute cost control initiatives;
the impact of quotas, tariffs, or safeguards on the importation or exportation of the Company’s customer’s products; or
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to update this forward-looking information. Nonetheless, the Company reserves the right to make such
updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this
Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to
provide any other updates.
ii
Item 1.
Business.
General
PART I
We are a major shipping agency service provider in China, with operating headquarters in Beijing and branches in Ningbo, Qingdao,
Tianjin, Qinhuangdao, Fangchenggang, Yantai, Yingkou and Zhoushan, China. We also have offices in the United States in Flushing, New
York, Perth, Australia and Hong Kong. Through these offices, we are able to coordinate our clients’ shipping needs, including preparing
documents, husbanding vessels, working through customs issues, coordinating matters with port authorities, overseeing and settling cargo
claims, tracking shipments, recommending trucking, warehousing and complementary services.
We act as a local agent and attend vessels directly in each of the ports in which we have branch offices. In addition to these ports, we
have contracting offices at all other commercial ports in China as a professional general/protecting agency. In the ports in which we do not yet
have an office, we appoint a local agent to attend the vessels directly.
We have designed our services to simplify the shipping process for our clients and to keep our clients fully informed about the status of
their shipments. To that end, we analyze the information about prospective shipments provided by our clients to determine the most economical
and efficient transportation solutions and then leverage our position as a shipping agency to negotiate competitive shipping rates. We also give
our clients daily disbursement reports to empower them to monitor and dispute all questionable charges. In addition to allowing clients to
monitor disbursements, our Disbursement Department audits all bills provided by ports for unreasonable charges that violate the guidelines
issued by China’s Ministry of Communications.
We provide shipping agency services to a variety of vessel sizes and types, including Handysize, Panamax, Capesize, Handysize, Roll-
On/Roll-Off RORO, and VLCC class vessels. We have assisted clients with a variety of shipping requirements, including bulk and break-bulk
general cargo, vehicle transport and raw materials such as crude oil and oil products and iron, manganese and other metal ores.
Market Background
Since China adopted its open door trade policy in 1978, inviting foreign investment in China, China’s economy has steadily developed,
both from new investments in China and from increased international trade. As international trade between China and other countries has
expanded, the shipping industry in China has also grown.
The evolution of the shipping agency industry has followed that of the shipping industry in general. Prior to the 1980s, China’s shipping
agency industry was dominated by a single state-owned shipping agency, Penavico. In 1985, a second shipping agency, Sinoagent, was
permitted to provide shipping agency services in China.
Since 1985, the PRC has taken a number of steps to open China’s shipping agency industry to private companies. In 1990, the PRC
adopted the International Ship Agency Management and Stipulation, which allowed state-owned companies to compete in the shipping agency
industry. In 2002, the PRC further relaxed the restrictions on shipping agencies by promulgating the People’s Republic of China International
Marine Transportation Rule, which permitted Chinese private entities and joint ventures between Chinese and foreign entities to compete in the
shipping agency industry. The Chinese and American Marine Transportation Agreement in 2003 and the New Round Chinese and European
Union Marine Transportation Agreement in 2002 allowed shipping transportation enterprises that were wholly owned by American and
European Union businesses, respectively, to provide shipping agency service for their parent companies.
We believe that there are approximately 1,400 licensed shipping agencies in China. At present, Penavico and Sinoagent still dominate
China’s shipping agency industry, combining to generate approximately 85% of the revenues in the industry. The remaining approved shipping
agencies in operation share the remaining 15% of revenues in the industry.
1
China’s Economic Development
China’s population of approximately 1.3 billion people is expected to grow by roughly 15 million people per year. The country’s gross
national product has grown at a rate of approximately 10 percent for 25 years, making it the fastest growth rate for a major economy in
recorded history. In the same 25-year period, China has moved more than 300 million people out of poverty and quadrupled the average
Chinese person’s income. The tremendous potential of this market is noted by the fact that 400 of the world’s largest 500 companies are
investing in China.
These development factors have produced a burgeoning consumer goods market, as the spending power and aspirations of consumers
rise. In response, industries are consolidating and modern retailers are penetrating second-tier and even some third-tier Chinese cities. The
increased availability of and demand for products throughout China has fueled a corresponding growth in the industries that transport goods
within China and between China and other countries.
Our Strategy
Our goals are to increase our market share in the PRC shipping agency market and to expand our business to related service areas. We
believe we can meet these goals by continuing to focus on the high quality of our personnel, the positive relationships we enjoy with local
ports, businesses and agencies and the breadth of services we offer to clients. Key elements of our strategy include the following:
• Increase our market share. We believe we have advantages over smaller shipping agencies in terms of infrastructure, administration
and services we can offer to clients. As a result, we believe we are able to compete on the basis of service with these smaller agencies. In order
to continue to increase our market share in China, we will focus on demonstrating to potential clients that typically use the larger shipping
agents that we are able to provide a high level of service. Potential customers in the shipping industry are strongly influenced by formal and
informal references. We believe that we have the opportunity to expand our market share by providing high levels of customer satisfaction with
our current customers so that they continue to use our services and recommend our shipping agency services to other potential customers that
wish to ship to China. We have obtained ISO9000 and UKAS certifications from the International Organization for Standardization and the
United Kingdom Accreditation Service, respectively, in recognition of the quality of services we provide. Each of these organizations assesses
the effectiveness of quality management systems implemented by companies. The International Organization for Standardization consists of a
worldwide federation of national standards bodies for approximately 130 countries, and the ISO9000 certification represents an international
consensus of these standards bodies, with the aim of creating global standards of product and service quality. UKAS is the sole national body in
the United Kingdom recognized by the government to provide accreditation of conformity assessment bodies. UKAS and ISO9000
certifications address the quality of systems only and do not certify the quality of products or services themselves.
• Establish local branches in additional ports in China. We currently maintain branch offices in eight cities in China: Ningbo,
Qingdao, Tianjin, Qinhuangdao, Fangchenggang, Yantai, Yingkou and Zhoushan. By having offices in each of these cities, we are able to
provide local agency services to our customers who use the commercial ports in these cities. We have found a number of benefits of being able
to serve as local agents, including the following advantages:
o We can avoid appointing local agents, which allows us to control the high level of service provided to our customers;
o We can develop strong relationships with local authorities, which allows us to stay abreast of developments in local ports and to
make sure our customers have as many advantages possible in working through any complications;
o We can maximize profit for our company by not needing to pay third party shipping agents to serve as local agents for our
o We avoid losing customers to the companies we appoint as local agents or to other competitors that may be able to provide local
customers;
agent services; and
o We may save our customers money by avoiding duplicative layers of administration.
• React quickly to opportunities to off er new services to our clients. We believe that our company is currently small enough to have
close working relationships with our customers. As a result, we believe we encourage our customers to raise any concerns, comments or
recommendations for additional services that they would like to see provided with our shipping agency services. We also believe that we are
large enough to implement many of these recommendations and strive to offer new services when we feel that the services will benefit our
customers.
2
• Maintain working relationships with third parties in port cities. We currently enjoy good working relationships with a variety of
entities that operate in commercial ports, including port authorities, tugboat companies, pilot stations, stevedore companies, customs agencies,
shipping agency associations and local government authorities. By increasing the number of ports at which we have branch offices, we believe
we can develop positive working relationships in additional port cities for the benefit of our customers. Because success in shepherding
shipments through China’s ports may be affected by personal relationships with local personnel, we believe that strong personal relationships
in local ports may enable us to enjoy higher loading and discharging rates and decreased port stay periods than if we did not have positive
personal relationships in those ports.
• Increase profile of United States operations . Our office in New York currently handles our accounting and marketing. We plan to
leverage our presence in the United States to increase the services we are able to offer to our customers, including shipments to and from the
United States and English-language customer services from native speakers.
Customers
We currently provide shipping agency services to a variety of international vessels. The majority of our customers are international
shipping companies that wish to ship goods to and from China. While one customer accounts for the majority of our revenues, we provide
services to a variety of shipping companies.
Our largest customer is Beijing Shou-Rong Forwarding Service Co., Ltd, an affiliate of Capital Steel, a steel company in China. We
provide shipping agency services for all vessels carrying iron ore for Capital Steel. Revenues from this company accounted for approximately
64% of our revenues in 2010 and 55% of our revenues in 2009.
In addition to these companies, we provide shipping agency services to a variety of shipping companies from Greece, Italy, Hong Kong,
Australia, Switzerland, the United States, Thailand and South Korea. We have provided shipping agencies services for vessels carrying bulk
and break-bulk cargoes, raw materials, consumer goods, and vehicles.
Our Strengths
We believe that the following strengths differentiate us from our competitors in China’s shipping agency industry:
• Presence in all of China ’ s commercial ports . China currently has 76 commercial ports. Currently, Penavico and Sinoagent are the
only shipping agencies that have agents in all of China’s ports. We have set up branches in eight ports and have contractual agents in the rest
and aim at establishing our network in all China ports to compete with the two giants.
• Strength of personnel and administration . Most of our employees have marine business working experience, and all of our
managers/chief operators once served in either Penavico or Sinoagent prior to joining our company. With these professionals and experienced
staff, we believe that we can provide competitive services to our customers.
• Reputation for reliability and responsiveness to customer requests . Our operators are constantly on duty so that we can respond
quickly to any customer’s inquiries regardless of any time difference between our customers and us. Our marketing staff also pays regular
visits to customers so that we can continually improve our services in response to customer feedback.
• Reputation for financial responsibility . In order to engage in business in China as a shipping agency, we must demonstrate financial
responsibility to customers, our business partners, ports and local governmental agencies. We believe our ability to meet our financial
obligations has encouraged customers to choose to do business with us and has resulted in the growth of a strong network of service partners in
the 76 ports in which we provide shipping agency services.
• Strength of information management system . We consistently collect and update port information from local ports so that we can
share current and accurate port information with our clients through our network.
3
• Quality of services provided to customers . Unlike agencies that provide local agent services in one particular port, we provide our
customers with both general agent and local agent services in all of China’s commercial ports. Our general agent services provide our
customers with accurate port information, which helps our customers make their way smoothly through loading and discharging cargo. Our
local agent services have generally resulted in shorter port stays and faster working rates for our customers’ ships, reducing their overall port
charges.
• Positive relationships with third parties in local ports . In local ports, we maintain positive relationships with stevedore companies,
pilot stations, towage companies and other local service providers, which helps our customers enjoy faster loading and discharging rates and a
smoother berthing and unberthing process.
• Strong network of local shipping agents in ports without branch offices . In addition to having branch offices in five major Chinese
commercial ports, we also have a strong network of other shipping agents. Using feedback from customers and our knowledge of the Chinese
shipping agency industry, we can compare and select the most competitive agents as our local agents.
Our Challenges
The successful execution of our strategies is subject to certain risks and uncertainties, including those relating to:
• our limited operating history in general and our recent uncertain profitability;
• limited funds with which to build a nationwide port network in China, to recruit and retain quality personnel, to advertise our services
and to develop new information technology for use in providing shipping agency services;
• the growth of the shipping agency industry in China and the entrance of new Chinese and foreign competitors into the market;
• our ability to respond to competitive pressures; and
• regulatory environment in China.
Competition
Our ability to be successful in our industry depends on our ability to compete effectively with companies that may be more well-
capitalized than we are or may provide shipping agency services we do not or cannot provide to our customers. While China’s shipping agency
industry has a variety of small shipping agencies, our two primary competitors are Penavico and Sinoagent. Both of these companies are state-
owned in part and much larger than we are and derive significantly more revenue from shipping agency services in China.
• Penavic o . Penavico was formed in 1953, as a state-owned shipping agency affiliated with COSCO. Beginning in 1955, Penavico
took over China’s shipping agency business from the foreign agents that previously did business in China and, until 1985, Penavico was the
only shipping agency operating in China. Penavico now has more than 80 local agencies and 300 business networks across China. Penavico
maintains offices in America, Europe, Japan, Korea, Singapore and Hong Kong. Penavico’s shipping agency business, bulk ships and container
ships currently account for approximately 64.5% of China’s market.
• Sinoagent . Sinoagent was formed in 1985 as a specialized subsidiary of Sinotrans Limited Company (“Sinotrans”), a company that
provides integrated ocean transportation, land transport, airfreight, warehousing, express services, shipping agency and freight forwarding
services. Due to its relationship with Sinotrans, Sinoagent is able to provide a seamless, integrated set of services to its customers.
We believe that Penavico’s and Sinoagent’s primary strengths include the following:
• the establishment of a complete port network in mainland China;
• the presence of a large base of clients; and
• the availability of funding and financial support from state-owned financial institutions.
4
Regulations on Foreign Exchange
Foreign Currency Exchange . Pursuant to the Foreign Currency Administration Rules promulgated in 1996 and amended in 1997 and
various regulations issued by State Administration of Foreign Exchange (“SAFE”), and other relevant PRC government authorities, RMB is
freely convertible only to the extent of current account items, such as trade related receipts and payments, interests and dividends. Capital
account items, such as direct equity investments, loans and repatriation of investment, require prior approval from SAFE or its provincial
branch for conversion of RMB into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC. Payments
for transactions that take place within the PRC must be made in RMB. Unless otherwise approved, PRC companies must repatriate foreign
currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign
exchange banks subject to a cap set by SAFE or its local counterpart. Unless otherwise approved, domestic enterprises must convert all of their
foreign currency receipts into RMB.
Dividend Distribution . The principal regulations governing divided distributions by wholly foreign-owned enterprises and Sino-foreign
equity joint ventures include:
• Wholly Foreign-Owned Enterprise Law (1986), as amended;
• Wholly Foreign-Owned Enterprise Law Implementing Rules (1990), as amended;
• Sino-Foreign Equity Joint Venture Enterprise Law (1979), as amended; and
• Sino-Foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.
Under these regulations, wholly foreign-owned enterprises and Sino-foreign equity joint ventures in the PRC may pay dividends only out of
their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, these foreign-
invested enterprises are required to set aside certain amounts of their accumulated profits each year, if any, to fund certain reserve funds. These
reserves are not distributable as cash dividends.
Regulation of foreign exchange in certain onshore and offshore transactions . Under recent notices issued by SAFE, PRC residents
are required to register with and receive approvals from SAFE in connection with offshore investment activities. SAFE has stated that the
purpose of these notices is to ensure the proper balance of foreign exchange and the standardization of cross-border flow of funds.
In January 2005, SAFE issued a notice stating that SAFE approval is required for any sale or transfer by PRC residents of a PRC
company’s assets or equity interests to foreign entities in exchange for the equity interests or assets of the foreign entities. The notice also states
that, when registering with the foreign exchange authorities, a PRC company acquired by an offshore company must clarify whether the
offshore company is controlled or owned by PRC residents and whether there is any share or asset link between or among the parties to the
acquisition transaction.
In April 2005, SAFE issued another notice further explaining and expanding upon the January notice. The April notice clarified that,
where a PRC company is acquired by an offshore company in which PRC residents directly or indirectly hold shares, such PRC residents must
(i) register with the local SAFE branch regarding their respective ownership interests in the offshore company, even if the transaction occurred
prior to the January notice, and (ii) file amendments to such registration concerning any material events of the offshore company, such as
changes in share capital and share transfers. The April notice also expanded the statutory definition of the term “foreign acquisition,” making
the notices applicable to any transaction that results in PRC residents directly or indirectly holding shares in the offshore company that has an
ownership interest in a PRC company. The April notice also provided that failure to comply with the registration procedures set forth therein
may result in the imposition of restrictions on the PRC company’s foreign exchange activities and its ability to distribute profits to its offshore
parent company.
On October 21, 2005, SAFE issued a new public notice concerning PRC residents’ investments through offshore investment vehicles.
This notice took effect on November 1, 2005 and replaces prior SAFE notices on this topic. According to the November 2005 notice:
5
• any PRC resident that created an off-shore holding company structure prior to the effective date of the November notice must submit
a registration form to a local SAFE branch to register his or her ownership interest in the offshore company on or before May 31, 2006;
• any PRC resident that purchases shares in a public offering of a foreign company would also be required to register such shares an
notify SAFE of any change of their ownership interest; and
• following the completion of an off-shore financing, any PRC shareholder may transfer proceeds from the financing into China for use
within China.
In accordance with the October 2005 notice, on December 12, 2007, Mr. Cao Lei and Mr. Zhang Mingwei obtained appropriate
registration from their local SAFE offices.
Employees
As of the date of filing of this report, we have 38 employees, 32 of whom are based in China. Of the total, 5 are in management, 1 is in
technical support, 2 are in sales and marketing, 13 are in financial affairs and administration, and 17 are in operation and disbursement. We
believe that our relations with our employees are good. We have never had a work stoppage, and our employees are not subject to a collective
bargaining agreement.
Item 1A. Risk Factors.
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 1B. Unresolved Staff Comments.
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 2.
Properties.
We currently rent six (6) facilities throughout China and the United States. Our headquarters are located in Beijing.
Office
Beijing, PRC
Fangchenggang, PRC
Flushing, NY
Ningbo, PRC
Qingdao, PRC
Qinhuangdao, PRC
Address
Room 705, Tower B
Boya International Center
No. 1, Lizezhongyi Road
Chaoyang District
Beijing, PRC 100102
2 nd Floor, Duty-Free Store Building
South Gate of Fangcheng Port
Fangcheng, PRC 538001
136-56 39th Avenue,
Room #305, Flushing, New York
11354
Room 1611, Hai Guang Plaza
No. 298 Zhong Shan West Road
Hai Shu District
Ningbo, PRC 315011
Room 2101 Building A, No. 10
Xiang Gang (Middle) Road,
Qingdao, PRC 266071
Room B01, 18 th Floor
Jin Yuan International Commercial Building
No. 146 He Bei Street, Hai Gang District
Qinhuangdao, PRC 0066000
6
Rental Term
Expires 12/31/2010
Space
845 m 2
Long term
200 m 2
Expires 12/31/2011
150m 2
Expires 11/01/2010
45 m 2
Expires 11/30/2010
186 m 2
Expires 07/16/2011
30 m 2
Item 3.
Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may
harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on
our business, financial condition or operating results.
7
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for Our Common Stock
Our common stock is traded on the NASDAQ Stock Market under the symbol SINO. As of June 30, 2010, there were four holders of
record of our common stock and approximately 700 total shareholders. This number excludes our common stock owned by shareholders
holding common stock under nominee security position listings. The high and low common stock sales prices per share during the periods
indicated were as follows:
Quarter Ended
Fiscal year 2010
Common stock price per share:
High
Low
Fiscal year 2009
Common stock price per share:
High
Low
Sep. 30
Dec. 31
Mar. 31
June 30
Year
$
$
$
$
5.00 $
2.50 $
4.00 $
3.12 $
4.95 $
2.56 $
3.99 $
2.11 $
5.00
2.11
9.21 $
3.31 $
6.20 $
1.77 $
4.33 $
1.60 $
3.80 $
2.17 $
9.21
1.60
Approximate Number of Holders of Our Common Stock
As of the date of this report there are four holders of record of our common stock and approximately 700 total shareholders.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain any earnings to support
operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable
future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a
number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of
Directors may deem relevant. Payments of dividends by Trans Pacific to our company are subject to restrictions including primarily the
restriction that foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign
exchange business after providing valid commercial documents.
IPO Proceeds
The section of the Registration Statements and IPO Prospectus entitled “Use of Proceeds” is incorporated herein by reference. The
effective date of the Securities Act registration statement for which the use of proceeds information is being disclosed is May 21, 2008, and the
Commission file numbers assigned to the registration statement are 333-150858 and 333-148611.
The offering closed on May 20, 2008. All of the common shares, without par value per share, registered in the offering were placed by
the placement agent, Anderson & Strudwick, Incorporated. The Registration Statements registered the initial public offering of up to 1,229,032
shares of the Company’s common stock and the resale of up to 217,960 shares of the Company’s common stock. All of the initial public
offering shares were placed at a price of $7.75 per share, and all such shares were sold in the offering, with an aggregate price of $9,524,998.
The Company did not receive any proceeds from the sale of any shares by the selling shareholders.
The net proceeds of the offering, including the private placement of securities related to the selling shareholders, were $9,172,314.
Expenses included placement agent commissions, legal fees, escrow agent fees and fees payable in connection with the private placement. All
of these fees were payable to parties other than directors, officers, general partners of the Company or their associates; to persons owning ten
percent (10%) or more of any class of equity securities of the Company; and to affiliates of the Company.
8
The Company has used offering proceeds for the following purposes from completion of the IPO through June 30, 2010.
Description of Use
Proposed
Expenditure Amount
Actual Expenditures
through June 30, 2010
Organization of our company and creation of contractual arrangements among our company,
Sino-China and Trans Pacific
Business expansion in 15 to 35 main ports in China
Sarbanes-Oxley compliance
Marketing of company across China, United States and internationally
Develop information exchange system
Staff training
Fixed asset purchase
Miscellaneous expenses
Stock repurchases
$
100,000 $
5,930,941
500,000
244,621
400,000
163,081
407,702
407,702
103,526
1,242,621
291,179
581,178
108,854
174,343
436,995
393,470
372,527
Total
Item 6.
Selected Financial Data
$
8,154,047 $
3,704, 693
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 7. Management’s Discussion and Analysis or Plan of Operation.
The following discussion and analysis of our company’s financial condition and results of operations should be read in conjunction with our
audited consolidated financial statements and the related notes included elsewhere in the Annual Report. This discussion contains forward-
looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those
anticipated in these forward-looking statements as a result of various factors.
Overview
We are a shipping agency service provider for foreign ships coming to Chinese ports. Our company, previously known as Sino-Global-
Shipping (America) Ltd., was incorporated in New York in February 2001. On September 18, 2007, we amended the Articles of Incorporation
and Bylaws to merge into a new corporation with the current name of Sino-Global Shipping America, Ltd., in Virginia.
Our principal geographic market is in the People’s Republic of China (“PRC”). As PRC laws and regulations restrict foreign ownership of
shipping agency service businesses, we operate our business in the PRC through Sino-Global Shipping Agency, Ltd. (“Sino-China”), a PRC
limited liability company wholly owned by our founder and Chief Executive Officer, Cao Lei, and Chief Financial Officer, Zhang Mingwei,
both of whom are PRC citizens. Sino-China holds the licenses and permits necessary to provide shipping services in the PRC. Headquartered in
Beijing with branches in Ningbo, Qingdao, Tianjin, Qinhuangdao and Fangchenggang, we provide general shipping agency services in all
commercial ports in China.
On November 13, 2007, we formed our wholly foreign-owned enterprise, Trans Pacific Shipping Limited (“Trans Pacific”), in Beijing, which
established a subsidiary, Trans Pacific Logistics Shanghai, Limited (“Trans Pacific Shanghai”), in Shanghai on May 31, 2009. This increases
our presence to nine ports in mainland China and will enable us to provide a full range of shipping agency services as well as freight forwarder
services. Trans Pacific acquired a 40% interest in Sino-Global Shipping Agency Development Co., Limited, in Beijing on November 6, 2009 in
order to develop additional business opportunities for the company.
9
Trans Pacific and Sino-China do not have a parent-subsidiary relationship. Instead, each of Trans Pacific and us has contractual arrangements
with Sino-China and its shareholders that enable us to substantially control over Sino-China.
On May 20, 2008, we completed an initial public offering of 1,229,032 common shares at a $7.75 offering price. Our shares started trading on
the NASDAQ Capital Market the next day.
With a purpose of building up an international shipping agency service network, we formed a wholly-owned subsidiary, Sino-Global Shipping
Australia Pty Ltd. (“Sino-Global AUS”) in Perth, Australia on July 3, 2008 in order to serve the needs of customers shipping into and out of
Western Australia. We also signed an agreement with Monson Agencies Australia (“Monson”), one of the largest shipping agency service
providers in Australia. Through Monson, we are able to provide general shipping agency services to all ports in Australia.
We established another wholly-owned subsidiary, Sino-Global Shipping (HK) Limited (“Sino-Global HK”) on September 22, 2008. We expect
that Sino-Global HK will become our control and management center for southern Chinese ports and will enable our company to extend its
offering of comprehensive shipping agency services to vessels going to and from one of the world’s busiest ports. On July 27, 2009, Sino-
Global HK signed an exclusive partnership agreement with Forbes & Company Limited (“Forbes”), which is a listed company on the Bombay
Stock Exchange (BOM: 502865) and one of the largest shipping and logistic service providers in India. Through Forbes, the Company is able
to provide general shipping agency services to all ports in India.
Following the initial public offering, our Board authorized a stock repurchase program under which we may repurchase up to 10% of our
outstanding common stock for a period of 12 months, which began October 9, 2008. In September 2009, our Board approved to extend the
stock repurchase program for another six months ended April 2010. The stock repurchase program has now expired. As of June 30, 2010, we
repurchased 125,191 shares of our common stock from the open market at an average price of $2.98 per share including trading expenses. The
total cost of stock repurchase through June 30, 2010 was $372,528.
Revenues
The worldwide financial crisis started from September 2008 has brought it with significant negative impact on our 2009 operations. However,
in 2010, we have continued to achieve remarkable top line growth. For the year ended June 30, 2010, our total revenues amounted to
approximately $26.84 million, representing a 46.40% increase from our total revenues of $18.33 million for the year ended June 30, 2009.
Year
2010
2009
2008
2007
2006
%
Revenue Growth
US$
26,841,336 46.40
18,334,359 21.52
15,087,238 49.51
10,090,879 13.07
8,924,786 31.69
Our total revenues are net of PRC business taxes and related surcharges. Sino-China’s revenues are subject to a 5% business tax as well as an
additional 0.5% surcharge after deducting the costs of services. We deduct these amounts from our gross revenues to arrive at our total
revenues.
We charge the shipping agency fees in two ways: (1) the fixed fees are predetermined with a customer, and (2) the cost-plus fees are calculated
based on the actual costs incurred plus a mark up. We generally require payments in advance from customers and bill them the balances within
30 days after the transactions are completed.
10
We believe the most significant factors that directly or indirectly affect our shipping agency service revenues are:
• the number of ships to which we provide port loading/discharging services;• the size and types of ships we serve;
• the rate of service fees we charge;
• the number of ports at which we provide services; and
• the number of customers we serve.
Historically, our services have primarily been driven by the increase in the number of ships and customers, provided that the rate of service fees
is determined by market competition. We believe that an increase in the number of ports served generally leads to an increase in the number of
ships and customers. We expect that we will continue to earn a substantial majority of our revenues from our shipping agency services. As a
result, we plan to continue to focus most of our resources on expanding our business to cover more ports in the PRC. In addition, we will
allocate our resources in marketing our brand to customers, including ship owners and charters, which transport goods from all ports around the
world to China.
Operating Costs and Expenses
Our operating costs and expenses consist of costs of revenues, general and administrative expenses, selling expenses and other expenses. Our
company’s total operating costs and expenses increased as a percentage of total revenues for the year ended June 30, 2010 mainly due to the
increase of the costs paid to Chinese local ports. Our general and administrative expenses decreased significantly during the year ended June
30, 2010, compared to those expenses for the same periods in 2009. This is largely due to our tightened budget control over the expenses. The
following table sets forth the components of our company’s costs and expenses for the periods indicated.
For the years ended June 30,
2010
2009
US$
%
US$
%
Revenues
Costs and expenses
Costs of revenues
General and administrative
Selling expense
Other expense
Total costs and expenses
26,841,336
100.00 18,334,359
100.00
23,668,070
88.18 15,767,390
86.00
4,102,864
272,829
135,557
28,179,320
15.29 4,859,116
380,362
61,648
104.98 21,068,516
1.02
0.51
26.50
2.07
0.34
114.91
Costs of Revenues . Costs of revenues represent the expenses incurred in the periods when a ship docks in a harbor to load and unload cargo.
We typically pay the costs of revenues on behalf of our customers. We receive revenues from our clients in U.S. dollars and pay the costs of
revenues to the Chinese local port agents in RMB. As such, the costs of services will change if the foreign currency exchange rates change. Our
costs of revenues could also increase if the ports were to raise their charges, particularly in the case of overtime payments during the public
holidays. Our costs of revenues as a percentage of our total revenues increased from 86.00% to 88.18% for the year ended June 30, 2010,
because the port charges for the larger vessels we served were much higher but the agent fees we received from our customers remained
unchanged. The exchange rate of U.S. dollars against the Chinese RMB was relatively stable during the period.
11
General and Administrative Expenses. Our general and administrative expenses primarily consist of salaries and benefits for our staff, both
operating and administrative personnel, depreciation expenses, office rental expenses and expenses for legal, accounting and other professional
services. Our general and administrative expenses as a percentage of our total revenues decreased from 26.50% to 15.29% for the year ended
June 30, 2010. Although we have incurred additional expenses, such as compliance costs of SOX404 and auditing expenses, as we have
operated as a publicly listed company in the United States, our general and administrative expenses decreased in the 2010 fiscal year based on
our efforts to tighten budget controls.
Selling Expenses. Our selling expenses primarily consist of commissions and traveling expenses for our operating staff to the ports at which we
provide services. Our selling expenses as a percentage of our total revenues, decreased from 2.07% to 1.02% for the year ended June 30, 2010.
Our efforts on controlling the selling expenses appear to have been effective during the year.
Critical Accounting Policies
We prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”). These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets and
liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually
evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other
conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We
believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated
financial statements.
Revenue Recognition
Revenue comprises the value of charges for the services in the ordinary course of our company’s activities and disbursements made on behalf
of customers. Revenues are recognized from shipping agency services upon completion of the services, which generally coincides with the date
of departure of the relevant vessel from port. Advance payments and deposits received from customers prior to the provision of services and
recognition of the related revenues are presented as current liabilities.
Some contracts are signed with a term that revenues are recognized as a mark up of actual expenses incurred. In a situation where the services
are completed but the information on the actual expenses is not available at the end of the fiscal period, we estimate revenues and expenses
based on our previous experience for the revenues of the same kind of vessels, port charges on the vessel’s particulars/movement and costs rate
of the port. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Accounts Receivable.”
Consolidation of Variable Interest Entities
Sino-China is considered to be a VIE and we are the primary beneficiary. On November 14, 2007, our company through Trans Pacific entered
into agreements with Sino-China, pursuant to which we receive 90% of Sino-China’s net income. We do not receive any payment from Sino-
China unless Sino-China recognizes net income during its fiscal year. Sino-China pays consulting and marketing fees equal to 85% and 5%,
respectively, of its net income to our new wholly foreign-owned subsidiary, Trans Pacific, and Trans Pacific supplies the technology and
personnel needed to service Sino-China. Sino-China was designed to operate in China for the benefit of our company.
The accounts of Sino-China are consolidated in the accompanying consolidated financial statements pursuant to Accounting Standard
Codification (“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s sales are included in our total sales, its income (loss) from operations
is consolidated with our company’s, and our net income (loss) from continuing operations before non-controlling interest in income (loss)
includes all of Sino-China’s net income (loss). Our non-controlling interest in its income (loss) is then subtracted in calculating the net income
(loss) attributable to our company. Because of the contractual arrangements, our company had a pecuniary interest in Sino-China that requires
consolidation of our and Sino-China’s financial statements.
12
Equity Investment
Investments in companies that are owned 20% to 50% for which we have significant influence but not control are accounted for by the equity
method. Under the equity method, we recognize in earnings its proportionate share of the income or loss of the investee.
Accounts Receivable
Accounts receivable are recognized at net realizable value. We maintain allowances for doubtful accounts for estimated losses resulting from
the failure of customers to make required payments in the relevant time period. We review the accounts receivable on a periodic basis and
record general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of
individual receivable balances, we consider many factors, including the age of the balance, the customer’s historical payment history, its
current credit-worthiness and current economic trends. Receivables are considered past due after 365 days. Accounts are written off only after
exhaustive collection efforts. Because of the worldwide financial crisis, we have experienced difficulties in collecting cash from some of our
customers.
When a client requests our shipping agency services, we communicate with port officials and our service partners rely on our prior experience
for similar vessels with similar needs in the same ports to obtain an estimate for the cost of revenues. We then calculate our shipping agency
fees in two ways: (1) the fixed fees are predetermined with a customer, and (2) the cost-plus fees are calculated based on the actual costs
incurred plus a mark up.
We generally obtain advance payment of our shipping agency fees prior to providing service to our clients. This significantly reduces the
amount of accounts receivable when the shipping agency fees are recognized. To the extent our estimates are insufficient; we bill our clients for
the balance to be paid within 30 days.
We use advance payments to pay a number of fees on behalf of our clients before their ships arrive in port, including harbor, berthing,
mooring/unmooring, tonnage, immigration, quarantine and tug hire fees. We record the amounts we receive as Advances from Customers and
the amounts we pay as Advances to Suppliers. We recognize revenues and expenses once the client’s ship leaves the harbor and the client pays
any outstanding amounts. In some cases, a delay in receiving bills will require us to estimate the Service Revenues and Costs of Services in
accordance with the rate and formulas approved by the Ministry of Communications. When this happens, we record the difference between
Service Revenues (as recognized) and Advances from Customers as Accounts Receivable and the difference between Cost of Revenues and
Advances to Suppliers as Accounts Payable. To the extent we recognize revenues and costs in this way, our Accounts Receivable and Accounts
Payable will reflect this estimation until we receive the bills and information we require to adjust revenues and expenses to reflect our actual
Service Revenues and Cost of Revenues. Any adjustment to actual from the estimated Revenues and Cost of Revenues recorded has been and
is expected to be immaterial.
Property and Equipment
We calculate gains and losses on disposals by comparing proceeds with the carrying amount of the related assets and include these gains and
losses in the consolidated statements of operations. We consider the carrying value of a long-lived asset to be impaired when the anticipated
undiscounted cash flow from such asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by
which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved or based on independent appraisals.
Translation of Foreign Currency
The accounts of our company and Sino-China are measured using the currency of the primary economic environment in which the entity
operates (the “functional currency”). Our functional currency is the U.S. dollar, while Trans Pacific and Sino-China report their financial
position and results of operations in Renminbi. The accompanying condensed consolidated financial statements are presented in U.S. dollars.
Foreign currency transactions are translated into U.S. dollars using the fixed exchange rates in effect at the time of the transaction. Generally
foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of
operations. We translate foreign currency financial statements of Sino-China, Trans Pacific, Sino-Global HK and Sino-Global AUS in
accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange rates quoted by the People’s
Bank of China at the balance sheet dates and revenues and expenses are translated at average exchange rates in effect during the periods.
13
Taxation
Because we and Sino-China are incorporated in different jurisdictions, we file separate income tax returns. We are subject to income and
capital gains taxes in the United States. Additionally, dividend payments made by our company are subject to withholding tax in the United
States.
We use the liability method of accounting for income taxes in accordance with US GAAP. Deferred taxes, if any, are recognized for the future
tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated
financial statements. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial
statements from such a position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized
upon ultimate settlement.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. Sino-China and Tran Pacific are registered in
PRC and governed by the Enterprise Income Tax Laws of the PRC. Their taxable incomes are subject to an enterprise income tax rate of 25%.
PRC Business Tax
Revenues from services provided by Sino-China are subject to PRC business tax of 5% and additional surcharges of 0.5%. We pay business tax
on gross revenues generated from our shipping agency services minus the costs of services, which are paid on behalf of our customers.
2011 Trends
Our revenues increased 46.40% for the year ended June 30, 2010, including growth rates of 22.48% for the first quarter ended September 30,
2009, 48.22% for the second quarter ended December 31, 2009, 83.26% for the third quarter ended March 31, 2010 and 44.83% for the last
quarter ended June 30, 2010, compared to the same periods in 2009. We renewed the agency service agreement with Beijing Shou Rong, our
largest customer, which accounted for 64% of our revenues for the fiscal year of 2010. The agency service agreement is renewable and will
expire on December 31, 2011. We expect that this renewed agreement is likely to enable our revenues to continue to grow in line with the
increased demand for iron ore in China. We have been marketing our business to other potential clients and looking for opportunities in other
areas in shipping and logistic industries.
We have incurred losses for the last nine quarters. The world financial crisis has negatively affected our operations particularly because, in
addition to the fact that fewer shipments have occurred during the crisis, we receive most of our revenues in U.S. dollars and pay most of our
expenses in Chinese Renminbi (“RMB”). As a result, we have faced increased costs of revenues, due to the devaluation of U.S. dollars against
RMB over the last several years. Although this devaluation had slowed in 2010 fiscal year, we expect the U.S. dollar will devaluate about 2%
to 5% against the RMB in 2011. As a result, the gross margin will stay depressed. While our general and administrative expenses are
significantly higher than their pre-IPO levels as a result of our business expansion and our company’s public listing, we have reduced these
amounts for the year ended June 30, 2010 compared to the same period in 2009. In the 2011 fiscal year, we will continue our combined effort
in budget controls and business promotion.
14
Results of Operations
Due to the economic uncertainties associated with the world wide financial crisis, it is difficult for us to predict future operating results. We
believe that period-to-period comparisons of operating results should not be relied upon as indicative of future performance.
Year Ended June 30, 2010 Compared to Year Ended June 30, 2009
Revenues. Our total revenues increased by 46.40% from $18,334,359 for the year ended June 30, 2009 to $26,841,336 for the year ended June
30, 2010. The number of ships that generated revenues for us increased from 241 to 358 for the comparable years in 2009 and 2010
respectively, representing an increase of 48.55%. Along with the economy recovery, there have been more vessels transporting iron ore and
other imported goods to Chinese ports, promoting our business growth in 2010.
Total Operating Costs and Expenses. Our total operating costs and expenses increased by 33.75% from $21,068,516 for the year ended June
30, 2009 to $28,179,320 for the year ended June 30, 2010. This increase was primarily due to increases in our costs of revenues.
Cost of Revenu es. Our cost of revenues increased by 50.11% from $15,767,390 for the 2009 fiscal year to $23,668,070 for the
2010 fiscal year. Costs of revenues increased faster than revenues, resulting in the decrease of gross margins from 14.00% down
to 11.82% for the comparative years ended June 30, 2009 and 2010, respectively. Because of the prices of iron ore increased,
importers used larger size of vessels to save freight costs. This resulted in increased fees charges at Chinese local ports. The
foreign exchange rate of Chinese currency against the U.S. dollar was relatively stable during the period. The average foreign
exchange rate was RMB6.8275 to $1.00 for fiscal 2010 compared to RMB6.8358 to $1.00 for fiscal 2009.
General and Administrative Expenses . Our general and administrative expenses decreased by 15.56% from $4,859,116 for the
2009 fiscal year to $4,102,864 for the 2010 fiscal year. This decrease was primarily due to the decreases of (1) $426,965 in
provision for doubtful accounts due to less difficulties in collecting cash from some of our customers, (2) $251,697 in office
renting and supplies and (3) $109,386 in automobile and transportation expenses.
We have spent approximately $0.29 million on Sarbanes-Oxley Section 404 compliance. On July 21, 2010, US President Obama
signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, with an exemption from Section 404(b) of the
Sarbanes-Oxley Act for non-accelerated and smaller reporting companies. Although our Company still has to comply with
Section 404(a), we expect we will significantly reduce our costs in complying with Sarbanes-Oxley.
Selling Expenses . Our selling expenses decreased by 28.27% from $380,362 for the year ended June 30, 2009 to $272,829 for the
year ended June 30, 2010, due to our efforts to tighten our budget for business promotion and travel expenses.
Operating Profit (Loss) . We had an operating loss of $1,337,984 for the year ended June 30, 2010, compared to operating loss of
$2,734,157 for the year ended June 30, 2009. Our company was particularly adversely affected by the global economic crisis in 2009, and we
began to recover in 2010. The operating loss for the 2010 fiscal year was primarily due to the increase in costs of services and general and
administrative expenses associated with our public listing expenses and provision for doubtful accounts caused by the difficulties in collecting
cash due to our customers’ struggles during the economic downturn.
Net Financial I ncome. Our net financial income was $150,632 for the year ended June 30, 2010, compared to our net financial income of
$25,010 for the year ended June 30, 2009. The net financial income comes largely from interest income from money deposits in banks and is
decreased by the foreign exchange losses recognized in the financial statement consolidation. As described in the above “ Translation of
Foreign Currency ”, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated
statements of operations.
15
Taxation Our income tax benefits were $8,370 in 2010, compared to tax expenses $126,234 in 2009. As we offset a net deferred tax asset of
$95,000 (consisting of $240,000 for allowance for doubtful accounts claimed last year and $145,000 for net operating loss carry forward), the
income tax expense of 2010 fiscal year was $86,630. Management has determined that no valuation allowance for deferred tax assets should be
provided as of June 30, 2010 because we are expected to generate taxable income in the near future.
Net Income. As a result of the foregoing, we had a net loss of $1,303,415 for the year ended June 30, 2010, compared to net loss of
$2,476,381 for the year ended June 30, 2009. After deduction of non-controlling interest in loss, net loss attributable to Sino-Global Shipping
America, Ltd. was $536,772 for the year ended June 30, 2009, compared to net loss of $1,675,691 for the year ended June 30, 2008.
Liquidity and Capital Resources
Cash Flows and Working Capital
We have financed our operations primarily through cash flows from operations and cash derived from our initial public offering. As of June 30,
2010, we had $5,926,153 in cash and cash equivalents, of which $298,219 was held by Sino-China. Our cash and cash equivalents primarily
consist of cash on hand and cash in banks.
The following table sets forth a summary of our cash flows for the periods indicated:
Net cash used in operating activities
Net cash used in investing activities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Operating Activities
For the years ended June 30,
2010
US$
2009
US$
(1,020,794 )
(331,642 )
(20,716 )
(1,333,501 )
7,259,654
5,926,153
(1,721,287 )
(225,554 )
(353,336 )
(2,343,596 )
9,603,250
7,259,654
Our sales continued to increase for the year ended June 30, 2010 compared to the year of 2009, but our gross margin declined, which was
mainly attributable to the increased costs of services. Net cash used in operating activities was $1,020,793 for the year ended June 30, 2010,
compared to net cash used in operating activities of $1,721,287 for the year ended June 30, 2009. The decrease of net cash in operating
activities is mainly attributable to (1) a net loss of $1,303,415, (2) an adjustment for provision of doubtful accounts of $346,647, (3) an increase
of prepaid taxes, (4) a decrease of advance from customers, and (5) the decrease in other liabilities of $330,652. This is decreased by the
decrease of accounts receivable of $659,137. It should be noted that we had net cash used in operating activities of $1,887,237 for the nine
months ended March 31, 2010, implying that we had net cash provided by operating activities of $811,741 for the three months ended June 30,
2010.
Investing Activities
Net cash used in investing activities was $331,643 compared to net cash used in investing activities of $225,554 for the years ended June 30,
2010 and 2009, respectively. We made capital expenditures of $40,371 and $396,624 for the fiscal years of 2010 and 2009, representing 0.39%
and 3.3% of our total assets, respectively. In addition, our wholly owned subsidiary, Trans Pacific, invested $236,569 in obtaining a
40% interest of Sino-Global Shipping Agency Development Co., Limited, in Beijing.
16
Financing Activities
Net cash used in financing activities was $20,716 for the year ended June 30, 2010, of which $86,625 was used to repurchase our outstanding
shares of common stock from the open market, offset by $65,909 from the increase of non-controlling interest in majority-owned subsidiary.
We believe that current cash, cash equivalents, and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs,
including cash needs for working capital and capital expenditures, for at least the next 12 months. We may, however, require additional cash
due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our
existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities or borrow from banks. We cannot assure
you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities,
including convertible debt securities, would dilute our shareholders. The incurrence of debt would divert cash from working capital and capital
expenditures to service debt obligations and could result in operating and financial covenants that would restrict our operations and our ability
to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business, operations and
prospects may suffer.
Contractual Obligations and Commercial Commitments
We have leased certain office premises and apartments for employees under operating leases expiring through July 31, 2011. Below is a
summary of our company’s contractual obligations and commitments as of June 30, 2010:
Contractual Obligations
Operating leases
Payment Due by Period
Total
Less than 1 year 1-3 years
More than 3 years
$
212,233 $
182,719 $
29,514 $
—
The Labor Contract Law of the PRC requires employers to assure the liability of severance payments if employees are terminated and have
been working for their employers for at least two years prior to January 1, 2008. The employers will be liable for one month of severance pay
for each year of service provided by the employees. As of June 30, 2010, our company has estimated its severance payments to be
approximately $102,460, which has not been reflected in our consolidated financial statements.
Company Structure
We conduct our operations primarily through our wholly-owned subsidiaries, Trans Pacific, Sino-AUS and Sino-HK and our variable interest
entity, Sino-China. As a result, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our
subsidiaries and management fees paid by Sino-China. If our subsidiaries incur debt on their own behalf in the future, the instruments
governing their debt may restrict their ability to pay dividends to us. In addition, Trans Pacific is permitted to pay dividends to us only out of its
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, wholly foreign-owned
enterprises like Trans Pacific are required to set aside at least 10% of their after-tax profit each year to fund a statutory reserve until the amount
of the reserve reaches 50% of such entity’s registered capital.
To the extent Trans Pacific does not generate sufficient after-tax profits to fund this statutory reserve, its ability to pay dividends to us may be
limited. Although these statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in
excess of retained earnings of the respective companies, these reserve funds are not distributable as cash dividends except in the event of a
solvent liquidation of the companies. Other than as described in the previous sentences, China’s State Administration of Foreign Exchange
(“SAFE”) has approved the company structure between our company and Trans Pacific, and Trans Pacific is permitted to pay dividends to our
company.
17
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not
entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our
condensed consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an
unconsolidated entity that serve as credit, liquidity or market risk support to such entity. We do not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and
development services with us.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 8.
Financial Statements and Supplementary Data.
The Company’s financial statements and the related notes, together with the report of Friedman LLP, are set forth following the
signature pages of this report.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Company maintains a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial
statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. For the purpose of
improving management efficiency and effectiveness, the Company has completed the implementation of a new accounting and management
information system using SAP Business One software. Our company is currently utilizing the new system.
As of June 30, 2010, our company carried out an evaluation, under the supervision of and with the participation of management, including our
company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of our company’s disclosure
controls and procedures. Based on the foregoing, the chief executive officer and chief financial officer concluded that our company’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective in timely
alerting them to information required to be included in the Company’s periodic Securities and Exchange Commission filings.
Changes in Internal Control over Financial Reporting.
There were no changes in our company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934) during the year ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our
company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those
policies and procedures that:
18
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the Company’s assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its
management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
The Company’s management assessed the effectiveness of its internal control over financial reporting as of June 30, 2010. In making
this assessment, management used the framework set forth in the report entitled Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components
of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and
communication, and (v) monitoring. Based on this assessment, the Company’s management believes that, as of June 30, 2010, its internal
control over financing reporting is effective based on those criteria.
Item 9B. Other Information.
The Company has previously reported all information required to be disclosed during the fourth quarter of fiscal 2010 in a report on
Form 8-K.
19
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Regulation S-K Item 401: The section of the Proxy entitled “Management” is incorporated herein by reference.
Regulation S-K Item 405: Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under 17
CFR 240.16a-3(e) during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most
recent fiscal year, and any written representation referred to in paragraph (b)(1) of this section, the Company is not aware of any director,
officer, beneficial owner of more than ten percent of any class of equity securities of the Company registered pursuant to Section 12 that failed
to file on a timely basis, as disclosed in the above Forms, reports required by Section 16(a) during the most recent fiscal year or prior years.
Regulation S-K Item 406: The Company has adopted a Code of Ethics and has filed a copy of the Code of Ethics with the Commission.
Regulation S-K Item 407(c)(3): None.
Regulation S-K Item 407(d)(4) and (5): The Company has an audit committee, consisting solely of the Company’s independent
directors, Joseph Jhu, Wang Jing and Dennis O. Laing. Mr. Wang qualifies as the audit committee financial expert. The Company’s audit
committee charter is available on the Company’s website (www.sino-global.com) or directly at the following link: http://media.corporate-
ir.net/media_files/irol/22/221375/corpgov/AuditCommCharte09272008.pdf.
Item 11.
Executive Compensation.
The following table shows the annual compensation paid by us to Mr. Cao Lei, our Principal Executive Officer, and Mr. Zhang
Mingwei, our Principal Accounting and Financial Officer, for the years ended June 30, 2010 and 2009. No other officer had a salary during
either of the previous two years of more than $100,000.
Summary Compensation Table
Name
Cao Lei, Principal Executive Officer
Zhang Mingwei, Principal Accounting and
Financial Officer
Year
2010
2009
Salary
US$
163,857
106,840
2010
2009
101,344
65,323
-
-
-
-
-(1)
-(1)
-(1)
-(1)
Total
US$
163,857
106,840
-
-
-
-
101,344
65,323
Bonus
US$
Securities-based
compensation
US$
All other
compensation
US$
(1) We granted each of Mr. Cao and Mr. Zhang options to purchase 36,000 shares of our common stock for $7.75 per share. We granted
these options on May 20, 2008. Although we recognize $53,114 in compensation expense for these options as 7,200 options vested for
each of Mr. Cao and Mr. Zhang in each of fiscal 2009 and 2010, changes in SEC disclosure requirements require us to disclose the grant
date fair value of these shares. As the grant was made in fiscal 2008, the amount is not reflected in this summary compensation table.
20
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Plan category
Equity compensation plans approved by security
holders
Name and Address
Mr. Cao Lei(1)
Mr. Zhang Mingwei(1)
Mr. Wang Jing (1)
Mr. Dennis O. Laing (1)
Mr. Joseph Jhu (1)
Mr. Daniel E. Kern(5)
Total
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights (a)
Weighted-average
exercise price of
outstanding options,
warrants and rights (b)
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
column (a)) (c)
128,000
$
7.75
174,903
Title of
Class
common
common
common
common
common
common
Amount of
Beneficial
Ownership
Percentage
Ownership
47.52 %
2.32 %
0.14 %
0.14 %
0.07 %
13.22 %
63.41 %
1,398,440 (2)
68,400 (2)
4,000 (3)
4,000 (3)
2,000 (4)
389,100 (6)
1,865,940
(1)
(2)
(3)
(4)
(5)
(6)
The individual’s address is c/o Sino-Global Shipping America, Ltd., 136-56 39th Avenue, Room #305, Flushing, NY 11354.
Mr. Cao and Mr. Zhang each has received options to purchase 36,000 shares of the Company’s common stock, of which 14,400
underlying shares are reflected in this table because they have vested. The remaining 21,600 options will vest more than 60 days after
the date hereof.
Mr. Wang and Mr. Laing each has received options to purchase 10,000 shares of the Company’s common stock, of which 4,000
underlying shares are reflected in this table because they have vested. The remaining 6,000 options will vest more than 60 days after
the date hereof.
Mr. Jhu has received options to purchase 10,000 shares of the Company’s common stock, of which 2,000 underlying shares are
reflected in this table because they have vested. The remaining 8,000 options will vest more than 60 days after the date hereof.
Mr. Kern’s address is 1027 Goldenrod Ave., Corona Del Mar, CA 92625.
Mr. Kern owns 176,200 shares in his individual name, 187,900 shares in the Daniel E. Kern ROTH IRA, and 25,000 shares through
Kern Asset Management. Mr. Kern maintains sole voting and dispositive power as to these shares.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Board of Directors maintains a majority of independent directors who are deemed to be independent under the definition of
independence provided by NASDAQ Stock Market Rule 4200(a)(15). The sections of the Registration Statements and IPO Prospectus entitled
“Related Party Transactions” and of the Proxy entitled “Election of Directors and Director Biographies” are incorporated herein by reference.
Other than as described therein, no transactions required to be disclosed under Item 404 of Regulation S-K have occurred since the beginning
of the Company’s last fiscal year.
Item 14.
Principal Accountant Fees and Services.
Friedman LLP was appointed by the Company to serve as its independent registered public accounting firm for fiscal 2010. Audit
services provided by Friedman LLP for fiscal 2010 included the examination of the consolidated financial statements of the Company; and
services related to periodic filings made with the SEC. In addition, Friedman LLP provided review services relating to the Company’s quarterly
reports.
21
Fees Paid To Independent Registered Public Accounting Firm
Audit Fees
During fiscal 2010 and 2009, Friedman LLP’s fees for the annual audit of our financial statements and the quarterly reviews of the
financial statements included in Forms 10-Q were $243,750 and $248,329, respectively.
Audit-Related Fees
During fiscal 2010 and 2009, the Company paid Friedman LLP $0 and $0, respectively, for audit-related services.
Tax Fees
The Company has not paid Friedman LLP for tax services in fiscal 2010 and 2009.
All Other Fee s
The Company has not paid Friedman LLP for any other services in fiscal 2010 and 2009.
Audit Committee Pre-Approval Policies
Before Friedman LLP was engaged by the Company to render audit or non-audit services, the engagement was approved by the
Company’s audit committee. All services rendered by Friedman LLP have been so approved.
Item 15.
Exhibits, Financial Statement Schedules.
The following documents are filed herewith:
Number
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
13.1
13.2
13.3
14.1
21.1
31.1
31.2
32.1
32.2
Exhibit
Articles of Incorporation of Sino-Global Shipping America, Ltd.(1)
Bylaws of Sino-Global Shipping America, Ltd. (1)
Specimen Certificate for Common Stock (1)
Exclusive Management Consulting and Technical Services Agreement by and between Trans Pacific and Sino-China. (1)
Exclusive Marketing Agreement by and between Trans Pacific and Sino-China. (1)
Proxy Agreement by and among Cao Lei, Zhang Mingwei, the Company and Sino-China. (1)
Equity Interest Pledge Agreement by and among Trans Pacific, Cao Lei and Zhang Mingwei. (1)
Exclusive Equity Interest Purchase Agreement by and among the Company, Cao Lei, Zhang Mingwei and Sino-China. (1)
First Amended and Restated Exclusive Management Consulting and Technical Services Agreement by and between Trans
Pacific and Sino-China. (1)
First Amended and Restated Exclusive Marketing Agreement by and between Trans Pacific and Sino-China. (1)
Agency Agreement by and between the Company and Beijing Shou Rong Forwarding Service Co., Ltd. (1)
Quarterly report of the Company on Form 10-Q for the period ended September 30, 2009.(2)
Quarterly report of the Company on Form 10-Q for the period ended December 31, 2009.(3)
Quarterly report of the Company on Form 10-Q for the period ended March 31, 2010.(4)
Code of Ethics of the Company.(5)
List of subsidiaries of the Company.(6)
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(7)
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(7)
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(7)
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(7)
22
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration Nos. 333-150858 and 333-148611.
Incorporated by reference to the Company’s Form 10-Q filed on November 13, 2009, File No. 001-34024.
Incorporated by reference to the Company’s Form 10-Q filed on February 12, 2010 and Form 10-Q/A filed on March 16, 2010, File
No. 001-34024.
Incorporated by reference to the Company’s Form 10-Q filed on May 14, 2010, File No. 001-34024.
Incorporated by reference to the Company’s Form 10-KSB filed on September 29, 2008, File No. 001-34024.
Incorporated by reference to the Company’s Form 10-K filed on September 22, 2009, File No. 001-34024.
Filed herewith.
23
In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SIGNATURES
September 28, 2010
September 28, 2010
September 28, 2010
September 28, 2010
September 28, 2010
SINO-GLOBAL SHIPPING AMERICA, LTD.
By: /s/ Zhang Mingwei
Zhang Mingwei
Chief Financial Officer
(Principal Financial and Accounting Officer)
By: /s/ Cao Lei
Cao Lei
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Wang Jing
Wang Jing
Independent Director
By: /s/ Dennis Laing
Dennis Laing
Independent Director
By: /s/ Joseph Jhu
Joseph Jhu
Independent Director
24
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATE
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2010 and 2009
Consolidated Statements of Operations for the Years Ended June 30, 2010 and 2009
Consolidated Statements of Cash Flows for the Years Ended June 30, 2010 and 2009
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended June 30, 2010 and 2009
Notes to the Consolidated Financial Statements
F-1
PAGE
F-2
F-3
F-4
F-5
F-6
F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Sino-Global Shipping America, Ltd.
We have audited the accompanying consolidated balance sheets of Sino-Global Shipping America, Ltd. and Affiliate as of June 30, 2010 and
2009, and the consolidated related statements of operations, cash flows and shareholders' equity for the years then ended. Sino-Global
Shipping America, Ltd.'s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Sino-Global Shipping America, Ltd. and Affiliate as of June 30, 2010 and 2009, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Friedman LLP
New York, New York
September 28, 2010
F-2
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
Assets
Current assets
Cash and cash equivalents
Advances to suppliers
Accounts receivable, less allowance for doubtful accounts of $137,982 and $723,640 as of June 30, 2010 and
June 30, 2009
Other receivables, less allowance for doubtful accounts of $40,000 as of June 30, 2010
Prepaid expenses and other current assets
Prepaid taxes
Employee loans receivable
Income tax receivable
Deferred tax assets
Total current assets
Property and equipment, net
Security deposits
Employee loans receivable less current portion
Deferred tax assets
Equity investment
Other assets
Total Assets
Liabilities and Shareholders' Equity
Current liabilities
Advances from customers
Accounts payable
Accrued expenses
Other current liabilities
Total Current Liabilities
Total Liabilities
Shareholders' equity
Preferred stock, 1,000,000 shares authorized, no par value
Common stock, 10,000,000 shares authorized, no par value; 3,029,032 shares issued
Additional paid-in capital
Treasury stock, at cost
Retained earnings (accumulated deficit)
Accumulated other comprehensive loss
Unearned Compensation
Total Sino-Global Shipping America Ltd. Shareholders' equity
Non-Controlling interest
Total shareholders' equity
June 30,
2010
US$
2009
US$
5,926,153
103,336
7,259,654
8,825
1,888,965
319,899
118,112
477,598
16,727
123,387
93,000
2,894,750
22,085
58,516
35,305
16,627
105,092
333,000
9,067,177 10,733,854
754,027
-
52,190
171,000
236,569
-
972,931
56,885
68,504
26,000
-
766
10,280,963 11,858,940
355,936
3,482,273
75,771
104,641
686,588
3,024,104
145,857
619,801
4,018,621
4,476,350
4,018,621
4,476,350
-
7,709,745
1,191,796
(372,527 )
(425,446 )
(4,624 )
(593,027 )
-
7,709,745
1,158,696
(285,902 )
111,326
(13,399 )
(755,396 )
7,505,917
7,925,070
(1,243,575 )
(542,480 )
6,262,342
7,382,590
Total Liabilities and Shareholders' Equity
10,280,963 11,858,940
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues
Costs and expenses
Cost of revenues
General and administrative expense
Selling expense
Other
Operating Loss
Financial income, net
Non-operating revenue
Non-operating costs
Loss from equity investment
Net loss before provision for income taxes
Income taxes
Net loss
Non-controlling interest in loss
Net loss attributable to Sino-Global Shipping America Ltd.
Earnings (loss) per share
-Basic
-Diluted
-Basic
-Diluted
Weighted average number of common shares
The accompanying notes are an integral part of these consolidated financial statements.
F-4
For the years ended June 30,
2010
US$
2009
US$
26,841,336 18,334,359
(23,668,070 ) (15,767,390 )
(4,102,864 )
(272,829 )
(135,557 )
(4,859,116 )
(380,362 )
(61,648 )
(28,179,320 ) (21,068,516 )
(1,337,984 )
(2,734,157 )
150,632
28,776
(3,507 )
(54,702 )
121,199
25,010
-
-
-
25,010
(1,216,785 )
(2,709,147 )
(86,630 )
232,766
(1,303,415 )
(2,476,381 )
(766,643 )
(800,690 )
(536,772 )
(1,675,691 )
(0.18 )
(0.18 )
(0.56 )
(0.56 )
2,915,879
2,915,879
2,987,297
2,987,297
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating Activities
Net loss
Adjustment to reconcile net loss to net cash used in operating activities
Loss on disposal of equipment
Stock option expense
Depreciation
Provision for doubtful accounts
Deferred tax expense (benefit)
Loss from equity investment
Changes in assets and liabilities
Decrease (Increase) in advances to supplier
Decrease (Increase) in accounts receivable
Decrease (Increase) in other receivables
Increase in prepaid expense and other current assets
Increase in prepaid tax
Decrease in employee loan receivables
Increase in income tax receivables
Decrease Increase in security deposits
Decrease (Increase) in long-term prepaid expenses
Decrease in advances from customers
Increase in accounts payable
Increase (Decrease) in accrued expenses
Decrease in income taxes payable
Increase (Decrease) in other current liabilities
Net cash used in operating activities
Investing Activities
Proceeds from sale of equipment
Capital expenditures and other additions
Equity investment
Net cash used in investing activities
Financing Activities
Payments of long-term debt
Payments for treasury stock
Increase in noncontrolling interest in majority-owned susidiary
Net cash used in financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information
Interest paid
Income taxes paid
Supplemental disclosure of non-cash investing activities
Employee loans receivable for the sale of equipment
For the years ended June 30,
2010
US$
2009
US$
(1,303,415 )
(2,476,381 )
11,041
195,469
216,997
346,648
95,000
54,702
(94,511 )
659,137
(297,814 )
(59,596 )
(442,293 )
16,214
(18,295 )
56,885
766
(330,652 )
458,169
(70,086 )
-
(515,160 )
22,571
188,849
250,450
773,612
(359,000 )
-
105,745
(2,403,053 )
191,430
(28,061 )
(35,305 )
-
(105,092 )
35,303
(766 )
(268,728 )
1,971,046
72,834
(168,011 )
511,270
(1,020,794 )
(1,721,287 )
-
(40,371 )
(291,271 )
171,070
(396,624 )
-
(331,642 )
(225,554 )
-
(86,625 )
65,909
(67,434 )
(285,902 )
-
(20,716 )
(353,336 )
39,651
(43,419 )
(1,333,501 )
(2,343,596 )
7,259,654
9,603,250
5,926,153
7,259,654
-
340,500
10,023
392,969
-
85,131
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Balance as of June 30, 2009
Shares repurchased
Fair value of stock options granted to member of the
audit committee
Amortization of stock options granted to employees
and members of audit committee
Foreign currency translation
Net loss
Comprehensive loss
Balance as of June 30, 2010
Common
stock
US$
Additional
paid-in
capital
US$
Treasury
stock
US$
Retained
earnings
(accumulated
deficit)
US$
Accumulated
other
comprehensive
loss
US$
Unearned
compensation
US$
Total
US$
7,709,745
1,158,696
(285,902 )
111,326
(13,399 )
(755,396 )
7,925,070
(86,625 )
33,100
(86,625 )
(33,100 )
-
195,469
8,775
(536,772 )
7,709,745
1,191,796
(372,527 )
(425,446 )
(4,624 )
(593,027 )
195,469
8,775
(536,772 )
(527,997 )
7,505,917
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Sino-Global Shipping America, Ltd. (the “Company”), previously known as Sino-Global-Shipping (America) Ltd., was incorporated
under section 402 of the Business Corporation Laws of the United States of America in New York on February 2, 2001.
On September 18, 2007, the Company amended the Articles of Incorporation and Bylaws to merge into a new Corporation, Sino-
Global Shipping America, Ltd. in Virginia.
The Company’s principal geographic market is in the People’s Republic of China (“PRC”). As PRC laws and regulations restrict foreign
ownership of shipping agency service businesses, the Company provides its services in the PRC through Sino-Global Shipping Agency Ltd.
(“Sino-China”), a Chinese legal entity, which holds the licenses and permits necessary to operate shipping services in the PRC. Sino-China is
located in Beijing with branches in Ningbo, Qingdao, Tianjin, Qinhuangdao and Fangchenggang and cooperation with all other ports in PRC.
On November 13, 2007, the Company formed a wholly owned foreign-owned enterprise, Trans Pacific Shipping Limited (“Trans Pacific”), in
Beijing, which established a subsidiary in Shanghai, which provides freight forwarder services.
Trans Pacific and Sino-China do not have a parent-subsidiary relationship. Instead, Trans Pacific operates with Sino-China through a
variety of contractual agreements as described in Note 2(a).
With a purpose of building up an international shipping agency service network, the Company formed a wholly-owned subsidiary, Sino-
Global Shipping Australia Pty Ltd. (“Sino-Global AUS”) in Australia on July 3, 2008, which signed an agreement with Monson Agencies
Australia (“Monson”), one of the largest shipping agency service providers in Australia. Through Monson, the Company is able to provide
general shipping agency services to all ports in Australia.
The Company established a wholly-owned subsidiary, Sino-Global Shipping (HK) Limited ("Sino-Global HK") on September 22, 2008.
Sino-Global HK becomes Sino-Global's control and management center for southern Chinese ports and will enable the Company to extend its
offering of comprehensive shipping agency services to vessels going to and from one of the world's busiest ports. On July 27, 2009, Sino-
Global HK signed an exclusive partnership agreement with Forbes & Company Limited (“Forbes”), which is a listed company on the Bombay
Stock Exchange and one of the largest shipping and logistic service providers in India. Through Forbes, the Company is able to provide general
shipping agency services to all ports in India.
The Company through Trans Pacific acquired a 90% interest in Trans Pacific Logistics Shanghai, Ltd., which provides freight forwarder
services in Shanghai. On November 6, 2009, the Company through Trans Pacific acquired a 40% interest in Sino-Global Shipping Agency
Development Co., Ltd. in Beijing.
F-7
The Company is listed on the Nasdaq Capital Market as a result of its Initial Public Offering (IPO) on May 20, 2008.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (“US GAAP”). The agency relationship between the Company and Sino-China and its branches is governed by a
series of contractual arrangements pursuant to which the Company has substantial control over Sino-China.
Sino-China is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary. On November 14, 2007, the
Company through Trans Pacific entered into agreements with Sino-China, pursuant to which the Company receives 90% of Sino-China’s net
income. The Company does not receive any payment from Sino-China unless Sino-China recognizes net income during its fiscal year. These
agreements do not entitle the Company to any consideration if Sino-China incurs a net loss during its fiscal year. In accordance with these
agreements, Sino-China pays consulting and marketing fees equal to 85% and 5%, respectively, of its net income to the Company’s wholly
owned foreign subsidiary, Trans Pacific, and Trans Pacific supplies the technology and personnel needed to service Sino-China. Sino-China
was designed to operate in China for the benefit of the Company.
T he accounts of Sino-China are consolidated in the accompanying condensed consolidated financial statements pursuant to
Accounting Standards Codification (“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s sales are included in the Company’s total sales,
and its income (loss) from operations is consolidated with the Company’s. Because of the contractual arrangements, the Company had a
pecuniary interest in Sino-China that requires consolidation of the Company’s and Sino-China’s financial statements.
The Company has consolidated Sino-China’s income because the entities are under common control in accordance with ASC 805-10,
“Business Combinations”. For this reason, the Company has included 90% of Sino-China’s net income in the Company’s net income as
discussed above as though the 2007 agreements were in effect from the inception of Sino-China, and only the 10% of Sino-China’s net income
not paid to the Company represents the non-controlling interest in Sino-China’s income.
(b) Fair Value of Financial Instruments
The carrying amounts reported in the consolidated financial statements for current assets and current liabilities approximate fair value
due to the short-term nature of these financial instruments.
(c) Use of Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual
experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue
recognition, allowance for doubtful accounts, the useful lives of property and equipment and unearned compensation.
F-8
Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
(d) Translation of Foreign Currency
The accounts of the Company and Sino-China and each of its branches are measured using the currency of the primary economic
environment in which the entity operates (the “functional currency”). The Company’s functional currency is US dollars (“$”) while Sino-China
reports its financial position and results of operations in Renminbi (“RMB”). The accompanying consolidated financial statements are
presented in US dollars. Foreign currency transactions are translated into US dollars using the fixed exchange rates in effect at the time of the
transaction. Generally foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated
statements of operations. The Company translates foreign currency financial statements of Sino-China, Sino-Global AUS, Sino-Global HK
and Trans Pacific in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange rates
quoted by the People’s Bank of China at the balance sheet dates and revenues and expenses are translated at average exchange rates in effect
during the periods. Resulting translation adjustments are recorded as other comprehensive income (loss) and accumulated as a separate
component of equity of the Company and also included in Non-controlling interest.
(e) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, and other highly liquid investments which are unrestricted as to withdrawal or use,
and which have maturities of three months or less when purchased. The Company maintains cash and cash equivalents with various financial
institutions mainly in the PRC, Australia, Hong Kong and the United States. Cash balances in the United States are insured by the Federal
Deposit Insurance Corporation subject to certain limitations.
F-9
(f) Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation and amortization. Historical cost comprises its
purchase price and any directly attributable costs of bringing the assets to its working condition and location for its intended use. Depreciation
is calculated on a straight-line basis over the following estimated useful lives:
Buildings
Motor vehicles
Furniture and office equipment
20 years
5-10 years
3-5 years
The carrying value of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from
such asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved or based on independent appraisals. Management has determined that there were no impairments at the
balance sheet dates.
(g) Equity Investment
Investments in companies that are owned 20% to 50% for which the Company has significant influence but not control are accounted for
by the equity method. Under the equity method, the Company recognizes in earnings its proportionate share of the income or loss of the
investee. The Company has an investment of 40% in Sino-Global Shipping Agency Development Co., Ltd. (“Development Co.”) The
Company recognized its proportionate share of loss of $54,703 for the year ended June 30, 2010.
Summarized financial information for Development Co is as follows:
Current Assets
Noncurrent Assets
Total Assets
Current liabilities
Noncurrent liabilities
Total Liabilities
Shareholders' equity
Total Liabilities and shareholders' equity
Results of Operations
Net Sales
Costs of goods sold
Gross profit
Operating loss
Net loss
(h) Revenue recognition
As of June 30, 2010
US$
100,190
70,579
170,769
13,751
-
13,751
157,018
170,769
For the year ended
June 30, 2010
-
-
-
(136,757 )
(136,757 )
$
$
The Company charges shipping agency fees in two ways: (1) fixed fees that are predetermined with the customer, and (2) cost-plus fees
that are calculated based on the actual costs incurred plus a markup. The Company generally requires payments in advance from customers and
bills them on the balance within 30 days after the transactions are completed. Revenues are recognized from shipping agency services upon
completion of services, which coincides with the date of departure of the relevant vessel from port. Advance payments and deposits received
from customers prior to the provision of services and recognition of the related revenues are presented as current liabilities.
F-10
Some contracts contain a provision stating that revenues are recognized for actual expenses incurred plus a profit margin. When the
services are completed but the information on the actual expenses is not available at the end of the fiscal period, we estimate revenues and
expenses based on our previous experience with similar vessels and port charges.
In accordance with ASC 405-45, the Company reports its revenue on the gross amounts billed to customers based on several criteria: (1)
the Company assumes all credit risk for the amounts billed to customers, (2) the Company has multiple suppliers for services ordered by
customers and discretion to select the supplier that provides the services, and (3) the Company determines the nature, type or specifications of
the services ordered by customers and the Company is responsible for fulfilling these services.
(i) Accounts receivable
Accounts receivable are presented at net realizable value. The Company maintains allowances for doubtful accounts for estimated
losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to
the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors,
including the age of the balance, customer’s historical payment history, its current credit-worthiness and current economic trends. Receivables
are considered past due after 365 days. Because of the worldwide financial crisis, the Company has difficulties in collecting cash from some of
its customers. In accordance with the accounting policies, management has determined that an allowance of $137,982 was required at June 30,
2010, and $723,640 at June 30, 2009. Accounts are written off after exhaustive efforts at collection.
(j) Taxation
Because the Company and Sino-China are incorporated in different jurisdictions, they file separate income tax returns. The Company
uses the liability method of accounting for income taxes in accordance with US GAAP. Deferred taxes, if any, are recognized for the future tax
consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial
statements.
The Company follows the provisions of ASC 740-10, “Accounting for Income Taxes”, which addresses the determination of whether tax
benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company
may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from
such a position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
settlement. ASC 740-10 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures.
The implementation of ASC 740-10 resulted in no material liability for unrecognized tax benefits and no material change to the
beginning retained earnings of the Company. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as
income tax expense in the Statement of Operations. For the year ended June 30, 2009, the Company incurred approximately $11,000 of
interest and penalties. Most of these interest and penalties incurred were due to the Company changed its tax year end from January 31 to June
30.
F-11
Income tax returns for the year prior to 2006 are no longer subject to examination by tax authorities.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. Sino-China and Trans Pacific are
registered in PRC and governed by the Enterprise Income Tax Laws of the PRC. Their taxable incomes were subject to an enterprise income
tax rate of 25% in accordance with the amendment of the Enterprise Income Tax Law of the PRC that became effective on January 1, 2008.
PRC Business Tax and Surcharges
Revenues from services provided by Sino-China and Trans Pacific are subject to the PRC business tax of 5%. Business tax and
surcharges are paid on gross revenues generated from shipping agency services minus the costs of services which are paid on behalf of
the customers.
In addition, under the PRC regulations, Sino-China is required to pay the city construction tax (7%) and education surcharges (3%)
based on the calculated business tax payments.
Sino-China has complied with ASC 405-50 and reports its revenues net of PRC’s business tax and surcharges for all the periods
presented in the consolidated statements of operations.
(k) Earnings (loss) per share
Earnings (loss) per share is calculated in accordance with ASC 260-10, “Earnings Per Share”. Basic earnings per share is computed by
dividing net income attributable to holders of common shares by the weighted average number of common shares outstanding during the years.
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised
or converted into common shares. Convertible, redeemable preference shares if applicable are included in the computation of diluted earnings
per share on an “if-converted” basis, when the impact is dilutive. Contingent exercise price resets are accounted for in a manner similar to
contingently issuable shares. Common share equivalents are excluded from the computation of diluted earnings per share if their effects would
be anti-diluted.
ASC 260-10 requires the presentation of both Basic EPS and Diluted EPS on the face of the Company’s Consolidated Statements of
Operations.
The following table sets forth the computation of basic and diluted per share information:
Numerator:
Net income (loss)
Denominator:
Weighted average common shares outstanding
Dilutive effect of stock options and warrants
Weighted average common shares outstanding, assuming dilution
F-12
2010
2009
$
(536,772 ) $
(1,675,691 )
2,915,879
-
2,915,879
2,987,297
-
2,987,297
The effect of 138,000 stock options and 139,032 warrants for all periods presented were not included in the calculation of diluted EPS
because they would be anti-dilutive.
3. OTHER RECEIVABLES / OTHER CURRENT LIABILITIES
(a) Other Receivables
Other receivables represent mainly amounts to be received from customers for advance payments made to the port agent for reimbursed
charges to be incurred in connection with the costs of services and temporary loans to employees.
(b) Other Current Liabilities
Other current liabilities represent mainly advance payments received from customers for reimbursed port agent charges to be incurred
and miscellaneous accrued liabilities.
4. EMPLOYEE LOANS RECEIVABLE
The employee loans receivable represent receivables from employees other than executive officers for three automobiles sold to these
employees during the fiscal year ended June 30, 2009. These receivables are secured by the automobiles and the personal assets of the
employees. The Company has not imputed any interest on these receivables due to immateriality.
Employee loans receivable consist of the following:
Loans from employees, secured by their personal assets, receivable in monthly installments of
approximately $1,386 bearing no interest through August 2014
Less : Current maturities
5. ADVANCES TO SUPPLIERS/ADVANCES FROM CUSTOMERS.
(a) Advances to Suppliers
June 30,
2010
US$
2009
US$
68,917
(16,727 )
52,190
85,131
(16,627 )
68,504
Advances to suppliers represent costs of services and fees paid to suppliers in advance in connection with the agency services fees
income to be recognized.
(b) Advances from Customers
Advances from customers represent money received from customers in advance in connection with the agency services fees income to
be recognized.
F-13
6. PROPERTY AND EQUIPMENT
Property and equipment are as follows:
Land and building
Motor vehicles
Computer equipment
Office equipment
Furniture & Fixtures
System software
Leasehold improvement
Total
Less : Accumulated depreciation and amortization
Property and equipment, net
7. STOCK-BASED COMPENSATION
June 30,
2010
US$
2009
US$
73,207
869,081
102,048
35,714
37,119
112,268
62,763
72,768
863,866
113,556
30,419
22,545
120,347
70,606
1,292,200
1,294,107
538,173
321,176
754,027
972,931
On May 20, 2008, the Company issued 174,000 stock options (“Options”) to its officers, employees and members of the audit committee
to purchase the Company’s common stock. The Options were all issued pursuant to the Company’s 2008 Stock Incentive Plan. On December
15, 2009, the Company issued 10,000 stock options to Joseph Jhu, member of the audit committee, to purchase the Company’s common
stock without par value per share.
The Options are non-statutory options and have been granted by the Compensation Committee to Cao Lei, Zhang Mingwei, Cao Jing Bo
and Cao Xin Qing. The Board of Directors approved the issuance of options to Dennis O. Laing, C. Thomas Burke and Wang Jing, all of whom
are members of both the Compensation Committee and Audit Committee. During the year ended June 30, 2009, Cao Xin Qing and C. Thomas
Burke left the Company and their options expired unexercised.
A summary of the options issued under the Plan is presented in the table below:
Options outstanding, beginning of year
Granted
Canceled, forfeited or expired
Options outstanding, end of year
Options exercisable, end of year
2010
2009
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
Shares
128,000 $
10,000 $
- $
7.75
3.37
7.75
174,000 $
- $
(46,000 ) $
138,000 $
7.43
128,000 $
7.75
-
7.75
7.75
27,600 $
7.75
25,600 $
7.75
F-14
The issuance of the Options is exempted from registration under of the Securities Act of 1933, as amended (the “Act”). The Options will
vest at a rate of 20% per year, with 20% vesting initially on May 19, 2010. The Common Stock underlying the Options granted may be sold in
compliance with Rule 144 under the Act. The term of the Options is 10 years and the exercise price of the Options are $7.75 (174,000 options)
and $3.37 (10,000 options) separately. Each Option may be exercised to purchase one share of Common Stock. Payment for the Options may
be made in cash or by exchanging shares of Common Stock at their Fair Market Value. Provided the Common Stock is then traded on the
NASDAQ Capital Market, the Fair Market Value will be equal to the average of the highest and lowest registered sales prices of Company
Stock on the date of exercise.
The fair value of 10,000 stock options granted in 2010 was calculated at the grant date using the Black-Scholes option-pricing model
with the following assumptions:
Black-Scholes Option Pricing Model
Assumptions:
Stock Price
Strike Price
Volatility
Risk-free Rate
Expected life
Dividend Yield
Marginal Tax Rate
Number of Options
$
$
3.31
3.37
408.84 %
2.35 %
5 yrs
0.00 %
0.00 %
10,000
For the 10,000 options granted in 2010, volatility of SINO stock is computed based on the monthly closing price from May 2008 to
December 2009. Because the Company does not have historical share option exercise experience to estimate future exercise patterns, the
expected life was determined using the simplified method as these awards meet the definition of "plain-vanilla" options under the rules
prescribed by Staff Accounting Bulletin No. 107.
The aggregate fair value of $593,027 at the year ended June 30, 2010 is presented as “Unearned Compensation”, comparing to $755,396
as the year ended June 30, 2009. For those 10,000 options issued in December 2009, the fair value is $33,100 as the year ended June 30, 2010.
The Company amortized stock option expenses of $195,469 and $188,849 for the years ended June 30, 2010 and 2009, respectively.
In connection with the initial public offering of the Company’s common stock on May 20, 2008, 139,032 warrants were issued to the
underwriter as part of their compensation. Each warrant has the right to purchase one share of common stock for an exercise price of $9.30 per
share with a term of 10 years. The fair value of these warrants which was netted against the proceeds from the initial public offering, totaled,
$214,451. This estimate was based on the NASD Rule 2710 “Valuation of Non-cash Compensation”.
F-15
8. NON-CONTROLLING INTEREST
Non-controlling interest in Sino-China consists of the following:
Sino-China:
Original paid-in capital
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Other adjustments
Trans Pacific Logistics Shanghai Ltd.
Total
9. COMMITMENTS AND CONTINGENCY
(a) Office leases
June 30,
2010
US$
2009
US$
356,400
1,044
(29,724 )
(1,641,802 )
4,598
(1,309,484 )
65,909
(1,243,575 )
356,400
1,044
(29,364 )
(873,378 )
2,818
(542,480 )
-
(542,480 )
The Company leases certain office premises and apartments for employees under operating leases through December 31, 2011. Future
minimum lease payments under operating leases agreements were as follows:
Year ending June 30,
2011
2012
(b) Contingency
Amount
US$
182,719
29,514
212,233
The Labor Contract Law of the People’s Republic of China requires employers to assure the liability of the severance payments if
employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The employers will be liable
for one month for severance pay for each year of the service provided by the employees. As of June 30, 2010, the Company has estimated its
severance payments of approximately $102,460, which has not been reflected in its consolidated financial statements.
F-16
10. CAPITAL STOCK
On May 20, 2008, the Company completed its initial public offering (“IPO”) of 1,229,032 ordinary shares at $7.75 offering price and
realized gross proceeds of $10,775,000 before cash offering costs of $1,602,684. Following the IPO, the Company announced it would
repurchase up to 10% of its outstanding common shares for a period of 12 months beginning in October 2008. As of June 30, 2010, the
Company repurchased 125,191 shares from the open market at an average price of $2.98 per share including trading expenses for the total cost
of $372,528. On September 19, 2009, the Company’s board of directors approved the extension of the repurchase of the common shares for a
period of 6 months. On June 07, 2010, the Company closed its Escrow bank account.
11. FINANCIAL INCOME (EXPENSES), NET
Financial income (expenses) for the years ended June 30, 2010 and June 30, 2009 are as follows:
Interest income
Interest expense
Bank charge
Foreign currency translation
12. INCOME TAXES
For the year ended June 30,
2010
US$
2009
US$
148,127
3,492
(28,257 )
27,270
150,632
149,553
(10,023 )
(6,926 )
(107,594 )
25,010
The income tax provision (benefit) for years ended June 30, 2010 and June 30, 2009 are as follows:
Current
USA
China
Deferred
Allowance for doubtful accounts
Net operating loss carryforward utilized
Valuation allowance
Net deferred
Total
For the year ended June 30,
2010
US$
2009
US$
8,370
-
8,370
(121,872 )
(4,362 )
(126,234 )
(240,000 )
145,000
-
(95,000 )
(86,630 )
333,000
26,000
-
359,000
232,766
As of June 30, 2010, the Company recognized deferred tax assets of $264,000 including current deferred tax assets of $93,000 and non-
current tax assets of $171,000. Management has determined that no valuation allowance for deferred tax assets should be provided as of June
30, 2010 because the Company is expected to be able to realize and recognize these deferred tax assets in the near future.
The Company had net operating loss carry forwards of approximately $431,000 which may be utilized to reduce New York State and
New York City taxable income through 2030.
F-17
Income tax expense for the years ended June 30, 2010 and 2009 varied from the amount computed by applying the statutory income tax
rate to income (loss) before taxes. A reconciliation between the expected federal income tax rate using the federal statutory tax rate of 35
percent to the Company’s effective income tax rate is as follows:
Expected federal income tax expense (benefit)
State, local tax net of federal benefit
Permanent difference
Net operating loss carry forward adjustments
Other
Total tax expense (benefit)
13. MAJOR CUSTOMER
For the year ended June 30,
2010
%
2009
%
35.00
(35.00 )
11.99
2.45
15.56
7.50
1.10
1.80
(2.14 )
(0.50 )
62.86
(25.10 )
For the years ended June 30, 2010 and June 30, 2009, approximately 64% and 55% respectively, of the Company’s revenues were from
one customer. The Company provides services to one customer under an exclusive agency agreement that expires on December 31, 2011. At
June 30, 2009, receivables from three customers approximated 24%, 13% and 10%, respectively.
F-18
Exhibit 31.1
I, Cao Lei, certify that:
CERTIFICATION
(1)
(2)
(3)
(4)
I have reviewed this Annual Report on Form 10-K of Sino-Global Shipping America, Ltd.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information referred to in this report, fairly present in all
material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal annual report that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
(5)
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: September 28, 2010
/s/ Cao Lei
Cao Lei
Chief Executive Officer
Exhibit 31.2
I, Zhang Mingwei, certify that:
CERTIFICATION
(1)
(2)
(3)
(4)
I have reviewed this Annual Report on Form 10-K of Sino-Global Shipping America, Ltd.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information referred to in this report, fairly present in all
material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal annual report that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
(5)
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: September 28, 2010
/s/ Zhang Mingwei
Zhang Mingwei
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Sino-Global Shipping America, Ltd. (the “Company”) on Form 10-K for the year ended June
30, 2010 as filed with the Securities and Exchange Commission on September 24, 2010 (the “Report”), I, Cao Lei, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of
operations of the Company.
September 28, 2010
/s/ Cao Lei
Cao Lei
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Sino-Global Shipping America, Ltd. (the “Company”) on Form 10-K for the year ended June
30, 2010 as filed with the Securities and Exchange Commission on September 24, 2010 (the “Report”), I, Zhang Mingwei, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of
operations of the Company.
September 28, 2010
/s/ Zhang Mingwei
Zhang Mingwei
Chief Financial Officer