U.
S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
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x
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Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the fiscal year ended
June 30,
2009
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Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For the
transition period from ___________ to ___________.
Commission
File Number 001-34024
Sino-Global
Shipping America, Ltd.
(Exact
name of registrant as specified in its charter)
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Virginia
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11-3588546
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(State
or other jurisdiction of
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(I.R.S.
employer
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incorporation
or organization)
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identification
number)
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36-09
Main Street
Suite
9C-2
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:
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Title
of each class
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Name
of each exchange on which registered
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Common
Stock, without par value per share
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NASDAQ
Capital Market
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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
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No
x
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
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No
x
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
x
No
¨
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.
¨
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.
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Large accelerated filer
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Accelerated filer
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Non-accelerated
filer
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(Do
not check if a smaller reporting company)
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Smaller reporting company
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x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
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No
x
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
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No
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N/A
x
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, 2008 was
approximately $4,830,844, based on the closing sales price of $3.30 per share,
as reported on the NASDAQ Capital Market, multiplied by the number of shares
outstanding on that date (1,462,892 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 2,929,032 shares of common stock and no shares of preferred
stock.
DOCUMENTS
INCORPORATED BY REFERENCE
This Form
10-K incorporates 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”). This Form 10-K also incorporates the proxy statement
filed on May 15, 2009 (the “Proxy”). The Registration Statements, IPO Prospectus
and Proxy are incorporated by reference into Parts I, II and III of this Form
10-K.
SINO-GLOBAL
SHIPPING AMERICA, LTD.
FORM
10-K
INDEX
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PART
I
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2
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Item
1.
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Business.
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2
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Item
1A.
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Risk
Factors.
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7
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Item
1B.
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Unresolved
Staff Comments.
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8
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Item
2.
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Properties.
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8
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Item
3.
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Legal
Proceedings.
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9
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Item
4.
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Submission
of Matters to a Vote of Security Holders.
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9
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PART
II
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10
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Item
5.
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Market
for Registrant
’
s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
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10
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Item
6.
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Selected
Financial Data
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11
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Item
7.
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Management
’
s
Discussion and Analysis or Plan of
Operation.
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11
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Item
7A.
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Quantitat
ive
and Qualitative Disclosures about Market
Risk.
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21
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Item
8.
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Financial
Statements and Supplementary Data.
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21
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
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21
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Item
9A/9A(T).
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Controls
and Procedures
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21
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Ite
m
9B.
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Other
Information.
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22
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PART
III
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23
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Item
10.
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Directors,
Executive Officers and Corporate Governance.
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23
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Item
11.
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Executive
Compensation.
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23
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
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24
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence.
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24
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Item
14.
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Principal
Accountant Fees and Services.
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24
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Item
15.
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Exhibits,
Financial Statement Schedules.
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25
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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:
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the
ability to timely and accurately provide shipping agency
services;
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its
dependence on a limited number of larger customers;
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political
and economic factors in the People’s Republic of China
(“PRC”);
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the
Company’s ability to expand and grow its lines of
business;
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unanticipated
changes in general market conditions or other factors, which may result in
cancellations or reductions in need for the Company’s
services;
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a
weakening of economic conditions which would reduce demand for services
provided by the Company and could adversely affect
profitability;
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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;
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the
acceptance in the marketplace of the Company’s new lines of
services;
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foreign
currency exchange rate fluctuations;
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hurricanes
or other natural disasters;
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the
Company’s ability to identify and successfully execute cost control
initiatives;
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the
impact of quotas, tariffs, or safeguards on the importation or exportation
of the Company’s customer’s products; or
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other
risks outlined above and in the Company’s other filings made periodically
by the Company.
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the
Company’s ability to attract, retain and motivate skilled personnel to
serve the Company.
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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.
PART
I
General
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.
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 9 percent for more than 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:
• We can avoid appointing local agents, which allows us to control
the high level of service provided to our customers;
• 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;
• We can maximize profit for our company by not needing to pay third
party shipping agents to serve as local agents for our customers;
• We avoid losing customers to the companies we appoint as local
agents or to other competitors that may be able to provide local agent services;
and
• We may save our customers money by avoiding duplicative layers of
administration.
•
React quickly to opportunities to
offer 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.
•
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 55% of our revenues in 2009 and 54% of our revenues
in 2008.
In 2009
fiscal year,,we also provided a significant amount of shipping agency services
to Hoegh Autoliners (Shanghai) Ltd.,a member of Hoegh Autoliners Ltd, a Norway
based shipping services provider with a network throughout the world. Revenues
from this company accounted for approximately 12% of our revenues in 2009 and 0%
of our revenues in 2008.
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.
•
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.
•
Penavico
. 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.
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:
•
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 48 employees, 40 of whom are based in
China. Of the total, 5 are in management, 2 are in technical support, 2 are in
sales and marketing, 22 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.
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.
We
currently rent ten (10) facilities throughout China, Australia and the United
States. Our headquarters are located in Beijing.
|
Office
|
|
Address
|
|
Rental Term
|
|
Space
|
|
Beijing,
PRC
|
|
Room
603, Tower A
Ye
Qing Plaza No. 9
Wangjing
(North) Road
Chao
Yang District
Beijing,
PRC 100102
|
|
Expires
12/31/2009
|
|
320
m
2
|
|
|
|
|
|
|
|
|
|
|
|
Room
705, Tower B
Boya
International Center
No.
1, Lizezhongyi Road
Chaoyang
District
Beijing,
PRC 100102
|
|
Expires
12/31/2010
|
|
845
m
2
|
|
|
|
|
|
|
|
|
|
Fangchenggang,
PRC
|
|
2
nd
Floor, Duty-Free Store Building
South
Gate of Fangcheng Port
Fangcheng,
PRC 538001
|
|
Long
term
|
|
200
m
2
|
|
|
|
|
|
|
|
|
|
Flushing,
NY
|
|
36-09
Main Street
Suite
9C-2
Flushing,
New York 11354
|
|
Expires
08/31/2010
|
|
60
m
2
|
|
|
|
|
|
|
|
|
|
Perth,
Australia
|
|
Suite
1, No. 1 High Street,
Fremantale,
WA 6160
Australia
|
|
Expires
08/31/2009
|
|
20
m
2
|
|
|
|
|
|
|
|
|
|
Kowloon,
Hong Kong
|
|
Floor
7, Lee Kong Commercial Building
115
Woosung Street, Jondan,
Kowloon,
Hong Kong
|
|
Expires
09/30/2010
|
|
20
m
2
|
|
|
|
|
|
|
|
|
|
Ningbo,
PRC
|
|
Room
1611, Hai Guang Plaza
No.
298 Zhong Shan West Road
Hai
Shu District
Ningbo,
PRC 315011
|
|
Expires
11/01/2009
|
|
45
m
2
|
|
|
|
|
|
|
|
|
|
Qingdao,
PRC
|
|
Room
2101 Building A, No. 10
Xiang
Gang (Middle) Road,
Qingdao,
PRC 266071
|
|
Expires
11/30/2010
|
|
186
m
2
|
|
|
|
|
|
|
|
|
|
Qinhuangdao,
PRC
|
|
Room
B01, 18
th
Floor
Jin
Yuan International Commercial Building
No.
146 He Bei Street, Hai Gang District
Qinhuangdao,
PRC 0066000
|
|
Expires
07/16/2011
|
|
30
m
2
|
|
|
|
|
|
|
|
|
|
Tianjin,
PRC
|
|
Room
108, Waidai Building
No.
5 Xuzhou Road
Hexi
District
Tianjin,
PRC 300456
|
|
Expires
10/30/2009
|
|
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.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
The
Company held its annual shareholder meeting during the fourth quarter, on May
27, 2009. The following matters were considered and approved at the meeting.
Proxies were solicited in favor of each of the below matters, and each matter
was approved at the meeting.
A total
of 2,726,899 shares were represented in person or by proxy at the Company’s 2009
annual general meeting, representing approximately 92.1% of outstanding shares.
During the meeting, all proposed resolutions were duly passed
including:
|
1.
|
Cao
Lei and Joseph Jhu were elected as the Class II members of the board of
directors, each to serve a term expiring at the annual meeting of
shareholders in 2012 or until his successor is duly elected and qualified.
Mr. Cao received approximately 98.4% of the votes cast at the meeting. Mr.
Jhu received approximately 98.6% of the votes cast at the
meeting.
|
|
2.
|
Friedman
LLP was appointed as the Company’s independent registered public
accounting firm for the fiscal year ending June 30, 2009. Approximately
96.2% of the votes cast at the meeting were cast for this item;
approximately 3.6% were cast against this item, and approximately 0.2%
were abstentions.
|
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. On June
30, 2009, there were 767 registered holders of record of our common stock. The
high and low common stock sales prices per share were as follows:
|
Quarter
Ended
|
Sep.
30
|
|
Dec.
31
|
|
Mar.
31
|
|
June 30
|
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock price per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
9.21
|
|
|
$
|
6.20
|
|
|
$
|
4.33
|
|
|
$
|
3.80
|
|
|
$
|
9.21
|
|
|
Low
|
|
$
|
3.31
|
|
|
$
|
1.77
|
|
|
$
|
1.60
|
|
|
$
|
2.17
|
|
|
$
|
1.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock price per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
N/A
|
|
|
$
|
N/A
|
|
|
$
|
N/A
|
|
|
$
|
27.49
|
|
|
$
|
27.49
|
|
|
Low
|
|
$
|
N/A
|
|
|
$
|
N/A
|
|
|
$
|
N/A
|
|
|
$
|
8.75
|
|
|
$
|
8.75
|
|
Approximate
Number of Holders of Our Common Stock
As of the
date of this report there are approximately 700 registered stockholders of our
common shares on the records of our transfer agent, including “street name” or
beneficial holders, whose shares are held of record by banks, brokers and other
financial institutions.
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.
The
Company has used offering proceeds for the following purposes from completion of
the IPO through June 30, 2009.
|
Description of Use
|
|
Proposed
Expenditure Amount
|
|
|
Actual Expenditures
through June 30, 2009
|
|
|
Organization
of our company and creation of contractual arrangements among our company,
Sino-China and Trans Pacific
|
|
$
|
100,000
|
|
|
$
|
103,526
|
|
|
Business
expansion in 15 to 35 main ports in China
|
|
|
5,930,941
|
|
|
|
553,637
|
|
|
Sarbanes-Oxley
compliance
|
|
|
500,000
|
|
|
|
43,994
|
|
|
Marketing
of company across China, United States and internationally
|
|
|
244,621
|
|
|
|
258.163
|
|
|
Develop
information exchange system
|
|
|
400,000
|
|
|
|
72,132
|
|
|
Train
staff
|
|
|
163,081
|
|
|
|
51,562
|
|
|
Fixed
asset purchase
|
|
|
407,702
|
|
|
|
396,624
|
|
|
Miscellaneous
expenses
|
|
|
407,702
|
|
|
|
296,459
|
|
|
Stock
repurchases
|
|
|
|
|
|
|
285,902
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,154,048
|
|
|
$
|
2,034,999
|
|
|
Item
6.
|
Selected
Financial Data
|
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 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 eight branches in
Ningbo, Qingdao, Tianjin, Qinhuangdao, Fangchenggang, Yantai, Yingkou and
Zhoushan, we provide general shipping agency services in all 76 ports in
China.
On
November 13, 2007, we formed our wholly foreign-owned enterprise, Trans Pacific
Shipping Limited (“Trans Pacific Beijing), in Beijing, which established a
wholly-owned subsidiary, Trans Pacific Logistics Shanghai, Limited (“Trans
Pacific Shanghai” and, together with Trans Pacific Beijing, “Trans Pacific”), 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 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. See
“Our Corporate Structure - Contractual Arrangements with Sino-China and its
Shareholders.”
On May
20, 2008, we completed an initial public offering of 1,229,032 ordinary 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 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. As of June 30, 2009, we
repurchased 100,000 shares of our common stock from the open market at an
average price of $2.86 per share including trading expenses. The total cost of
stock repurchase is $285,902.
Revenues
The
worldwide financial crisis that started from September 2008 has brought it with
significant negative impact on our operations. Nevertheless, we have achieved
top line growth. For the year ended June 30, 2009, our total revenues amounted
to approximately $18.33 million, representing a 21.52% increase from our total
revenues of $15.09 million for the year ended June 30, 2008. Due to the
financial crisis, we did not reach our revenue target of $22.64 million, a 50%
growth, for the 2009 fiscal year.
The
fourth quarter saw an increased volume of iron ore imports into China. Our total
revenues amounted to approximately $5.48 million, a 40% growth for the fourth
quarter 2009, over our total revenues of $3.91 million for the fourth quarter
2008.
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.
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, 2009 mainly due to the increased value of the
Chinese RMB against the U.S. dollar. Our general and administrative expenses
also increased significantly during the year ended June 30, 2009, compared to
those expenses for the same periods in 2008. This is largely due to increased
personnel expenses, public company listing expenses, business expansion and
allowance for doubtful accounts. The following table sets forth the components
of our company’s costs and expenses for the periods
indicated.
|
|
|
For the years ended June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
|
Revenues
|
|
|
18,334,359
|
|
|
|
100.00
|
|
|
|
15,087,238
|
|
|
|
100.00
|
|
|
|
3,247,121
|
|
|
|
21.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of revenues
|
|
|
15,767,390
|
|
|
|
86.00
|
|
|
|
12,371,691
|
|
|
|
82.00
|
|
|
|
3,395,699
|
|
|
|
27.45
|
|
|
General
and administrative
|
|
|
4,859,116
|
|
|
|
26.50
|
|
|
|
2,348,894
|
|
|
|
15.57
|
|
|
|
2,510,222
|
|
|
|
106.87
|
|
|
Selling
|
|
|
380,362
|
|
|
|
2.07
|
|
|
|
190,648
|
|
|
|
1.26
|
|
|
|
189,714
|
|
|
|
99.51
|
|
|
Other
expense
|
|
|
61,648
|
|
|
|
0.34
|
|
|
|
90,118
|
|
|
|
0.60
|
|
|
|
(28,470
|
)
|
|
|
(31.59
|
)
|
|
Total
costs and expenses
|
|
|
21,068,516
|
|
|
|
114.91
|
|
|
|
15,001,351
|
|
|
|
99.43
|
|
|
|
6,067,166
|
|
|
|
40.44
|
|
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 82.00% to 86.00% for the year ended June 30 2009, in line with the
devaluation of U.S. dollars against the Chinese RMB in the same
period.
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
increased in the 2009 fiscal year due to expenses spent on setting up
Sino-Global AUS, Sino-Global HK and the new branches and subsidiaries in China,
recruitment of new personnel, spending on travel and publicity. We have incurred
additional general and administrative expenses as we have expanded our
operations and begun to operate as a publicly listed company in the United
States.
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
increased in both absolute amount and as a percentage of our total net revenues
for the year ended June 30, 2009, mainly due to the increase in the number of
ports we served in China and overseas.
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 condensed 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. These agreements do not entitle us to any consideration if
Sino-China incurs a net loss during its fiscal year. In accordance with the
agreements, 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 condensed
consolidated financial statements pursuant to Financial Accounting Standards
Board Interpretation No. 46 (Revised), “Consolidation of Variable Interest
Entities - an Interpretation of ARB No. 51”. 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.
Mr. Cao
Lei owned more than 70% of both Sino-China and our company before completion of
the offering and was able to cause our company and Sino-China to enter into the
2007 agreements at any point in time. Accordingly, for all periods presented,
our company has consolidated Sino-China’s income because the entities are under
common control in accordance with SFAS 141, “Business Combinations”. For this
reason, we have included 90% of Sino-China’s net income in our 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 our
company represents the non-controlling interest in Sino-China’s
income.
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. In
accordance with our accounting policies, we have determined that an allowance of
$723,640 was required at June 30, 2009, comparing $48,708 at June 30, 2008.
In addition, we wrote off uncollected accounts of $146,452 for the 2009 fiscal
year.
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 services.
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 Services 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 Services. Any adjustment to actual from
the estimated Revenues and Cost of Services recorded has been and is expected to
be immaterial.
Property
and Equipment
We state
property and equipment at historical cost less accumulated depreciation and
amortization. Historical cost consists of its purchase price and any directly
attributable costs of bringing the asset to its working condition and location
for its intended use. We provide for depreciation and amortization in amounts
sufficient to expense the related cost of depreciable assets for operations over
their estimated useful lives. Depreciation and amortization are calculated on a
straight-line basis to write off the cost of assets to their residual values
over their estimated useful lives as follows:
|
Buildings
|
20
years
|
|
Motor
vehicles
|
5-10
years
|
|
Furniture
and office equipment
|
3-5
years
|
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. We have determined that there were no
impairments of fixed assets for the year ended June 30, 2009.
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 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 SFAS No. 52, “Foreign
Currency Translation”. 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
included in non-controlling interest.
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.
Effective July 1, 2007, we adopted Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”). —
an interpretation of SFAS No. 109, “Accounting for Income Taxes.” Under FIN 48,
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. As of June 30, 2009,
we recognized deferred tax assets of $359,000 including current deferred tax
assets of $333,000 and non-current tax assets of $26,000. We have determined
that no allowance for deferred tax assets should be provided because we will be
able to realize and recognize these deferred tax assets in the near
future.
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 33% until December 31, 2007. The 5th Session of
the 10th National People’s Congress amended the Enterprise Income Tax Law of the
PRC that became effective on January 1, 2008. The newly amended Enterprise
Income Tax Law introduces a wide range of changes which include, but are not
limited to, the unification of the income tax rate for domestic-invested and
foreign-invested enterprises at 25%. This change has reduced our income tax rate
from 33% to 25% since January 1, 2008. In addition, according to the amended
detailed implementation and administrative rules, the new income tax law
broadens the tax reductions in terms of categories and extents for the domestic
companies.
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.
2010
Growth and Earning Expectations
The
financial crisis has severely damaged the world economy in general and the
shipping industry in particular. We cannot predict whether the worst of the
economic down turn has finished or how long the world economy and the shipping
industry in particular will require to recover fully from the
recession.
In
addition to general economic uncertainty, we have been affected by uncertainty
in China’s steel manufacturing industry. We are one of the major shipping agency
service providers for China’s iron ore shipments. Our 2009 revenues consist of
55% revenues from our largest customer, Beijing Shou Rong, and over 20% revenues
from other customers associating in iron ore imports. As of the
filing of this report, Chinese steel makers and the world’s major suppliers of
iron ore have not yet reached an agreement on 2009 iron ore prices, creating an
uncertain situation on iron ore imports into China. As a result, we are unable
to provide a growth and earnings forecast for the year 2010 where there exist
such significant uncertainties.
Results
of Operations
The
following table sets forth a summary of our consolidated results of operations
for the periods indicated. 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, 2009 Compared to Year Ended June 30, 2008
Revenues.
Our total
revenues increased by 21.52% from $15,087,238 for the year ended June 30, 2008
to $18,334,359 for the year ended June 30, 2009. The number of ships that
generated revenues for us increased from 217 to 231 for 2008 and 2009,
respectively. Since the onset of the financial crisis, the number of ships
carrying imported goods to China declined significantly, from 61 vessels in the
first quarter down to 47 vessels in the second quarter and 47 vessels in the
third quarter of the 2009 fiscal year. The final quarter caught up with 76
vessels we served coming to China.
Total Operating Costs and
Expenses.
Our total operating costs and expenses increased by 40.44%
from $15,001,351 for the year ended June 30, 2008 to $21,068,516 for the year
ended June 30, 2009. This increase was primarily due to increases in our costs
of services and in our general and administrative expenses.
|
|
Ÿ
|
Cost of Services.
Our
cost of services increased by 27.45% from $12,371,691 for the 2008 fiscal
year to $15,767,390 for the 2009 fiscal year. Costs of services increased
faster than revenues, resulting in the decrease of gross margins from
18.00% down to 14.00% for the comparative years ended June 30, 2008 and
2009, respectively. This is largely due to the revaluation of Chinese
currency against the U.S. dollar. The average foreign exchange rate
increased by 6.38%, from RMB7.3173 to $1.00 for the year ended June 30,
2008 to RMB6.8358 to $1.00 for the year ended June 30, 2009. It is a
convention in shipping industries that the shipping contracts are prepared
in U.S. dollars, and local payments must be made in the local currency. As
a result, we may not be able to mitigate the damage resulted from the
fluctuation of exchange rates.
|
|
|
Ÿ
|
General and Administrative
Expenses
. Our general and administrative expenses increased by
106.87% from $2,348,894 for the 2008 fiscal year to $4,859,116 for 2009
fiscal year. This increase was primarily due to (1) expenses of $773,612
in allowance for doubtful accounts due to difficulties in collecting cash
from some of our customers, (2) allocation of $188,849 of stock option
expenses, (3) an increase of $628,454 spent on legal fees, audit fees,
investor relations, Sarbanes-Oxley Section 404(a) compliance and other
expenses for our company’s public listing, (4) an increase of $473,928 in
salaries and human resource expenses for our staff, (5) an increase of
$164,894 in renting additional office space for our offices in China and
overseas, (6) an increase of $223,229 in business development, and (7) an
increase of $130,788 in professional services such as capital
verification, accounting and tax advice and legal advice for our business
in China and overseas.
|
|
|
|
We
expect our general and administrative expenses will increase in the
near term as a result of Sarbanes-Oxley Section 404(b) compliance and
business expansion. Meanwhile, we continue to focus on tightening our
budget and reducing non-operating
expenses.
|
|
|
|
|
|
|
|
Selling
Expenses
. Our selling expenses increased by 99.51% from $190,648
for the year ended June 30, 2008 to $380,362 for the year ended June 30,
2009, due to an increase in business promotion and travel expenses, and
the expenses for our Hong Kong, Australia offices, and the new branches
and subsidiaries in
China.
|
Operating Profit (Loss).
We
had an operating loss of $2,734,157 for the year ended June 30, 2009, compared
to operating income of $85,887 for the year ended June 30, 2008. Our company had
a large amount of operating loss for the 2009 fiscal year, primarily due to the
increase in costs of services that resulted from RMB revaluation and general and
administrative expenses associated with our public listing expenses and
allowance for doubtful accounts caused by the difficulties in collecting cash in
the financial crisis situation.
Financial Income, Net.
Our
net financial income was $25,010 for the year ended June 30, 2009, compared to
our net financial income of $318,559 for the year ended June 30, 2008. The net
financial income comes largely from interest income from money deposits in
banks, mitigated 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.
Taxation.
Our
income tax expenses were $126,234 in 2009, compared to $246,667 in 2008. As we
recorded a net deferred tax assets of $359,000 ($333,000 for allowance for
doubtful accounts and $26,000 for net operating loss carry forward), the income
tax benefit of 2009 fiscal year was $232,766. For further details, see Note 13
of the consolidated financial statements.
Net Income.
As a result of
the foregoing, we had a net loss from continuing operations before
non-controlling interest in loss of $2,476,381 for the year ended June 30, 2009,
compared to net income from continuing operations before non-controlling
interest in income of $157,779 for the year ended June 30, 2008. After deduction
of non-controlling interest in income (loss) and income taxes, net loss was
$1,675,691 for the year ended June 30, 2009, compared to net income of $133,694
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, 2009, we had $7,259,654
in cash and cash equivalents, of which $316,247 was held by Sino-China. Our cash
and cash equivalents primarily consist of cash on hand and cash in
banks.
The
following table sets forth a summary of our cash flows for the periods
indicated:
|
|
|
For the Year Ended June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(1,721,287
|
)
|
|
|
736,352
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
(225,554
|
)
|
|
|
478,315
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(353,336
|
)
|
|
|
7,943,959
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(2,343,596
|
)
|
|
|
9,077,159
|
|
|
Cash
and cash equivalents at beginning of year
|
|
|
9,603,250
|
|
|
|
526,091
|
|
|
Cash
and cash equivalents at end of year
|
|
|
7,259,654
|
|
|
|
9,603,250
|
|
Operating
Activities
Since May
2003, we began to expand our business by setting up additional branches
throughout China. As of June 30, 2009, we had nine branches and subsidiaries
conducting our shipping agency and logistic services in China and three
operating offices in the USA, Australia and Hong Kong. Our sales continued to
increase for the year ended June 30, 2009 compared to 2008, but our gross margin
declined, which was mainly attributable to the increased costs of services that
resulted from the RMB revaluation. Net cash used in operating activities was
$1,721,287 for the year ended June 30, 2009, compared to net cash provided by
operating activities of $736,352 for the year ended June 30, 2008. The decrease
of net cash in operating activities is mainly attributable to a net loss of
$1,675,699 and a non-controlling interest in income loss of $800,690. It should
be noted that we had net cash used in operating activities of $1,907,605 for the
nine months ended March 31, 2009 but only $1,721,287 for the full fiscal year
2009, implying that we had net cash provided by operating activities of $186,318
for the last quarter of fiscal year 2009.
Investing
Activities
Net cash
provided by investing activities was $225,554 compared to net cash used in
investing activities of $478,315 for the years ended June 30, 2009 and 2008,
respectively. We made capital expenditures of $396,624 and $771,407 for the
fiscal years of 2009 and 2008, representing 2.61% and 5.11% of our total
revenues, respectively. Facing the worldwide financial crisis, we substantially
reduced our capital spending. In addition, we disposed some of fixed assets,
mainly automobiles, receiving proceeds of $171,070.
Financing
Activities
Net cash
used in financing activities was $353,336 for the year ended June 30, 2009, of
which $285,902 was used to repurchase 100,000 shares of our outstanding common
stock from the open market and $67,434 for repayment of long term
debts.
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. However, financing may not 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 through July 31, 2011. Below is a summary of our company’s contractual
obligations and commitments as of June 30, 2009:
|
|
|
Payment Due by Period
|
|
|
|
|
Total
|
|
|
Less than 1 year
|
|
|
1-3 years
|
|
|
More than 3
years
|
|
|
Contractual
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
$
|
404,448
|
|
|
$
|
305,567
|
|
|
$
|
98,881
|
|
|
$
|
—
|
|
The Labor
Contract Law of the PRC, effective as of January 1, 2008, 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, 2009, our company has
estimated its severance payments to be approximately $78,360, 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. See “Risk Factor - We may not pay dividends”, “Risk Factor - Changes in
China’s political and economic policies could harm our business” and “Dividend
Policy”.
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.
Recent
Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting Standards
Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (the Codification). The Codification,
which was launched on July 1, 2009, became the single source of authoritative
nongovernmental U.S. GAAP, superseding existing FASB, American Institute of
Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and
related literature. The Codification eliminates the GAAP hierarchy contained in
SFAS No. 162 and establishes one level of authoritative GAAP. All other
literature is considered non-authoritative. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. We will adopt this Statement for the quarter ending
September 30, 2009. The adoption of this pronouncement will not have a material
impact on our consolidated financial statements.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R),” and SFAS No. 166, “Accounting for Transfers of Financial Assets—an
amendment of FASB Statement No. 140.” SFAS No. 167 amends FASB Interpretation
46(R) to eliminate the quantitative approach previously required for determining
the primary beneficiary of a variable interest entity and requires ongoing
qualitative reassessments of whether an enterprise is the primary beneficiary of
a variable interest entity. SFAS No. 166 amends SFAS No. 140 by removing the
exemption from consolidation for Qualifying Special Purpose Entities (QSPEs).
This Statement also limits the circumstances in which a financial asset, or
portion of a financial asset, should be derecognized when the transferor has not
transferred the entire original financial asset to an entity that is not
consolidated with the transferor in the financial statements being presented
and/or when the transferor has continuing involvement with the transferred
financial asset. We will adopt these Statements for interim and annual reporting
periods beginning on July 1, 2010. We do not expect the adoption of these
standards to have any material impact on our consolidated financial
statements.
|
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/9A(T).
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
The
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 a major part
of the implementation of a new accounting and management information system
using SAP Business One software. The new system passed the pilot test procedures
and will be applied in the coming fiscal year.
As of
June 30, 2009, 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, 2009 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:
(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, 2009. 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, 2009, its
internal control over financing reporting is effective based on those
criteria.
The
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management’s report in the annual report.
|
Item 9B.
|
Other
Information.
|
The
Company has previously reported all information required to be disclosed during
the fourth quarter of 2009 in a report on Form 8-K.
PART
III
|
Item 10.
|
Directors,
Executive Officers and Corporate
Governance.
|
Regulation
S-K Item 401: The sections of the Registration Statements, IPO Prospectus and
Proxy entitled “Management” are 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
Chief Executive Officer for the years ended June 30, 2009 and 2008. No other
officer had a salary during either of the previous two years of more than
$100,000.
Summary
Compensation Table
|
Name
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock based
compensation
|
|
|
All other
compensation
|
|
|
Total
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
Cao
Lei, Principal Executive Officer
|
2009
|
|
|
106,840
|
|
|
|
-
|
|
|
|
53,114
|
(1)
|
|
|
-
|
|
|
|
159,954
|
|
|
|
2008
|
|
|
129,727
|
|
|
|
5,965
|
|
|
|
|
|
|
|
-
|
|
|
|
135,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhang
Mingwei, Principal Accounting and Financial Officer
|
2009
|
|
|
65,323
|
|
|
|
-
|
|
|
|
53,114
|
(1)
|
|
|
-
|
|
|
|
118,437
|
|
|
|
2008
|
|
|
14,286
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
14,286
|
|
|
(1)
|
Stock
based compensation consists of options to purchase 7,200 shares each for
$7.75 per share that vested during the year ended June 30,
2009.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
|
|
|
|
Plan category
|
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)
|
|
Equity
compensation plans approved by security holders
|
128,000
|
|
$
|
7.75
|
|
174,903
|
|
Name and Address
|
|
Title of
Class
|
|
Amount of
Beneficial
Ownership
|
|
Percentage
Ownership
|
|
|
Mr. Cao
Lei(1)
|
|
common
|
|
|
1,391,240
|
(2)
|
47.50
|
%
|
|
Mr.
Zhang Mingwei(1)
|
|
common
|
|
|
61,200
|
(2)
|
2.09
|
%
|
|
Mr.
Wang Jing (1)
|
|
common
|
|
|
2,000
|
(3)
|
0.07
|
|
|
Mr.
Dennis O. Laing (1)
|
|
common
|
|
|
2,000
|
(3)
|
0.07
|
|
|
Mr.
Daniel E. Kern(4)
|
|
common
|
|
|
389,100
|
(5)
|
13.28
|
|
|
Total
|
|
|
|
|
1,845,540
|
|
63.01
|
%
|
|
(1)
|
The
individual’s address is c/o Sino-Global Shipping America, Ltd., 36-09 Main
Street, Suite 9C-2, Flushing, NY
11354.
|
|
(2)
|
Mr.
Cao and Mr. Zhang each has received options to purchase 36,000 shares of
the Company’s common stock, of which 7,200 underlying shares are reflected
in this table because they have vested. The remaining 28,800
options will vest more than 60 days after the date
hereof.
|
|
(3)
|
Mr.
Wang and Mr. Laing each 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.
|
|
(4)
|
Mr.
Kern’s address is 1027 Goldenrod Ave., Corona Del Mar, CA
92625.
|
|
(5)
|
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 2009. Audit services provided by Friedman LLP for
fiscal 2009 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.
Fees
Paid To Independent Registered Public Accounting Firm
Audit
Fees
During
fiscal 2009 and 2008, 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 and 10-QSB were $248,329 and $197,000, respectively.
Audit
Related Fees
During
fiscal 2009 and 2008, the Company paid Friedman LLP $0 and $40,500,
respectively, for audit-related services. The audit-related services in 2008
were for services rendered in connection with responding to comment letters from
the SEC prior to the Company’s initial public offering of its common
stock.
Tax
Fees
The
Company has not paid Friedman LLP for tax services in fiscal 2009 and
2008.
All Other Fee
s
The
Company has not paid Friedman LLP for any other services in fiscal 2009 and
2008.
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
|
|
Exhibit
|
|
3.1
|
|
Articles
of Incorporation of Sino-Global Shipping America,
Ltd.(1)
|
|
3.2
|
|
Bylaws
of Sino-Global Shipping America, Ltd. (1)
|
|
4.1
|
|
Specimen
Certificate for Common Stock(1)
|
|
10.1
|
|
Exclusive
Management Consulting and Technical Services Agreement by and between
Trans Pacific and Sino-China. (1)
|
|
10.2
|
|
Exclusive
Marketing Agreement by and between Trans Pacific and Sino-China.
(1)
|
|
10.3
|
|
Proxy
Agreement by and among Cao Lei, Zhang Mingwei, the Company and Sino-China.
(1)
|
|
10.4
|
|
Equity
Interest Pledge Agreement by and among Trans Pacific, Cao Lei and Zhang
Mingwei. (1)
|
|
10.5
|
|
Exclusive
Equity Interest Purchase Agreement by and among the Company, Cao Lei,
Zhang Mingwei and Sino-China. (1)
|
|
10.6
|
|
First
Amended and Restated Exclusive Management Consulting and Technical
Services Agreement by and between Trans Pacific and Sino-China.
(1)
|
|
10.7
|
|
First
Amended and Restated Exclusive Marketing Agreement by and between Trans
Pacific and Sino-China. (1)
|
|
10.8
|
|
Agency
Agreement by and between the Company and Beijing Shou Rong Forwarding
Service Co., Ltd. (1)
|
|
13.1
|
|
Quarterly
report of the Company on Form 10-Q for the period ended September 30,
2008.(2)
|
|
13.2
|
|
Quarterly
report of the Company on Form 10-Q for the period ended December 31,
2008.(3)
|
|
13.3
|
|
Quarterly
report of the Company on Form 10-Q for the period ended March 31,
2009.(4)
|
|
14.1
|
|
Code
of Ethics of the Company.(5)
|
|
21.1
|
|
List
of subsidiaries of the Company.(6)
|
|
31.1
|
|
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.(6)
|
|
31.2
|
|
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.(6)
|
|
32.1
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.(6)
|
|
32.2
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002.(6)
|
|
(1)
|
Incorporated
by reference to the Company’s Registration Statement on Form S-1,
Registration Nos. 333-150858 and
333-148611.
|
|
(2)
|
Incorporated
by reference to the Company’s Form 10-Q filed on November 11, 2008, File
No. 001-34024.
|
|
(3)
|
Incorporated
by reference to the Company’s Form 10-Q filed on February 13, 2009, File
No. 001-34024.
|
|
(4)
|
Incorporated
by reference to the Company’s Form 10-Q filed on May 15, 2009, File
No. 001-34024.
|
|
(5)
|
Incorporated
by reference to the Company’s Form 10-KSB filed on September 29, 2008,
File No. 001-34024.
|
SIGNATURES
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.
|
|
SINO-GLOBAL
SHIPPING AMERICA, LTD.
|
|
|
|
|
|
September
22, 2009
|
By:
|
/s/ Zhang Mingwei
|
|
|
|
Zhang
Mingwei
|
|
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Financial and Accounting
Officer)
|
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATE
INDEX
TO FINANCIAL STATEMENTS
|
|
PAGE
|
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
|
|
|
Consolidated
Balance Sheets as of June 30, 2009 and 2008
|
F-3
|
|
|
|
|
Consolidated
Statements of Operations for the Years Ended June 30, 2009 and
2008
|
F-4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended June 30, 2009 and
2008
|
F-5
|
|
|
|
|
Consolidated
Statements of Changes in Shareholders’ Equity for the Years Ended June 30,
2009 and 2008
|
F-6
|
|
|
|
|
Notes
to the Consolidated Financial Statements
|
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, 2009 and 2008, 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, 2009 and 2008, 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
22, 2009
|
1700
BROADWAY, NEW YORK, NY 10019 T 212.842.7000 F 212.842.7001
WWW.FRIEDMANLLP .COM
OFFICES
IN NEW YORK LONG ISLAND AND NEW JERSEY AND A MEMBER OF DFK WITH AFFILIATES
WORLDWIDE
|
|
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED BALANCE
SHEETS
|
|
|
June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
7,259,654
|
|
|
|
9,603,250
|
|
|
Advances
to suppliers
|
|
|
8,825
|
|
|
|
114,570
|
|
Accounts
receivable, less allowance for doubtful accounts of $723,640 and
$48,708
|
|
|
2,894,750
|
|
|
|
1,265,309
|
|
|
Other
receivables
|
|
|
22,085
|
|
|
|
213,515
|
|
|
Prepaid
expenses and other current assets
|
|
|
58,516
|
|
|
|
30,455
|
|
|
Prepaid
taxes
|
|
|
35,305
|
|
|
|
-
|
|
|
Employee
loans receivable
|
|
|
16,627
|
|
|
|
-
|
|
|
Income
tax receivable
|
|
|
105,092
|
|
|
|
-
|
|
|
Deferred
tax assets
|
|
|
333,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
10,733,854
|
|
|
|
11,227,099
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
972,931
|
|
|
|
1,068,527
|
|
|
Security
deposits
|
|
|
56,885
|
|
|
|
92,188
|
|
|
Employee
loans receivable less current portion
|
|
|
68,504
|
|
|
|
-
|
|
|
Deferred
tax assets
|
|
|
26,000
|
|
|
|
-
|
|
|
Other
assets
|
|
|
766
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
11,858,940
|
|
|
|
12,387,814
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
|
-
|
|
|
|
28,450
|
|
|
Advances
from customers
|
|
|
686,588
|
|
|
|
955,316
|
|
|
Accounts
payable
|
|
|
3,024,104
|
|
|
|
1,053,058
|
|
|
Accrued
expenses
|
|
|
145,857
|
|
|
|
73,023
|
|
|
Income
taxes payable
|
|
|
-
|
|
|
|
168,011
|
|
|
Other
current liabilities
|
|
|
619,801
|
|
|
|
108,531
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
4,476,350
|
|
|
|
2,386,389
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt less current maturities
|
|
|
-
|
|
|
|
38,984
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
4,476,350
|
|
|
|
2,425,373
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling
interest
|
|
|
(542,480
|
)
|
|
|
260,001
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
7,709,745
|
|
|
|
7,709,745
|
|
|
Additional
paid-in capital
|
|
|
1,158,696
|
|
|
|
1,498,033
|
|
|
Treasury
stock, at cost
|
|
|
(285,902
|
)
|
|
|
-
|
|
|
Retained
earnings
|
|
|
111,326
|
|
|
|
1,787,017
|
|
|
Accumulated
other comprehensive loss
|
|
|
(13,399
|
)
|
|
|
(8,773
|
)
|
|
Unearned
Compensation
|
|
|
(755,396
|
)
|
|
|
(1,283,582
|
)
|
|
|
|
|
7,925,070
|
|
|
|
9,702,440
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders' Equity
|
|
|
11,858,940
|
|
|
|
12,387,814
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For the years ended June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
18,334,359
|
|
|
|
15,087,238
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
Costs
of revenues
|
|
|
(15,767,390
|
)
|
|
|
(12,371,691
|
)
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expense
|
|
|
(4,859,116
|
)
|
|
|
(2,348,894
|
)
|
|
Selling
expense
|
|
|
(380,362
|
)
|
|
|
(190,648
|
)
|
|
Other
expense
|
|
|
(61,648
|
)
|
|
|
(90,118
|
)
|
|
|
|
|
(21,068,516
|
)
|
|
|
(15,001,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (loss)
|
|
|
(2,734,157
|
)
|
|
|
85,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
income, net
|
|
|
25,010
|
|
|
|
318,559
|
|
|
Net
income (loss) before (provision) benefit for income taxes
|
|
|
(2,709,147
|
)
|
|
|
404,446
|
|
|
|
|
|
|
|
|
|
|
|
|
(Provision)
benefit for income taxes
|
|
|
232,766
|
|
|
|
(246,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) before non-controlling interest in income
(loss)
|
|
|
(2,476,381
|
)
|
|
|
157,779
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interest in income (loss)
|
|
|
(800,690
|
)
|
|
|
24,085
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(1,675,691
|
)
|
|
|
133,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
|
(0.56
|
)
|
|
|
0.07
|
|
|
-Diluted
|
|
|
(0.56
|
)
|
|
|
0.07
|
|
|
Weighted
average number of common shares
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
|
2,987,297
|
|
|
|
1,938,056
|
|
|
-Diluted
|
|
|
2,987,297
|
|
|
|
1,973,218
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
For the years ended June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(1,675,691
|
)
|
|
|
133,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
Loss
on sale of property and equipment
|
|
|
22,571
|
|
|
|
-
|
|
|
Depreciation
and amortization
|
|
|
250,450
|
|
|
|
170,098
|
|
|
Stock
option expense
|
|
|
188,849
|
|
|
|
-
|
|
|
Non-controlling
interest in income (loss)
|
|
|
(800,690
|
)
|
|
|
24,085
|
|
|
Provision
for doubtful accounts
|
|
|
773,612
|
|
|
|
415,673
|
|
|
Deferred
tax benefit
|
|
|
(359,000
|
)
|
|
|
-
|
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
|
Decrease
in advances to suppliers
|
|
|
105,745
|
|
|
|
472,071
|
|
|
Increase
in accounts receivable
|
|
|
(2,403,053
|
)
|
|
|
(941,039
|
)
|
|
Decrease
(Increase) in other receivables
|
|
|
191,430
|
|
|
|
(43,545
|
)
|
|
Increase
in prepaid expense and other current assets
|
|
|
(28,061
|
)
|
|
|
(17,479
|
)
|
|
Increase
in prepaid tax
|
|
|
(35,305
|
)
|
|
|
-
|
|
|
Increase
in income tax receivable
|
|
|
(105,092
|
)
|
|
|
-
|
|
|
Decrease
(Increase) in security deposits
|
|
|
35,303
|
|
|
|
(92,188
|
)
|
|
Increase
in other assets
|
|
|
(766
|
)
|
|
|
-
|
|
|
Increase
(Decrease) in advances from customers
|
|
|
(268,728
|
)
|
|
|
238,309
|
|
|
Increase
in accounts payable
|
|
|
1,971,046
|
|
|
|
191,496
|
|
|
Increase
in accrued expenses
|
|
|
72,834
|
|
|
|
13,533
|
|
|
Increase
(Decrease) in income taxes payable
|
|
|
(168,011
|
)
|
|
|
156,024
|
|
|
Increase
in other current liabilities
|
|
|
511,270
|
|
|
|
15,620
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(1,721,287
|
)
|
|
|
736,352
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of property and equipment
|
|
|
171,070
|
|
|
|
|
|
|
Capital
expenditures and other additions
|
|
|
(396,624
|
)
|
|
|
(771,407
|
)
|
|
Payments
from related party
|
|
|
-
|
|
|
|
1,249,722
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
(225,554
|
)
|
|
|
478,315
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
Payments
of bank loans
|
|
|
-
|
|
|
|
(45,791
|
)
|
|
Proceeds
from (payments of) long-term debt
|
|
|
(67,434
|
)
|
|
|
67,434
|
|
|
Payments
for treasury stock
|
|
|
(285,902
|
)
|
|
|
-
|
|
|
Proceeds
from issuance of common stock
|
|
|
-
|
|
|
|
7,922,316
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(353,336
|
)
|
|
|
7,943,959
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate fluctuations on cash and cash equivalents
|
|
|
(43,419
|
)
|
|
|
(81,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(2,343,596
|
)
|
|
|
9,077,159
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of year
|
|
|
9,603,250
|
|
|
|
526,091
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of year
|
|
|
7,259,654
|
|
|
|
9,603,250
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
|
10,023
|
|
|
|
5,711
|
|
|
Income
taxes paid
|
|
|
392,969
|
|
|
|
83,624
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing activities
|
|
|
|
|
|
|
|
|
|
Employee
loans receivable for the sale of automobiles
|
|
|
85,131
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
other
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
paid-in
|
|
|
Treasury
|
|
|
Retained
|
|
|
comprehensive
|
|
|
|
|
|
|
|
|
|
|
stock
|
|
|
capital
|
|
|
stock
|
|
|
earnings
|
|
|
loss
|
|
|
|
|
|
Total
|
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 30, 2008
|
|
|
7,709,745
|
|
|
|
1,498,033
|
|
|
|
-
|
|
|
|
1,787,017
|
|
|
|
(8,773
|
)
|
|
|
(1,283,582
|
)
|
|
|
9,702,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares repurchased
|
|
|
|
|
|
|
|
|
|
|
(285,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(285,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of stock options granted to employees and members of
audit committee
|
|
|
|
|
|
|
(339,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339,337
|
|
|
|
-
|
|
|
Amortization
of stock options granted to employees and members
of audit committee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188,849
|
|
|
|
188,849
|
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,626
|
)
|
|
|
|
|
|
|
(4,626
|
)
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,675,691
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,675,691
|
)
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,680,317
|
)
|
|
Balance
as of June 30, 2009
|
|
|
7,709,745
|
|
|
|
1,158,696
|
|
|
|
(285,902
|
)
|
|
|
111,326
|
|
|
|
(13,399
|
)
|
|
|
(755,396
|
)
|
|
|
7,925,070
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
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 eight branches in Ningbo, Qingdao,
Tianjin, Qinhuangdao, Zhoushan, Fangchenggang, Yantai and Yingkou. On November
13, 2007 The Company formed a wholly owned foreign-owned enterprise, Trans
Pacific Shipping Limited (“Trans Pacific”), in Beijing, which established a
wholly-owned subsidiary, Trans Pacific Logistics Shanghai, Limited (“Trans
Pacific”), in Shanghai on May 31, 2009. This increases the Company's presence to
nine ports in mainland China as of June 30, 2009 and will enable the Company to
provide a full range of shipping agency services as well as 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 will become
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 (BOM: 502865) and one of the largest shipping and logistic service
providers in India. Through Forbes, the Company is able to general shipping
agency services to all ports in India.
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 financial statements
pursuant to Financial Accounting Standards Board Interpretation No. 46
(Revised), “Consolidation of Variable Interest Entities - an Interpretation of
ARB No. 51”. As a VIE, Sino-China’s sales are included in the Company’s total
sales, its income (loss) from operations is consolidated with the Company’s, and
the Company’s net income (loss) before non-controlling interest in income (loss)
includes all of Sino-China’s net income. The Company’s non-controlling interest
in its income (loss) is then subtracted in calculating the net income (loss)
attributable to the Company. 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 SFAS 141, “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. The carrying value of the
long-term debt approximates fair value based on market rates and terms currently
available to the Company.
The
Company decided not to elect the fair value option as prescribed by FASB
Statement of Financial Accounting Standards No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities-Including an Amendment of FASB
Statement No. 115”, for its financial assets and liabilities.
(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.
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 Statement of Financial Accounting Standard (“SFAS”) No. 52,
“Foreign Currency Translation”. 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)
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
|
20
years
|
|
Motor
vehicles
|
5-10
years
|
|
Furniture
and office equipment
|
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)
Revenue recognition
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.
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 EITF 99-19, 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.
(h)
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 $723,640 was required at June 30, 2009,
and $48,708 at June 30, 2008. Accounts are written off after exhaustive
efforts at collection.
(i)
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.
Effective
July 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”). —
an interpretation of SFAS No. 109, “Accounting for Income Taxes.” The
Interpretation 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 FIN 48, 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. FIN 48 also provides guidance on derecognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures.
The
implementation of FIN 48 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.
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 33% until December 31, 2007. The 5th Session of
the 10th National People’s Congress amended the Enterprise Income Tax Law of the
PRC that became effective on January 1, 2008. The newly amended Enterprise
Income Tax Law introduces a wide range of changes which include, but are not
limited to, the unification of the income tax rate for domestic-invested and
foreign-invested enterprises at 25%. This change has reduced the income tax rate
from 33% to 25% since January 1, 2008. In addition, according to the amended
detailed implementation and administrative rules, the new income tax law
broadens the tax reductions in terms of categories and extents for the domestic
companies.
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 EITF 06-3 and reports its revenues net of PRC’s business tax
and surcharges for all the periods presented in the consolidated statements of
operations.
(j)
Earnings (loss) per share
Earnings
(loss) per share is calculated in accordance with SFAS No. 128, “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 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.
SFAS No.
128 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:
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,675,691
|
)
|
|
$
|
133,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
2,987,297
|
|
|
|
1,938,056
|
|
|
Dilutive
effect of stock options and warrants
|
|
|
-
|
|
|
|
35,162
|
|
|
Weighted
average common shares outstanding, assuming dilution
|
|
|
2,987,297
|
|
|
|
1,973,218
|
|
(k)
Reclassifications
Certain
reclassifications between Financial Income (Expense), Net and Non-Operating
Revenues have been made to the prior year financial statements to conform to the
current year presentation. The reclassifications have no impact on the
Company’s net income in the prior year.
(l)
Subsequent Events
The
accompanying consolidated financial statements were approved by management and
the board of directors and were issued on September 22, 2009. Management has
evaluated subsequent events through this date.
(m) Recent
Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting Standards
Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (the Codification). The Codification,
which was launched on July 1, 2009, became the single source of authoritative
nongovernmental U.S. GAAP, superseding existing FASB, American Institute of
Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and
related literature. The Codification eliminates the GAAP hierarchy contained in
SFAS No. 162 and establishes one level of authoritative GAAP. All other
literature is considered non-authoritative. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The Company will adopt this Statement for its quarter ending
September 30, 2009. The adoption of this pronouncement will not have a material
impact on the Company’s consolidated financial statements.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R),” and SFAS No. 166, “Accounting for Transfers of Financial Assets—an
amendment of FASB Statement No. 140.” SFAS No. 167 amends FASB Interpretation
46(R) to eliminate the quantitative approach previously required for determining
the primary beneficiary of a variable interest entity and requires ongoing
qualitative reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity. SFAS No. 166 amends SFAS No. 140
by removing the exemption from consolidation for Qualifying Special Purpose
Entities (QSPEs). This Statement also limits the circumstances in which a
financial asset, or portion of a financial asset, should be derecognized when
the transferor has not transferred the entire original financial asset to an
entity that is not consolidated with the transferor in the financial statements
being presented and/or when the transferor has continuing involvement with the
transferred financial asset. The Company will adopt these Statements for interim
and annual reporting periods beginning on July 1, 2010. The Company does not
expect the adoption of these standards to have any material impact on the
consolidated financial statements.
In
December 2007, the FASB issued SFAS 160, “Non-controlling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51”, which is
effective for annual periods beginning after December 15, 2008. Early adoption
is prohibited, and, accordingly, the Company has not yet adopted SFAS 160. The
objective of this Statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. The Company is currently assessing the impact
of SFAS 160; the Company believes the adoption of this standard will have a
material effect on its consolidated shareholders’ equity. The Company’s
shareholders’ equity will increase or decrease by the amount of the
non-controlling interest currently reported outside of equity. However, the
adoption of SFAS 160 is not expected to have a material impact on the Company’s
net income or loss.
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:
|
|
|
June 30,
|
|
|
|
|
2009
|
|
|
|
|
US$
|
|
|
|
|
|
|
Loans
from employees, secured by their personal assets, receivable in monthly
installments of
approximately $1,385 bearing no interest through
August 2014
|
|
|
85,131
|
|
|
Less
: Current maturities
|
|
|
(16,627
|
)
|
|
|
|
|
68,504
|
|
5.
ADVANCES TO SUPPLIERS/ADVANCES FROM CUSTOMERS.
(a)
Advances to Suppliers
Advances
to suppliers represent costs of services and fees paid to suppliers in advance
in connection with the agency services fees income to be
recognized.
(b)
Advances from Customers
Advances
from customers represent money received from customers in advance in connection
with the agency services fees income to be recognized.
6.
PROPERTY AND EQUIPMENT
Property
and equipment are as follows:
|
|
|
June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Land
and building
|
|
|
72,768
|
|
|
|
72,479
|
|
|
Motor
vehicles
|
|
|
863,866
|
|
|
|
1,085,139
|
|
|
Computer
equipment
|
|
|
113,556
|
|
|
|
90,990
|
|
|
Office
equipment
|
|
|
30,419
|
|
|
|
28,188
|
|
|
Furniture
& Fixtures
|
|
|
22,545
|
|
|
|
19,088
|
|
|
System
software
|
|
|
120,347
|
|
|
|
17,623
|
|
|
Leasehold
improvements
|
|
|
70,606
|
|
|
|
80,983
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,294,107
|
|
|
|
1,394,490
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
: Accumulated depreciation and amortization
|
|
|
321,176
|
|
|
|
325,963
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
972,931
|
|
|
|
1,068,527
|
|
7.
STOCK-BASED COMPENSATION
On May
20, 2008, the Company issued 174,000 stock options (“Options”) to its officers,
employees and members in the audit committee to purchase the Company’s common
stock, without par value per share. The Options were all issued pursuant to the
Company’s 2008 Stock Incentive Plan. No options were issued during the year
ended June 30, 2009.
The
Options are non-statutory options and have been granted under 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 on 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:
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding, beginning of period
|
|
|
174,000
|
|
|
$
|
7.75
|
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
174,000
|
|
|
$
|
7.75
|
|
|
Canceled,
forfeited or expired
|
|
|
(46,000
|
)
|
|
$
|
7.75
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding, end of period
|
|
|
128,000
|
|
|
$
|
7.75
|
|
|
|
174,000
|
|
|
$
|
7.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable, end of period
|
|
|
25,600
|
|
|
$
|
7.75
|
|
|
|
-
|
|
|
$
|
7.75
|
|
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, 2009. 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 is
$7.75.
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 stock options granted 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 (S)
|
|
$
|
7.75
|
|
|
Strike
Price (X)
|
|
$
|
7.75
|
|
|
Volatility
(
s
)
|
|
|
173.84
|
%
|
|
Risk-free
Rate
|
|
|
3.02
|
%
|
|
Time
to expiration (T)
|
|
5
yrs
|
|
|
Dividend
Yield
|
|
|
0.00
|
%
|
|
Marginal
Tax Rate
|
|
|
0.00
|
%
|
|
Number
of Options
|
|
|
174,000
|
|
Volatility
of SINO stock is computed based on the daily closing price from May 21, 2008 to
June 30, 2008. 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 $755,396 at the year ended June 30, 2009 is presented as
“Unearned Compensation”, comparing to $1,283,582 as the year ended June 30,
2008. The Company amortized stock option expenses of $188,849 for the year ended
June 30, 2009.
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”.
8.
LONG-TERM DEBT
Long-term
debt at June 30, 2008 was $38,984. The amount was fully repaid during the year
ended June 30, 2009.
Equipment
loans consist of the following:
|
|
|
June 30,
|
|
|
|
|
2008
|
|
|
|
|
US$
|
|
|
|
|
|
|
|
Loans
payable to bank, collateralized by a Company automobile, payable in
monthly installments of $2,743, including interest at 8.18% through
September
2010
|
|
|
67,434
|
|
|
|
|
|
67,434
|
|
|
Less
- Current maturities
|
|
|
28,450
|
|
|
|
|
|
38,984
|
|
Interest
expense on long-term debt was approximately $4,820 for the year ended June 30,
2008.
9.
NON-CONTROLLING INTEREST
Non-controlling
interest in Sino-China consists of the following:
|
|
|
June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Original
capital contribution
|
|
|
356,400
|
|
|
|
356,400
|
|
|
Additional
paid-in capital
|
|
|
1,044
|
|
|
|
1,044
|
|
|
Accumulated
other comprehensive loss
|
|
|
(29,364
|
)
|
|
|
(27,572
|
)
|
|
Accumulated
deficit
|
|
|
(873,378
|
)
|
|
|
(72,688
|
)
|
|
Other
adjustments
|
|
|
2,818
|
|
|
|
2,817
|
|
|
|
|
|
(542,480
|
)
|
|
|
260,001
|
|
10.
COMMITMENTS AND CONTINGENCY
(a)
Office leases
The
Company leases certain office premises and apartments for employees under
operating leases through July 31, 2011. Future minimum lease payments under
operating leases agreements were as follows:
|
|
|
Amount
|
|
|
|
|
US$
|
|
|
|
|
|
|
|
Year
ending June 30,
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
305,567
|
|
|
2011
|
|
|
97,661
|
|
|
2012
|
|
|
1,220
|
|
|
|
|
|
|
|
|
|
|
|
404,448
|
|
(b)
Contingency
The Labor
Contract Law of the People’s Republic of China, effective as of January 1, 2008,
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, 2009, the Company has estimated its severance payments of approximately
$78,360, which has not been reflected in its consolidated financial
statements.
11.
CAPITAL STOCK
The
predecessor of the Company incorporated in New York State had 200 shares of
common stock issued and outstanding, without par value. Upon the merger into a
Virginia shell corporation on September 18, 2007, each share of common stock in
the predecessor company was exchanged for 9,000 shares of common stock in the
Company. The New York State company ceased to exist after the merger. As of
December 31, 2007, the authorized capital stock of the Company consisted of
10,000,000 shares of common stock, no par value, 1,800,000 of which are issued
and outstanding, and 1,000,000 shares of preferred stock, without par value,
none of which are issued and outstanding.
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, 2009, the Company repurchased 100,000 shares from the open market at an
average price of $2.86 per share including trading expenses for the total cost
of $285,902. On September 19, 2009, the Company’s board of directors
approved the extension of the repurchase of the common shares for a period of 6
months.
12.
FINANCIAL
INCOME (EXPENSES), NET
Financial
income (expenses) for the years ended June 30, 2009 and June 30, 2008 are as
follows:
|
|
|
For
the
year
ended
June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
149,553
|
|
|
|
89,987
|
|
|
Interest
expense
|
|
|
(10,023
|
)
|
|
|
(739
|
)
|
|
Bank
charge
|
|
|
(6,926
|
)
|
|
|
(9,487
|
)
|
|
Foreign
currency translation
|
|
|
(107,594
|
)
|
|
|
238,798
|
|
|
|
|
|
25,010
|
|
|
|
318,559
|
|
13.
INCOME TAXES
The
income tax provision (benefit) for years ended June 30, 2009 and June 30, 2008
are as follows:
|
|
|
For the year ended June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
USA
|
|
|
(121,872
|
)
|
|
|
(196,744
|
)
|
|
China
|
|
|
(4,362
|
)
|
|
|
(49,923
|
)
|
|
|
|
|
(126,234
|
)
|
|
|
(246,667
|
)
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
|
333,000
|
|
|
|
12,000
|
|
|
Net operating loss carryforward
|
|
|
26,000
|
|
|
|
|
|
|
Valuation allowance
|
|
|
-
|
|
|
|
(12,000
|
)
|
|
Net deferred
|
|
|
359,000
|
|
|
|
-
|
|
|
Total
|
|
|
232,766
|
|
|
|
(246,667
|
)
|
During
the year ended June 30, 3009, the valuation allowance decreased by
$12,000.
As of
June 30, 2009, the Company recognized deferred tax assets of $359,000 including
current deferred tax assets of $333,000 and non-current tax assets of $26,000.
Management has determined that no valuation allowance for deferred tax assets
should be provided as of June 30, 2009 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 $222,000 which
may be utilized to reduce New York State and New York City taxable income
through 2029.
Income
tax expense for the years ended June 30, 2009 and 2008 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:
|
|
|
For the year ended June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
Expected
federal income tax expense (benefit)
|
|
|
(35.00
|
)
|
|
|
35.00
|
|
|
|
|
|
|
|
|
|
|
|
|
State,
local tax net of federal benefit
|
|
|
7.50
|
|
|
|
13.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent
difference
|
|
|
1.10
|
|
|
|
5.40
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carry forward adjustments
|
|
|
1.80
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(0.50
|
)
|
|
|
(0.70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
tax expense (benefit)
|
|
|
(25.10
|
)
|
|
|
52.70
|
|
14.
MAJOR CUSTOMER
For the
years ended June 30, 2009 and June 30, 2008, approximately 55%
and 54% respectively, of the Company’s revenues were from one
customer. The Company provides services to this customer under an exclusive
agency agreement that is terminable on three months’ notice and that expires on
December 31, 2009. The contract is renewable on an annual basis. At June 30,
2009, receivables from three customers approximated 24%, 13% and 10%,
respectively. At June 30, 2008, receivable from one customer approximated
78%.
Exhibit
Index
|
Number
|
|
Exhibit
|
|
3.1
|
|
Articles
of Incorporation of Sino-Global Shipping America,
Ltd.(1)
|
|
3.2
|
|
Bylaws
of Sino-Global Shipping America, Ltd. (1)
|
|
4.1
|
|
Specimen
Certificate for Common Stock(1)
|
|
10.1
|
|
Exclusive
Management Consulting and Technical Services Agreement by and between
Trans Pacific and Sino-China. (1)
|
|
10.2
|
|
Exclusive
Marketing Agreement by and between Trans Pacific and Sino-China.
(1)
|
|
10.3
|
|
Proxy
Agreement by and among Cao Lei, Zhang Mingwei, the Company and Sino-China.
(1)
|
|
10.4
|
|
Equity
Interest Pledge Agreement by and among Trans Pacific, Cao Lei and Zhang
Mingwei. (1)
|
|
10.5
|
|
Exclusive
Equity Interest Purchase Agreement by and among the Company, Cao Lei,
Zhang Mingwei and Sino-China. (1)
|
|
10.6
|
|
First
Amended and Restated Exclusive Management Consulting and Technical
Services Agreement by and between Trans Pacific and Sino-China.
(1)
|
|
10.7
|
|
First
Amended and Restated Exclusive Marketing Agreement by and between Trans
Pacific and Sino-China. (1)
|
|
10.8
|
|
Agency
Agreement by and between the Company and Beijing Shou Rong Forwarding
Service Co., Ltd. (1)
|
|
13.1
|
|
Quarterly
report of the Company on Form 10-Q for the period ended September 30,
2008.(2)
|
|
13.2
|
|
Quarterly
report of the Company on Form 10-Q for the period ended December 31,
2008.(3)
|
|
13.3
|
|
Quarterly
report of the Company on Form 10-Q for the period ended March 31,
2009.(4)
|
|
14.1
|
|
Code
of Ethics of the Company.(5)
|
|
21.1
|
|
List
of subsidiaries of the Company.(6)
|
|
31.1
|
|
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.(6)
|
|
31.2
|
|
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.(6)
|
|
32.1
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.(6)
|
|
32.2
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002.(6)
|
|
(1)
|
Incorporated
by reference to the Company’s Registration Statement on Form S-1,
Registration Nos. 333-150858 and
333-148611.
|
|
(2)
|
Incorporated
by reference to the Company’s Form 10-Q filed on November 11, 2008, File
No. 001-34024.
|
|
(3)
|
Incorporated
by reference to the Company’s Form 10-Q filed on February 13, 2009, File
No. 001-34024.
|
|
(4)
|
Incorporated
by reference to the Company’s Form 10-Q filed on May 15, 2009, File
No. 001-34024.
|
|
(5)
|
Incorporated
by reference to the Company’s Form 10-KSB filed on September 29, 2008,
File No. 001-34024.
|
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