Attached files
| file | filename |
|---|---|
| EX-32.2 - Sino-Global Shipping America, Ltd. | v173939_ex32-2.htm |
| EX-31.2 - Sino-Global Shipping America, Ltd. | v173939_ex31-2.htm |
| EX-32.1 - Sino-Global Shipping America, Ltd. | v173939_ex32-1.htm |
| EX-31.1 - Sino-Global Shipping America, Ltd. | v173939_ex31-1.htm |
U.S.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
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x
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Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For the
quarterly period ended December
31, 2009
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¨
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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
(State
or other jurisdiction of
incorporation
or organization)
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11-3588546
(I.R.S.
employer
identification
number)
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136-56
39th Avenue, Room #305
Flushing,
New York 11354
(Address of principal
executive offices and zip code)
(718)
888-1814
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant 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 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 (§232.405 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 o No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer (Do not check if a smaller reporting
company)
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¨
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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 ¨ No x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
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 2,907,346 issued and
outstanding shares of common stock and no shares of preferred
stock.
SINO-GLOBAL
SHIPPING AMERICA, LTD.
FORM
10-Q
INDEX
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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i
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PART
I.
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FINANCIAL
INFORMATION
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1
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Item
1.
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Financial
Statements.
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1
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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1
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Item
3.
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Quantitative
and Qualitative Disclosures about Market Risk.
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11
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Item
4/4T.
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Controls
and Procedures
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11
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PART
II.
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OTHER
INFORMATION
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12
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Item
1.
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Legal
Proceedings
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12
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Item
1A.
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Risk
Factors.
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12
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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12
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Item
3.
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Defaults
upon Senior Securities
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12
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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13
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Item
5.
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Other
Information
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13
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Item
6.
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Exhibits
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13
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2
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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·
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the
ability to timely and accurately provide shipping agency
services;
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·
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its
dependence on a limited number of larger
customers;
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·
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political
and economic factors in the Peoples’ Republic of China
(“PRC”);
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·
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the
Company’s ability to expand and grow its lines of
business;
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·
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unanticipated
changes in general market conditions or other factors, which may result in
cancellations or reductions in the need for the Company’s
services;
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·
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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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·
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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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·
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the
acceptance in the marketplace of the Company’s new lines of
services;
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·
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foreign
currency exchange rate
fluctuations;
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·
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hurricanes
or other natural disasters;
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·
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the
Company’s ability to identify and successfully execute cost control
initiatives;
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·
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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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·
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other
risks outlined above and in the Company’s other filings made periodically
by 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.
i
PART
I. FINANCIAL
INFORMATION
Item
1. Financial Statements.
See the
financial statements following the signature page of this report, which are
incorporated herein by reference.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The
following discussion and analysis of our company’s financial condition and
results of operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes included elsewhere in
this report. In this report, the terms “we,” “the Company,” “our
company,” and “our” refer to Sino-Global Shipping America, Ltd., a Virginia
corporation. This discussion contains forward-looking statements that involve
risks and uncertainties. Actual results and the timing of selected events could
differ materially from those anticipated in these forward-looking statements as
a result of various factors.
Overview
We are a
shipping agency service provider for foreign ships coming to Chinese ports. Our
company, previously known as Sino-Global-Shipping (America) Ltd., was
incorporated in New York in February 2001. On September 18, 2007, we amended the
Articles of Incorporation and Bylaws to merge into a new corporation with the
current name of Sino-Global Shipping America, Ltd., in Virginia.
Our
principal geographic market is in the People’s Republic of China (“PRC”). As PRC
laws and regulations restrict foreign ownership of shipping agency service
businesses, we operate our business in the PRC through Sino-Global Shipping
Agency, Ltd. (“Sino-China”), a PRC limited liability company wholly owned by our
founder and Chief Executive Officer, Cao Lei, and Chief Financial Officer, Zhang
Mingwei, both of whom are PRC citizens. Sino-China holds the licenses and
permits necessary to provide shipping services in the PRC. Headquartered in
Beijing with branches in Ningbo, Qingdao, Tianjin, Qinhuangdao, Fangchenggang,
we provide general shipping agency services in all commercial ports in
China.
On
November 13, 2007, we formed our wholly foreign-owned enterprise, Trans Pacific
Shipping Limited (“Trans Pacific Beijing), in Beijing, which established a
subsidiary, Trans Pacific Logistics Shanghai, Limited (“Trans Pacific
Shanghai”), in Shanghai on May 31, 2009. This increases our presence to nine
ports in mainland China and will enable us to provide a full range of shipping
agency services as well as freight forwarder services. Trans Pacific established
another subsidiary, Sino-Global Shipping Agency Development Co., Limited, in
Beijing on November 2, 2009 in order to develop additional business
opportunities for the company.
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.
1
We
established another wholly-owned subsidiary, Sino-Global Shipping (HK) Limited
(“Sino-Global HK”) on September 22, 2008. We expect that Sino-Global HK will
become our control and management center for southern Chinese ports and will
enable our company to extend its offering of comprehensive shipping agency
services to vessels going to and from one of the world’s busiest ports. On July
27, 2009, Sino-Global HK signed an exclusive partnership agreement with Forbes
& Company Limited (“Forbes”), which is a listed company on the Bombay Stock
Exchange (BOM: 502865) and one of the largest shipping and logistic service
providers in India. Through Forbes, the Company is able to provide general
shipping agency services to all ports in India.
Following
the initial public offering, our Board authorized a stock repurchase program
under which we may repurchase up to 10% of our outstanding common stock for a
period of 12 months, which began October 9, 2008. In September 2009, our Board
approved to extend the stock repurchase program for another six months ended
April 2010. As of December 31, 2009, we repurchased 119,686 shares of our common
stock from the open market at an average price of $2.95 per share including
trading expenses. The total cost of stock repurchase through December 31, 2009
was $352,748.
Revenues
For the
six months and three months ended December 31, 2009, our total revenues amounted
to approximately $12.88 million and $6.63 million, representing a 34.51% and
48.22% increase from our total revenues for the same periods in 2008. We expect
our top line growth will continue along with the economy recovery in China and
around the world.
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 decreased as a percentage of total revenues
for the six months and three months ended December 31, 2009 mainly due to our
tightened budget control over general and administrative expenses. The following
table sets forth the components of our company’s costs and expenses for the
periods indicated.
2
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For
the six months ended December 31,
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||||||||||||||||||||||||
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2009
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2008
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Change
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||||||||||||||||||||||
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US$
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%
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US$
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%
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US$
|
%
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|||||||||||||||||||
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Revenues
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12,877,051 | 100.00 | 9,573,195 | 100.00 | 3,303,856 | 34.51 | ||||||||||||||||||
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Costs
and expenses
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||||||||||||||||||
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Costs
of revenues
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(11,296,568 | ) | (87.73 | ) | (8,562,514 | ) | (89.44 | ) | (2,734,054 | ) | 31.93 | |||||||||||||
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|
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||||||||||||||||||
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General
and administrative
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(1,796,094 | ) | (13.95 | ) | (2,173,456 | ) | (22.70 | ) | 377,362 | (17.36 | ) | |||||||||||||
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Selling
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(83,299 | ) | (0.65 | ) | (236,688 | ) | (2.47 | ) | 153,389 | (64.81 | ) | |||||||||||||
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Other
income (expense)
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7,508 | 0.06 | (1,260 | ) | (0.01 | ) | 8,768 | (695.87 | ) | |||||||||||||||
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Total
costs and expenses
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(13,168,453 | ) | (102.26 | ) | (10,973,918 | ) | (114.63 | ) | (2,194,535 | ) | 20.00 | |||||||||||||
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For
the three months ended December 31,
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||||||||||||||||||||||||
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2009
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2008
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Change
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||||||||||||||||||||||
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US$
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%
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US$
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%
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US$
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%
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|||||||||||||||||||
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Revenues
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6,632,243 | 100.00 | 4,474,518 | 100.00 | 2,157,725 | 48.22 | ||||||||||||||||||
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Costs
and expenses
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||||||||||||||||||
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Costs
of revenues
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(5,853,104 | ) | (88.25 | ) | (4,055,949 | ) | (90.65 | ) | (1,797,155 | ) | 44.31 | |||||||||||||
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||||||||||||||||||
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General
and administrative
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(937,673 | ) | (14.14 | ) | (1,155,706 | ) | (25.83 | ) | 218,033 | (18.87 | ) | |||||||||||||
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Selling
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(36,603 | ) | (0.55 | ) | (141,660 | ) | (3.17 | ) | 105,057 | (74.16 | ) | |||||||||||||
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Other
income (expense)
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(46,102 | ) | (0.70 | ) | 1,737 | 0.04 | (47,839 | ) | (2,754.12 | ) | ||||||||||||||
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Total
costs and expenses
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(6,873,482 | ) | (103.64 | ) | (5,351,578 | ) | (119.60 | ) | (1,521,904 | ) | 28.44 | |||||||||||||
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. With our cost control efforts, our costs of revenues as a percentage
of our total revenues, slightly decreased from 89.44% to 87.73% and from 90.65%
to 88.25% for the six months and three months ended December 31 2009 and 2008,
respectively. The exchange rate of U.S. dollars against the Chinese RMB was
relatively stable during the 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. For the six months and three months ended
December 31, 2009, our general and administrative expenses as a percentage of
our total revenues decreased from 22.70% to 13.95% and from 25.83% to 14.14%for
the six months and three months ended December 31, 2008, respectively. Our
budget control efforts appear effective in improving our operating results,
although we still incurred large expenses on our business expansion and company
public listing expenses.
3
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
decreased in both absolute amount and as a percentage of our total net revenues
for the six months and three months ended December 31, 2009. We effectively
control the selling budgets.
Critical
Accounting Policies
We
prepare the condensed 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 Accounting Standard Codification
(“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s sales are included in
our total sales, its income (loss) from operations is consolidated with our
company’s, and our net income (loss) from continuing operations before
non-controlling interest in income (loss) includes all of Sino-China’s net
income (loss). Our non-controlling interest in its income (loss) is then
subtracted in calculating the net income (loss) attributable to our company.
Because of the contractual arrangements, our company had a pecuniary interest in
Sino-China that requires consolidation of our and Sino-China’s financial
statements.
4
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. We have determined that an allowance of $723,640
was required at December 31, 2009, which is no change from the amount at June
30, 2009 and September 30, 2009.
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
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 six
months ended December 31, 2009.
5
Translation
of Foreign Currency
The
accounts of our company and Sino-China are measured using the currency of the
primary economic environment in which the entity operates (the “functional
currency”). Our functional currency is the U.S. dollar, while Trans Pacific and
Sino-China report their financial position and results of operations in
Renminbi. The accompanying condensed consolidated financial statements are
presented in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars using the fixed exchange rates in effect at the time of the
transaction. Generally foreign exchange gains and losses resulting from the
settlement of such transactions are recognized in the consolidated statements of
operations. We translate foreign currency financial statements of Sino-China,
Trans Pacific, Sino-Global HK and Sino-Global AUS in accordance with ASC 830-10,
“Foreign Currency Matters”. Assets and liabilities are translated at current
exchange rates quoted by the People’s Bank of China at the balance sheet dates
and revenues and expenses are translated at average exchange rates in effect
during the periods. 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. 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 December 31, 2009, we recognized
deferred tax assets of $397,000 including current deferred tax assets of
$326,000 and non-current tax assets of $71,000. We have determined that no
valuation allowance for deferred tax assets should be provided because it is
more likely than not that 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 25%.
PRC
Business Tax
Revenues
from services provided by Sino-China are subject to PRC business tax of 5% and
additional surcharges of 0.5%. We pay business tax on gross revenues generated
from our shipping agency services minus the costs of services, which are paid on
behalf of our customers.
2010
Growth and Earnings Expectations
Our
revenues have continued to grow in the first half of fiscal year 2010. Our
revenues increased 34.51% for the six months ended December 31, 2009, of which
the growth rates were 22.48% for the first quarter ended September 30, 2009 and
48.22% for the second quarter ended December 31, 2009. We renewed the agency
service agreement with Beijing Shou Rong, our largest customer, which accounted
for 58% of our revenues for the first half fiscal year of 2010. The agency
service agreement is renewable and will expire on December 31, 2011. We expect
that this renewed agreement is likely to enable our revenues to continue to grow
in line with the increased demand for iron ore in China. We have been marketing
our business to other potential clients and looking for opportunities in other
areas in shipping and logistic industries.
We have
incurred losses for the last eight quarters. The world financial
crisis has negatively affected our operations, in addition to the fact that
fewer shipments have occurred during the crisis, we receive most of our revenues
in US dollars and pay most of our expenses in Chinese Renminbi. As a result, we
have faced increased costs of revenues, due to the devaluation of RMB against US
dollar. While our general and administrative expenses are significantly higher
than their pre-IPO levels as a result of our business expansion and our
company’s public listing, we have reduced these amounts for the six months ended
December 31, 2009 compared to the same period in 2008. In the first half of the
2010 fiscal year, we concentrated on budget cut without compromising
business promotion.
6
Results
of Operations
Due to
the economic uncertainties associated with the world wide financial crisis, it
is difficult for us to predict future operating results. We believe that
period-to-period comparisons of operating results should not be relied upon as
indicative of future performance.
Six
Months Ended December 31, 2009 Compared to Six Months Ended December 31,
2008
Revenues. Our total
revenues increased by 34.51% from $9,573,195 for the six months ended December
31, 2008 to $12,877,051 in the comparable six months in 2009. The number of
ships that generated revenues for us increased from 108 in the first six months
of 2009 fiscal year, to 134 in the first six months in 2010 fiscal year,
representing an increase of 24.07%. In addition, our revenues per
ship increased during the six months ended December 31, 2009.
Total Operating Costs and
Expenses. Our total operating costs and expenses increased by 20.00%
from $10,973,918 for the six months ended December 31, 2008 to $13,168,453 for
the six months ended December 31, 2009. This increase was primarily due to
increases in our costs of revenues, offset by the decrease of our general and
administrative expenses and selling expenses.
|
|
|
Cost of Revenues. Our
cost of revenues increased by 31.93% from $8,562,514 for the six months
ended December 31, 2008 to $11,296,568 for the six months ended December
31, 2009. Costs of revenues increased more slowly than revenues, resulting
in a higher gross margin, which was 10.56% and 12.27% for the comparative
six months in 2008 and 2009, respectively. We managed to achieve the
higher gross margin through cost control even though the foreign exchange
rate of Chinese currency against the U.S. dollar decreased from RMB6.8469
to $1.00 for the six months ended December 31, 2008 to RMB6.8291 to $1.00
for the six months ended December 31,
2009.
|
|
|
|
General and Administrative
Expenses. Our general and administrative expenses decreased by
17.36% from $2,173,456 for the first half fiscal year of 2008 to
$1,796,094 for the first half fiscal year of 2009. Our general and
administrative expenses reduced mainly because of (1) the decrease of
$194,502 in travel, car and related expenses and (2) the reduced expenses
of $182,765 in office rent and supplies. We spent $89,394 in
Sarbanes-Oxley compliance for the six months ended December 31, 2009,
compared to the similar expenses of $47,369 in the same six month period
in 2008.
|
|
|
|
Selling Expenses. Our
selling expenses decreased by 64.81% from $236,688 to $83,299 for the six
months ended December 31, 2008 and 2009 respectively, due to our tightened
budget in business promotion and travel
expenses.
|
Operating Profit (Loss). We
had an operating loss of $291,402 for the six months ended December 31, 2009,
compared to an operating loss of $1,400,723 for the comparable six months in
2008. We significantly decreased our operating losses through our efforts in
improving gross margin, reducing general and administrative expenses and selling
expenses.
Financial Income, Net. Our
net financial income was $185,760 for the six months ended December 31, 2009,
compared to our net financial expense of $74,533 for the six months ended
December 31, 2008. Our financial income is largely generated by interest income
from cash in banks and offset by the foreign exchange loss recognized in the
financial statement consolidation.
Taxation. Our
income tax provision was $293,151 for the six months ended December 31, 2009,
compared to $226,296 for the six months ended December 31, 2008. This includes
estimated U.S. current income tax expenses of $331,151 offset by a deferred U.S.
tax benefit of $38,000. We are not required to provide for income taxes in China
until we generate net income. For further details, see Note 11 of the condensed
consolidated financial statements.
7
Net Income. As a result of
the foregoing, we had a net loss of $404,418 for the six months ended December
31, 2009, compared to net loss of $1,701,572 for the six months ended December
31, 2008. After deduction of non-controlling interest in loss of $465,478, net
income attributable to Sino-Global Shipping America, Ltd. was $61,060 for the
six months ended December 31, 2009, compared to net loss attributable to
Sino-Global Shipping America, Ltd. of $1,331,579 for the six months ended
December 31, 2008.
Three
Months Ended December 31, 2009 Compared to Three Months Ended December 31,
2008
Revenues. Our total
revenues increased by 48.22% from $4,474,518 for the three months ended December
31, 2008 to $6,632,243 in the three months ended December 31, 2009. The number
of ships that generated revenues for us was 47 and 66 for the three months ended
December 31, 2008 and 2009 respectively, representing an increase of
40.43%. In addition, our average revenues per ship increased during
the three month period.
Total Operating Costs and
Expenses. Our total operating costs and expenses increased by 28.44%
from $5,351,578 for the three months ended December 31, 2008 to $6,873,482 for
the three months ended December 31, 2009. This increase was primarily due to
increases in our costs of services, offset by the decrease of our general and
administrative expenses and selling expenses. Our efforts in
controlling such expenses resulted in total operating costs and expenses
increasing more slowly than revenues.
|
|
|
Cost of Revenues. Our
cost of revenues increased by 44.31% from $4,055,949 for the three months
ended December 31, 2008 to $5,853,104 for the three months ended December
31, 2009. Costs of revenues increased by less than revenues, resulting in
a higher gross margin, which was 9.35% and 11.75% for the comparative
three months ended December 31, 2008 and 2009, respectively. The foreign
exchange rate of Chinese currency against the U.S. dollar was relatively
stable during the three months ended December 31, 2009. The average
foreign exchange rate decreased from RMB6.8390 to $1.00 for the three
months ended December 31, 2008 to RMB6.8274 to $1.00 for the three months
ended December 31, 2009.
|
|
|
|
General and Administrative
Expenses. Our general and administrative expenses decreased by
18.87% from $1,155,706 for the three months ended December 31, 2008 to
$937,673 for the three months ended December 31, 2009. Our general and
administrative expenses reduced mainly because of (1) the decrease of
$191,454 in travel, car and related expenses and (2) the reduced expenses
of $101,820 in office rent and supplies, We spent $47,765 in
Sarbanes-Oxley compliance for the three months ended December 31, 2009,
compared to the similar expenses of $47,369 in the same three month period
in 2008.
|
|
|
|
Selling Expenses. Our
selling expenses decreased by 74.16% from $141,660 for the three months
ended December 31, 2008 to $36,603 for the three months ended December 31,
2009 due to our efforts to tighten our budget for business promotion and
travel expenses.
|
Operating Profit (Loss). We
had an operating loss of $241,239 for the three months ended December 31, 2009,
compared to operating loss of $877,060 for the comparable three months in 2008.
We significantly decreased our operating losses through our efforts in improving
gross margin, reducing general and administrative expenses and selling
expenses.
Financial Income, Net. Our
net financial income was $16,327 for the three months ended December 31, 2009,
compared to our net financial loss of $90,312 for the three months ended
December 31, 2008. Our financial income is largely generated by interest income
from cash in banks and offset by the foreign exchange losses recognized in the
financial statement consolidation.
Taxation. Our
income tax provision was $119,151 for the three months ended December 31, 2009,
compared to $153,666 for the three months ended December 31, 2008. This includes
estimated U.S. current income tax expenses of $199,151 offset by a deferred U.S.
tax benefit of $80,000. We are not required to provide for income taxes in China
until we generate net income. For further details, see Note 11 of the condensed
consolidated financial statements.
8
Net Income. As a result of
the foregoing, we had a net losses of $389,771 for the three months ended
December 31, 2009, compared to net losses of $1,121,038 for the three months
ended December 31, 2008. After deduction of non-controlling interest in loss,
net loss attributable to Sino-Global Shipping America, Ltd. was $34,514 for the
three months ended December 31, 2009, compared to net loss attributable to
Sino-Global Shipping America, Ltd. of $901,346 for the three months ended
December 31, 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.
Operating
Activities
Our sales
continued to increase and our gross margin was moderately improved during the
six months ended December 31, 2009. For the six months ended December 31, 2009,
our net cash used in operating activities was $67,890, compared to net cash used
in operating activities of $1,548,172 for the comparable six months in 2008. The
improvement of net cash in operating activities is mainly attributable to (1)
the decrease in accounts receivable of $1,115,302, (2) the increase in accounts
payable of $321,828 and (3) the increase in advances from customers of $266,328.
This is mitigated by (1) an increase in advances to suppliers of $566,061 and
(2) a decrease of other current liabilities of $546,377.
Investing
Activities
Net cash
used in investing activities was $2,617 for the six months ended December 31,
2009, compared to net cash used in investing activities of $183,718 for the six
months ended December 31, 2008. Facing the worldwide financial crisis, we
substantially reduced our capital spending.
Financing
Activities
Net cash
used in financing activities was $63,917, of which $66,846 was spent on
repurchasing 13,586 shares of our outstanding common stock from the open market
during the six months ended December 31, 2009.
We
believe that our 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 December 31, 2011. Below is a summary of our company’s
contractual obligations and commitments as of December 31,
2009:
9
|
Payment Due by Period
|
||||||||||||||||
|
Total
|
Less than 1
year
|
1-3 years
|
More than 3
years
|
|||||||||||||
|
Contractual
Obligations
|
||||||||||||||||
|
Operating
leases
|
$ | 528,904 | $ | 386,499 | $ | 142,405 | $ | -- | ||||||||
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 December 31, 2009, our company has
estimated its severance payments to be approximately $79,200, 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 a statement
establishing the FASB Accounting Standards Codification as the source of the
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative GAAP for SEC
registrants. This statement is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. On the effective
date of this statement, all then existing non-SEC accounting and reporting
standards were superseded.
10
In
June 2009, the FASB issued an amendment to its Interpretation,
“Consolidation of Variable Interest Entities.” The statement requires an entity
to perform an analysis to determine whether the entity’s variable interest give
it a controlling financial interest in a variable interest entity by
rationalizing characteristics that would give it power to direct the activities
of a variable interest entity and the obligation to absorb losses or the right
to receive benefits from the entity that could potentially be significant to the
variable interest entity. The statement is effective for years beginning after
November 15, 2009 and is not expected to have a material effect on the
Company’s consolidated financial statements.
On August
26, 2009, the FASB issued Accounting Standard Update (ASU) 2009-05, Measuring
Liabilities at Fair Value, to clarify how entities should estimate the fair
value of liabilities under the FASB ASC Topic 820, Fair Value Measurements and
Disclosures. The amendments in ASU 2009-05 reduce potential ambiguity in
financial reporting when measuring the fair value of liabilities. Therefore,
preparers, investors, and other users of financial statements will have a better
understanding of how the fair value of liabilities was measured, helping to
improve consistency in the application of Topic 820. The FASB issued ASU 2009-05
as a result of expressed concern that there may be a lack of observable market
information to measure the fair value of a liability. For example, in the
hypothetical transfer of an asset subject to a restriction there will be no
observable data available to measure the liability because it is restricted from
being transferred. This guidance is effective for the first reporting period
(including interim periods) beginning after issuance. The adoption of this
accounting standard did not have a material effect on the Company’s consolidated
financial statements.
On Jan.
21, 2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2010-06, Improving Disclosures about Fair Value
Measurements. The ASU reports on new disclosure requirements — and
clarifications of existing requirements — under Accounting Standards
Codification (ASC) Subtopic 820-10 (originally issued as FAS 157). The new
disclosure requirements apply to interim and annual reporting periods beginning
after Dec. 15, 2009, with one exception: The new rules regarding purchases,
sales, issuances and settlements associated with Level 3 measurements will be
effective for fiscal years beginning after Dec. 15, 2010, and for interim
periods within those fiscal years. The adoption of this accounting standard is
not expected to have a material effect on the Company’s consolidated financial
statements.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk.
Not
applicable.
Item
4/4T. Controls and
Procedures
Evaluation
of Disclosure Controls and Procedures
Our
Company maintains a system of controls and procedures designed to provide
reasonable assurance as to the reliability of the financial statements and other
disclosures included in this report, as well as to safeguard assets from
unauthorized use or disposition. For the purpose of improving
management efficiency and effectiveness, the Company has completed a major part
of the implementation of a new accounting and management information system
using SAP Business One software. Our company is currently utilizing this new
system.
As of
December 31, 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 our
Company’s periodic Securities and Exchange Commission filings.
11
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
three months or six months ended December 31, 2009 that have materially
affected, or are reasonably likely to materially affect, our company’s internal
control over financial reporting.
PART
II. OTHER
INFORMATION
Item
1. Legal Proceedings
None.
Item
1A. Risk Factors.
Not
applicable.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
(a)
|
None
|
|
(b)
|
The
annual report filed on September 22, 2009 for the fiscal year ended June
30, 2009 (SEC Accession No. 0001144204-09-049470) is incorporated herein
by reference, subject to the replacement of the table under Item 5 thereof
with the following table showing the use of proceeds from our initial
public offering.
|
|
Description of Use
|
|
Proposed
Expenditure
Amount
|
|
|
Actual Expenditures
through
December 31, 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
|
930,421
|
||||||
|
Sarbanes-Oxley
compliance
|
500,000
|
133,387
|
||||||
|
Marketing
of company across China, United States and internationally
|
244,621
|
417,538
|
||||||
|
Develop
information exchange system
|
400,000
|
104,611
|
||||||
|
Train
staff
|
163,081
|
83,325
|
||||||
|
Fixed
asset purchase
|
407,702
|
396,624
|
||||||
|
Miscellaneous
expenses
|
407,702
|
324,474
|
||||||
|
Stock
repurchases
|
—
|
352,748
|
||||||
|
Total
|
$
|
8,154,047
|
$
|
2,846,656
|
||||
|
(c)
|
Our
company repurchased 13,586 shares of our outstanding common stock from the
open market during the three months ended December 31,
2009. The Company repurchased 3,786 shares in October 2009,
4,000 shares in November 2009 and 5,800 shares in December
2009. From commencement of the repurchase plan through the date
of this filing, our company has repurchased 121,686 shares of common
stock, including 2,000 shares after December 31,
2009.
|
Item
3. Defaults upon Senior Securities
None.
12
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
The
Company previously announced that its Annual Shareholder Meeting for the fiscal
year ended June 30, 2009 will be held on February 11, 2010. Contrary
to such previous announcement, the meeting was held in person in Flushing, New
York.
Item
6. Exhibits
The
following exhibits 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 Registrant 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 Registrant, 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 Registrant and Beijing Shou Rong Forwarding
Service Co., Ltd.(2)
|
|
|
10.9
|
Lease
Agreement dated December 8, 2009.(3)
|
|
|
13.1
|
Annual
report of our company on Form 10-K for the year ended June 30, 2010.(4)
|
|
|
14.1
|
Code
of Ethics of our company.(5)
|
|
|
21.1
|
List
of subsidiaries of our company.(4)
|
|
|
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 No. 333-148611.
|
|
(2)
|
Incorporated
by reference to our company’s Form 8-K filed on January 15, 2010, File No.
001-34024.
|
|
(3)
|
Incorporated
by reference to our company’s Form 8-K filed on February 8, 2010, File No.
001-34024.
|
|
(4)
|
Incorporated
by reference to our company’s Form 10-K filed on September 22, 2009, File
No. 001-34024.
|
|
(5)
|
Incorporated
by reference to our company’s Form 10-KSB filed on September 29, 2008,
File No. 001-34024.
|
|
(6)
|
Filed
herewith.
|
13
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
SINO-GLOBAL
SHIPPING AMERICA, LTD.
|
||
|
February
11, 2010
|
By:
|
/s/ Zhang Mingwei
|
|
Zhang
Mingwei
|
||
|
Chief
Financial Officer
|
||
|
(Principal
Financial and Accounting
Officer)
|
||
14
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATE
INDEX
TO FINANCIAL STATEMENTS
|
PAGE
|
||||
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS:
|
||||
|
Condensed
Consolidated Balance Sheets as of December 31, 2009 (unaudited) and June
30, 2009
|
F-2 | |||
|
Condensed
Consolidated Statements of Operations for the six and three months ended
December 31, 2009 (unaudited) and 2008 (unaudited)
|
F-3 | |||
|
Condensed
Consolidated Statements of Cash Flows for the six months ended December
31, 2009 (unaudited) and 2008 (unaudited)
|
F-4 | |||
|
Notes
to the Condensed Consolidated Financial Statements
|
F-5 | |||
F-1
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
December 31,
|
June 30,
|
|||||||
|
2009
|
2009
|
|||||||
|
US$
|
US$
|
|||||||
|
(Unaudited)
|
||||||||
|
Assets
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
7,118,374 | 7,259,654 | ||||||
|
Advances
to suppliers
|
574,886 | 8,825 | ||||||
|
Accounts
receivable, less allowance for doubtful accounts of $723,640 as
of
|
||||||||
|
December
31, 2009 and June 30, 2009
|
1,779,448 | 2,894,750 | ||||||
|
Other
receivables
|
170,128 | 22,085 | ||||||
|
Prepaid
expenses and other current assets
|
123,865 | 58,516 | ||||||
|
Prepaid
taxes
|
77,553 | 35,305 | ||||||
|
Employee
loans receivable
|
16,636 | 16,627 | ||||||
|
Income
tax receivable
|
34,445 | 105,092 | ||||||
|
Deferred
tax assets
|
326,000 | 333,000 | ||||||
|
Total
current assets
|
10,221,335 | 10,733,854 | ||||||
|
Property
and equipment, net
|
853,084 | 972,931 | ||||||
|
Security
deposits
|
75,943 | 56,885 | ||||||
|
Employee
loans receivable less current portion
|
60,223 | 68,504 | ||||||
|
Deferred
tax assets
|
71,000 | 26,000 | ||||||
|
Other
assets
|
- | 766 | ||||||
|
Total
Assets
|
11,281,585 | 11,858,940 | ||||||
|
Liabilities
and Shareholders' Equity
|
||||||||
|
Current
liabilities
|
||||||||
|
Advances
from customers
|
952,916 | 686,588 | ||||||
|
Accounts
payable
|
3,345,932 | 3,024,104 | ||||||
|
Accrued
expenses
|
3,259 | 145,857 | ||||||
|
Income
taxes payable
|
4,247 | - | ||||||
|
Other
current liabilities
|
73,424 | 619,801 | ||||||
|
Total
Current Liabilities
|
4,379,778 | 4,476,350 | ||||||
|
Total
Liabilities
|
4,379,778 | 4,476,350 | ||||||
|
Shareholders'
equity
|
||||||||
|
Preferred
stock, 1,000,000 shares authorized, no par value
|
- | - | ||||||
|
Common
stock, 10,000,000 shares authorized, no par value; 3,029,032
shares
|
||||||||
|
issued
|
7,709,745 | 7,709,745 | ||||||
|
Additional
paid-in capital
|
1,158,696 | 1,158,696 | ||||||
|
Treasury
stock, at cost
|
(352,748 | ) | (285,902 | ) | ||||
|
Retained
earnings
|
172,386 | 111,326 | ||||||
|
Accumulated
other comprehensive loss
|
(24,906 | ) | (13,399 | ) | ||||
|
Unearned
Compensation
|
(755,396 | ) | (755,396 | ) | ||||
|
Total
Sino-Global Shipping America Ltd. Shareholders' equity
|
7,907,777 | 7,925,070 | ||||||
|
Non-Controlling
interest
|
(1,005,970 | ) | (542,480 | ) | ||||
|
Total
shareholder's equity
|
6,901,807 | 7,382,590 | ||||||
|
Total
Liabilities and Shareholders' Equity
|
11,281,585 | 11,858,940 | ||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
For the six months ended
|
For the three months ended
|
|||||||||||||||
|
December 31,
|
December 31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||
|
Revenues
|
12,877,051 | 9,573,195 | 6,632,243 | 4,474,518 | ||||||||||||
|
Costs
and expenses
|
||||||||||||||||
|
Cost
of revenues
|
(11,296,568 | ) | (8,562,514 | ) | (5,853,104 | ) | (4,055,949 | ) | ||||||||
|
General
and administrative expense
|
(1,796,094 | ) | (2,173,456 | ) | (937,673 | ) | (1,155,706 | ) | ||||||||
|
Selling
expense
|
(83,299 | ) | (236,688 | ) | (36,603 | ) | (141,660 | ) | ||||||||
|
Other
income (expense)
|
7,508 | (1,260 | ) | (46,102 | ) | 1,737 | ||||||||||
| (13,168,453 | ) | (10,973,918 | ) | (6,873,482 | ) | (5,351,578 | ) | |||||||||
|
Operating
loss
|
(291,402 | ) | (1,400,723 | ) | (241,239 | ) | (877,060 | ) | ||||||||
|
Financial
income (expense), net
|
185,760 | (74,553 | ) | 16,327 | (90,312 | ) | ||||||||||
|
Non-operating
revenue (expense)
|
2,265 | - | (37,935 | ) | - | |||||||||||
|
Non-operating
costs
|
(7,890 | ) | - | (7,773 | ) | - | ||||||||||
| 180,135 | (74,553 | ) | (29,381 | ) | (90,312 | ) | ||||||||||
|
Net
loss before provision for income taxes
|
(111,267 | ) | (1,475,276 | ) | (270,620 | ) | (967,372 | ) | ||||||||
|
Income
taxes
|
(293,151 | ) | (226,296 | ) | (119,151 | ) | (153,666 | ) | ||||||||
|
Net
loss
|
(404,418 | ) | (1,701,572 | ) | (389,771 | ) | (1,121,038 | ) | ||||||||
|
Non-controlling
interest in loss
|
(465,478 | ) | (369,993 | ) | (355,257 | ) | (219,692 | ) | ||||||||
|
Net
income (loss) attributable to Sino-Global Shipping America
Ltd.
|
61,060 | (1,331,579 | ) | (34,514 | ) | (901,346 | ) | |||||||||
|
Earnings
(loss) per share
|
||||||||||||||||
|
-Basic
|
0.02 | (0.44 | ) | (0.01 | ) | (0.30 | ) | |||||||||
|
-Diluted
|
0.02 | (0.44 | ) | (0.01 | ) | (0.30 | ) | |||||||||
|
Weighted
average number of common shares
|
||||||||||||||||
|
-Basic
|
2,921,907 | 2,995,048 | 2,817,569 | 3,003,206 | ||||||||||||
|
-Diluted
|
3,198,939 | 2,995,048 | 2,817,569 | 3,003,206 | ||||||||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
SINO-GLOBAL
SHIPPING AMERICA LTD. AND AFFILIATE
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the six
months ended December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
US$
|
US$
|
|||||||
|
Operating
Activities
|
||||||||
|
Net
loss
|
(404,418 | ) | (1,701,572 | ) | ||||
|
Adjustment
to reconcile net loss to net cash used in operating
activities
|
||||||||
|
Depreciation
|
116,872 | 85,597 | ||||||
|
Provision
for doubtful accounts
|
- | 45,815 | ||||||
|
Deferred
tax benefit
|
(38,000 | ) | - | |||||
|
Changes
in assets and liabilities
|
||||||||
|
Decrease
(Increase) in advances to supplier
|
(566,061 | ) | 49,232 | |||||
|
Decrease
(Increase) in accounts receivable
|
1,115,302 | (979,662 | ) | |||||
|
Increase
in other receivables
|
(148,043 | ) | (60,595 | ) | ||||
|
Increase
in prepaid expense and other current assets
|
(65,349 | ) | (19,514 | ) | ||||
|
Increase
in prepaid tax
|
(42,248 | ) | - | |||||
|
Decrease
in employee loan receivables
|
8,272 | - | ||||||
|
Decrease
in income tax receivables
|
70,647 | - | ||||||
|
Decrease
(Increase) in security deposits
|
(19,058 | ) | 36,467 | |||||
|
Increase
in long-term prepaid expenses
|
766 | - | ||||||
|
Increase
(Decrease) in advances from customers
|
266,328 | (946,971 | ) | |||||
|
Increase
in accounts payable
|
321,828 | 2,149,337 | ||||||
|
Increase
(Decrease) in accrued expenses
|
(142,598 | ) | 19,616 | |||||
|
Increase
(Decrease) in income taxes payable
|
4,247 | (221,940 | ) | |||||
|
Decrease
in other current liabilities
|
(546,377 | ) | (3,982 | ) | ||||
|
Net
cash used in operating activities
|
(67,890 | ) | (1,548,172 | ) | ||||
|
Investing
Activities
|
||||||||
|
Capital
expenditures and other additions
|
(2,167 | ) | (183,718 | ) | ||||
|
Net
cash used in investing activities
|
(2,167 | ) | (183,718 | ) | ||||
|
Financing
Activities
|
||||||||
|
Payments
of long-term debt
|
- | (13,743 | ) | |||||
|
Payments
for treasury stock
|
(66,846 | ) | (158,624 | ) | ||||
|
Increase
in noncontrolling interest in majority-owned subsidiary
|
2,929 | - | ||||||
|
Net
cash used in financing activities
|
(63,917 | ) | (172,367 | ) | ||||
|
Effect
of exchange rate fluctuations on cash and cash equivalents
|
(7,306 | ) | 9,546 | |||||
|
Net
decrease in cash and cash equivalents
|
(141,280 | ) | (1,894,711 | ) | ||||
|
Cash
and cash equivalents at beginning of period
|
7,259,654 | 9,603,250 | ||||||
|
Cash
and cash equivalents at end of period
|
7,118,374 | 7,708,539 | ||||||
|
Supplemental
information
|
||||||||
|
Interest
paid
|
- | - | ||||||
|
Income
taxes paid
|
267,000 | 387,142 | ||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-4
SINO-GLOBAL
SHIPPING AMERICA, LTD. AND AFFILIATE
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND NATURE OF BUSINESS
Sino-Global
Shipping America, Ltd. (the “Company”), previously known as Sino-Global-Shipping
(America) Ltd., was incorporated under section 402 of the Business Corporation
Laws of the United States of America in New York on February 2,
2001.
On
September 18, 2007, the Company amended the Articles of Incorporation and Bylaws
to merge into a new Corporation, Sino-Global Shipping America, Ltd. in
Virginia.
The
Company’s principal geographic market is in the People’s Republic of China
(“PRC”). As PRC laws and regulations restrict foreign ownership of shipping
agency service businesses, the Company provides its services in the PRC through
Sino-Global Shipping Agency Ltd. (“Sino-China”), a Chinese legal entity, which
holds the licenses and permits necessary to operate shipping services in the
PRC. Sino-China is located in Beijing with branches in Ningbo, Qingdao, Tianjin,
Qinhuangdao and Fangchenggang and cooperation with all other ports in PRC. On
November 13, 2007, the Company formed a wholly owned foreign-owned enterprise,
Trans Pacific Shipping Limited (“Trans Pacific”), in Beijing, which established
a subsidiary in Shanghai, which provides freight forwarder services. Trans
Pacific invested in another subsidiary, Sino-Global Shipping Agency Development
Co., Ltd. on November 2, 2009 in Beijing. Trans Pacific owns 99% of Sino-Global
Shipping Agency Development Co., Ltd.
Trans
Pacific and Sino-China do not have a parent-subsidiary relationship. Instead,
Trans Pacific operates with Sino-China through a variety of contractual
agreements as described in Note 2(a).
With a
purpose of building up an international shipping agency service network, the
Company formed a wholly-owned subsidiary, Sino-Global Shipping Australia Pty
Ltd. (“Sino-Global AUS”) in Australia on July 3, 2008, which signed an agreement
with Monson Agencies Australia (“Monson”), one of the largest shipping agency
service providers in Australia. Through Monson, the Company is able to provide
general shipping agency services to all ports in Australia.
The
Company established a wholly-owned subsidiary, Sino-Global Shipping (HK) Limited
("Sino-Global HK") on September 22, 2008. Sino-Global HK becomes Sino-Global's
control and management center for southern Chinese ports and will enable the
Company to extend its offering of comprehensive shipping agency services to
vessels going to and from one of the world's busiest ports. On July 27, 2009,
Sino-Global HK signed an exclusive partnership agreement with Forbes &
Company Limited (“Forbes”), which is a listed company on the Bombay Stock
Exchange and one of the largest shipping and logistic service providers in
India. Through Forbes, the Company is able to provide general shipping agency
services to all ports in India.
The
Company is listed on the Nasdaq Capital Market as a result of its Initial Public
Offering (IPO) on May 20, 2008.
F-5
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of presentation
The
accompanying condensed 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.
The
accounts of Sino-China are consolidated in the accompanying condensed
consolidated financial statements pursuant to Accounting Standards Codification
(“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s sales are included in
the Company’s total sales, and its income (loss) from operations is consolidated
with the Company’s. Because of the contractual arrangements, the Company had a
pecuniary interest in Sino-China that requires consolidation of the Company’s
and Sino-China’s financial statements.
The
Company has consolidated Sino-China’s income because the entities are under
common control in accordance with ASC 805-10, “Business Combinations”. For this
reason, the Company has included 90% of Sino-China’s net income in the Company’s
net income as discussed above as though the 2007 agreements were in effect from
the inception of Sino-China, and only the 10% of Sino-China’s net income not
paid to the Company represents the non-controlling interest in Sino-China’s
income.
(b)
Fair Value of Financial Instruments
The
carrying amounts reported in the condensed consolidated financial
statements for current assets and current liabilities approximate fair value due
to the short-term nature of these financial instruments.
F-6
(c)
Use of Estimates
The
preparation of the condensed 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 condensed 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 condensed 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 condensed
consolidated statements of operations. The Company translates foreign currency
financial statements of Sino-China, Sino-Global AUS, Sino-Global HK
and Trans Pacific in accordance with ASC 830-10, “Foreign Currency
Matters”. Assets and liabilities are translated at current exchange rates quoted
by the People’s Bank of China at the balance sheet dates and revenues and
expenses are translated at average exchange rates in effect during the periods.
Resulting translation adjustments are recorded as other comprehensive income
(loss) and accumulated as a separate component of shareholders’ 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:
F-7
|
20
years
|
|
|
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 ASC 405-45, the Company reports its revenue on the gross amounts
billed to customers based on several criteria: (1) the Company assumes all
credit risk for the amounts billed to customers, (2) the Company has multiple
suppliers for services ordered by customers and discretion to select the
supplier that provides the services, and (3) the Company determines the nature,
type or specifications of the services ordered by customers and the Company is
responsible for fulfilling these services.
(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 December 31
and June 30, 2009, respectively. Accounts are written off after exhaustive
efforts at collection.
F-8
(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 bases of assets and liabilities and their reported
amounts in the condensed consolidated financial statements.
The
Company follows the provisions of ASC 740-10, “Accounting for
Income Taxes”, which addresses the determination of whether tax benefits claimed
or expected to be claimed on a tax return should be recorded in the financial
statements. Under ASC 740-10, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the
financial statements from such a position would be measured based on the largest
benefit that has a greater than fifty percent likelihood of being realized upon
ultimate settlement. ASC 740-10 also provides guidance on derecognition,
classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures.
The
implementation of ASC 740-10 resulted in no material liability for unrecognized
tax benefits and no material change to the beginning retained earnings of the
Company. The Company recognizes interest and penalties, if any, related to
unrecognized tax benefits as income tax expense in the Statement of
Operations.
Income
tax returns for the year prior to 2005 are no longer subject to examination by
tax authorities.
PRC
Enterprise Income Tax
PRC
enterprise income tax is calculated based on taxable income determined under PRC
GAAP. Sino-China and Trans Pacific are registered in PRC and governed by the
Enterprise Income Tax Laws of the PRC. Their taxable incomes were subject to an
enterprise income tax rate of 25% in accordance with the amendment of the
Enterprise Income Tax Law of the PRC that became effective on January 1,
2008.
F-9
PRC
Business Tax and Surcharges
Revenues
from services provided by Sino-China and Trans Pacific are subject to the
PRC business tax of 5%. Business tax and surcharges are paid on gross revenues
generated from shipping agency services minus the costs of services which are
paid on behalf of the customers.
In
addition, under the PRC regulations, Sino-China is required to pay the city
construction tax (7%) and education surcharges (3%) based on the calculated
business tax payments.
Sino-China
has complied with ASC 405-50 and reports its revenues net of PRC’s business
tax and surcharges for all the periods presented in the condensed consolidated
statements of operations.
(j)
Earnings (loss) per share
Earnings
(loss) per share is calculated in accordance with ASC 260-10, “Earnings Per
Share”. Basic earnings per share is computed by dividing net income attributable
to holders of common shares by the weighted average number of common shares
outstanding during the years. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
shares were exercised or converted into common shares. Convertible,
redeemable preferred shares, if any, 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-dilutive.
The following table reconciles weighted
average common shares outstanding with denominator used in the calculation of
diluted per share information for the six months at December 31,
2009:
|
Denominator:
|
||||
|
Weighted
average common shares outstanding
|
2,921,907 | |||
|
Dilutive
effect of stock options and warrants
|
277,032 | |||
|
Weighted
average common shares outstanding, assuming dilution
|
3,198,939 | |||
The
effect of stock options and warrants for all other periods persented
was anti-dilutive.
(k)
Reclassifications
Certain
reclassifications between Financial Income (Expense), Net and Non-Operating
Revenues have been made to the 2008 financial information to conform to the
current period presentation. The reclassifications have no impact on
the Company’s net loss.
(l)
Subsequent Events
The
accompanying condensed consolidated financial statements were approved by
management and the board of directors and were issued on February 11, 2010.
Management has evaluated subsequent events through this date.
(m) Recent
Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board ("FASB") issued a statement
establishing the FASB Accounting Standards Codification as the source of the
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative GAAP for SEC
registrants. This statement is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. On the effective
date of this statement, all then existing non-SEC accounting and reporting
standards were superseded.
F-10
In
June 2009, the FASB issued an amendment to its Interpretation,
“Consolidation of Variable Interest Entities.” The statement requires an entity
to perform an analysis to determine whether the entity’s variable interest give
it a controlling financial interest in a variable interest entity by
rationalizing characteristics that would give it power to direct the activities
of a variable interest entity and the obligation to absorb losses or the right
to receive benefits from the entity that could potentially be significant to the
variable interest entity. The statement is effective for years beginning after
November 15, 2009 and is not expected to have a material effect on the
Company’s consolidated financial statements.
On August
26, 2009, the FASB issued Accounting Standard Update (ASU) 2009-05, Measuring
Liabilities at Fair Value, to clarify how entities should estimate the fair
value of liabilities under the FASB ASC Topic 820, Fair Value Measurements and
Disclosures. The amendments in ASU 2009-05 reduce potential ambiguity in
financial reporting when measuring the fair value of liabilities. Therefore,
preparers, investors, and other users of financial statements will have a better
understanding of how the fair value of liabilities was measured, helping to
improve consistency in the application of Topic 820. The FASB issued ASU 2009-05
as a result of expressed concern that there may be a lack of observable market
information to measure the fair value of a liability. For example, in the
hypothetical transfer of an asset subject to a restriction there will be no
observable data available to measure the liability because it is restricted from
being transferred. This guidance is effective for the first reporting period
(including interim periods) beginning after issuance. The adoption of this
accounting standard did not have a material effect on the Company’s consolidated
financial statements.
On Jan.
21, 2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2010-06, Improving Disclosures about Fair Value
Measurements. The ASU reports on new disclosure requirements — and
clarifications of existing requirements — under Accounting
Standards Codification (ASC)
Subtopic 820-10 (originally issued as FAS 157). The new disclosure requirements
apply to interim and annual reporting periods beginning after Dec. 15, 2009,
with one exception: The new rules regarding purchases, sales, issuances and
settlements associated with Level 3 measurements will be effective for fiscal
years beginning after Dec. 15, 2010, and for interim periods within those fiscal
years. The adoption of this accounting standard is not expected to have a
material effect on the Company’s consolidated financial statements.
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.
F-11
(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:
|
December 31,
|
June 30,
|
|||||||
|
2009
|
2009
|
|||||||
|
US$
|
US$
|
|||||||
|
(Unaudited)
|
||||||||
|
Loans
from employees, secured by their personal assets, receivable in monthly
installments of approximately $1,386 bearing no interest through August
2014
|
76,859 | 85,131 | ||||||
|
Less
: Current maturities
|
(16,636 | ) | (16,627 | ) | ||||
| 60,223 | 68,504 | |||||||
5.
ADVANCES TO SUPPLIERS/ADVANCES FROM CUSTOMERS.
(a)
Advances to Suppliers
Advances
to suppliers represent costs of services and fees paid to suppliers in advance
in connection with the agency services fees income to be
recognized.
(b)
Advances from Customers
Advances
from customers represent money received from customers in advance in connection
with the agency services fees income to be recognized.
6.
PROPERTY AND EQUIPMENT
Property
and equipment are as follows:
|
December 31,
|
June 30,
|
|||||||
|
2009
|
2009
|
|||||||
|
US$
|
US$
|
|||||||
|
(Unaudited)
|
||||||||
|
Land
and building
|
72,807 | 72,768 | ||||||
|
Motor
vehicles
|
864,334 | 863,866 | ||||||
|
Computer
equipment
|
111,618 | 113,556 | ||||||
|
Office
equipment
|
32,484 | 30,419 | ||||||
|
Furniture
& Fixtures
|
24,985 | 22,545 | ||||||
|
System
software
|
122,609 | 120,347 | ||||||
|
Leasehold
improvement
|
62,420 | 70,606 | ||||||
|
Total
|
1,291,257 | 1,294,107 | ||||||
|
Less
: Accumulated depreciation and amortization
|
438,173 | 321,176 | ||||||
|
Property
and equipment, net
|
853,084 | 972,931 | ||||||
F-12
7.
NON-CONTROLLING INTEREST
Non-controlling
interest consists of the following:
|
Decem
ber 31,
|
June
30,
|
|||||||
|
2009
|
2009
|
|||||||
|
US$
|
US$
|
|||||||
|
(Unaudited)
|
(Audited)
|
|||||||
|
Original
paid-in capital
|
356,400 | 356,400 | ||||||
|
Additional
paid-in capital
|
1,044 | 1,044 | ||||||
|
Accumulated
other comprehensive loss
|
(30,305 | ) | (29,364 | ) | ||||
|
Accumulated
deficit
|
(1,338,856 | ) | (873,378 | ) | ||||
|
Other
adjustments
|
2,818 | 2,818 | ||||||
| (1,008,899 | ) | (542,480 | ) | |||||
|
Sino-Global
Shipping Agency Development, Limited
|
2,929 | - | ||||||
|
Original
paid-in-capital
|
(1,005,970 | ) |
(542,480
|
) | ||||
8.
COMMITMENTS AND CONTINGENCY
(a)
Office leases
The
Company leases certain office premises and apartments for employees under
operating leases through December 31, 2011. Future minimum lease payments under
operating leases agreements were as follows:
|
Amount
|
||||
|
US$
|
||||
|
Year
ending December 31,
|
||||
|
2010
|
386,499 | |||
|
2011
|
142,405 | |||
|
528,904
|
||||
(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
December 31, 2009, the Company has estimated its severance payments of
approximately $79,200, which has not been reflected in its condensed
consolidated financial statements.
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. On September
19, 2009, the Company’s board of directors approved the extension of the
repurchase of the common shares for a period of six months ending April
2010. As of December 31, 2009, the Company repurchased 119,686 shares
from the open market at an average price of $2.95 per share including trading
expenses for the total cost of $352,748.
F-13
10.
Financial income (expenses)
Financial
income (expenses) for the six months ended December 31, 2009 and 2008 and the
three months ended December 31, 2009 and 2008 are as follows:
|
For
the six months ended
|
For
the three months ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
|
Interest
income
|
126,866 | 83,631 | 16,298 | 37,274 | ||||||||||||
|
Interest
expense
|
3,492 | (5 | ) | 3,492 | (5 | ) | ||||||||||
|
Bank
charge
|
(11,131 | ) | (2,105 | ) | (7,587 | ) | (1,503 | ) | ||||||||
|
Foreign
currency translation
|
66,533 | (156,074 | ) | 4,124 | (126,078 | ) | ||||||||||
| 185,760 | (74,553 | ) | 16,327 | (90,312 | ) | |||||||||||
11.
INCOME TAXES
The
income tax provision for the six months ended December 31, 2009 and 2008 and the
three months ended December 31, 2009 and 2008 are as follows:
|
For
the six months ended
|
For
the three months ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
|
Current
|
||||||||||||||||
|
USA
|
(331,151 | ) | (221,941 | ) | (199,151 | ) | (153,142 | ) | ||||||||
|
China
|
- | (4,355 | ) | - | (524 | ) | ||||||||||
| (331,151 | ) | (226,296 | ) | (199,151 | ) | (153,666 | ) | |||||||||
|
Deferred
|
||||||||||||||||
|
Allowance
for doubtful accounts
|
(7,000 | ) | - | 7,000 | - | |||||||||||
|
Net
operating loss carryforward
|
45,000 | - | 71,000 | - | ||||||||||||
|
Valuation
allowance
|
- | - | 2,000 | - | ||||||||||||
|
Net
deferred
|
38,000 | - | 80,000 | - | ||||||||||||
|
Total
|
(293,151 | ) | (226,296 | ) | (119,151 | ) | (153,666 | ) | ||||||||
12.
MAJOR CUSTOMERS
For the
six months ended December 31, 2009 and 2008, approximately 58%
and 52% respectively, of the Company’s revenues were from
one customer. The Company provides services to one customer under an
exclusive agency agreement that expired on December 31, 2009. The
contract was renewed and it will terminate on December 31,
2011.
F-14