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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     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 2,903,841 issued and outstanding shares of common stock and no shares of preferred stock.

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SINO-GLOBAL SHIPPING AMERICA, LTD.

FORM 10-Q

INDEX

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		ii
PART I. FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1
Item 3. Quantitative and Qualitative Disclosures about Market Risk		9
Item 4/4T. Controls and Procedures		9
PART II. OTHER INFORMATION		10
Item 1. Legal Proceedings		10
Item 1A. Risk Factors		10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		10
Item 3. Defaults upon Senior Securities		10
Item 4. [Reserved]		10
Item 5. Other Information		10
Item 6. Exhibits		11
INDEX TO FINANCIAL STATEMENTS		F-1

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain statements of a forward-looking nature.  Such forward-looking statements, including but not limited to projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company.  Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently.  The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to the following:

	·	the ability to timely and accurately provide shipping agency services;

	·	its dependence on a limited number of larger customers;

	·	political and economic factors in the Peoples’ Republic of China (“PRC”);

	·	the Company’s ability to expand and grow its lines of business;

	·	unanticipated changes in general market conditions or other factors, which may result in cancellations or reductions in the need for the Company’s services;

	·	a weakening of economic conditions which would reduce demand for services provided by the Company and could adversely affect profitability;

	·	the effect of terrorist acts, or the threat thereof, on consumer confidence and spending, or the production and distribution of product and raw materials which could, as a result, adversely affect the Company’s shipping agency services, operations and financial performance;

	·	the acceptance in the marketplace of the Company’s new lines of services;

	·	foreign currency exchange rate fluctuations;

	·	hurricanes or other natural disasters;

	·	the Company’s ability to identify and successfully execute cost control initiatives;

	·	the impact of quotas, tariffs, or safeguards on the importation or exportation of the Company’s customer’s products; or

·

other risks outlined above and in the Company’s other filings made periodically by the Company.

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.

 

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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. 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 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, we formed our wholly foreign-owned enterprise, Trans Pacific Shipping Limited (“Trans Pacific Beijing”), in Beijing, which established a wholly-owned subsidiary, Trans Pacific Logistics Shanghai, Limited (“Trans Pacific Shanghai” and, together with Trans Pacific Beijing, “Trans Pacific”), in Shanghai on May 31, 2009. This increases our presence in mainland China and enables us to provide a full range of shipping agency services as well as freight forwarder services.  Trans Pacific acquired a 40% interest in Sino-Global Shipping Agency Development Co., Limited, in Beijing on November 6, 2009 in order to develop additional business opportunities for the company.

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 Sino-China.

 

With a purpose of building an international shipping agency service network, we formed a wholly-owned subsidiary, Sino-Global Shipping Australia Pty Ltd. (“Sino-Global AUS”) in Perth, Australia on July 3, 2008 in order to serve the needs of customers shipping into and out of Western Australia. We also signed an agreement with Monson Agencies Australia (“Monson”), one of the largest shipping agency service providers in Australia. Through Monson, we are able to provide general shipping agency services to all ports in Australia.

We established another wholly-owned subsidiary, Sino-Global Shipping (HK) Limited (“Sino-Global HK”) on September 22, 2008. We expect that Sino-Global HK will become our control and management center for southern Chinese ports and will enable our company to extend its offering of comprehensive shipping agency services to vessels going to and from one of the world’s busiest ports. On July 27, 2009, Sino-Global HK signed an exclusive partnership agreement with Forbes & Company Limited (“Forbes”), which is a listed company on the Bombay Stock Exchange (BOM: 502865) and one of the largest shipping and logistic service providers in India. Through Forbes, we are able to provide general shipping agency services to all ports in India.

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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. Following the initial public offering, our Board authorized a stock repurchase program under which we may repurchase up to 10% of our outstanding common stock for a period of 12 months, which began October 9, 2008. In September 2009, our Board approved to extend the stock repurchase program for another six months ended April 2010. The stock repurchase program has now expired. In total, we repurchased 125,191 shares of our common stock from the open market at an average price of $2.98 per share including trading expenses. The total cost of stock repurchase was $372,528.

Revenues

 

For the first quarter ended September 30, 2010, our total revenues amounted to approximately $8.20 million, representing a 31.30% increase from our total revenues of $6.24 million for the quarter ended September 30, 2009.

Our total revenues are net of PRC business taxes and related surcharges. Sino-China’s revenues are subject to a 5% business tax as well as an additional 0.5% surcharge after deducting the costs of services. We deduct these amounts from our gross revenues to arrive at our total revenues.

We charge the shipping agency fees in two ways: (1) the fixed fees are predetermined with a customer, and (2) the cost-plus fees are calculated based on the actual costs incurred plus a mark up. We generally require payments in advance from customers and bill them the balances within 30 days after the transactions are completed.

 

We believe the most significant factors that directly or indirectly affect our shipping agency service revenues are:

 

	·	the number of ships to which we provide port loading/discharging services;

	·	the size and types of ships we serve;

	·	the rate of service fees we charge;

	·	the number of ports at which we provide services; and

·

the number of customers we serve.

 

Historically, our services have primarily been driven by the increase in the number of ships and customers, provided that the rate of service fees is determined by market competition. We believe that an increase in the number of ports served generally leads to an increase in the number of ships and customers. We expect that we will continue to earn a substantial majority of our revenues from our shipping agency services. As a result, we plan to continue to focus most of our resources on expanding our business to cover more ports in the PRC. In addition, we will allocate our resources in marketing our brand to customers, including ship owners and charters, which transport goods from all ports around the world to China.

 

Operating Costs and Expenses

Our operating costs and expenses consist of costs of revenues, general and administrative expenses, selling expenses and other expenses. Our company’s total operating costs and expenses increased as a percentage of total revenues for the three months ended September 30, 2010 mainly due to the increase of the costs paid to Chinese local ports. Our general and administrative expenses increased in absolute amount but decreased as a percentage of total revenues. As our operations increased, our general and administrative expenses increased accordingly. The following table sets forth the components of our company’s costs and expenses for the periods indicated. 

 

		For the three months ended September 30,
		2010								2009								Change
		US$				%				US$				%				US$					%
Revenues			8,199,344				100.00				6,244,808				100.00				1,954,536					31.30
Costs and expenses
Cost of revenues			(7,394,678	)			(90.19	)			(5,443,464	)			(87.17	)			(1,951,214	)				35.85
General and administrative			(1,027,199	)			(12.53	)			(858,421	)			(13.75	)			(168,778	)				19.66
Selling			(54,345	)			(0.66	)			(46,696	)			(0.75	)			(7,649	)				16.38
Others			29,026				0.35				53,610				0.86				(24,584	)				(45.86	)
			(8,427,196	)			(103.03	)			(6,294,971	)			(100.81	)			(2,103,590	)				26.03

Costs of Revenues. Costs of revenues represent the expenses incurred in the periods when a ship docks in a harbor to load and unload cargo. We typically pay the costs of revenues on behalf of our customers. We receive revenues from our clients in U.S. dollars and pay the costs of revenues to the Chinese local port agents in RMB. As such, the costs of services will change if the foreign currency exchange rates change. Our costs of revenues could also increase if the ports were to raise their charges, particularly in the case of overtime payments during the public holidays. Our costs of revenues as a percentage of our total revenues increased from 87.17% to 90.19% for the three months ended September 30, 2010 and 2009 respectively, because the port charges for the larger vessels we served were much higher. In addition, the exchange rate of U.S. dollars against the Chinese RMB also devaluated approximately 1%, resulting in the increased of costs of revenues. To overcome the negative impact form the above two factors, we are re-negotiating the agency fees with our major customers and we expect positive responses from them.

 

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 three months ended September 30, 2010, our general and administrative expenses as a percentage of our total revenues decreased from 13.75% to 12.53% for the three months ended September 30, 2009. Our budget control efforts appear effective in improving our operating results, although we still incurred significant expenses in our business expansion and company public listing expenses.

Selling Expenses. Our selling expenses primarily consist of commissions and traveling expenses for our operating staff to the ports at which we provide services. Although they slightly increased in absolute amount, our selling expenses decreased as a percentage of our total net revenues for the three months ended September 30, 2010 due to our efforts to tighten our budget controls.

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.

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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.”

  

Basis of Consolidation

 

The condensed consolidated financial statements include the accounts of the parent and its subsidiaries.  All significant inter-company transaction and balances are eliminated in consolidation.  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 condensed consolidated in the accompanying consolidated financial statements pursuant to Accounting Standard Codification (“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s sales are included in our total sales, its income (loss) from operations is consolidated with our company’s, and our net income (loss) from continuing operations before non-controlling interest in income (loss) includes all of Sino-China’s net income (loss). Our noncontrolling 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.

Equity Investment

Investments in companies that are owned 20% to 50% for which we have significant influence but not control are accounted for by the equity method. Under the equity method, we recognize in earnings our proportionate share of the income or loss of the investee.

  

Accounts Receivable

 

Accounts receivable are recognized at net realizable value. We maintain allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments in the relevant time period. We review the accounts receivable on a periodic basis and record general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, we consider many factors, including the age of the balance, the customer’s historical payment history, its current credit-worthiness and current economic trends. Receivables are considered past due after 365 days. Accounts are written off only after exhaustive collection efforts. Because of the worldwide financial crisis we have experienced difficulties in collecting cash from some of our customers.

When a client requests our shipping agency services, we communicate with port officials and our service partners rely on our prior experience for similar vessels with similar needs in the same ports to obtain an estimate for the cost of revenues. We then calculate our shipping agency fees in two ways: (1) the fixed fees are predetermined with a customer, and (2) the cost-plus fees are calculated based on the actual costs incurred plus a mark up.

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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 calculate gains and losses on disposals by comparing proceeds with the carrying amount of the related assets and include these gains and losses in the consolidated statements of operations. We consider the carrying value of a long-lived asset to be impaired when the anticipated undiscounted cash flow from such asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved or based on independent appraisals.

 

Translation of Foreign Currency

 

The accounts of our company and Sino-China are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). Our functional currency is the U.S. dollar, while Trans Pacific and Sino-China report their financial position and results of operations in Renminbi. The accompanying condensed consolidated financial statements are presented in U.S. dollars. Foreign currency transactions are translated into U.S. dollars using the fixed exchange rates in effect at the time of the transaction. Generally foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations. We translate foreign currency financial statements of Sino-China, Trans Pacific, Sino-Global HK and Sino-Global AUS in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange rates quoted by the People’s Bank of China at the balance sheet dates and revenues and expenses are translated at average exchange rates in effect during the periods.

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.

 

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.

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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.

PRC Enterprise Income Tax

 

PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. Sino-China and Tran Pacific are registered in PRC and governed by the Enterprise Income Tax Laws of the PRC. Their taxable incomes are subject to an enterprise income tax rate of 25%.

 

PRC Business Tax

 

Revenues from services provided by Sino-China are subject to PRC business tax of 5% and additional surcharges of 0.5%. We pay business tax on gross revenues generated from our shipping agency services minus the costs of services, which are paid on behalf of our customers.

2011 trends

We continued our top-line growth for the three months ended September 30, 2010 and expect the trend will continue through the 2011 fiscal year. In contrast to the increase in our revenues, we only managed to have a marginal increase of our gross profits in the absolute amount, and our gross margin decreased continuously. Because we receive most of our revenues in U.S. dollars and pay most of our expenses in Chinese Renminbi (“RMB”), we have faced increased costs of revenues due to the devaluation of U.S. dollars against RMB over the last several years. From June 17, 2010, Chinese RMB started its second round of re-valuation, and we anticipate that the U.S. dollar will devalue about 2% to 5% against the RMB in 2011. As a result, we expect that our gross margin will stay depressed unless we are able to successfully renegotiate service prices with our major customers, and there is no guarantee that we will be able to do so. 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 reduced these amounts for the year ended June 30, 2010 compared to the same period in 2009. In the 2011 fiscal year, we will continue our combined effort in budget controls and business promotion. In the first quarter of 2011, we have continued to reduce these amounts.

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.

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

 

Revenues. Our total revenues increased by 31.30% from $6,244,808 for the three months ended September 30, 2009 to $8,199,344 in the comparable three months in 2010. The number of ships that generated revenues for us increased from 93 in the three months ended September 30, 2009, to 103 in the three months ended September 30, 2010, representing an increase of 10.75%.

 

Total Operating Costs and Expenses. Our total operating costs and expenses increased by 26.03% from $6,294,971 for the three months ended September 30, 2009 to $8,427,196 for the three months ended September 30, 2010. This increase was primarily due to increases in our costs of revenues.

·

Costs of Revenues. Our cost of revenues increased by 35.85% from $5,443,464 for the three months ended September 30, 2009 to $7,394,678 for the three months ended September 30, 2010. Costs of revenues increased faster than revenues, resulting in the decrease of gross margins from 12.83% down to 9.81% for the comparative three months ended September 30, 2009 and 2010, respectively. Because iron ore prices increased, importers used larger vessels to save freight costs. This resulted in increased fees charges at Chinese local ports. Additionally, the foreign exchange rate of Chinese currency against the U.S. dollar increased during the period. The average foreign exchange rate was RMB6.7692 to $1.00 for the first quarter of fiscal 2011 compared to RMB6.8309 to $1.00 for the first quarter of fiscal 2010.

 

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	·	General and Administrative Expenses. Our general and administrative expenses increased by 19.66% from $858,421 for the three months ended September 30, 2009 to $1,027,199 for the three months ended September 30, 2010. This mainly due to (1) an increase of $12,497 in salaries and human resource expenses, (2) increased travel and car related expenses of $59,067, (3) a increase of $54,928 in office supplies due to operating volume increase and (4) increased entertainment expenses of $34,873 for business promotion.
	·	Selling Expenses. Our selling expenses increased by 16.38% from $46,696 for the quarter ended September 30, 2009 to $54,345 for the quarter ended September 30, 2009, due to operating volume increase.

Operating Profit (Loss). We had an operating loss of $247,852 for the three months ended September 30, 2010, compared to operating loss of $50,163 for the comparable three months in 2009. The operating loss for the first quarter of fiscal 2011 was primarily due to the increase in costs of revenues and in general and administrative expenses.

Financial Income, Net. Our net financial income was $86,141 for the three months ended September 30, 2010, compared to our net financial income of $169,433 for the three months ended September 30, 2009. The net financial income comes largely from interest income from money deposits in banks and by the foreign exchange losses recognized in the financial statements. As described in the above “Translation of Foreign Currency”, foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the condensed consolidated statements of operations.

Taxation.  Our income tax expenses were $28,188 for the three months ended September 30, 2010, compared to $132,000 for the three months ended September 30, 2009.  Although we had losses on our consolidated results of operations, we incurred income tax expenses on the profitable results of our U.S. operations.

Net Income. As a result of the foregoing, we had a net loss of $201,527 for the quarter ended September 30, 2010, compared to net loss of $14,647 for the quarter ended September 30, 2009. After deduction of non-controlling interest in loss, net loss attributable to Sino-Global Shipping America, Ltd. was $143,281 for the three months ended September 30, 2010, compared to net profit of $95,574 for the three months ended September 30, 2009.

Liquidity and Capital Resources

Cash Flows and Working Capital

 

We have financed our operations primarily through cash flows from operations and cash derived from our initial public offering. As of September 30, 2010, we had $6,168,552 in cash and cash equivalents, of which $287,895 was held by Sino-China. Our cash and cash equivalents primarily consist of cash on hand and cash in banks.

 

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The following table sets forth a summary of our cash flows for the periods indicated:

 

		For the three months ended September 30,
		2010				2009
		US$				US$
Net cash provided by (used in) operating activities			302,040				(675,551	)
Net cash used in investing activities			(34,030	)			(904	)
Net cash used in financing activities			(2,780	)			(18,282	)
Net increase (decrease) in cash and cash equivalents			242,399				(705,638	)
Cash and cash equivalents at beginning of period			5,926,153				7,259,654
Cash and cash equivalents at end of period			6,168,552				6,554,016

Operating Activities

 

Net cash provided by operating activities was $302,040 for the three months ended September 30, 2010, compared to net cash used in operating activities of $675,551 for the comparable three months in 2009. It should be noted that the improved operating cash flows are mainly attributable to an increase of advances of $756,310 from customers and a decrease of $366,069 in prepaid tax. This was offset by the increase in advances to suppliers of $328,663 and the decrease in income tax receivables of $264,876.

Investing Activities

 

Net cash used in investing activities was $34,030 compared to net cash used in investing activities of $904 for the three months ended September 30, 2010 and 2009, respectively. We made capital expenditures of $34,030 and $904 for the first quarter of fiscal 2011 and 2010, representing 0.32% and 0.01% of our total assets, respectively.

Financing Activities

 

Net cash used in financing activities was $2,780 for the three months ended September 30, 2010 from the increase of non-controlling interest in majority-owned subsidiary.

 

We believe that current cash, cash equivalents, and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including cash needs for working capital and capital expenditures for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities or borrow from banks. 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 2012. Below is a summary of our company’s contractual obligations and commitments as of September 30, 2010:

		Payment Due by Period
		Total				Less than 1 year				1-3 years				More than 3 years
Contractual Obligations
Operating leases		$	531,553			$	291,688			$	239,865			$	—

 

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The Labor Contract Law of the PRC requires employers to assure the liability of severance payments if employees are terminated and have been working for their employers for at least two years prior to January 1, 2008. The employers will be liable for one month of severance pay for each year of service provided by the employees. As of September 30, 2010, our company has estimated its severance payments to be approximately $93,000, which has not been reflected in our condensed 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.

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.

Evaluation of Disclosure Controls and Procedures

Our Company maintains a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. For the purpose of improving management efficiency and effectiveness, the Company has completed the implementation of a new accounting and management information system using SAP Business One software. Our company is currently utilizing the new system.

As of September 30, 2010, our company carried out an evaluation, under the supervision of and with the participation of management, including our company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Based on the foregoing, the chief executive officer and chief financial officer concluded that our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective in timely alerting them to information required to be included in the Company’s periodic Securities and Exchange Commission filings.

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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 ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

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 September 30, 2010, our company carried out an evaluation, under the supervision of and with the participation of management, including our company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of our company’s disclosure controls and procedures.  Based on the foregoing, the chief executive officer and chief financial officer concluded that our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective in timely alerting them to information required to be included in our Company’s periodic Securities and Exchange Commission filings.

Changes in Internal Control over Financial Reporting

There were no changes in our company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the three months ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

 

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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 28, 2009 for the fiscal year ended June 30, 2010 (SEC Accession No. 0001144204-10-051290) 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.

 

		Per Registration statement								As September 30, 2010
Description of Use		US$				%				US$				%
Organization of our company and creation of contractual arrangements among our company, Sino-China and Trans Pacific			100,000				1.23	%			103,526				1.27	%
Business expansion in 15 to 35 main ports in China			5,930,941				72.74	%			1,406,584				17.25	%
Sarbanes-Oxley compliance			500,000				6.13	%			292,739				3.59	%
Marketing of company across China, United States and internationally			244,621				3.00	%			645,149				7.91	%
Develop information exchange system			400,000				4.91	%			109,791				1.35	%
Train staff			163,081				2.00	%			194,962				2.39	%
Fixed asset purchase			407,702				5.00	%			436,995				5.36	%
Miscellaneous expenses			407,702				5.00	%			410,333				5.03	%
Stock repurchases											372,527				4.57	%
Total			8,154,047				100.00	%			3,972,607				48.72	%

(c)           During the three months ended September 30, 2010, the company did not repurchase any shares of common stock.

Item 3.  Defaults upon Senior Securities

None.

Item 4.  [Reserved]

Item 5.  Other Information

None.

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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)

 

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(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.

 

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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.
November 12, 2010	By:	/s/ Zhang Mingwei
		Zhang Mingwei
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATE