UNITED STATES

 

 

 

(Exact name of registrant as specified in its charter)

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Copies to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This registration statement contains a prospectus to be used in connection with the initial public offering of up to [______] shares of the registrant’s common stock on a best-efforts, minimum/maximum basis through the underwriter named on the cover page of that prospectus (the “IPO Prospectus”). In addition, the registrant is registering on this registration statement the resale of up to [______] shares of its common stock (the “Registrable Securities”) held by selling shareholders. Consequently, this registration statement contains a second prospectus to cover these possible resales (the “Resale Prospectus”) by certain of the registrant’s stockholdersshareholders named under the Resale Prospectus (the “selling shareholders”). The IPO Prospectus and the Resale Prospectus are substantively identical, except for the following principal points:

 

 

 

 

 

 

 

 

The registrant has included in this Registration Statement, after the financial statements, alternate pages to reflect the foregoing differences.

 

 

 

 

 

 

Minimum Offering: [______] Shares of Common Stock

Maximum Offering: [______] Shares of Common Stock

 

This is the initial public offering of Sino-Global Shipping America, Ltd., a Virginia corporation. We are offering a minimum of [______] shares and a maximum of [______] shares of our common stock. Our officers and directors may, but have made no commitment, nor indicated they intend to, purchase shares in the offering. Purchases by our officers and directors may be made in order to reach the minimum offering amount. We have not placed a limit on the number of shares our officers and directors may purchase in this offering.

 

We expect that the offering price will be $[______] per share. No public market currently exists for our shares. We have applied for approval for quotation on the NASDAQ Capital Market under the symbol “SINO” for the shares of common stock we are offering. We believe that upon the completion of the offering contemplated by this prospectus, we will meet the standards for listing on the NASDAQ Capital Market.

 

 

We expect total cash expenses for this offering to be approximately $[______]. The underwriter must sell the minimum number of securities offered ([______] shares of common stock) if any are sold. The underwriter is required to use only its best efforts to sell the securities offered. The offering will terminate upon the earlier of: (i) a date mutually acceptable to us and our underwriter after which the minimum offering is sold or (ii) June 1, 2008. Until we sell at least [______] shares, all investor funds will be held in an escrow account at SunTrust Bank, Richmond, Virginia. If we do not sell at least [______] shares by June 1, 2008, all funds will be promptly returned to investors (within one business day) without interest or deduction.

 

 

 

 

Except where the context otherwise requires and for purposes of this prospectus only, the terms:

 

· “we,” “us,” “our” and “our company” refer to Sino-Global Shipping America, Ltd. and, except where the context otherwise requires, Trans Pacific Shipping Limited and Sino-Global Shipping Agency Ltd.;

 

· “shares” and “common stock” refer to shares of our common stock, without par value per share;

 

· “China” and “PRC” refer to the People’s Republic of China; and

 

· all references to “RMB,” “Renminbi” and “¥” are to the legal currency of China and all references to “USD,” “U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.

 

This prospectus contains translations of certain RMB amounts into U.S. dollar amounts at a specified rate solely for the convenience of the reader. Unless otherwise stated, the translations of RMB into U.S. dollars have been made at the single rate of exchange of $1.00 to RMB7.6155, the exchange rate at June 30, 2007. We make no representation that the RMB or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. On March 17,April 8, 2008, the noon buying rate was $1.00 to RMB7.0830.RMB7.0008. See “Risk Factors - Fluctuation of the Renminbi could materially affect our financial condition and results of operations” for discussions of the effects of fluctuating exchange rates on the value of our shares. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

 

For the sake of consistency throughout this prospectus, the Chinese names of individuals will follow the Chinese language convention of last name followed by first name. All individuals named in this prospectus who have Chinese names consisting of three syllables have two-syllable first names.

 

 

 

 

We are the parent company of Trans Pacific Shipping Limited (“Trans Pacific”), our wholly-owned subsidiary in Beijing. Trans Pacific operates Sino-Global Shipping Agency Ltd. (previously Sino-Global Shipping Consulting Ltd.), our Chinese shipping agency (“Sino-China”), by contract. Prior to the completion of this offering, we and Sino-China are under common control, by virtue of our Chief Executive Officer’s ownership of more than 80%70% of both companies. We provide shipping agency services in China and have offices in China located in Beijing, Ningbo, Qingdao, Tianjin, Qinhuangdao and Fangchenggang and in the United States in Flushing, New York to coordinate our clients’ shipping needs, including preparing documents, husbanding vessels, processing customs issues, coordinating matters with port authorities, overseeing and settling cargo claims, tracking shipments, and recommending trucking, warehousing and complementary services.

 

We act as a local agent and attend vessels directly in each of the ports in which we have branch offices. In addition to these ports, we have contracting offices at all other commercial ports in China as a professional general/protecting agency. In the ports in which we do not yet have an office, we appoint a local agent to attend the vessels directly. See “Our Business - General”.

 

We have designed our services to simplify the shipping process for our clients and to keep our clients fully informed about the status of their shipments. To that end, we analyze the information about prospective shipments provided by our clients to determine the most economical and efficient transportation solutions and then leverage our position as a shipping agency to negotiate competitive shipping rates. We also give our clients disbursement reports to empower them to monitor and dispute all questionable charges. In addition to allowing clients to monitor disbursements, our Disbursement Department audits all bills provided by ports for unreasonable charges that violate the guidelines issued by China’s Ministry of Communications.

 

We provide shipping agency services to a variety of vessel sizes and types, including Handysize, Panamax, Capesize, Roll-On/Roll-Off (“RORO”), and Very Large Crude Carrier (“VLCC”) class vessels. We have assisted clients with a variety of shipping requirements, including bulk and break-bulk general cargo, vehicle transport and raw materials such as crude oil and oil products and iron, manganese and other metal ores.

 

 

 

Since China adopted its open door trade policy in 1978, inviting foreign investment in China, China’s economy has steadily developed, both from new investments in China and from increased international trade. As international trade between China and other countries has expanded, the shipping industry in China has also grown.

 

The evolution of the shipping agency industry has followed that of the shipping industry in general. In January 1953, the PRC founded the China Ocean Shipping Agency (“Penavico”) as a branch of China Ocean Shipping Company (“COSCO”). Penavico and its branches in ports served as China’s only shipping agent until the open door policy opened the industry to other companies. China’s second shipping agency, China Marine Shipping Agency Company Limited (“Sinoagent”) was founded in 1985 and allowed customers a choice of shipping agents at a number of ports in China.

 

 

Since 1985, the PRC has taken a number of steps to open China’s shipping agency industry to private companies. In 1990, the PRC adopted the International Ship Agency Management and Stipulation (国榻緇緊代理管理瘼定), which allowed state-owned companies to compete in the shipping agency industry. In 2002, the PRC further relaxed the restrictions on shipping agencies by promulgating the People’s Republic of China International Marine Transportation Rule (中华人民共和国国榻海瀰条例), which permitted Chinese private entities and joint ventures between Chinese and foreign entities to compete in the shipping agency industry. The Chinese and American Marine Transportation Agreement (中美海瀰协定) in 2003 and the New Round Chinese and European Union Marine Transportation Agreement (中国与欧盟海瀰协定) in 2002 allowed shipping transportation enterprises that were wholly owned by American and European Union businesses, respectively, to provide shipping agency service for their parent companies.

 

Companies may serve as general shipping agents in certain locations and as local shipping agents in other locations. As of June 30, 2006, we believe that approximately 1,400 shipping agencies (including 33 joint ventures) have been approved in China. In 2006, China’s shipping agency industry saw revenues of approximately $1.53 billion. Of this amount, Penavico and Sinoagent combined for approximately 85% of the shipping agency industry market share.

 

 

Sino-China was founded in 2001 under the name “Sino-Global Shipping Consulting Ltd.” As organized prior to this offering, Sino-China had five divisions, which corresponded to the five ports in which Sino-China has branch offices: Ningbo, Qingdao, Tianjin, Qinhuangdao and Fangchenggang. Sino-China currently holds four local licenses in China to serve as a local shipping agent in Ningbo, Qingdao, Tianjin, and Fangchenggang. Sino-Global has applied for a local shipping agent license in Qinhuangdao and expects to receive this license in the next few months. Sino-China provides general shipping agency services in 76 ports in China.

 

Our company was incorporated in New York on February 2, 2001 to enable Sino-China to develop the American and Canadian markets for Sino-China and to provide better and more convenient services to our American and Canadian customers. In anticipation of this offering, we have re-organized our company.

 

On September 14, 2007, we formed a stock corporation in the Commonwealth of Virginia and, on September 18, 2007, we merged with and into our Virginia corporation, Sino-Global Shipping America, Ltd. On November 13, 2007, we organized Trans Pacific as a wholly foreign-owned enterprise in Beijing. Trans Pacific is our wholly-owned subsidiary and operates Sino-China by contract.

 

Each of Mr. Cao Lei, our Chief Executive Officer, and Mr. Zhang Mingwei, our Chief Financial Officer, is a shareholder in our company and in Sino-China; however, the companies do not have a parent-subsidiary relationship and ownership between the companies is not identical. Furthermore, Trans Pacific and Sino-China do not have a parent-subsidiary relationship. Nevertheless, by virtue of Mr. Cao’s ownership of more than 80%70% of both companies, we and Sino-China are considered under common control of Mr. Cao. On November 14, 2007, a variety of contracts were executed with 25 year renewable terms and govern the relationships among Trans Pacific, Sino-China and our company.

 

PRC law currently limits foreign ownership of companies that provide shipping agency services. To comply with these foreign ownership restrictions, we operate our business in China through Sino-China, a PRC limited liability company wholly owned by Cao Lei, our Chief Executive Officer, and Zhang Mingwei, our Chief Financial Officer, both of whom are PRC citizens. Sino-China holds the licenses and approvals necessary to operate our shipping agency business in China. We have contractual arrangements with Sino-China and its shareholders pursuant to which we provide management and technical consulting services to Sino-China through Trans Pacific, our wholly-owned subsidiary in China. Through these contractual arrangements, which enable us to control Sino-China, we are considered the primary beneficiary of Sino-China. Accordingly, we consolidate Sino-China’s results, assets and liabilities in our financial statements. Because of Mr. Cao’s common control of Sino-China and our company, we have consolidated these results beginning on July 1, 2005.from the inception of Sino-China. For a description of these contractual arrangements, see “Our Corporate Structure - Contractual Arrangements with Sino-China and its Shareholders.”

 

 

The following diagram illustrates our current corporate structure and the place of formation, ownership interest and affiliation of our subsidiary and Sino-China as of the date of this prospectus.

 

 

 

 

 

We have engaged Anderson & Strudwick, Incorporated to conduct this offering on a “best efforts, minimum/maximum” basis. The underwriter has not made a firm commitment in this offering and thus has no obligation or commitment to purchase any of our shares. Although they have not formally committed to do so, our affiliates may opt to purchase shares in connection with this offering. To the extent such individuals invest, they will purchase our shares with investment intent and without the intent to resell. Any shares purchased by our affiliates shall contribute to the calculation of whether we achieved our minimum offering. We have not placed limits on the number of shares eligible to be purchased by our affiliates.

 

 

In the table below, we provide summary financial data for our company. This information is derived from our consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected for any future period. When you read this historical selected financial data, you should read it along with the historical financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

 

 

We have made statements in this prospectus, including under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and elsewhere that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “will,” “should,” “could” and similar expressions. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.

 

Examples of forward-looking statements include:

 

· projections of revenue, earnings, capital structure and other financial items;

 

· statements of our plans and objectives;

 

· statements regarding the capabilities and capacities of our business operations;

 

· statements of expected future economic performance; and

 

· assumptions underlying statements regarding us or our business.

 

The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss many of these risks under the heading “Risk Factors” above. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.

 

The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

 

In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

 

 

Sino-China was founded in 2001 under the name “Sino-Global Shipping Consulting Ltd.” and subsequently changed its name to “Sino-Global Shipping Agency, Ltd.” As organized prior to this offering, Sino-China had five divisions, which corresponded to the five ports in which Sino-China has branch offices: Ningbo, Qingdao, Tianjin, Qinhuangdao and Fangchenggang. Sino-China currently holds four local licenses in China to serve as a local shipping agent in Ningbo, Qingdao, Tianjin, and Fangchenggang. Sino-China has applied for a local shipping agent license in Qinhuangdao and expects to receive this license in the next few months. Sino-China provides general shipping agency services in 76 ports in China.

 

Our company was incorporated in New York on February 2, 2001 to enable Sino-China to develop the American and Canadian markets for Sino-China and to provide better and more convenient services to American and Canadian customers. In anticipation of this offering, we have re-organized our company.

 

On September 14, 2007, we formed a stock corporation in the Commonwealth of Virginia and, on September 18, 2007, we merged with and into our Virginia corporation, Sino-Global Shipping America, Ltd. On November 13, 2007, we organized Trans Pacific as a wholly foreign-owned enterprise in Beijing. Trans Pacific is our wholly-owned subsidiary and operates Sino-China by contract.

 

Each of Mr. Cao Lei, our Chief Executive Officer, and Mr. Zhang Mingwei, our Chief Financial Officer, is a shareholder in our company and in Sino-China; however, the companies do not have a parent-subsidiary relationship and ownership between the companies is not identical. Furthermore, Trans Pacific and Sino-China do not have a parent-subsidiary relationship. Nevertheless, by virtue of Mr. Cao’s ownership of more than 80%70% of both companies, we and Sino-China are considered under common control. On November 14, 2007, a variety of agreements were executed with 25 year renewable terms and govern the relationships among Trans Pacific, Sino-China and our company.

 

PRC law currently limits foreign ownership of companies that provide shipping agency services. To comply with these foreign ownership restrictions, we operate our business in China through Sino-China, a PRC limited liability company wholly owned by Cao Lei, our Chief Executive Officer, and Zhang Mingwei, our Chief Financial Officer, both of whom are PRC citizens. Sino-China holds the licenses and approvals necessary to operate our shipping agency business in China. We have contractual arrangements with Sino-China and its shareholders pursuant to which we provide management and technical consulting services to Sino-China through Trans Pacific, our wholly-owned subsidiary in China. Through these contractual arrangements, which enable us to control Sino-China, we are considered the primary beneficiary of Sino-China. Accordingly, we consolidate Sino-China’s results, assets and liabilities in our consolidated financial statements. Because of Mr. Cao’s common control of Sino-China and our company, we have consolidated these results beginning on July 1, 2005,from the beginninginception of the period presented.Sino-China. For a description of these contractual arrangements, see “Our Corporate Structure - Contractual Arrangements with Sino-China and its Shareholders.”

 

In the opinion of Kang Da, our PRC legal counsel, (i) the ownership structures of Trans Pacific and Sino-China comply with, and immediately after this offering, will comply with, current PRC laws and regulations; (ii) our contractual arrangements with Sino-China and its shareholders are valid and binding on all parties to these arrangements, and do not violate current PRC laws or regulations; and (iii) the business operations of Trans Pacific and Sino-China comply with current PRC laws and regulations.

 

 

 

The following diagram illustrates our current corporate structure and the plan of formation and affiliation of our subsidiary and Sino-China as of the date of this prospectus.

 

 

 

 

We were incorporated in New York in 2001 in order to expand Sino-China’s operations from China to the United States. At the time of our incorporation, we were authorized to issue 200 shares of common stock. Ownership in our New York corporation was as follows:

 

On September 14, 2007, we formed Sino-Global Shipping America, Ltd., a Virginia corporation. Our Virginia corporation 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. On September 18, 2007, we completed the merger of our New York corporation with and into our Virginia corporation. While we are now a Virginia corporation, we are authorized to do business in New York. In the merger, we exchanged each share of common stock in our New York corporation for 9,000 shares of common stock in our Virginia corporation. To date, 1,800,000 shares of common stock and no shares of preferred stock have been issued. Our company may be obligated to purchase certain of these issued and outstanding shares of common stock on the terms and under the conditions described in greater detail in the section titled “Related Party Transactions - Loan to Mr. Cao.”

 

On December 31, 2007, Mr. Cao Lei sold, in the aggregate, [______] shares of his common stock in our company to two investors. See “Selling Shareholders.” As a result of the merger and Mr. Cao’s sale of shares of our common stock, ownership in our Virginia corporation is now as follows:

 

 

We formed Trans Pacific on November 13, 2007. Trans Pacific is a wholly foreign-owned entity that is a subsidiary of our a Virginia company. Trans Pacific has entered into agreements with Sino-China, by which Trans Pacific provides marketing and management consulting and technological consulting services to Sino-China in return for payments from Sino-China. See “—Contractual Arrangements with Sino-China and its Shareholders.”

 

 

We provide our shipping agency services through Sino-China, a limited company established in the PRC. Mr. Cao Lei and Mr. Zhang Mingwei, both of whom are PRC citizens, own 96.74% and 3.26% of Sino-China, respectively. Mr. Cao is our Chief Executive Officer and Mr. Zhang is our Chief Financial Officer. Sino-China operates our shipping agency operations and holds the licenses and approvals necessary to conduct our business in China.

 

 

By virtue of our Chief Executive Officer’s ownership of more than 80%70% of our company and Sino-China, we are considered to be under common control. In addition, our relationships with Sino-China and its shareholders are governed by a series of contractual arrangements. Under PRC laws, each of Sino-China and Trans Pacific is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Sino-China and Trans Pacific, Sino-China does not transfer any other funds generated from its operations to Trans Pacific. The contracts discussed below are all effective as of November 14, 2007 by and among the listed parties. The term of each agreement is 25 years, and our company (or Trans Pacific to the extent we are not a party to the agreement in question) is able to renew each agreement unilaterally for one or more additional terms, provided such renewal is permitted under applicable law at the time.

 

 

 

Under the exclusive management consulting and technical consulting service agreement between Trans Pacific and Sino-China, Sino-China appoints Trans Pacific to be the exclusive provider of technology and management services to Sino-China to assist Sino-China with its operations. In addition to providing management, analysis and technology services, Trans Pacific also provides training for Sino-China’s personnel. In return for these services, Sino-China will pay a service fee to Trans Pacific of 5% of Sino-China’s monthlyannual net profits.

 

 

Under the exclusive marketing agreement between Sino-China and Trans Pacific, Sino-China appoints Trans Pacific to be the exclusive provider of marketing services to Sino-China to assist Sino-China with its operations. Trans Pacific agrees to provide world-wide customer resources for Sino-China, financial support if Sino-China needs assistance in obtaining operating funds, marketing and communication with Sino-China’s current and potential customers and assistance to Sino-China in locating and participating in relevant industry groups. In return for these services, Sino-China will pay a service fee to Trans Pacific of 85% of Sino-China’s monthlyannual net profits.

 

 

Under the equity interest pledge agreement between Trans Pacific and each of Mr. Cao and Mr. Zhang, Mr. Cao and Mr. Zhang have each pledged all of their equity interest in Sino-China to Trans Pacific to guarantee that Trans Pacific collects technical consulting and service fees from Sino-China. In the event Sino-China, Mr. Cao or Mr. Zhang defaults under the equity interest pledge agreement, Trans Pacific is entitled to contractual remedies, including foreclosing on the pledged equity interests. Mr. Cao and Mr. Zhang have agreed not to transfer or assign the equity interest without prior written approval from Trans Pacific.

 

 

The exclusive equity interest purchase agreement among our company, Sino-China, Mr. Cao and Mr. Zhang permits our company to purchase Mr. Cao’s and Mr. Zhang’s equity interests in Sino-China, to the extent allowed under PRC laws. The agreement also prohibits Mr. Cao and Mr. Zhang from transferring any portion of their equity interests to anyone other than us. We have the exclusive authority to exercise the right to purchase these shares, subject to compliance with PRC laws.

 

 

Pursuant to the proxy agreement among our company, Sino-China, Mr. Cao and Mr. Zhang, Mr. Cao and Mr. Zhang have agreed to entrust their rights to exercise their voting power to the person(s) appointed by our company.

 

 

After deducting the estimated underwriting discount and offering expenses payable by us, we expect to receive net proceeds of approximately $[______] from this offering if the minimum offering is sold and $[______] if the maximum offering is sold.

 

We intend to use the net proceeds of this offering as follows, and we have ordered the specific uses of proceeds in order of priority. We do not expect that our priorities for fund allocation would change if the amount we raise in this offering exceeds the size of the minimum offering but is less than the maximum offering. To the extent we raise an amount between the maximum offering and the minimum offering, we expect to utilize our offering proceeds in order of such priority.

 

 

We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of Directors may deem relevant. Payments of dividends by Trans Pacific to our company are subject to restrictions including primarily the restriction that foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents.

 

 

 

Our business is primarily conducted in China and all of our revenues are denominated in RMB. However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the then current exchange rates, for the convenience of the readers. The conversion of RMB into U.S. dollars in this prospectus is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this prospectus were made at a rate of RMB7.6155 to $1.00, the noon buying rate in effect as of June 30, 2007. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. Our company does not currently engage in currency hedging transactions.

 

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.

 

 

 

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share after the offering. Dilution results from the fact that the per share offering price is substantially in excess of the book value per share attributable to the existing shareholders for our presently outstanding shares. Our net tangible book value attributable to common stockholdersshareholders at [______] was $[______] or $[______] per share. Net tangible book value per share as of [______] represents the amount of total tangible assets less goodwill, acquired intangible assets net, and total liabilities, divided by the number of shares outstanding.

 

If the minimum offering is sold, we will have [______] shares outstanding upon completion of the offering. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after [______], will be approximately $[______] or $[______] per share. This would result in dilution to investors in this offering of approximately $[______] per share or approximately [______]% from the offering price of $[______] per share. Net tangible book value per share would increase to the benefit of present stockholdersshareholders by $[______] per share attributable to the purchase of the shares by investors in this offering.

 

If the maximum offering is sold, we will have [______] shares outstanding upon completion of the offering. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after [______], will be approximately $[______] or $[______] per share. This would result in dilution to investors in this offering of approximately $[______] per share or approximately [______]% from the offering price of $[______] per share. Net tangible book value per share would increase to the benefit of present shareholders by $[______] per share attributable to the purchase of the shares by investors in this offering.

 

The following table sets forth the estimated net tangible book value per share after the offering and the dilution to persons purchasing shares based on the foregoing minimum and maximum offering assumptions.

 

The following charts illustrate our pro forma proportionate ownership. Upon completion of the offering under alternative minimum and maximum offering assumptions, of present shareholders and of investors in this offering, compared to the relative amounts paid and comparative to our capital by present shareholders as of the date the consideration was received and by investors in this offering, assuming no changes in net tangible book value other than those resulting from the offering.

 

 

You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus. The selected statements of operations data are for the fiscal years ended June 30, 2006 and 2007. The selected balance sheet data set forth below, are as of June 30, 2006 and 2007. This selected financial data is derived from our consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto which are included elsewhere in this prospectus.

 

 

 

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited historical consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our 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, including those set forth under “Risk Factors” and elsewhere in this prospectus. 

 

 

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 Article of Incorporation and Bylaws to merge into a new corporation with the current name of Sino-Global Shipping America, Ltd., in Virginia.

 

Our principal geographic market is in the PRC. As PRC laws and regulations prohibit or restrict foreign ownership of shipping agency service businesses, we operate our business in the PRC through 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 five branches in Ningbo, Qingdao, Tianjin, Qinhuangdao and Fangchenggang, Sino-China provides general shipping agency services in 76 ports in China and serves as a local shipping agent in each of these five port cities.  For the ports where it does not have a local license, Sino-China appoints a local agent for its local shipping agency service businesses.

 

On November 13, 2007, we formed our wholly foreign-owned enterprise, Trans Pacific, in Beijing. 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. See “Our Corporate Structure - Contractual Arrangements with Sino-China and its Shareholders.”

 

We have grown significantly in the last two years. Our total revenues increased from approximately $8.92 million in 2006 to approximately $10.09 million in 2007 and to approximately $8.14 million for the six months ended December 31, 2007. In 2006, 2007 and the six months ended December 31, 2007, we recorded consolidated net income from continuing operations before non-controlling interest in income of $0.56 million, $1.14 million and $0.62 million, respectively.

 

 

For the year ended June 30, 2007 and for the six months ended December 31, 2007, our total revenues amounted to approximately $10.09 million and $8.14 million, respectively. 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.

 

The most significant factors that directly or indirectly affect our shipping agency service revenues are: 

 

 

 

 

 

 

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 covering more ports in the PRC. 

 

 

Our operating costs and expenses consist of cost of services, general and administrative expenses, selling expenses and other expenses. Our total operating costs and expenses have declined as a percentage of our total revenues from 2006 to 2007 due to economies of scale and the revenue growth we have achieved. However, the costs and expenses have increased as a percentage of total revenues from the six months ended December 31, 2007, because of an increase in cost of services, resulting from increased port charges in that period. The following table sets forth the components of our costs and expenses both in absolute amount and as a percentage of total net revenues for the periods indicated. All dollar figures in the following are presented in thousands of dollars.

 

 

 

 

 

Because we and Sino-China are incorporated in different jurisdictions, we file separate income tax returns. We are subject to income or capital gains tax in the US. Additionally, dividend payments made by our company are subject to withholding tax in the US. 

 

 

PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. Sino-China is registered as a PRC domestic company and governed by the Enterprise Income Tax Laws of the PRC. Its taxable incomes are subject to an enterprise income tax rate of 33%. The 5th Session of the 10th National People’s Congress amended the Enterprise Income Tax Law of PRC that became effective on January 1, 2008. The newly amended Enterprise Income Tax Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises at 25%. This change will reduce our income tax rate from 33% to 25% in 2008. In addition, according to the amended detailed implementation and administrative rules, the new income tax law will broaden the tax reductions in terms of categories and extents for the domestic companies. We expect the new income tax law will bring with it a positive impact on our company’s net profits in 2008 and onwards.

 

 

 

 

 

We prepare consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.

 

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.

 

 

Revenue comprises the value of charges for the services in the ordinary course of our company’s activities net of disbursements made on behalf of customers. Revenues are recognized from shipping agency services upon completion of 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 of 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.”

 

 

The accounts of Sino-China are consolidated in the accompanying financial statements pursuant to Financial Accounting Standards Board Interpretation No. 46 (Revised), “Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51”. As a VIE, Sino-China’s sales are included in our company’s total sales, its income from operations is consolidated with our company’s, and our net income from continuing operations before non-controlling interest in income includes all of Sino-China’s net income. Our non-controlling interest in its income is then subtracted in calculating the net income attributable to our company. Because of the contractual arrangements, we had a pecuniary interest in Sino-China that requires consolidation of our company’s and Sino-China’s financial statements.

 

 

Mr. Cao Lei owns more than 80%70% of both Sino-China and our company (before completion of the offering) and was able to cause our company and Sino-China to enter into the 2007 agreements at any point in time. Accordingly, for all periods presented, beginning on July 1, 2005, our company has consolidated Sino-China’s income because the entities are under common control in accordance with SFAS 141, “Business Combinations”. For this reason, beginning on July 1, 2005, the beginning of the periods presented, we have included 90% of Sino-China’s net income in our net income as discussed above as though the 2007 agreements were in effect atfrom the beginninginception of the periods presented,Sino-China, and only the 10% of Sino-China’s net income not paid to our company represents the non-controlling interest in Sino-China’s income.

 

 

Accounts receivable are recognized initially at fair value less allowances for doubtful accounts. 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 makes general and specific allowances when there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, we consider many factors, including the age of the balance, customer’s historical payment history, its current credit-worthiness and current economic trends. The amount of the provision, if any is recognized in the consolidated statement of operations within “General and administrative expenses”. We have determined that an allowance was not required at the balance sheet dates. 

 

We have not historically required an allowance for accounts receivable because our company does not have any significant bad expense. When a client requests our shipping agency services, we communicate with port officials and our service partners and 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 undertaking to provide 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 Cost 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 so 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.

 

 

We state property and equipment 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. We provide for depreciation and amortization in amounts sufficient to expense the related cost of depreciable assets for operations over their estimated useful lives. Depreciation and amortization are calculated on a straight-line basis to write off the cost of assets to their residual values over their estimated useful lives as follows: 

We calculate gains and losses on disposals by comparing proceeds with 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 market value of the long-lived asset. Fair market 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 at June 30, 2007 and 2006.

 

 

 

Components included in the consolidated financial statements of 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”). Our functional currency is US dollars while Sino-China uses the Renminbi as its reporting currency. The consolidated financial statements are presented in US dollars. Foreign currency transactions are translated into the functional currency using the fixed exchange rates. 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 in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 52, “Foreign Currency Translation”. Assets and liabilities are translated at current exchange rates quoted by the People’s Bank of China on June 30, 2006 and 2007 of RMB7.9956 to $1.00 and RMB7.6155 to $1.00, respectively and related revenues and expenses are translated at average exchange rates in effect during the periods. Resulting translation adjustments are recorded as comprehensive income (loss) which is a separate component included in Non-controlling interest. 

 

 

Earnings per share is calculated in accordance with SFAS No. 128, “Earnings Per Share”. Basic earnings per share is computed by dividing net income attributable to holders of common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. Convertible, redeemable preference shares are included in the computation of diluted earnings per ordinary 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. Ordinary share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive. Earnings per share data has been retroactively adjusted for all periods presented to reflect the recapitalization of our company, as further discussed in Note 11 of the consolidated financial statements.

 

 

As described below, we have increased the number of ships served. We believe that the following factors have contributed to this increase:

 

 

 

 

 

 

Our service charge rate depends largely on the size and types of ships we serve. Specifically, high rates are normally charged for larger ships than for smaller ships. For example, during the six months ended December 31, 2007, we served a new client, Ocean Bulk, with an average charge rate of $32,979, comparing to the average charge rate of $76,048 for our major customer, Beijing Shou Rong, whose ships are much larger.

 

 

The charge rate also relates to the types of services we provide. The less extensive the services are, the lower our charge rates will ordinarily be. For example, we provided services to Eagle Shipping, which services related primarily to ship equipment repairing and other owner affair services. As a result, the average charge rate per ship for Eagle Shipping was $15,906 in the six months ended December 31, 2007.

 

While competitive pressures may in the future affect our average charge rate, we do not believe that such pressures have resulted in the decline in average charge rate to date. Additionally, we believe that the trend is less one of decreasing fees and more one of increasing the number and scope of companies for which we provide shipping agency services. To the extent this growth results in our company serving smaller ships or providing more limited services to clients, the average charge rate will likely decrease.

 

 

The following table sets forth a summary of our consolidated results of operations for the periods indicated. Our business has evolved rapidly since we commenced operations in 2001. Our limited operating history makes it difficult 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. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To date, we have financed our operations primarily through cash flows from operations. As of December 31, 2007, we had approximately $0.98 million in cash and cash equivalents, of which approximately $0.33 million was held by Sino-China. Our cash and cash equivalents primarily consist of cash on hand and cash in banks.

 

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

 

 

Our operating activities generated positive cash for the years ended June 30, 2007 and 2006, and for the six months ended December 31, 2007 and 2006. The cash generated from operating activities for the year ended June 30, 2007 was approximately $0.15 million more than the same period ended in the preceding year primarily due to our increase in revenues of approximately $1.2 million for the year ended June 30, 2007 compared to the same period in the preceding year.

 

Since May 2003, we began to expand our business by setting up additional branches throughout China. As of December 31, 2007, we had six branch offices conducting our shipping agency services in China.

 

As our sales were increased for the year ended June 30, 2007 compared to June 30, 2006, our gross margin has declined mainly attributable to the mix of services we provided our customers. During the year ended June 30, 2007, we had provided more services to our customers with lower gross margin than the same period in the preceding year. The cash generated from operating activities for the six months ended December 31, 2007 was approximately $0.13 million less than the same period ended in the preceding year.

 

 

Both revenues and gross margin increased for the December 31, 2007 six month period; however, we incurred significant operating expenses to operate additional branch offices. Nonetheless, both six month periods ended December 31, 2007 and 2006 had net increases in cash and cash equivalents in excess of $0.43 million.

 

As we presented in the above table, our cash generated from operating activities was sufficient to meet our investing and financing activities for all periods with no net decrease in cash and cash equivalents. We expect our business will continue to grow and our cash generated from operating activities will be sufficient to fund our investing and financing needs as we establishing more branches each year. We expect to use our operating cash to fund major expenditures such as acquisitions of new property and equipment, payroll, employee benefits, travel, selling and rent.

 

Net cash provided by operating activities decreased to approximately $0.75 million in the six months ended December 31, 2007 from approximately $0.88 million in the six months ended December 31, 2006. The decrease was mainly attributable to several factors, including (i) a decrease in advances from customers of $0.34 million for the anticipated port charges in the third quarter of 2007 and (ii) an increase in other receivable amounting to approximately $0.37 million, of which $0.27 million was prepaid IPO expenses such as audit fees and legal fees. The decrease in net operating cash flow was partially offset by (i) a decrease in advance to suppliers of $0.41 million so as to match the decrease in advance from customers and (ii) an increase in other current liabilities due to increase in rent deposit of $0.07 million for the additional office for Sino-China, advance payments received from customers for reimbursed port agent charges and other operating expenses.

 

Net cash generated from operating activities increased to approximately $0.87 million in 2007 from approximately $0.72 million in 2006. The increase was primarily due to several factors, including (i) the net income of approximately $0.10 million in 2007 compared to a net income of approximately $0.29 million in 2006 which was due to higher operating expenses and lower margin from approximately 18% to 16% because of competition; (ii) the non-controlling interest in income contribution of approximately $1.04 million in 2007 compared to that of approximately $0.27 million incurred in 2006 which was due to all new branch offices were operating during the year ended 2007; (iii) the increase in add-back of non-cash expenses, consisting of depreciation expenses of approximately $0.06 million which was due to the additional property equipment purchased for the expansion of the business; and (iv) the increase in accounts payable, accrued expenses and other current liabilities of approximately $0.12 million were due to increase in operating expenses and income taxes because of increase in sales and permanent tax adjustment (mainly entertainment expense) to tax liabilities. The increase in operating cash flow was partially offset by (i) the increase in accounts receivable amounting to approximately $0.60 million which was due to increase in sales for the year ended 2007; and (ii) the increase in advances to suppliers of approximately $0.19 million which was due the anticipated sales in the first quarter of 2007.

 

 

Net cash used in investing activities decreased from approximately $0.69 million in the six months ended December 31, 2006 to approximately $0.20 million in the six months ended December 31, 2007, primarily due to the decrease of payments advanced to related parties and less capital expenditures for branch offices. Net cash used in investing activities increased from approximately $0.65 million in 2006 to approximately $0.91 million in 2007 primarily due to our purchase of additional fixed assets.

 

 

Net cash used in financing activities was approximately $0.05 million in the six months ended December 31, 2007. This amount is used to pay back the bank loans associated with the credit provided by HSBC in New York. Sino-China increased its registered capital by approximately $23 million in the six months ended December 31, 2006. Net cash provided by financing activities was approximately $0.17 million for the year ended June 30, 2007, consisting of approximately $0.54 million used to pay back the bank loans associated with the credit provided by HSBC in New York and the increased registered capital of Sino-China.

 

We believe that our current cash and cash equivalents, anticipated cash flow from operations and the proceeds from this offering will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities or borrow from banks. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute our shareholders. The incurrence of debt would divert cash from working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that would restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business, operations and prospects may suffer.

 

 

 

We lease certain office premises under non-cancelable leases. In December 2007, we leased additional office premises under two non-cancellable leases which expire through January 13, 2010, for approximately $317,000 per year. Rent expense under operating leases for the years ended June 30, 2007 and 2006, and for the six -month periods ended December 31, 2007 and 2006, were $121,777, $115,857, $70,779 and $61,645, respectively.

 

Future minimum lease payments under our other non-cancelable operating leases agreements are as follows:

 

 

We made capital expenditures of approximately $0.15 million, $0.34 million and $0.20 million in 2006 and 2007 and the six months ended December 31, 2007, respectively, representing 1.70%, 3.40% and 2.46% of our total revenues, respectively. In the past, our capital expenditures were used to purchase cars and computers for our business. Our capital expenditures may increase in the near term as our business continues to grow and as we expand and improve our financial and accounting systems and infrastructure. 

 

 

We conduct our operations primarily through our wholly-owned subsidiary, Trans Pacific, 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 Trans Pacific and management fees paid by Sino-China. If Trans Pacific incurs debt on its own behalf in the future, the instruments governing its debt may restrict its 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 owned foreign 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. Trans Pacific’s registered capital is $100,000. 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”.

 

 

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 shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves 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. 

 

 

 

 

Our exposure to interest rate risk primarily relates to the interest income generated by excess cash invested in demand deposits and liquid investments with original maturities of three months or less. We have not used any derivative financial instruments to manage our interest risk exposure. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest income may be lower than expected due to changes in market interest rates. 

 

 

Our revenues and costs of services are denominated in both Renminbi and U.S. dollars. Recently, there has been significant international pressure on the Chinese government to permit the free floatation of the Renminbi, resulting in an appreciation of the Renminbi against the U.S. dollar increased from RMB7.9956 to $1.00, RMB7.6155 to $1.00 and RMB7.3046 to $1.00 on June 30, 2006, June 30, 2007, and December 31, 2007, respectively. The continuing increase of the exchange rate of the Renminbi against the U.S. Dollar may have severe impact on our inter-company transactions and balances. While we had a foreign currency translation gain of $36,812 and $49,480 for the year ended June 30, 2007 and for the six months ended December 31, 2007, we suffered a foreign currency translation loss of $15,426 for 2006. Our future gain or loss on foreign currency translation depend on the trend of Renminbi revaluation, the proportion of cash and cash equivalents depositing in Sino-China and the volume of inter-company transactions.