RISK
FACTORS
Investment
in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other
information included in this prospectus before making an investment decision. The risks and uncertainties described below are not the
only ones we face, but represent the material risks to our business. There may be additional risks and uncertainties not currently known
to us or that we currently do not believe are material that may harm our business and financial performance. If any of the following
risks actually occurs, our business, financial condition or results of operations could suffer. In that case, you may lose all or part
of your investment. You should not invest in this offering unless you can afford to lose your entire investment. You should carefully
consider these risk factors, together with all of the other information in this prospectus and the documents we have incorporated by
reference in the section “Where You Can Find Additional Information” located on page 21 of this prospectus before you
decide to purchase any shares of our common stock (“Shares”).
RISKS
RELATED TO THE CORONAVIRUS PANDEMIC
We
face risks related to health pandemics that could impact our sales and operating results.
Our
business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of
respiratory illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China. Any outbreak of contagious diseases,
and other adverse public health developments, particularly in China, could have a material and adverse effect on our business operations.
These could include disruptions or restrictions on our ability to resume the general shipping agency services, as well as temporary closures
of our facilities and ports or the facilities of our customers and third-party service providers. Any disruption or delay of our customers
or third-party service providers would likely impact our operating results and the ability of the Company to continue as a going concern.
In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could
adversely affect the economies and financial markets of China and many other countries, resulting in an economic downturn that could
affect demand for our services and significantly impact our operating results.
The
coronavirus disease 2019 (COVID-19) has had a significant impact on our operations since January 2020 and could materially adversely
affect our business and financial results for the remaining months of the 2021 calendar year.
Our
ability to manufacture and/or sell our products may be impaired by damage or disruption to our manufacturing, warehousing or distribution
capabilities, or to the capabilities of our suppliers, logistics service providers or distributors as a result of the impact from the
COVID-19. This damage or disruption could result from events or factors that are impossible to predict or are beyond our control, such
as raw material scarcity, pandemics, government shutdowns, disruptions in logistics, supplier capacity constraints, adverse weather conditions,
natural disasters, fire, terrorism or other events. In December 2019, COVID-19 emerged in Wuhan, China. In compliance with the government
mandates, the Company temporarily closed and its production operations were halted from late January 2020 through the middle of February
2020. During this closure, employees had only limited access to the Company’s facilities, which led to delayed order manufacturing,
assembly and fulfillment. While the spread of the disease has gradually returned under control in China, COVID-19 could adversely affect
our business and financial results for the remaining months of the year 2021. As a result, there is a possibility that the Company’s
revenues and operating cash flows may be significantly lower than expected for fiscal year 2021.
RISKS
RELATED TO OUR BUSINESS
We
have historically relied on a limited number of customers for a substantial portion of our business.
The
nature of our business is driven by the needs of our clients, and we have historically found a limited number of customers account for
a significant portion of our business each year. For the year ended June 30, 2020, three customers accounted for approximately 42%, 23%
and 22% of the Company’s revenues, respectively. As of June 30, 2020, one customer accounted for approximately 87% of the Company’s
accounts receivable, net. For the year ended June 30, 2019, three customers accounted for approximately 35%, 16% and 13% of the Company’s
revenues, respectively. As of June 30, 2019, all of these customers accounted for approximately 26% of the Company’s accounts receivable,
net. Our business will be materially and adversely affected if we fail to retain any of these key customers or our collaborative partners
over whom we are very dependent fail to perform as expected.
Our
revenue will be materially and adversely affected if our new service offerings do not gain market acceptance.
Our
new service offerings may not gain market acceptance in the shipping logistic industry. To directly market and offer our service offerings,
we and/or our collaborative partners may require a marketing and sales force with appropriate technical expertise and supporting distribution
capabilities. We may not be able to further establish sales, marketing and distribution capabilities or enter into arrangements with
third parties on acceptable terms. If we or our partners cannot successfully promote our new services, our ability to generate additional
revenue will be limited.
We
have a history of operating losses, and we may not be able to achieve or sustain profitability; we have recently shifted our cryptocurrency
mining business, and we may not be successful in this business.
We
are not currently profitable and have incurred losses over three of our last four fiscal years. Continued losses could continue and may
increase as we continue to work to develop our business. Although we are primarily operating in the shipping industry as a non-asset
based global shipping and freight logistics integrated solution provider, we have also begun to explore cryptocurrency mining. Our current
strategy is new and unproven, is in an industry that is itself new and evolving and is subject to the risks discussed below. Even if
we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
Our
results of operation may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our
results of operations, including the levels of our net revenues, expenses, net loss and other key metrics, may vary significantly in
the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results
may not be meaningful, especially given our limited operating history. Accordingly, the results for any one quarter are not necessarily
an indication of future performance. Fluctuations in quarterly results may adversely affect the market price of our ordinary shares.
Factors that may cause fluctuations in our quarterly financial results include:
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the
amount and timing of operating expenses related to our new business operations and infrastructure;
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fluctuations
in the price of cryptocurrencies we mine; and
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general
economic, industry and market conditions.
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Because
cryptocurrencies may be determined to be investment securities, we may inadvertently violate the Investment Company Act and incur large
losses as a result and potentially be required to register as an investment company or terminate operations and we may incur third party
liabilities.
We
plan to engage in the mining of cryptocurrencies, which the SEC has said are currencies and not securities. We therefore believe that
we will not be engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being
engaged in those activities. However, under the Investment Company Act a company may be deemed an investment company under section 3(a)(1)(C)
thereof if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items)
on an unconsolidated basis.
As
a result of our investments and our mining activities, including investments in which we do not have a controlling interest, the investment
securities we hold could exceed 40% of our total assets, exclusive of cash items and, accordingly, we could determine that we have become
an inadvertent investment company. The cryptocurrencies we mine, acquire or otherwise own may be deemed an investment security by the
SEC, although we do not believe any of such cryptocurrencies are securities. An inadvertent investment company can avoid being classified
as an investment company if it can rely on one of the exclusions under the Investment Company Act. One such exclusion, Rule 3a-2 under
the Investment Company Act, allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which
an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated
basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value
of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. We may take actions
to cause the investment securities held by us to be less than 40% of our total assets, which may include acquiring assets with our cash
and cryptocurrency on hand or liquidating our investment securities or cryptocurrency or seeking a no-action letter from the SEC if we
are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.
As the Rule 3a-2 exception is available to a company
no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the 40% limit
for at least three years after we cease being an inadvertent investment company. This may limit our ability to make certain investments
or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to become an
investment company engaged in the business of investing and trading securities.
Classification as an investment company under
the Investment Company Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing
almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would require a restructuring
of our operations, and we would be very constrained in the kind of business we could do as a registered investment company. Further, we
would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition,
and would need to file reports under the Investment Company Act regime. The cost of such compliance would result in the Company incurring
substantial additional expenses, and the failure to register if required would have a materially adverse impact to conduct our operations.
If we are unable to successfully execute
our cryptocurrency mining initiative, it would adversely affect our financial and business condition and results of operations.
In early 2021, we decided to enter the cryptocurrency
mining business. There are various risks related to these efforts, including the risk that these efforts may not provide the expected
benefits in our anticipated time frame, if at all, and may prove costlier than expected; and the risk of adverse effects to our business,
results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost
effective or do not result in the cost savings and other benefits at the levels that we anticipate. Our intentions and expectations with
regard to the execution of our business plan, and the timing of any related initiatives, are subject to change at any time based on management’s
subjective evaluation of our overall business needs. If we are unable to successfully execute our business plan, whether due to failure
to realize the anticipated benefits from our various business initiatives in the anticipated time frame or otherwise, we may be unable
to achieve our financial targets.
Our evolving business model is subject to various uncertainties.
As cryptocurrency assets may become more widely
available, we expect the services and products associated with them to evolve. In order to stay current with the industry, our business
model may need to evolve as well. From time to time, we may modify aspects of our business model relating to our strategy. We cannot offer
any assurance that these or any other modifications will be successful or will not result in harm to our business. We may not be able
to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results. Further,
we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities in this business sector
and we may lose out on those opportunities. Such circumstances could have a material adverse effect on our business, prospects or operations.
Cryptocurrencies, including those maintained
by or for us, may be exposed to cybersecurity threats and hacks.
As with any computer code generally, flaws in
cryptocurrency codes may be exposed by malicious actors. Several errors and defects have been found previously, including those that disabled
some functionality for users and exposed users’ information. Exploitations of flaws in the source code that allow malicious actors
to take or create money have previously occurred. Despite our efforts and processes to prevent breaches, our devices, as well as our miners,
computer systems and those of third parties that we will use in our operations, will be vulnerable to cyber security risks, including
cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft
or misuse, and similar disruptions from unauthorized tampering with our miners and computer systems or those of third parties that we
use in our operations. Such events could have a material adverse effect on our ability to continue as a going concern or to pursue our
business strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value
of any cryptocurrency or other cryptocurrencies we mine or otherwise acquire or hold for our own account.
The shipping agency business is very competitive
in nature and many of our competitors have greater financial, marketing and other resources than we have.
The market segments that we serve do not have
high entry barriers. There are many companies ranging from small to large in China that provide shipping and freight-related logistics
services. At present, the state-owned companies in China still dominate the industry and generate a majority of the revenues in the industry.
These companies have greater service capabilities, a larger customer base and more financial, marketing, network and human resources than
we do. Most of them engage in a wide range of businesses and involve many aspects of the industry chain. Our competitors may introduce
new business models, and if these new business models are more attractive to customers than the business models we currently use, our
customers may switch to our competitors’ services, and we may lose market share. We believe that competition in worldwide shipping
agency industry may become more intense as more shipping agencies, including Chinese/foreign joint ventures, are qualified to conduct
business. We cannot assure you that we will be able to compete successfully against any new or existing competitors, or against any new
business models our competitors may implement. In addition, the increased competition we anticipate in the shipping agent industry may
also reduce the number of vessels for which we are able to provide shipping agency services, or cause us to reduce agency fees in order
to attract or retain customers. All of these competitive factors could have a material adverse effect on our business and results of operations.
Our customers are engaged in the shipping
industry, and, consequently, our financial performance is dependent upon the economic conditions of that industry.
We derive our revenues from providing services
to customers in the business of shipping materials to China and our success is dependent upon our customer’s shipping needs. Our
customers’ shipping needs are intrinsically linked to economic conditions in the shipping industry in general and trade with China
in particular. The shipping industry, in turn, is subject to intense competitive pressures and is affected by overall economic conditions.
Accordingly, demand for our services could be harmed by instability or downturns in the shipping industry, reductions in trade between
China and other countries or a combination of both which could materially lower demand or cause our customers to forego the shipping agency
services we provide by attempting to provide such services in-house. If any of the foregoing occurs, it would have a material adverse
effect on our business and our results of operations.
We may be required to assume liabilities
for our clients in the future.
An increasing number of companies that require
shipping agency services have pressured shipping agents to guarantee their clients’ liabilities. Some companies have required shipping
agents, as a condition of doing business, to pay for tariffs, port charges, and other fees, or to pay these fees with the promise of reimbursement
at a later date. Other companies have sought to include shipping agents as parties in voyage charter agreements, leading to potential
liability for shipping agents in the event of a breach by another party. We expect that these pressures on shipping agents to accept more
liability will increase as competition among shipping agencies intensifies. While we do not currently pay these liabilities and have no
present intention to begin doing so in the future, the assumption of any of these or other liabilities could have a material adverse effect
on our business and results of operations.
We are heavily dependent upon the services
of experienced personnel who possess skills that are valuable in our industry, and we may have to actively compete for their services.
We are a small company with limited resources,
and we compete in large part on the basis of the quality of services we are able to provide our clients. As a result, we are heavily dependent
upon our ability to attract, retain and motivate skilled personnel to serve our clients. Many of our personnel possess skills that would
be valuable to other companies engaged in one or more of our business lines. Consequently, we expect that we will have to actively compete
with other Chinese shipping agencies to retain these employees. Some of our competitors may be able to pay our employees more than we
are able to pay to retain them. Our ability to profitably operate is substantially dependent upon our ability to locate, hire, train and
retain our personnel. Although we have not experienced difficulty locating, hiring, training or retaining our employees to date, there
can be no assurance that we will be able to retain our current personnel, or that we will be able to attract and assimilate other qualified
personnel in the future. If we are unable to effectively obtain and maintain skilled personnel, the quality of the shipping services that
we provide could be materially impaired, which would have a material adverse effect on our business and results of operations.
We are substantially dependent upon our
key personnel.
Our performance is substantially dependent on
the performance of our executive officers and key employees. In particular, the services of:
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Mr.
Lei Cao, Chief Executive Officer;
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Ms.
Tuo Pan, Acting Chief Financial Officer;
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Ms.
Jing Shan, Chief Operating Officer;
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Mr.
Xintang You, Chief Technology Officer; and
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Mr.
Lei Nie, Vice President
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would be difficult for us to replace. While we
have employment contracts with each of our executive officers, such contracts may be terminated in certain circumstances by the executive
officers. Moreover, we do not have any “key person” life insurance policies on any of our employees. The loss of the services
of any of our executive officers or other key employees could substantially impair our ability to effectively execute our business and
expand our service platform, which would have a material adverse effect on our business and results of operations.
We need to maintain our relationships with
local shipping agents.
Our shipping agency business is dependent upon
our relationships with local agents operating in the ports where our customers ship their products. As a general agent, substantially
all of our shipping agency revenues have been derived from services delivered by the local agents and we believe local agent relationships
will remain critical to our success in the future. We have a number of local agents that account for a significant portion of our business,
the loss of one or more of which could materially and negatively impact our ability to retain and service our customers. We cannot be
certain that we will be able to maintain and expand our existing local agent relationships or enter into new local agent relationships,
or that new or renewed local agent relationships will be available on commercially reasonable terms. If we are unable to maintain and
expand our existing local agent relationships, renew existing local agent relationships, or enter into new local agent relationships,
we may lose customers, customer introductions and co-marketing benefits, and our business and results of operations may suffer significantly.
We are dependent on third-party carriers
and inland transportation companies to transport our clients’ cargo.
We rely on commercial ocean freight carriers and
inland transportation companies for the movement of our client’s cargo. Consequently, our ability to provide services for our clients
could be adversely impacted by: shortages in available cargo capacity; changes by carriers and transportation companies in policies and
practices such as scheduling, pricing, payment terms and frequency of service or increases in the cost of fuel, taxes and labor; and other
factors not within our control. Reductions in ocean freight capacity could negatively impact our yields. Material interruptions in service
or stoppages in transportation, whether caused by strike, work stoppage, lock-out, slowdown or otherwise, could adversely impact our business,
results of operations and financial condition.
Our profitability depends on our ability
to effectively manage our cost structure as we grow the business.
As we continue to attempt to increase our revenues
through the expansion of our service offerings, we must maintain an appropriate cost structure to maintain and increase our profitability.
While we intend to increase our revenues by increasing the number and quality of the shipping services we provide by strategic acquisitions,
and by maintaining and expanding our gross profit margins by reducing costs, our profitability will be driven in large part by our ability
to manage our agent commissions, personnel and general and administrative costs as a function of our net revenues. There can be no assurances
that we will be able to effectively control our costs and failure to do so would result in lack of profitability, which would have a material
adverse effect our business and results of operations.
Comparisons of our operating results from
period to period are not necessarily meaningful and should not be relied upon as an indicator of future performance.
Our operating results have fluctuated in the past
and likely will continue to fluctuate in the future because of a variety of factors, many of which are beyond our control. There can be
no assurance that our historic operating performance will continue in future periods. Because our quarterly revenues and operating results
vary significantly, comparisons of our period-to-period results are not necessarily meaningful and should not be relied upon as an indicator
of future performance.
We have not paid any dividends and we do
not foresee paying dividends in the future.
We have never declared or paid any cash dividends
on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future, if ever. Any future
determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition,
operating results, capital requirements, Virginia and PRC laws, and other factors that our board of directors deems relevant.
FOREIGN OPERATIONAL RISKS
Adverse regulatory developments in China
may subject us to additional regulatory review and expose us to government interference, and additional disclosure requirements and regulatory
scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance
requirements for companies like us with operations in China, all of which could increase our compliance costs, subject us to additional
disclosure requirements, and/or suspend or terminate our future securities offerings, making capital-raising more difficult.
Although we are incorporated in Virginia and we
are headquartered in New York, as we have operations in China, we are subject to PRC laws. The recent regulatory developments in China,
in particular with respect to restrictions on China-based companies raising capital offshore, including through the variable interest
entities structure, or the VIE structure, may lead to additional regulatory review in China over our financing and capital raising activities
in the United States. In addition, we may become subject to industry-wide regulations that may be adopted by the relevant PRC authorities,
which may have the effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension
or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial
condition and results of operations. We may have to adjust, modify, or completely change our business operations in response to adverse
regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely,
cost-efficient, or liability-free manner or at all.
On July 30, 2021, in response to the recent regulatory
developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek
additional disclosures from offshore issuers associated with China-based operating companies before their registration statements will
be declared effective, including detailed disclosure related to VIE structures and whether the VIE and the issuer, when applicable, received
or were denied permission from Chinese authorities to list on U.S. exchanges and the risks that such approval could be denied or rescinded.
On August 1, 2021, the China Securities Regulatory Commission stated in a statement that it had taken note of the new disclosure requirements
announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries
should strengthen communications on regulating China-related issuers. We are subject to a variety of PRC laws. We also maintain a VIE
structure with respect to part of our operations in China. Therefore, we may be subject to tightened regulatory review and exposed to
government interference in China. In light of the recent regulatory and policy developments in China and government actions taken by the
PRC government, including possible imposition of restrictions and/or approval requirements on China-based companies raising capital offshore,
the offering of our securities may be subject to additional disclosure requirements and review that the SEC or other regulatory authorities
in the United States may adopt for companies with China-based operations.
We do not have business liability or disruption insurance.
We do not have any business liability or disruption
insurance coverage for our operations. Any business interruption, litigation or natural disaster may result in our business incurring
substantial costs and the diversion of resources.
We
rely on contractual arrangements with our VIE for our operations, which may not be as effective in providing control over these entities
as direct ownership.
Although we have temporarily
suspended doing business with our VIE, Sino-Global Shipping Agency Ltd. (“Sino-China”), our operations and financial results
might in the future dependent on it, in which we have no equity ownership interest and must rely on contractual arrangements to control
and operate the businesses of our VIE. These contractual arrangements are not as effective in providing control over the VIE as direct
ownership. For example, the VIE may be unwilling or unable to perform its contractual obligations under our commercial agreements. Consequently,
we would not be able to conduct our operations in the manner currently planned. In addition, the VIE may seek to renew its agreements
on terms that are disadvantageous to us. Although we have entered into a series of agreements that provide us with substantial ability
to control the VIE, we may not succeed in enforcing our rights under them insofar as our contractual rights and legal remedies under PRC
law are inadequate. In addition, if we are unable to renew these agreements on favorable terms when these agreements expire or enter into
similar agreements with other parties, our business may not be able to operate or expand, and our operating expenses may significantly
increase.
In January
2015, China’s Ministry of Commerce unveiled a draft legislation that could change how the government is regulating corporate structures,
especially for VIEs controlled by foreign investments. Instead of looking at “ownership”, the draft law focused on the entities
or individuals hold control of a VIE. If a VIE is deemed to be controlled by foreign investors, it may be barred from operating in restricted
sectors or the prohibited sectors listed on a “negative list”, where only companies controlled by Chinese nationals could
operate, even if structured as VIEs. As of the report date, no formal legislation has been implemented.
In the event
that the draft law is implemented in any form, and that the Company’s business was characterized as one of the “restricted”
or “prohibited” sectors, the VIE the Company currently maintains contractual arrangements with may be barred from operation
which may adversely affect our business if the market for shipping agent services turn around and we intend to resume such business operation
with our VIE.
Uncertainties with respect to the Chinese
legal system could have a material adverse effect on us and may restrict the level of legal protections to foreign investors.
China’s legal system is based on statutory
law. Unlike the common law system, statutory law is based primarily on written statutes. Previous court decisions may be cited as persuasive
authority but do not have a binding effect. Since 1979, the PRC government has been promulgating and amending the laws and regulations
regarding economic matters, such as corporate organization and governance, foreign investment, commerce, taxation and trade. However,
since these laws and regulations are relatively new, and the PRC legal system continues to rapidly evolve, the interpretation of many
laws, regulations and rules is not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may
limit legal protections available to us.
In addition, any litigation in China may be protracted
and may result in substantial costs and diversion of resources and management’s attention. The legal system in China cannot provide
investors with the same level of protection as in the U.S. The Company is governed by laws and regulations generally applicable to local
enterprises in China. Many of these laws and regulations were recently introduced and remain experimental in nature and subject to changes
and refinements. Interpretation, implementation and enforcement of the existing laws and regulations can be uncertain and unpredictable
and therefore may restrict the legal protections available to foreign investors.
Governmental control of currency conversion
may affect the value of your investment.
In the course of providing services for international
shipments, we occasionally require currencies from other countries to conduct our business. While we believe that we have complied with
applicable currency control laws and regulations in all material aspects, we cannot guarantee you that our efforts will be free from challenge
or that, if challenged, we will be successful in our defense of our current practices. Under our current corporate structure, our income
is paid in different currencies, depending on our agreements with individual customers. We then pay in local currencies the expenses associated
with operating a company in several countries. Shortages in the availability of foreign currency may restrict our ability to pay such
expenses unless and until we convert currencies that we have into those that we require.
One of the currencies we often convert among is
the RMB. The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance
of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions,
interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the
PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government
authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the
repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future
to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign
currency to satisfy our currency demands, we may not be able to pay dividends, if any, in foreign currencies to our shareholders.
Changes in Currency Conversion Policies
in China may have a material adverse effect on us.
RMB is still not a freely exchangeable currency.
Since 1998, the State Administration of Foreign Exchange of China has promulgated a series of circulars and rules in order to enhance
verification of foreign exchange payments under a Chinese entity’s current account items, and has imposed strict requirements on
borrowing and repayments of foreign exchange debts from and to foreign creditors under the capital account items and on the creation of
foreign security in favor of foreign creditors.
This may complicate foreign exchange payments
to foreign creditors under the current account items and thus may affect the ability to borrow under international commercial loans, the
creation of foreign security, and the borrowing of RMB under guarantees in foreign currencies. Moreover, the value of RMB may become subject
to supply and demand, which could be largely impacted by international economic and political environments. Any fluctuations in the exchange
rate of RMB could have an adverse effect on the operational and financial condition of the Company and its subsidiaries in China.
Fluctuation in the value of the RMB may
have a material adverse effect on your investment.
The change in value of the RMB against the U.S.
dollar, Canadian dollars, Australian dollar, the Euro and other currencies may fluctuate and is affected by, changes in China’s
political and economic conditions, among other things. On July 21, 2005, the PRC government changed its decade-old policy of pegging the
value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against
a basket of certain foreign currencies. This change in policy has resulted in an appreciation of the RMB against the U.S. dollar. While
the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the
PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the
RMB against the U.S. dollar and other currencies. As a portion of our costs and expenses is denominated in RMB, the revaluation in July
2005 and potential future revaluation has and could further increase our costs.
Changes in China’s political and economic
policies could harm our business.
China’s economy has historically been a
planned economy subject to governmental plans and quotas and has, in certain aspects, been transitioning to a more market-oriented economy.
Although we believe that the economic reform and the macroeconomic measures adopted by the Chinese government have had a positive effect
on the economic development of China, we cannot predict the future direction of these economic reforms or the effects these measures may
have on our business, financial position or results of operations. In addition, the Chinese economy differs from the economies of most
countries belonging to the Organization for Economic Cooperation and Development, or OECD. These differences include:
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level
of government involvement in the economy;
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level
of capital reinvestment;
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control
of foreign exchange;
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methods
of allocating resources; and
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balance
of payments position.
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As a result of these differences, our business
may not develop in the same way or at the same rate as might be expected if the Chinese economy were similar to those of the OECD member
countries.
Since 1979, the Chinese government has promulgated
many new laws and regulations covering general economic matters. Despite this activity to develop a legal system, China’s system
of laws is not yet complete. Even where adequate law exists in China, enforcement of existing laws or contracts based on existing law
may be uncertain or sporadic, and it may be difficult to obtain swift and equitable enforcement or to obtain enforcement of a judgment
by a court of another jurisdiction. The relative inexperience of China’s judiciary, in many cases, creates additional uncertainty
as to the outcome of any litigation. In addition, interpretation of statutes and regulations may be subject to government policies reflecting
domestic political changes. Our activities in China will also be subject to administration review and approval by various national and
local agencies of China’s government. Because of the changes occurring in China’s legal and regulatory structure, we may not
be able to secure the requisite governmental approval for our activities. Although we have obtained all required governmental approval
to operate our business as currently conducted, to the extent we are unable to obtain or maintain required governmental approvals, the
Chinese government may, in its sole discretion, prohibit us from conducting our business.”
The tariffs by the U.S. government and the
trade war between the U.S. and China, and on a larger scale, internationally, may dampen global growth. If the U.S. government subjects
our customers’ products to tariffs, our business operations and revenue may be negatively impacted.
The U.S. government has recently, among other
actions, imposed new or higher tariffs on specified products imported from China to penalize China for what it characterizes as unfair
trade practices and China has responded by imposing new or higher tariffs on specified products imported from the United States. In December
2019, China announced that it suspended tariffs on certain products, and the U.S. and China signed a trade deal in January 2020 that cut
some U.S. tariffs on Chinese goods in exchange for Chinese pledges to purchase more of American farm, energy, and manufactured goods and
address some U.S. complaints about intellectual property practices. The imposed tariffs may cause the depreciation of the RMB currency
and a contraction of certain PRC industries that will likely be affected by the tariffs.
We rely on customers involved in international
shipping for our revenues. To the extent our customers’ business is weakened by the tariffs, they may have reduced need for our
logistics services. As such, we may have access to fewer business opportunities and our operation may be negatively impacted. In addition,
future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially
have a negative impact on our business and we cannot provide any assurances as to whether such actions will occur or the form that they
may take.
As some of our directors, officers and assets
are outside the United States, it will be extremely difficult to acquire jurisdiction and enforce liabilities against us and our officers,
directors and assets based in China.
Some of our directors and officers reside outside
the United States. In addition, many of our assets are located outside the United States. As a result, it may be difficult or impossible
to effect service of process within the United States upon our directors or officers and our subsidiaries, or enforce against any of them
court judgments obtained in United States courts, including judgments relating to United States federal securities laws. Furthermore,
because the majority of our assets are located in China and PRC does not have treaties with the United States or many other countries
providing for the reciprocal recognition and enforcement of judgment of courts, it would also be extremely difficult to access those assets
to satisfy an award entered against us in United States court.
Our international operations require us
to comply with a number of U.S. regulations.
In addition to the Chinese laws and regulations
with which we must comply, we must also comply with the United States Foreign Corrupt Practices Act (“FCPA”), which prohibits
U.S. companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any
act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate
entity or obtain any unfair advantage. Any failure by us to adopt appropriate compliance procedures and ensure that our employees and
agents comply with the FCPA and applicable laws and regulations in foreign jurisdictions could result in substantial penalties and/or
restrictions in our ability to conduct business in certain foreign jurisdictions. The U.S. Department of the Treasury’s Office of
Foreign Asset Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries, entities
and individuals based on U.S. foreign policy and national security goals. As a result, we are restricted from entering into transactions
with certain targeted foreign countries, entities, and individuals except as permitted by OFAC, which could reduce our future growth.
Recent joint statement by the SEC and the
Public Company Accounting Oversight Board (United States), or the “PCAOB,” proposed rule changes submitted by Nasdaq, and
an act passed by the U.S. Senate all call for additional and more stringent criteria to be applied to emerging market companies upon assessing
the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add
uncertainties to our offering.
On April 21, 2020, SEC Chairman Jay Clayton and
PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated
with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized
the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in
emerging markets.
On May 18, 2020, Nasdaq filed three proposals
with the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a “Restrictive Market,”
(ii) adopt a new requirement relating to the qualification of management or the board of directors for Restrictive Market companies, and
(iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s
auditor.
On May 20, 2020, the U.S. Senate passed an act
requiring a foreign company to certify it is not owned or manipulated by a foreign government if the PCAOB is unable to audit specified
reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s
auditor for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange.
On June 4, 2020, the U.S. President issued a memorandum
ordering the President’s working group on financial markets, or the “PWG,” to submit a report to the President within
60 days of the date of the memorandum that should include recommendations for actions that can be taken by the executive branch and by
the SEC or PCAOB to enforce U.S. regulatory requirements on Chinese companies listed on U.S. stock exchanges and their audit firms.
On August 6, 2020, the PWG released a report recommending
that the SEC take steps to implement the five recommendations outlined in the report. In particular, to address companies from jurisdictions
that do not provide the PCAOB with sufficient access to fulfill its statutory mandate, or “NCJs”, the PWG recommends enhanced
listing standards on U.S. stock exchanges. This would require, as a condition to initial and continued exchange listing, PCAOB access
to work papers of the principal audit firm for the audit of the listed company. Companies unable to satisfy this standard as a result
of governmental restrictions on access to audit work papers and practices in NCJs may satisfy this standard by providing a co-audit from
an audit firm with comparable resources and experience where the PCAOB determines it has sufficient access to audit work papers and practices
to conduct an appropriate inspection of the co-audit firm. The report permits the new listing standards to provide for a transition period
until January 1, 2022 for listed companies, but would apply immediately to new listings once the necessary rulemakings and/or standard-setting
are effective.
On August 10, 2020, the SEC announced that SEC
Chairman had directed the SEC staff to prepare proposals in response to the PWG Report, and that the SEC was soliciting public comments
and information with respect to these proposals. Since we are listed on the Nasdaq Capital Market, if we fail to meet the new listing
standards before the deadline specified thereunder due to factors beyond our control, we could face possible de-listing from the Nasdaq
Capital Market, deregistration from the SEC, and/or other risks, which may materially and adversely affect, or effectively terminate,
the trading of our shares of common stock in the United States.
The lack of access to the PCAOB inspection in
China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, investors
may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes
it more difficult to evaluate the effectiveness of these accounting firm’s audit procedures or quality control procedures as compared
to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in our shares
of common stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.
Our former auditor, Friedman LLP, the independent registered public
accounting firm that issues the audit report incorporated by reference in this prospectus, and our current auditor, Audit Alliance LLP,
as auditors of companies that are traded publicly in the United States and firms registered with the PCAOB, are subject to laws in the
United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
The market price for our securities may
be subject to wide fluctuations.
The securities of a number of companies with substantial
operations in China have experienced wide fluctuations in their stock price. Among the factors that could affect the price of our common
stock are risk factors described in this section and other factors, including:
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announcements
of competitive developments, by our competitors;
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regulatory
developments of our industry affecting us, our customers or our competitors;
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actual
or anticipated fluctuations in our quarterly operating results;
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failure
of our quarterly financial and operating results to meet market expectations or failure to
meet our previously announced guidance, if any;
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changes
in financial estimates by securities research analysts;
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changes
in the economic performance or market valuations of our competitors;
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additions
or departures of our executive officers and other key personnel;
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announcements
regarding intellectual property litigation (or potential litigation) involving us or any
of our directors and officers;
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fluctuations
in the exchange rates between the U.S. dollar and the Renminbi; and
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release
or expiration of the underwriters’ post-offering lock-up or other transfer restrictions
on our outstanding common stock.
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In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are not related to the operating performance of particular industries or companies. In
addition, the market prices and trading volumes of companies listed on the Nasdaq Capital Market
have been volatile. As a result, the trading price of our common stock is likely to be volatile and could fluctuate significantly in response
to many factors, including the following, some of which are beyond our control:
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variations
in our operating results;
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changes
in expectations of our future financial performance, including financial estimates by securities
analysts and investors;
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changes
in operating and stock price performance of other companies in our industry;
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additions
or departures of key personnel; and future sales of our common stock.
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Domestic
and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic
and political conditions unrelated to our performance, may adversely affect the price of our common stock.
We
may need additional capital and may sell additional securities or other equity securities or incur indebtedness, which could result in
additional dilution to our shareholders or increase our debt service obligations.
In the future, we may require additional cash
resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to
pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or
obtain a credit facility. The sale of additional equity securities or equity-linked debt securities could result in dilution to our shareholders.
The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants
that would restrict our operations. We cannot assure you that financing will be available, if at all, in amounts or on terms acceptable
to us.
Substantial future sales of our securities
in the public market, or the perception that these sales could occur, could cause the price of our securities to decline.
Additional sales of our securities in the public
market or the perception that these sales could cause the market price of our securities to decline. In addition, we may grant or sell
additional options, restricted shares or other share-based awards in the future under our share incentive plan to our management, employees
and other persons, the settlement and sale of which may further dilute our shares and drive down the price of our securities.
If NASDAQ were to delist our securities
from trading on its exchange, such action could limit investors’ ability to make transactions in our securities and subject us to
additional trading restrictions.
Our common stock is currently listed on The Nasdaq Capital Market.
We cannot assure you that our securities will meet the continued listing requirements be listed on NASDAQ in the future.
If NASDAQ delists our common stock from trading
on its exchange, we could face significant material adverse consequences including:
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a
limited availability of market quotations for our securities;
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a
determination that our common stock is a “penny stock” which will require brokers
trading in our common stock to adhere to more stringent rules and possibly resulting in a
reduced level of trading activity in the secondary trading market for our common stock;
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a
limited amount of news and analyst coverage for our company; and
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a
decreased ability to issue additional securities or obtain additional financing in the future.
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If our shares of common stock become subject
to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity
in our securities may be adversely affected.
If our common stock were removed from listing with the Nasdaq Capital
Market, it may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny
stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any
securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt, the rules
impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted and
determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may
find it more difficult to acquire or dispose of our common stock on the secondary market. Investors in penny stocks should be prepared
for the possibility that they may lose their whole investment.
Our
business is subject to changing regulations related to corporate governance and public disclosure that have increased both our costs and
the risk of noncompliance.
Because
our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities
charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including
the Public Company Accounting Oversight Board, the SEC and NASDAQ, have issued requirements and regulations and continue to develop additional
regulations and requirements in response to corporate scandals and laws enacted by Congress. Our efforts to comply with these regulations
have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time
and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are
subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time
as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance
matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.
RISKS ASSOCIATED WITH THIS OFFERING
The market price for our common stock may be volatile, which
could result in substantial losses to investors.
The market price for our common stock is likely to be volatile and
subject to wide fluctuations in response to factors including the following:
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actual or anticipated fluctuations
in our quarterly operating results;
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changes in the Chinese shipping industry or shipping
agency industry;
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changes in the Chinese economy;
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changes in political relationships, both within China
and between China and other countries;
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announcements by our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
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additions or departures of key personnel;
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fluctuation of the Renminbi against the U.S. Dollar
and other currencies; or
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In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are not related to the operating performance of particular companies. As a result,
to the extent shareholders sell our shares in negative market fluctuation, they may not receive a price per share that is based solely
upon our business performance. We cannot guarantee that shareholders will not lose some of their entire investment in our common
stock.
Our classified board structure may prevent a change in our control.
Our board of directors is divided into three classes of directors. The
current terms of the directors expire in 2022, 2023 and 2024. Directors of each class are chosen for three-year terms upon
the expiration of their current terms, and each year one class of directors is elected by the shareholders. The staggered terms
of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change
in control might be in the best interest of our shareholders.
Our directors and officers control a majority of our capital
stock, limiting your influence on shareholder decisions.
Our officers and directors possess substantial ability to impact our
management and affairs and the outcome of matters submitted to shareholders for approval. These shareholders, acting individually
or as a group, could exert control and substantial influence over matters such as electing directors and approving mergers or other business
combination transactions. This concentration of ownership and voting power may also discourage, delay or prevent a change in control of
our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company
and might reduce the price of our common stock. These actions may be taken even if they are opposed by our other shareholders.
THE COMPANY
Sino-Global Shipping America, Ltd. (“Sino,” the “Company,”
or “we”), a Virginia corporation, was founded in the U.S. in 2001. Sino is a non-asset based global shipping and freight logistics
integrated solution provider. Sino provides tailored solutions and value-added services to its customers to drive effectiveness and control
in related aspects throughout the entire shipping and freight logistics chain. We operate in four operating segments, including (1) shipping
agency and management services, operated by our subsidiary in Hong Kong and the U.S.; (2) inland transportation management services, operated
by our subsidiaries in the U.S.; (3) freight logistics services, operated by our subsidiaries in the People’s Republic of China
(the “PRC” or “China”) and the U.S.; and (4) container trucking services, operated by our subsidiaries in the
PRC and the U.S.
We conduct our business primarily through
our wholly-owned subsidiaries in the PRC (including Hong Kong) and the U.S., where a majority of our clients are located.
Our subsidiary in China, Trans Pacific Shipping Limited (“Trans
Pacific Beijing”), a wholly owned foreign enterprise, invested in one 90%-owned subsidiary, Trans Pacific Logistics Shanghai Limited
(“Trans Pacific Shanghai;” Trans Pacific Beijing and Trans Pacific Shanghai are referred to collectively as “Trans Pacific”).
As PRC laws and regulations restrict foreign ownership of local shipping agency service businesses, we provided our shipping agency services
in the PRC through Sino China, a Chinese legal entity, which holds the licenses and permits necessary to operate local shipping agency
services in the PRC. Trans Pacific Beijing and Sino-China do not have a parent-subsidiary relationship. Trans Pacific Beijing has contractual
arrangements with Sino-China and its stockholders that enable us to substantially control Sino-China. Through Sino-China, we were able
to provide local shipping agency services in all commercial ports in the PRC. Sino-China is one of the committee members of China Association
of Shipping Agencies & Non-Vessel-Operating Common Carriers (“CASA”). CASA was approved to form by China Ministry of Communications.
Sino-China is also our only entity that is qualified to do shipping agency business in China. We keep the VIE to prepare ourselves for
the market to turn around.
Our corporate structure diagram as of the date of this prospectus is
as below:
Our Strategy
Our strategy is to:
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Provide
better solutions for issues and challenges faced by the entire shipping and freight logistics
chain to better serve our customers and explore additional growth avenues.
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Diversify
our current service offerings organically or through acquisitions and/or strategic alliance;
continue to grow our business in the U.S. market;
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Continue
to streamline our business practice, optimize our cost structure and improve our operating
efficiency through effective planning, budgeting, execution and cost control and strengthening
our IT infrastructure;
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Continue
to reduce our dependency on our legacy business and few key customers; and
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Continue
to monetize our relationships with our strategic partners and leverage their support and
our innovation to expand our business.
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With the establishment of our subsidiary in Los Angeles, we added cargo
forwarding services to our service platform in the second quarter of fiscal 2017, which is included in our inland transportation business
line for the year ended June 30, 2016. As we are developing our cargo forwarding services, the Company provides freight logistics services
and container trucking services as two new business segments in fiscal 2017. During fiscal year 2018, the Company began to provide bulk
cargo container services to the customers. On November 13, 2019, the Company entered into a cooperation agreement with Shanming Liang,
a director of Guangxi Jinqiao Industrial Group Co., Ltd., to cooperate and expand the bulk cargo container services business.
Corporate Information
Our principal executive offices are located at 1044 Northern Boulevard,
Suite 305, Roslyn, New York 11576-1514. Our telephone number at this address is (718) 888-1814. Our common stock is traded on the Nasdaq
Capital Market under the symbol “SINO.”
Our Internet website, www.sino-global.com, provides a variety of information
about our Company. We do not incorporate by reference into this prospectus the information on, or accessible through, our website, and
you should not consider it as part of this prospectus. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K filed with the SEC are available, as soon as practicable after filing, at the investors’ page on our corporate website,
or by a direct link to its filings on the SEC’s free website.
SELLING
SHAREHOLDERS
This
prospectus relates to shares of common stock that are being registered for reoffer and resale by the selling stockholders. The shares
of common stock are “restricted securities” and/or “control securities” under the Securities Act. The selling
stockholders may resell any or all of the shares at any time while this prospectus is current.
The
following table sets forth certain information regarding the ownership of our common stock by the selling stockholders as of the date
of this reoffer prospectus, and the number of shares of our common stock currently being offered by each selling stockholder pursuant
to this reoffer prospectus. The information set forth in the following table regarding beneficial ownership after resale of securities
assumes that the selling shareholders will sell all of the shares of common stock owned by that selling shareholder covered by this prospectus.
The
inclusion in the table of the individuals named therein shall not be deemed to be an admission that any such individuals are “affiliates.”
The address of each selling stockholder is c/o Sino-Global Shipping America, Ltd., 1044 Northern Boulevard, Suite 305, Roslyn, New York
11576-1514.
Selling Stockholder
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Position, office,
or other material
relationship
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Number of
shares of
common stock
owned before sale(1)
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Number of
shares of
common stock
registered by this
reoffer prospectus(2)
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Number of
shares of
common stock
owned after
sale
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Percentage
of shares
of common stock
owned after
sale(3)
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Lei Cao
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CEO, Chairman
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1,021,008
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1,021,008
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0
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-
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Tuo Pan (4)
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Acting CFO
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279,000
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279,000
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0
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-
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Lei Nie (4)
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Vice President
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279,000
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279,000
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0
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-
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Zhikang Huang
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Director
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248,000
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248,000
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0
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-
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Jing Wang
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Director
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46,000
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46,000
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0
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-
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Tieliang Liu
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Director
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50,000
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48,000
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2,000
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*
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Xiaohuan Huang
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Director
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20,000
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20,000
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0
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-
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(1)
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The shares owned by a person include shares owned by the individual
as well as shares issuable upon the exercise of options or restricted shares granted to the selling shareholder under the 2014 Plan,
whether or not such options or restricted shares must vest or become exercisable (as applicable) within 60 days of the reoffer prospectus.
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(2)
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Represents the maximum number of Shares issued under the 2014
Plan that could be sold under this prospectus if the holder exercised all of his options when vested and sold the underlying Shares. Does
not constitute a commitment to sell any or all of the stated number of Shares. The number of Shares to be sold shall be determined
from time to time by each selling stockholder in his discretion.
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(3)
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Based on 16,152,113 shares of common stock outstanding as of August
26, 2021.
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(4)
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Tuo Pan, our acting CFO, and Lei Nie, our Vice President, are
wife and husband. The 279,000 shares beneficially owned by Tuo Pan and Lei Nie include 239,000 shares of common stock directly owned
by Tuo Pan, and 40,000 shares of common stock directly owned by Lei Nie.
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