Attached files
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EX-31.2 - Winland Ocean Shipping Corp | v178369_ex31-2.htm |
EX-31.1 - Winland Ocean Shipping Corp | v178369_ex31-1.htm |
EX-32.1 - Winland Ocean Shipping Corp | v178369_ex32-1.htm |
EX-32.2 - Winland Ocean Shipping Corp | v178369_ex32-2.htm |
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: For the Fiscal
Year Ended December 31, 2009
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
File Number 333-142908
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(Exact
name of registrant as specified in its charter)
Texas
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20-5933927
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
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Rm
703, 7/F, Bonham Trade Centre, 50 Bonham Strand, Sheung Wan, Hong Kong,
China
(Address,
including zip code, of principal executive offices)
00852-28549088
(Registrants’
telephone number, including area code)
Securities Registered Under Section
12(b) of the Exchange Act: None.
Securities Registered Under Section
12(g) of the Exchange Act: None.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act. Yes x No o
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes o No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o Accelerated
filer o Non-accelerated
filer o Smaller Reporting
Company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No
x
Aggregate
market value of the voting stock held by non-affiliates of the registrant based
upon the closing price as of June 30, 2009 was approximately
$115,375,000.
The
number of outstanding shares of the registrant’s common stock on March 22, 2009
was 130,000,000.
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
ANNUAL
REPORT ON FORM 10-K
FOR
THE YEAR ENDED DECEMBER 31, 2009
Index
TABLE OF
CONTENTS
PART
I
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|
|
ITEM
1.
|
Business
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3
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ITEM
1A
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Risk
Factors
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16
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ITEM
1B.
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Unresolved
Staff Comments
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16
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ITEM
2.
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Properties
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16
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ITEM
3.
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Legal
Proceedings
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17
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ITEM
4.
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(Removed
and Reserved)
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n/a
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PART
II
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|
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ITEM
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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17
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ITEM
6.
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Selected
Financial Data
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18
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ITEM
7.
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Management‘s
Discussion and Analysis of Financial Condition and Results of
Operations
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19
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ITEM
7A.
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Quantitative
and Qualitative Disclosures about Market Risk.
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33
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ITEM
8.
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Financial
Statements and Supplementary Data
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33
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ITEM
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
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33
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ITEM
9AT.
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Controls
and Procedures
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33
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ITEM
9B.
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Other
Information
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34
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ITEM
10.
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Directors,
Executive Officers, and Corporate Governance
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34
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ITEM
11.
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Executive
Compensation
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38
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ITEM
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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39
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ITEM
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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40
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ITEM
14.
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Principal
Accountant Fees and Services
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41
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PART
IV
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|
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ITEM
15.
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Exhibits
and Financial Statement Schedules
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42
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SIGNATURES
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47
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- 2
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PART
I
ITEM
1. Business
Forward
Looking Statements
The
following is management’s discussion and analysis of certain significant factors
which have affected the financial position and operating results of Winland
Online Shipping Holdings Corporation (formerly Trip Tech, Inc. and hereinafter,
“Winland” or
“WLOL” and
together with its subsidiaries and its variable interest entities, the “Company”) during the
periods included in the accompanying consolidated and combined financial
statements, as well as information relating to the plans of our current
management. This report includes forward-looking statements. Generally, the
words “believes” “anticipates”, “may”, “will”, “should”, “expect”, “intend”,
“estimate”, “continue” and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the U.S.
Securities and Exchange Commission (the “SEC”) from time to
time, which could cause actual results or outcomes to differ materially from
those projected. Undue reliance should not be placed on these forward-looking
statements which speak only as of the date hereof. We undertake no obligation to
update these forward-looking statements.
The
following discussion and analysis should be read in conjunction with our
consolidated and combined financial statements and the related notes thereto and
other financial information contained elsewhere in this report.
Acquisition
of SkyAce Group Limited
On August 12, 2008, Trip Tech, Inc.
(n/k/a WLOL and sometimes referred to herein as “Trip Tech” when
referring to the operations of the Company prior to the Exchange, as defined
below) entered into a Share Exchange Agreement with SkyAce Group Limited (“SkyAce”), a British
Virgin Islands company and Pioneer Creation Holdings Limited (“PCH”), a British
Virgin Islands company and the sole stockholder of SkyAce. As a result of the
share exchange, the Company acquired all of the issued and outstanding
securities of SkyAce from PCH in exchange for 76,925,000 newly-issued shares of
the Company’s common stock, par value $0.001 per share and 1,000,000 shares of
the Company’s Series A Preferred Stock which such preferred shares were
convertible into (and subsequently did convert into) 30,000,000 shares of common
stock (the “Exchange”). On
August 12, 2008, PCH beneficially owned 82.25% of the voting capital stock of
the Company. As a result of the Exchange, SkyAce became a wholly-owned
subsidiary of WLOL. On October 23, 2008, PCH converted its 1,000,000 shares
of Series A Preferred Stock into 30,000,000 shares of common stock. As a result,
the total outstanding shares of common stock increased to 130,000,000,
and PCH now directly owns 82.25% of the voting capital stock of
WLOL.
The following is disclosure regarding
WLOL, SkyAce and SkyAce’s two wholly-owned subsidiaries: (a) Plentimillion Group
Limited (“PGL”), a British Virgin Islands holding company, the principal
business activities of which are (through its wholly-owned subsidiaries) ocean
transportation and chartering brokerage and (b) Best Summit Enterprise Limited
(“BSL” and
together with PGL, the “SkyAce Group”), a
British Virgin Islands holding company which controls (as is more fully
described below) (i) Dalian Winland International Shipping Agency Co. Ltd., a
company organized under the laws of the People’s Republic of China (“PRC”), the principal
activities of which include shipping agency services, booking cargo space,
storage of goods and customs declaration (“DWIS”), (ii) Dalian
Winland International Logistic Co. Ltd., a company organized under the laws of
the People’s Republic of China (“PRC”), the principal
activities of which include freight forwarding services and logistics shipping
agency services (“DWIL”) and (iii)
Dalian Shipping Online Network Co. Ltd., a company organized under the laws of
the PRC, the principal activities of which include online services for its
members (“DSON”
or “Shipping
Online”, and together with DWIS and DWIL, the “Winland International
Group”).
Prior
Operations of Trip Tech
Trip Tech was incorporated in Texas on
November 17, 2006 to enter the online travel industry and to establish a large
scale, full service online travel company. Immediately prior to the Exchange,
Trip Tech was a development stage internet-based travel company operating with a
functional “branded” travel website. Since Trip Tech’s inception, Trip Tech
established its corporate existence as a publicly held corporation, raised
founder capital, and designed and installed a functional “branded” travel
website. As of the date immediately prior to the Exchange, Trip Tech had not
been able to raise additional funds through either debt or equity offerings. As
a result of the foregoing, Trip Tech began to explore its options regarding the
development of a new business plan and direction. On August 12, 2008, Trip Tech
consummated the Exchange with SkyAce and the Pioneer Creation Holdings
Limited.
- 3
-
Our
common stock is currently traded on the Over-The-Counter Bulletin Board under
the symbol “WLOL”. Immediately prior to the Exchange, Trip Tech was considered a
“blank check” company with US$40,963 in assets and a net loss of US$34,965 for
the fiscal year ending February 29, 2008. On the date of the closing of
the Exchange, the Company did not have any liabilities.
Current
Operations of the Company (General Development of Business)
SkyAce
SkyAce is a holding company founded in
the British Virgin Islands on September 22, 2006 with no significant
operations. SkyAce was formed solely for the purpose of acquiring PGL
and BSL from Mr. Li Honglin and Ms. Xue Ying, each of whom had owned fifty
percent (50%) of both PGL and BSL and each of whom now own fifty
percent (50%) of SkyAce. SkyAce has authorized capital of US$50,000 consisting
of 50,000 ordinary shares authorized, two (2) of which are currently issued and
outstanding and held by Trip Tech as a result of the Exchange. Li Honglin, a
Director and the President of Winland, serves as a Director of SkyAce. Xue Ying,
a Director, the Chief Executive Officer and the Secretary of Winland, also
serves as a Director of SkyAce.
PGL
PGL is a holding company founded
in the British Virgin Islands on July 5, 2006. PGL was formed solely for
the purpose of acquiring each of the following wholly-owned subsidiaries from Li
Honglin and Xue Ying (both of whom previously owned fifty percent (50%) of each
of the following entities), which such transfers occurred between January 1,
2008 and March 31, 2008:
(a)
|
Winland Shipping Co., Ltd., a
company organized under the laws of Hong Kong on August 11, 2000
(“Winland
Shipping”);
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(b)
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Kinki International Industrial
Limited, a company organized under the laws of Hong Kong on May 2, 2006
(“Kinki”);
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(c)
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Bestline Shipping Limited, a
company organized under the laws of Hong Kong on January 27, 1994
(“Bestline”);
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(d)
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Lancrusier Development Co.,
Limited, a company organized under the laws of Hong Kong on July 11, 1995
(“Lancrusier”);
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(e)
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Win Star Shipping Co., Ltd., a
company organized under the laws of St. Vincent and the Grenadines (“SVG”)
on June 21, 2000 (“Win
Star”);
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(f)
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Bodar Shipping Co., Ltd., a
company organized under the laws of SVG on January 7, 2004 (“Bodar”);
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(g)
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Winland Dalian Shipping S.A., a
company organized under the laws of Panama and registered in Hong Kong on
June 8, 2005 (“Winland
Dalian”);
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(h)
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Treasure Way Shipping Limited, a
company organized under the laws of Hong Kong on May 27, 2002
(“Treasure
Way”).
|
PGL acquired
the following additional entities in 2008:
(i)
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Win Eagle Shipping Co., Ltd., a
company organized under the laws of Malta on July 29, 2002 (“Win
Eagle”);
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(j)
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Win Bright Shipping Co., Ltd. a
company organized under the laws of Malta on February 8, 2002
(“Win
Bright”);
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- 4
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(k)
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Win Ever Shipping Co., Ltd., a
company organized under the laws of Malta on February 8, 2002
(“Win
Ever”).
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(l)
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Win Glory S.A., a company
organized under the laws of Panama and registered in Hong Kong on April 2,
2003 (“Win
Glory”).
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(m)
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Win Moony Shipping Co., Ltd., a
company organized under the laws of Malta on September 26, 2003
(“Win
Moony”).
|
PGL acquired the following
entities in 2009:
(n)
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Win Grace Shipping Co., Ltd., a
company organized under the laws of Malta on September 4, 2003
(“Win
Grace”).
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(o)
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Win Hope Shipping Co., Ltd., a
company organized under the laws of Malta on June 14, 2001 (“Win
Hope”).
|
PGL established the following
entities in 2009:
(p)
|
Bodar Shipping S.A. is
incorporated and registered in Panama on February 12, 2009 (“Bodar
Shipping”).
|
(q)
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Win Moony Shipping S.A. was
incorporated and registered in Panama on April 30, 2009 (“Win
Shipping”).
|
(r)
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Bao Shun Shipping S.A. was
incorporated and registered in Panama on June 10, 2009 (“Bao
Shun”).
|
(s)
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Winland International Shipping
Co., Limited is incorporated and registered in Hong Kong on August 27,
2009 ("Winland
International").
|
PGL and
each of its wholly-owned subsidiaries set forth above (collectively, the “PGL Group”) are
engaged in ocean transportation of dry bulk cargoes worldwide through the
ownership and operation of dry bulk vessels. The principal business activities
of the PGL Group are ocean transportation and chartering. The operations of
each of the Company’s vessels are managed by Winland Shipping, while the
chartering businesses are managed by Kinki and Bestline. Winland International's
primary business is to develop and expand the global shipping
market. Lancrusier’s primary business is management and accounting, while
Win Star, Bodar, Winland Dalian, Treasure Way, Win Eagle, Win Bright, Win Ever,
Win Glory, Win Moony, Win Grace, Win Hope and Bao Shun collectively own 12 of
the Company’s vessels.
BSL
SkyAce’s
wholly-owned subsidiary BSL was incorporated in the British Virgin Islands
on November 30, 2006. BSL sole business is to act as a holding company for
its wholly-owned subsidiary, HK Wallis Development Limited, a company organized
under the laws of Hong Kong on December 9, 2006 (“Wallis”). The sole
business of Wallis is to act as a holding company for its wholly-owned
subsidiary, Beijing Huate Xingye Technology Co., Ltd., a company organized under
the laws of the PRC on March 18, 2008 (“Beijing Huate”).
Beijing Huate was formed with the purpose of producing IT software, developing
new products and adopting advanced and applicable technology and scientific
management methods to create economic benefits for its stockholders. It does
this by controlling, through Exclusive Technical Consulting and Service
Agreements and related transaction documents dated as of March 31, 2008
(collectively, the “Service Agreements”,
each of which are referenced as Exhibits herein), DWIS, DWIL and
DSON.
In
compliance with the PRC’s foreign investment restrictions on internet
information services and other laws and regulations, the Company conducts all of
its internet information and media services and advertising in China through
DWIS, DWIL and Shipping Online, each a domestic variable interest entity
(also referred to in this Annual Report as a “VIE”). In accordance
with ASC 810 (formerly SFAS No. 46R, “Consolidation of Variable Interest
Entities”), a VIE is to be consolidated by a company if that company is subject
to a majority of the risk of loss for the VIE or is entitled to receive a
majority of the VIE’s residual returns. Upon executing the Service Agreements,
DWIS, DWIL and Shipping Online (collectively also known as the “VIEs”) are all
considered VIEs and the Company, through its ownership and control of SkyAce,
BSL, Wallis and Beijing Huate, is considered their primary
beneficiary.
- 5
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Pursuant
to the Service Agreements, Beijing Huate provides on-going technical services
and other services to the VIEs in exchange for substantially all net income of
the VIEs. In addition, the stockholders of the VIEs have pledged all of their
shares in the VIEs to Beijing Huate, representing one hundred percent (100%) of
the total issued and outstanding capital stock of the VIEs, as collateral for
non-payment under the Service Agreements or for fees on technical and other
services due thereunder. Beijing Huate also has the power to appoint all
directors and senior management personnel of the VIEs.
DWIS
Dalian Winland International Shipping
Agency Co., Ltd. (“DWIS”) was
incorporated under the laws of the PRC on December 5, 2002 by three (3)
investors, namely, Dalian Winland Industry Group Co., Ltd. (“DWIG”), Dalian
Winland Shipping Co., Ltd. (“DWSC”) and Dalian
Weihang Freight Forwarding Co., Ltd. (“DWFF”). At
establishment, the percentage of each party’s equity interest was 51%, 41.5% and
7.5%, respectively. DWIG was incorporated by Li Honglin and Xue Ying having a
60% and 40% interest, respectively. DWSC was incorporated by DWIG and Xue Ying
having a 60% and 40% interest, respectively. DWFF was incorporated by Li Honglin
and Xue Ying having a 66.7% and 33.3% interest, respectively. Thus, Li Honglin
and Xue Ying had owned a 50.5425% and 49.4575% of DWIS indirectly at inception.
According to a share trust instrument agreement executed in February 2005, Li
Honglin transferred 0.5425% of his interest in DWIS to Xue Ying. Thereafter, Li
Honglin and Xue Ying own 50% each of DWIS as at December 31, 2009 and 2008. The
principal activities of DWIS include shipping agency services, booking cargo
space, storage of goods, and declaration of customs. On August 18, 2009, DWIS
disposed of the Haoyue vessel to a related party, Dalian Winland Shipping Co.,
Ltd. The net cash proceeds were $1,272,685, after deducting tax expenses of
$28,350 from the gross proceeds of $1,301,035.
DWIL
Dalian Winland International Logistic
Co., Ltd. (“DWIL”) was
incorporated under the laws of the PRC on July 28, 2003 by three (3) investors,
namely, DWIG, DWSC and DWIS. At establishment, the percentage of each party’s
equity interest was 51%, 47.6% and 1.4%, respectively, and Li Honglin and Xue
Ying owned 48.4436% and 51.5564% of DWIL indirectly at inception, respectively.
According to a share trust instrument agreement executed in February 2005, Xue
Ying transferred 1.5564% of her interest in DWIL to Li Honglin. Thereafter, Li
Honglin and Xue Ying each owned 50% of DWIL as of December 31, 2009 and 2008.
The principal activities of DWIL are freight forwarding services logistics
shipping agency services. DWIL owns one of the Company’s vessels.
Shipping
Online
Dalian Shipping Online Network Co.,
Ltd. (“DSON” or
“Shipping
Online”) was incorporated under the laws of the PRC on February 20, 2003
by two (2) investors, namely, Li Honglin and Xue Ying. At establishment, the
percentage of each party’s equity interest was 80% and 20%, respectively.
According to a share trust instrument executed in February 2005, Li Honglin
transferred 30% of his interest of Shipping Online to Xue Ying. Thereafter, Li
Honglin and Xue Ying each owned 50% of Shipping Online as at December 31, 2009
and 2008. The principal activities of Shipping Online are providing online
services to its members.
Summary
of Current Business of the Company
The Company is a comprehensive, modern
international shipping company with its world headquarters based in China. The
Company is mainly engaged in a comprehensive range of international shipping and
logistics services such as bulk cargo transportation, chartering, shipping
agents, logistics, ship trading, spare parts supplies, crew recruitment and
shipping porter operation, as well as relevant industry news and data analysis
and advertising.
The Company's core business is
international bulk cargo transportation. It has an ocean shipping fleet of 13
vessels, with a self-owned carrying capacity of over 200,000
tons. Through monthly voyage charters and time charters, the Company
can provide carrying capacity of about 1,000,000 tons with shipping lines to
major ports around the world.
- 6
-
In addition, the Company owns and
operates an industrial online portal called “Shipping Online” which is accessed
on the internet at http://www.sol.com.cn.
This website functions as a business platform, providing on-line and off-line
integrated international shipping and logistics services, such as bulk cargo
chartering, container booking, shipping agents, ship trading and building, spare
parts supplies, crew recruitment, as well as shipping news and data analysis;
the off-line operating team is made up of industrial elites and a logistics
network with branches in Beijing, Tianjin, Dalian, Yingkou, Qingdao,
Zhangjiagang, Lianyungang and Shanghai. These branches collectively provide a
full service system with a combination of integrated group and localized
branches.
Providing comprehensive shipping and
logistics services through the internet is not only the innovation and creation
of the Company, but is also the basis of the transition for the entire shipping
industry from a traditional business model to a modern business model. The
Company believes it will create a broad space for development and lead the
accelerated development of the entire shipping industry.
Our operating revenue in 2006 reached
US$59.2 million, of which the net profit was nearly US$7.4 million; as the
global shipping market experienced a breakthrough in development, the Company
achieved annual operating revenues of US$70.3 million in 2007, net income of
US$21.4 million, enjoying approximately 200% growth as compared with 2006. The
operating revenue of 2008 reached $84.2 million, net income of $19.1 million.
However, the operating revenue and net income for the year ended December 31,
2009 dropped to 50.2 million and a resulted net loss of $7.0
million.
The performance for the current
reporting period was significantly impacted by the global financial crisis which
resulted in a severely depressed shipping market, offset by the positive output
from management initiatives of cost control and the implementation of our
shipping online portal. The Company intends to steadily expand its capacity and
enlarge the size of its ocean transport fleet by acquiring additional vessels or
businesses at lower prices in light of the current slump in the shipping market.
The Company intends to continue to push forward with its comprehensive shipping
and logistics services with Shipping Online in order to expand its market
share.
On June 3, 2009, Winland Shipping and
Bao Shun Shipping S.A. entered into a Memorandum of Agreement (“MOA”) with Mario
Shipping Corporation (“MSC”) for the
purchase by the Company from MSC of a 2003 built handysize vessel (20,212 gross
tonnage, 10,948 net tonnage) known as “Bao Shun” for a price of
US$20,700,000. On June 4, 2009, the MOA was amended to nominate Bao
Shun Shipping S.A. as the actual buyer that would remain fully responsible for
performing under the MOA, and on July 14, 2009 the MOA was further amended to
change the expected time of delivery to the period of July 14, 2009 to October
10, 2009 and to modify certain payment and interest terms. On August 14,
2009, the Company paid ten percent (10%) of the purchase price for the vessel
(approximately US$2,070,000) in cash.
On September 25, 2009, the parties to
the MOA closed on the purchase of the vessel whereby the Company paid the
balance on the purchase price of US$18,630,000 as well as acquisition cost of
$181,125. The Company funded $14,490,000 through a long-term loan
with Dialease Maritime S.A. which is secured by the vessel “Bao Shun”, and
funded $3,000,000 via a long-term note. The Company paid the remaining balance
of $1,321,125 in cash. The loan is to be repaid in eighty-four (84)
monthly payments with an interest rate at the Japanese LIBOR plus
2.3%.
Brief
History of the Company’s Shipping Business
The Company was founded in 1993 as a
chartering business. Since the market was dominated by State-owned enterprises
at that time, the attitude and level of service was generally not satisfying to
customers. Li Honglin, the founder of the Company, seized the opportunity to
privately establish the Company by himself, giving full play to the advantages
of service and price. The Company gradually received recognition from a large
number of corporate customers.
With gradual accumulation of capital
and experience, as well as an acute grasp of market trends, the Company leased
its first vessel in 1995. In 1997, in light of the outbreak of the Southeast
Asian financial crisis, the global shipping market experienced a downturn.
Having an optimistic view on market prospects and a stable support of customer
resources, the Company seized the opportunity to lease more vessels at a lower
price, becoming a ship owner by direct purchase of vessels in 1998. After 2000,
the Company expanded its fleet through the purchase of between 3-4 ships
annually.
- 7
-
By the end of 2004, in order to become
a modern comprehensive shipping company with sustainable development and
innovation potential, the Company developed a strategy to provide traditional
maritime services on the internet and created a new industry business and
profitability model by integration of traditional shipping services and internet
e-commerce.
To achieve this strategic planning, at
the end of 2004 the Company launched the famous domestic online shipping portal
“Shipping Online” and began providing network-based shipping services. Shipping
Online is a maritime shipping portal and integrates traditional business
practices into designing and developing on-line services for the most important
parts of the international shipping industry. Shipping Online provides
comprehensive platform solutions, and includes an industry trading platform and
business operations platform based on our original information and marketing
platform.
The operating income directly and
indirectly generated from e-commerce services generated by Shipping Online has
become an important added component of the Company’s revenues as well as an
enormous publicity value which we believe will continue to advance the Company’s
growth beyond the original shipping business of the Company. DWIS and DWIL
provide one-stop, multi-level professional shipping services in each link of the
value chain through Shipping Online.
Market
Segments of the Company
Bulk
Cargo Transportation and Chartering
The three main categories for
international sea transportation are bulk cargo, container liner transport and
oil and gas transport, of which bulk cargo transport occupies more than a forty
percent (40%) market share and is generally considered the most important market
segment of the shipping industry.
The bulk cargo transportation market
can be further divided on the basis of the tonnage. The industry uses the
following terms to describe such subsets of the bulk cargo transport market
(from large to small size): The Capesize vessels market, the Panamax vessels
market, the Supramax vessels market and the Handysize vessels market. The
Company's fleet is primarily concentrated in the latter two categories, namely,
the Supramax and Handysize vessel markets.
The Company conducts its shipping
business through the Plentimillion Group and its two (2) main businesses are dry
bulk shipping (voyage chartering and time chartering) and vessel chartering.
During the fiscal years ended 2009 and 2008, 49.7% and 68.3% of SkyAce’s revenue
was generated from dry bulk shipping revenues, respectively.
E-Commerce
& Comprehensive Logistics Services
E-commerce services of the shipping
industry mainly provide various professional services to enterprises in
shipping, logistics, foreign trade, ship, marine, and other areas. Therefore,
e-commerce services of the shipping industry have corresponding market
segmentations in accordance with their respective customer groups and type of
services. The three most common market segments are as follows:
·
|
Shipping
Information Services. Shipping websites of this type
provide shipping information, statistics and data, market analysis,
comments, transaction reports and other information services. Website
sponsors are mainly research institutions and media with a full range of
government background, such as “Chinese Shipping” by the Shanghai Shipping
Exchange, the “CNET” by "China Shipping Weekly" under the Chinese
Association of Traffic and Transportation. These shipping websites provide
information services mainly by relying on their ability to obtain and
report information, but without any business transaction information. This
is the most common e-commerce service subset in the shipping
industry.
|
- 8
-
·
|
Shipping
Transactions. With
the popularity of e-commerce services, more and more shipping companies
understand that the internet is playing an increasingly important role on
when they conduct business. Therefore a large number of shipping companies
have begun to release information on their own products and services on
the internet for promotion and the ability for customers to search their
product. Such trend has formed an online trading market for the purpose of
online transactions. If the shipping company timely posts information to
benefit cargo owners and charter companies it will enhance the operational
efficiency of vessels. When ship-owners desire to conduct ship trading,
they can now choose to release relevant information on a shipping portal,
resulting in more buyers and sellers to choose from yielding a better
return. Shipping e-commerce websites of this type mainly provide a
platform for business information and inquiry services and a direct link
between member companies who can make off-line transactions and provide a
trading platform for exchanges on business information. This is the second
most common e-commerce service subset in the shipping
industry.
|
·
|
Shipping
Operations. The
ultimate goal for enterprises is to not only access information but also
to effectively use such information in actual business transactions. The
two subsets above merely provide business with access to information. In
order to enable customers to complete a transaction, Shipping Online
assists customers in completing transactions directly through its network
as an agent. As an agent, Shipping Online provides bulk cargo chartering,
container online booking, spare parts and materials supply online services
and ship sales. Such services go beyond the simple model of providing
information by providing a practical and efficient operational platform
for its member shipping
companies.
|
Market
Share and Competition
Bulk
Cargo Transportation
In the segment markets of Supramax and
Handysize vessels for bulk cargo transportation, with 13 self-owned vessels and
ships by voyage charter and time charter, the Company’s transport capacity is
approximately 1 million tons monthly, which is in the medium-sized level in Far
East region with higher visibility and influence. Four decades of service with
stability and quality help it to consolidate a large number of loyal clients
including some Chinese State-owned large enterprises such as China Capital
Steel, China Bao Steel, China Minmetals, China National Petroleum and China
Petrochemical, and other famous international enterprises, including Japan’s
MARUBENI, MITSUBISHI and NIPPON, Korea’s POSCO and LG, Singapore’s LIVEN and
Switzerland’s STEEL BASE.
With respect to competition, the
Company competes with about 5 large State-owned shipping enterprises in China
like COSCO, China Shipping and we also compete with approximately 100 small
shipping companies (companies generally having 5 or less vessels). The Company
generally ranks among the top 10 in its industry class with respect to size. The
competitive advantages and disadvantages for each class of competition
(including the Company’s current situation) are as follows:
Enterprise Type
|
Main Advantages
|
Main Disadvantages
|
||
China
Large State- Owned Enterprises (approximately 5
enterprises)
|
· large fleet
with strong transport capacity
· Easy
acquisition of large state cargo owners as a State-owned
enterprise
· High
visibility and marketability
· Rich
resources, favorable policies
|
· Low
efficiency and slow market reaction
· Difficulty
with cost control
· Weak service
awareness, unstable staff
·Operation
without flexibility and autonomy
|
||
The
Company
|
·Advanced
operation model, high-level internet application
·Flexible
decision-making of management, fast market reaction
·Good cost
control and scale effect
·Stable staff,
rich market experience
·Strong service
awareness and innovation
|
·Single vessel
with small transport capacity, cargo resource
constraints
·Relative small
fleet size
·Little
government background, little favor policy
·Narrow
financing and low growth rate
|
||
Small
Shipping Companies (approximately 100 enterprises)
|
·Flat-styled
management, relatively high efficient decision-making
·Good service
awareness, quick market reaction
|
·Small-sized
fleet, inefficient transport capacity
·Lack of
industrial experience, unstable customer resources
·Single
business, weak risk control
·High cost, no
scale effect
|
- 9
-
From the
comparison above it can be seen that the Company is a modern shipping company
with innovative thinking. Compared with China's large state-owned enterprises,
we have some constraints and relative disadvantages, however we believe we also
have great potential for development. If the Company can rapidly expand its
fleet size, update its capacity configuration and continue to reap the
advantages of internet application and software strength, we believe it is
possible to rapidly expand the scale of business and to access to larger space
for our development in the future.
E-Commerce
(Comprehensive Logistics Services)
There are less than ten comprehensive
websites in the shipping industry in China, and Shipping Online’s website http://www.sol.com.cn
is one of the leading websites overall in the industry according to www.chinarank.org.cn, which is operated by the
Internet Society of China. With respect to the e-commerce market
subsets, Shipping Online is still a market follower with respect to what we call
“Shipping Information Services” (the obtainment and dissemination of industry
information such as news and statistics) and thus, cannot provide information in
the most-timely fashion compared with our state-owned competitors. However, we
have adopted a competitive strategy of providing the most comprehensive and
systemic shipping information through Shipping Online.
With respect to the industry subsection
of the e-commerce market we call “Shipping Transactions”, Shipping Online was
the first company to enter into such market, has the most experience with such
market and is generally considered a leader in the provision of such services.
The Company has rich experience in the shipping business and the Company’s
management has laid a solid professional foundation for the design of online
products and offline consulting services.
With respect to the industry subsection
we call “Shipping Operations”, which is much more professional and complex,
namely, the providing direct online operation to shipping enterprises, Shipping
Online is the first e-commerce enterprise to deal directly with the shipping
orders. On the one hand, we have stable business orders through Shipping Online,
on the other hand our professional offline team can deal with orders in a timely
manner, and provide the operations at the scene through local subsidiaries and
member enterprises.
With respect to competition, Shipping
Online is the first company in China to promote shipping services on the
internet and is the first company to put it into practice. Therefore, we are
unique in a vast majority of the online operations without competition in such
areas. Through long-term practice and experience, we have established a
relatively high entry barrier and therefore own a competitive advantage, which
we believe will enable us to maintain the competitive edge for a long time in
the future.
- 10
-
Shipping Online’s management team is
very familiar with the shipping industry and has a profound understanding and
grasp of the business needs of shipping companies, which provides products and
services tailored to the needs of shipping companies and an unparalleled
professional practicality. It is difficult for competitors to learn and imitate
in a short period of time. Even if they can fully copy the shipping webpage,
they cannot easily obtain the professional experience of our operational
processes and off-line support. Once the business needs have changed, the
internet services and processes must continuously adjust and optimize in order
to meet the specific needs of enterprises. Thus, rapid market reaction and
adjustment are problematic barriers for competitors in a short
term.
Furthermore, an online order must be
achieved under the professional support of an off-line team. An e-commerce
portal only provides information and cannot complete transactions. It is at best
a distribution center of information. Shipping Online’s off-line operational
team entered the shipping market in 1993 and has more than 10 years of
operational experience with freight forwarders, cargo agents, shipping agents,
bulk cargo carting, sale and maintenance, spare part supply and other fields of
application. The efficient systematic matching between off-line operations and
online orders is a significant barrier for competitors.
The
Company’s Products and Services
Introduction
As one of
the most comprehensive modern international shipping companies in China and Asia
based on the Internet, the Company is mainly engaged in a comprehensive range of
online and off-line international shipping services such as bulk cargo
transportation, chartering, shipping agents, international logistics, ship
trading, spare parts supplies, crew recruitment and shipping porter operation,
as well as relevant industry news and data analysis and
advertising.
Bulk
Cargo Ocean Transportation Services
The Company has 13 self-owned vessels,
with transport capacity of over 200,000 tons. Through vessels by “voyage
charter” and “time charter”, the Company’s transport capacity is approximately 1
million tons monthly for main lines in the world. The Capacity of a single
vessel is from 3,000 tons to 40,000 tons. Our vessels sail under the Flags of
St. Vincent, Malta, Panama, China and Hong Kong. The vessels are able to carry
various types of cargo and provide multi-level and wide range of maritime
transport services.
Online
Chartering Services
The Company’s online chartering
services are transaction services specifically designed for ship owners, charter
agents, and various trading companies to achieve efficient interactions between
ships and cargo (that is, matching suitable cargo for a suitable ship). To
achieve this goal, we provide a service that automatically matches ship and
cargo information in terms of ports, so that our on-line members can directly
search by port name (or other key word) and use the information to meet their
business needs.
To provide our online members fast,
efficient and convenient transactions, our website has established a special
chartering operation team which not only collects ship and cargo information
from around the world, but also directly provides agency services to our
members. Utilizing our experienced ship and cargo agents, members save on the
cost of finding their counterparts on their own. At present, we have a staff of
10 persons that rely on information provided by our members every day and on
various types of empty ship information, and our team also uses their own
channels to collect information. They can provide online interactions to
hundreds of vessels and provide professional, efficient chartering services for
many ship and cargo owners.
Online
Container Booking Business
Container booking is an important
aspect of importing and exporting, and one that is unavoidable to many small and
medium-sized cargo owners. Considering costs and efficiency, shipping companies
generally do not provide direct booking services to small and medium-sized cargo
owners. Instead, they authorize several major professional agents to accept
booking, and costs related to such logistics increase for each additional agent.
Generally speaking, agents are regional and unitary, that is, they only have
certain advantages in their respective city or line, while the trading company
often is not subject to the restrictions of geographical and export lines.
Therefore, they sometimes are required to choose a number of agents to provide
services which increases their operational complexity and management
costs.
- 11
-
Shipping Online fully understands the
problems that such traditional model brings to cargo owners. We offer online
booking that makes use of the advantages of the internet in the dissemination
and gathering of information collected with respect to container export booking
orders of the same route from main port cities. This allows our members to
reduce the number of intermediaries and as a result, obtain a lower price.
Shipping Online reduces the costs of transportation for cargo owners and offers
a more stable supply for shipping companies. Following this “gathering cargo
resources, centralizing purchase” principle, when we launched online booking
services, we obtained recognition by cargo owners and laid a good foundation for
the market. The Company developed a profit model from such innovation through
chartering for cargo owners and providing relevant operation services. We
obtained profits from both price difference and operational fees. Based on the
import and export of over 100 million TEUs in China in 2009, this market size is
at least US$5 billion (“TEU” means
“twenty-foot equivalent unit”, an industry standard term used to describe a
cargo container 20 feet long and 8 feet wide).
Online
Ship Trading, Building and Maintenance Services
There are two main models of ship
trading, building and maintenance services available in Shipping Online. One is
a self-help transactions model among member companies, that is, member companies
freely distribute information on or search for ship trading or maintenance or
building information of all kinds and directly establish contacts with each
other and then consummate a deal; the other main model is that we are appointed
by a member to complete a transaction whereby the Company generates a 1% -3%
commission from such transactions.
In order to increase the quantity and
quality of information on ship trading, we encourage domestic member enterprises
to release more information. We rely on an English version of the website as
well as foreign channels of long-established cooperation in order to obtain
abundant international ship trading information and thus serve as a
communication bridge between domestic and foreign market.
With respect to ship repairing and
manufacturing services, China has become the world's second largest shipbuilding
base second only to the South Korea, and there has been a growing number of
foreign shipping companies making shipbuilding orders to domestic repairing and
manufacturing factories. We provide updated information on the competitive
products and production capacity offered by these factories on our multilingual
website for customers, accept shipbuilding inquiries abroad as a representative
of ship owners and generate a commission equal to 1% -2% of the shipbuilding
price.
Online
Supplies Services of Spare Parts and Materials
With China's rapid economic
development, China has become the world's processing factory. With respect to
ship spare parts and common materials, China's products of good quality at a low
price are recognized by the world over. The procurement of spare parts and
materials are often made when a ship is calls at a port in China. However,
language and other barriers often result in poor communication and low
efficiency of procurement. Common practitioners are generally local small
companies, and there is no domestic large-scale supplier in China. In fact, in
accordance with the estimates on the above market, procurement of spare parts
and materials in China and abroad every year reaches US$3 billion. Therefore in
accordance with international norms on spare parts manuals, we provide over
100,000 categorized types of spare parts and materials on our website, and we
accept online orders 24-hours a day. Such online marketplace greatly improves
the accuracy and efficiency of procurement and is in line with our core network
of suppliers for spare parts and materials and ship agents established in major
cities in China. Goods are distributed quickly to the vessel at low cost, which
is ideal for foreign shipping companies.
Online
Crew Recruitment Service
The online recruitment services
provided by Online Shipping are different from ordinary talent recruitment
services in light of the stringent international restrictions for qualifications
on different levels of work. Crew members are certified by professional service
providers and therefore, we have developed an online crew recruitment system to
account for the four integral customer groups: ship owners, crew service
companies, crew training schools and crew members. Recruiting information and
training information are published by the employing units and resumes are posted
by crew members so as to achieve an optimal allocation of human resources. With
the increase of the vessel’s capacity in recent years, the crew market,
especially the senior crew market, is facing a serious shortage. Thus, the crew
recruitment service market is full of great opportunities. Through steady
development, the online crew recruitment channel in Shipping Online has become
China's leading platform for large-scale recruitment of crew members. Because
many ship owner companies access Shipping Online for its offering of crew
recruitment services, we believe Shipping Online has laid a good foundation for
the Company to promote other business services to these member
enterprises.
- 12
-
Shipping
Online Information Services
Shipping Online provides comprehensive
professional news services on ships, ports, maritime and trade for member
companies. Through various channels we collect and summarize information on
major industrial events with a global scope. We also gather statistical data in
various fields to release in Shipping Online in categories for free reading by
member companies so as to enhance customer loyalty.
In addition to industry news,
statistics and other industrial information, we provide market price indices,
transaction reports, analyses and other decision support information,
particularly in several major businesses in the shipping industry, such as the
Baltic series indices and market comments, the tankers transport market index,
prices and comments on new ships, second-hand ships and the ship-dismantling
markets, international fuel market prices and comments, the China Costal Bulk
Freight Index and market analysis and the China Containerized Freight Index.
These professional information services provide an important platform for member
companies to understand markets and expand their businesses.
Shipping
Online Marketing Platform Services
Compared with traditional media such as
television, newspapers and magazines, internet media is more cost-effective,
especially for a non-popular industry such as the shipping industry. Industrial
portal advertising values are much higher than that of news portal sites because
customer groups are more concentrated and pure in industrial portals and
advertisements therein are much more persistent. Many shipping companies have
come to realize these points and in recent years, they have gradually expanded
their promotion investment in the network. We believe that the industrial
portals are the best platforms for marketing activities of small and medium
sized enterprises.
Shipping Online, a vertical portal in
the shipping field, provides to its member companies a series of marketing
services such as enterprise website building, network advertising, corporate
interviews and event reports, to help increase member company visibility rapidly
and to promote the business growth of such enterprises. Our advertising clients
include American ABB, Germany MARES, Singapore Singhai Marine Services, the Hong
Kong Supermar Machinery, China Marine and Seaman Service, Yingkou Port Affairs
Group, Xiamen Port Affairs Group and International Shipping Agency
ISB.
Developmental
Strategies of the Company
Growth
Strategies
We have established a two-step strategy
for the development of the Company. The first step is to enhance the integration
of competitive business, such as bulk cargo transport and the online business of
Shipping Online, and gradually turn the original business team to off-line
operations of Shipping Online and provide comprehensive shipping services based
on the internet, namely, “improve the offline business based on the internet”.
The second step is to further intensify the marketing promotion of e-commerce
platform and network building of Shipping Online once Shipping Online matures
and stabilizes its online business, and to expand the sources and increase the
number of online business orders. We believe the expansion of our online
business will bring about steady expansion of the off-line business, and the
model can be reproduced in other major shipping countries in the world. We
believe Shipping Online will eventually become one of the most comprehensive,
modern shipping and logistics service providers in the industry.
Sales
Strategies
The Company acts as a modernized
shipping company which supplies comprehensive shipping logistics services based
on the internet. The Company has the following sales
strategies:
- 13
-
·
|
Internet
Sales Strategy. In
light of lower efficiency and higher costs, the traditional shipping
operating model is becoming the choke point of further development in the
shipping industry. However, the emergence of e-commerce offers a clear way
of breaking through the choke point. Shipping Online is one of the most
famous and most influenced portal websites in the field of the shipping
logistics. Every day, a mass of member companies log on the internet to
issue and inquire about all kinds of shipping supply and demand
information. We believe that this can supply the Company with a steady
source of information for developing its business. Through active feedback
from member companies, the Company can reduce the costs of expanding its
business and gain considerable sales income. At the same time, we believe
that Shipping Online will be able to expand its popularity and influence,
such as advertising in the search engine and the plane media,
co-organizing important exhibitions about the industry, and organizing and
undertaking all types of selection
activities.
|
·
|
“From
Point to Surface” Sales Strategy. The shipping logistics
comprehensive services offered by the Company through Shipping Online can
supply shipping companies with overall business solutions. Usually, member
companies will approach our website in order to obtain a certain service,
however they realize after being exposed to all of the other services we
offer that they need several other services. Our “from point to surface”
sales strategy aims to first assist the member in solving its initial
business issue or issues, and then introduce such member to our overall
products and services, and encourage the member to introduce these
services to its colleagues. Also, we will offer favorable package
discounts. We believe such strategy will help us expand our business and
increase our sales.
|
·
|
“Member
Developing Member” Sales Strategy. Many of the member companies of
the Shipping Online contact us actively through introductions made by
their friends. We pay great attention to the public praise promotion
between the clients. We encourage the existing member companies to
introduce other companies to join the Shipping Online and to provide
discounts or awards to such members for their contribution to the
development of the customers in order to expand our
sales.
|
·
|
Bit
By Bit Local Sales Strategy. As a China-based shipping
company, the Company divides its primary sales objects into three parts
according to its scale of business and regional advantage. The Company
will input the advantage resources in turn from inner to outside according
to the chart below. We will supply familiar clients in familiar markets
with preponderant services in order to maintain stable corporate
operations and efficient use of our
resources.
|
Sales
Channels
The Company has been focusing on two
channels. First, the Company has sought cooperation with the medium and large
cargo owners and trading companies with long term transport agreements. Second,
the Company has joined several agency groups. The Company reports its vessels’
open schedule to, and will receive cargo information from, the agents. This can
increase the velocity and operating efficiency of the ships. These two sales
channels cannot work without Shipping Online. Other than these two sales
channels and the implementation of our sales strategies as discussed above, we
mainly rely on telemarketing. We believe we will gradually rebuild and expand
the range and scale of business of the existing branches, and build sales and
service branches within China and abroad in port cities to supply the localized
demographic services. We will demonstrate and promote network solutions directly
to the shipping companies in order to increase the sales effects. In small and
medium sized cities, we are planning to develop an agency sales network and
target local companies which have a good reputation and recognize the corporate
pattern of development in order to cooperatively build a profitable sales and
services network.
Business
Development
Plan For Expanding Transport
Capacity. In order to further increase the scale effect of our fleet
transport and to supply our clients a more convenient and well rounded maritime
transport service, we are planning to renew and expand the capacity of our
transport business by importing larger ships. Not only would this
increase the variety of cargo transported, but this would increase the variety
of targeted clients. We are actively increasing the Company’s level of internet
and information application, increasing the operating efficiency and reducing
operating costs in order to more closely supply clients with more transparent
services.
- 14
-
Planning For Promotion of
Shipping Online. With respect to network promotion, the Company will
implement measures to ensure that our website appears more frequently and more
prominently in online search engines. With respect to traditional
media, we plan to carry on integration and promotion in shipping magazines and
newspapers at home and abroad in order to increase our image. Additionally, we
are planning to put up a billboard in the area of the port docks of the
important port cities in order to reinforce our brand image of the Shipping
Online in the shipping industry, the logistics industry and foreign trade
industry.
Plan For Technical
R&D. The Company’s technical R&D planning is divided into three
parts: one is to enforce the technicality and convenience of the Shipping
Online’s services through increasing the research and understanding to the needs
of the clients; another is, for the shipping companies, to develop business
operational systems which can be installed and used in the client’s local
computers based on the internet information resources; another is to continue to
speed up the integration of inside and outside information of the shipping
companies, and develop corporate information portal system which can cover the
entire supply chains.
Planning for the National
Marketing Network. With the increase of the membership companies of the
Shipping Online and the continued expansion of the comprehensive internet-based
services, we need to build a sales and service network covering the national
main port cities, to shorten the response time of customer services and increase
the speed of solving problems. In 2010, the Company will continue to alter and
rebuild the existing eight branches, including those in Beijing, Shanghai,
Tianjin, Qingdao, Dalian, Yingkou, Zhangjiagang and Lianyungang, to meet the
needs of the membership sales and member service of the Shipping
Online. From 2010 to 2012, the Company intends to complete the construction
of the branches in such port cities as Ningbo, Xiamen, Shenzhen (or Guangzhou)
and Guangxi province. After 2012, the Company intends to select
between 10 to 15 freshwater port cities and other grade one or two inland cities
to develop a sales agency network, and to form a marketing and services network
which covers the main national customers.
Planning for the Expansion
of Personnel. The Company attaches great importance to the cultivation of
professional talents, especially those who are accomplished in the shipping
industry and in the internet e-commerce industry. In order to cooperate with the
establishment of the branches above, the Company will continue to train and
employ qualified management talent. Through continuously improving the Company’s
corporate management structure, management systems and retention of talent and
promotion practices, the Company provides its personnel with a favorable working
atmosphere and opportunity for development. The Company will continue
to improve its hiring, human resources development, performance evaluation and
training management practices.
Research
and Development (R&D)
The Company’s R&D is mainly devoted
to our e-commerce business in two areas, the product and service R&D of
Shipping Online and the management information system R&D for our off-line
shipping business. Currently, there are six (6) persons responsible for such
R&D, all of which have earned at least their bachelors degree. Core
technical personnel have worked with the Company for years, have engaged in
system development for the shipping industry in the area of Internet, and have a
deep understanding of the shipping industry and its business processes. The
Company also owns the core technique in the area of exploring the shipping
website called network gate and an industry system application related to the
shipping industry.
The Company spent US$98,660 (which is
reflected in WLOL’s General and Administrative Expenses) for the year ended
December 31, 2009, US$41,379 (which are reflected in WLOL’s General and
Administrative Expenses) for the year ended
December 31, 2008 and US$8,636 (included in Skyace’s General and Administrative
Expenses) for the year ended December 31, 2007 on Company-sponsored research and
development activities as determined in accordance with US GAAP. The Company
plans to spend US$120,000 during fiscal year 2010 and US$151,000 during fiscal
year 2011 on Company-sponsored research and development activities.
Employees
As of the date of this Annual Report,
the Company has approximately 228 employees.
Intellectual
Property
The Company currently does not own any
trademarks or patents. However, the Company did receive notification of
acceptable of trademark registration for the trademarks “Winland” and “Shipping
Online” from the Trademark Office of the State of Administration for Industry
and Commerce on December 7, 2005 and September 27, 2005, respectively. The
Company currently has three main domain names: www.sol.com.cn, www.winlandshipping.com
and www.shippingonline.cn.
These three domain names are all in good standing.
- 15
-
ITEM
1A Risk Factors
Not
required for a "smaller reporting company".
ITEM
1B. Unresolved Staff
Comments
None.
ITEM
2. Properties
All land
in China is owned by the State. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case
of land used for industrial purposes, the land use rights are granted for a
period of 50 years. This period may be renewed at the expiration of the initial
and any subsequent terms. Granted land use rights are transferable and may be
used as security for borrowings and other obligations.
The
Company has the following material office and land leases:
Lessee
|
Property
Address
|
Square
Meters
|
Lessor
|
Commencement
Date (Month
and Year)
|
Termination
Date (Month
and Year)
|
Rental
Amount per
Year (US$)
|
|||||||||
DSON
|
Room
A2, Floor 23, Summit Building, No.4 Shanghai Rd., Zhongshan District,
Dalian, China
|
54.98 |
Li
Honglin
|
January
2010
|
December
2010
(Renews
Every Year)
|
3,510.21 | |||||||||
DWIS
|
Room
D1, Floor 23, Summit Building, No.4 Shanghai Rd., Zhongshan District,
Dalian, China
|
40.94 |
Li
Honglin
|
January
2010
|
December
2010
(Renews
Every Year)
|
3,510.21 | |||||||||
DWIL
|
Room
C2, Floor 23, Summit Building, No.4 Shanghai Rd., Zhongshan District,
Dalian, China
|
54.98 |
Xue
Ying
|
January
2010
|
December
2010
(Renews
Every Year)
|
3,510.21 | |||||||||
DWIL—Beijing
Branch
|
Room
1418, Jingguang Business Center, Chaoyang District, Beijing,
China
|
70.93 |
Jingguang
Business Center Management Co.
|
December
2009
|
November
2011
(Renew
Every Year)
|
14,946.18 | |||||||||
DWIS
and DWIL- Shanghai Branch
|
Unit
E, Building 19, 855 S. Pudong Rd., Shanghai, China
|
140.85 |
Xing
Tai Real Estate Co.
|
January
2009
|
January
2011
(Renew
Every Two Years)
|
32,332.53 | |||||||||
PGL
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
591.53 |
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
43,877.61 | |||||||||
DSON
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
207.04 |
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
15,357.64 | |||||||||
DWIS
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
88.73 |
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
6,581.64 | |||||||||
DWIL
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
295.76 |
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
21,938.81 |
- 16
-
We
believe that all of our properties and equipment have been adequately
maintained, are generally in good condition, and are suitable and adequate for
our business.
ITEM
3. Legal Proceedings
In the normal course of business, we
are named as a defendant in lawsuits in which claims are asserted against us. In
our opinion, the liabilities, if any, which may ultimately result from such
lawsuits, are not expected to have a material adverse effect on our financial
position, results of operations or cash flows. As of December 31, 2009, the
claim of $501,640.34 (including interest) by Sinoriches Global Ltd. for voyage
charter contract dispute is in arbitration.
ITEM
4. Submission of Matters to a Vote of
Security Holders
None.
PART
II
ITEM 5.
|
Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
|
Market
For the Company’s Common Equity
Our common stock has traded on the
OTCBB under the symbol “WLOL” since October 17, 2008. There has been an
extremely limited public market for our common stock. Set forth below is a
table showing the high and low bids for each quarter within the last 2 fiscal
years from which information is available as provided to us from Pink Sheets,
LLC. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual
transactions:
High
|
Low
|
|||||||
Year
Ended December 31, 2008
|
||||||||
January
2 through March 31
|
NONE
|
NONE
|
||||||
April
1 through June 13 (before a 1.480973971 split)
|
||||||||
June
16 through June 30 (after a 1.480973971 split)
|
NONE
|
NONE
|
||||||
July
1 through August 8
|
NONE
|
NONE
|
||||||
August
11 through September 30 (after a 2 for 1 split)
|
$ | 4.05 | $ | 1.50 | ||||
October
1 through December 31
|
$ | 4.00 | $ | 1.15 | ||||
Year
Ended December 31, 2009
|
||||||||
January
2 through March 31
|
$ | 3.25 | 1.20 | |||||
April
1 through June 30
|
$ | 5.65 | 1.20 | |||||
July
1 through September 30
|
$ | 5.50 | 4.25 | |||||
October
1 through December 31
|
$ | 4.50 | 2.25 |
- 17
-
When the trading price of our common
stock is below US$5.00 per share, the common stock is considered to be a “penny
stock” that is subject to rules promulgated by the SEC (Rule 15-1 through 15g-9)
under the Exchange Act. These rules impose significant requirements on brokers
under these circumstances, including: (a) delivering to customers the SEC’s
standardized risk disclosure document; (b) providing customers with current
bid and ask prices; (c) disclosing to customers the brokers-dealer’s and
sales representatives compensation; and (d) providing to customers monthly
account statements.
Dividends
Dividends paid by WLOL, if any, will be
contingent upon our revenues and earnings, if any, capital requirements and
financial conditions. The payment of dividends, if any, will be within the
discretion of the Board of Directors of the Company. WLOL presently intends to
retain all earnings, if any, for use in our business operations and accordingly,
the Board does not anticipate declaring any cash dividends for the foreseeable
future.
Holders
of Common Equity
As of December 31, 2009, we had issued
and outstanding One Hundred Thirty Million (130,000,000) shares of our common
stock to 18 holders of record and zero (0) shares of preferred stock. The
Company believes that it has more stockholders since many of its shares are held
in "street" name. See also the “Security Ownership of Certain Beneficial Owners
and Management” above for a table setting forth (a) each person known by us to
be the beneficial owner of five percent (5%) or more of our common stock and (b)
all directors and officers individually and all directors and officers as a
group as of March 22, 2010.
Securities
Authorized for Issuance under Equity Compensation Plans
As of December 31, 2009, we had no
compensation plans (including individual compensation arrangements) under which
our equity securities are authorized for issuance.
Performance
Graph
Not required for a “smaller reporting
company”.
Recent
Sales of Unregistered Securities
As of December 31, 2009, there were
130,000,000 shares of common stock issued and outstanding and zero (0) shares of
preferred stock issued and outstanding and during the fiscal year ended December
31, 2009, there were no issuances or sales of any of the Company’s unregistered
securities. We have never utilized an underwriter for an offering of
our securities.
Options
and Warrants
As of December 31, 2009, and as of the
date of this Annual Report, we have no outstanding options or
warrants.
Transfer
Agent and Registrar
Corporate Stock Transfer,
3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209
currently acts as our transfer agent and registrar.
ITEM
6. Selected Financial
Data
Not
required for a “smaller reporting company”.
- 18
-
ITEM
7. Management‘s Discussion and Analysis of
Financial Condition and Results of Operations
Forward
Looking Statements
The following is management’s
discussion and analysis of certain significant factors which have affected our
financial position and operating results during the periods included in the
accompanying consolidated financial statements, as well as information relating
to the plans of our current management. This Annual Report includes
forward-looking statements. Generally, the words “believes ”, “anticipates”, “
may ”, “ will ”, “ should ”, “ expect ”, “ intend ”, “estimate”, “continue” and
similar expressions or the negative thereof or comparable terminology are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties, including the matters set forth in this Annual
Report or other reports or documents we file with the SEC from time to time,
which could cause actual results or outcomes to differ materially from those
projected. Undue reliance should not be place on these forward-looking
statements which speak only as of the date hereof. We undertake no obligation to
update these forward-looking statements.
The following discussion and analysis
should be read in conjunction with our consolidated financial statements and the
related notes thereto and other financial information contained elsewhere in
this Annual Report.
Summary
of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of WLOL and its
subsidiaries and variable interest entities (“VIEs”) (the “Company”) as
follows:
I.
Subsidiaries and Holding Companies:
a)
|
SkyAce
is wholly-owned subsidiary of WLOL and incorporated under the law of
British Virgin islands (“BVI”).
|
b)
|
Plentimillion
Group Limited (“PGL”) is a wholly-owned subsidiary of SkyAce and
incorporated in BVI.
|
c)
|
Best
Summit Enterprise Limited (“BSL”) is a wholly-owned subsidiary of SkyAce
and incorporated in BVI.
|
d)
|
Hong
Kong Wallis Development Limited (“Wallis”) is registered in Hong Kong and
is a wholly-owned subsidiary of
BSL.
|
e)
|
Beijing
Huate Xingye Technology Limited (“Huate”) was registered in the People’s
Republic of China (“PRC”) on March 18, 2008 and is a wholly-owned
subsidiary of Wallis.
|
II.
Subsidiaries of PGL - Businesses in transportation and chartering:
f)
|
Winland
Shipping Co., Limited, is registered in Hong
Kong.
|
g)
|
Win
Star Shipping Co., Limited, is incorporated and registered in St. Vincent
and the Grenadines (“S.V.G.”).
|
h)
|
Bodar
Shipping Co., Limited, is incorporated and registered in
S.V.G.
|
i)
|
Winland
Dalian Shipping S.A. is incorporated in Panama and registered in Hong
Kong,
|
j)
|
Treasure
Way Shipping Limited is incorporated and registered in Hong
Kong.
|
k)
|
Win
Eagle Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
l)
|
Win
Ever Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
- 19
-
m)
|
Win
Bright Shipping Co., Limited is incorporated and registered in Valletta,
Malta.
|
n)
|
Kinki
International Industrial Limited is registered in Hong Kong, managing
chartering business of vessels.
|
o)
|
Bestline
Shipping Limited is registered in Hong Kong, managing chartering business
of vessels.
|
p)
|
Lancrusier
Development Co., Limited is registered in Hong Kong, management and
accounting of the above companies.
|
q)
|
Win
Glory S.A. is incorporated in Panama, registered in Hong
Kong.
|
r)
|
Win
Grace Shipping Co., Limited is incorporated and registered in
Malta.
|
s)
|
Win
Hope Shipping Co., Limited is incorporated and registered in
Malta.
|
t)
|
Win
Moony Shipping Co., Limited is incorporated and registered in
Malta.
|
u)
|
Bodar
Shipping S.A. is incorporated and registered in
Panama.
|
v)
|
Win
Moony Shipping S.A. is incorporated and registered in
Panama.
|
w)
|
Bao
Shun Shipping S.A. is incorporated and registered in
Panama.
|
x)
|
Winland
International Shipping Co., Limited is incorporated and registered in Hong
Kong.
|
III. VIEs
- Businesses in Shipping Agency, Freight Forwarding and Online
Services:
To comply
with the People’s Republic of China (“PRC”) laws and regulations, the Company
provides substantially all of its shipping agency and freight forwarding
services and online services in China via its VIEs. These VIEs are wholly-owned
by certain related parties or directors of the Company.
The
following is a summary of the VIEs of the Company:
y)
|
Dalian
Winland International Shipping Agency Co. Ltd. (“DWIS”) is incorporated
under the laws of the PRC. The principal activity of DWIS is shipping
agency services.
|
z)
|
Dalian
Winland International Logistic Co. Ltd. (“DWIL”) is incorporated under the
laws of PRC. The principal activity of DWIL is freight forwarding
services.
|
aa)
|
Dalian
Shipping Online Network Co. Ltd. (“DSON” or “Shipping Online”) is
incorporated under the laws of PRC. The principal activities of DSON are
providing online service for the
members.
|
- 20
-
On March 31, 2008, the Company entered
into exclusive technical service agreements with DWIS, DWIL and DSON under which
the Company provides technical and other services to DWIS, DWIL and DSON in
exchange for substantially all of the net income of DWIS, DWIL and DSON. All
voting rights of DWIS, DWIL and DSON are assigned to the Company, and the
Company has the right to appoint all directors and senior management personnel
of DWIS, DWIL and DSON. In addition, shareholders of DWIS, DWIL and DSON have
pledged their equity interests in DWIS, DWIL and DSON as collateral to the
Company for the non-payment of the fees for technical and other services due to
the Company.
The Company applied the provision of
ASC 810 (formerly SFAS No. 46R, Consolidation of Variable Interest
Entities ), a variable interest entity (“VIE”) to be consolidated by a
company if that company is subject to a majority of the risk of loss for the
VIEs or is entitled to receive a majority of the VIEs’ residual
returns. As a result, DWIS, DWIL and DSON became the Company’s VIEs effective as
of January 1, 2008.
The Company adopted ASC 805 (formerly
SFAS No. 141), which requires the consolidated financial statements for the
periods ended December 31, 2009 and 2008 be presented as though the transfer of
net assets or exchange of VIEs’ interests had occurred at the beginning of the
period. Financial statements of all VIEs have been included in the Company’s
consolidated financial statements as of December 31, 2009 and 2008.
Inter-company balances and transactions
have been eliminated in consolidation.
Concentrations
The Company’s major customers who
accounted for the following percentages of total revenue and accounts receivable
are as follows:
Sales
|
Accounts Receivable
|
|||||||||||||||
Major
Customers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Company
A
|
6.98 | % | - | 0.43 | % | - | ||||||||||
Company
B
|
2.76 | % | - | - | - | |||||||||||
Company
C
|
2.32 | % | - | - | - | |||||||||||
Company
D
|
1.67 | % | - | - | - | |||||||||||
Company
E
|
1.46 | % | 0.98 | % | - | - | ||||||||||
Company
F
|
- | 3.91 | % | - | - | |||||||||||
Company
G
|
- | 2.65 | % | - | - | |||||||||||
Company
H
|
- | 1.89 | % | - | - | |||||||||||
Company
I
|
- | 1.06 | % | - | - |
- 21
-
The Company’s major oil suppliers who
accounted for the following percentages of total oil purchases and total
accounts payable are as follows:
Oil Purchases
|
Accounts Payable
|
|||||||||||||||
Major
Suppliers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Company
H
|
22.18 | % | 22.60 | % | 4.55 | % | - | |||||||||
Company
I
|
18.42 | % | - | 7.31 | % | - | ||||||||||
Company
J
|
17.87 | % | 11.28 | % | - | 2.08 | % | |||||||||
Company
K
|
12.04 | % | 23.63 | % | 0.39 | % | - | |||||||||
Company
L
|
9.97 | % | - | - | - | |||||||||||
Company
M
|
- | 8.69 | % | - | 6.57 | % | ||||||||||
Company
N
|
- | 8.30 | % | - | 1.49 | % |
Use
of Estimates
The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Management makes these estimates using the best
information available at the time the estimates are made. Actual results could
differ materially from those estimates.
- 22
-
Fair
Value of Financial Instruments
Fair Value of Financial Instruments
- ASC 820-10 (formerly SFAS 157) establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy prioritizes the inputs into three levels based on the extent to which
inputs used in measuring fair value are observable in the market.
These tiers include:
(I)
|
Level 1—defined
as observable inputs such as quoted prices in active
markets;
|
|
(II)
|
Level 2—defined
as inputs other than quoted prices in active markets that are either
directly or indirectly observable;
and
|
|
(III)
|
Level 3—defined
as unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own
assumptions.
|
The carrying amounts of financial
assets and liabilities, such as cash and cash equivalents, accounts receivable,
short-term and long-term loans, accounts payable, notes payable and other
payables, approximate their fair values because of the short maturity of these
instruments.
Inventories
Inventories of the Company are composed
of fuel oil and diesel oil. Inventories are stated at the lower of cost or net
realizable value (market value). The cost is determined on the basis of weighted
average. Net realizable value is based on estimated selling prices less any
further costs expected to be incurred for disposal.
Accounts
Receivable
Accounts receivable include receivables
from shippers and ship owners, net of a provision for doubtful accounts. At each
balance sheet date, all potentially uncollectible accounts are assessed
individually for purposes of determining the appropriate provision for doubtful
accounts. At December 31, 2009 and 2008, the Company had no allowance for
doubtful accounts.
Vessels
and Depreciation Policy
Vessels are carried at cost less
accumulated depreciation and impairment losses. Vessels are stated as
cost which consists of the contract price of the directly purchased vessels or
present value of minimum lease payments for the vessels acquired by capital
lease, and any direct expenditure incurred upon acquisition for major
improvements and delivery.
Depreciation is computed using the
straight-line method over the estimated useful life of the vessels, after
considering the estimated residual value. The residual value ranges
from 0.4% to 6% of the imputed original cost at the birth date of each vessel.
Management estimates the useful lives of the vessels to be 25 years from the
birth dates. As all the vessels were acquired second hand, the Company specified
the depreciation periods by deducting the periods used before purchase from 25
years.
The costs of significant replacements,
renewals and improvements are capitalized and depreciated over the shorter of
the vessel’s remaining estimated useful life or the estimated life of the
renewal or improvement. Expenditures for routine maintenance
and repairs are expensed as incurred.
- 23
-
Fixed
Assets
Fixed assets are carried at cost less
accumulated depreciation and amortization. Depreciation is provided over the
fixed assets’ estimated useful lives, using the straight-line method. Estimated
useful lives are as follows:
Motor
vehicles
|
5
years
|
Office
equipment
|
5
years
|
The cost and related accumulated
depreciation of assets sold or otherwise retired are eliminated from the
accounts and any gain or loss is included in the statement of income. The cost
of maintenance and repairs is charged to income as incurred, whereas significant
renewals and improvements are capitalized.
Dry
Dock Fees
Vessels must undergo regular
inspection, monitoring and maintenance, referred to as dry docking, to maintain
the required operating certificates. International Maritime Organization (IMO)
regulations generally require that vessels be dry docked every five years.
Because dry docking enables a vessel to continue operating in compliance with
IMO requirements, the costs of these scheduled dry dockings are customarily
capitalized and are then amortized over a 60-month period beginning with the
accounting period following the vessel’s release from dry docking.
Impairment
of Long-Term Assets
Long-term assets of the Company are
reviewed annually to determine whether their carrying value has become impaired,
pursuant to the guidelines established in FASB Codification 360-10-35-17
(Statement of Financial Accounting Standards (“SFAS”) No. 144). The
Company considers assets to be impaired if the carrying value exceeds the future
projected cash flows from the related operations. The Company also
re-evaluates the periods of amortization to determine whether subsequent events
and circumstances warrant revised estimates of an asset’s useful life. There
were no impairments for the years ended December 31, 2009 and 2008.
Revenue
Recognition
Revenue is recognized based on the
following four criteria:
(I)
|
That
the amount of revenue can be measured
reliably;
|
(II)
|
The
probability that the economic benefits will flow to the
Company;
|
(III)
|
Whether
the stage of completion at the balance sheet date can be measured
reliably;
|
(IV)
|
Whether
the costs incurred, or to be incurred can be measured
reliably.
|
For dry bulk shipping service, the
allocation of revenue between reporting periods is based on relative transit
time in each reporting period with expenses recognized as incurred.
For chartering brokerage services,
sales are recognized when a ship leaves port.
For shipping agency and freight
forwarding services, sales are recognized when a ship leaves port.
For online services, sales are
recognized according to the stage of completion in accordance with the service
period defined in executed contracts.
Retirement
Benefits
Retirement benefits in the form of
contributions, under defined contribution retirement plans to the relevant
authorities are charged to operations as incurred. Retirement benefits amounting
to $125,372 and $115,070 were charged to operations for the years ended December
31, 2009 and 2008, respectively.
- 24
-
Income
Tax
Deferred tax assets and liabilities are
recognized for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be applied to taxable income in the years in
which those temporary differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the statement of income in the period that includes the enactment date. A
valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to realize
their benefits, or that future deductibility is uncertain.
Earnings
(Loss) Per Share
Basic earnings (loss) per share are
computed by dividing income (loss) available to common shareholders by the
weighted-average number of common shares outstanding during the period. Diluted
earnings (loss) per share are computed in a similar manner to basic earnings
(loss) per share except that the denominator is increased to include the number
of additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
The Company does not have any dilutive securities for the years ended December
31, 2009 and 2008.
Foreign
Currency Translation
Assets and liabilities of foreign
subsidiaries are translated into United States dollars at currency exchange
rates in effect at period-end and revenues and expenses are translated at
average exchange rates in effect for the period. Gains and losses resulting from
foreign currency transactions are included in results of operations. Gains and
losses resulting from the translation of foreign subsidiaries’ balance sheets
are included as a separate component of shareholders’ equity.
December 31, 2009
|
December 31, 2008
|
|||||||
Period
end RMB: US$ exchange rate
|
6.8372 | 6.8542 | ||||||
Average
period RMB: US$ exchange rate
|
6.8457 | 7.0842 |
Comprehensive
Income (Loss)
Comprehensive income (loss) is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, all items that are
required to be recognized under current accounting standards as components of
comprehensive income (loss) should be reported in a financial statement that is
presented with the same prominence as other financial statements. The Company’s
only current component of comprehensive income (loss) is the foreign currency
translation adjustment.
- 25
-
Reporting
Segments
Accounting standards require public
business enterprises to report information about each of their operating
business segments that exceed certain quantitative thresholds or meet certain
other reporting requirements. Operating business segments have been defined as
components of an enterprise for which separate financial information is
available and which financial information is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company has determined that it has three reportable segments:
(1) Dry bulk shipping, (2) Chartering brokerage, and (3) Other activities
segment.
|
·
|
Dry
Bulk Shipping Service – Our dry bulk shipping service operates a fleet of
thirteen vessels that provides marine shipping services for dry and liquid
bulk cargo shipping. The segment contributed 50% and 68% of combined
operating revenues for the years ended December 31, 2009 and 2008,
respectively.
|
|
·
|
Chartering
Brokerage Service – Our chartering brokerage service provides ship
chartering services for unrelated shipping companies and shippers. The
segment contributed 41% and 26% of the Company’s consolidated operating
revenues for the years ended December 31, 2009 and 2008,
respectively.
|
|
·
|
Other
activities – Our other activities segment is comprised of shipping agency
and freight forwarding services, and online services. Shipping agency and
freight forwarding services provide transportation and logistic services
to shippers in the PRC. Online services provide internet services for
members. These operating segments were not separately reported as they do
not meet any of the quantitative thresholds under ASC 280-10
(formerly SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information). Other activities segment
contributed 9% and 6% of the Company’s consolidated operating revenues for
the years ended December 31, 2009 and 2008,
respectively.
|
Recent
Accounting Pronouncements
On July
1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162). ASC 105-10 establishes the FASB ASC as
the source of authoritative accounting principles recognized by the FASB to be
applied in preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America. The adoption of
this standard had no impact on the Company’s consolidated financial
statements.
Effective January 1, 2009, the Company
adopted ASC 805 (formerly SFAS No. 141 (R), Business Combinations). ASC
805 requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired. The adoption of ASC 805 did not have any
effect on the Company’s consolidated financial statements as of December 31,
2009.
Effective January 1, 2009, the Company
adopted ASC 810-10 (formerly SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements). This Statement establishes accounting
and reporting standards that require (1) the ownership interests in
subsidiaries’ non-parent owners to be clearly presented in the equity section of
the balance sheet; (2) the amount of consolidated net income attributable to the
parent and to the noncontrolling interest be clearly identified and presented on
the face of the consolidated statement of income; (3) that changes in a parent’s
ownership interest while the parent retains its controlling financial interest
in its subsidiary be accounted for consistently; (4) that when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and the gain or loss on the
deconsolidation of the subsidiary be measured using the fair value of any
noncontrolling equity; and (5) that entities provide disclosures that clearly
identify the interests of the parent and the interests of the noncontrolling
owners. The adoption of ASC 810-10 did not have a significant effect on the
Company’s consolidated financial statements as of December 31,
2009.
- 26
-
Effective January 1, 2009, the Company
adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ), which amends SFAS No. 133 and
expands disclosures to include information about the fair value of derivatives,
related credit risks and a company's strategies and objectives for using
derivatives. The adoption of ASC 815-10 did not have a material effect on the
Company’s consolidated financial statements as of December 31,
2009.
Effective January 1, 2009, the Company
adopted ASC 815-40 (formerly Emerging Issues Task Force (“EITF”) Issue No.
07-05, Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock
(“EITF 07-05”). ASC
815-40 addresses the determination of whether an instrument (or an embedded
feature) is indexed to an entity's own stock, which is the first part of the
scope exception in paragraph 11(a) of FASB SFAS No. 133 , Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”). If an instrument (or an
embedded feature) that has the characteristics of a derivative instrument under
paragraphs 6–9 of SFAS 133 is indexed to an entity's own stock, it is still
necessary to evaluate whether it is classified as stockholders' equity (or would
be classified as stockholders' equity if it were a freestanding instrument).
Other applicable authoritative accounting literature, including Issues EITF
00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company Own Stock, and EITF 05-2, The Meaning of “Conventional Debt
Instrument” in Issue No. 00-19, provide guidance for determining whether
an instrument (or an embedded feature) is classified as stockholders' equity (or
would be classified as stockholders' equity if it were a freestanding
instrument). ASC 815-40 does not address the second part of the scope exception
in paragraph 11(a) of SFAS 133. The adoption of ASC 815-40 did not have a
material effect on the consolidated financial statements as of December 31,
2009.
On April 1, 2009, the FASB
approved ASC 805 (formerly FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies),
which amends Statement 141(R) and eliminates the distinction between contractual
and non-contractual contingencies. Under ASC 805, an acquirer is required to
recognize at fair value an asset acquired or liability assumed in a business
combination that arises from a contingency if the acquisition-date fair value of
that asset or liability can be determined during the measurement period. If the
acquisition-date fair value cannot be determined, the acquirer applies the
recognition criteria in SFAS No. 5, Accounting for Contingencies
and Interpretation 14, “Reasonable Estimation of the Amount of a Loss – and
interpretation of FASB Statement No. 5,” to determine whether the
contingency should be recognized as of the acquisition date or after it. The
adoption of ASC 805 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
ASC 320-10 (formerly FSP FAS 115-2 and
FAS 124-2) amends the other-than-temporary impairment guidance in U.S. GAAP for
debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. It did not amend existing
recognition and measurement guidance related to other-than-temporary impairments
of equity securities. We are required to adopt ASC 320-10 for our interim and
annual reporting periods ending after June 15, 2009. ASC 320-10 does not
require disclosures for periods presented for comparative purposes at initial
adoption. ASC 320-10 requires comparative disclosures only for periods ending
after initial adoption. The adoption of ASC 320-10 did not have a material
effect on the consolidated financial statements as of December 31,
2009.
On April 9, 2009, the FASB also
approved ASC 825-10 (formerly FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments) to require disclosures about fair value of
financial instruments in interim period financial statements of publicly traded
companies and in summarized financial information required by APB Opinion
No. 28, Interim Financial
Reporting . We are required to adopt ASC 825-10 for our interim and
annual reporting periods ending after June 15, 2009. ASC 825-10 does not
require disclosures for periods presented for comparative purposes at initial
adoption. ASC 825-10 requires comparative disclosures only for periods ending
after initial adoption. The adoption of ASC 825-10 did not have a material
effect on the consolidated financial statements as of December 31,
2009.
In June 2009, the FASB issued ASC
810-10 (formerly SFAS No. 167) Amendments to FASB Interpretation No. 46(R),
which require an enterprise to perform an analysis and ongoing reassessments to
determine whether the enterprises’ variable interest or interests give it a
controlling financial interest in a variable interest entity and amends certain
guidance for determining whether an entity is a variable interest entity. It
also requires enhanced disclosures that will provide users of financial
statements with more transparent information about an enterprises’ involvement
in a variable interest entity. ASC 810-10 is effective as of the beginning of
each reporting entity’s first annual reporting period that begins after November
15, 2009 and for all interim reporting periods after that. The adoption of ASC
810-10 did not have a material effect on the consolidated financial
statements as of December 31, 2009.
- 27
-
Results
of Operations
Results
of Operations for the Years Ended December 31, 2009 Compared With the Year Ended
December 31, 2008 (in U.S. dollars, except otherwise as indicated)
For The Year Ended December 31,
|
||||||||||||||||||||||||
|
2009
|
2008
|
Increase (Decrease)
|
|||||||||||||||||||||
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
In Amount
|
In %
|
|||||||||||||||||||
Revenues
|
50,178,721 | 100.0 | % | 84,206,001 | 100.0 | % | (34,027,280 | ) | (40.4 | )% | ||||||||||||||
Vessel
operating costs
|
40,200,329 | 80.1 | % | 48,243,078 | 57.3 | % | (8,042,749 | ) | (16.7 | )% | ||||||||||||||
Service
costs
|
3,423,667 | 6.8 | % | 5,151,894 | 6.1 | % | (1,728,227 | ) | (33.5 | )% | ||||||||||||||
Depreciation
and amortization
|
7,481,360 | 14.9 | % | 7,035,338 | 8.4 | % | 446,022 | 6.3 | % | |||||||||||||||
General
and administrative expense
|
4,106,919 | 8.2 | % | 3,647,435 | 4.3 | % | 459,484 | 12.6 | % | |||||||||||||||
Selling
expense
|
343,289 | 0.7 | % | - | 0.0 | % | 343,289 | 100.0 | % | |||||||||||||||
Interest
expense, net
|
627,836 | 1.3 | % | 817,202 | 1.0 | % | (189,366 | ) | (23.2 | )% | ||||||||||||||
Other
expense, net
|
649,731 | 1.3 | % | 209,227 | 0.2 | % | 440,504 | 210.5 | % | |||||||||||||||
Income
tax expense
|
(90,084 | ) | (0.2 | )% | (17,827 | ) | 0.0 | % | (72,257 | ) | 405.3 | % | ||||||||||||
Net
loss from discontinued operation
|
(214,461 | ) | (0.4 | )% | (12,663 | ) | 0.0 | % | (201,798 | ) | 1593.6 | % | ||||||||||||
Net
(loss) income
|
(6,958,955 | ) | (13.9 | )% | 19,071,337 | 22.6 | % | (26,030,292 | ) | (136.5 | )% | |||||||||||||
Weighted
average shares outstanding
|
||||||||||||||||||||||||
-
Basic
|
130,000,000 | 115,877,596 | 14,122,404 | 12.2 | % | |||||||||||||||||||
-
Diluted
|
130,000,000 | 115,877,596 | 14,122,404 | 12.2 | % | |||||||||||||||||||
Net
(loss) income per share
|
||||||||||||||||||||||||
-
Basic
|
(0.05 | ) | 0.16 | (0.21 | ) | (131.3 | )% | |||||||||||||||||
-
Diluted
|
(0.05 | ) | 0.16 | (0.21 | ) | (131.3 | )% |
- 28
-
Revenues
Our
revenues are derived from the operation of:
·
|
Dry bulk
shipping
|
·
|
Chartering
brokerage
|
·
|
Other activities which represent
shipping agency services, freight forwarding services, and online
services.
|
Of the
total revenues, dry bulk shipping, chartering brokerage and other activities
contributed 50%, 41% and 9% for the year ended December 31, 2009, compared with
68%, 26% and 6% for the year ended December 31, 2008, respectively.
For the
year ended December 31, 2009, total revenues decreased by approximately $34.0
million, or 40.4%, to $50.2 million from $84.2 million for the year ended
December 31, 2008. This decrease consisted of a dry bulk shipping decline of
$32.5 million, or 56.6%; a chartering brokerage decline of $1.2 million, or
5.6%; and other activities decline of $0.2 million, or 5.1%.
The
significant decrease in revenue was due to the severity of the decline in the
global shipping market as the impact of the global financial crisis and the
economic recession has broadened and deepened since late 2008. The Baltic Dry
Index, a leading indicator of the global dry bulk shipping market, dropped
approximately 57% for the year ended December 31, 2009 as compared with the same
period of 2008.
Among
other activities, online services grew significantly. We believe this growth
reflected the management’s strategic decision to implement and market the
shipping online portal more aggressively at the beginning of 2009.
Vessel
Operating Costs
Vessel
operating costs include mainly fuel costs, port fees and crew wages which were
incurred in the operation of dry bulk shipping, and vessel chartering costs
which were incurred in the business of chartering brokerage. For the year ended
December 31, 2009, vessel operating expenses decreased by approximately $8.0
million, or 16.7%, to $40.2 million, compared with $48.2 million for the year
ended December 31, 2008. This decrease is principally attributable to the
decreased business volume, which resulted in the decrease in fuel and related
consumption, offset by the increased average fuel rate.
Service
Costs
Service
costs were incurred in the operation of other activities in our freight
forwarding services. For the year ended December 31, 2009, service costs
decreased by approximately $1.7 million, or 33.5%, to $3.4 million, compared
with $5.2 million for the year ended December 31, 2008. This decrease was in
line with the decreased revenue generated from the operation of our freight
forwarding services.
Depreciation
and Amortization
Depreciation
of vessels and amortization of deferred dry dock fees increased by approximately
$0.4 million, or 6.3%, to $7.5 million for the year ended December 31, 2009,
compared with $7.0 million for the year ended December 31, 2008. This increase
is attributable to the increased amortization of dry dock fees.
General
and Administrative Expenses
General
and administrative expenses, which included mainly wages and professional
service fees, increased by approximately $0.5 million, or 12.6%, to $4.1 million
for the year ended December 31, 2009 from $3.6 million for the year ended
December 31, 2008. This increase is mainly attributable to the general costs
incurred in connection with a vessel under major repair. In 2009, the vessel
Winland Dalian had been under major repair without operation and therefore not
generating revenue.
- 29
-
Selling
Expenses
Selling
expenses were commissions paid to promote our dry bulk shipping and chartering
brokerage business, which reflected the management’s strategy of expanding the
business initiated at the beginning of 2009. For the year ended December 31,
2009, selling expenses were $0.3 million.
Interest
Expense, Net
Net
interest expense declined significantly by approximately $0.2 million, or 23.2%,
to $0.6 million for the year ended December 31, 2009, compared with
approximately $0.8 million for the year ended December 31, 2008. This decrease
is primarily attributable to an interest rate decline on long-term loans and
increased payments to pay off outstanding long-term loans, offset by the new
long-term loan and note payable initiated from the new vessel purchased in late
2009.
Other
Expense, Net
Other
expense increased by approximately $0.4 million, or 210.5%, to $0.6 million for
the year ended December 31, 2009, compared with $0.2 million for the year ended
December 31, 2008. This increase is mainly attributable to the settlement of a
litigated claim.
Income
Tax Expense
Income
tax was imposed on the taxable income from other activities. For the year ended
December 31, 2009, income tax expense was approximately $0.09 million as
compared with $0.02 million for the year ended December 31, 2008. This
difference is mainly attributable to changes in deferred tax assets and
liabilities.
Net
Loss from Discontinued Operation
Net loss
from discontinued operation was approximately $0.2 million for the year ended
December 31, 2009, compared with net loss from discontinued operation of $0.01
million for the year ended December 31, 2008. Due to the depressed shipping
market in 2009, the disposed vessel suffered a loss from its operation before
the operation was discontinued for the year ended December 31,
2009.
Net
(Loss) Income
Net
income decreased by approximately $26.0 million, or 136.5%, to a net loss of
$7.0 million for the year ended December 31, 2009 from a net income of $19.1
million for the year ended December 31, 2008. This decrease is primarily
attributable to the significant decline in revenues, increased depreciation and
amortization expense, increased selling expense and other expenses, partially
offset by the cumulative effect of other factors aforementioned.
As a
percentage of revenue, net (loss) income was (13.9%) and 22.6% for the year
ended December 31, 2009 and 2008, respectively. This change was a reflection of
the unprecedented macro-economic environment affecting the shipping market
negatively worldwide.
Net
(Loss) Income Per Share
For both
basic and diluted shares, net (loss) income per share decreased by $0.21, or
131.3%, to net loss of $(0.05) per share for the year ended December 31, 2009
from $0.16 per share for the year ended December 31, 2008. This decrease is
attributable to decreased net income of $26.0 million, offset by an increase of
14,122,404 shares in 2009.
- 30
-
Liquidity
and Capital Resources
Working
Capital
We
had a working capital deficit of approximately $10.1 million at December 31,
2009 as compared to working capital of approximately $1.7 million at December
31, 2008. This is principally attributable to decreased cash and cash
equivalents of $4.7 million resulting from cash used in investing activities of
$20.9 million to purchase a vessel, offset by cash provided by operating and
financing activities of $2.4 million and $12.6 million, respectively, for the
year ended December 31, 2009. The decreased working capital is secondly due to
the increased current portion of long-term loans and notes payable which
resulted from multiple financing activities for the year ended December 31,
2009.
To
improve liquidity, the Company changed the registrations of the flags of two of
its vessels. With these new registrations, the Company believes dry dock fees
will continue to decrease while such vessels keep meeting the standards of
certification and inspection. To increase its cash resources, the Company
obtained a short-term bank loan of $1,170,070, a long-term loan of $14,490,000
and a long-term note of $3,000,000 during the year ended December 31, 2009. The
long-term debt was principally used to purchase a new vessel. Additionally, on
March 5, 2010, the Company obtained an extension of the due date of two notes
payable to related parties amounting to $2,961,739 to July 19, 2012. Also in
2010, the Company obtained commitments from certain shareholders and related
parties to provide working capital to the Company, if needed, in the form of
notes payable or personal loans. We
believe our working capital will increase and liquidity will be improved.
We believe the Company has sufficient cash to sustain operation for the next 12
months.
Operating
Activities
For the
year ended December 31, 2009, our cash provided by operating activities was
approximately $2.4 million. This is primarily attributable to our net loss of
$7.0 million adjusted by amortization of $4.0 million and depreciation of $3.5
million; and increased accounts payable and other current liabilities of $1.8
and $1.1 million, respectively; offset by increased dry docking cost of $2.4
million.
For the
year ended December 31, 2008, our cash provided by operating activities of $23.9
million is primarily attributable to the net income of $19.1 million with
adjustments of amortization of $3.5 million and depreciation of $3.5 million;
and to decreased prepayments and other receivables of $2.9 million and $2.7
million, respectively; offset by decreased advance from customers of $2.5
million.
Investing
Activities
Net cash
used in investing activities for the year ended December 31, 2009 was $19.6
million. This was due to acquiring a new vessel at the cost of $20.9 million,
offset by the net cash proceeds of $1.3 million from disposition of a
vessel.
For the
year ended December 31, 2008, net cash used in investing activities was $0.09
million which was used to purchase fixed assets.
Financing
Activities
Net cash
provided by our financing activities was $12.6 million for the year ended
December 31, 2009. It is mainly attributable to proceeds from long-term loans,
long-term notes payable, and short-term loan of $14.5 million, $2.4 million, and
$1.2 million, respectively; offset by repayments to long-term loans and related
parties of $3.1 million and $2.4 million, respectively.
For the
year ended December 31, 2008, net cash used in our financing activities was
$18.7 million. It principally included payment of dividends of $48.2 million,
repayments to related parties, long-term loans, long term notes, capital lease
obligations, and short-term loans of $3.2 million, $2.8 million, $2.3 million,
$1.5 million and $1.0 million, respectively; offset by proceeds from related
parties of $40.4 million.
- 31
-
To face
the challenges of a global financial crisis and a depressed shipping market, we
have taken effective initiatives to pursue profitability by pushing forward the
implementation of our online portal, which has resulted in sales increases on
the segment of online services. We have developed cost control strategies on
cutting vessel management costs as well as general management
costs. We have carried out our strategies to collect outstanding
balances while maintaining strong business relationships with our customers. We
also negotiate with our vendors to extend our credit term. To improve liquidity,
we changed the registrations of the flags of two vessels. With new
registrations, we believe dry dock fees will continue to decrease while such
vessels keep meeting the standards of certification and inspection.
Our
principal capital sources are cash flows from operations, bank loans, notes
payable, and personal loans. We believe that cash flow from our operations will
improve as business operations rebound and global economy showing signs of
recovery. We believe that existing cash and resources from our credit facilities
are sufficient to meet our projected operating requirements for the next
year.
Capital
Expenditures
We will
make major capital expenditures in connection with purchase of new vessels
and we will finance such capital expenditures through bank loans. We expect we
will incur capital expenditures on developing our shipping online portal and by
marketing our shipping online services. We expect other major capital
expenditures to include funding dry dockings of our fleet to preserve the
quality of our vessels as well as to comply with international shipping
standards and environmental laws and regulations in 2010. We will finance these
capital expenditures from the cash flows from our operations, notes payable and
personal loans, if needed.
Material
Commitments/Tabular Disclosure of Contractual Obligations
The repayment schedule for the
principal amount of long-term loans is as follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$ | 4,128,908 | ||
2011
|
3,425,076 | |||
2012
|
1,725,566 | |||
2013
|
1,317,276 | |||
2014
|
1,317,276 | |||
Thereafter
|
7,574,341 | |||
Total
|
$ | 19,488,443 |
The repayment schedule for long-term
notes payable is as follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$ | 3,326,132 | ||
2011
|
467,665 | |||
2012
|
603,771 | |||
2013
|
771,315 | |||
2014
|
698,690 | |||
Total
|
$ | 5,867,573 |
As of December 31, 2009, future minimum
payments required under non-cancelable leases are:
- 32
-
Years Ended December 31,
|
Amount
|
|||
2010
|
89,443 | |||
2011
|
10,871 | |||
Total
|
$ | 100,314 |
Off-Balance
Sheet Arrangements
None.
ITEM 7A.
|
Quantitative and Qualitative
Disclosures about Market
Risk.
|
Not required for a “smaller reporting
company”.
ITEM 8.
|
Financial Statements and
Supplementary Data
|
Reference
is made to the “F” pages herein comprising a portion of this Annual Report
on Form 10-K.
ITEM 9.
|
Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosures
|
None.
ITEM
9AT.
|
Controls and
Procedures
|
Evaluation
of Disclosure Controls and Procedures
We are
required to maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our reports under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
In
connection with the preparation of this Form 10-K for the year ended
December 31, 2009, our management, under the supervision of the Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of disclosure
controls and procedures. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control systems are met. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of December 31, 2009.
Management’s
Annual Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control
structure and procedures over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f)) under the Exchange Act. Our management
conducted an assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2009 based on the framework set forth in
Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our internal control over financial reporting as of December 31,
2009 were effective.
- 33
-
This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
ITEM 9B.
|
Other
Information
|
Effective as of March 22, 2010, the
Company changed its business address and telephone number from 305 Zhongshan
Road, Shahekou District, Dalian, The People’s Republic of China 116021,
telephone 86-411-39660000 to Room 703, 7/F, Bonham Trade Centre, 50 Bonham
Strand, Sheung Wan, Hong Kong, China, telephone number
00852-28549088.
PART
III
ITEM 10.
|
Directors, Executive Officers,
and Corporate Governance
|
Set forth
below are the names of WLOL’s directors and officers, their business experience
during the last 5 years, their ages and all positions and offices that they
shall hold with the Company as of the date of this Annual Report.
Name
|
Age
|
Position(s)
|
||
Xue
Ying
|
39
|
Chief
Executive Officer, Secretary and Director
|
||
Li
Honglin
|
45
|
Chairman
of the Board and President
|
||
Jing
Yan
|
42
|
Chief
Financial Officer
|
||
Xie
Xiaoyan
|
40
|
Chief
Operating Officer, Director
|
||
Xiao
Liwu
|
44
|
Independent
Director
|
||
Xie
Kewei
|
45
|
Independent
Director
|
||
Si
Zhaoqing
|
50
|
Independent
Director
|
||
Michelle
Sun
|
37
|
Independent
Director
|
Family
Relationships
There are no family relationships by,
between or among the members of the Board or other executives, except that Li
Honglin and Xue Ying are husband and wife. None of our directors and officers
are directors or executive officers of any company that files reports with the
SEC except as set forth in the “Biographies of Officers and Directors” section
below.
Term
of Office
Our directors are appointed for a
one-year term and each director shall hold office until the annual meeting of
shareholders following his/her election or until his/her successor is elected
and qualified. The Board of Directors shall elect the officers of the Company at
each annual meeting of the Board of Directors. The Board of Directors may
appoint such other officers and agents as it shall deem necessary and shall
determine the salaries of all officers and agents from time to time. The
officers shall hold office until their successors are chosen and
qualified.
- 34
-
Biographies
of Officers and Directors
Xue Ying. Ms. Xue has served
as Chief Executive Officer, Secretary and as a Director of WLOL effective as of
August 12, 2008. Ms. Xue also serves as a Director of SkyAce and as a Director
of Plentimillion. In April 1993, together with her husband, Li Honglin, Ms. Xue
founded Dalian Weihang Freight Forwarding Co., Ltd., a freight forwarding
company in Dalian, China which carried out the business of freight forwarding
agency and chartering and is the predecessor entity to the Company. Ms. Xue also
was in charge of the corporate administrative work for the Company. Ms. Xue
developed the Company for the next (10) years. Ms. Xue graduated from the law
department of Nanjing University majoring in business law in 1992 and she earned
her EMBA at China Europe International Business Administration College in
Shanghai in 2007.
Jing Yan. Ms. Jing has served
as Chief Financial Officer of WLOL effective as of August 12, 2008. Prior to
joining WLOL, Ms. Jing owned her own CPA firm since 2004. With her extensive
financial and accounting knowledge, along with comprehensive experience, Ms.
Jing had been distinguished as a trusted advisor to investors and executives on
financial, accounting and tax matters. Prior to 2004, Ms Jing worked
for Han's Technologies, Inc. and ISP Channel (n/k/a Softnet Technology
Corp. (SOFN.OB)). In this sector, she has played an important role in raising
funds, exercising management decision-making, and practicing accounting system
implementation. Ms. Jing holds a MBA degree in accounting from California State
University and a BA degree in management from Shanghai Maritime University in
China. Ms. Jing is also an active Certified Public Accountant.
Li Honglin. Mr. Li has served
as President and a Director of WLOL effective as of August 12, 2008. Mr. Li also
serves as Chairman of the Board of SkyAce. Mr. Li began his career working with
the Dandong Ocean Shipping Company in Liaoning province, China. After five (5)
years working with Dandong, Mr. Li established Dalian Weihang Freight Forwarding
Co., Ltd. In 1993, a freight forwarding agency company in Dalian, China and the
predecessor entity to the Company. Mr. Li founded the Company with his wife, Xue
Ying, and in 1995, the Company purchased its first vessel. After ten (10) years
of development, Mr. Li has expanded the Company into several fields of the
international marine shipping business, from freight forwarding agency, shipping
agency, ship chartering, ship management to bulk cargo ocean transport,
container liner transport and shipping portal operation. Mr. Li Honglin has
expertise in strategy management and in the operation of ocean transport
companies. At the same time, he has a forward-looking insight into the
development trend of the international ocean transport market and has an
abundant ability of dealing with the risk. Mr. Li is a graduate of the Shanghai
Ocean Shipping Institute (now known as the Shanghai Maritime
University).
Xie Xiaoyan. Ms. Xie has
served as a Director of WLOL effective as of August 12, 2008 and as Chief
Operating Officer of WLOL since September 26, 2008. In 1993, she joined the
Company as a secretary. After that, she used to serve as a cashier and operation
administrator. In 2000, she began to take charge of the operation and management
of the fleet. Moreover, she also has a deep understanding and grasp of the
international shipping market. She used to participate in the core work such as
a series of ship-purchase and sales, exploration of the new market and new
business and so on, and has built up a long-term steady cooperation relationship
with prime clients and related companies in the industry. She is one of founders
of the Company. Ms. Xie graduated from Jinzhou Normal College with a major in
foreign languages in 1991.
Xiao Liwu. Mr. Xiao has served
as a Director of WLOL effective as of August 12, 2008. Mr. Xiao currently serves
as President for Ningbo Penavico-ccl International Freight Forwarding Co. Ltd.
in Ningbo, China and has served in such capacity for the past five (5) years.
Xiao entered the logistics industry after graduating from Shanghai Maritime
University in 1988. Mr. Xiao is considered a professional in the field of
logistics.
Xie Kewei. Mr. Xie has served
as a Director of WLOL effective as of August 12, 2008. Mr. Xie currently serves
as Managing Director for China Container Line Co. Ltd. Shanghai Company and has
served in such capacity since January 2002. Mr. Xie has devoting himself to the
container transportation service for more than ten (10) years. He is also
considered a professional in shipping industry. Mr. Xie earned his bachelor’s
degree from Shanghai Maritime University at 1988.
Si Zhaoqing. Mr. Si has served
as a Director of WLOL effective as of August 12, 2008. Mr. Si currently serves
as President of the China CITIC Bank branch in Jinzhou, Dalian and has served in
such capacity since January 2008. Prior to that, Mr. Si served as Vice President
of the Qingni branch of China CITIC Bank for five (5) years, during which Mr. Si
was in charge of both the credit department and the accounting department. Mr.
Si is an expert in financing and economic field and he is also a respected
advisor. Mr. Si earned his bachelor’s degree from Dalian Fisheries University in
1982.
- 35
-
Michelle Sun. Ms. Sun has
served as a Director of WLOL effective as of August 12, 2008. Ms. Sun currently
serves for Harrison Accounting Group, Inc. in California since 2000. Ms. Sun has
extensive experience from a variety of client assignments, including those in
manufacturing, real estate, construction, retail, transportation, medical and
nonprofit industries. Ms. Sun has nearly 10 years of experience in the
accounting field and is also a Certified Public Accountant in the State of
California.
Director
Qualifications and Experience
The following table identifies some of
the experience, qualifications, attributes and skills that the Board considered
in making its decision to appoint and nominate directors to our Board. This
information supplements the biographical information provided above. The
vertical axis displays the primary factors reviewed by the Board in evaluating a
board candidate.
Ms. Xue
|
Ms. Jing
|
Mr. Li
|
Ms. Xie
|
Mr. Xiao
|
Mr. Xie
|
Mr. Si
|
Ms. Sun
|
||||||||
Experience,
Qualification, Skill or Attribute
|
x
|
x
|
x
|
x
|
x
|
x
|
x
|
x
|
|||||||
Professional
standing in chosen field
|
|||||||||||||||
Expertise
in shipping or related industry
|
x
|
x
|
x
|
x
|
x
|
x
|
|||||||||
Expertise
in technology or related industry
|
|||||||||||||||
Audit
Committee Financial Expert (actual or potential)
|
x
|
x
|
x
|
x
|
|||||||||||
Civic
and community involvement
|
|||||||||||||||
Other
public company experience
|
x
|
||||||||||||||
Diversity
by race, gender or culture
|
|||||||||||||||
Specific
skills/knowledge:
|
|||||||||||||||
-shipping
|
x
|
x
|
x
|
x
|
x
|
x
|
|||||||||
-technology
|
|||||||||||||||
-governance
|
x
|
x
|
x
|
Legal
Proceedings
None of
the members of the Board or other executives has been involved in any bankruptcy
proceedings, criminal proceedings, any proceeding involving any possibility of
enjoining or suspending members of our Board or other executives from engaging
in any business, securities or banking activities, and have not been found to
have violated, nor been accused of having violated, any federal or state
securities or commodities laws.
Compliance
with Section 16(A) of the Exchange Act
We are not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act and therefore, our officers,
directors and greater than ten percent (10%) stockholders are not required under
Section 16(a) of the Exchange Act to file reports of ownership and changes in
ownership with the SEC.
Board Leadership Structure, Executive
Sessions of Non-Management
Directors
Ms. Xue currently serves as the
chief executive officer of the Company and Mr. Li serves as Chairman of the
Board. The Board has chosen to separate the chief executive officer and Board
chair positions because it believes it is appropriate in light of our corporate
structure and this structure benefits the interests of all share
owners.
- 36
-
The Company’s non-management
directors meet without management present at each of the Board’s regularly
scheduled in-person meetings. If the Board convenes for a special meeting, the
non-management directors will meet in executive session if circumstances
warrant.
Risk Oversight
The Board oversees the business of
the Company and considers the risks associated with the Company’s business
strategy and decisions. The Board implements its risk oversight function both as
a whole and through its Committees. In particular:
|
·
|
The
Audit Committee oversees risks related to the Company’s financial
statements, the financial reporting process, accounting and legal matters.
The Audit Committee meets in executive session with each of the Company’s
Chief Financial Officer, Vice President of Internal Audit and with
representatives of our independent registered public accounting
firm.
|
|
·
|
The
Compensation Committee manages risks related to the Company’s compensation
philosophy and programs. The Compensation Committee reviews and approves
compensation programs and engages the services of compensation consultants
to ensure that it adopts appropriate levels of compensation commensurate
with industry standards.
|
|
·
|
The
Governance and Nominating Committee oversees risks related to corporate
governance and the selection of Board
nominees.
|
Each
of the Committee Chairs reports to the full Board regarding materials risks as
deemed appropriate.
Committees
of our Board of Directors
As of
January 19, 2009, our Board of Directors has an Audit Committee, a Compensation
Committee and a Corporate Governance and Nominating Committee established in
accordance with the Exchange Act and NASDAQ rules. Since January 15,
2009, the Audit Committee met 3 times, the Compensation Committee met 1 time and
the Corporate Governance and Nominating Committee met 1 time. A brief
description of each committee is set forth below.
|
·
|
Audit
Committee – The
purpose of the Audit Committee is to provide assistance to our Board of
Directors in fulfilling their oversight responsibilities relating to our
consolidated financial statements and financial reporting process and
internal controls in consultation with our independent registered public
accountants and internal auditors. The Audit Committee is also responsible
for ensuring that the independent registered public accountants submit a
formal written statement to us regarding relationships and services which
may affect the auditor’s objectivity and independence. The Board
appointed Si Zhaoqing, Michelle Sun and Xiao Liwu to serve as members of
the Audit Committee, with Si Zhaoqing serving as Chairman, on January 19,
2009. Our Audit Committee financial expert is Michelle Sun, an
independent director.
|
|
·
|
Compensation
Committee – The
purpose of the Compensation Committee is to review and make
recommendations to our Board of Directors regarding all forms of
compensation to be provided to our executive officers and directors,
including stock compensation and loans, and all bonus and stock
compensation to all employees. As of January 15, 2009, Xie Kewei, Xiao
Liwu and Si Zhaoqing serve as members of the Compensation Committee, with
Xie Kewei serving as
Chairman.
|
|
·
|
Corporate
Governance and Nominating Committee – The purpose of the
Nominating Committee is to review the composition and evaluate the
performance of the Board, recommend persons for election to the Board and
evaluate director compensation. The Nominating Committee is
also responsible for reviewing the composition of committees of the Board
and recommending persons to be members of such committees, and maintaining
compliance of committee membership with applicable regulatory
requirements. The Nominating Committee does not have a formal
diversity policy. Although the Board does not currently have
formal specific minimum criteria for nominees, substantial relevant and
diverse business and industry experience would generally be considered
important qualifying criteria, as would the ability to attend and prepare
for Board and shareholder meetings. We have not adopted
procedures by which security holders may recommend nominees to our Board
of Directors. As of January 15, 2009, Xiao Liwu, Xie Kewei and Si
Zhaoqing serve as members of the Corporate Governance and Nominating
Committee, with Xiao Liwu serving as
Chairman.
|
- 37
-
ITEM 11.
|
Executive
Compensation
|
Compensation
Discussion and Analysis
Not
required for a “smaller reporting company”.
Summary
Compensation Table
The
following table sets forth compensation information for services rendered by our
named executive officers during the last 2 completed fiscal years. The
compensation listed below which will be paid to our current officers will be
paid by SkyAce. The following information includes the U.S. dollar value of base
salaries, bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
Summary Compensation
Table
Name And
Principal Function
(a)
|
Year
(b)
|
Salary
(US$)
(c)
|
Bonus
(US$)
(d)
|
Stock
Awards
(US$)
(e)
|
Option
Awards
(US$)
(f)
|
Non-
Equity
Incentive
Plan
Compen-
sation
(US$)
(g)
|
Non-
qualified
Deferred
Compen-
sation
Earnings
(US$)
(h)
|
All Other
Compensation
(US$)
(i)
|
Total
(US$)
(j)
|
|||||||||||||||||||||||||||
Xue
Ying, Chief
Executive
Officer
and
Secretary (3)
|
2009
2008
|
150,000
150,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
150,000
150,000-
|
|||||||||||||||||||||||||||
Li
Honglin, President (4)
|
2009
2008
|
150,000
150,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
150,000
150,000-
|
|||||||||||||||||||||||||||
Jing
Yan, Chief
Financial
Officer(5)
|
2009
2008
|
120,000
120,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
120,000
120,000-
|
|||||||||||||||||||||||||||
Xie
Xiaoyan, Chief
Operating
Officer(6)
|
2009
2008
|
80,000
80,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
80,000
80,000
|
As of December 31, 2009, we did not
have any “Grants of Plan-Based Awards”, “Outstanding Equity Awards”, “Option
Exercises and Stock Vested”, “Pension Benefits”, “Nonqualified Defined
Contribution and Other Nonqualified Deferred Compensation Plans”, or “Potential
Payments Upon Termination or Change in Control” to report.
- 38
-
Executive
Compensation – Narrative Disclosure
The
Company did not provide compensation to executive officers other than the
standard compensation arrangement set forth in the table above.
Director
Compensation
We did
not provide any compensation to our Directors during the fiscal year ended
December 31, 2009. We may establish certain compensation plans (e.g. options,
cash for attending meetings, etc.) with respect to Directors in the
future.
Additional
Narrative Disclosure
Employment
Agreements
There are currently no employment
agreements by and between WLOL and its officers, directors or
employees.
Benefit
Plans
During
the fiscal year ended December 31, 2009, we had no stock option, retirement,
pension or profit-sharing programs for the benefit of its directors, officers or
other employees, however our Board may recommend adoption of one or more such
programs in the future.
In
accordance with Chinese law, DWIS, DWIL and DWON offer a welfare program
pursuant to which it pays pension, accident, medical, birth, job and house
allowance payments for all contract employees of the Company and its
affiliates.
ITEM 12.
|
Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
|
The
following table sets forth each person known by us to be the beneficial owner of
five percent (5%) or more of our common stock, all directors individually and
all directors and officers as a group as of March 22, 2010. Each person named
below has sole voting and investment power with respect to the shares shown
unless otherwise indicated.
Name and Address of Beneficial
Owner(1)
|
Amount of
Direct
Ownership
|
Amount of
Indirect
Ownership
|
Total
Beneficial
Ownership
|
Percentage
of Class(2)
|
|
|||||
Li
Honglin, Chairman of the Board and President
|
0
|
106,925,000
|
(3)
|
106,925,000
|
(3)
|
82.25
|
%
|
|||
Xue
Ying, Chief Executive Officer, Secretary and Director
|
0
|
106,925,000
|
(4)
|
106,925,000
|
(4)
|
82.25
|
%
|
|||
Jing
Yan, Chief Financial Officer
|
0
|
0
|
0
|
0
|
%
|
|||||
Xie
Xiaoyan, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Xiao
Liwu, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Xie
Kewei, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Si
Zhaoqing, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Michelle
Sun, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
ALL
DIRECTORS AND OFFICERS AS A GROUP (8 PERSONS):
|
0
|
106,925,000
|
106,925,000
|
82.25
|
%
|
|||||
Pioneer
Creation Holdings Limited
2nd
Floor, Abbott Building
Road
Town
Tortola
British Virgin Islands
|
106,925,000
|
106,925,000
|
82.25
|
%
|
- 39
-
(1)
|
Unless otherwise noted, each
beneficial owner has the same address as
WLOL.
|
(2)
|
Applicable percentage of
ownership is based on 130,000,000 shares of our common stock outstanding
as of March 22, 2010, together with securities exercisable or convertible
into shares of common stock within sixty (60) days of March 22, 2010 for
each stockholder. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power
with respect to securities. Shares of common stock are deemed to be
beneficially owned by the person holding such securities for the purpose
of computing the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person. Note that affiliates are subject to Rule
144 and Insider trading regulations - percentage computation is for form
purposes only.
|
(3)
|
Li Honglin may be considered to
beneficially own 53,462,500 shares by virtue of his 50% ownership in
Pioneer Creation Holdings Limited and 53,462,500 shares by virtue of his
spouse’s (Xue Ying’s) 50% ownership in Pioneer Creation Holdings Limited,
which beneficially owns 106,925,000 shares of our common
stock.
|
(4)
|
Xue Ying may be considered to
beneficially own 53,462,500 shares by virtue of her 50% ownership in
Pioneer Creation Holdings Limited and 53,462,500 shares by virtue of her
spouse’s (Li Honglin’s) 50% ownership in Pioneer Creation Holdings
Limited, which owns 106,925,000 shares of our common
stock.
|
ITEM 13.
|
Certain Relationships and Related
Transactions, and Director
Independence
|
Related
Party Transactions
The Company provided shipping agency
and freight forwarding services to Winland Container Lines Ltd., a company
controlled by the Chairman and CEO of the Company. For the years
ended December 31, 2009 and 2008, the Company recognized service revenue of
$1,361,558, and $1,624,860, respectively. For the years ended December 31, 2009
and 2008, the Company paid $3,586,440 and $2,299,713 of expenses to related
ports and received $4,609,946 and $4,155,446 of payments from related ports on
behalf of Winland Container Lines Ltd. The outstanding balance at December 31,
2009 was interest-free, unsecured and has been subsequently
settled.
The Company paid $27,746,305 and
$1,366,667 of expenses on behalf of Dalian Winland Group Co., Ltd., a company
controlled by the Chairman and CEO of the Company, for the years ended December
31, 2009 and 2008, respectively. The Company collected $27,112,627
and $40,281,647 on behalf of Dalian Winland Group Co., Ltd. for the years ended
December 31, 2009 and 2008, respectively. For the years ended December 31, 2009
and 2008, the Company recognized interest expense of $90,680 and $90,455,
respectively. The outstanding receivable balance of $16,113 at
December 31, 2009 is interest-free, unsecured and has no fixed repayment
term.
Dalian Winland Shipping Co., Ltd., a
company controlled by the Chairman and Chief CEO of the Company, operates as a
vessel management company for the Company. The vessel management fee for the two
vessels was $30,000 and $36,000 for the years ended December 31, 2009 and 2008,
respectively. The Company recognized relevant service revenue of $0 and $146,757
for the years ended December 31, 2009 and 2008, respectively. For the years
ended December 31, 2009 and 2008, on behalf of Dalian Winland Shipping Co.,
Ltd., the Company paid $195,407 and $7,015,600, and received $1,274,413 and
$3,663,903, respectively. The Company recognized interest expense of $57,407 and
$138,003 for the years ended December 31, 2009 and 2008, respectively. The
Company disposed of vessel Haoyue to Dalian Winland Shipping Co., Ltd.for
$1,287,077.
Dalian Master Well Ship Management Co.,
Ltd., a company controlled by the Chairman and CEO of the Company, operates as a
vessel management company for the Company. The vessel management fees for the
years ended December 31, 2009 and 2008 was $229,800 and $259,200, respectively.
The Company paid $341,763 and $751,901 on behalf of Dalian Master Well Ship
Management Co., Ltd. for the years ended December 31, 2009 and 2008,
respectively. The Company collected $70,548 and $83,468 on behalf of Dalian
Master Well Ship Management Co., Ltd. for the years ended December 31, 2009 and
2008, respectively. The outstanding balance of $7,200 at December 31, 2009 is
interest-free, unsecured, and have no fixed repayment term.
- 40
-
Winland Shipping Japan Co., Ltd. is
controlled by the Chairman and Chief Executive Officer of the Company. The
Company recognized relevant agency service fees of $685,079 and $67,546 for the
years ended December 31, 2009 and 2008, respectively. The Company paid $743,846
and $0 on behalf of Winland Shipping Japan Co., Ltd. for the years ended
December 31, 2009 and 2008, respectively. The outstanding balance of $13,707 at
December 31, 2009 is interest-free, unsecured and has no fixed repayment
term.
The
Company believes that each of the related party transactions set forth above to
be fair and reasonable and made at arms length with such related party. The
Company’s Audit Committee, which is comprised of solely independent directors,
has also ratified each of these related party transactions after careful review
and analysis.
Policies
and Procedures for Related-Party Transactions
As is more fully summarized in the
Company’s Code of Ethics as referenced as Exhibit 14.1 herein, all employees,
executives and directors of the Company must fully disclose the nature of any
related party transaction to the Company’s Chief Financial
Officer. If determined to be material to the Company by the Chief
Financial Officer, the Company’s Audit Committee must review and approve in
writing in advance such related party transactions. The most
significant related party transactions, particularly those involving the
Company’s directors or executive officers, must be reviewed and approved in
writing in advance by the Company’s Board of Directors. The Company
must report all such material related party transactions under applicable
accounting rules, federal securities laws, and SEC rules and regulations, and
securities market rules. Any dealings with a related party must be
conducted in such a way that no preferential treatment is given to the Company’s
business.
Promoters
None.
Director
Independence
The
following directors are independent: Xiao Liwu, Xie Kewei, Si Zhaoqing and
Michelle Sun.
The
following directors are not independent: Li Honglin, Xue Ying and Xie
Xiaoyan.
Promoters
and Certain Control Persons
None.
ITEM 14.
|
Principal Accountant Fees and
Services
|
The firm
of Weinberg & Company, P.A. acts as our principal accountant and has acted
in such capacity since October 28, 2008. The following is a summary of fees
incurred for services rendered.
- 41
-
2009
|
2008
|
|||||||
Audit
fees
|
$ | 295,000 | $ | 460,146 | ||||
Audit
related fees
|
- | - | ||||||
Tax
fees
|
3,000 | - | ||||||
Other
fees
|
- | - | ||||||
Total
|
$ | 298,000 | $ | 460,146 |
Audit
Committee Pre-Approval
The
policy of the Audit Committee is to pre-approve all audit and non-audit services
provided by the independent accountants. These services may include audit
services, audit-related services, tax fees, and other services. Pre-approval is
generally provided for up to one year and any pre-approval is detailed as to the
particular service or category of services. The Audit Committee has delegated
pre-approval authority to certain committee members when expedition of services
is necessary. The independent accountants and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent accountants in accordance with this pre-approval
delegation, and the fees for the services performed to date. All of the services
described above in this Item 14 were approved in advance by the Audit Committee
of the Board of Directors during the fiscal year ended December 31,
2009.
PART
IV
ITEM 15.
|
Exhibits and Financial Statement
Schedules
|
(a) Financial
Statements and Schedules
The
financial statements are set forth under Item 8 of this Annual Report.
Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.
(b) Exhibits
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
LOCATION
|
2.1
|
Share
Exchange Agreement, dated August 12, 2008, by and among Trip Tech, Inc.,
SkyAce Group Limited and Pioneer Creation Holdings Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.1
|
Articles
of Incorporation of Trip Tech, Inc.
|
Incorporated
by reference to Exhibit 3.1 to the Company’s Registration Statement on
Form SB-2 as filed with the SEC on May 14, 2007
|
||
3.2
|
Amended
and Restated Bylaws of Trip Tech, Inc. dated as of August 27,
2008
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on September 29, 2008
|
||
3.3
|
Memorandum
and Articles of Association of SkyAce Group
Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.4
|
Certificate
of Incorporation of SkyAce Group Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12,
2008
|
- 42
-
3.5
|
Memorandum
and Articles of Association of Plentimillion Group Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.6
|
Certificate
of Incorporation of Plentimilllion Group Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.7
|
Memorandum
and Articles of Association of Best Summit Enterprises
Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.8
|
Certificate
of Incorporation of Best Summit Enterprises Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.9
|
Memorandum
and Articles of Association of Wallis Development Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.10
|
Certificate
of Incorporation of Wallis Development Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.11
|
Articles
of Association of Beijing Huate Xingye Keji Co. Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.12
|
Certificate
of Incorporation of Beijing Huate Xingye Keji Co. Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.13
|
Certificate
of Correction to Trip Tech’s Articles of Incorporation, dated August 11,
2008
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.14
|
Certificate
of Amendment to Certificate of Incorporation of the Company, dated
September 24, 2008
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on September 29, 2008
|
||
3.15
|
Certificate
of Corporate Resolutions Designating Series A Preferred Stock of the
Company, dated August 12, 2008
|
Incorporated
by reference to Exhibit 3.15 to the Company’s Annual Report on Form 10-K
as filed with the SEC on March 31, 2009
|
||
10.1
|
Exclusive
Technology Consultation Service Agreement, dated March 31, 2008, by and
among Beijing Huate Xingye Keji Co. Ltd. and Winland
International
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.2
|
Exclusive
Technology Consultation Service Agreement, dated March 31, 2008, by and
among Beijing Huate Xingye Keji Co. Ltd. and Winland
Logistics
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
- 43
-
10.3
|
Exclusive
Technology Consultation Service Agreement, dated March 31, 2008, by and
among Beijing Huate Xingye Keji Co. Ltd. and Shipping
Online
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.4
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Winland International Shipping Agency
Co., Ltd. and Dalian Winland Group Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.5
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Winland International Shipping Agency
Co., Ltd. and Dalian Weihang Logistic Agent Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.6
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Winland International Shipping Agency
Co., Ltd. and Dalian Winland Shipping Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.7
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and between
Wallis Development Limited, Dalian Winland International Logistic Co.,
Ltd. and Dalian Winland Group Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.8
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and between
Wallis Development Limited, Dalian Winland International Logistic Co.,
Ltd. and Dalian Winland Shipping Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.9
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and between
Wallis Development Limited, Dalian Winland International Logistic Co.,
Ltd. and Dalian Winland International Shipping Agency Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.10
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and
Li Honglin
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.11
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and
Xue Ying
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.12
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.13
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland Shipping Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12,
2008
|
- 44
-
10.14
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Weihang Logistic Agent Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.15
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland International Logistic Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.16
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.17
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Winland Shipping Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.18
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Li Honglin
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.19
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Xue Ying
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.20
|
Powers
of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co.,
Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Weihang Logistic Agent
Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd. For Dalian
Winland International Shipping Agency Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.21
|
Powers
of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co.,
Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Winland International
Shipping Agency Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd.
for Dalian Winland International Logistic Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.22
|
Powers
of Attorney, dated March 31, 2008, executed by Li Honglin and Xue Ying in
favor of Beijing Huate Xingye Keji Co. Ltd. and Dalian Shipping Online
Network Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.23
|
Memorandum
of Agreement, dated June 3, 2009, by and between Mario Shipping
Corporation and Winland Shipping Co. Ltd.
|
Incorporated
by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.24
|
Addendum No.
1 to Memorandum of Agreement dated June 4, 2009 (Bao
Shun)
|
Incorporated
by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13,
2009
|
- 45
-
10.25
|
Addendum
No. 2 to Memorandum of Agreement dated July 14, 2009 (Bao
Shun)
|
Incorporated
by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.26
|
Loan
Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)
|
Incorporated
by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.27
|
Amendment
to Loan Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)
|
Incorporated
by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.28
|
First
Preferred Panamanian Ship Mortgage
|
Incorporated
by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.29
|
Deed
of Guarantee
|
Incorporated
by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
14.1
|
Code
of Ethics
|
Incorporated
by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB
as filed with the SEC on March 28, 2008
|
||
21
|
List
of Subsidiaries
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
31.1
|
Certifications
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
Provided
herewith
|
||
31.2
|
Certifications
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
Provided
herewith
|
||
32.1
|
Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
the Sarbanes-Oxley Act Of 2002
|
Provided
herewith
|
||
32.2
|
Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
the Sarbanes-Oxley Act Of 2002
|
Provided
herewith
|
||
99.1
|
Audit
Committee Charter, dated January 15, 2009
|
Incorporated
by reference Exhibit 99.1 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 20, 2009
|
||
99.2
|
Compensation
Committee Charter, dated January 15, 2009
|
Incorporated
by reference Exhibit 99.2 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 20, 2009
|
||
99.3
|
Corporate
Governance and Nominating Committee Charter, dated January 15,
2009
|
Incorporated
by reference Exhibit 99.3 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 20,
2009
|
- 46
-
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Annual Report to be signed on our behalf by the
undersigned, thereunto duly authorized.
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
|
||
Date:
March 26, 2010
|
||
By:
|
/s/ Xue
Ying
|
|
Name:
Xue Ying
|
||
Titles:
Chief Executive Officer, Principal Executive Officer,
Secretary
and
Director
|
||
/s/ Jing
Yan
|
||
Name:
Jing Yan
|
||
Titles:
Chief Financial Officer and Principal Accounting
Officer
|
In
accordance with the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the dates indicated.
Signatures
|
Title
|
Date
|
||
Chief
Executive Officer,
|
||||
/s/ Xue Ying
|
Principal
Executive Officer,
|
|||
Name:
Xue Ying
|
Secretary
and Director
|
March
26, 2010
|
||
/s/ Li Honglin
|
Chairman
of the Board and
|
|||
Name:
Li Hongling
|
President
|
March
26, 2010
|
||
Chief
Financial Officer and
|
||||
/s/ Jing Yan
|
Principal
Financial and
|
|||
Name:
Jing Yan
|
Accounting
Officer
|
March
26, 2010
|
||
/s/ Xie Xiaoyan
|
||||
Name:
Xie Xiaoyan
|
Director
|
March
26, 2010
|
||
/s/ Xiao Liwu
|
||||
Name:
Xiao Liwu
|
Director
|
March
26, 2010
|
||
/s/ Xie Kewei
|
||||
Name:
Xie Kewei
|
Director
|
March
26, 2010
|
||
/s/ Si Zhaoqing
|
||||
Name:
Si Zhaoqing
|
Director
|
March
26, 2010
|
||
/s/ Michelle Sun
|
||||
Name:
Michelle Sun
|
Director
|
March
26, 2010
|
- 47
-
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
FINANCIAL
STATEMENTS
TABLE
OF CONTENTS
Page
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008
|
F-3
|
CONSOLIDATED
STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME FOR THE YEARS
ENDED DECEMBER 31, 2009 AND 2008
|
F-5
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
|
F-7
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
|
F-8
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009
AND 2008
|
F-10
|
Draft:
February , 2009
F-1
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of:
Winland
Online Shipping Holdings Corp. and Subsidiaries
We have
audited the accompanying consolidated balance sheets of Winland Online Shipping
Holdings Corp. and subsidiaries (the “Company”) as of December 31, 2009 and
2008, and the related consolidated statements of (loss) income and comprehensive
(loss) income, changes in shareholders’ equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
was not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Winland Online
Shipping Holdings Corp. and subsidiaries as of December 31, 2009 and 2008 and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
Weinberg
& Company, P.A.
Boca
Raton, Florida
March 12,
2010
F-2
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
ASSETS
December 31, 2009
|
December 31, 2008
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 3,530,724 | $ | 8,233,588 | ||||
Accounts
receivable
|
1,881,584 | 1,719,599 | ||||||
Inventories
|
1,839,146 | 2,560,644 | ||||||
Prepayments
|
688,117 | 763,931 | ||||||
Other
receivables and other assets
|
683,010 | 56,902 | ||||||
Deferred
tax assets
|
1,538 | 5,427 | ||||||
Due
from related parties
|
1,113,643 | 760,256 | ||||||
Other
assets of discontinued operation
|
- | 2,305 | ||||||
Total
current assets
|
9,737,762 | 14,102,652 | ||||||
Vessels,
net
|
42,597,403 | 25,087,795 | ||||||
Fixed
assets, net
|
151,041 | 236,194 | ||||||
Deferred
dry dock fees, net
|
9,311,647 | 11,034,686 | ||||||
Other
intangible assets
|
3,657 | 3,647 | ||||||
Long-term
assets of discontinued operation
|
- | 1,324,112 | ||||||
Total
long-term assets
|
52,063,748 | 37,686,434 | ||||||
TOTAL
ASSETS
|
$ | 61,801,510 | $ | 51,789,086 |
See
accompanying notes to consolidated financial statements.
F-3
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
LIABILITIES
AND SHAREHOLDERS’ EQUITY
December 31, 2009
|
December 31, 2008
|
|||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 6,893,862 | $ | 5,026,648 | ||||
Short-term
bank loan
|
1,170,070 | - | ||||||
Current
portion of long-term loans
|
4,128,908 | 2,811,672 | ||||||
Current
portion of long-term notes payable, net of discount of $693,012 and
$13,345 at December 31, 2009 and 2008, respectively
|
3,326,132 | 273,469 | ||||||
Advances
from customers
|
793,334 | 629,594 | ||||||
Payroll
payable
|
903,964 | 969,351 | ||||||
Due
to related parties
|
20,907 | 768,586 | ||||||
Taxes
payable
|
51,250 | 9,707 | ||||||
Deferred
revenue
|
159,688 | 97,506 | ||||||
Other
current liabilities and accrued liabilities
|
2,375,613 | 1,713,371 | ||||||
Other
liabilities of discontinued operation
|
- | 125,479 | ||||||
Total
current liabilities
|
19,823,728 | 12,425,383 | ||||||
LONG-TERM
LIABILITIES
|
||||||||
Long-term
loans
|
15,359,535 | 5,327,762 | ||||||
Long-term
notes payable, net of discount of $1,407,170 and $0 at December 31, 2009
and 2008, respectively
|
2,541,441 | 2,954,393 | ||||||
Deferred
tax liabilities
|
1,150 | 5,231 | ||||||
Total
long-term liabilities
|
17,902,126 | 8,287,386 | ||||||
TOTAL
LIABILITIES
|
37,725,854 | 20,712,769 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
SHAREHOLDERS’
EQUITY
|
||||||||
Preferred
stock, $0.001 per share; 20,000,000 shares authorized; 0 share
issued and outstanding
|
- | - | ||||||
Common
stock, $0.001 per share; 200,000,000 shares authorized, 130,000,000 shares
issued and outstanding
|
130,000 | 130,000 | ||||||
Additional
paid-in capital
|
3,322,966 | 3,322,966 | ||||||
Accumulated
other comprehensive income
|
716,805 | 758,511 | ||||||
Retained
earnings
|
19,905,885 | 26,864,840 | ||||||
Total
Shareholders’ Equity
|
24,075,656 | 31,076,317 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 61,801,510 | $ | 51,789,086 |
See
accompanying notes to consolidated financial statements.
F-4
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
2009
|
2008
|
|||||||
REVENUES
|
$ | 50,178,721 | $ | 84,206,001 | ||||
COSTS
AND EXPENSES
|
||||||||
Vessel
operating costs
|
40,200,329 | 48,243,078 | ||||||
Service
costs
|
3,423,667 | 5,151,894 | ||||||
Depreciation
and amortization
|
7,481,360 | 7,035,338 | ||||||
General
and administrative expenses
|
4,106,919 | 3,647,435 | ||||||
Selling
expenses
|
343,289 | - | ||||||
TOTAL
COSTS AND EXPENSES
|
55,555,564 | 64,077,745 | ||||||
OTHER
EXPENSES
|
||||||||
Interest
expense, net
|
627,836 | 817,202 | ||||||
Other
expense, net
|
649,731 | 209,227 | ||||||
(LOSS)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(6,654,410 | ) | 19,101,827 | |||||
INCOME
TAX EXPENSE
|
(90,084 | ) | (17,827 | ) | ||||
(LOSS)
INCOME FROM CONTINUING OPERATIONS
|
(6,744,494 | ) | 19,084,000 | |||||
DISCONTINUED
OPERATION
|
||||||||
Gain
from disposition of discontinued operation
|
5,195 | - | ||||||
Loss
from discontinued operation
|
(219,656 | ) | (12,663 | ) | ||||
NET
LOSS FROM DISCONTINUED OPERATION
|
(214,461 | ) | (12,663 | ) | ||||
NET
(LOSS) INCOME
|
(6,958,955 | ) | 19,071,337 | |||||
OTHER
COMPREHENSIVE INCOME
|
||||||||
Foreign
currency translation (loss) gain
|
(41,706 | ) | 383,173 | |||||
COMPREHENSIVE
(LOSS) INCOME
|
$ | (7,000,661 | ) | $ | 19,454,510 |
See
accompanying notes to consolidated financial statements.
F-5
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
2009
|
2008
|
|||||||
Weighted
average shares outstanding
|
||||||||
-
Basic
|
130,000,000 | 115,877,596 | ||||||
-
Diluted
|
130,000,000 | 115,877,596 | ||||||
(Loss)
income from continuing operations per share
|
||||||||
-
Basic
|
$ | (0.05 | ) | $ | 0.16 | |||
-
Diluted
|
$ | (0.05 | ) | $ | 0.16 | |||
Loss
from discontinued operation per share
|
||||||||
-
Basic
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
-
Diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
Net
(loss) income per share
|
||||||||
-
Basic
|
$ | (0.05 | ) | $ | 0.16 | |||
-
Diluted
|
$ | (0.05 | ) | $ | 0.16 |
See
accompanying notes to consolidated financial statements.
F-6
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Common Stock
|
Preferred Stock
|
|||||||||||||||||||||||||||||||
Shares
|
Par Value
|
Shares
|
Par Value
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Income
|
Retained
Earnings
|
Total
|
|||||||||||||||||||||||||
BALANCE
AT
JANUARY
1, 2008
|
76,925,000 | $ | 76,925 | 1,000,000 | $ | 1,000 | $ | 3,342,287 | $ | 375,338 | $ | 7,793,503 | $ | 11,589,053 | ||||||||||||||||||
Foreign
currency translation gain
|
- | - | - | - | - | 383,173 | - | 383,173 | ||||||||||||||||||||||||
Recapitalization
|
23,075,000 | 23,075 | - | - | 9,679 | - | - | 32,754 | ||||||||||||||||||||||||
Conversion
of preferred stock to common stock
|
30,000,000 | 30,000 | (1,000,000 | ) | (1,000 | ) | (29,000 | ) | - | - | - | |||||||||||||||||||||
Net
income
|
- | - | - | - | - | - | 19,071,337 | 19,071,337 | ||||||||||||||||||||||||
BALANCE
AT
JANUARY
1, 2009
|
130,000,000 | $ | 130,000 | - | - | $ | 3,322,966 | $ | 758,511 | $ | 26,864,840 | $ | 31,076,317 | |||||||||||||||||||
Foreign
currency translation loss
|
- | - | - | - | - | (41,706 | ) | - | (41,706 | ) | ||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (6,958,955 | ) | (6,958,955 | ) | ||||||||||||||||||||||
BALANCE
AT
DECEMBER
31, 2009
|
130,000,000 | $ | 130,000 | - | $ | - | $ | 3,322,966 | $ | 716,805 | $ | 19,905,885 | $ | 24,075,656 |
See
accompanying notes to consolidated financial statements.
F-7
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss) income
|
$ | (6,958,955 | ) | $ | 19,071,337 | |||
Net
loss from discontinued operation
|
214,461 | 12,663 | ||||||
(Loss)
income from continuing operations
|
(6,744,494 | ) | 19,084,000 | |||||
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities:
|
||||||||
Depreciation
|
3,473,518 | 3,502,099 | ||||||
Amortization
of deferred dry dock fees
|
4,007,842 | 3,533,239 | ||||||
Discount
on long-term notes payable
|
200,189 | 44,765 | ||||||
Amortization
of capital lease obligations
|
- | 72,175 | ||||||
Deferred
taxes
|
(193 | ) | 100,020 | |||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
Decrease In:
|
||||||||
Accounts
receivable
|
(161,985 | ) | 922,678 | |||||
Inventories
|
721,498 | (931,672 | ) | |||||
Prepayments
|
78,119 | 2,887,198 | ||||||
Other
receivables and other assets
|
(625,049 | ) | 2,661,078 | |||||
Deferred
revenue
|
62,183 | - | ||||||
Deferred
dry dock fees
|
(2,367,612 | ) | (4,630,014 | ) | ||||
Increase
(Decrease) In:
|
||||||||
Accounts
payable
|
1,768,336 | (1,045,016 | ) | |||||
Advance
from customers
|
163,739 | (2,488,439 | ) | |||||
Accrued
expenses
|
(503,143 | ) | (225,655 | ) | ||||
Taxes
payable
|
41,542 | (136,964 | ) | |||||
Other
current liabilities
|
1,073,396 | 397,708 | ||||||
Net
cash provided by continuing operations
|
1,187,886 | 23,747,200 | ||||||
Net
cash provided by discontinued operation
|
1,192,313 | 185,816 | ||||||
Net
cash provided by operating activities
|
2,380,199 | 23,933,016 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase
of a vessel
|
(20,881,125 | ) | - | |||||
Purchases
of fixed assets
|
(16,700 | ) | (87,239 | ) | ||||
Proceeds
from disposition of discontinued operation, net
|
1,272,685 | - | ||||||
Net
cash used in investing activities
|
(19,625,140 | ) | (87,239 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from/(repayments of) short-term loan
|
1,170,070 | (1,000,000 | ) | |||||
Repayments
of long-term loans
|
(3,140,991 | ) | (2,811,672 | ) | ||||
Proceeds
from long-term loans
|
14,490,000 | - | ||||||
Proceeds
from/(repayments of) long-term notes payable
|
2,439,523 | (2,297,889 | ) | |||||
Repayments
of capital lease obligations
|
- | (1,514,100 | ) | |||||
Repayments
to related parties
|
(2,374,819 | ) | (3,181,257 | ) | ||||
Proceeds
from related parties
|
- | 40,354,139 | ||||||
Payment
of dividends
|
- | (48,213,871 | ) | |||||
Net
cash provided by (used in) financing activities
|
12,583,783 | (18,664,650 | ) |
See
accompanying notes to consolidated financial statements.
F-8
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
2009
|
2008
|
|||||||
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(4,661,158 | ) | 5,181,127 | |||||
Effect
of exchange rate changes on cash
|
(41,706 | ) | 379,203 | |||||
Cash
and cash equivalents at beginning of period
|
8,233,588 | 2,673,258 | ||||||
CASH AND CASH EQUIVALENTS AT END OF
YEAR
|
$ | 3,530,724 | $ | 8,233,588 | ||||
SUPPLEMENTARY CASH FLOW
INFORMATION:
|
||||||||
Interest
paid
|
$ | 627,836 | $ | 496,667 | ||||
Income
taxes paid
|
$ | 44,287 | $ | 53,859 |
See
accompanying notes to consolidated financial statements.
F-9
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
Winland
Online Shipping Holdings Co. was incorporated under the laws of Texas on
November 17, 2006. On September 23, 2008, Trip Tech, Inc. changed its name to
Winland Online Shipping Holdings Corporation (“WLOL”).
On August
12, 2008, Trip Tech, Inc. (“Trip Tech”) entered into a share exchange agreement
with SkyAce Group Limited (“SkyAce”) and Pioneer Creation Holdings Limited
(“PCH”). PCH is the sole shareholder of SkyAce. As a result of the share
exchange, Trip Tech acquired all of the issued and outstanding securities of
SkyAce from PCH in exchange for 76,925,000 newly-issued shares of Trip Tech’s
common stock, par value $0.001 per share and 1,000,000 shares of Series A
Preferred Stock, which such Preferred Shares would be converted into 30,000,000
shares of Common upon Trip Tech amending its Articles of Incorporation to
sufficiently increase the number of authorized shares of Common Stock in order
to effect such issuance. SkyAce became a wholly-owned subsidiary of WLOL. At the
time of the merger, WLOL had 23,075,000 shares of common stock. On September 23,
2008, the authorized shares were increased to 200,000,000 shares. On Octobers
23, 2008, 1,000,000 shares of preferred stock, par value of $0.001 were
converted into 30,000,000 shares of common stock. As a result, the total
outstanding shares of common stock increased to 130,000,000, and PCH owned
82.25% of the voting capital stock of WLOL.
The
exchange transaction was accounted for as a reverse acquisition in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 805 (formerly Statement of Financial Accounting Standards
(“SFAS”) No. 141, Business Combinations). The
acquisition was accounted for as the recapitalization of SkyAce. Accordingly,
the consolidated and combined statements of income include the results of
operations of SkyAce from January 1, 2008, and the results of operations of WLOL
from the acquisition date through December 31, 2009.
SkyAce
declared a dividend of $48,213,871 on December 31, 2007 and paid it on March 31,
2008.
WLOL and
subsidiaries (the “Company”) is mainly engaged in a comprehensive range of
online and off-line international shipping services such as dry bulk shipping,
chartering, shipping agency, and international logistics.
2. LIQUIDITY
The
Company incurred a net loss of $6,958,955 for the year ended December 31, 2009.
The Company also had a working capital deficit of $10,085,966 at December 31,
2009. This was principally due to the Company using cash to purchase a new
vessel, and to pay long-term loans. To improve liquidity, the Company changed
the registrations of the flags of two of its vessels. With new registrations,
the Company believes dry dock fees will continue to decrease while such vessels
keep meeting the standards of certification and inspection. To increase its cash
resources, the Company obtained a short-term bank loan of $1,170,070 (See Note
8), a long-term loan of $14,490,000 (see Note 9), and a long-term note of
$3,000,000 (see Note 10). The long-term debt was principally used to purchase a
new vessel. Additionally,
on March 5, 2010 the Company obtained an extension of the due date of two notes
payable to related parties amounting to $2,961,739 to July 19, 2012. See Notes
10 and 17. Also in 2010, the Company obtained commitments from certain
shareholders and related parties to provide working capital to the Company, if
needed, in the form of notes payable or personal loans.
F-10
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis
of Presentation
The
audited consolidated financial statements of Winland Online Shipping Holdings
Corporation have been prepared in accordance with U.S. generally accepted
accounting principles and pursuant to the requirements for reporting on Form
10-K.
(b)
Principles of Consolidation
The
consolidated financial statements include the accounts of WLOL and its
subsidiaries and variable interest entities (“VIEs”) (the “Company”) as
follows:
I.
Subsidiaries and Holding Companies:
a)
|
SkyAce
is wholly-owned subsidiary of WLOL and incorporated under the law of
British Virgin islands (“BVI”).
|
b)
|
Plentimillion
Group Limited (“PGL”) is a wholly-owned subsidiary of SkyAce and
incorporated in BVI.
|
c)
|
Best
Summit Enterprise Limited (“BSL”) is a wholly-owned subsidiary of SkyAce
and incorporated in BVI.
|
d)
|
Hong
Kong Wallis Development Limited (“Wallis”) is registered in Hong Kong and
is a
wholly-owned subsidiary of
BSL.
|
e)
|
Beijing
Huate Xingye Technology Limited (“Huate”) was registered in the People’s
Republic of China (“PRC”) on March 18, 2008 and is a wholly-owned
subsidiary of Wallis.
|
II.
Subsidiaries of PGL - Businesses in transportation and chartering:
f)
|
Winland
Shipping Co., Limited, is registered in Hong
Kong.
|
g)
|
Win
Star Shipping Co., Limited, is incorporated and registered in St. Vincent
and the Grenadines (“S.V.G.”).
|
h)
|
Bodar
Shipping Co., Limited, is incorporated and registered in
S.V.G.
|
i)
|
Winland
Dalian Shipping S.A. is incorporated in Panama and registered in Hong
Kong,
|
j)
|
Treasure
Way Shipping Limited is incorporated and registered in Hong
Kong.
|
F-11
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Principles of Consolidation (Continued)
II.
Subsidiaries of PGL - Businesses in transportation and chartering
(Continued)
k)
|
Win
Eagle Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
l)
|
Win
Ever Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
m)
|
Win
Bright Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
n)
|
Kinki
International Industrial Limited is registered in Hong Kong, managing
chartering business of vessels.
|
o)
|
Bestline
Shipping Limited is registered in Hong Kong, managing chartering business
of vessels.
|
p)
|
Lancrusier
Development Co., Limited is registered in Hong Kong, management and
accounting of the above companies.
|
q)
|
Win
Glory S.A. is incorporated in Panama, registered in Hong
Kong.
|
r)
|
Win
Grace Shipping Co., Limited is incorporated and registered in
Malta.
|
s)
|
Win
Hope Shipping Co., Limited is incorporated and registered in
Malta.
|
t)
|
Win
Moony Shipping Co., Limited is incorporated and registered in
Malta.
|
u)
|
Bodar
Shipping S.A. is incorporated and registered in
Panama.
|
v)
|
Win
Moony Shipping S.A. is incorporated and registered in
Panama.
|
w)
|
Bao
Shun Shipping S.A. is incorporated and registered in
Panama.
|
x)
|
Winland
International Shipping Co., Limited is incorporated and registered in Hong
Kong.
|
III. VIEs
- Businesses in Shipping Agency, Freight Forwarding and Online
Services:
To comply
with the People’s Republic of China (“PRC”) laws and regulations, the Company
provides substantially all its shipping agency and freight forwarding services
and online services in China via its VIEs. These VIEs are wholly-owned by
certain related parties or directors of the Company.
The
following is a summary of the VIEs of the Company:
y)
|
Dalian
Winland International Shipping Agency Co. Ltd. (“DWIS”) is incorporated
under the laws of the PRC. The principal activity of DWIS is shipping
agency services.
|
z)
|
Dalian
Winland International Logistic Co. Ltd. (“DWIL”) is incorporated under the
laws of PRC. The principal activity of DWIL is freight forwarding
services.
|
aa)
|
Dalian
Shipping Online Network Co. Ltd. (“DSON” or “Shipping Online”) is
incorporated under the laws of PRC. The principal activities of DSON are
providing online service for the
members.
|
F-12
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Principles of Consolidation (Continued)
On March
31, 2008, the Company entered into exclusive technical service agreements with
DWIS, DWIL and DSON under which the Company provides technical and other
services to DWIS, DWIL and DSON in exchange for substantially all net income of
DWIS, DWIL and DSON. All voting rights of DWIS, DWIL and DSON are assigned to
the Company, and the Company has the right to appoint all directors and senior
management personnel of DWIS, DWIL and DSON. In addition, shareholders of DWIS,
DWIL and DSON have pledged their equity interests in DWIS, DWIL and DSON as
collateral to the Company for the non-payment of the fees for technical and
other services due to the Company.
The
Company applied the provision of ASC 810 (formerly SFAS No. 46R, Consolidation of Variable Interest
Entities ), a variable interest entity (“VIE”) to be consolidated by a
company if that company is subject to a majority of the risk of loss for the
VIEs or is entitled to receive a majority of the VIEs’ residual
returns. As a result, DWIS, DWIL and DSON became the Company’s VIEs since
January 1, 2008.
The
Company adopted ASC 805 (formerly SFAS No. 141), which requires the consolidated
financial statements for the periods ended December 31, 2009 and 2008 be
presented as though the transfer of net assets or exchange of VIEs’ interests
had occurred at the beginning of the period. Financial statements of all VIEs
have been included in the Company’s consolidated financial statements as of
December 31, 2009 and 2008.
Inter-company
balances and transactions have been eliminated in consolidation.
(c)
Concentrations
The
Company’s major customers who accounted for the following percentages of total
revenue and accounts receivable are as follows:
|
Sales
|
Accounts Receivable
|
||||||||||||||
Major
Customers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Company
A
|
6.98 | % | - | 0.43 | % | - | ||||||||||
Company
B
|
2.76 | % | - | - | - | |||||||||||
Company
C
|
2.32 | % | - | - | - | |||||||||||
Company
D
|
1.67 | % | - | - | - | |||||||||||
Company
E
|
1.46 | % | 0.98 | % | - | - | ||||||||||
Company
F
|
- | 3.91 | % | - | - | |||||||||||
Company
G
|
- | 2.65 | % | - | - | |||||||||||
Company
H
|
- | 1.89 | % | - | - | |||||||||||
Company
I
|
- | 1.06 | % | - | - |
F-13
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c)
Concentrations (Continued)
The
Company’s major oil suppliers who accounted for the following percentages of
total oil purchases and total accounts payable are as follows:
|
Oil Purchases
|
Accounts Payable
|
||||||||||||||
Major
Suppliers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Company
H
|
22.18 | % | 22.60 | % | 4.55 | % | - | |||||||||
Company
I
|
18.42 | % | - | 7.31 | % | - | ||||||||||
Company
J
|
17.87 | % | 11.28 | % | - | 2.08 | % | |||||||||
Company
K
|
12.04 | % | 23.63 | % | 0.39 | % | - | |||||||||
Company
L
|
9.97 | % | - | - | - | |||||||||||
Company
M
|
- | 8.69 | % | - | 6.57 | % | ||||||||||
Company
N
|
- | 8.30 | % | - | 1.49 | % |
(d) Use
of Estimates
The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. Actual results could differ materially from those
estimates.
(e)
|
Fair
Value of Financial
Instruments
|
Fair Value of Financial Instruments
- ASC 820-10 (formerly SFAS 157) establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy prioritizes the inputs into three levels based on the extent to which
inputs used in measuring fair value are observable in the market.
These
tiers include:
(I)
|
Level 1—defined
as observable inputs such as quoted prices in active
markets;
|
(II)
|
Level 2—defined
as inputs other than quoted prices in active markets that are either
directly or indirectly observable;
and
|
(III)
|
Level 3—defined
as unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own
assumptions.
|
The
carrying amounts of financial assets and liabilities, such as cash and cash
equivalents, accounts receivable, short-term and long-term loans, accounts
payable, notes payable and other payables, approximate their fair values because
of the short maturity of these instruments.
F-14
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Inventories
Inventories
of the company are composed of fuel oil and diesel oil. Inventories are stated
at the lower of cost or net realizable value (market value). The cost is
determined on the basis of weighted average. Net realizable value is based on
estimated selling prices less any further costs expected to be incurred for
disposal.
(g)
Accounts Receivables
Accounts
receivables include receivables from shippers and ship owners, net of a
provision for doubtful accounts. At each balance sheet date, potentially
uncollectible accounts are assessed individually for purposes of determining the
appropriate provision for doubtful accounts. At December 31, 2009 and 2008, the
Company has no allowance for doubtful accounts.
(h)
Vessels and Depreciation Policy
Vessels
are carried at cost less accumulated depreciation and impairment
losses.
Vessels
are stated as cost which consists of the contract price of the directly
purchased vessels or present value of minimum lease payments for the vessels
acquired by capital lease, and any direct expenditure incurred upon acquisition
for major improvements and delivery.
Depreciation
is computed using the straight-line method over the estimated useful life of the
vessels, after considering the estimated residual value. The residual
value ranges from 0.4% to 6% of the imputed original cost at the birth date of
each vessel. Management estimates the useful lives of the vessels to be 25 years
from the birthdates. As all the vessels were second hand, the Company specified
the depreciation periods by deducting the periods used before purchase from 25
years.
The costs
of significant replacements, renewals and betterments are capitalized and
depreciated over the shorter of the vessel’s remaining estimated useful life or
the estimated life of the renewal or betterment. Expenditures for routine
maintenance and repairs are expensed as incurred.
(i) Fixed
Assets
Fixed
assets are carried at cost less accumulated depreciation and amortization.
Depreciation is provided over their estimated useful lives, using the
straight-line method. Estimated useful lives are as follows:
Motor
vehicles
|
5
years
|
Office
equipment
|
5
years
|
The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized. Also see Note
5.
(j) Dry
Dock Fees
Vessels
must undergo regular inspection, monitoring and maintenance, referred to as dry
docking, to maintain the required operating certificates. International Maritime
Organization (IMO) regulations generally require that vessels be dry docked
every five years. Because dry docking enable the vessel to continue operating in
compliance with IMO requirements, the costs of these scheduled dry docking are
customarily capitalized and are then amortized over a 60-month period beginning
with the accounting period following the vessel’s release from dry docking. Also
see Note 6.
F-15
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k)
Impairment of Long-Term Assets
Long-term
assets of the Company are reviewed annually as to whether their carrying value
has become impaired, pursuant to the guidelines established in FASB Codification 360-10-35-17
(Statement of Financial Accounting Standards (“SFAS”) No. 144). The
Company considers assets to be impaired if the carrying value exceeds the future
projected cash flows from the related operations. The Company also
re-evaluates the periods of amortization to determine whether subsequent events
and circumstances warrant revised estimates of useful lives. There were no
impairments for the years ended December 31, 2009 and 2008.
(l)
Revenue Recognition
Revenue
is recognized based on the following four criteria:
(I) The
amount of revenue can be measured reliably;
(II) It
is probable that the economic benefits will flow to the Company;
(III) The
stage of completion at the balance sheet date can be measured
reliably;
(IV) The
costs incurred, or to be incurred can be measured reliably.
For dry
bulk shipping service, the allocation of revenue between reporting periods is
based on relative transit time in each reporting period with expenses recognized
as incurred.
For
chartering brokerage services, sales are recognized when the ship leaves
port.
For
shipping agency and freight forwarding services, sales are recognized when the
ship leaves port.
For
online services, sales are recognized according to the stage of completion in
accordance with the service period defined in executed contracts.
(m)
Retirement Benefits
Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to operations as incurred.
Retirement benefits amounting to $125,372 and $115,070 were charged to
operations for the years ended December 31, 2009 and 2008,
respectively.
(n)
Income Tax
Deferred
tax assets and liabilities are recognized for the future tax consequence
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain. Also see Note 12.
F-16
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)
Earnings (Loss) Per Share
Basic
earnings (loss) per share are computed by dividing income (loss) available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings (loss) per share is computed similar to
basic earnings (loss) per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. The Company does not have dilutive securities for the
years ended December 31, 2009 and 2008.
(p)
Foreign Currency Translation
Assets
and liabilities of foreign subsidiaries are translated into United States
dollars at currency exchange rates in effect at period-end and revenues and
expenses are translated at average exchange rates in effect for the period.
Gains and losses resulting from foreign currency transactions are included in
results of operations. Gains and losses resulting from translation of foreign
subsidiaries balance sheets are included as a separate component of
shareholders’ equity.
December 31, 2009
|
December 31, 2008
|
|||||||
Period
end RMB: US$ exchange rate
|
6.8372 | 6.8542 | ||||||
Average
period RMB: US$ exchange rate
|
6.8457 | 7.0842 |
(q)
Comprehensive Income (Loss)
Comprehensive
income (loss) is defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other disclosures,
all items that are required to be recognized under current accounting standards
as components of comprehensive income (loss) should be reported in a financial
statement that is presented with the same prominence as other financial
statements. The Company’s only current component of comprehensive income (loss)
is the foreign currency translation adjustment.
(r)
Reporting Segments
Accounting
standards require public business enterprises to report information about each
of their operating business segments that exceed certain quantitative threshold
or meet certain other reporting requirements. Operating business segments have
been defined as a component of an enterprise about which separate financial
information is available and is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has determined that there are three reportable
segments: (1) Dry bulk shipping, (2) Chartering brokerage, and (3) Other
activities segment.
Dry Bulk
Shipping Service - Dry bulk shipping service operates a fleet of thirteen
vessels that provides marine shipping services for dry and liquid bulk cargo
shipping. The segment contributed 50% and 68% of combined operating revenues for
the years ended December 31, 2009 and 2008, respectively.
Chartering
Brokerage Service - Chartering brokerage service provides ship chartering
services for unrelated shipping companies and shippers. The segment contributed
41% and 26% of consolidated operating revenues for the years ended December 31,
2009 and 2008, respectively.
F-17
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r)
Reporting Segments (Continued)
Other
activities - Other activities segment comprises shipping agency and freight
forwarding services, and online services. Shipping agency and freight forwarding
service provides transportation and logistic services to shippers in the PRC.
Online services provide internet services for members. These operating segments
were not separately reported as they do not meet any of the quantitative
thresholds under ASC 280-10 (formerly SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information). Other activities segment contributed
9% and 6% of consolidated operating revenues for the years ended December 31,
2009 and 2008, respectively.
Also see
Note 14.
(s)
Recent Accounting Pronouncements
On July
1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162). ASC 105-10 establishes the FASB ASC as
the source of authoritative accounting principles recognized by the FASB to be
applied in preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America. The
adoption of this standard had no impact on the Company’s consolidated
financial statements.
Effective
January 1, 2009, the Company adopted ASC 805 (formerly SFAS No. 141 (R),
Business Combinations).
ASC 805 requires an acquirer to measure the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree at
their fair values on the acquisition date, with goodwill being the excess value
over the net identifiable assets acquired. The adoption of ASC 805 did not have
any effect on the Company’s consolidated financial statements as of December 31,
2009.
Effective
January 1, 2009, the Company adopted ASC 810-10 (formerly SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements). This Statement establishes accounting
and reporting standards that require the ownership interests in subsidiaries’
non-parent owners be clearly presented in the equity section of the balance
sheet; requires the amount of consolidated net income attributable to the parent
and to the noncontrolling interest be clearly identified and presented on the
face of the consolidated statement of income; requires that changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently; requires that when a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value and the gain or loss
on the deconsolidation of the subsidiary be measured using the fair value of any
noncontrolling equity; requires that entities provide disclosures that clearly
identify the interests of the parent and the interests of the noncontrolling
owners. The adoption of ASC 810-10 did not have a significant effect on the
Company’s consolidated financial statements as of December 31,
2009.
Effective
January 1, 2009, the Company adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ), which amends SFAS No. 133 and
expands disclosures to include information about the fair value of derivatives,
related credit risks and a company's strategies and objectives for using
derivatives. The adoption of ASC 815-10 did not have a material effect on the
consolidated financial statements as of December 31, 2009.
F-18
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Recent Accounting Pronouncements (Continued)
Effective
January 1, 2009, the Company adopted ASC 815-40 (formerly Emerging Issues Task
Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
07-05”). ASC 815-40
addresses the determination of whether an instrument (or an embedded feature) is
indexed to an entity's own stock, which is the first part of the scope exception
in paragraph 11(a) of FASB SFAS No. 133 , Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”). If an instrument (or an
embedded feature) that has the characteristics of a derivative instrument under
paragraphs 6–9 of SFAS 133 is indexed to an entity's own stock, it is still
necessary to evaluate whether it is classified in stockholders' equity (or would
be classified in stockholders' equity if it were a freestanding instrument).
Other applicable authoritative accounting literature, including Issues EITF
00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company Own Stock, and EITF 05-2, The Meaning of “Conventional Debt
Instrument” in Issue No. 00-19, provides guidance for determining whether
an instrument (or an embedded feature) is classified in stockholders' equity (or
would be classified in stockholders' equity if it were a freestanding
instrument). ASC 815-40 does not address that second part of the scope exception
in paragraph 11(a) of SFAS 133. The adoption of ASC 815-40 did not have a
material effect on the consolidated financial statements as of December 31,
2009.
On
April 1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies),
which amends Statement 141(R) and eliminates the distinction between contractual
and non-contractual contingencies. Under ASC 805, an acquirer is required to
recognize at fair value an asset acquired or liability assumed in a business
combination that arises from a contingency if the acquisition-date fair value of
that asset or liability can be determined during the measurement period. If the
acquisition-date fair value cannot be determined, the acquirer applies the
recognition criteria in SFAS No. 5, Accounting for Contingencies
and Interpretation 14, “Reasonable Estimation of the Amount of a Loss – and
interpretation of FASB Statement No. 5,” to determine whether the
contingency should be recognized as of the acquisition date or after it. The
adoption of ASC 805 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt ASC 320-10 for our interim and annual reporting periods ending
after June 15, 2009. ASC 320-10 does not require disclosures for periods
presented for comparative purposes at initial adoption. ASC 320-10 requires
comparative disclosures only for periods ending after initial adoption. The
adoption of ASC 320-10 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by APB Opinion No. 28, Interim Financial Reporting .
We are required to adopt ASC 825-10 for our interim and annual reporting periods
ending after June 15, 2009. ASC 825-10 does not require disclosures for
periods presented for comparative purposes at initial adoption. ASC 825-10
requires comparative disclosures only for periods ending after initial adoption.
The adoption of ASC 825-10 did not have a material effect on the
consolidated financial statements as of December 31, 2009.
F-19
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Recent Accounting Pronouncements (Continued)
In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167) Amendments to FASB
Interpretation No. 46(R), which require an enterprise to perform an analysis and
ongoing reassessments to determine whether the enterprises variable interest or
interests give it a controlling financial interest in a variable interest entity
and amends certain guidance for determining whether an entity is a variable
interest entity. It also requires enhanced disclosures that will provide users
of financial statements with more transparent information about an enterprises
involvement in a variable interest entity. ASC 810-10 is effective as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009 and for all interim reporting periods after that. The
adoption of ASC 810-10 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
F-20
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
4. VESSELS
The
Company’s current fleet consists of thirteen vessels as bulk carriers as of
December 31, 2009 and 2008. Among the thirteen vessels, two of them denoted (a)
were acquired by syndicated loans and are still under pledge, also see Note 9;
nine vessels denoted (b) were acquired through capital leases; a vessel denoted
(c) was acquired through the long-term notes payable from related parties, also
see Note 10; and one remaining vessel denoted (d) was acquired through the
long-term loan and long-term note payable, also see Note 9 and 10.
The
vessels of the Company consist of the following:
December 31, 2009
|
December 31, 2008
|
||||||||
At
cost:
|
|||||||||
Win
Hope
|
(b)
|
$ | 2,679,285 | $ | 2,679,285 | ||||
Win
Ever
|
(b)
|
1,737,966 | 1,737,966 | ||||||
Win
Bright
|
(b)
|
1,739,258 | 1,739,258 | ||||||
Win
Eagle
|
(b)
|
3,560,852 | 3,560,852 | ||||||
Win
Glory
|
(b)
|
2,503,697 | 2,503,697 | ||||||
Win
Grace
|
(b)
|
3,677,861 | 3,677,861 | ||||||
Win
Moony
|
(b)
|
3,682,178 | 3,682,178 | ||||||
Win
Star
|
(b)
|
3,336,600 | 3,336,600 | ||||||
Winland
Dalian
|
(a)
|
18,243,139 | 18,243,139 | ||||||
Win
Honey
|
(a)
|
4,500,000 | 4,500,000 | ||||||
Bodar
|
(b)
|
4,985,441 | 4,985,441 | ||||||
Andong
|
(c)
|
2,961,739 | 2,954,393 | ||||||
Baoshun
|
(d)
|
20,881,125 | - | ||||||
$ | 74,489,141 | $ | 53,600,670 | ||||||
December 31, 2009
|
December 31, 2008
|
||||||||
Less: Accumulated
depreciation
|
|||||||||
Win
Hope
|
(b)
|
$ | 2,009,463 | $ | 1,768,328 | ||||
Win
Ever
|
(b)
|
1,564,169 | 1,564,169 | ||||||
Win
Bright
|
(b)
|
1,565,332 | 1,565,332 | ||||||
Win
Eagle
|
(b)
|
3,204,767 | 3,204,767 | ||||||
Win
Glory
|
(b)
|
2,119,201 | 1,797,297 | ||||||
Win
Grace
|
(b)
|
3,310,075 | 2,804,369 | ||||||
Win
Moony
|
(b)
|
3,313,961 | 2,761,634 | ||||||
Win
Star
|
(b)
|
3,002,940 | 3,002,940 | ||||||
Winland
Dalian
|
(a)
|
4,743,216 | 3,648,628 | ||||||
Win
Honey
|
(a)
|
1,522,969 | 1,269,844 | ||||||
Bodar
|
(b)
|
4,486,897 | 4,486,897 | ||||||
Andong
|
(c)
|
797,056 | 638,670 | ||||||
Baoshun
|
(d)
|
251,692 | - | ||||||
$ | 31,891,738 | $ | 28,512,875 | ||||||
Vessels,
net
|
$ | 42,597,403 | $ | 25,087,795 |
Vessel
depreciation expense for the years ended December 31, 2009 and 2008 was
$3,377,081 and $3,383,542 respectively.
In 2009,
the vessel Winland Dalian had been under major repair without operation. The
indirect costs of $1,002,106, mainly including management fees, sailor costs,
and repair costs, were recorded as general and administrative expenses for the
year ended December 31, 2009.
F-21
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
4. VESSELS
(CONTINUED)
The
Company pledged the following vessels as collateral against long-term loans.
Also see Note 9.
December 31, 2009
|
December 31, 2008
|
|||||||
Net Book Value
|
||||||||
Winland
Dalian
|
$ | 13,499,923 | $ | 14,594,511 | ||||
Win
Honey
|
2,977,031 | 3,230,156 | ||||||
Baoshun
|
20,629,433 | - | ||||||
Total
|
$ | 37,106,387 | $ | 17,824,667 |
Insurance
Costs:
There are
four kinds of marine insurance for the Company which insures the vessels and
shipping business as follows:
Insurance Type
|
Coverage
|
Insurance Premium
For The Year Ended December 31,
|
||||||||||
2009
|
2008
|
|||||||||||
Hull
insurance
|
$ | 71,240,000 | $ | 1,017,985 | $ | 1,157,052 | ||||||
Protection
& indemnity insurance
|
99,460,000 | 1,010,180 | 920,598 | |||||||||
Freight
demurrage and defense insurance
|
95,058 | 90,935 | ||||||||||
Delay
insurance
|
47,970 | 60,495 | ||||||||||
Total
|
$ | 2,171,193 | $ | 2,229,080 |
Insurance
costs are amortized on a straight-line basis over the beneficial periods and are
recorded in vessel expenses in the consolidated statements of income and
comprehensive income for the years ended December 31, 2009 and 2008. Annual
premium expenses were $2,171,193 and $2,229,080 for the years ended December 31,
2009 and 2008, respectively. Prepaid insurance was $26,950 and $0 as of
December 31, 2009 and 2008, respectively.
5. FIXED
ASSETS
Fixed
assets consist of the following:
December 31, 2009
|
December 31, 2008
|
|||||||
At
cost:
|
||||||||
Motor
vehicles
|
$ | 244,612 | $ | 244,005 | ||||
Office
equipment
|
204,031 | 369,607 | ||||||
Leasehold
improvement
|
181,671 | - | ||||||
630,314 | 613,612 | |||||||
Less: Accumulated
depreciation
|
||||||||
Motor
vehicles
|
159,458 | 117,516 | ||||||
Office
equipment
|
174,298 | 259,902 | ||||||
Leasehold
improvement
|
145,517 | - | ||||||
479,273 | 377,418 | |||||||
Fixed
assets, net
|
$ | 151,041 | $ | 236,194 |
Depreciation
expense for the years ended December 31, 2009 and 2008 was $96,437 and $118,557,
respectively.
F-22
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
6. DEFERRED
DRY DOCK FEES
Deferred
dry dock fees consist of the
following:
December 31, 2009
|
December 31, 2008
|
|||||||
Cost
|
$ | 17,608,753 | $ | 21,594,143 | ||||
Less:
Accumulated amortization
|
8,297,106 | 10,559,457 | ||||||
Deferred
dry dock fees, net
|
$ | 9,311,647 | $ | 11,034,686 |
Amortization
expense for the years ended December 31, 2009 and 2008 was $4,007,842 and
$3,533,239, respectively.
Amortization
expense for the next five years and thereafter is as follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$ | 3,241,386 | ||
2011
|
2,689,722 | |||
2012
|
1,990,157 | |||
2013
|
1,232,212 | |||
2014
|
158,170 | |||
Total
|
$ | 9,311,647 |
7. DUE
TO/FROM RELATED PARTIES
Due
to/from related parties consist of the following:
(I) Due From Related Parties
|
December 31, 2009
|
December 31, 2008
|
||||||||||
Winland
Container Lines Ltd.
|
a | ) | $ | 1,097,384 | $ | 759,042 | ||||||
Dalian
Winland Group Co., Ltd
|
b | ) | 16,113 | - | ||||||||
Due
from employees
|
c | ) | 146 | 1,214 | ||||||||
Total
due from related parties
|
$ | 1,113,643 | $ | 760,256 | ||||||||
(II) Due
To Related Parties
|
December 31,
2009
|
December 31, 2008
|
||||||||||
Dalian
Winland Group Co., Ltd
|
b | ) | $ | - | $ | 526,885 | ||||||
Dalian
Winland Shipping Co., Ltd
|
d | ) | - | 120,664 | ||||||||
Dalian
Master Well Ship Management Co., Ltd
|
e | ) | 7,200 | 48,614 | ||||||||
Winland
Shipping Japan Co., Ltd
|
f | ) | 13,707 | 72,423 | ||||||||
Total
due to related parties
|
$ | 20,907 | $ | 768,586 |
a)
|
Winland
Container Lines Ltd. is controlled by the Chairman and Chief Executive
Officer of the Company. The Company provided shipping agency and freight
forwarding services to Winland Container Lines Ltd. For the years ended
December 31, 2009 and 2008, the Company recognized service revenue of
$1,361,558, and $1,624,860, respectively. For the years ended December 31,
2009 and 2008, the Company paid $3,586,440 and $2,299,713 of expenses to
related ports and received $4,609,946 and $4,155,446 of payments from
related ports on behalf of Winland Container Lines Ltd. The outstanding
balances at December 31, 2009 and 2008 are interest-free, unsecured and
they were subsequently settled.
|
F-23
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
7.
|
DUE
TO/FROM RELATED PARTIES (CONTINUED)
|
b)
|
Dalian
Winland Group Co., Ltd (“DWIG”) is controlled by the Chairman and Chief
Executive Officer of the Company. The Company paid $27,746,305 and
$1,366,667 of expenses on behalf of DWIG for the years ended December 31,
2009 and 2008, respectively. The Company collected $27,112,627
and $40,281,647 on behalf of DWIG for the years ended December 31, 2009
and 2008, respectively. For the years ended December 31, 2009 and 2008,
the Company recognized interest expense of $90,680 and $90,455,
respectively. Also see Note 10. The outstanding receivable balance at
December 31, 2009 is interest-free, unsecured and has no fixed repayment
term.
|
c)
|
Due
from/to employees are interest-free, unsecured and have no fixed repayment
terms. The amounts due from/to employees primarily represent advances to
sales personnel, or prepaid by sales personnel of the Company for business
and travelling related expenses.
|
d)
|
Dalian
Winland Shipping Co., Ltd (“DWSC”) is controlled by the Chairman and Chief
Executive Officer of the Company. It operates as a vessel management
company for the Company. The vessel management fee for the two vessels was
$30,000 and $36,000 for the years ended December 31, 2009 and 2008,
respectively. The Company recognized relevant service revenue of $0 and
$146,757 for the years ended December 31, 2009 and 2008, respectively. For
the years ended December 31, 2009 and 2008, on behalf of DWSC, the Company
paid $195,407 and $7,015,600; and received $1,274,413 and $3,663,903,
respectively. The Company recognized interest expense of $57,407 and
$138,003 for the years ended December 31, 2009 and 2008, respectively.
Also see Note 10. The Company disposed of vessel Haoyue to DWSC for
$1,287,077. Also see Note 13.
|
e)
|
Dalian
Master Well Ship Management Co., Ltd is controlled by the Chairman and
Chief Executive Officer of the company. It operates as the vessel
management company for the Company. The vessel management fees for the
years ended December 31, 2009 and 2008 was $229,800 and $259,200,
respectively. The Company paid $341,763 and $751,901 on behalf of Dalian
Master Well Ship Management Co., Ltd, for the years ended December 31,
2009 and 2008, respectively. The Company collected $70,548 and $83,468 on
behalf of Dalian Master Well Ship Management Co., Ltd, for the years ended
December 31, 2009 and 2008, respectively. The outstanding balances at
December 31, 2009 and 2008 are interest-free, unsecured, and have no fixed
repayment term.
|
f)
|
Winland
Shipping Japan Co., Ltd is controlled by the Chairman and Chief Executive
Officer of the Company. The Company recognized relevant agency service
fees of $685,079 and $67,546 for the years ended December 31, 2009 and
2008, respectively. The Company paid $743,846 and $0 on behalf of Winland
Shipping Japan Co., Ltd, for the years ended December 31, 2009 and 2008,
respectively. The outstanding balances at December 31, 2009 and 2008 are
interest-free, unsecured and have no fixed repayment
term.
|
Also see
Note 10 for long-term notes payable to related parties.
8. SHORT-TERM
BANK LOAN
The
Company obtained a short-term bank loan from Shanghai Pudong Development Bank
for $1,170,070 on July 10, 2009. The loan principal is due July 6, 2010. The
interest payment is due quarterly at an annual interest rate of 5.31%. Interest
expense was $29,820 for the year ended December 31, 2009. The loan is guaranteed
by the Chairman and CEO of the Company.
F-24
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
9. LONG-TERM
LOANS
Long-term
loans consist of the following:
December 31, 2009
|
December 31, 2008
|
|||||||
Loans
from Dialease Maritime S.A.:
|
||||||||
Due
on August 1, 2011, monthly interest payment is 1-month LIBOR plus 1.75%
per annum, and the actual rate at December 31, 2009 is 2.03 %, secured by
the vessel Winland Dalian (also see Note 4), assignment of insurance of
the vessel, and guaranteed by the Chairman of the Company. Principal is
repaid every month in 72 equal installments from September
2005.
|
$ | 3,519,456 | $ | 5,631,120 | ||||
Due
on July 21, 2012, monthly interest payment is 1-month LIBOR plus 1.75% per
annum, and the actual rate at December 31, 2009 is 2.03%, secured by the
vessel Win Honey (also see Note 4), assignment of insurance of the vessel,
and guaranteed by the Chairman of the Company. Principal is repaid every
month in 72 equal installments from August 2006.
|
1,808,306 | 2,508,314 | ||||||
Term
of the loan is 7 years with interest 1-month LIBOR plus 2.30% per annum,
monthly payment composed of principle and interest is fixed at $109,773,
initial payment is due on October 24, 2009, secured by the vessel Baoshun
(also see Notes 2 and 4).
|
14,160,681 | - | ||||||
Total
long-term loans
|
19,488,443 | 8,139,434 | ||||||
Less:
Current portion
|
4,128,908 | 2,811,672 | ||||||
Long-term
portion
|
$ | 15,359,535 | $ | 5,327,762 |
Interest
expense for the years ended December 31, 2009 and 2008 was $249,924 and
$447,578, respectively.
The
repayment schedule for the principal amount of long-term loans is as
follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$ | 4,128,908 | ||
2011
|
3,425,076 | |||
2012
|
1,725,566 | |||
2013
|
1,317,276 | |||
2014
|
1,317,276 | |||
Thereafter
|
7,574,341 | |||
Total
|
$ | 19,488,443 |
F-25
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
10. LONG-TERM
NOTES PAYABLE
Long-term
notes payable consists of the following:
December 31, 2009
|
December 31, 2008
|
|||||||||||
Notes
payable to unrelated party:
|
||||||||||||
Win
Grand Shipping Limited, net of discount of $13,345 at December 31, 2008,
paid off on September 17, 2009
|
$ | - | $ | 273,469 | ||||||||
Sea
Carrier Shipping Co., Ltd., net of discount of $2,100,182 at December 31,
2009, expire at September 25, 2014, fixed repayment of $2,897 per day,
monthly payment due one month in advance.
|
a | ) | 2,905,834 | - | ||||||||
Subtotal
|
2,905,834 | 273,469 | ||||||||||
Notes
payable to related companies:
|
||||||||||||
Dalian
Winland Shipping Co. , Ltd. due July 19, 2010, at an interest rate of 5%
per annum
|
b | ) | 1,148,131 | 1,145,283 | ||||||||
Dalian
Winland Group Co., Ltd. due July 19, 2010, at an interest rate of 5% per
annum
|
c | ) | 1,813,608 | 1,809,110 | ||||||||
Subtotal
|
2,961,739 | 2,954,393 | ||||||||||
Total
long-term notes payable
|
5,867,573 | 3,227,862 | ||||||||||
Less:
Current portion
|
3,326,132 | 273,469 | ||||||||||
Long-term
portion
|
$ | 2,541,441 | $ | 2,954,393 |
The
amortization of discounts on notes payable for the years ended December 31, 2009
and 2008 was $200,189 and $44,765, respectively.
The
long-term note denoted a) was used to purchase the vessel Baoshun. Also see Note
4.
The
long-term notes obtained from DWSC and DWIG, two related parties, denoted b) and
c) were both used to purchase the vessel Andong. Also see Notes 4 and 7. The due
date of these notes were extended to July 19, 2012 on March 5, 2010. See Note
17.
Interest
expense for the years ended December 31, 2009 and 2008 was $148,087 and
$228,458, respectively.
The
repayment schedule for long-term notes payable is as follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$ | 3,326,132 | ||
2011
|
467,665 | |||
2012
|
603,771 | |||
2013
|
771,315 | |||
2014
|
698,690 | |||
Total
|
$ | 5,867,573 |
F-26
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
11. COMMITMENTS
The
Company leases office space under operating leases. Lease expense was $190,069
and $131,341 for the years ended December 31, 2009 and 2008,
respectively.
As of
December 31, 2009, future minimum payments required under non-cancelable leases
are:
Years Ended December 31,
|
Amount
|
|||
2010
|
89,443 | |||
2011
|
10,871 | |||
Total
|
$ | 100,314 |
12. INCOME
TAX
(a)
Income
Tax Expense
Dalian
Winland International Shipping Agency Co. Ltd., Dalian Winland International
Logistic Co. Ltd. and Dalian Shipping Online Network Co. Ltd. are incorporated
under the laws of PRC and subjected by Chinese tax law. On March 16, 2007, the
National People’s Congress of China approved the Corporate Income Tax Law of the
People’s Republic of China (the “new CIT Law”), which was effective on January
1, 2008. Under the new CIT Law, the corporate income tax rate applicable to
these companies starting from January 1, 2008 is 25%.
Winland
Shipping Co., Limited, Treasure Way Shipping Limited, Kinki International
Industrial Limited, Bestline Shipping Limited, Lancrusier Development Co.,
Limited, and Winland International Shipping Co., Limited are incorporated and
registered in Hong Kong. All the income derived from these companies is exempt
from income tax under the local tax law; there is no income tax expense for the
years ended December 31, 2009 and 2008.
Win Star
Shipping Co., Limited and Bodar Shipping Co., Limited are incorporated and
registered in St. Vincent and Grenadines. Win Eagle Shipping Co., Limited, Win
Ever Shipping Co., Limited, and Win Bright Shipping Co., Limited are
incorporated and registered in Valletta, Malta. These five companies obtained
tax exemptions from the local governments, so they did not have any tax expense
for the year ended December 31, 2009 and 2008. Winland Dalian Shipping S.A. and
Win Glory S.A. are incorporated in Panama and are registered in HongKong. Win
Grace Shipping Co., Limited, Win Hope Shipping Co., Limited, Win Moony Shipping
Co., Limited are incorporated and registered in Valletta, Malta. Bodar Shipping
S.A., Win Moony Shipping S.A., and Bao Shun Shipping S.A. are incorporated and
registered in Panama. Since these companies are exempt from income tax under the
local tax law, they did not have any income tax for the years ended December 31,
2009 and 2008.
Effective
January 1, 2007, the Company adopted ASC 740-10 (formerly FASB Interpretation
No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FASB statement No.109,
Accounting for Income
Taxes). ASC 740-10 addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under ASC 740-10, we may recognize the tax benefit from an
uncertainty tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement. ASC 740-10 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased
disclosures.
F-27
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
12. INCOME
TAX (CONTINUED)
(a)
|
Income
Tax Expense (Continued)
|
Income
tax expense for the years ended December 31, 2009 and 2008 is summarized as
follows:
For The Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Current
|
$ | (90,277 | ) | $ | 82,193 | |||
Deferred
|
193 | (100,020 | ) | |||||
Income
tax expense
|
$ | (90,084 | ) | $ | (17,827 | ) |
The
Company’s income tax expense differs from the “expected” tax expense for the
years ended December 31, 2009 and 2008 (computed by applying the Hong Kong CIT
rate of 17.5 and PRC CIT rate of 25 to income before income taxes) as
follows:
For The Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Computed
“expected” benefit (expense)
|
$ | 1,163,567 | $ | (3,440,129 | ) | |||
Favorable
tax rates
|
(1,253,651 | ) | 3,422,302 | |||||
Income
tax expense
|
$ | (90,084 | ) | $ | (17,827 | ) |
The tax
effects of temporary differences that give rise to the Company’s net deferred
tax assets and liabilities as of December 31, 2009 and 2008 are as
follows:
December 31, 2009
|
December 31, 2008
|
|||||||
Deferred
tax assets (liabilities):
|
||||||||
Current
portion:
|
||||||||
General
and administrative expenses
|
$ | - | $ | 6,718 | ||||
Service
revenue and commissions
|
2,434 | (631 | ) | |||||
Valuation
allowance-short term
|
(732 | ) | (660 | ) | ||||
Other
income
|
(164 | ) | - | |||||
Subtotal
|
1,538 | 5,427 | ||||||
Non-current
portion:
|
||||||||
Depreciation
expense
|
(31,454 | ) | (9,276 | ) | ||||
Net
operating loss
|
135,585 | 97,740 | ||||||
Valuation
allowance
|
(105,281 | ) | (93,695 | ) | ||||
Subtotal
|
(1,150 | ) | (5,231 | ) | ||||
Net
deferred tax assets
|
$ | 388 | $ | 196 |
F-28
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
12. INCOME
TAX (CONTINUED)
(b)
|
Tax
Holiday Effect
|
For 2009
and 2008 the Hong Kong corporate income tax rate was 17.5%. Certain subsidiaries
of the Company which were registered in Hong Kong are entitled to tax exemptions
as long as they do not operate in Hong Kong under the local tax law. Since these
companies do not have operations in Hong Kong, they did not have any income tax
expense for the years ended December 31, 2009 and 2008.
The
combined effects of the income tax expense exemptions and reductions available
to the Company for the years ended December 31, 2009 and 2008 is as
follows:
2009
|
2008
|
|||||||
Tax
holiday (benefit) expense
|
$ | (1,253,651 | ) | $ | 3,422,302 | |||
Basic
net (loss) income per share excluding
tax holiday effect
|
$ | (0.04 | ) | $ | 0.14 |
13. DISCONTINUED
OPERATION
On August
18, 2009, the Company disposed of the Haoyue vessel to a related party, Dalian
Winland Shipping Co., Ltd. The net cash proceeds were $1,272,685, after
deducting tax expense of $28,350 from the gross proceeds of $1,301,035. Also see
Note 7.
The
following represents the vessel at the date of disposal:
August 18, 2009
|
||||
Vessel,
net
|
$ | 1,267,490 | ||
Net
asset
|
1,267,490 | |||
Gross
proceeds from disposition
|
1,301,035 | |||
Less:
Tax expense
|
(28,350 | ) | ||
Net
proceeds
|
1,272,685 | |||
Gain
from disposition of discontinued operation
|
$ | 5,195 |
In
accordance with ASC 205-20 (formerly SFAS 144, Accounting for the Impairment or
Disposal of Long-lived Assets ), the results of operations of Haoyue was
presented separately as discontinued operation in the consolidated statement of
loss and assets or liabilities of discontinued operation in the consolidated
balance sheet at December 31, 2008. The losses from the discontinued operation
of $ $214,461 were reflected in the Company’s statements of income (loss) and
comprehensive income (loss) for the year ended December 31, 2009.
The
following is the unaudited pro forma net income of the Company for the years
ended December 31, 2009 and 2008 assuming the disposition of Haoyue was
completed on January 1, 2009 and 2008.
For
The Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Net
(loss) income
|
$ | (6,744,494 | ) | $ | 19,084,001 | |||
Weighted
average shares, basic and diluted
|
130,000,000 | 115,877,596 | ||||||
Net
(loss) income per share, basic and diluted
|
$ | (0.05 | ) | $ | 0.16 |
F-29
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
14. SEGMENT
INFORMATION
The
Company determined that there are three reportable segments: (1) Dry bulk
shipping, (2) Chartering brokerage, and (3) Other activities segment. The other
activities segment comprises shipping agency, freight forwarding services and
online services. These operating segments were not separately reported as they
do not meet any of the quantitative thresholds under ASC 280-10 (formerly SFAS
No. 131, Disclosures about Segments of an Enterprise and Related
Information).
The
Company's segment information as of and for the years ended December 31, 2009
and 2008 are as follows:
The Year Ended
December 31, 2009
|
Dry Bulk
Shipping
|
Chartering
Brokerage
|
Other
Activities
|
Corporate
and
Eliminations
|
Consolidated
|
|||||||||||||||
Sales
to unaffiliated customers
|
$ | 24,935,494 | $ | 20,785,940 | $ | 4,457,287 | $ | - | $ | 50,178,721 | ||||||||||
Intersegment
sales
|
- | - | 91,111 | (91,111 | ) | - | ||||||||||||||
Net
sales
|
24,935,494 | 20,785,940 | 4,548,398 | (91,111 | ) | 50,178,721 | ||||||||||||||
Costs
|
22,189,056 | 18,102,384 | 3,423,667 | (91,111 | ) | 43,623,996 | ||||||||||||||
Depreciation
and amortization
|
7,385,421 | - | 95,939 | - | 7,481,360 | |||||||||||||||
Other
operating expenses
|
3,890,543 | 310,204 | 1,332,663 | 284,449 | 5,817,859 | |||||||||||||||
Gain
from disposition of discontinued operation
|
- | - | 5,195 | - | 5,195 | |||||||||||||||
(Loss)
income from discontinued operation
|
(219,974 | ) | - | 318 | - | (219,656 | ) | |||||||||||||
Net
(loss) income
|
$ | (8,749,500 | ) | $ | 2,373,352 | $ | (298,358 | ) | $ | (284,449 | ) | $ | (6,958,955 | ) | ||||||
December 31, 2009
|
||||||||||||||||||||
Identifiable
assets
|
$ | 44,537,934 | $ | 10,900,478 | $ | 9,340,286 | $ | (2,977,188 | ) | $ | 61,801,510 |
The Year Ended
December 31, 2008
|
Dry Bulk
Shipping
|
Chartering
Brokerage
|
Other
Activities
|
Corporate
and
Eliminations
|
Consolidated
|
|||||||||||||||
Sales
to unaffiliated customers
|
$ | 57,482,423 | $ | 22,027,720 | $ | 4,695,858 | $ | - | $ | 84,206,001 | ||||||||||
Intersegment
sales
|
- | - | 632,508 | (632,508 | ) | - | ||||||||||||||
Net
sales
|
57,482,423 | 22,027,720 | 5,328,366 | (632,508 | ) | 84,206,001 | ||||||||||||||
Costs
|
31,287,747 | 18,884,795 | 3,854,938 | (632,508 | ) | 53,394,972 | ||||||||||||||
Depreciation
and amortization
|
6,964,312 | - | 71,026 | - | 7,035,338 | |||||||||||||||
Other
operating expenses
|
2,550,950 | 29,622 | 1,575,157 | 535,962 | 4,691,691 | |||||||||||||||
(Loss)
income from discontinued operation
|
- | - | (12,663 | ) | - | (12,663 | ) | |||||||||||||
Net
income (loss)
|
$ | 16,679,414 | $ | 3,113,303 | $ | (185,418 | ) | $ | (535,962 | ) | $ | 19,071,337 | ||||||||
December 31, 2008
|
||||||||||||||||||||
Identifiable
assets
|
$ | 25,514,626 | $ | 19,129,175 | $ | 9,701,281 | $ | (2,555,996 | ) | $ | 51,789,086 |
F-30
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMEENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
14. SEGMENT
INFORMATION (CONTINUED)
Information
for Company’s sales by geographical area for the years ended December 31, 2009
and 2008 are as follows:
For The Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Sales
to unaffiliated customers:
|
||||||||
Japan,
Korea and Russia
|
$ | 27,734,345 | $ | 33,682,400 | ||||
PRC
|
12,848,185 | 21,051,500 | ||||||
Southern
and Eastern Asia
|
6,883,315 | 16,841,200 | ||||||
Mediterranean
and Red Sea
|
- | 8,420,600 | ||||||
Other
|
2,712,876 | 4,210,301 | ||||||
Total
|
$ | 50,178,721 | $ | 84,206,001 |
15. LITIGATION
The
Company settled a litigation claim in September 2009 in connection with an oil
pollution accident that occurred in 2006 in Korea. The amount of the settlement
was $505,112 and was recorded as other expense in the consolidated statement of
(loss) income for the year ended December 31, 2009.
16. CONTINGENCIES
The
Company signed a voyage charter contract with Sinoriches Global Ltd. on
June 11, 2007. The Company canceled the contract on June 18, 2007.
Sinoriches Global Ltd. filed an arbitration claim of $501,640 including interest
for the dispute. As of December 31, 2009, the case is in the process of
exchanging documents and evidence for arbitration. The Company does not believe
the case will result in a significant unfavorable outcome.
17. SUBSEQUENT
EVENT
The
Company registered and incorporated For Tai Shipping Co., Ltd. and Won Lee
Shipping Co., Ltd. on March 1, 2010 in Hong Kong.
On March
5, 2010, the Company obtained an extension of the due date of two
long-term notes payables totalling $2,961,739 with related
parties from July 19, 2010 to July 19, 2012.
F-31