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EX-21 - Winland Ocean Shipping Corpv190056_ex21.htm
EX-31.2 - Winland Ocean Shipping Corpv190056_ex31-2.htm
EX-32.2 - Winland Ocean Shipping Corpv190056_ex32-2.htm
EX-32.1 - Winland Ocean Shipping Corpv190056_ex32-1.htm
EX-31.1 - Winland Ocean Shipping Corpv190056_ex31-1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
AMENDMENT NO. 1

TO

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
 
20-5933927
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

 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 x
 
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  x   Smaller Reporting Company     o
 
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. 
 
 
 

 

EXPLANATORY NOTE

We are filing this Amendment No. 1 to its Annual Report on Form 10-K to enhance certain disclosures made in Item 3, in our Results of Operations, Liquidity and Capital Resources and Material Commitments/Tabular Disclosure of Contractual Obligations sub-sections of Item 7 and in Notes 3, 6 and 15 to our financial statements for the years ended December 31, 2008 and 2009 which are included herewith.  We also corrected our designation as a non-accelerated filer on the front cover of this Amendment No. 1 and have updated Exhibit 21 which list out our subsidiaries at December 31, 2009.  All other Items in this Amendment No. 1 remain unchanged.

 
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WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009

Index

TABLE OF CONTENTS

PART I
   
ITEM 1.
Business
4
ITEM 1B.
Unresolved Staff Comments
17
ITEM 2.
Properties
17
ITEM 3.
Legal Proceedings
18
ITEM 4.
(Removed and Reserved)
18
PART II
   
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
18
ITEM 7.
Management‘s Discussion and Analysis of Financial Condition and Results of Operations
20
ITEM 8.
Financial Statements and Supplementary Data
31
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
32
ITEM 9AT.
Controls and Procedures
32
ITEM 9B.
Other Information
32
ITEM 10.
Directors, Executive Officers, and Corporate Governance
33
ITEM 11.
Executive Compensation
36
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
38
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
38
ITEM 14.
Principal Accountant Fees and Services
40
PART IV
   
ITEM 15.
Exhibits and Financial Statement Schedules
40
SIGNATURES
45
 
 
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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”).

 
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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.

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”);

 
(b)
Kinki International Industrial Limited, a company organized under the laws of Hong Kong on May 2, 2006 (“Kinki”);

 
(c)
Bestline Shipping Limited, a company organized under the laws of Hong Kong on January 27, 1994 (“Bestline”);

 
(d)
Lancrusier Development Co., Limited, a company organized under the laws of Hong Kong on July 11, 1995 (“Lancrusier”);

 
(e)
Win Star Shipping Co., Ltd., a company organized under the laws of St. Vincent and the Grenadines (“SVG”) on June 21, 2000 (“Win Star”);

 
(f)
Bodar Shipping Co., Ltd., a company organized under the laws of SVG on January 7, 2004 (“Bodar”);

 
(g)
Winland Dalian Shipping S.A., a company organized under the laws of Panama and registered in Hong Kong on June 8, 2005 (“Winland Dalian”);

 
(h)
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:

 
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(i)
Win Eagle Shipping Co., Ltd., a company organized under the laws of Malta on July 29, 2002 (“Win Eagle”);

 
(j)
Win Bright Shipping Co., Ltd. a company organized under the laws of Malta on February 8, 2002 (“Win Bright”);
 
 
(k)
Win Ever Shipping Co., Ltd., a company organized under the laws of Malta on February 8, 2002 (“Win Ever”).

 
(l)
Win Glory S.A., a company organized under the laws of Panama and registered in Hong Kong on April 2, 2003 (“Win Glory”).

 
(m)
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)
Win Grace Shipping Co., Ltd., a company organized under the laws of Malta on September 4, 2003 (“Win Grace”).

 
(o)
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)
Win Moony Shipping S.A. was incorporated and registered in Panama on April 30, 2009 (“Win Shipping”).

 
(r)
Bao Shun Shipping S.A. was incorporated and registered in Panama on June 10, 2009 (“Bao Shun”).

 
(s)
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.

 
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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.
 
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.

 
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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. 
 
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%.

 
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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.

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:

 
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·
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.
 
 
·
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 
 
· Low efficiency and slow market reaction
 
· Difficulty with cost control
 
 
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· High visibility and marketability 
 
· Rich resources, favorable policies
 
· 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
 
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.
 
 
- 11 -

 

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.

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.

 
- 12 -

 
 
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.
 
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.

 
- 13 -

 
   
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.

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.

 
- 14 -

 
 
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:
 
 
·
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.
 
 
- 15 -

 
 
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.
 
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.

 
- 16 -

 
 
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.
 
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
 
  
- 17 -

 
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
 
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.  The insured underwriter settled the accident in 2006. Since then, the Company had not known any further claim related to such accident until January 2009 when the Company received the Korean court order which showed the claim was made on October 6, 2008. The Company settled the claim in September 2009 after adjudication was made on September 18, 2009, and the Company recognized the expense immediately.
 
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.
 
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.
 
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:

 
- 18 -

 
 
   
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
 
 
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.

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.

 
- 19 -

 
 
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 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.
 
 
- 20 -

 
 
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.

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.

 
- 21 -

 
 
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
%
   
-
     
-
 
 
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
%
 
 
- 22 -

 

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.
 
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.

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.
 
 
- 25 -

 

·
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.

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.

 
- 26 -

 

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
)%

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 4% decreased business volume, which resulted in the decrease in fuel and related consumption. The change was also attributable to the 13% decrease in the fuel rate.
 

 
- 28 -

 
 
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. Since one vessel was dry docked earlier than its anticipated schedule, the remaining unamortized dry dock fees for this vessel was expensed in 2009. This caused the increased amortization of dry dock fees of $474,603.
 
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 of $1,002,006.  In 2009, the vessel Winland Dalian had been under major repair without operation and therefore not generating revenue.
 
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 average interest rate decline of 1.07% on long-term loans and decreased previous long-term loans principal balance resulted from the payments of $3,140,991 made in 2009, offset by a new long-term loan of $14,490,000 and note payable of $3,000,000 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 of $505,112.

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 of $0.1 million.

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.

 
- 29 -

 

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 of $34.0 million, increased depreciation and amortization expense of $0.4 million, increased selling expense and other expenses of $0.3 million, 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.

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.

In compliance with International Maritime Organization (IMO) regulations, vessels must undergo regular inspection, monitoring and maintenance, referred to as “dry docking”, to maintain their required operating certificates. IMO regulations generally require vessels to be dry docked every 60 months. Dry docking requirements may be more or less stringent, depending on the jurisdiction under which a vessel’s flag is registered. To improve liquidity, the Company changed the registrations of the flags of two of its vessels to a jurisdiction which requires less dry docking for vessels to maintain their operating certificates and with lower dry docking fees.  With these new registrations, the dry docking fees of these two vessels decreased by $1,770,528 in 2009.  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

Net cash provided by operating activities during the years ended December 31, 2009 and 2008 was $2,380,199 and $23,933,016, respectively, a decrease of $21,552,817 or 90.1%.  This decrease in cash flow from operating activities was mainly due to the decrease in revenue from $84,206,001 during the year ended December 31, 2008 to $50,178,721 during the year ended December 31, 2009 which caused the decrease in net income of $12,112,382 to a net loss of $6,958,955.

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.

 
- 30 -

 

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 $12,583,783 for the year ended December 31, 2009 compared to cash used of $18,664,650 for 2008. The difference of $31,248,233 was primarily due to proceeds from a long-term loan of $14,490,000 and a long-term note payable of $3,000,000, which contributed to our financing of a vessel purchase, and a short-term loan of $1,170,070 to improve working capital, offset by repayments to long-term loans and related parties of $3,140,991 and $2,374,819, respectively.

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
 
   
Payments Due by Period
 
   
Total
   
Less
Than 1
Year
   
1-3
Years
   
3-5
Years
   
More Than 5
Years
 
Long-term loans obligations
  $ 19,488,443     $ 4,128,908     $ 5,150,642     $ 2,634,552     $ 7,574,341  
Long-term notes payable obligations
    5,867,573       3,326,132       1,071,436       1,470,005       -  
Non-cancelable leases obligations
    100,314       89,443       10,871       -       -  

Off-Balance Sheet Arrangements

None.

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.

 
- 31 -

 
 
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.

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.

 
- 32 -

 

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.
 
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.

 
- 33 -

 

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.
 
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.

 
- 34 -

 

  
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.

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.

 
- 35 -

 

            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.
 
ITEM 11.
Executive Compensation

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.  

 
- 36 -

 

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
   
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
 
   
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
   
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
   
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.
 
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.

- 37 -

 
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
%
 
(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.

 
- 38 -

 

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.
 
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.
 
 
- 39 -

 
 
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.

   
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
 
 
- 40 -

 

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
         
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

 
- 41 -

 
 
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
         
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

 
- 42 -

 
 
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
         
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

 
- 43 -

 

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
         
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
 
Provided herewith
         
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
 
 
- 44 -

 

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: July 8, 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
 
July 8, 2010
         
/s/ Li Honglin
 
Chairman of the Board and
   
Name: Li Hongling
 
President
 
July 8, 2010
         
   
Chief Financial Officer and
   
/s/ Jing Yan
 
Principal Financial and
   
Name: Jing Yan
 
Accounting Officer
 
July 8, 2010
         
/s/ Xie Xiaoyan
       
Name: Xie Xiaoyan
 
Director 
 
July 8, 2010
         
/s/ Xiao Liwu
       
Name: Xiao Liwu
 
Director
 
July 8, 2010
         
/s/ Xie Kewei
       
Name: Xie Kewei
 
Director
 
July 8, 2010
         
/s/ Si Zhaoqing
       
Name: Si Zhaoqing
 
Director
 
July 8, 2010
         
/s/ Michelle Sun
       
Name: Michelle Sun
 
Director
 
July 8, 2010
 
 
- 45 -

 

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
 
 
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.

/s/ 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 STATEMENTS
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 STATEMENTS
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 STATEMENTS
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 STATEMENTS
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
 
                         
Daewoo International Corporation
   
6.98
%
   
-
     
0.43
%
   
-
 
Biz& Shipping Co., Ltd. Seoul, Korea
   
2.76
%
   
-
     
-
     
-
 
Winning Shipping (HK) Co., Ltd.
   
2.32
%
   
-
     
-
     
-
 
Dynaroy Corporation SDN BHD
   
1.67
%
   
-
     
-
     
-
 
Cargill Ocean Transportation (Singapore) Pte. Ltd.
   
1.46
%
   
0.98
%
   
-
     
-
 
Universe Co. Ltd. Taibei
   
-
     
3.91
%
   
-
     
-
 
Cargill Ocean Transportation (Singapore) Pte. Ltd.
   
-
     
2.65
%
   
-
     
-
 
China Int’l Fund Limited
   
-
     
1.89
%
   
-
     
-
 
Liven Agrichem Pte. Ltd.
   
-
     
1.06
%
   
-
     
-
 
 
 
F-13

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
 
                         
Singapore Petroleum Company (Hong Kong) Limited
   
22.18
%
   
22.60
%
   
4.55
%
   
-
 
A/S Dan Bunkering Ltd.
   
18.42
%
   
-
     
7.31
%
   
-
 
Raffles Bunkering Pte Ltd.
   
17.87
%
   
11.28
%
   
-
     
2.08
%
Seabridge Bunkering Pte Ltd.
   
12.04
%
   
23.63
%
   
0.39
%
   
-
 
United Bunkering & Trading (HK) Ltd.
   
9.97
%
   
-
     
-
     
-
 
Trans-Tec Services Inc.
   
-
     
8.69
%
   
-
     
6.57
%
Chimbusco Pan Nation Petro-Chemical Co., Ltd.
   
-
     
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 STATEMENTS
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.

 
F-15

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(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.

(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.
 
 
F-16

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(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.

(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.

 
F-17

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(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.

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.
 
 
F-18

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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.

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.
 
 
F-19

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Recent Accounting Pronouncements (Continued)

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.

 
F-20

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.

 
F-21

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

4.    VESSELS (CONTINUED)

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.

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.
 
 
F-22

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

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.

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
 
 
 
F-23

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

6.    DEFERRED DRY DOCK FEES (CONTINUED)

The roll-forward of the beginning and ending balance of deferred dry dock fees consist of the following:

  
 
December 31, 2009
   
December 31, 2008
 
Balance at January 1, 2009
  $ 11,034,686     $ 9,937,910  
Addition of deferrals
    2,284,803       4,630,015  
Less: Amortization expense
    (4,007,842 )     (3,533,239 )
Deferred dry dock fees, net
  $ 9,311,647     $ 11,034,686  

The Company’s vessels are required to be drydocked approximately every 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. The Company defers the costs associated with the drydockings as they occur and amortizes these costs on a straight-line basis over the period between drydockings. Cost deferred as part of a vessel’s drydocking include actual costs incurred at the drydocking yard; cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking. If the vessel is drydocked earlier than originally anticipated, any remaining deferred drydock costs that have not been amortized are expensed at the beginning of the next drydock. Amortization expense for drydocking for the years ended December 31, 2009 and 2008 was $4,007,842 and $3,533,239, respectively. All other costs incurred during drydocking are expensed as incurred.

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-24

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-25

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-26

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-27

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-28

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-29

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
 
 
F-30

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

13.    DISCONTINUED OPERATION (CONTINUED)

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-31

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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-32

 

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY TRIP TECH, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.

The insured underwriter settled the accident in 2006. Since then, the Company had not known any further claim related to such accident until January 2009 when the Company received the Korean court order which showed the claim was made on October 6, 2008. The Company settled the claim in September 2009 after adjudication was made on September 18, 2009, and the Company recognized the expense immediately.
 
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-33