U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

| | TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the period from _________________ to __________________

Commission File Number 333-134991

_______________________________________________

BAOSHINN CORPORATION

(Exact name of registrant as specified in its charter)

______________________________________________

Nevada		20-3486523
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
A-B 8/F Hart Avenue
Tsimshatsui, Kowloon, Hong Kong		N/A
(Address of principal executive offices)		(zip code)
Registrant‘s telephone number, including area code: (852) 2815-1355

_____________________________________________

Securities registered under Section 12(b) of the Exchange Act:

None.

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value per share

(Title of Class)

Indicate by check mark if registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.      |  | Yes   | X | No.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  |  | Yes   | X | No.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | X | Yes   |  | No.

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) 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.  [  ]

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.  (Check one):

Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer [  ]

Smaller reporting company [ X ]

(Do not check if a smaller reporting company)

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

|  | Yes   | X | No.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second quarter. Note: If determining whether a particular person or entity is an affiliate cannot be made without involving an unreasonable effort and expense, the aggregate market value of the common equity held by non-affiliates may be calculated on the basis of reasonable assumptions, if the assumptions are set forth in this form.

6,550,000 common shares @ $0.021* = $137,550

*Average of bid and ask closing prices on June 30, 2010.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes |  | No. |  |

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

21,400,000 common shares issued and outstanding as of March 28, 2011

DOCUMENTS INCORPORATED BY REFERENCE:

None.

FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Baoshinn Corporation (the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report

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will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

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TABLE OF CONTENTS

PART I		Page
Item 1.	Description of Business	5
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
PART II
Item 5.	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
Item 6.	Selected Financial Data	13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 8.	Financial Statements and Supplementary Data	19
	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheets
	Consolidated Income Statement
	Consolidated Statements of Cash Flows
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income
	Notes to Consolidated Financial Statements
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	48
Item 9A.(T)	Controls and Procedures	48
Item 9B.	Other Information	49
PART III
Item 10.	Directors and Executive Officers and Corporate Governance	49
Item 11.	Executive Compensation	52
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13.	Certain Relationships and Related Transactions, and Director Independence	54
Item 14.	Principal Accountant Fees and Services	55
Item 15.	Exhibits	56
	Signatures	57

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PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

Background

Baoshinn Corporation was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc. We were formed as a “blind pool” or “blank check” company whose business plan was to seek to acquire a business opportunity through completion of a merger, exchange of stock, or other similar type of transaction. Prior to our identification of Bao Shinn International Express (“BSIE”) as an acquisition target, our only business activity was organizational activities.

We consummated our merger with BSIE, a privately held Hong Kong corporation, on March 31, 2006, by acquiring all of the issued and outstanding common stock of BSIE in a share exchange transaction. We issued 16,500,000 shares of our common stock in exchange for 100% of the issued and outstanding shares of BSIE common stock. As a result of the share exchange transaction, BSIE became our wholly-owned subsidiary.

The former stockholders of BSIE acquired 76.74% of our issued and outstanding common stock as a result of completion of the share exchange transaction. Therefore, although BSIE became our wholly-owned subsidiary, the transaction was accounted for as a recapitalization of BSIE whereby BSIE is deemed to be the accounting acquirer and is deemed to have adopted our capital structure.

Government Approval/Regulations

BSIE is a travel service provider located in Hong Kong. As a travel service provider BSIE must be a member of the Travel Industry Council in Hong Kong. Such a member must meet the following criteria:

1.

It is a limited company incorporated or registered in Hong Kong.

2.

Its only business is travel-related and tourism.

3.

It is a member of one of the eight Association Members. BSIE is a HATA member (Hong Kong Association of Travel Agents). It has a minimum paid-up capital of Hong Kong Currency of $500,000, plus an additional Hong Kong Currency of $250,000 for each branch office.

4.

It conducts its travel-related and tourism business within separate and independent commercial premises / buildings.

5.

It employs at each office at least one manager with two years’ relevant experience and another full-time staff member.

Any company that participates in the Travel industry in Hong Kong is required by law to be the member of the Travel Industry Council (TIC) in Hong Kong. Without joining the TIC, we cannot sell travel packages or provide travel services to the public. Any individual that buys a travel package or receives travel service from a non Travel Industry Council member will not have proper insurance coverage, and it is illegal for a company to sell travel service without joining the TIC.

Baoshinn International Express Background

BSIE is headquartered in Hong Kong and was established in 2002 to offer extended travel services primarily focused on wholesale businesses and corporate clients. Through our Hong Kong subsidiary, we are ticket consolidators of major international airlines, including Thai Airways, Eva Airways, Dragon Air, Air China, China Southern Airlines, China Eastern Airlines, HongKong Airlines & HongKong Express. With a strong and experienced team of travel consultants and officers dedicated to excellent travel services, we provide travel services such as ticketing, hotel and accommodation arrangements, tour packages, incentive tours and group sightseeing services to customers located in Hong Kong and Mainland China.

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Chartered Flights

Chartered flights generally account for less than 5% of our total business. During peak periods, such as the Easter holiday, summer holiday, Christmas, New Year and Chinese New Year, our chartered flight schedule will depend on the market situation. We will discuss options with airlines such as Eastern Airline to Shanghai, Thai Airways to Bangkok, Eva Airlines to Taipei and Dragon Airline to Beijing.

Business Objective

We intend to expand our current travel agency wholesale business, direct corporate client sales and Hong Kong to China travel arrangement in Hong Kong operations, and establish additional operations Mainland China. The estimated funding to meet these objectives is: (i) US $500,000 to expand the Hong Kong Operation; (ii) US $1,200,000 to establish branch offices and sales representative centers in Mainland China; (iii) US$1,500,000 for working capital of Mainland China operations.

Our long term objective is to enlarge our customer base and to provide privileged services in the Hong Kong and China Mainland market.

Description of Services

Ticketing Agency

We are ticket consolidators (meaning we are wholesale agents for the airlines) for Thai Airway, Eva Airways, China Airlines, Dragon Air, Air China, China Southern Airlines, China Eastern Airlines, HongKong Airlines and Hong Kong Express. Our computerized in-house ticketing network allows us to book and issue flight tickets for any international airline. We currently use the Abacus, Amadeus, World Span, Galileo and E-Term ticketing systems, which offer the most comprehensive ticketing services to our customers. All of these systems are recognized by the airlines as ticket booking systems, which link to airline computer systems and allow us to gain direct access to those systems and issue the ticket.

Hotel/Accommodation Arrangement

We provide accommodation arrangements through our Hotel Division, which enables our customer to make advance arrangements throughout their tour. We have the capability to provide hotel reservations to any hotel in the world.

Inbound Division

We provide local support and accommodation for inbound travelers to Hong Kong through our strategic alliances and relationships with local hotels and transportation companies. We provide hotel reservations, transportation, tour guides, optional tour and entrance tickets for playground and Disneyland in Hong Kong. Our current customers mostly come from the Asia Pacific regions, including China, Japan and Taiwan, also chartered customers from Europe and North America. Our staff will concentrate on China Inbound travel and Disneyland Resort Tours as we hope to capitalize on the domestic travel market in China.

China Division

With our long established relationships in the China travel industry and our special relationships with hosts in China, we provide one-stop service to customers to enjoy the widest range of options, packages, tickets and accommodations in China.

Corporate Division

We provide custom services and arrangements to our corporate clients for their business travel. With a team of travel consultants specifically trained for our corporate clients, we provide our expertise to corporate customers by designing business itineraries that fit their busy schedules.

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We are now undergoing developments and expansion in all divisions. With our planned branch offices due to open in the next two years, our business is expected to be more comprehensive and be offered to a much wider spectrum of customers, while maintaining our high standard of service.

Operation

BSIE’s headquarters is located in Kowloon, Hong Kong. The office lease is for a term of six (6) years, and it commenced on January 1, 2004. On January 2, 2010 the lease was renewed for another 2 years, and that extension will expire on December 31, 2011. Bao Shinn Holidaies Limited (“BSHL”), which is one of the Company’s subsidiaries (55% owned), is located in Central Hong Kong, and its office lease for a twelve (12) year term commencing on July 28, 2008.

BSIE has 17 employees, and BSHL has 15 employees as of the end of 2010.

BSIE is a member of the Travel Industry Council of Hong Kong (TIC) and the Hong Kong Outbound Tour Operator’s Association (OTOA). To maintain memberships with these organizations, we are required to comply with the agencies’ regulations, which demand a high standard of professionalism in the travel industry and to protect the interests of our customers.

Ordinary Membership of the TIC shall meet the following criteria:

Our goal is to capture an all-encompassing market that will include the inbound/outbound markets for travel services in Hong Kong, China and around the world. We believe that we can compete on the retail, wholesale and corporate levels of the travel industry using this all-encompassing approach.

Market Overview

The travel industry has become a significant driving force in Hong Kong’s economy. This includes inbound as well as outbound business, as evidenced by the following facts, trends and future estimates.

1.

In 2008, there were 29.51 million visitors to Hong Kong, a growth of 4.7%% compared to 2007. Source: Hong Kong Tourism Board, January 2009.

2.

Being an international city, Hong Kong is a popular venue for international conventions and exhibitions, which bring a large number of visitors to the City every year.

3.

Attractions in Hong Kong such as the Sun Yat-Sen Museum, Ocean Park Theme Hotel and Disneyland Resort are expected to attract more visitors in the coming years.

4.

International Sports events, including the Macau Grand Prix in November and the Hong Kong Rugby Seven are held every year and have been attracting a large number of visitors to Hong Kong:

PEOPLES REPUBLIC OF CHINA

Market Overview

Travelers from Mainland China are by far the largest source of revenue for the Hong Kong travel industry. The Chinese Government plans to further expand the opportunities given to its citizens to travel to Hong Kong. With the expanding middle class in China, the number of Mainland China Travelers and the revenues they generate is expected to increase. The recent opening of the Disneyland Resort in Hong Kong has also attracted tourists from Mainland China.

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Source:  Hong Kong Tourism Board, April, 2008

·

The economy of China has been expanding dramatically since the 1990’s. The number of travelers continues to increase as well as their spending power. Overall spending by Mainland China Visitors has been increased steadily in the past five years. Source: Hong Kong Tourism Board.

·

Besides traveling outside China, the domestic travel market in Mainland China has been growing rapidly. With Baoshinn’s new sales representative offices we plan to tap into this increasing demand.

Travel Policy Changes

·

Benefiting from the progressive extension of the Individual Visit Scheme (IVS), Mainland China was the origin for more than half the total visitors to Hong Kong in 2007. Source: Hong Kong Tourism Board, February, 2008.

·

The Individual Visit Scheme (IVS) was originally implemented in July, 2003. On July 1, 2004, IVS was launched in a total of 32 cities in southern and eastern China, permitting residents to travel to Hong Kong as individuals. Previously the Chinese Government only allowed groups to travel to Hong Kong. During 2007, 15.49 million or 55% of all the Mainland visitors traveled to Hong Kong under IVS.

·

Total Mainland China Visitors to Hong Kong increased of 16.8% from 2007 to 2008. This represented 16.8 million visitors in 2008. Source: Hong Kong Tourism Board, January, 2009.

·

Starting in July, 2002, Mainland China Visitors were allowed to exchange foreign currencies freely in unlimited amounts with commercial banks. In January 2005, the Chinese Government increased the cash limit that may be carried by visitors from Mainland China to Hong Kong from US$749 to US$2,497 (RMB 6,000 to RMB 20,000). (Exchange Rate: US$1:RMB8.01).

The “Quota System” was cancelled in January 2002 for traveling from PRC to Hong Kong. New “Travel Permits” for Mainland China Visitors was established in May 2002. New Permits are valid for 5 years with multi-purposes entries, including leisure and business visits; unlike the prior permits, which were only valid for business visits. Transit Travel Permits allow Chinese citizens to stay in Hong Kong for a maximum of 7 days. Business Travel Permits have been gradually replaced by Multi-purpose Permits, which offers more flexibility and ease of use. For visitors from the Mainland, the flexibility and convenience offered by IVS travel encourages them to make more frequent and short-stay visits to Hong Kong.

Marketing Strategies

Our goal is to create and keep customers. Our marketing strategy will reflect this goal as we build our reputation in Hong Kong and China. With our experience and network in the industry, we are growing our business to provide excellent travel solutions to customers.

Our marketing strategies include the following:

·

With the number of visitors increasing, we continue to enhance our sales volume in ticketing sales, inbound and outbound tours packages, and hotel accommodation arrangements. This allows us to negotiate competitive rates, since we are a ticket consolidator for several international airlines.

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·

We will work to take advantage of the IVS and the spectacular growth in China’s economy.

·

We will strive to improve service quality for customers, by investing in advanced computer programs, with a view to supplying innovative information technology solutions to both individual and corporate travelers.

·

To further expand our service coverage for Mainland China visitors, we plan to open a new office in Shanghai and Beijing. This office will provide complete travel services to individual and corporate customers in the Eastern and Northern area of China.

·

We plan to further expand our travel services coverage to Guangzhou and Shenzhen in Mainland China. These offices will allow us to provide superior travel services for travelers in the Southern China.

·

We also plan to operate chartered flights from Hong Kong to Mainland, Thailand and Taiwan in the future.

·

We plan to increase our coverage and our presence in China through the development of five representative sales offices in each of the five China regions, result in a total of 20 representative sales offices in China. This “well-organized network” is our planned branch in the People’s Republic of China. This will be a network that, based on the experience of our officers and directors, we plan on being well organized and efficient. We plan to set up our network in the People’s Republic of China through the retail chain which will not only contact the customer, but will also deal with the local travel companies in China to expand the sales network.

·

We plan to operate in a retail chain store format to enlarge our customer base and provide more comprehensive services in Mainland China. This “retail chain” means the company will open the branch to serve the direct customer of the Chinese agents. Currently, we provide our services to travel agencies who further sell our product to direct customers.

·

Currently, a majority of our revenues are generated from travel agencies, the rest of our revenue comes from direct corporate customers and sale of air ticket route from Hong Kong to Mainland China. Our plan is to increase the direct corporate customer business, because of its higher gross profit margin.

Marketing Techniques

Air Tickets wholesale (core business):

·

Maintain a good relationship with airlines to get competitive first tier agent air ticket price, as well as lucrative airline incentive contract.

·

Strong sales team built up a wide network within the Hong Kong travel industry over years, and kept a good reputation among Hong Kong local retail travel agents.

·

Flat organization structure enables efficient decision making and quick response to market change.

·

Distribute the competitive selling price list by electronic auto-fax and email and by physical visits to our customer.

·

Increase fixed space allotment from airlines in the travel hot season.

·

Geographically located in the heart of East Asia, the short haul travel package market in Hong Kong has great potential and a higher margin.

·

Build in house package design, combine hotel services and air flight with innovative ideas.

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Corporate travel:

Our current market techniques to promote corporate are:

·

Focus on niche market and avoid competing with giant corporate traveler company such as American Express and CWT.

·

Provide superior service to SME clients that are ignored by giant corporate travel agencies, and keep them by providing flexible service terms.

·

Recruit experienced corporate travel consultants with clients on hand, and retain them by an incentive salary structure.

·

Full decentralized corporate travel department, to enable department head full autonomy in operating the corporate travel business.

Sale of air ticket route from Hong Kong to Mainland China.

Our current market techniques to promote inbound travel are:

·

Build extensive relationships with China local hotels to obtain competitive hotel rates, and secure hotel rooms during peak season.

·

Use existing networks in mainland China and Taiwan to penetrate into those overseas markets, provide tour services, hotel, and car transfer services for Hong Kong visitors from these regions.

·

As part of our long term market strategies, the existing business in Hong Kong will build the foundation for future China development, and will integrate into future China operations.

Competition and Market Trends

There is considerable competition for consolidators and wholesale ticket sellers in China. While we have considerable experience and expertise in this field, several major competitors do exist in this market. Our competitors run similar businesses to ours.

The e-ticket is a trend that the airlines are moving towards, and consumers purchasing airline tickets and making hotel reservations via telephone or internet is a competitive force. Due to the limitations and regulations surrounding e-tickets, this is not a trend that we feel will have a significant impact on our business expansion, if at all.

Airlines are trying to build up e-ticket systems/internet booking systems, so they can reach end customers directly without the use of travel agents. However whether the e-ticket system can be successful in Hong Kong and China is still a question mark. With the limitations of e-ticketing itself, and different consumer habits in Greater China compared to developed western countries, time will tell whether e-ticket can be prevail in greater China.

Limitations & Regulations

·

E-tickets are normally non-endorsable, non-re-routable, and they lack flexibility when dealing with more complicated bookings.

·

Details are input by the end-customer, and it is very easy to create errors by those not familiar with airline coding.

·

Dependence on internet and computer system will be a disaster during system outage.

·

E-tickets are not a growing trend in the Greater China Region on the consumer end.

·

Online credit card usage is still not prevailing in Greater China due to insecurity and fraud. In general, people’s attitude towards the use of credit cards is different in western developed countries, where the citizens are more accustomed to shopping with credit cards.

·

Fewer people in China have credit cards.

·

As a developing country, consumers in China are not confident in internet transactions. They are more

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likely to accept physical human contact, or a paper ticket where they can see what they get.

Regarding the methods of competition in our industry, we release the authority to the front line staff to negotiate the deal with customers, while our competitors have more formal channels they must go through to make a decision. Thus, our turnaround is faster than our competition and more efficient.

Our competitor’s advantage is that their financial background is stronger than ours.

Our main advantage is our relatively small size which allows us to be more flexible and respond to market changes more rapidly.

Employees

We have approximately 32 employees in Hong Kong.

ITEM 1.A.  RISK FACTORS.

Not Applicable as a smaller reporting company.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES.

We do not own any real property for use in our operations or otherwise. We do rent office space from non-affiliates third parties, on the terms described more specifically below:

Name of Landlord	Property location		Rental Charges Monthly		Duration	Lease Contract Under
Wan Shinn Motors Company Limited	Room A&B, 8/F, 8 Hart Avenue, Tsim Sha Tsui, Kowloon.		$3,107		01/01/2010 - 12/31/2011	Bao Shinn International Express
Tak Shing Investment Co. Ltd.	Room 208 Tak shing House. 20 Des Voeux Road Central, Hong Kong		$4,974		07/28/2010 - 07/27/2012	Bao Shinn Holidays Limited
Twelve Months Ending December 31:		Future Minimum Lease Payments $
December 31, 2011		96,803
December 31, 2012		29,819

We use our facilities to house our corporate headquarters and operations and believe our facilities are suitable for such purpose. We also believe that our insurance coverage adequately covers our interest in our leased space. We have a good relationship with our landlords. We believe that these facilities will be adequate for the foreseeable future.

The Company currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities or interests in, persons primarily engaged in real estate activities.

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ITEM 3.  LEGAL PROCEEDINGS.

We may be subject to litigation from time to time as a result of our normal business operations. Presently, there are no material pending legal proceedings to which we are a party or as to which any of our property is subject, and no such proceedings are known to be threatened or contemplated against us.

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.

(a)

MARKET INFORMATION. Our common shares are quoted for trading on the OTC Bulletin Board under the symbol “BHNN”. The closing price of our common stock, as reported by the OTC Bulletin Board on December 31, 2010, was $.045.

National Association of Securities Dealers OTC Bulletin Board*
Quarter End	High	Low
March 31, 2008	.40	.30
June 30, 2008	.39	.10
September 30, 2008	.10	.07
December 31, 2008	.21	.07
March 31, 2009	.21	.21
June 30, 2009	.21	.02
September 30, 2009	.02	.02
December 31, 2009	.02	.02
March 31, 2010	.02	.02
June 30, 2010	.021	.021
September 30, 2010	.022	.022
December 31, 2010	.045	.045

*

Over-the-counter market quotations reflects high and low bid quotations and inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.

Our transfer agent and registrar for our common stock is Madison Stock Transfer Inc. Their address is PO Box 145, Brooklyn, New York, USA 11229-0145. Their telephone number is (718) 627-4453. Their fax number is (718) 627-6341.

(b)

HOLDERS. As of December 31, 2010, we had approximately 25 shareholders of record who held 21,400,000 shares of the Company‘s common stock. This figure does not include shareholders whose shares are held in street or nominee names. We believe that as of December 31, 2010, there are approximately 73 beneficial owners of our Common Stock, when these shareholders are considered.

(c)

DIVIDEND POLICY. We have not declared or paid any cash dividends on our common stock and we do not intend to declare or pay any cash dividend in the foreseeable future.  The payment of dividends, if any, is within the discretion of our Board of Directors and will depend on our earnings, if any, our capital requirements and financial condition and such other factors as our Board of Directors may consider.

(d)

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

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Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average exercise Price of outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column)
Equity compensation plans approved by security holders	None	Nil	Nil

(e)

RECENT SALE OF UNREGISTERED SECURITIES. The Company has made no sales of unregistered securities in the last three years.

ITEM 6.  SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

  RESULTS OF OPERATIONS.

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This discussion and analysis of our financial condition and results of operations includes “forward-looking” statements that reflect our current views with respect to future events and financial performance. We use words such as “expect,” “anticipate,” “believe,” and “intend” and similar expressions to identify forward-looking statements. You should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties inherent in future events and you should not rely unduly on these forward looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Reference in the following discussion to “our”, “us” and “we” refer to the operations of Baoshinn Corporation and its subsidiaries (“the Company”), except where the context otherwise indicates or requires.

The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes to the audited financial statements included in this annual report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

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Results of operations for year ended December 31, 2010 compared to year ended December 31, 2009

	For Year Ended  31 Dec, 2010		For Year Ended  31 Dec, 2009
	$		$
Retail and Corporate revenue	30,161,944		23,912,150
Commission from travel booking services	117,873		156,544
Incentive commissions	320,610		239,045
Net sales	30,600,427		24,307,739
Cost of sales	(29,252,793)		(23,008,756)
Gross profit	1,347,634		1,298,983
Other operating income – Note 5	59,226		54,984
Depreciation	(21,601)		(27,821)
Administrative and other operating expenses	(1,285,542)		(1,298,752)
Income/(Loss) from operations	99,717		27,394
Other non-operating income - Note 6	4,917		1,149
Interest expenses – Note 7	(736)		(1,230)
Income/(Loss) before income taxes	103,898		27,313
Income taxes - Note 8	(24,433)		(6,176)
Net Income/(Loss)	79,465		21,137
Non-controlling interest	(53,711)		(15,978)
Net Income/(Loss) attributable to The Group	25,754		5,159

Going Concern

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We had a net income of $25,754 for the year ended December 31, 2010 and a net loss since inception of $1,167,418. On December 31, 2010 we had cash on hand of $547,485. These circumstances raise substantial doubt about our ability to continue as a going concern. These doubts were outlined in our independent auditor’s report on our consolidated financial statements for the year ended December 31, 2010, which are included in this annual report on Form 10-K. Although our consolidated financial statements raise substantial doubt about our ability to continue as a going concern, they do not include any adjustments relating to recoverability and classification of recorded assets, or the amounts or classifications of liabilities that might be necessary in the event we cannot continue as a going concern. Certain of the Company’s shareholders have verbally agreed to provide continuing financial support to the Company for future losses it may incur.

Revenues

For the year ended December 31, 2010, the Company has experienced an increase in sales revenues, and the Company was recognized by Eva Airline as its top selling agent in Hong Kong. Eva Airlines operates both short haul routes within South East Asia and long haul routes including North America and Europe. The company has also been appointed as a first tier agent for two additional airlines, i.e., HongKong Airlines & HongKong Express. Hong Kong Airlines mainly operates flights originating from Hong Kong to destinations in Asian cities, including Bangkok, Kuala Lumpur, Manila, and major cities in Japan. HongKong express mainly operates flights originating from Hong Kong to mainland China, second tier cities, including Changsha, Fuzhou, Hangzhou, Hefei, Guiyang etc.

14

Our revenue for the year ended December 31, 2010 was $30,600,427, compared to $24,307,739 in the year ended December 31, 2009. We generate our revenues primarily from retail and corporate business. For the year ended December 31, 2010, we derived 98.6%, 0.3% and 1.1% of our revenues from our retail & corporate clients, commissions from travel booking services and airline incentive commissions respectively.

The table below sets forth the revenues from our principal lines of business for the periods indicated.

		Year ended December 31, 2010	Year ended December 31, 2009
		Audited	Audited
		$	$
Retail and Corporate revenue		30,161,944	23,912,150
Commission from travel booking services		117,873	156,544
Incentive commissions		320,610	239,045
Total revenue		30,600,427	24,307,739

Retail and Corporate Revenue

Revenues from retail and corporate travel services are recognized when the travel service provided by the Company is completely delivered. The Company presents revenue from such transactions on a gross basis in the consolidated statements of comprehensive income, as the Company acts as a principal, assumes inventory and credit risks, and has the primary obligation to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations. The Company also has discretion in determining the service prices. The Company changes the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to make it a holiday package or business travel solution for customers.

Referral fees for travel booking services

We receive referral fees from travel product providers for booking travel services. The itinerary and product price are generally fixed by the travel product providers and we book the travel services on behalf of the customers. Referral fees from travel booking services rendered are recognized as commissions after the services are rendered and collections are reasonably assured. We present revenues from such transactions on a net basis in the consolidated statements of operations, as we act as an agent, we do not assume any inventory and credit risks, we have no obligations for cancelled airline or hotel ticket reservations, and do not have discretion in determining the service prices.

Incentive commission from travel suppliers

We earn an incentive commission from many travel suppliers. Contracts with certain travel suppliers contain discretionary escalating commissions that are paid to us subject to achieving specific performance targets. Such discretionary escalating commissions are recognized on an accrual basis because such commissions are usually paid in arrears and we can reasonably estimate such commissions. Our statement of operations presents revenues from such transactions on a net basis, because we act as an agent, we do not assume any inventory risk, and we have no obligation for cancelled airline tickets.

Cost of Sales

Costs of sales are costs directly attributable to rendering our revenues, which consist primarily of payments for travel costs to airlines and suppliers. Cost of revenues accounted for 95.6% of our revenue in the year ended December 31, 2010 and 94.7% of our revenues in the year ended December 31, 2009.

The table below sets forth the cost of sales for the periods indicated.

15

	Year ended December 31, 2010		Year ended December 31, 2009
	Audited		Audited
	$		$
Total revenue	30,600,427		24,307,739
Cost of sales	(29,252,793)		(23,008,756)
Gross profit	1,347,634		1,298,983

Gross Profit and Gross Profit Margin

Our gross profit for the year ended December 31, 2010 was $1,347,634, compared to $1,298,983 in the year ended December 31, 2009. The gross profit margin rate decreased from 5.3% for the year ended December 31, 2009 to 4.4% for the year ended December 31, 2010. The decrease in our gross profit margin rate is mainly due to the increase in fuel surcharge during 2010. Fuel surcharge lead to an increase in air ticket turnover, however the gross profit per ticket stays the same, consequently gross profit margin rate decreased.

Operating Expenses

Overview

Total operating expenses for the year ended December 31, 2010 were $1,285,542 or 4.2% of revenues, while the operating expenses for year ended December 31, 2009 were $1,298,752 or 5.3% of revenues. The decreases in dollar amount are mainly attributable to our cost saving strategy, which reduced salaries, commissions, and allowances as compared to the same period last year.

Salaries, Commissions and Allowances

Salaries, Commissions and Allowances has decreased from $928,588 for the year ended December 31, 2009 to $894,046 for the year ended December 31, 2010, The Group has flattened organization structure by cutting senior management staff, reducing staff redundancy and decentralizing its operations. Meanwhile, support and administration staffing has also been cut to reduce back office costs.

Legal and Professional Fees

Legal and professional fees for the year ended December 31, 2010 were $35,912 or 0.1% of revenues, while the legal and professional fees for year ended December 31, 2009 were $40,635 or 0.2% of revenues. Legal and professional fees in the current period were consistent with the same period last year.

Office Rental

Office rental for the year ended December 31, 2010 was $96,877 or 0.4% of revenues, while the Office rental for year ended December 31, 2009 were $94,772 or 0.4% of revenues.  Office rental expenses in the current period were consistent to the same period last year.

16

Other General and Administration Expenses

Other expenses for the year ended December 31, 2010 were $258,707 or 0.8% of revenues, while the other expenses for year ended December 31, 2009 were $234,757 or 0.9% of revenues. The expenses in the current period were consistent to the same period last year.

Other operating income

		Year Ended		Year Ended
		Dec 31, 2010		Dec 31, 2009
		Audited		Audited
GDS commission income		-		1,737
Refund Write back		24,580		12,153
Management service income		34,646		41,094
		59,226		54,984

Commission Income

Commission income for the year ended December 31, 2010 were nil compared to $1,737 for year ended December 31, 2009. During the year ended December 31, 2010, we increased the number of tickets booked through a lower percentage commission booking system, which resulted in a lower amount of commissions.

Commission income is received by the Company from the Global Distribution Systems Supplier (GDS), which is the booking system that links airlines, IATA and travel agencies. GDS acts as an information medium between the Airlines and Travel agencies. Travel consultants check seat availability and fare conditions, and make reservations through GDS. GDS also links Airline and Travel Agencies through IATA’s Bill and Settling Plans (BSP). Once the ticket is issued from IATA through the GDS system, travel agencies will settle the payment with airlines through IATA‘s fortnightly BSP Payment.

Each GDS system has a different layout, and different user manual and command. Airlines can choose to link with one or a few GDS. The Company currently has 4 GDS‘s installed; they are “Amadeus”, “Worldspan”, “Travelsky” and “Abacus”. A GDS will normally provide equipment and install their system onsite for a travel agency. The travel agency must generally sign an agreement with each GDS supplier which details its usage and reward scheme. Some GDS suppliers require travel agencies to maintain a minimum usage volume, otherwise the travel agency will have to pay fees for the equipment. GDS suppliers also encourage travel agencies to book tickets through their system by rewarding travel agencies on the number of tickets booked in a certain period of time.

The Company encourages its consultants to use the GDS that has the best compensation structure, however, a balance between operational efficiency is also considered. Some airlines are more user friendly with a specific GDS, also with each travel consultancy’s experience with different systems, the Company leaves it to the consultant’s discretion to choose the GDS it uses.

Management Service Income

Management service income represents compensation from a related party, Bao Shinn Express Company Limited (“BSEL”). BSEL currently holds 38.55% of the company’s outstanding common stock. The Company has provided management services to BSEL on business operations and general travel industry knowledge. Management service

income from BSEL was $34,646 in the year ended December 31, 2010, compared to $41,094 in the year ended December 31, 2009.

The Company recognizes the management service as “other operating income”, as the Company’s management team is part of its operation team. Accordingly, the revenue generated by the management team is considered part of the Company’s operations.

17

Other non-operating income / (expenses)

		Year Ended		Year Ended
		Dec 31, 2010		Dec 31, 2009
		Audited		Audited
Gain on exchange		-		825
Interest income		16		324
Sundry income		4,901		-
		4,917		1,149

Exchange Gain

The exchange (loss)/gain was $nil for the year ended December 31, 2010 compared to $825 in the year ended December 31, 2009. This was attributable to a more stable rate of the Hong Kong Dollar against foreign currencies, including the U.S. Dollar, RMB and the Thai Baht for the year ended December 31, 2010.

The Company pays overseas suppliers in their currency, and charges its customers in HK dollars, with the exchange rate determined at the point of invoicing. Because of the timing difference between payments and receipts, the Company incurs exchange differences in transactions with overseas suppliers. The Company recognizes the gain or loss as “non-operational income or expense”, as this is not from operations.

Interest Income

Interest income was $16 for the year ended December 31, 2010, compared to $324 for the year ended December 31, 2009. This interest was earned from bank savings and fixed deposit accounts. The Company considers it non-operational income. The decrease in the interest income for the year ended December 31, 2010 was mainly due to a decrease in the bank interest rate compare to the same period in 2009.

Net Income

Our net income was $25,754 for the year ended December 31, 2010, compared to a net income of $5,159 for the year ended December 31, 2009. The increase in net income for the year ended December 31, 2010 compared to the same period last year was mainly due to the increase in gross profit as a result of the Company’s change in business strategy, as well as an improvement in the general economy in 2010 compared to 2009.

Operating Activities

Net cash provided by operating activities was $396,955 for the year ended December 31, 2010, compared to net cash used in operating activities of $12,901 for the year ended December 31, 2009. The cash provided during the year ended December 31, 2010 is mainly due to the movement in working capital. Working capital increased $45,894 from $742,064 as of December 31, 2009 to $787,958 as of December 31, 2010.

Investing Activities  

For the year ended December 31, 2010, net cash used in investing activities was $68,635 compared to $193 for the same period in 2009. The cash was mainly used for the purchase of new office equipment for our subsidiary.

Financing Activities

Net cash used by financing activities was $39,085 for the year ended December 31, 2010, compared to $34,327 net cash provided by financing activities for the year ended December 31, 2009. For the year ended December 31, 2010 and 2009, there were no financing activities, the movement in cash is mainly due to the changes in temporary advances from directors.

18

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

19

Baoshinn Corporation

Consolidated Financial Statements

For the Year Ended December 31, 2010, 2009 and

Nine Months Ended December 31, 2008

(Stated in US Dollars)

20

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Baoshinn Corporation

We have audited the accompanying consolidated balance sheet of Baoshinn Corporation (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the year ended December 31, 2010 and 2009 and the nine months ended December 31, 2008.  These consolidated financial statements are the responsibility of The Group’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 the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 The Group and its subsidiaries as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the year ended December 31, 2010 and 2009 and nine months ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that The Group will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, The Group has accumulated losses. These factors raise substantial doubt about The Group’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/Dominic K.F. Chan & Co

Certified Public Accountants

Hong Kong

March 30, 2011

21

BAOSHINN CORPORATION

CONSOLIDATED BALANCE SHEET

(Stated in US Dollars)

	At December 31,
	2010		2009
	$		$
ASSETS
Current Assets
Cash and cash equivalents	547,485		260,155
Accounts receivable	1,695,759		1,182,614
Deferred cost – note 13	1,200,598		416,651
Restricted cash	12,861		-
Amount due from a related party – Note 12	-		87,029
Deposits, prepaid expenses and other receivables – Note 9	785,854		800,482
Total Current Assets	4,242,557		2,746,931
Plant and equipment – Note 10	41,475		52,430
TOTAL ASSETS	4,284,032		2,799,361
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current Liabilities
Accounts payable	1,804,077		1,198,145
Deferred revenue – note 13	1,217,300		419,431
Other payables and accrued liabilities – Note 11	414,354		267,566
Income tax payable	18,568		6,172
Amounts due to related parties – Note 12	300		113,553
Total current liabilities	3,454,599		2,004,867
TOTAL LIABILITIES	3,454,599		2,004,867
COMMITMENTS AND CONTINGENCIES – Note 18
STOCKHOLDERS’ EQUITY
Common stock
Par value : 2010 - US$0.001
Authorized: 2010 – 200,000,000 shares
Issued and outstanding: 2010 – 21,400,000 shares	21,400		21,400
Additional paid-in capital	1,793,596		1,778,263
Accumulated other comprehensive income	(1,329)		32
Accumulated deficit	(1,167,418)		(1,193,172)
TOTAL STOCKHOLDERS’ EQUITY OF THE GROUP	646,249		606,523
ATTRIBUTABLE TO NON-CONTROLLING INTERESTS	183,184		187,971
ATTRIBUTBLE TO THE GROUP	829,433		794,494
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	4,284,032		2,799,361

See notes to consolidated financial statement.

22

BAOSHINN CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(Stated in US Dollars)

See notes to consolidated financial statements.

23

BAOSHINN CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in US Dollars)

See notes to consolidated financial statements.

24

BAOSHINN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

 (Stated in US Dollars)

See notes to consolidated financial statements

25

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1.

Corporation information

Baoshinn Corporation (the “Company”) was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc. During the year ended March 31, 2008, Baoshinn Corporation and its subsidiaries (collectively referred to as the Group) issued 2,400,000 restricted common shares of $0.001 per share at a value of $0.3 per share with a net proceeds of approximately $624,000 and redeemed 2,500,000 restricted common shares and these shares are classified as not issued and outstanding.

On February 20, 2008, Bao Shinn International Express Limited (“BSIE”) incorporated a wholly owned subsidiary, Bao Shinn (China) Express Limited (“BSCE”) of 1,000,000 ordinary shares at $0.128 per share. On October 2009, BSCE has been deregistered.

On July 16, 2008, Bao Shinn Holidays Limited (“BSHL”) was incorporated with 3,000,000 ordinary shares issued and paid at $0.128 per share. BSIE owns 55% of BSHL.

2.

Description of business

BSIE, a wholly owned subsidiary of the Group, offers extended travel services primarily focused on wholesale businesses and corporate clients. BSIE is a ticket consolidator of major international airlines including Thai Airways, Eva Airways, Dragon Air, Air China, China Southern Airlines and China Eastern Airlines that provides travel services such as ticketing, hotel and accommodation arrangements, tour packages, incentive tours and group sightseeing services.

However, the Group relies on the shareholder, Bao Shinn Express Company Limited, which is the member of International Air Transport Association to supply air tickets and tour packages from different airlines companies.

BSHL offers extended travel services primarily focused on corporate client in Hong Kong and the Mainland China.

3.

Going concern

The financial statements have been prepared in accordance with generally accepted principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company generated a net profit for the year ended December 31, 2010 of $25,754, on December 31, 2010 it had an accumulated deficit of $1,167,418 and a working capital of $787,958.

Management believes that actions presently taken to revise the Group’s operating and financial requirements provide the opportunity for the Group to continue as a going concern. The Group’s ability to achieve these objectives cannot be determined at this stage. If the Group is unsuccessful in its endeavors, it may be forced to cease operations. These financial statements do not include any adjustments that might result from this uncertainty. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

26

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies

Basis of presentation and consolidation

The accompanying consolidated financial statements of The Group have been prepared in accordance with generally accepted accounting principles in the United States of America.

On June 29, 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification (Codification) as the single source of authoritative US generally accepted accounting principles (GAAP) for all non governmental entities Rules and interpretive releases of the Securities and Exchange Commission (SEC) and also sources of authoritative US GAAP for SEC registrants. The Codification does not change US GAAP but takes previously issued FASB standards and other U.S. GAAP authoritative pronouncements, changes the way the standards are referred to, and includes them in specific topic arrears. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification did not have any impact on the Group’s financial statements.

The consolidated financial statements include the accounts of The Group and its subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The results of subsidiaries acquired or disposed of during the years are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.

Use of estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year.  These accounts and estimates include, but are not limited to, the valuation of accounts receivable, deferred income taxes and the estimation on useful lives of plant and equipment.  Actual results could differ from those estimates.

Concentrations of credit risk

Financial instruments that potentially subject the Group to significant concentrations of credit risk consist principally of accounts receivable.  In respect of accounts receivable, the Group extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security.  In order to minimize the credit risk, the management of the Group has delegated a team responsibility for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts.  Further, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts.  In this regard, the directors of the Group consider that the Group’s credit risk is significantly reduced.  

27

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.  

Summary of significant accounting policies (Continued)

Concentrations of supplier risk

The Group relies on Thai Airways as its major supplier of air tickets and tour packages. If this supplier became unwilling to cooperate with the Group, the Group would have to find alternative resources, which could materially affect the Group’s ability to generate revenue and profitability.

Cash and cash equivalents

Cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months or less.

Restricted cash

Certain cash balances are held as security for short-term bank guarantee deposit for the International Air Transport Association and are classified as restricted cash in the consolidated balance sheets.

Accounts receivable

Accounts receivable are stated at original amount less allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the year end.  An allowance is also made when there is objective evidence that the Group will not be able to collect all amounts due according to original terms of receivables.  Bad debts are written off when identified.  The Group extends unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to be fully collectible.  The Group does not accrue interest on trade accounts receivable.

 

The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis credit evaluations are preferred on all customers requiring credit over a certain amount.

During the reporting year ended December 31, 2010, the Group had experienced the bad debts of $9,773. The Group did not experience any bad debts and accordingly, did not make any allowance for doubtful debts during the year ended December 31, 2009 and the 9 months ended December 31, 2008.

28

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation.  Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.  Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.

Depreciation of plant and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates:

Furniture and fixtures

20% - 50%

Office equipment

20%

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

Revenue recognition

 

The Group recognizes revenue when it is earned and realizable based on the following criteria: persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

The Group also evaluates the presentation of revenue on a gross versus a net basis through application of Emerging Issues Task Force No. (“EITF”) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The consensus of this literature is that the presentation of revenue as “the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee” is a matter of judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the factors that should be considered are: whether the Group is the primary obligor in the arrangement (strong indicator); whether it has general inventory risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the conclusion drawn is that the Group performs as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis.

29

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Revenue recognition (Continued)

The Group has the following three types of revenues:

-

Retail and corporate travel service revenues,

-

Referral fee for travel booking services, and

-

Incentive commission from travel suppliers.

Retail and corporate travel service revenues

Revenues from retail and corporate travel services are recognized when the travel service provided by the Group is completely delivered.  The Group presents revenue from such transactions on a gross basis in the consolidated statements of operations, as the Group acts as a principal, assumes inventory and credit risks, and has primary obligations to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations.  The Group also has latitude in determining the ticket prices.  The Group changes the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to make it a holiday package or business travel solution for customers.

Referral fee for travel booking services

The Group receives referral fee from travel product providers for booking travel services through the Group. The itinerary and product price are generally fixed by the travel product providers and the Group books the travel services on behalf of the customers.  Referral fees from travel booking services rendered are recognized as commissions after the services are rendered and collections are reasonably assured.  The Group presents revenues from such transactions on a net basis in the consolidated statements of operations, as the Group acts as an agent, does not assume any inventory and credit risks, has no obligations for cancelled airline or hotel ticket reservations, and does not have latitude in determining the service prices.

Incentive commission from travel suppliers

The Group earns an incentive commission from many travel suppliers. Contracts with certain travel suppliers contain discretionary escalating commissions that are paid to the Group subject to achieving specific performance targets.  Such discretionary escalating commissions are recognized on an accrual basis because such commissions are usually paid in arrears and the Group can reasonably estimate such commissions.  The Group presents revenues from such transactions on a net basis in the statements of operations, as the Group acts as an agent, does not assume any inventory risk, and has no obligations for cancelled airline ticket reservations.

Deferred revenue

The Group records deferred revenue when it receives payments in advance of the completion of delivery of travel services. Hence, revenue from retail and corporate travel service is deferred. Upon completion of delivery of travel services, the Group recognized this as sales in the consolidated statement of operations.

30

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Deferred cost

The Group adopted an indented policy on retail and corporate service. The Group records deferred cost when it pays in advance of the completion of delivery of travel services and consistently with deferred revenue. Upon completion of delivery of travel services, deferred cost is charged to cost of sales in the consolidated statement of operations.

Advertising expenses

Advertising expenses are charged to expense as incurred.

Year Ended

Year Ended

9-months Ended

Dec 31, 2010

Dec 31, 2009

Dec 31, 2008

$5,534

$6,610

$1,730

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The FASB issued Accounting Standard Codification Topic 740 (ASC 740) “Income Taxes”. ASC 740 clarifies the accounting for uncertainty in tax positions. This requires that an entity recognized in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. The adoption of ASC 740 did not have any impact on the Group’s results of operations or financial condition for the year ended 31 December, 2009.  As of the date of the adoption of ASC 740, the Group has no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods.  The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.

Comprehensive income

Other comprehensive income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income but are excluded from net income as these amounts are recorded as a component of stockholders’ equity.  The Group’s other comprehensive income represented foreign currency translation adjustments.

31

BAOSHINN CORPORATION

NOTES TO AUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Foreign currency translation

The functional currency of the Group is Hong Kong dollars (“HK$”).  The Group maintains its financial statements in the functional currency.  Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates.  Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction.  Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the financial statements of the Group which are prepared using the functional currency have been translated into United States dollars.  Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates.  Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

					9-months
	Year ended		Year ended		period ended
	Dec 31, 2010		Dec 31, 2009		Dec 31, 2008
Period/year end HK$ : US$ exchange rate	7.775		7.756		7.7510
Average periodically/yearly HK$ : US$ exchange rate	7.769		7.751		7.7802

Fair value of financial instruments

The carrying values of the Group’s financial instruments, including cash and cash equivalents, trade and other receivables, deposits, trade and other payables approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.

32

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Basic and diluted earnings per share

The Group computes earnings per share (“EPS’) in accordance with FASB Accounting Standard Codification Topic 260 (ASC 260) “Earnings Per Share”, and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The calculation of diluted weighted average common shares outstanding for the year ended December 31, 2010 is based on the estimate fair value of The Group’s common stock during such periods applied to options using the treasury stock method to determine if they are dilutive.

The following tables are a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

	Year Ended 31 Dec, 2010		Year Ended 31 Dec, 2009		9-Months Ended 31 Dec, 2008
	$		$		$
Numerator for basic and diluted earnings per share:
Net Income/(loss)	25,754		5,159			(144,173)
Denominator:
Basic weighted average shares	21,400,000		21,400,000			21,400,000
Effect of dilutive securities	288,504		223,860			-
Diluted weighted average shares1	21,688,504		21,623,860			21,400,000
Basic earnings/(loss) per share: 0.12	0.12 cents		0.02 cents			(0.67) cents
Diluted earnings/(loss) per share:	0.12 cents		0.02 cents			(0.67) cents

¹ Due to the net loss in the 9-months ended December 31, 2008, diluted shares used in the diluted EPS calculation represent basic shares for the 9-months ended December 31, 2008. Using actual diluted shares would result in anti-dilution. There were no anti-dilutive shares for the 9-months ended December 31, 2008.

33

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Stock-Based Compensation

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Share- Compensation (formerly, FASB Statement 123R), the Group measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

During the year ended December 31, 2010 and 2009, The Group recorded stock-based compensation of $15,333 and $11,500 respectively.

During the nine months period ended December 31, 2008, The Group recorded the overprovision of $2,300 as a credit to operations to recognize the forfeited stock option included in other non-operating income.

Related parties transactions

A related party is generally defined as (i) any person that holds 10% or more of The Group’s securities and their immediate families, (ii) the Group’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Group, or (iv) anyone who can significantly influence the financial and operating decisions of the Group. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Recently issued accounting pronouncements

In March 2008, the FASB issued ASC 815 (SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133) to amend and expand the disclosures about derivatives and hedging activities. The standard requires enhanced qualitative disclosures about an entity’s objectives and strategies for using derivatives, and tabular quantitative disclosures about the fair value of derivative instruments and gains and losses on derivatives during the reporting period. This standard is effective for both fiscal years and interim periods that begin after November 15, 2008. The adoption of this standard on December 29, 2008, the beginning of The Group’s fiscal year, did not have a material impact on its audited condensed consolidated financial statements.

34

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Recently issued accounting pronouncements (Continued)

In April 2009, the FASB issued ASC805-20-35. ASC805-20-35 amends the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. ASC805-20-35 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and instead carries forward most of the provisions in ASC805 for acquired contingencies. ASC805-20-351 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2008. We do not expect ASC805-20-35 to have any impact on the Group’s consolidated results of operations and financial condition.

In May 2009, ASC 855, Subsequent Events (“ASC 855”) includes guidance that was issued by the FASB, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company’s evaluation of its subsequent events. ASC 855 defines two types of subsequent events, “recognized” and “non-recognized”. Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June 15, 2009. The Group implemented the guidance included in ASC 855 as of April 1, 2009. The effect of implementing this guidance was not material to The Group’s financial position or results of operations.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on The Group’s consolidated financial statements.

In September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740), ”Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities”, which provides implementation guidance on accounting for uncertainty in income taxes, as well as eliminates certain disclosure requirements for nonpublic entities.  For entities that are currently applying the standards for accounting for uncertainty in income taxes, this update shall be effective for interim and annual periods ending after September 15, 2009. For those entities that have deferred the application of accounting for uncertainty in income taxes in accordance with paragraph 740-10-65-1(e), this update shall be effective upon adoption of those standards. The adoption of this standard is not expected to have an impact on The Group’s consolidated financial position and results of operations since this accounting standard update provides only implementation and disclosure amendments.

35

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Recently issued accounting pronouncements (Continued)

In September 2009, the FASB has published ASU 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10, “Fair Value Measurements and Disclosures – Overall”, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This ASU also requires new disclosures, by major category of investments including the attributes of investments within the scope of this amendment to the Codification. The guidance in this update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted.   The Group is in the process of evaluating the impact of this standard on its consolidated financial position and results of operations.

In October 2009, the FASB has published ASU 2009-13, “Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue Recognition-Multiple-Element Arrangements”, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method and also requires expanded disclosures. The guidance in this update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on The Group’s consolidated financial position and results of operations.

ASC 105, Generally Accepted Accounting Principles (“ASC 105”), reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board (“FASB”) into a single source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification (“ASC”) carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed “non-authoritative”. ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September 15, 2009. The Group has implemented the guidance included in ASC 105 as of July 1, 2009. The implementation of this guidance changed the Group’s references to GAAP authoritative guidance but did not impact the Group’s financial position or results of operations.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Group’s fiscal year 2012); early adoption is permitted.  The Group

36

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

Recently issued accounting pronouncements (Continued)

is currently evaluating the impact of adopting ASU 2009-14 on its financial statements.

In February 2010, the FASB issued ASU 2010-09 which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. The adoption of this guidance on January 1, 2010 did not have a material effect on the Company’s financial statements.

In December 2010, the FASB issued Accounting Standards Update ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations (Topic 805). The update requires public companies to disclose pro forma information for business combinations that occur in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. This guidance is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. The Company’s adoption of FASB ASU No. 2010-29 effective December 1, 2010 did not have an impact on the Company’s consolidated results of operations or financial position but did result in additional disclosures.

5.

Other operating income

		Year Ended		Year Ended		9 Months Ended
		Dec 31, 2010		Dec 31, 2009		Dec 31, 2008
		$		$		$
	GDS commission income	-		1,737		4,277
	Refund Write back	24,580		12,153		19,923
	Management service income	34,646		41,094		33,525
		59,226		54,984		57,725

6.

Other non-operating income

			Year Ended		Year Ended		9 Months Ended
			Dec 31, 2010		Dec 31, 2009		Dec 31, 2008
			$		$		$
	Gain on exchange		-		825		2,907
	Interest income		16		324		1,357
	Sundry income		4,901		-		3,702
	Reversal of Stock Based compensation		-		-		2,300
			4,917		1,149		10,266

37

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

7.

Interest expenses

			Year Ended		Year Ended		9 Months Ended
			Dec 31, 2010		Dec 31, 2009		Dec 31, 2008
			$		$		$
	Interest expense		736		1,230		8,083

8.

Income taxes

The Company and its subsidiaries file separate income tax returns.

The Company is incorporated in the United States, and is subject to United States federal and state income taxes. The Company did not generate taxable income in the United States in 2008, 2009 and 2010.

The subsidiaries are incorporated in Hong Kong, and are subject to Hong Kong Profits Tax. at 16.5% for the year ended December 31, 2010 and 2009.

Provision for Hong Kong profits tax has been made for the year presented as the subsidiaries have assessable profits during the year.

The following table accounts for the differences between the actual tax provision and the amounts obtained by applying the applicable statutory income tax rate of 16.5% to income/(loss) before taxes for the year ended December 31, 2010 and 2009 and 9 months ended December 31, 2008.

		Year Ended			Year Ended		9 Months Ended
		December 31, 2010			December 31, 2009		December 31, 2008
		$			$		$
Income/(Loss) before taxes		25,754			5,159		(144,173)
	Computed tax benefit at Hong Kong
	income tax rate		34,235		(6,087)		(28,950)
	Valuation allowance adjustment		(596)		(6,965)		26,773
	Non-taxable items		(11,690)		(82)		(224)
	Non-deductible expenses		65		15,200		7,386
	Others		2,419		4,110		(4,985)
			24,433		6,176		-

38

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

8.

Income Taxes (Continued)

Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Group follows FASB Accounting Standard Codification Topic 740- (ASC 740) “Income taxes”, ASC 740 and requires a valuation allowance, if any, to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized, and therefore, a full valuation allowance has been provided as of December 31, 2008. For the year ended December 31, 2010 and 2009, the Group does not have any tax loss carrying-forwards, therefore does not recognize deferred tax assets.

9.

Deposits, prepaid expenses and other receivables

			At December 31,
			2010		2009
			$		$
	Security deposits to suppliers [1]		699,732		691,505
	Prepayments and other receivables		55,458		76,231
	Utility, rental and other deposits		30,664		32,746
			785,854		800,482

^[1] Represents a deposit with the airline companies to allow the Group to issue an agreed upon amount of air tickets per month.

39

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

10.

Plant and equipment

				At December 31,
				2010		2009
				$		$
	Cost
	Furniture and fixtures			51,333		47,934
	Office equipment			61,472		99,922
				112,805		147,856
	Accumulated depreciation
	Furniture and fixtures			26,913		21,264
	Office equipment			44,417		74,162
				71,330		95,426
	Net
	Furniture and fixtures			24,420		26,670
	Office equipment			17,055		25,760
				41,475		52,430

Depreciation expenses for the year ended December 31, 2010 are $21,601 (for the year ended December 31, 2009: $27,821, for the 9-months period ended December 31, 2008: $28,866).

11.

Other payables and accrued liabilities

				At December 31,
				2010		2009
				$		$
	Sale deposits received			165,447		102,359
	Accrued expenses			199,693		133,404
	Other payables			49,214		31,803
				414,354		267,566

40

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

11.

Amounts due from/(to) related parties

Amounts due from/(to) related parties for working capital are as follows:

				At 31 December
				2010		2009
				$		$
	Amounts due from related parties			-		87,029
	Amounts due to related parties			300		113,553

The amounts due from related parties, represent advances to a minority shareholder of Bao Shinn Holidays Limited (“BSHL”), is temporary advance, interest free, unsecured and due on demand.

The amounts due to related parties, represent advances from certain directors and shareholders of The Group, are interest free (2009: 5.5% per annum), unsecured and have no fixed repayment terms.

13.

Deferred cost and revenue

The Group has re-evaluated its accounting treatment for revenues from retail and corporate travel services from previously issued financial statements and concluded that these revenues are recognized when the travel service provided by the Group is completely delivered.  Cost and revenue is deferred when the Group paid and received payment in advance of the completion of delivery of travel services respectively as at the year end (see note 4). The deferred cost and revenue had been offset with accounts payable and receivables respectively in the previous years. To enhance the accuracy and adequacy of the disclosure, the Group revised the previously issued financial statements as of and for the year ended December 31, 2009 to correct the classification corresponding to its presentation.  

The effect of this reclassification is to increase accounts receivable by $419,431, increase accounts payable by $416,651, increase deferred revenue by $419,431 and increase deferred cost by $416,651 as of December 31, 2009, as compared to the Group’s previously issued financial statements.

14.

Stock options

The Group has stock options plans that allow it to grant options to its key employees. Over the course of employment, The Group issues vested or non-vested stock options to an employee which is struck at US$0.35 per share.

41

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

14.

Stock options (Continued)

For non-vested stock options, the options have a maximum term of three years up to March 31, 2011. For vested stock options, the exercise period of the options commenced on March 31, 2008 and will expire on March 31, 2011, subject to that maximum of 30% of options to be exercised up to March 31, 2009, maximum of 60% of options to be exercised up to March 31, 2010 and the 100% of options to be exercised up to March 31, 2011.

In the year ended March 31, 2008, a total of 300,000 and 80,000 of vested and non-vested options respectively were granted to key employees of The Group at a price of $0.35 per share, exercisable for a term of three years which vest immediately under the vesting conditions.

The fair value of these options at the date of grant was estimated to be $0.1533 and $0.1125 for vested and non-vested options per unit respectively using the Black-Scholes option pricing model with the following weighted average assumptions: expected life of three years; risk-free interest rate of 3.07%; expected dividend yield of 0% and an expected volatility of 47.77%. The stock-based compensation expense recorded in the year ended December 31, 2010 and 2009 was $15,333 and $11,500 respectively which was charged to the consolidated statement of operations and credited to contributed surplus. During the 9 months ended December 31, 2008, the Group recorded the overprovision of $2,300 as a credit to recognize the forfeited stock option included in other non-operating income.

							Weighted
				Weighted			average
		Number of		average			remaining
		options		exercise price			life
Balance as of December 31, 2010		330,000		0.35			0.25
Exercisable as of December 31, 2008		155,000		0.35			2.25
Exercisable during the year		75,000		0.35
Exercisable as of December 31, 2009		230,000		0.35			1.25
Exercisable during the year		100,000		0.35
Exercisable as of December 31, 2010		330,000		0.35			0.25

15.

Concentration of credit

A substantial percentage of the Group's sales are made to the following customers. Details of the customers accounting for 10% or more of total net revenue are as follows:

	Year ended		Year ended		9 months ended
	Dec 31, 2010		Dec 31, 2009		Dec 31, 2008
Travel Expert Limited (a Hong Kong  incorporated travel agent)	16%		13%		13%

42

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

15.

Concentration of credit (Continued)

Details of the accounts receivable from the one customer with the largest receivable balances at December 31, 2010 and 2009 are as follows:

	Percentage of account receivable
	December 31
	2010		2009
Travel Expert Limited (a Hong Kong incorporated travel agent)	18%		13%

16.

Pension plans

The Group participates in a defined contribution pension scheme under the Mandatory Provident Fund Schemes Ordinance “MPF Scheme” for all its eligible employees in Hong Kong.

The MPF Scheme is available to all employees aged 18 to 64 with at least 60 days of service in the employment in Hong Kong.  Contributions are made by the Group’s subsidiary operating in Hong Kong at 5% of the participants’ relevant income with a ceiling of HK$20,000.  The participants are entitled to 100% of the Group’s contributions together with accrued returns irrespective of their length of service with the Group, but the benefits are required by law to be preserved until the retirement age of 65.  The only obligation of the Group with respect to MPF Scheme is to make the required contributions under the plan.

The assets of the schemes are controlled by trustees and held separately from those of the Group.  Total pension cost was $31,629 during year ended December 31, 2010 (for the year ended December 31, 2009: $36,337, for the nine months ended December 31, 2008: $31,813).

17.

Fair Value Measurements

The Group adopted FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), related to The Group’s financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets and liabilities.

 

Level 2 — observable inputs other than quoted prices in active markets for identical assets and liabilities.

 

Level 3 — unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

 

ASC 820 also provides guidance for determining the fair value of a financial asset when the market for that asset is not active, and for determining fair value when the volume and level of activity for an asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate when a transaction is not orderly.

43

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

17.

Fair Value Measurements (Continued)

The effective date for certain aspects of ASC 820 was deferred and are currently being evaluated by The Group. Areas impacted by the deferral relate to nonfinancial assets and liabilities that are measured at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. The effects of these remaining aspects of ASC 820 are to be applied by the Group to fair value measurements prospectively beginning November 1, 2009. The adoption of the remaining aspects of ASC 820 is not expected to have a material impact on its financial condition or results of operations.

The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at December 31, 2010 and 2009:

				Fair Value Measurements at reporting date using
		December 31, 2010		Quoted Price in active Markets for identical assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
		$		$		$		$
Assets
Accounts receivable		1,695,759		-		-		1,695,759
Deferred cost		1,200,598		-		-		1,200,598
Restricted cash		12,861		-		-		12,861
Amount due from a related party		785,854		-		-		785,854
Liabilities
Accounts payable		1,804,077		-		-		1,804,077
Deferred revenue		1,217,300		-		-		1,217,300
Other payables and accrued liabilities		414,354		-		-		414,354
Amounts due to related parties		300		-		-		300

44

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

17.

Fair Value Measurements (Continued)

				Fair Value Measurements at reporting date using
		December 31, 2009		Quoted Price in active Markets for identical assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
		$		$		$		$
Assets
Accounts receivable		1,182,614		-		-		1,182,614
Deferred cost		416,651						416,651
Prepaid expenses and other receivables		800,482		-		-		800,482
Amount due from a related party		87,029		-		-		87,029
Liabilities
Accounts payable		1,198,145		-		-		1,198,145
Deferred revenue		419,431						419,431
Other payables and accrued liabilities		267,566		-		-		267,566
Amounts due to related parties		113,553		-		-		113,553

Level 3 financial assets represent the fair value of our accounts receivables.

18.

Commitments and contingencies

Operating leases commitments

The Group leases office premises under various non-cancelable operating lease agreements that expire at various dates through years 2011 to 2012, with an option to renew the lease.  All leases are on a fixed repayment basis.  None of the leases includes contingent rentals.  Minimum future commitments under these agreements payable as of December 31, 2010 are as follows:-

December 31

$

2011

 96,803

2012

 29,819

126,622

Rental expenses for the year ended December 31, 2010 were $96,877 (for the year ended December 31, 2009: $94,772, for the nine months ended December 31, 2008 was $84,880).

45

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

19.

Related party transactions

In the ordinary course of business, BSIE, our wholly-owned subsidiary, purchases and sells air tickets and tour packages from/to Bao Shinn Express Company Limited (“BSEL”). BSEL holds 38.6% of Baoshinn Corporation’s outstanding common stock.  The consolidated income statement for the periods presented includes the following related party transactions.