UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: For the Fiscal Year Ended December 31, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 333-142908

 

WINLAND OCEAN SHIPPING CORP.

(Exact name of registrant as specified in its charter)

 

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

 

   Rm 703, 7/F, Bonham Trade Centre, 50 Bonham Strand, Sheung Wan, Hong Kong

 

(Address, including zip code, of principal executive offices)

 

00852-28549088

 (Registrants’ telephone number, including area code)

 

Securities Registered Under Section 12(b) of the Exchange Act:  None.

 

Securities Registered Under Section 12(g) of the Exchange Act:  None.

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    

 

Yes ¨     No x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨    Accelerated filer     ¨    Non-accelerated filer   ¨    Smaller Reporting Company    x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No x

 

Aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing price as of June 30, 2011 was approximately $15,280,875.

 

The number of outstanding shares of the registrant’s common stock on March 29, 2012 was 195,000,000. 

 

 

WINLAND OCEAN SHIPPING CORP.

(F/K/A WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2011

 

Index

 

TABLE OF CONTENTS

 

PART I			3
ITEM 1.	Business		3
ITEM 1A.	Risk Factors		11
ITEM 1B.	Unresolved Staff Comments		11
ITEM 2.	Properties		12
ITEM 3.	Legal Proceedings		12
ITEM 4.	Mine Safety Disclosures.		12
PART II			12
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		12
ITEM 6.	Selected Financial Data		14
ITEM 7.	Management‘s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk		20
ITEM 8.	Financial Statements and Supplementary Data		21
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		22
ITEM 9A.	Controls and Procedures		22
ITEM 9B.	Other Information		23
ITEM 10.	Directors, Executive Officers, and Corporate Governance		23
ITEM 11.	Executive Compensation		28
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		29
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		30
ITEM 14.	Principal Accountant Fees and Services		31
PART IV			31
ITEM 15.	Exhibits and Financial Statement Schedules		31
SIGNATURES			37

  

 

PART I

 

ITEM 1.

Business

 

Forward Looking Statements

 

The following is management’s discussion and analysis of certain significant factors which have affected the financial position and operating results of Winland Ocean Shipping Corp., a Texas corporation (formerly known as Winland Online Shipping Holdings Corporation and hereinafter, “Winland” or “WLOL” and together with its subsidiaries, the “Company”) during the periods included in the accompanying consolidated and combined financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes” “anticipates”, “may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the U.S. Securities and Exchange Commission (the “SEC”) from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

 

The following discussion and analysis should be read in conjunction with our consolidated and combined financial statements and the related notes thereto and other financial information contained elsewhere in this report.

 

Corporate History

 

On August 12, 2008, Trip Tech, Inc. (n/k/a WLOL and sometimes referred to herein as “Trip Tech” when referring to the operations of the Company prior to the Exchange, as defined below) entered into a Share Exchange Agreement with SkyAce Group Limited (“SkyAce”), a British Virgin Islands company and Pioneer Creation Holdings Limited (“PCH”), a British Virgin Islands company and the sole stockholder of SkyAce. As a result of the share exchange, the Company acquired all of the issued and outstanding securities of SkyAce from PCH in exchange for 76,925,000 shares (as adjusted for the March 2011 forward split, 115,387,500 shares) of the Company’s common stock, par value $0.001 per share and 1,000,000 shares of the Company’s Series A Preferred Stock which such preferred shares were convertible into (and subsequently did convert into) 30,000,000 shares (as adjusted for the March 2011 forward split, 45,000,000 shares) of common stock (the “Exchange”).

 

On August 12, 2008, PCH beneficially owned 82.25% of the voting capital stock of the Company. As a result of the Exchange, SkyAce became a wholly-owned subsidiary of WLOL. On October 23, 2008, PCH converted its 1,000,000 shares of Series A Preferred Stock into 30,000,000 shares (as adjusted for the March 2011 forward split, 45,000,000 shares) of common stock. As a result, the total outstanding shares of common stock increased to 130,000,000 (as adjusted for the March 2011 forward split, 195,000,000 shares) and PCH now directly owns 82.25% of the voting capital stock of WLOL.

 

The following is disclosure regarding WLOL, SkyAce and SkyAce’s two wholly-owned subsidiaries: (a) Plentimillion Group Limited (“PGL”), a British Virgin Islands holding company, the principal business activities of which are (through its wholly-owned subsidiaries) ocean transportation and chartering brokerage and (b) Best Summit Enterprise Limited (“BSL” and together with PGL, the “SkyAce Group”), a British Virgin Islands holding company.

 

Our common stock is currently quoted on the OTCQB under the symbol “WLOL.OB”.

 

Current Operations of the Company (General Development of Business)

 

The following is disclosure regarding WLOL, WLOL’s wholly-owned subsidiary SkyAce Group Limited, a British Virgin Islands company (“SkyAce”) and SkyAce’s two wholly-owned subsidiaries: (a) Plentimillion Group Limited (“PGL”), a British Virgin Islands holding company, the principal business activities of which are (through its wholly-owned subsidiaries) ocean transportation and chartering brokerage and (b) Best Summit Enterprise Limited (“BSL” and together with PGL, the “SkyAce Group”), a British Virgin Islands holding company.

 

 

SkyAce

 

SkyAce is a holding company founded in the British Virgin Islands (“BVI”) on September 22, 2006 with no significant operations. SkyAce was formed solely for the purpose of acquiring PGL and BSL from Mr. Li Honglin and Ms. Xue Ying, each of whom had owned fifty percent (50%) of both PGL and BSL and each of whom now own fifty percent (50%) of SkyAce.

 

SkyAce has authorized capital of $50,000 consisting of 50,000 ordinary shares authorized, two of which are currently issued and outstanding and held by Trip Tech as a result of the Exchange. Li Honglin, a Director and the President of Winland, serves as a Director of SkyAce. Xue Ying, a Director, the Chief Executive Officer and the Secretary of Winland, also serves as a Director of SkyAce.

 

PGL

 

PGL is a holding company founded in the BVI on July 5, 2006. PGL was formed solely for the purpose of acquiring each of the following wholly-owned subsidiaries from Li Honglin and Xue Ying (both of whom previously owned fifty percent (50%) of each of the following entities), which such transfers occurred between January 1, 2008 and March 31, 2008:

 

(a)

Winland Shipping Co., Ltd. was organized under the laws of Hong Kong on August 11, 2000 (“Winland Shipping”);

 

(b)

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

 

(c)

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

 

(d)

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

 

(e)

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

 

(f)

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

 

(g)

Winland Dalian Shipping S.A. was organized under the laws of Panama on June 8, 2005 (“Winland Dalian”); and

 

(h)

Treasure Way Shipping Limited was organized under the laws of Hong Kong on May 27, 2002 (“Treasure Way”).

 

PGL acquired the following additional entities in 2008:

 

(i)

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

 

(j)

Win Bright Shipping Co., Ltd. was organized under the laws of Malta on February 8, 2002 (“Win Bright”);

 

(k)

Win Ever Shipping Co., Ltd. was organized under the laws of Malta on February 8, 2002 (“Win Ever”);

 

(l)

Win Glory S.A. was organized under the laws of Panama on April 2, 2003 (“Win Glory”); and

 

(m)

Win Moony Shipping Co., Ltd. was organized under the laws of Malta on September 26, 2003 (“Win Moony”).

 

 

PGL acquired the following entities in 2009:

 

(n)

Win Grace Shipping Co., Ltd. Was organized under the laws of Malta on September 4, 2003 (“Win Grace”); and

 

(o)

Win Hope Shipping Co., Ltd. was organized under the laws of Malta on June 14, 2001 (“Win Hope”).

 

PGL established the following entities in 2009:

 

(p)

Bodar Shipping S.A. was incorporated and registered in Panama on February 12, 2009 (“Bodar Shipping”);

 

(q)

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

 

(r)

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

 

(s)

Winland International Shipping Co., Ltd. was incorporated and registered in Hong Kong on August 27, 2009 ("Winland International").

 

PGL established the following entities in 2010:

 

(t)

Fon Tai Shipping Co., Limited was incorporated and registered in Hong Kong on March 1, 2010 (“Fon Tai”);

 

(u)

Won Lee Shipping Co., Limited was incorporated and registered in Hong Kong on March 1, 2010 (“Won Lee”);

 

(v)

Kin Ki International Industrial Limited was incorporated and registered in BVI on January 4, 2010 (“Kin Ki International”);

 

(w)

Win Bright Shipping S.A. was incorporated and registered in Panama on November 15, 2010 (“Win Bright Shipping”); and

 

(x)

Win Ever Shipping S.A. was incorporated and registered in Panama on December 3, 2010 (“Win Ever Shipping”).

 

PGL and each of its wholly-owned subsidiaries set forth above (collectively, the “PGL Group”) are engaged in ocean transportation of dry bulk cargo worldwide through the ownership and operation of dry bulk vessels. The principal business activities of the PGL Group are ocean transportation and chartering brokerage. The operations of each of the Company’s vessels are managed by Winland Shipping, while the chartering brokerage businesses are managed by Kinki and Bestline. Lancrusier’s primary business is management and accounting.  Winland Dalian, Treasure Way, Win Eagle, Win Bright, Win Ever, Win Grace, Win Hope, Win Shipping, Bao Shun, Fon Tai and Won Lee collectively own 11 of the Company’s vessels.  Win Glory, Win Star, Bodar and Win Moony are currently in the process of winding down and have no operations.  Winland International's primary business is to develop and expand the global shipping market.  Kin Ki International, Win Bright Shipping and Win Ever Shipping had no operations in 2011. These three companies will take over the operations of Kinki, Win Bright and Win Ever once the corresponding governments with which such vessels are registered approve the applications to cancel these companies. Win Glory owns one vessel which was sold to an unrelated third party for a purchase price of $1,700,000 on August 6, 2011. Win Star owns one vessel which was sold to an unrelated third party for a purchase price of $3,278,452 on August 16, 2011. Bodar Shipping owns one vessel which was sold to an unrelated third party for a purchase price of $3,550,823 on September 30, 2011.

 

 

BSL

 

SkyAce’s wholly-owned subsidiary BSL was incorporated in the British Virgin Islands on November 30, 2006. BSL sole business is to act as a holding company for its wholly-owned subsidiary, Wallis Development Limited, a company organized under the laws of Hong Kong on December 9, 2006 (“Wallis”). The sole business of Wallis is to act as a holding company for its wholly-owned subsidiary, Beijing Huate Xingye Keji Co., Ltd., a company organized under the laws of the PRC on March 18, 2008 (“Beijing Huate”). Beijing Huate was formed with the purpose of producing IT software, developing new products and adopting advanced and applicable technology and scientific management methods to create economic benefits for its stockholders.  As of December 31, 2010, Beijing Huate controlled DWIS, DWIL and Shipping Online (each of which are defined below), however on February 16, 2011, Beijing Huate terminated its control of such entities as is more fully described below.

 

Disposition of Online Services Business

 

On March 31, 2008, Wallis and Beijing Huate entered into a series of Exclusive Technical Consulting and Service Agreements, (collectively, together with all related transaction documents executed in connection therewith, the “Service Agreements”) whereby Beijing Huate controlled (a) Dalian Winland International Shipping Agency Co., Ltd. (“DWIS”), a PRC company whose principal activities include shipping agency services, booking cargo space, storage of goods and declaration of customs, (b) Dalian Winland International Logistic Co., Ltd. (“DWIL”), a PRC company whose principal activities included freight forwarding services logistics shipping agency services and which owns one shipping vessel and (c) Dalian Shipping Online Network Co., Ltd. (“Shipping Online”) a PRC company whose principal activities are providing online services to its members.

 

In compliance with the PRC’s foreign investment restrictions on internet information services and other laws and regulations, the Company had conducted all of its internet information and media services and advertising in China (collectively, the “Online Services”) through DWIS, DWIL and Shipping Online, each a domestic variable interest entity (each, a “VIE” and collectively, the “VIEs”) and each of which are ultimately owned by Li Honglin, the President and Chairman of the Board of WLOL (50% of each VIE) and Xue Ying, the Chief Executive Officer, Secretary and director of WLOL (50% of each VIE).  Pursuant to the Service Agreements, Beijing Huate provided on-going technical services and other services to the VIEs in exchange for substantially all of the net income of the VIEs. In addition, the stockholders of the VIEs had pledged all of their shares in the VIEs to Beijing Huate, representing 100% of the total issued and outstanding capital stock of the VIEs, as collateral for non-payment under the Service Agreements or for fees on technical and other services due thereunder. Beijing Huate also had the power to appoint all directors and senior management personnel of the VIEs.

 

On February 16, 2011, Wallis and Beijing Huate voluntarily entered into a Termination of Services Agreement with the VIEs and the stockholders of the VIEs (the “Termination Agreement”), effective immediately, whereby all of the Service Agreements have terminated and are of no further force or effect.  The disinterested Board of Directors of WLOL resolved to terminate the Service Agreements with the belief that such disposition will help the Company focus on its core business of dry bulk shipping and charter brokerage services.  No termination penalties were incurred by the Company in connection with the Termination Agreement.  Pursuant to the terms of the Termination Agreement, the Company received a fee in the amount of RMB1,000,000 (US$151,319).

 

Summary of Current Business

 

The Company's core business is international bulk cargo transportation.  We believe that our Company is a well-known shipping enterprise based in China.  We currently have an ocean shipping fleet of 11 vessels, with a self-owned carrying capacity of over 240,000 tons.  Through monthly voyage charters and time charters, the Company can provide carrying capacity of about 1,000,000 tons with shipping lines to major ports around the world.

 

The Company generated revenue of $84.2 million and net income of $19.1 million in 2008. With the global economic crisis and shipping market downturn since late 2008, our operating revenues in 2009 dropped to $50.2 million with a net loss of $7.0 million. Our operating revenues and net income improved in 2010 with an increase to $59.2 million and $3.1 million, respectively. For fiscal year ended December 31, 2011, our operating revenues and net income were $60.8 million and $3.1 million, respectively.  

 

 

Our Business Strategies

 

Our team has over 18 years of ship operating and management experience and we have established a broad customer base. The Company plans to continue to steadily expand its capacity and enlarge the size of its ocean transport fleet by constructing new vessels and by acquiring additional vessels or businesses at lower prices in light of the current slump in the shipping market. The Company also plans to modify its business strategy by shortening its investment return period and lowering our costs. The Company believes that it will be able to control more vessels to increase the Company’s fleet size and the level of shipping capacity. The Company believes it will also have more flexibility to operate vessels and have more potential to increase its profit margins. Ultimately, we believe our new strategy will increase the Company’s core business competencies.

 

The Company has also implemented a new business strategy which includes utilizing the Company’s expertise of vessel management to expand into the bareboat and long-term chartering businesses. A bareboat charter is an arrangement for the chartering or hiring of a vessel whereby no crew or provisions are included as part of the agreement. The owner gives possession of the vessel to the charterer and the charterer hires its own master and crew. In a voyage or time charter, the vessel is chartered for a particular voyage or for a set period of time. The charterer can direct where the ship will go however the owner of the ship retains possession of the ship through its employment of the master and crew. The Company plans on taking advantage of its expertise of vessel management by focusing on the bareboat and long-term time chartering businesses in our chartering brokerage segment in 2012. Ultimately, we plan to eliminate our voyage chartering and less-than-six-month short-term time chartering businesses.

 

Our growth strategy is, in dry bulk shipping operation, to expand our fleet scale and to increase our market share through the construction of new vessels or through the acquisition of second-hand ships.  In the charter brokerage operations business, our growth strategy is to expand our market share in the Panamax and Capesize vessels ship market while maintaining our current operations advantages to meet different customer demands.

 

The Company intends to increase sales through the implementation of the following sales strategies:

 

·

Fully developing our potential with our existing customers. Many of our customers have various transportation needs, and we intend to develop our business relationships to offer more transportation solutions to our existing customers through increased communication and analysis. It is our goal to become a full service provider to our new and existing clients.

 

·

Referrals. We encourage our customers to refer their business suppliers and/or customers to us. We offer service discounts or promotional deals to incentivize and reward our customers for referrals.

 

·

Networking. We have joined two global ship owner alliance organizations to increase our access to international resources of cargo and other customers in order to increase our sales.

 

·

Internet sales. With the rapid development of e-commerce, many customers compare and seek shipping services online. The Company has fully recognized the potential of this sales channel and has joined a more well-known maritime e-commerce website.  Additionally, we have built up our own website and continue to advertise our services on the internet.

 

Business Development

 

We initiated the following business development plan to establish and maintain the Company’s business advantages:

 

·

Fleet expansion. We plan to expand our fleet size beyond our current number of 13 vessels. We intend to improve our fleet structure, eliminate old ships and build or acquire modernized large tonnage or newer ships in the ordinary course of business. We believe this will not only help to improve existing customer satisfaction, but also help us expand our market share in larger vessel markets since larger vessels sell a wider variety of goods which would in turn increase our customer base.

 

 

·

Charter brokerage expansion. With more than ten years of operational experience, we believe our charter business has developed a good reputation with a relatively stable customer base and market. While maintaining our current competitive advantage, we intend to charter large tonnage vessels to satisfy our customers shipping needs and become a full service shipping provider.

 

·

Recruitment of senior management personnel. With the expansion of our fleet scale and business operations, we will require more senior qualified management personnel to establish a solid foundation for sustainable development. We intend to develop an employee incentive employee stock option plan to be more competitive on recruiting more intelligent professionals to join us.

 

On June 3, 2009, Winland Shipping and Bao Shun Shipping S.A. entered into a Memorandum of Agreement (“MOA”) with Mario Shipping Corporation (“MSC”) for the purchase by the Company from MSC of a 2003 built handysize vessel (20,212 gross tonnage, 10,948 net tonnage) known as “Bao Shun” for a price of $20,700,000.  On June 4, 2009, the MOA was amended to nominate Bao Shun as the actual buyer that would remain fully responsible for performing under the MOA, and on July 14, 2009 the MOA was further amended to change the expected time of delivery to the period of July 14, 2009 to October 10, 2009 and to modify certain payment and interest terms.  On August 14, 2009, the Company paid 10% of the purchase price for the vessel (approximately $2,070,000) in cash.

 

On September 25, 2009, the parties to the MOA closed on the purchase of the vessel whereby the Company paid the balance on the purchase price of $18,630,000 as well as acquisition cost of $181,125.  The Company funded $14,490,000 through a long-term loan with Mitsubishi UFJ Lease & Finance Co., Ltd., which is secured by the vessel “Bao Shun”, and funded $3,000,000 via a long-term note. The Company paid the remaining balance of $1,321,125 in cash.  The loan is to be repaid in 84 monthly payments with an interest rate at the Japanese LIBOR plus 2.3%.

 

On March 26, 2010, the Company obtained a loan facility of $37 million from China Merchants Bank Co., Ltd. to finance the construction of two new vessels “Fon Tai” and “Rui Lee”. As of September 30, 2011, we drew down the full $37 million from our loan facility, and executed four new notes payable totaling $14,036,500 million in the aggregate, for purposes of commencing the building of such vessels.

 

On May 20, 2010, Fon Tai entered into a novation agreement, which was subsequently amended on May 21, 2010, whereby Fon Tai assumed all of the rights and obligations of Rich Forth Investments Limited ("Rich"), a related party which is controlled by relatives of the Chairman and Chief Executive Officer (“CEO”) of the Company, under a shipbuilding contract with JiangSu Hantong Ship Heavy Industry Co., Ltd. ("JiangSu") previously executed on December 6, 2006 for the construction of one 57,000dwt bulk carrier vessel (Fon Tai). The contract amount of $29,950,000 included the ship building contract price of $28,500,000 payable to JiangSu and a contract transfer fee of $1,450,000 payable to Rich for the reimbursement of costs incurred in connection with the construction. Vessel Fon Tai was delivered and placed into service on January 10, 2011.

 

Also, on May 20, 2010, Won Lee entered into a novation agreement, which was subsequently amended on May 21, 2010, whereby Won Lee assumed all of the rights and obligations of Rich under a shipbuilding contract with JiangSu for the construction of one 57,000dwt bulk carrier vessel (Rui Lee). The contract amount of $29,950,000 included the ship building contract price of $28,500,000 payable to JiangSu and a contract transfer fee of $1,450,000 payable to Rich for the reimbursement of costs incurred in connection with the construction.  Rui Lee was delivered and placed into service on May 5, 2011.

 

Effective March 22, 2011, the Company changed its name from “Winland Online Shipping Holdings Corporation” to “Winland Ocean Shipping Corp.” to more accurately reflect its current business in light of the disposition described above and increased its authorized common stock from 200,000,000 to 400,000,000 shares.  Effective March 25, 2011 (and paid on March 28, 2011), the Company effected a 1.5 for 1 forward stock split of its common stock, increasing its issued and outstanding shares from 130,000,000 to 195,000,000 shares.

 

 

On June 10, 2011, the Company executed a memorandum of agreement with an unrelated third party to sell a vessel owned by Win Glory for $1,700,000.  The Company closed the sale of such vessel on August 6, 2011.

 

On July 29, 2011, the Company executed a contract with an unrelated third party to sell a vessel owned by Win Star for $3,278,452.  The Company closed the sale of such vessel on August 16, 2011.

 

On September 15, 2011, the Company executed a Memorandum of Agreement with an unrelated third party to sell a vessel owned by Bodar Shipping for $3,550,823. The Company closed the sale of such vessel on September 30, 2011.

 

Brief History of the Company’s Shipping Business

 

The Company was founded in 1993 as a chartering business. Since the market was dominated by State-owned enterprises at that time, the level of service was generally not satisfying to customers. Li Honglin, the founder of the Company, seized the opportunity to privately establish the Company with his wife, Xue Ying (the Company’s CEO), giving full play to the advantages of service and price. The Company gradually received recognition from a large number of corporate customers.

 

With gradual accumulation of capital and experience, as well as an acute grasp of market trends, the Company leased its first vessel in 1995. In 1997, in light of the outbreak of the Southeast Asian financial crisis, the global shipping market experienced a downturn. Having an optimistic view on market prospects and a stable support of customer resources, the Company seized the opportunity to lease more vessels at a lower price, becoming a ship owner by direct purchase of vessels in 1998.  During 2000-2005, the Company purchased a total of 13 vessels. The Company purchased one in 2009, and constructed two in 2010 (one delivered in January 2011 and another one delivered in May 2011). The Company sold one in 2009, disposed one with its disposition of its VIEs in February 2011, and sold three in 2011.

 

Market Segments of the Company

 

The three main categories for international sea transportation are bulk cargo, container liner transport and oil and gas transport, of which bulk cargo transport occupies more than a 40% market share and is generally considered the most important market segment of the shipping industry.

 

  The bulk cargo transportation market can be further divided on the basis of the tonnage. The industry uses the following terms to describe such subsets of the bulk cargo transport market (from large to small size): The Capesize vessels market, the Panamax vessels market, the Supramax vessels market and the Handysize vessels market. The Company's fleet is primarily concentrated in the latter two categories, namely, the Supramax and Handysize vessel markets.

 

The Company conducts its shipping business through the Plentimillion Group and its two main businesses are dry bulk shipping (self-owned fleet transportation service) and vessel chartering (bareboat chartering, voyage chartering and time chartering).

 

During the fiscal years ended 2011 and 2010, 51% and 54% of WLOL’s revenue was generated from dry bulk shipping segment and 49% and 46% from chartering brokerage segment, respectively.

 

Market Share and Competition

 

In the segment markets of Supramax and Handysize vessels for bulk cargo transportation, with 11 self-owned vessels and ships by voyage charter and time charter, the Company’s current transport capacity is approximately 1 million tons monthly, which is in the medium-sized level in the Far East region with higher visibility and influence. Decades of service with stability and quality have helped us consolidate a large number of loyal clients including some Chinese State-owned large enterprises such as China Capital Steel, China Bao Steel, China Minmetals, China National Petroleum and China Petrochemical, and other famous international enterprises.

 

 

With respect to competition, the Company competes with about 5 large State-owned shipping enterprises in China including COSCO and China Shipping, and we also compete with approximately 100 small shipping companies (companies generally having 5 or fewer vessels). The Company generally ranks among the top 10 in its industry class with respect to size. The competitive advantages and disadvantages for each class of competition (including the Company’s current situation) are as follows:

  

Enterprise Type		Main Advantages		Main Disadvantages
China Large State- Owned Enterprises (approximately 5 enterprises)		· large fleet with strong transport capacity		· Low efficiency and slow market reaction
		· Easy acquisition of large state cargo owners as a State-owned enterprise		· Difficulty with cost control

 

		· High visibility and marketability		· Weak service awareness, unstable staff
		· Rich resources, favorable policies		· Operation without flexibility and autonomy
The Company		· Aggressive Management team		· Single vessel with small transport capacity, cargo resource constraints
		· Flexible decision-making of management, fast market reaction		· Relative small fleet size
		· Good cost control and scale effect		· Little government background, little favor policy
		· Stable staff, rich market experience		· Narrow financing and low growth rate
		· Strong service awareness and innovation
Small Shipping Companies (approximately 100 enterprises)		· Flat-styled management, relatively high efficient decision-making		· Small-sized fleet, inefficient transport capacity
		· Good service awareness, quick market reaction		· Lack of industrial experience, unstable customer resources
				· Single business, weak risk control
				· High cost, no scale effect

 

From the comparison above, we believe we can be viewed as an aggressive shipping company with innovative thinking. Compared with China's large state-owned enterprises, we have some constraints and relative disadvantages however we believe we also have great potential for development. If the Company can rapidly expand its fleet size, update its capacity configuration and continue to reap the advantages of customer oriented philosophy and large client bases, we believe it is possible to rapidly expand the scale of business and to access to larger space for our development in the future.

 

The Company’s Products and Services

 

The Company currently has 11 self-owned vessels, with transport capacity of over 240,000 tons. Through vessels by bareboat charter and time charter, the Company’s transport capacity is approximately 1 million tons monthly for main lines in the world. The Capacity of a single vessel is from 6,800 tons to 57,000 tons. Our vessels sail under the flags of St. Vincent, Malta, Panama and Hong Kong. The vessels are able to carry various types of bulk cargo and provide multi-level and wide range of maritime transport services.

 

 

Key Customers

 

The Company’s major customers who accounted for the following percentage of total revenue are as follows:

 

		Revenues
Major Customers		For The Year Ended December 31, 2011				For The Year Ended December 31, 2010
G U SHIPPING PTE LTD.			25.2	%			27.3	%
MARUBENI TETSUGEN CO., LTD.			4.2	%			4.5	%
VITERRA ASIA PTE LTD.			3.8	%			0.0	%
STX  PANOCEAN CO., LTD.			2.3	%			9.7	%
STEMCOR S.E.A PTE LTD., SINGAPORE			2.3	%			2.9	%

 

Key Suppliers

 

The Company’s major oil suppliers who accounted for the following percentages of total oil purchases are as follows:

 

		Oil Purchases
Major Suppliers		For The Year Ended December 31, 2011				For The Year Ended December 31, 2010
SEABRIDGE  BUNKERING PTE LTD.			15.1	%			5.9	%
A/S DAN-BUNKERING LTD.			14.9	%			20.8	%
INTERNATIONAL BUNKER SERVICES K.K.(IBS)			8.8	%			0.0	%
CHIMBUSCO PAN NATION PETRO-CHEMICAL CO., LTD.			8.7	%			8.8	%
BOMIN BUNKER OIL LTD.			8.3	%			0.0	%

 

Employees

 

As of December 31, 2011, the Company had approximately 74 full time employees.

 

Research and Development

 

The Company spent $2,500 (which is reflected in WLOL’s General and Administrative Expenses for the year ended December 31, 2011) and $30,750 (which is reflected in WLOL’s General and Administrative Expenses for the year ended December 31, 2010) on Company-sponsored research and development activities as determined in accordance with US GAAP.  

 

Intellectual Property

 

The company currently has one trademark “Winland” in both Chinese and English, and the Company owns one domain name www.winlandshipping.com, which is currently in good standing.

 

ITEM 1A.

Risk Factors

 

Not required for smaller reporting companies.

  

ITEM 1B.

Unresolved Staff Comments

 

None.

 

 

ITEM 2.

Properties

 

All land in China is owned by the State. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of 50 years. This period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.

 

The Company currently has the following material office and land leases:

 

Lessee

Property Address

Square Meters

Lessor

Commencement Date (Month and Year)

Termination Date (Month and Year)

Rental Amount per Year ($)

PGL

No.305 Zhongshan Rd.,Shahekou District, Dalian, China

591.53

Dalian Winland Shipping Co., Ltd

January 2012

December 2012 (Renews Every Year)

44,194

Winland International

Rm 703, 7/F, Bonham Trade Centre, 50 Bonham Strand, Sheung Wan, Hong Kong, China

765

Henderson Sunshine Property Management

October 28, 2011

October 27, 2013 ((Renews Every Two Year)

23,626

 

We believe that all of our properties and equipment have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

  

ITEM 3.

Legal Proceedings

 

The Company signed a voyage charter contract with Sinoriches Global Ltd. on June 11, 2007. The Company canceled the contract on June 18, 2007. Sinoriches Global Ltd. filed an arbitration claim of $501,640 including interest for the dispute. As of December 31, 2011, the case is in the process of exchanging documents and evidence for arbitration. The Company intends to vigorously defend this action, and the Company does not believe the case will result in a significant unfavorable outcome.

 

In 2009, the Company recorded a claim in connection with an oil pollution accident that occurred in Korea in 2006 as other expenses. The case has not been settled as the year ended December 31, 2011. The insured underwriter will cover the settlement amount when the case is settled in the future.

 

ITEM 4.

Mine Safety Disclosures.

 

Not applicable.

 

PART II

 

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market For the Company’s Common Equity

 

Our common stock is currently quoted on the Over the Counter Bulletin Board’s OTCQB market under the symbol “WLOL”. There has been an extremely limited public market for our common stock.  Set forth below is a table showing the high and low bids for each quarter within the last 2 fiscal years from which information is available as provided to us from Pink Sheets, LLC.  These quotations reflect pre forward split, inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:

 

 

		High				Low
Year Ended December 31, 2010
January 4 through March 31		$	2.70			$	1.50
April 1 through June 30		$	2.25			$	1.65
July 1 through September 30		$	1.70			$	1.25
October  1 through December 31		$	2.90			$	1.60
Year Ended December 31, 2011
January 3 through March 28		$	2.50				1.30
March 29 through March 31 (after 1.5 for 1 split)		$	1.40				1.01
April 1 through June 30		$	1.30				0.20
July 1 through September 30		$	0.25				0.03
October 1 through December 30		$	0.53				0.05

 

When the trading price of our common stock is below $5.00 per share, the common stock is considered to be a “penny stock” that is subject to rules promulgated by the SEC (Rule 15-1 through 15g-9) under the Exchange Act. These rules impose significant requirements on brokers under these circumstances, including: (a) delivering to customers the SEC’s standardized risk disclosure document; (b) providing customers with current bid and ask prices; (c) disclosing to customers the brokers-dealer’s and sales representatives compensation; and (d) providing to customers monthly account statements.

 

Dividends

 

Dividends paid by WLOL, if any, will be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within the discretion of the Board of Directors of the Company. WLOL presently intends to retain all earnings, if any, for use in our business operations and accordingly, the Board does not anticipate declaring any cash dividends for the foreseeable future.

  

Holders of Common Equity

 

As of March 28, 2012, we had issued and outstanding One Hundred Ninety-Five Million (195,000,000) shares of our common stock (post March 2011 forward stock split) to 13 holders of record and no shares of preferred stock. The Company believes that it has more stockholders since many of its shares are held in "street" name. See also the “Security Ownership of Certain Beneficial Owners and Management” herein for a table setting forth (a) each person known by us to be the beneficial owner of five percent (5%) or more of our common stock and (b) all directors and officers individually and all directors and officers as a group as of March 29, 2012. 

 

Effective March 25, 2011 (payable March 28, 2011), the Company effected a 1.5 for 1 forward stock split of its common stock to shareholders of record as of March 25, 2011, increasing the total issued and outstanding number of shares of the Company’s common stock from 130,000,000 to 195,000,000 shares.  The Company also increased its authorized common stock from 200,000,000 shares to 400,000,000 shares in connection with the forward split.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

As of December 31, 2011, we had no compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.

 

 

Stock Performance Graph

 

Not required for smaller reporting companies.

 

Recent Sales of Unregistered Securities

 

Effective March 25, 2011 (payable March 28, 2011), the Company effected a 1.5 for 1 forward stock split of its common stock to shareholders of record as of March 25, 2011, increasing the total issued and outstanding number of shares of the Company’s common stock from 130,000,000 to 195,000,000 shares.  The Company also increased its authorized common stock from 200,000,000 shares to 400,000,000 shares in connection with the forward split.

 

As of December 31, 2011, there were 195,000,000 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding and during the fiscal year ended December 31, 2011, there were no issuances or sales of any of the Company’s unregistered securities.  We have never utilized an underwriter for an offering of our securities.

 

Transfer Agent and Registrar

 

Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209 currently acts as our transfer agent and registrar.

 

ITEM 6.

Selected Financial Data

 

The following selected consolidated financial data are derived from the audited consolidated financial statements of the Company included elsewhere in this report. The data presented herein should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

  

		2010				2011
Income Statement Data
Sales revenue		$	59,153,749			$	60,761,987
Income from continuing operations		$	2,767,309			$	(820,633	)
Net income		$	3,141,881			$	3,056,763
Income per share from continuing operations-diluted, basic		$	0.02			$	(0.00	)
Net income per share-diluted, basic		$	0.02			$	0.02
Cash Flow Data
Cash flow from operating activities		$	9,715,822			$	4,454,188
Cash flow from investing activities		$	(4,865,464	)		$	(3,156,961	)
Cash flow from financing activities		$	4,183,687			$	(10,739,142	)

 

		December 31, 2010				December 31, 2011
Balance Sheet Data
Current assets		$	20,199,357			$	12,685,725
Total assets		$	115,544,566			$	111,410,645
Total liabilities		$	88,124,340			$	83,514,457
Long-term liabilities		$	59,928,267			$	54,553,114
Shareholders' equity		$	27,420,226			$	27,896,188

 

 

ITEM 7.

Management‘s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This Annual Report includes forward-looking statements. Generally, the words “believes ”, “anticipates”, “ may ”, “ will ”, “ should ”, “ expect ”, “ intend ”, “estimate”, “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Annual Report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be place on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

 

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Annual Report.

 

Critical Accounting Policies, Estimates and Assumptions

 

The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.

 

The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

 

This section should be read together with the Summary of Significant Accounting Policies included as Notes to the Consolidated Financial Statements included in the report.

 

Revenue Recognition

 

Revenue is recognized based on the following four criteria:

 

(I)     The amount of revenue can be measured reliably;

 

(II)    It is probable that the economic benefits will flow to the Company;

 

(III)   The stage of completion at the balance sheet date can be measured reliably;

 

(IV)   The costs incurred, or to be incurred can be measured reliably.

 

Revenues are generated from dry bulk shipping and chartering brokerage services. Dry bulk shipping revenues for cargo transportation are recognized ratably over the estimated relative transit time of each voyage. Voyage revenue is deemed to commence upon the ship leaves the port and is deemed to end upon the completion of discharge of the current cargo, Chartering brokerage service revenues are recognized when the ship leaves port.

 

Under dry bulk shipping, voyage expenses such as bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions are paid by the Company whereas, under charter brokerage services, such voyage costs are paid by the Company's customers. All voyage and vessel operating expenses are expensed as incurred on an accrual basis.

 

 

Estimates Affecting Accounts Receivable and Impairment of Long-Lived Assets

 

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect our reporting of assets and liabilities. These estimates are particularly significant where they affect the reported net realizable value of the Company’s accounts receivable and impairment of long-lived assets.

 

As of December 31, 2011, the Company provided no reserve against accounts receivable. Management’s estimate of no reserve on accounts receivable at December 31, 2011 was based on the aged nature of these accounts receivable. In making its judgment, management assessed its customers’ ability to continue to pay their outstanding invoices on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debt to the Company.

 

Results of Operations for the Year Ended December 31, 2011 Compared With the Year Ended December 31, 2010 (in U.S. dollars, except otherwise as indicated)

 

		2011								2010								Change
		Amount				% of Revenues				Amount				% of Revenues				In Amount				In %
Sales revenue			60,761,987				100.0	%			59,153,749				100.0	%			1,608,238				2.7	%
Vessel operating costs			48,171,113				79.3	%			45,996,015				77.8	%			2,175,098				4.7	%
Depreciation and amortization			7,332,780				12.1	%			6,460,028				10.9	%			872,752				13.5	%
General and administrative			2,353,074				3.9	%			2,463,641				4.2	%			(110,567	)			(4.5	)%
Selling expenses			346,537				0.6	%			363,203				0.6	%			(16,666	)			(4.6	)%
Interest expenses			2,852,284				4.7	%			993,857				1.7	%			1,858,427				187.0	%
Other expenses			526,832				0.9	%			109,696				0.2	%			417,136				380.3	%
Income (loss) from continuing operations			(820,633	)			(1.4	)%			2,767,309				4.7	%			(3,587,942	)			(129.7	)%
Gain from disposition of discontinued operations			4,216,285				6.9	%			-				0.0	%			4,216,285				100.0	%
Income (loss) from discontinued operations, net			(338,889	)			(0.6	)%			374,572				0.6	%			(713,461	)			(190.5	)%
Net income			3,056,763				5.0	%			3,141,881				5.3	%			(85,118	)			(2.7	)%
Weighted average shares outstanding, basic and diluted			195,000,000								195,000,000								-				-
Net income per share, basic and diluted			0.02								0.02								-				-

  

Sales Revenue

 

Our revenues are derived from the operation of dry bulking shipping services and chartering brokerage services.  Of the total revenues, dry bulk shipping and chartering brokerage contributed 51% and 49% for the year ended December 31, 2011, respectively, compared with 53% and 47% for the year ended December 31, 2010, respectively.

 

For the year ended December 31, 2011, total revenues increased by approximately $1.6 million, or 2.7%, to $60.8 million from $59.2 million for the year ended December 31, 2010. This increase mainly resulted from the strong performance of our chartering brokerage segment which increased by $2.0 million in revenues, or 7%, offset by slightly decreased revenue generated from the dry bulk shipping segment of $0.4 million, or 1%, which was due to the weak global economic environment, especially the downturn in shipping industry during the period. The average Baltic Dry Index (BDI), a leading indicator of the global dry bulk shipping market, declined by approximately 44% for the year ended December 31, 2011 compared with the year ended December 31, 2010. The decline evidenced the challenging business environment.

 

 

Vessel Operating Costs

 

Vessel operating costs included mainly fuel costs, port fees, commissions and crew wages which were incurred in the operation of dry bulk shipping, and vessel chartering costs which were incurred in our chartering brokerage business. For the year ended December 31, 2011, vessel operating costs increased by $2.2 million, or 4.7%, to $48.2 million, compared with $46.0 million for the year ended December 31, 2010. This increase was partially in line with our increased revenues but also attributed to the 40% increases in the marine gas oil and intermediate fuel oil rates which resulted in a significant increase in fuel costs. Fuel costs are a main component in vessel operating costs, which have historically represented over 80% of total vessel operating costs.

 

Depreciation and Amortization

 

For the year ended December 31, 2011, depreciation of vessels increased by approximately $1.5 million, or 57.7%, to $4.1 million from $2.6 million for the year ended December 31, 2010. This increase is primarily due to the delivery of two new larger vessels in January and May 2011, slightly offset by the net effect from the disposition of three old small vessels. The amortization of deferred dry dock fees decreased by $0.3 million, or 8.4%, for the year ended December 31, 2011 to $3.0 million from $3.5 million for the year ended December 31, 2010. This decrease was primarily attributable to the certain vessels that have changed their flag registrations to jurisdictions which have fewer dry dock requirements.

 

General and Administrative

 

General and administrative expenses, which included mainly wages, travel expenses, public relations, office leasing and professional service fees, decreased by approximately $0.1 million, or 4.5%, to $2.4 million for the year ended December 31, 2011, from $2.5 million for the year ended December 31, 2010. This increase was primarily due to decreases in wages.

 

Selling Expenses

 

Selling expenses consisted of commissions paid to promote our dry bulk shipping and chartering brokerage businesses. For the year ended December 31, 2011, selling expenses decreased by $0.02 million, or 4.6%, to $0.35 million. The decrease was due to the fact that commission-based new businesses were promoted less in 2011 as compared to 2010.

 

Interest Expenses

 

Interest expenses increased significantly by approximately $1.9 million, or 187.0%, to $2.9 million for the year ended December 31, 2011, compared with approximately $1.0 million for the year ended December 31, 2010. This increase is primarily due to the complete drawdown of our $37 million loan facility and two long-term notes payable totaling $14,450,000 which had been initiated for the purchase of the vessels Fon Tai and Rui Lee in late May 2010. The loan facility and the long-term notes payable resulted in an interest expense increase of $2 million for the year ended December 31, 2011 compared with the year ended December 31, 2010.

 

Other Expenses

 

Other expenses were $0.5 million for the year ended December 31, 2011, compared with $0.1 million for the year ended December 31, 2010. This reflected an accumulated effect on our miscellaneous transactions.

 

 

Income (Loss) from Continuing Operations

 

Loss from continuing operations was $0.8 million for the year ended December 31, 2011, compared with income from continuing operations of $2.8 million for the year ended December 31, 2010. This decrease of $3.6 million, or 129.7%, was primarily attributable to an increase in vessel operating costs as well as interest and depreciation expenses which resulted from the delivery of two new vessels during the first half year of 2011, offset by increased revenues.

 

Gain from Disposition of Discontinued Operations

 

During the year ended December 31, 2011, we disposed of three old vessels. The net proceeds were recognized as a gain from the disposition of discontinued operations in the amount of $4.2 million for the year ended December 31, 2011.

 

Income (Loss) from Discontinued Operations

 

We incurred a loss from discontinued operations of $0.3 million and income of $0.4 million for the year ended December 31, 2011 and 2010, respectively, which consisted of discontinued operations of our former VIEs (DWIS, DWIL and DSON) during the period of January 1, 2011 to February 16, 2011 and discontinued operations of the three old vessels for the year ended December 31, 2011. For the year ended December 31, 2011, we incurred a loss of $0.06 million and $0.3 million from discontinued operations of our former VIEs and the three disposed vessels, respectively. For the comparable periods, we incurred a loss of $1.1 million and a gain of $1.1 million from the discontinued operations of the VIEs and the three vessels, respectively.

 

Net Income

 

For the year ended December 31, 2011, net income decreased by approximately $0.09 million, or 2.7%, to $3.06 million from $3.14 million for the year ended December 31, 2010. This decrease was primarily attributable to a decrease in income from continuing operations of $4.0 million, offset by an increase in gain from disposition of discontinued operations of $4.2 million for the comparable periods.

 

As a percentage of revenue, net income was 5.0% compared with 5.3% for the year ended December 31, 2011 and 2010, respectively. Behind the consistent and reasonably fluctuated net income level in two years was the significant decreases in income from continuing operations, which reflected the continuing volatility in the global shipping market, offset by the gain from disposition of three old vessels which were attained at low cost and sold at favorable prices.

 

Net Income Per Share

 

For both basic and diluted shares, net income per share remained at $0.02 per share for the years ended December 31, 2011 and 2010.  There was no change to the weighted average of the shares for the comparable years.

 

 

Liquidity and Capital Resources

 

Working Capital

 

We had a working capital deficit of approximately $16.3 million at December 31, 2011 as compared to a working capital deficit of approximately $8.0 million at December 31, 2010. This deficit is principally attributable to cash payments of $8.7 million to purchase the two new vessels.

 

Since the onset of the global financial crisis in late 2008, the shipping industry has undergone a downturn and the Company has faced various challenges in the shipping market. To improve the Company’s operations, we have developed expanding market strategies of utilizing new vessels and chartering more time charter businesses. We have also initiated cost control strategies of cutting vessel management costs as well as general management costs to improve profitability. With these efforts, our revenues increased 2.4% and we outperformed the average BDI, the well-known indicator of dry bulk shipping market which declined 44% for the comparable periods. We have carried out our strategies to collect outstanding balances while maintaining strong business relationships with our customers. We have also negotiated (and continue to negotiate) with our vendors to extend our credit terms.  

 

In January and May 2011, two new vessels were placed into operation. We believe these new vessels will continue to contribute to our revenues and improve our cash flows.

 

On February 16, 2011, we disposed of our former VIEs (DWIS, DWIL and DSON). Upon the disposition, we focused on our core business and our operations improved. We believe our operations will continue to improve as those disposed entities were operating at a loss.

 

For the year ended December 31, 2011, we disposed of three old vessels. We received $8.4 million net cash proceeds from these dispositions.

 

To improve liquidity, the Company has maintained the commitments from certain shareholders and related parties to provide working capital to the Company, if needed, in the form of notes payable or personal loans. We believe our working capital will increase and our liquidity will be improved. We also believe the Company has sufficient cash to sustain operations for the next 12 months.

 

Operating Activities

 

Net cash provided by operating activities was $4.5 million and $9.7 million for the year ended December 31, 2011 and 2010, respectively. The decline in cash flows from operating activities during fiscal 2011 as compared to fiscal 2010 is principally due to our weak results from continuing operations, increased inventory levels and increases in receivables, offset by increases in advances from customers and a payable to a ship builder.

 

Investing Activities

 

Net cash used in investing activities was $3.2 million and $4.9 million for the year ended December 31, 2011and 2010, respectively. For the year ended December 31, 2011, we invested $8.7 million in cash by purchasing new vessels and spent $2.8 million in cash in connection with the disposition of our VIEs. Meanwhile, we received $8.4 million in net proceeds from the disposition of three vessels. For the year ended December 31, 2010, $4.8 million in cash was used for the construction of the new vessels.

 

Financing Activities

 

Net cash used in our financing activities was $10.7 million for the year ended December 31, 2011. This amount was attributable to repayments of long-term loans, long-term notes payable and to related parties of $5.9 million, $3.0 million and $1.8 million, respectively.

 

 

For the year ended December 31, 2010, net cash provided by financing activities was $4.2 million and was mainly attributable to the proceeds from long-term loans and advances from related parties of $5.7 million and $3.3 million, respectively, offset by repayments of long-term loans and long-term notes payable of $4.1 million and $1.1 million, respectively.

 

Capital Expenditures

 

We intend to make major capital expenditures in connection with the expansion of our fleet capacity, although the Company does not currently have any written purchase contracts. We will expend some capital on expanding bareboat charting and long-term chartering business. Other major capital expenditures will consist of funding dry dockings of our fleet to preserve the quality of our vessels and funding to comply with international shipping standards and environmental laws and regulations during the next 12 months.

 

Capital Resources

 

We intend to finance capital expenditures for the expansion our fleet capacity through bank loans and notes payable.  We intend to finance other capital expenditures mainly from cash flows from our continuing operations as well as notes payable and personal loans, if needed. We believe that cash flows from our operations will be improved as two new vessels commenced operations in January and May 2011. We believe that existing cash and resources from our credit facilities are sufficient to meet our projected operating requirements during the next 12 months.

 

Material Commitments/Tabular Disclosure of Contractual Obligations

 

		Payments Due by Period
		Total				Less Than 1 Year				1-3 Years				3-5 Years				More Than 5 Years
Long-term loans obligations			46,229,419				5,923,066				10,034,552				10,034,552				20,237,249
Long-term notes payable obligations			14,377,770				3,827,500				6,820,544				3,729,726				-
Non-cancelable leases obligations			89,665				69,979				19,686				-				-

  

Off-Balance Sheet Arrangements

 

None.

  

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk.

 

Interest Rate Risk

 

The Company is exposed to market risk from floating interest rates, which could impact its results of operations and financial condition. The Company minimizes market risk via its operating and financing activities. As of December 31, 2011, the Company’s debt consisted of $46,229,419 in long-term loans at various margin above the LIBOR. For the year ended December 31, 2011, actual interest rates on the outstanding long-term loans ranged from 2.05% to 2.44% and the weighted average interest rate was 2.17%.

 

Foreign Currency and Exchange Rate Risk

 

The shipping industry’s functional currency is the U.S. dollar. The Company generates a majority of its revenues in U.S. dollars. The majority of the Company’s operating expenses are in U.S. dollars, and the majority of the Company’s investing and all of its financing activities are in U.S. dollars. The Company does not intend to use financial derivatives to mitigate the risk of exchange rate fluctuations for its operating, investing and financing activities. For the year ended December 31, 2011, the exchange rate for Renminbi against the U.S. dollar was in the region of RMB6.3108 to RMB6.6286 against USD1.00. The average translation rate was RMB6.4544 against USD1.00.

 

 

ITEM 8.

Financial Statements and Supplementary Data

 

Reference is made to the “F” pages herein comprising a portion of this Annual Report on Form 10-K.

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

 

FINANCIAL STATEMENTS

TABLE OF CONTENTS

 

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010	F-3
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010	F-5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010	F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010	F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR YEARS ENDED DECEMBER 31, 2011 AND 2010	F-8

  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of

Winland Ocean Shipping Corp.

Texas, USA

 

We have audited the accompanying consolidated balance sheets of Winland Ocean Shipping Corp. and its Subsidiaries (collectively, the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in all material respects, the financial position of Winland Ocean Shipping Corp. and its Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

March 30, 2012

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

ASSETS
		December 31, 2011				December 31, 2010
CURRENT ASSETS
Cash and cash equivalents		$	3,297,032			$	12,691,496
Accounts receivable			821,983				2,461,335
Inventories			3,161,397				1,771,838
Prepayments			525,179				964,152
Other receivables and other assets			890,844				887,081
Due from related parties			3,989,290				1,423,455
Total current assets			12,685,725				20,199,357
Vessels, net			94,634,999				39,476,824
Vessels under construction			-				47,700,567
Fixed assets, net			9,218				136,270
Deferred dry dock fees, net			4,080,703				8,027,857
Deferred tax assets			-				34
Other intangible assets			-				3,657
Total long-term assets			98,724,920				95,345,209
TOTAL ASSETS		$	111,410,645			$	115,544,566

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

LIABILITIES AND SHAREHOLDERS’ EQUITY
		December 31, 2011				December 31, 2010
CURRENT LIABILITIES
Accounts payable		$	8,768,479			$	8,062,374
Short-term bank loan			-				1,512,450
Current portion of long-term loans			5,923,066				6,627,576
Current portion of long-term notes payable, net of discount of $331,517 and $589,740 at December 31, 2011 and 2010, respectively			3,827,500				2,906,832
Advance from customers			578,952				947,442
Payroll payable			1,467,315				1,401,048
Payable to ship builder			1,900,000				-
Due to related parties			4,393,605				3,658,379
Taxes payable			-				39,743
Deferred revenue			-				175,501
Other current and accrued liabilities			2,102,426				2,864,728
Total current liabilities			28,961,343				28,196,073
LONG-TERM LIABILITIES
Long-term loans			40,306,353				40,031,919
Long-term notes payable (including related parties), net of discount of $676,561 and $817,430 at December 31, 2011 and 2010, respectively			10,550,270				17,046,348
Payable to ship builder			3,696,491				2,850,000
Total long-term liabilities			54,553,114				59,928,267
TOTAL LIABILITIES			83,514,457				88,124,340
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred stock, $0.001 per share;  20,000,000 shares authorized, 0 shares issued and outstanding			-				-
Common stock, $0.001 per share; 400,000,000 shares authorized, 195,000,000 shares issued and outstanding			195,000				195,000
Additional paid-in capital			1,595,276				3,257,966
Accumulated other comprehensive income			1,383				919,494
Retained earnings			26,104,529				23,047,766
Total Shareholders’ Equity			27,896,188				27,420,226
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	111,410,645			$	115,544,566

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

		For the Years Ended December 31,
		2011				2010
SALES REVENUE		$	60,761,987			$	59,153,749
COST AND EXPENSES
Vessel operating costs			48,171,113				45,996,015
Depreciation and amortization			7,332,780				6,460,028
General and administrative			2,353,074				2,463,641
Selling expenses			346,537				363,203
TOTAL COST AND EXPENSES			58,203,504				55,282,887
OTHER EXPENSES
Interest expenses			2,852,284				993,857
Other expenses			526,832				109,696
INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			(820,633	)			2,767,309
INCOME TAX EXPENSE			-				-
INCOME/(LOSS) FROM CONTINUING OPERATIONS		$	(820,633	)		$	2,767,309
DISCONTINUED OPERATIONS
Gain from disposition of discontinued operations			4,216,285				-
Income (Loss) from discontinued operations, net			(338,889	)			374,572
INCOME FROM DISCONTINUED OPERATIONS, NET			3,877,396				374,572
NET INCOME		$	3,056,763			$	3,141,881
OTHER COMPRHENSIVE INCOME
Foreign currency translation gain			(918,111	)			202,689
COMPREHENSIVE INCOME		$	2,138,652			$	3,344,570
Weighted average shares, basic and diluted			195,000,000				195,000,000
Net income per share, basic and diluted
Income from continuing operations		$	(0.00	)		$	0.02
Income from discontinued operations, net		$	0.02			$	0.00
Net income		$	0.02			$	0.02

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

																						Accumulated
																		Additional				Other
						Preferred								Common				Paid-In				Comprehensive				Retained
		Shares				Stock				Shares				Stock				Capital				Income				Earnings				Total
BALANCE AT JANUARY 1, 2010			-			$	-				195,000,000			$	195,000			$	3,257,966			$	716,805			$	19,905,885			$	24,075,656
Foreign currency translation gain			-				-				-				-				-				202,689				-				202,689
Net income			-				-				-				-				-				-				3,141,881				3,141,881
BALANCE AT JANUARY 1, 2011			-			$	-				195,000,000			$	195,000			$	3,257,966			$	919,494			$	23,047,766			$	27,420,226
Transfer assets between entities under common control																			(1,662,690	)			(918,111	)							(2,580,801	)
Net income			-				-				-				-				-				-				3,056,763				3,056,763
BALANCE AT DECEMBER 31, 2011			-			$	-				195,000,000			$	195,000			$	1,595,276			$	1,383			$	26,104,529			$	27,896,188

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

		For the Years Ended December 31,
		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income			3,056,763				3,141,881
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			4,139,210				2,972,752
Amortization of deferred dry dock fees			3,011,448				3,487,276
Discount on long-term notes payable			399,092				693,012
Gain on disposition of discontinued operations			(4,216,285	)			-
Loss on disposal of fixed assets			-				6,038
Deferred taxes			34				354
Vessel impairment loss			-				297,420
Changes in operating assets and liabilities net of effects of discontinued operations:
Accounts receivable			(1,558,972	)			(579,751	)
Inventories			(1,567,380	)			67,308
Prepayments			(146,364	)			(276,035	)
Other receivables and other assets			(3,511,535	)			(204,072	)
Deferred revenue			(175,501	)			15,813
Deferred dry dock fees			(2,100,183	)			(2,203,486	)
Accounts payable			1,185,123				1,168,512
Advance from customers			2,629,669				154,108
Accrued expenses			462,954				497,084
Taxes payable			(33,871	)			(11,507	)
Other current and accrued liabilities			133,495				489,115
Payable to ship builder			2,746,491				-
CASH PROVIDED BY OPERATING ACTIVITIES			4,454,188				9,715,822
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessels			(8,717,554	)			-
Payment for vessels under construction			-				(4,800,567	)
Purchase of fixed assets			-				(64,897	)
Proceeds from disposition of discontinued operation, net			8,383,584				-
Transfer of assets between entities under common control			(2,822,991	)			-
CASH USED IN INVESTING ACTIVITIES			(3,156,961	)			(4,865,464	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans			-				342,380
Repayments of long-term loans			(5,895,770	)			(4,128,948	)
Proceeds from long-term loans			-				5,700,000
Repayments of long-term notes payable			(3,012,763	)			(1,057,405	)
Advance from/(repayments to) related parties			(1,830,609	)			3,327,660
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			(10,739,142	)			4,183,687
Effect of exchange rate changes on cash and cash equivalents			47,451				126,727
NET INCREASE (DECREASE) IN CASH			(9,394,464	)			9,160,772
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		$	12,691,496			$	3,530,724
CASH AND CASH EQUIVALENTS AT END OF YEAR		$	3,297,032			$	12,691,496
Supplementary Disclosures for Cash Flow Information:
Income taxes paid		$	37,456			$	62,379
Interest paid		$	2,611,881			$	2,067,577
NON-CASH INVESTING AND FINANCING ACTIVITIES
Payments for vessels facilitated through proceeds from long-term loans		$	5,700,000			$	25,600,000
Payments for vessels facilitated through notes payable		$	-			$	14,450,000

 

See accompanying notes to the consolidated financial statements

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

1.    ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Trip Tech, Inc. (“Trip Tech”) was incorporated under the laws of Texas on November 17, 2006. On September 23, 2008, Trip Tech changed its name to Winland Online Shipping Holdings Corporation. On March 22, 2011, Winland Online Shipping Holdings Corporation changed its name to Winland Ocean Shipping Corporation (“WLOL” and together with WLOL’s subsidiaries, the “Company”).

 

On August 12, 2008, WLOL entered into a share exchange agreement with SkyAce Group Limited (“SkyAce”) and Pioneer Creation Holdings Limited (“PCH”). PCH is the sole shareholder of SkyAce. As a result of the share exchange, WLOL acquired all of the issued and outstanding securities of SkyAce from PCH in exchange for 115,387,500 newly-issued shares of WLOL’s common stock, par value $0.001 per share and 1,000,000 shares of Series A preferred stock, which such preferred shares would be converted into 45,000,000 shares of common stock upon WLOL amending its Articles of Incorporation to sufficiently increase the number of authorized shares of common stock in order to effect such issuance. SkyAce became a wholly-owned subsidiary of WLOL. At the time of the merger, WLOL had 34,612,500 shares of common stock. On September 23, 2008, the authorized shares were increased to 200,000,000 shares. On Octobers 23, 2008, 1,000,000 shares of preferred stock, par value of $0.001 were converted into 45,000,000 shares of common stock. As a result, the total outstanding shares of common stock increased to 195,000,000, and PCH owned 82.25% of the voting capital stock of WLOL.

 

On February 16, 2011, the Company terminated the technical service agreements with Dalian Winland International Shipping Agency Co., Ltd. (“DWIS”), Dalian Winland International Logistic Co., Ltd. (“DWIL”) and Dalian Shipping Online Network Co., Ltd. (“DSON”). The operating results of DWIS, DWIL and DSON have been presented as discontinued operations for the years ended December 31, 2011 and 2010. See Note 13.

 

On March 28, 2011, the Company declared to (i) effect a 1.5-for-1 forward stock split of the Company’s common stock; and (ii) increase the number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares. As a result, all the amounts in the accompanying consolidated financial statements have been restated to give effect to the 1.5-for-1 forward stock split.

 

The Company sold three vessels named Win Glory, Win Star and Bodar to unrelated parties on August 6, August 16 and September 30, 2011, respectively. The operating results of these vessels have been presented as discontinued operations for the years ended December 31, 2011 and 2010. See Note 13.

 

The Company is mainly engaged in ocean transportation of dry bulk cargo worldwide through the ownership and operation of dry bulk vessels and chartering brokerage services.

 

2.     LIQUIDITY

 

The Company had a working capital deficit of $16,275,618 and $7,996,716 as of December 31, 2011 and 2010, respectively. To improve liquidity, the Company obtained written commitments from certain shareholders and related parties to provide working capital to the Company, if needed, in the form of notes payable or personal loans.

 

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)

Basis of Presentation

 

The accompanying consolidated financial statements of Winland Ocean Shipping Corporation and subsidiaries have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“US GAAP”) and pursuant to the requirements for reporting on Form 10-K. The Company’s functional and reporting currency is the United States Dollar (“$”).

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(b)

Reclassification

 

Amounts in the consolidated financial statements for the year ended December 31, 2010 were reclassified to conform to the presentation used in the year ended December 31, 2011. See Note 13, Discontinued Operations, for a discussion relating these reclassifications.

 

(c) Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of WLOL and its subsidiaries as of December 31, 2011 as follows:

 

I. Subsidiaries and Holding Companies:

 

a)

SkyAce is a wholly-owned subsidiary of WLOL and incorporated under the law of British Virgin islands (“BVI”).

 

b)

Plentimillion Group Limited (“PGL”) is a wholly-owned subsidiary of SkyAce and incorporated in BVI.

 

c)

Best Summit Enterprise Limited (“BSL”) is a wholly-owned subsidiary of SkyAce and incorporated in BVI.

 

d)

Hong Kong Wallis Development Limited (“Wallis”) is registered in Hong Kong and is a wholly-owned subsidiary of BSL.

 

e)

Beijing Huate Xingye Technology Limited (“Huate”) is registered in PRC on March 18, 2008 and is a wholly-owned subsidiary of Wallis.

 

II. Subsidiaries of PGL - Businesses in dry bulk shipping and chartering brokerage:

 

f)

Winland Shipping Co., Limited, is registered in Hong Kong.

 

g)

Winland Dalian Shipping S.A. is incorporated in Panama and registered in Hong Kong,

 

h)

Treasure Way Shipping Limited is incorporated and registered in Hong Kong.

 

i)

Win Eagle Shipping Co., Limited, is incorporated and registered in Valletta, Malta.

 

j)

Win Ever Shipping Co., Limited, is incorporated and registered in Valletta, Malta.

 

k)

Win Bright Shipping Co., Limited, is incorporated and registered in Valletta, Malta.

 

l)

Kinki International Industrial Limited is registered in Hong Kong, managing chartering brokerage business of vessels.

 

m)

Bestline Shipping Limited is registered in Hong Kong, managing chartering brokerage business of vessels.

 

n)

Lancrusier Development Co., Limited is registered in Hong Kong, management and accounting of the above companies.

 

o)

Win Grace Shipping Co., Limited is incorporated and registered in Malta.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

  

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(c)

Principles of Consolidation (Continued)

 

II. Wholly owned subsidiaries of PGL - Businesses in dry bulk shipping and chartering brokerage (continued):

 

p)

Win Hope Shipping Co., Limited is incorporated and registered in Malta.

 

q)

Win Moony Shipping Co., Limited is incorporated and registered in Malta.

 

r)

Bodar Shipping S.A. is incorporated and registered in Panama.

 

s)

Win Moony Shipping S.A. is incorporated and registered in Panama.

 

t)

Bao Shun Shipping S.A. is incorporated and registered in Panama.

 

u)

Winland International Shipping Co., Limited is incorporated and registered in Hong Kong.

 

v)

Kin Ki International Industrial Limited is incorporated and registered in BVI.

 

w)

Fon Tai Shipping Co., Limited is incorporated and registered in Hong Kong.

 

x)

Won Lee Shipping Co., Limited is incorporated and registered in Hong Kong.

 

y)

Win Ever Shipping S.A. is incorporated and registered in Panama.

 

z)

Win Bright Shipping S.A. is incorporated and registered in Panama.

 

Inter-company accounts and transactions have been eliminated in consolidation.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(d)  Concentrations

 

The Company’s major customers who accounted for the following percentages of total revenues are as follows:

 

		Revenues
		For The Year Ended				For The Year Ended
Major Customers		December 31, 2011				December 31, 2010
G U SHIPPING PTE LTD.			25.2	%			27.3	%
MARUBENI TETSUGEN CO., LTD.			4.2	%			4.5	%
VITERRA ASIA PTE LTD.			3.8	%			0.0	%
STX  PANOCEAN CO., LTD.			2.3	%			9.7	%
STEMCOR S.E.A PTE LTD., SINGAPORE			2.3	%			2.9	%

 

The Company’s major oil suppliers who accounted for the following percentages of total oil purchases are as follows:

 

		Oil Purchases
		For The Year Ended				For The Year Ended
Major Suppliers		December 31, 2011				December 31, 2010
SEABRIDGE  BUNKERING PTE LTD.			15.1	%			5.9	%
A/S DAN-BUNKERING LTD.			14.9	%			20.8	%
INTERNATIONAL BUNKER SERVICES K.K.(IBS)			8.8	%			0.0	%
CHIMBUSCO PAN NATION PETRO-CHEMICAL CO., LTD.			8.7	%			8.8	%
BOMIN BUNKER OIL LTD.			8.3	%			0.0	%

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(e)  Use of Estimates

 

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of vessels; the allowance for doubtful accounts; the fair value determination of financial and equity instruments; the recoverability of intangible asset and property, plant and equipment; and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

 

(f)  Fair Value of Financial Instruments

 

Fair Value of Financial Instruments - FASB (Financial Accounting Standards Board) ASC 820-10 (Accounting Standards Codification: Fair Value Measurements and Disclosures) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

 

These tiers include:

 

(I)

Level 1—defined as observable inputs such as quoted prices in active markets;

(II)

Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

(III)

Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known PRC and international institutions with original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity.

 

The carrying amounts of other financial assets and liabilities, such as accounts receivable, prepayments, other receivables and other assets, due from related parties, accounts payable, current portion of long-term bank loans and notes payable, advance from customers, payroll payable, payable to ship builder, due to related parties and other payables and accrued liabilities approximate their fair values because of the short maturity of these instruments. The fair value of the Company’s long-term bank loans and notes payable is estimated based on the current rates offered to the Company for debt of similar terms and maturities. Under this method, the Company’s fair value of long-term bank loans and notes payable was not significantly different from the carrying value at December 31, 2011.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(g)  Inventories

 

Inventories of the Company are composed of fuel oil and diesel oil. Inventories are stated at the lower of cost or net realizable value (market value). The cost is determined on the basis of weighted average. Net realizable value is based on estimated selling prices less any further costs expected to be incurred for disposal.

 

(h)  Accounts Receivable

 

Accounts receivable include receivables from shippers and ship owners, net of a provision for doubtful accounts. At each balance sheet date, potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. At December 31, 2011 and 2010, the Company has no allowance for doubtful accounts.

 

(i)  Vessels and Depreciation Policy

 

Vessels are carried at cost less accumulated depreciation and impairment losses. Vessels are stated as cost which consists of the contract price of the directly purchased vessels or present value of minimum lease payments for the vessels acquired by capital lease, and any direct expenditure incurred upon acquisition for major improvements and delivery.

 

Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated residual value. The residual values were 10% and 15% of the purchase prices for second-hand vessels and self-constructed vessels, respectively. Management estimates the useful lives of the vessels to be 25 years from the date of initial delivery of each vessel from the shipyard to the owner. As for second- hand vessels, the Company specified the depreciation periods by deducting the periods used before purchase from 25 years.

 

The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Expenditures for routine maintenance and repairs are expensed as incurred.

 

(j) Vessels Under Construction

 

Vessels under construction are stated at cost. They are not depreciated until the vessels are completed and ready for use. Interest and finance costs relating to vessels, barges and other equipment under construction are capitalized to properly reflect the cost of assets acquired. The capitalized interest as part of vessels and vessels under construction was $344,757 and $942,823 for the years ended December 31, 2011 and 2010, respectively.

 

(k) Fixed Assets

 

Fixed assets are carried at cost less accumulated depreciation and amortization. Depreciation is provided over the estimated useful life, using the straight-line method. Estimated useful lives are 5 years for motor vehicles and office equipment.

 

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

 

Fixed assets depreciation expense for the years ended December 31, 2011 and 2010 was $6,352 and $83,582, respectively.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(l) Dry Dock Fees

 

Vessels must undergo regular inspection, monitoring and maintenance, referred to as dry docking, to maintain the required operating certificates. International Maritime Organization (IMO) regulations generally require that vessels be dry docked every five years. Because dry docking enable the vessel to continue operating in compliance with IMO requirements, the costs of these scheduled dry docking are customarily capitalized and are then amortized over a 60-month period beginning with the accounting period following the vessel’s release from dry docking. Also see Note 6.

 

(m) Impairment of Long-Lived Assets

 

Long-lived assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in FASB ASC 360-10-35-17. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations.  The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

 

In 2010, the Company assessed the recoverability of the carrying value of vessel Andong, the vessel of DWIL, a former VIE of the Company, which resulted in an impairment loss of $297,420. The loss reflects the amount by which the carrying value of the vessel exceeds its estimated fair value determined by its discounted future cash flows. The impairment loss is recorded as a component of costs and expenses in the income from discontinued operations in the Consolidated Statements of Income and Comprehensive Income for the year ended December 31, 2010. The operating results of the VIEs are reclassified in the discontinued operations for all periods presented. See Note 13 “Discontinued Operations” for a discussion relating to these reclassifications.

 

(n) Revenue Recognition

 

Revenue is recognized based on the following four criteria:

 

(I)

The amount of revenue can be measured reliably;

 

(II)

It is probable that the economic benefits will flow to the Company;

 

(III)

The stage of completion at the balance sheet date can be measured reliably;

 

(IV)

The costs incurred, or to be incurred can be measured reliably.

 

Revenues are generated from dry bulk shipping and chartering brokerage services. Dry bulk shipping revenues for cargo transportation are recognized ratably over the estimated relative transit time of each voyage. Voyage revenue is deemed to commence upon the ship leaving the port and is deemed to end upon the completion of discharge of the current cargo. Chartering brokerage service revenues are recognized when the ship leaves the port.

 

Under dry bulk shipping, voyage expenses such as bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions are paid by the Company, whereas under charter brokerage services, such voyage costs are paid by the Company's customers. All voyage and vessel operating expenses are expensed as incurred on an accrual basis.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(o) Earnings Per Share

 

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company did not have dilutive securities for the years ended December 31, 2011 and 2010.

 

(p) Comprehensive Income

 

The assets and liabilities of the Company’s PRC subsidiary, Huate, are translated into United States dollars at currency exchange rates in effect at period-end and revenues and expenses are translated at average rates in effect for the period. Gains and losses resulting from the translation of Huate’s financial statements are included in comprehensive income.

 

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income should be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s only component of comprehensive income is the foreign currency translation adjustment.

 

(q) Reporting Segments

 

Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative threshold or meet certain other reporting requirements. Operating business segments have been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has determined that there are two reportable segments: (1) dry bulk shipping and (2) chartering brokerage.

 

Dry Bulk Shipping Service – The dry bulk shipping service segment operates a fleet of twelve vessels that provides marine shipping services for dry and liquid bulk cargo shipping. The segment contributed 51% and 53% of the combined operating revenues for the years ended December 31, 2011 and 2010, respectively.

 

Chartering Brokerage Service – The chartering brokerage service segment provides ship chartering services for shipping companies and shippers. The segment contributed 49% and 47% of the combined operating revenues for the years ended December 31, 2011 and 2010, respectively.

 

(r) New Accounting Pronouncements

 

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The guidance in ASU 2011-04 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements, including clarification of the FASB's intent about the application of existing fair value and disclosure requirements and changing a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this ASU should be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(r) New Accounting Pronouncements (Continued)

 

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The guidance in ASU 2011-05 applies to both annual and interim financial statements and eliminates the option for reporting entities to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. This ASU also requires consecutive presentation of the statement of net income and other comprehensive income. Finally, this ASU requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this ASU should be applied retrospectively and are effective for fiscal year, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

4.   VESSELS

 

The Company’s current fleet consists of eleven and thirteen vessels as bulk carriers as of December 31, 2011 and 2010, respectively.

 

The vessels of the Company consist of the following:

 

				December 31, 2011				December 31, 2010
At cost:
Win Hope				$	2,679,285			$	2,679,285
Win Ever					1,737,966				1,737,966
Win Bright					1,739,258				1,739,258
Win Eagle					3,560,852				3,560,852
Win Glory		(a)			-				2,503,697
Win Grace					3,677,861				3,677,861
Win Moony					3,682,178				3,682,178
Win Star		(a)			-				3,336,600
Winland Dalian					18,243,139				18,243,139
Win Honey					4,500,000				4,500,000
Bodar		(a)			-				4,985,441
Andong		(b)			-				2,760,221
Baoshun					20,881,125				20,881,125
Fon Tai		(c)			30,986,337				-
Rui Lee		(c)			31,126,584				-
				$	122,814,585			$	74,287,623

 

				December 31, 2011				December 31, 2010
Less:  Accumulated depreciation
Win Hope				$	2,411,356			$	2,250,597
Win Ever					1,564,169				1,564,169
Win Bright					1,565,332				1,565,332
Win Eagle					3,204,767				3,204,767
Win Glory		(a)			-				2,253,328
Win Grace					3,310,075				3,310,075
Win Moony					3,313,961				3,313,961
Win Star		(a)			-				3,002,940
Winland Dalian					6,932,393				5,837,805
Win Honey					2,029,219				1,776,094
Bodar		(a)			-				4,486,897
Andong		(b)			-				986,373
Baoshun					2,265,229				1,258,461
Fon Tai		(c)			965,741				-
Rui Lee		(c)			617,344				-
				$	28,179,586			$	34,810,799
Vessels, net				$	94,634,999			$	39,476,824

 

Vessel depreciation expenses recorded in the continuing operations for the years ended December 31, 2011 and 2010 were $4,098,324 and $2,595,616, respectively. Vessel depreciation expenses recorded in the discontinued operations for the years ended December 31, 2011 and 2010 were $34,534 and $293,554, respectively.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

4.    VESSELS (CONTINUED)

 

(a)

The Company sold Win Glory, Win Star and Bodar to unrelated party buyers on August 6, 2011, August 16, 2011 and September 30, 2011, respectively. See Note 13.

 

(b)

An impairment loss of $297,420 for the vessel Andong was recognized for the year ended December 31, 2010. Andong was disposed of with the VIEs on February 16, 2011. The impairment loss was recorded in the income from discontinued operations for the year ended December 31, 2010.

 

(c)

The construction of Fon Tai (HT073) and Rui Lee (HT074) were completed and delivered to the Company on January 10, 2011 and May 5, 2011, respectively.

 

The Company pledged the following vessels as collateral against long-term loans (see also Note 9):

 

Net Book Value		December 31, 2011				December 31, 2010
Winland Dalian		$	11,310,746			$	12,405,334
Win Honey			2,470,781				2,723,906
Baoshun			18,615,896				19,622,664
Fon Tai			30,020,596				-
Rui Lee			30,509,239				-
Total		$	92,927,258			$	34,751,904

 

Insurance Costs:

 

There are four kinds of marine insurance which insure the Company’s vessels and shipping business as follows:

 

		Premium Expense
Insurance		For The Years Ended December 31,
		2011		2010
Hull insurance	$	1,000,335		$	1,065,565
Protection & indemnity insurance		1,151,170			1,100,599
Freight demurrage and defense insurance		110,791			108,532
Delay insurance		60,926			88,584
Total	$	2,323,222		$	2,363,280

 

Insurance costs are amortized on a straight-line basis over the beneficial periods and are recorded in vessel expenses in the consolidated statements of income and comprehensive income for the years ended December 31, 2011 and 2010. Premium expenses were $2,323,222 and $2,363,280 for the years ended December 31, 2011 and 2010, respectively. The prepayment for insurance was $89,860 and $0 as of December 31, 2011 and 2010, respectively.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

5.    VESSELS UNDER CONSTRUCTION

 

The Company entered into an agreement on May 20, 2010 to transfer two novation agreements dated August 15, 2009 with reference made to two ship building contracts previously executed on December 6, 2006 between a third party and the ship builder for the construction of vessels HT073 and HT074. The contract amount of $29,950,000 for each vessel included the ship building contract price of $28,500,000 due to the ship yard and a contract transfer fee of $1,450,000 due to Rich Forth Investment Limited (“Rich”), a related party which is controlled by a relative of the Chairman of the Company. The contract transfer fees reimbursed Rich for costs incurred in connection with building the ships, including a finder’s fee and interest that Rich paid to third parties for amounts borrowed to pay the finder’s fee. The amounts shown in the accompanying consolidated balance sheets include milestone installments related to the ship building contract term, contract transfer fees, other direct costs incurred during the construction periods, and capitalized interest, all of which are capitalized to properly reflect the cost of assets acquired and not depreciated until the vessels are completed and ready for use. Vessels under construction as of December 31, 2010 consist of the following:

 

Vessel		Contract				Construction				Other				Finder’s				Capitalized
Name		Amount				Costs				Direct Costs				Fees				Interest				Total
HT073		$	29,950,000			$	28,500,000			$	648,503			$	1,425,000			$	512,628			$	31,086,131
HT074		$	29,950,000			$	14,250,000			$	509,241			$	1,425,000			$	430,195			$	16,614,436
Total		$	59,900,000			$	42,750,000			$	1,157,744			$	2,850,000			$	942,823			$	47,700,567

 

 Fon Tai (HT073) and Rui Lee (HT074) were subsequently delivered to the Company on January 10, 2011 and May 5, 2011, respectively.

 

6.    DEFERRED DRY DOCK FEES

 

Deferred dry dock fees consisted of the following:

 

		December 31, 2011				December 31, 2010
Cost		$	9,978,081			$	15,800,781
Less: Accumulated amortization			5,897,378				7,772,924
Deferred dry dock fees, net		$	4,080,703			$	8,027,857

 

Amortization expense for the next five years and thereafter is as follows:

 

Periods Ended December 31,		Amount
2012		$	1,446,427
2013			1,057,842
2014			725,027
2015			500,503
2016			350,904
Total		$	4,080,703

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

6.    DEFERRED DRY DOCK FEES (CONTINUED)

 

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

 

		December 31, 2011				December 31, 2010
Beginning balance		$	8,027,857			$	9,311,647
Addition of deferrals			2,100,183				2,203,486
Less: Amortization expense recorded in discontinued operations			(990,654	)			(1,762,384	)
Less: Disposition of discontinued operations			(3,035,889	)			-
Less: Amortization expense			(2,020,794	)			(1,724,892	)
Deferred dry dock fees, net		$	4,080,703			$	8,027,857

 

The Company’s vessels are required to be drydocked approximately every 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. The Company defers the costs associated with the drydockings as they occur and amortizes these costs on a straight-line basis over the period between drydockings. Cost deferred as part of a vessel’s drydocking include actual costs incurred at the drydocking yard, cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise, and the cost of hiring a third party to oversee the drydocking. If the vessel is drydocked earlier than originally anticipated, any remaining deferred drydock costs that have not been amortized are expensed at the beginning of the next drydock. Amortization expense for dry docking for the years ended December 31, 2011 and 2010 was $3,011,448 and $3,487,276, respectively. All other costs incurred during drydocking are expensed as incurred.

 

7.    DUE FROM/TO RELATED PARTIES

 

Due from/to related parties consisted of the following:

 

(I)   Due From Related Parties				December 31, 2011				December 31, 2010
Winland Container Lines Ltd.		a)		$	3,708,466			$	1,423,455
Dalian Winland Shipping Co., Ltd		b)							-
Dalian Winland Group Co., Ltd		c)			217,127				-
Dalian Master Well Ship Management Co., Ltd		d)			-				-
Winland Shipping Japan Co., Ltd		e)			63,697				-
Total due from related parties				$	3,989,290			$	1,423,455

 

(II)   Due To Related Parties				December 31, 2011				December 31, 2010
Dalian Winland Shipping Co., Ltd		b)		$	22,313			$	42,495
Dalian Winland Group Co., Ltd		c)			-				2,063,948
Dalian Master Well Ship Management Co., Ltd		d)			216,200				28,824
Winland Shipping Japan Co., Ltd		e)			-				5,517
Rich Forth Investment Limited		f)			4,155,092				1,517,595
Total due to related parties				$	4,393,605			$	3,658,379

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

7.    DUE FROM/TO RELATED PARTIES (CONTINUED)

 

a)

Winland Container Lines Ltd. is controlled by relatives of the Chairman and Chief Executive Officer of the Company. The Company provided shipping agency and freight forwarding services to Winland Container Lines Ltd. For the years ended December 31, 2011 and 2010, the Company recognized charter income for the vessel Winland Dalian of $0 and $153,507, respectively; and the Company recognized service revenues of $1,977,090 and $2,164,073, respectively. For the years ended December 31, 2011 and 2010, the Company paid $37,504,248 and $24,556,744 of expenses to ports, and received $36,061,231 and $26,572,089 of payments from ports on behalf of Winland Container Lines Ltd., respectively. The outstanding balance at December 31, 2011 was interest-free, unsecured and was subsequently settled.

 

b)

Dalian Winland Shipping Co., Ltd (“DWSC”) is controlled by the Chairman and Chief Executive Officer of the Company. DWSC rented an office to the Company. The rental fees for the office of the Company were $44,362 and $44,194 for the years ended December 31, 2011 and 2010, respectively. The vessel management fees were $0 and $18,000 for the years ended December 31, 2011 and 2010, respectively. For the years ended December 31, 2011 and 2010, on behalf of DWSC, the Company paid $0 and $2,234,843, and received $2,357 and $2,155,825, respectively. The outstanding balance at December 31, 2011 is interest-free, unsecured and has no fixed repayment term.

 

c)

Dalian Winland Group Co., Ltd (“DWIG”) is controlled by the Chairman and Chief Executive Officer of the Company. The Company recognized relevant agency service fees of $98,854 and $0 for years ended December 31, 2011 and December 31, 2010, respectively. Rent for vessel Andong was $9,400 and $0 for the years ended December 31, 2011 and 2010, respectively. The Company received delay compensation of $185,000 and $0 for years ended December 31, 2011 and December 31, 2010, respectively. The Company paid $16,207,499 and $6,440,547 on behalf of DWIG for the years ended December 31, 2011 and 2010, respectively. The Company collected $14,398,597 and $8,430,902 on behalf of DWIG for the years ended December 31, 2011 and 2010, respectively. The Company recognized interest expense of $0 and $92,200 for the years ended December 31, 2011 and 2010, respectively. The outstanding balance at December 31, 2011 is interest-free, unsecured and has no fixed repayment term.

 

d)

Dalian Master Well Ship Management Co., Ltd is controlled by the Chairman and Chief Executive Officer of the Company and operates as the vessel management company for the Company. The vessel management fees for the years ended December 31, 2011 and 2010 were $265,800 and $232,200, respectively. The Company paid $0 and $217,116 on behalf of Dalian Master Well Ship Management Co., Ltd. for the years ended December 31, 2011 and 2010, respectively. The Company collected $0 and $6,540 on behalf of Dalian Master Well Ship Management Co., Ltd. for the years ended December 31, 2011 and 2010, respectively. The outstanding balance at December 31, 2011 is interest-free, unsecured, and has no fixed repayment term.

 

e)

Winland Shipping Japan Co., Ltd is controlled by the Chairman and Chief Executive Officer of the Company. The Company recognized relevant agency service fees of $0 and $15,674 for the years ended December 31, 2011 and 2010, respectively. The Company paid $36,865 and $71,322 and received $44,514 and $47,951 on behalf of Winland Shipping Japan Co., Ltd. for the years ended December 31, 2011 and 2010, respectively. The outstanding balance at December 31, 2011 is interest-free, unsecured and has no fixed repayment term.

 

f)

Rich Forth Investment Limited is controlled by relatives of the Chairman and Chief Executive Officer of the Company and operates as a vessel management company for the Company. The vessel management fee was $44,100 and $52,200 for the years ended December 31, 2011 and 2010, respectively. The Company paid $11,470,939 and $416,679, and collected $13,616,168 and $1,651,015 for the years ended December 31, 2011 and 2010, respectively. The Company recognized interest expense for long-term notes payable of $948,945 and $231,160 for the years ended December 31, 2011 and 2010, respectively. The outstanding balance at December 31, 2011 is interest-free, unsecured and has no fixed repayment term. Also see Note 10 for long-term notes payable to related parties.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

8.     SHORT-TERM BANK LOAN

 

The Company’s VIE, DWIL, obtained a short-term bank loan from Dalian Bank for $1,512,450 on November 4, 2010. The loan principal is due October 21, 2011. The interest payment is due monthly at an annual interest rate of 7.784%. The loan is guaranteed by Dalian Guo Tou Investment Co., an unrelated party, and Dalian Winland Group Co., Ltd., a related party of the Company.

 

The results of operations of VIEs were presented separately as discontinued operations in the consolidated statements of income and comprehensive income for the years ended December 31, 2011 and 2010. See Note 13, Discontinued Operations, for a discussion relating these reclassifications.

 

9.    LONG-TERM LOANS

 

Long-term loans consist of the following:

 

		December 31,				December 31,
		2011				2010
Loans from Dialease Maritime S.A.:
Due on August 1, 2011, monthly interest payment is at 1-month USD LIBOR plus 1.75% per annum (2.05% at December 31, 2011), secured by the vessel Winland Dalian (also see Note 4), assignment of insurance of the vessel, and guaranteed by the Chairman of the Company. Principal is repaid every month in 72 equal installments from September 2005		$	-			$	1,407,792
Due on July 21, 2012, monthly interest payment is at 1-month USD LIBOR plus 1.75% per annum (2.05% at December 31, 2011), secured by the vessel Win Honey (also see Note 4), assignment of insurance of the vessel, and guaranteed by the Chairman of the Company. Principal is repaid every month in 72 equal installments from August 2006			408,290				1,108,298
Term of the loan is 7 years with interest at the 1-month JPY LIBOR plus 2.30% per annum (2.44% at December 31, 2011), monthly payment of principal is fixed at $109,773, initial payment on October 24, 2009, secured by the vessel Baoshun (also see Note 4)			11,526,129				12,843,405
Loan facility of $37,000,000 from China Merchants Bank:
Drawdown from the loan facilities due on September 21, 2012, with interest rate at the 3-month USD LIBOR plus 1.5% per annum (2.08% at December 31, 2011). The principal payment is fixed at $497,500 quarterly, starting September 21, 2011, with final payment of $497,500 on May 5, 2021. The interest is accrued from June 29, 2010 and paid quarterly starting December 21, 2010 until the principal is paid. The loan is secured by the vessel Rui Lee, and guaranteed by the Chairman and the CEO of the Company (also see Note 4)			18,905,000				14,200,000
Drawdown from the loan facilities due on June 21, 2014, with interest rate at the 3-month USD LIBOR plus 1.5% per annum (2.08% at December 31, 2011). The principal payment is fixed at $427,500 quarterly, starting March 21, 2011, with final payment of $427,500 due December 21, 2020. The interest is accrued from July 9, 2010 and paid quarterly starting December 21, 2010 until the principal payoff. The loan is secured by the vessel Fon Tai, and guaranteed by the Chairman and the CEO of the Company (also see Note 4)			15,390,000				17,100,000
Total long-term loans			46,229,419				46,659,495
Less: Current portion			5,923,066				6,627,576
Long-term portion		$	40,306,353			$	40,031,919

 

Interest expense for the years ended December 31, 2011 and 2010 was $897,218 and $429,761, respectively.

 

The interest on the loan facility which was used to build the vessels Fon Tai and Rui Lee was capitalized as part of vessels upon the vessel delivery. For the years ended December 31, 2011 and 2010, the interest capitalized to vessels was $111,102 and $179,520, respectively.

 

The repayment schedule for the principal amount of long-term loans is as follows:

 

Periods Ended December 31,		Amount
2012		$	5,923,066
2013			5,017,276
2014			5,017,276
2015			5,017,276
2016			5,017,276
Thereafter			20,237,249
Total		$	46,229,419

 

 

WINLAND OCEAN SHIPPING CORP.

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

10.    LONG-TERM NOTES PAYABLE

 

Long-term notes payable consists of the following:

 

				December 31, 2011				December 31,  2010
Notes payable to unrelated party:
Sea Carrier Shipping Co., Ltd., net of discount of $1,008,078 and $1,407,170 at December 31, 2011 and December 31, 2010, respectively, due September 25, 2014, fixed repayment of $2,897 per day, monthly payment due one month in advance		a)		$	1,640,544			$	2,541,441
Sea Carrier Shipping Co., Ltd., net of discount of $1,786,679 and $1,968,520 at December 31, 2011 and 2010, respectively, due March 31, 2016, fixed repayment of $3,718 per day, monthly payment due at the end of each month as amended on April 1, 2011		b)			3,269,863				3,850,000
Sea Carrier Shipping Co., Ltd., net of discount of $1,786,679 and $1,968,520 at December 31, 2011 and 2010, respectively, due March 31, 2016, fixed repayment of $3,718 per day, monthly payment due at the end of each month as amended on April 1, 2011		c)			3,269,863				3,850,000
Subtotal					8,180,270				10,241,441
Notes payable to related party:
Dalian Winland Shipping Co., Ltd., due July 19, 2012, at an interest rate of 5% per annum					-				1,148,131
Dalian Winland Group Co., Ltd., due July 19, 2012, at an interest rate of 5% per annum					-				1,813,608
Rich Forth Investment Limited, due March 31, 2016, at an interest rate of 5.841% on unpaid principal balance per annum, fixed quarterly $215,000 repayment of principal started June 2011, interest payment started June 1, 2010 as amended on April 1, 2011		f)			3,870,000				4,300,000
Rich Forth Investment Limited, due June 30, 2016, at an interest rate of 5.841% on unpaid principal balance per annum, fixed monthly $122,500 repayment of principal started Q3 2011, interest payment started June 1, 2010 as amended on April 1, 2011		g)			2,327,500				2,450,000
Subtotal					6,197,500				9,711,739
Total long-term notes payable					14,377,770				19,953,180
Less: Current portion					3,827,500				2,906,832
Long-term portion				$	10,550,270			$	17,046,348

 

The long-term note denoted a) was used to purchase the vessel Baoshun (see Note 4). The amortization of discount on this long-term note for the years ended December 31, 2011 and 2010 was $399,092 and $693,012, respectively.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

10.    LONG-TERM NOTES PAYABLE (CONTINUED)

 

The long-term notes denoted b) and f) were used to build the vessel Fon Tai which was delivered on January 10, 2011. The interest on these long-term notes before the delivery was capitalized and expensed afterwards. For the year ended December 31, 2011, the capitalized interest on these long-term notes was $14,183, and expensed interest on these long-term notes was $784,955.

 

The long-term notes denoted c) and g) were used to build the vessel Rui Lee which was delivered on May 5, 2011. The interest on these long-term notes before the delivery was capitalized and expensed afterwards. For the year ended December 31, 2011, the capitalized interest on these long-term notes was $219,472, and expensed interest on these long-term notes was $481,555.

 

The repayment schedule for long-term notes payable is as follows:

 

Periods Ended December 31,		Amount
2012		$	3,827,500
2013			3,490,000
2014			3,330,544
2015			2,890,000
2016			839,726
Total		$	14,377,770

 

11.    PAYABLE TO SHIP BUILDER

 

Upon the vessel Fon Tai’s delivery on January 10, 2011, the balance of $2,850,000 payable to ship builder will be repaid annually in three equal installments of $950,000, starting from January 9, 2012.

 

Upon the vessel Rui Lee’s delivery on May 5, 2011, the balance of $2,850,000 payable to ship builder will be repaid annually in three equal installments of $950,000, starting from May 4, 2012.

 

As of December 31, 2011 and 2010, the current portion of the payable to ship builder was $1,900,000 and $0, respectively and the long-term portion of the payable to ship builder was $3,696,491 and $2,850,000, respectively.

 

12.    COMMITMENTS

 

Lease Commitments

 

The Company leases office space under operating leases. Lease expense was $68,547 and $215,296 for the years ended December 31, 2011 and 2010, respectively.

 

As of December 31, 2011, future minimum payments required under non-cancelable leases are:

 

Periods  Ended December 31,		Amount
2012		$	69,979
2013			19,686
Total		$	89,665

 

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

13.    DISCONTINUED OPERATIONS

 

(a)     Disposition of VIEs

 

To comply with PRC laws and regulations, on March 18, 2008, the Company entered into exclusive technical service agreements (VIE agreements) with Dalian Winland International Shipping Agency Co., Ltd. (“DWIS”), Dalian Winland International Logistics Co., Ltd. (“DWIL”), and Dalian Shipping Online Network Co., Ltd. (“DSON” or “Shipping Online”), each VIE of which is incorporated in the PRC, pursuant to which the Company provided technical and other services to DWIS, DWIL and DSON in exchange for substantially all net income of DWIS, DWIL and DSON. All voting rights of DWIS, DWIL and DSON were assigned to the Company, and the Company had the right to appoint all directors and senior management personnel of DWIS, DWIL and DSON. In addition, the shareholders of DWIS, DWIL and DSON had pledged their equity interests in DWIS, DWIL and DSON as collateral to the Company for the non-payment of the fees for technical and other services due to the Company.

 

On February 16, 2011, the Company voluntarily entered into a Termination of Services Agreement with such VIEs (DWIS, DWIL and DSON) and the stockholders of the VIEs, whereby it voluntarily disposed of its Online Services business by terminating its control of the VIEs. The stockholders of the VIEs paid the Company a termination fee of RMB1,000,000 ($151,319) as consideration. It was the Company’s management decision to dispose of the VIEs in light of the fact that it was in the best interests of the Company to focus on its core businesses of dry bulk shipping and charter brokerage services.

 

After the termination of services, the VIEs are ultimately 100% controlled by Mr. Li Hong Lin and Ms. Xue Ying, the Chairman and CEO, and the majority shareholder of the Company. Such disposition is considered a transfer of assets between entities under common control and the Company recorded the difference between the consideration given and the net assets of the VIEs of $2,752,567 from the transaction as a reduction of shareholders’ equity.

 

The consolidated balance sheets at December 31, 2010 and 2011 do not reflect the assets held for sale due to the fact that the decision to dispose of the VIEs occurred after December 31, 2010, and the disposition was completed prior to December 31, 2011. As there was no continuing cash flow from the disposed VIEs expected to be generated by the on-going entities, and the Company will not have significant continuing involvement in the operations of the disposed VIEs after February 16, 2011, the revenues and expenses related to the operations of the VIEs have been segregated from continuing operations and reported as discontinued operations for all periods in accordance with ASC 205-20 “Discontinued Operations”. The following are revenues, income from discontinued operations and loss on disposition of discontinued operations:

 

		For The Years Ended December 31,
		2011				2010
Revenue		$	478,301			$	4,492,967
Costs and expenses			541,413				5,179,676
Income tax expense			-				57,189
Loss from discontinued operations		$	(63,112	)		$	(743,898	)

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

13.    DISCONTINUED OPERATIONS (CONTINUED)

 

The following represents the assets and liabilities of discontinued operations at the date of the disposition:

 

		February 16, 2011
Assets:
Cash and cash equivalents		$	3,275,311
Accounts receivable			3,198,324
Other current assets			3,853,605
Vessel, net			1,925,685
Other long-term assets			8,855
Total assets		$	12,261,780
Liabilities:
Accounts payable			479,018
Short-term bank loan			1,514,830
Advance from customers			2,998,159
Other current liabilities			1,298,356
Long-term bank loans			3,067,531
Total liabilities		$	9,357,894
Total net assets disposed		$	2,903,886
Cash consideration		$	151,319
Loss recorded in additional paid in capital		$	2,752,567

 

(b)     Disposition of Vessel Win Glory

 

On June 10, 2011, the Company signed a Memorandum of Agreement with Pacific Pty., Ltd., Belize to sell the vessel Win Glory for a cash consideration of $1,700,000. The vessel Win Glory was delivered to the buyer on August 6, 2011. The revenues and expenses related to the operations of Win Glory have been segregated from continuing operations and reported as discontinued operation for all periods in accordance with ASC 205-20 “Discontinued Operations”. Following are revenues, income from discontinued operation and gain on disposition of discontinued operation:

 

		For The Years Ended December 31,
		2011				2010
Revenue		$	1,326,659			$	1,994,936
Costs and expenses			1,360,425				1,932,812
(Loss) income from discontinued operation		$	(33,766	)		$	62,124

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

13.    DISCONTINUED OPERATIONS (CONTINUED)

 

The following represents the assets and liabilities of the discontinued operation at the date of the disposition:

 

		August 6, 2011
Vessel, net		$	250,370
Deferred dry dock fees			210,730
Total assets			461,100
Net assets disposed			461,100
Net proceeds from disposition			1,639,750
Gain from disposition of discontinued operation		$	1,178,650

 

(c)     Disposition of Vessel Win Star

 

On July 29, 2011, the Company signed a Memorandum of Agreement with Greatwall Shipping Limited to sell the vessel Win Star for a cash consideration of $3,278,452. The vessel Win Star was delivered to the buyer on August 16, 2011. The revenues and expenses related to the operations of Win Star have been segregated from continuing operations and reported as discontinued operation for all periods in accordance with ASC 205-20 “Discontinued Operations”. Following are revenues, loss from discontinued operation and gain on disposition of discontinued operation:

 

		For The Years Ended December 31,
		2011				2010
Revenue		$	1,951,279			$	4,786,411
Costs and expenses			2,456,997				4,796,402
Loss from discontinued operation		$	(505,718	)		$	(9,991	)

 

 The following represents the assets and liabilities of the discontinued operation at the date of the disposition:

 

		August 16, 2011
Assets:
Inventories		$	92,933
Vessel, net			333,660
Deferred dry dock fees			2,120,425
Total assets			2,547,018
Net assets disposed			2,547,018
Net proceeds from disposition			3,193,012
Gain from disposition of discontinued operation		$	645,994

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

13.    DISCONTINUED OPERATIONS (CONTINUED)

 

(d)     Disposition of Vessel Bodar

 

On September 15, 2011, the Company signed a Memorandum of Agreement with Maritime Delivery Inc. to sell the vessel Bodar for a cash consideration of $3,550,822. The vessel Bodar was delivered to the buyer on September 30, 2011. The revenues and expenses related to the operations of Bodar have been segregated from continuing operations and reported as discontinued operation for all periods in accordance with ASC 205-20 “Discontinued Operations”. Following are revenues, income from discontinued operation and gain on disposition of discontinued operation:

 

		For The Years Ended December 31,
		2011				2010
Revenue		$	2,359,941			$	3,891,226
Costs and expenses			2,096,234				2,824,889
Income from discontinued operation		$	263,707			$	1,066,337

 

The following represents the assets and liabilities of the discontinued operation at the date of the disposition:

 

		September 30, 2011
Assets:
Inventories		$	84,888
Vessel, net			498,544
Deferred dry dock fees			575,749
Total assets			1,159,181
Net assets disposed			1,159,181
Net proceeds from disposition			3,550,822
Gain from disposition of discontinued operation		$	2,391,641

 

14.    INCOME TAX

 

Winland Shipping Co., Limited, Treasure Way Shipping Limited, Kinki International Industrial Limited, Bestline Shipping Limited, Lancrusier Development Co., Limited, Winland International Shipping Co., Limited, Fon Tai Shipping Co., Limited and Won Lee Shipping Co., Limited are incorporated and registered in Hong Kong. All the income derived from these shipping companies and vessels registered in Hong Kong and engaged in undertaking international carriages is exempt from local income tax under the local tax law; there is no income tax expense for the years ended December 31, 2011 and 2010.

 

Win Eagle Shipping Co., Limited, Win Ever Shipping Co., Limited, and Win Bright Shipping Co., Limited are incorporated and registered in Valletta, Malta. These three companies obtained tax exemptions from the local governments, so they did not have any tax expense for the years ended December 31, 2011 and 2010. Winland Dalian Shipping S.A. is incorporated in Panama and registered in Hong Kong. Win Grace Shipping Co., Limited, Win Hope Shipping Co., Limited, Win Moony Shipping Co., Limited are incorporated and registered in Valletta, Malta. Bodar Shipping S.A., Win Moony Shipping S.A., Bao Shun Shipping S.A., Win Bright Shipping S.A. and Win Ever Shipping S.A. are incorporated and registered in Panama. Kin Ki International Industrial Limited is incorporated and registered in BVI. Since these companies are exempt from income tax under the local tax law, they did not have any income tax for the years ended December 31, 2011 and 2010.

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

14.    INCOME TAX (CONTINUED)

 

Win Star Shipping Co., Limited and Bodar Shipping Co., Limited are incorporated and registered in S.V.G. and these companies obtained tax exempt from the local governments and therefore the gain from selling the vessel is tax exempted. Win Glory S.A. is incorporated in Panama and registered in Hong Kong. The capital gain from selling the vessels is not subject to Hong Kong local income tax according to the local income tax law.

 

DWIS, DWIL and DSON are incorporated under the laws of PRC and subjected by Chinese tax law. On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT Law”), which was effective on January 1, 2008. Under the new CIT Law, the corporate income tax rates applicable to DWIS, DSON and DWIL are 25% starting from January 1, 2008. The income tax expenses of the VIEs are separately presented in the income from discontinued operations. See Note 13, Discontinued Operations, for a discussion relating these reclassifications.

 

15.    SEGMENT INFORMATION

 

The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer who, as of December 31, 2011, reviews the results of the operating segments when making decisions about allocating resources and assessing performance. The segments are: (1) dry bulk shipping and (2) chartering brokerage.

 

The Company's segment information for the years ended December 31, 2011 and as of December 31, 2010 is as follows:

 

The Year Ended		Dry Bulk				Chartering				Corporate and
December 31, 2011		Shipping				Brokerage				Eliminations				Consolidated
Sales to unaffiliated customers		$	31,222,427			$	29,539,560			$	-			$	60,761,987
Intersegment sales			1,491,019				-				(1,491,019	)			-
Net sales			32,713,446				29,539,560				(1,491,019	)			60,761,987
Costs			24,579,066				25,083,066				(1,491,019	)			48,171,113
Depreciation and amortization			7,332,780				-				-				7,332,780
Other operating expenses			5,761,001				317,726				-				6,078,727
Income/(Loss) from continuing operations		$	(4,959,401	)		$	4,138,768			$	-			$	(820,633	)

 

The Year Ended		Dry Bulk				Chartering				Corporate and
December 31, 2010		Shipping				Brokerage				Eliminations				Consolidated
Sales to unaffiliated customers		$	31,646,669			$	27,507,080			$	-			$	59,153,749
Intersegment sales			1,151,292				-				(1,151,292	)			-
Net sales			32,797,961				27,507,080				(1,151,292	)			59,153,749
Costs			23,470,110				23,677,197				(1,151,292	)			45,996,015
Depreciation and amortization			6,460,028				-				-				6,460,028
Other operating expenses			3,555,356				375,041				-				3,930,397
Income/(Loss) from continuing operations		$	(687,533	)		$	3,454,842			$	-			$	2,767,309

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

15.    SEGMENT INFORMATION (CONTINUED)

 

Information for Company’s sales by geographical area for the years ended December 31, 2011 and 2010 is as follows:

 

		The Years Ended December 31,
		2011				2010
Sales to unaffiliated customers:
Japan, Korea and Russia		$	11,374,644			$	12,522,849
PRC (including Hong Kong)			21,716,334				21,833,648
Southern and Eastern Asia			19,012,425				17,343,879
Other			8,658,584				7,453,373
Total		$	60,761,987			$	59,153,749

 

16.    CONTINGENCIES

 

The Company signed a voyage charter contract with Sinoriches Global Ltd. on June 11, 2007. The Company canceled the contract on June 18, 2007. Sinoriches Global Ltd. filed an arbitration claim of $501,640 including interest for the dispute. As of December 31, 2011, the case is in the process of exchanging documents and evidence for arbitration. The Company does not believe the case will result in a significant unfavorable outcome.

 

In 2009, the Company recorded the claim in connection with an oil pollution accident that occurred in Korea in 2006 as other expenses. The case has not been settled as of December 31, 2011. The insurance underwriter will pay the settlement amount when the case is settled in the future.

 

17.    RESTATEMENTS ON PREVIOUSLY FILED QUARTERLY INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

On February 16, 2011, the Company voluntarily entered into a Termination of Services Agreement with the VIEs (DWIS, DWIL and DSON) and the stockholders of the VIEs, whereby it voluntarily disposed of its Online Services business by terminating its control of the VIEs. The stockholders of the VIEs paid the Company a termination fee of RMB1,000,000 ($151,319) as consideration. After the termination of services, the VIEs are ultimately 100% controlled by Mr. Li Hong Lin and Ms. Xue Ying, the Chairman and CEO the majority shareholder of the Company.

 

In the Company’s previous quarterly filings of the consolidated financial statements for three months ended March 31, 2011 on May 11, 2011, for six months ended June 30, 2011 on August 12, 2011 and for nine months ended September 30, 2011 on November 14, 2011, a loss of $2,603,403 from the disposition of the VIEs was recognized in the consolidated statements of income and other comprehensive income. Since this is a transaction between entities under common control, the above difference of $2,603,403 between the cash received and the net assets of the VIEs should be accounted for as a reduction of the additional paid in capital of the Company instead of a loss in the income statement.

 

Accordingly, as described below, certain previously reported amounts included in our consolidated financial statements have been restated:

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

17.    RESTATEMENTS ON PREVIOUSLY FILED UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)

 

		As previously
Consolidated balance sheets as of March 31, 2011		reported				Adjustment				As adjusted
		(Unaudited)								(Unaudited)
Additional paid in capital		$	3,257,966			$	(1,662,690	)		$	1,595,276
Accumulated other comprehensive income			924,970				(918,111	)			6,859

 

Statement of operations for three months ended March 31, 2011		As previously reported				Adjustment				As adjusted
			(Unaudited)								(Unaudited)
REVENUES		$	13,260,830			$	-			$	13,260,830
COST AND EXPENSES
Vessel operating costs			9,613,454				-				9,613,454
Depreciation and amortization			1,632,283				-				1,632,283
General and administrative			580,901				-				580,901
Selling			86,824				-				86,824
			11,913,462				-				11,913,462
OTHER EXPENSES
Interest expense, net			(480,648	)			-				(480,648	)
Other income (expense), net			14,366				-				14,366
INCOME FROM CONTINUING OPERATIONS			881,086				-				881,086
DISCONTINUED OPERATIONS
Loss form disposition of discontinued operations			(2,603,403	)			2,603,403				-
Loss form discontinued operations			(112,931	)			49,819				(63,112	)
Income tax expense from discontinued operations			(9,382	)			9,382				-
NET LOSS FROM DISCONTINUED OPERATIONS			(2,725,716	)			2,662,604				(63,112	)
NET (LOSS) INCOME			(1,844,630	)			2,662,604				817,974
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain			5,476				-				5,476
COMPREHENSIVE (LOSS) INCOME		$	(1,839,154	)			2,662,604			$	823,450
Weighted average number of shares, basic and diluted			195,000,000				-				195,000,000
Income per share from continuing operations, basic and diluted		$	0.00			$	-			$	0.00
Income (Loss) per share from discontinued operations, basic and diluted		$	(0.01	)		$	0.01			$	0.00
Net (Loss) Income per share, basic and diluted		$	(0.01	)		$	0.01			$	0.00

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

17. RESTATEMENTS ON PREVIOUSLY FILED UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)

 

		As previously
Consolidated balance sheets as of June 30, 2011		reported				Adjustment				As adjusted
		(Unaudited)								(Unaudited)
Additional paid in capital		$	3,257,966			$	(1,662,690	)		$	1,595,276
Accumulated other comprehensive income			925,257				(918,111	)			7,146

 

Statement of operations for six months ended June 30, 2011		As previously reported				Adjustment				As adjusted
			(Unaudited)								(Unaudited)
REVENUES		$	34,139,960			$	-			$	34,139,960
COST AND EXPENSES
Vessel operating costs			26,276,040				-				26,276,040
Depreciation and amortization			3,406,953				-				3,406,953
General and administrative			1,033,445				-				1,033,445
Selling			163,833				-				163,833
			30,880,271				-				30,880,271
OTHER EXPENSES
Interest expense, net			(1,653,584	)			-				(1,653,584	)
Other income (expense), net			95,428				-				95,428
INCOME FROM CONTINUING OPERATIONS			1,701,533				-				1,701,533
DISCONTINUED OPERATIONS
Loss form disposition of discontinued operations			(2,603,403	)			2,603,403				-
Loss form discontinued operations			(166,753	)			103,641				(63,112	)
Income tax expense from discontinued operations			(9,382	)			9,382				-
NET LOSS FROM DISCONTINUED OPERATIONS			(2,779,538	)			2,716,426				(63,112	)
NET (LOSS) INCOME			(1,078,005	)			2,716,426				1,638,421
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain			5,763				-				5,763
COMPREHENSIVE (LOSS) INCOME		$	(1,072,242	)		$	2,716,426			$	1,644,184
Weighted average number of shares, basic and diluted			195,000,000				-				195,000,000
Income per share from continuing operations, basic and diluted		$	0.01			$	-			$	0.01
Income (Loss) per share from discontinued operations, basic and diluted		$	(0.01	)		$	0.01			$	0.00
Net (Loss) Income per share, basic and diluted		$	(0.01	)		$	0.01			$	0.01

 

 

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

17.    RESTATEMENTS ON PREVIOUSLY FILED UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)

 

		As previously
Consolidated balance sheets as of September 30, 2011		reported				Adjustment				As adjusted
		(Unaudited)								(Unaudited)
Additional paid in capital		$	3,257,966			$	(1,662,690	)		$	1,595,276
Accumulated other comprehensive income			925,413				(918,111	)			7,302

   

 

WINLAND OCEAN SHIPPING CORPORATION

(FORMERLY WINLAND ONLINE SHIPPING HOLDINGS CORPORATION)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

17.    RESTATEMENTS ON PREVIOUSLY FILED UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)

 

		As previously
Statement of operations for nine months ended September 30, 2011		reported				Adjustment				As adjusted
		(Unaudited)								(Unaudited)
REVENUES		$	45,436,489			$	-			$	45,436,489
COST AND EXPENSES
Vessel operating costs			35,842,270				-				35,842,270
Depreciation and amortization			4,377,536				-				4,377,536
General and administrative			1,578,429				-				1,578,429
Selling			257,818				-				257,818
			42,056,053				-				42,056,053
OTHER EXPENSES
Interest expense, net			(2,790,942	)			-				(2,790,942	)
Other income, net			110,221				-				110,221
INCOME FROM CONTINUING OPERATIONS			699,715				-				699,715
DISCONTINUED OPERATIONS
Gain form disposition of discontinued operations			1,612,882				2,603,403				4,216,285
Loss form discontinued operations			(375,421	)			36,532				(338,889	)
Income tax expense from discontinued operations			(9,382	)			9,382				-
NET INCOME FROM DISCONTINUED OPERATIONS			1,228,079				2,649,317				3,877,396
NET INCOME			1,927,794				2,649,317				4,577,111
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain			5,919				-				5,919
COMPREHENSIVE INCOME		$	1,933,713			$	2,649,317			$	4,583,030
Weighted average number of shares, basic and diluted			195,000,000				-				195,000,000
Income per share from continuing operations, basic and diluted		$	0.00			$	-			$	0.00
Income per share from discontinued operations, basic and diluted		$	0.01			$	0.01			$	0.02
Net Income per share, basic and diluted		$	0.01			$	0.01			$	0.02

 

  

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

 

Dismissal of Independent Accountants

 

Effective as of December 22, 2011 (the “Effective Date”), our board of directors dismissed Weinberg & Company, P.A. (“Weinberg”) as our  principal independent registered public accounting firm. Weinberg had been engaged to audit our financial statements since October 28, 2008.

 

No report prepared by Weinberg included in our financial statements for the past two (2) fiscal years, as well as the subsequent interim periods through the Effective Date, contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principle.

 

The dismissal of Weinberg as our principal independent registered public accountants was approved by the Board effective as of the Effective Date.

 

During our two (2) most recent fiscal years, as well as the subsequent interim period through the Effective Date, there were no disagreements between us and Weinberg on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with any report prepared by Weinberg.

 

During our most recent two (2) fiscal years, as well as the subsequent interim period through the Effective Date, Weinberg did not advise us of any of the matters identified in Item 304(a)(1)(v)(A) - (D) of Regulation S-K.

 

WE requested Weinberg to furnish a letter addressed to the SEC stating whether it agrees with the statements made by the Registrant and, if not, stating the respects in which it does not agree. A copy of the letter is filed herewith as Exhibit 16.1.

 

New Independent Accountants

 

Effective as of December 22, 2011, our board of directors approved the engagement of MaloneBailey, LLP (“MaloneBailey”) as our principal independent registered public accounting firm to audit our financial statements. We did not consult MaloneBailey on any matters described in Item 304(a)(2) of Regulation S-K during our two (2) most recent fiscal years or any subsequent interim period prior to engaging MaloneBailey.

 

ITEM 9A.

Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

 

In connection with the preparation of this Form 10-K for the year ended December 31, 2011, our management, under the supervision of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of disclosure controls and procedures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2011.

 

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control structure and procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2011 based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting as of December 31, 2011 were effective.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the permanent exemption rules for smaller reporting companies, which require the company to provide only management’s report in this annual report. 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.

Other Information

 

None.

 

PART III

 

ITEM 10.

Directors, Executive Officers, and Corporate Governance

 

Set forth below are the names of WLOL’s directors and officers, their business experience during the last 5 years, their ages and all positions and offices that they shall hold with the Company as of the date of this Annual Report.

 

Name		Age		Position(s)
Xue Ying		41		Chief Executive Officer, Secretary and Director
Li Honglin		46		Chairman of the Board and President
Jing Yan		44		Chief Financial Officer
Xie Xiaoyan		42		Chief Operating Officer, Director
Xiao Liwu		46		Independent Director
Xie Kewei		47		Independent Director
Si Zhaoqing		52		Independent Director
Michelle Sun		39		Independent Director

 

 

Family Relationships

 

There are no family relationships by, between or among the members of the Board or other executives, except that Li Honglin and Xue Ying are husband and wife. None of our directors and officers are directors or executive officers of any company that files reports with the SEC except as set forth in the “Biographies of Officers and Directors” section below.

 

Term of Office

 

Our directors are appointed for a one-year term and each director shall hold office until the annual meeting of shareholders following his/her election or until his/her successor is elected and qualified. The Board of Directors shall elect the officers of the Company at each annual meeting of the Board of Directors. The Board of Directors may appoint such other officers and agents as it shall deem necessary and shall determine the salaries of all officers and agents from time to time. The officers shall hold office until their successors are chosen and qualified.

 

Biographies of Officers and Directors

 

Xue Ying. Ms. Xue has served as Chief Executive Officer, Secretary and as a Director of WLOL effective as of August 12, 2008. Ms. Xue also serves as a Director of SkyAce and as a Director of Plentimillion. In April 1993, together with her husband, Li Honglin, Ms. Xue founded Dalian Weihang Freight Forwarding Co., Ltd., a freight forwarding company in Dalian China which carried out the business of freight forwarding agency and chartering and is the predecessor entity to the Company. Ms. Xue also was in charge of the corporate administrative work for the Company. Ms. Xue developed the Company for the next (10) years. Ms. Xue graduated from the law department of Nanjing University majoring in business law in 1992 and earned her EMBA at China Europe International Business School in Shanghai in 2007.  Ms. Xue has the experience, qualifications, attributes and skills to qualify her to serve as a director.  Her experience running the Company and its subsidiaries and her business and legal education have contributed to her knowledge of the business and her understanding of the shipping industry.  Because of this experience, we expect that Ms. Xue will act in the best interest of the Company.

 

Jing Yan. Ms. Jing has served as Chief Financial Officer of WLOL effective as of August 12, 2008. Prior to joining WLOL, Ms. Jing owned her own CPA firm since 2004. With her extensive financial and accounting knowledge, along with comprehensive experience, Ms. Jing had been distinguished as a trusted advisor to investors and executives on financial, accounting and tax matters. Prior to 2004, Ms Jing worked for ISP Channel (n/k/a Softnet Technology Corp. (SOFN.OB)) and several private companies. In this sector, she has played an important role in raising funds, exercising management decision-making, and practicing accounting system implementation. Ms. Jing holds a MBA degree in accounting from California State University and a BA degree in management from Shanghai Maritime University in China. Ms. Jing is also an active Certified Public Accountant.

 

Li Honglin. Mr. Li has served as President and a Director of WLOL effective as of August 12, 2008. Mr. Li also serves as Chairman of the Board of SkyAce. Mr. Li began his career working with the Dandong Ocean Shipping Company in Liaoning province, China. After five (5) years working with Dandong, Mr. Li established Dalian Weihang Freight Forwarding Co., Ltd. In 1993, a freight forwarding agency company in Dalian, China and the predecessor entity to the Company. Mr. Li founded the Company with his wife, Xue Ying, and in 1995, the Company purchased its first vessel. After more than ten (10) years of development, Mr. Li has expanded the Company into several fields of the international marine shipping business, from freight forwarding agency, shipping agency, ship chartering, ship management to bulk cargo ocean transport, container liner transport and shipping portal operation. Mr. Li Honglin has expertise in strategy management and in the operation of ocean transport companies. At the same time, he has a forward-looking insight into the development trend of the international ocean transport market and has an abundant ability of dealing with the risk. Mr. Li is a graduate of the Shanghai Ocean Shipping Institute (now known as the Shanghai Maritime University). Mr. Li earned his EMBA at China Europe International Business School in Beijing in 2010.  Mr. Li has the experience, qualifications, attributes and skills to qualify him to serve as a director.  His experience running the Company and its subsidiaries, his standing in the industry and his maritime education have all contributed to his knowledge of the business and his understanding of the shipping industry.  Because of this experience, we expect that he will act in the best interest of the Company.

 

 

Xie Xiaoyan. Ms. Xie has served as a Director of WLOL effective as of August 12, 2008 and as Chief Operating Officer of WLOL since September 26, 2008. In 1993, she joined the Company as a secretary. After that, she used to serve as a cashier and operation administrator. In 2000, she began to take charge of the operation and management of the fleet. Moreover, she also has a deep understanding and grasp of the international shipping market. She used to participate in the core work such as a series of ship-purchase and sales, exploration of the new market and new business and so on, and has built up a long-term steady cooperation relationship with prime clients and related companies in the industry. She is one of founders of the Company. Ms. Xie graduated from Jinzhou Normal College with a major in foreign languages in 1991.  Ms. Xie has the experience, qualifications, attributes and skills to qualify her to serve as a director.  Her experience operating and managing our fleet has contributed to her knowledge of the business and her understanding of the internationals shipping market.  Because of this experience, we expect that she will act in the best interest of the Company.

  

Xiao Liwu. Mr. Xiao has served as a Director of WLOL effective as of August 12, 2008. Mr. Xiao currently serves as President for Ningbo Penavico-ccl International Freight Forwarding Co. Ltd. in Ningbo, China and has served in such capacity for the past five (5) years. Xiao entered the logistics industry after graduating from Shanghai Maritime University in 1988. Mr. Xiao is considered a professional in the field of logistics. Mr. Xiao has the experience, qualifications, attributes and skills to qualify him to serve as a director.  His experience as President of a freight forwarding company and his maritime education, as well as his noted expertise in logistics have contributed to his knowledge of the business and his understanding of the shipping industry.  Because of this experience, we expect that he will act in the best interest of the Company.

 

Xie Kewei. Mr. Xie has served as a Director of WLOL effective as of August 12, 2008. Mr. Xie currently serves as Managing Director for China Container Line Co. Ltd. Shanghai Company and has served in such capacity since January 2002. Mr. Xie has devoting himself to the container transportation service for more than ten (10) years. He is also considered a professional in shipping industry. Mr. Xie earned his bachelor’s degree from Shanghai Maritime University at 1988. Mr. Xie has the experience, qualifications, attributes and skills to qualify him to serve as a director. His experience running a container line company, his maritime education and his noted expertise in the shipping industry have contributed to his knowledge of the business and his understanding of the shipping industry. Because of this experience, we expect that he will act in the best interest of the Company.

 

Si Zhaoqing. Mr. Si has served as a Director of WLOL effective as of August 12, 2008. Mr. Si currently serves as President of the China CITIC Bank branch in Jinzhou, Dalian and has served in such capacity since January 2008. Prior to that, Mr. Si served as Vice President of the Qingni branch of China CITIC Bank for five (5) years, during which Mr. Si was in charge of both the credit department and the accounting department. Mr. Si is an expert in financing and economic field and he is also a respected advisor. Mr. Si earned his bachelor’s degree from Dalian Fisheries University in 1982. Mr. Si has the experience, qualifications, attributes and skills to qualify him to serve as a director.  With his experience as a noted expert in finance and his service as President of the China CITIC Bank, as well as his maritime education, we expect that Mr. Si will act in the best interest of the Company.

 

Michelle Sun. Ms. Sun has served as a Director of WLOL effective as of August 12, 2008. Ms. Sun currently serves for a private CPA firm in California since 2000. Ms. Sun has extensive experience from a variety of client assignments, including those in manufacturing, real estate, construction, retail, transportation, medical and nonprofit industries. Ms. Sun has over 10 years of experience in the accounting field and is also a Certified Public Accountant in the State of California. Ms. Sun has the experience, qualifications, attributes and skills to qualify her to serve as a director.  With her experience as a CPA and with the transportation and shipping industry, we expect that she will act in the best interest of the Company.

 

Director Qualifications and Experience

 

The following table identifies some of the experience, qualifications, attributes and skills that the Board considered in making its decision to appoint and nominate directors to our Board. This information supplements the biographical information provided above. The vertical axis displays the primary factors reviewed by the Board in evaluating a board candidate.

 

 

Ms. Xue

Mr. Li

Ms. Xie

Mr. Xiao

Mr. Xie

Mr. Si

Ms. Sun

Experience, Qualification, Skill or Attribute

Professional standing in chosen field

x

x

x

x

x

x

x

Expertise in shipping or related industry

x

x

x

x

x

Expertise in technology or related industry

Audit Committee Financial Expert (actual or potential)

x

x

x

x

Civic and community involvement

Other public company experience

Diversity by race, gender or culture

Specific skills/knowledge:

-shipping

x

x

x

x

x

-governance

x

x

x

  

Legal Proceedings

 

Unless otherwise indicated, to the knowledge of the Company after reasonable inquiry, no current director or executive officer of the Company during the past ten years, has (i) been convicted in a criminal proceeding (excluding traffic violations or other minor offenses), (ii) been a party to any judicial or administrative proceeding (except for any matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws, (iii) filed a petition under federal bankruptcy laws or any state insolvency laws or has had a receiver appointed for the person’s property or (iv) been subject to any judgment, decree or final order enjoining, suspending or otherwise limiting for more than 60 days, the person from engaging in any type of business practice , acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity or engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws, (v) been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated, (vi) been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated, (vii) been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (a) any Federal or State securities or commodities law or regulation, (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity, or (viii) been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

There are no material pending legal proceedings to which any of the individuals listed above is party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

 

Compliance with Section 16(A) of the Exchange Act

 

We are not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act and therefore, our officers, directors and greater than ten percent (10%) stockholders are not required under Section 16(a) of the Exchange Act to file reports of ownership and changes in ownership with the SEC.

 

 

Board Leadership Structure, Executive Sessions of Non-Management Directors

 

Ms. Xue currently serves as the chief executive officer of the Company and Mr. Li serves as Chairman of the Board. The Board has chosen to separate the chief executive officer and Board chair positions because it believes it is appropriate in light of our corporate structure and this structure benefits the interests of all share owners.

 

The Company’s non-management directors meet without management present at each of the Board’s regularly scheduled in-person meetings. If the Board convenes for a special meeting, the non-management directors will meet in executive session if circumstances warrant.

 

The Board’s Role in Risk Oversight

 

The Board oversees our shareholders’ interest in the long-term health and the overall success of the Company and its financial strengths. The full Board is actively involved in overseeing risk management for the Company. It does so in part through discussion and review of our business, financial and corporate governance practices and procedures. The Board, as a whole, reviews the risks confronted by the Company with respect to its operations and financial condition, establishes limits of risk tolerance with respect to the Company’s activities and ensures adequate property and liability insurance coverage.

 

 Because of the role of the Board in the risk oversight of the Company, the Board believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to the Company’s operations. The Board recognizes that there are different leadership structures that could allow it to effectively oversee the management of the risks relating to the Company’s operations, and while the Board believes its current leadership structure enables it to effectively manage such risks, it was not the primary reason the Board selected its current leadership structure over other potential alternatives.  The Board implements its risk oversight function both as a whole and through its Committees. In particular:

 

·

The Audit Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting and legal matters. The Audit Committee meets in executive session with each of the Company’s Chief Financial Officer, Vice President of Internal Audit and with representatives of our independent registered public accounting firm.

 

·

The Compensation Committee manages risks related to the Company’s compensation philosophy and programs. The Compensation Committee reviews and approves compensation programs and engages the services of compensation consultants to ensure that it adopts appropriate levels of compensation commensurate with industry standards.

 

·

The Governance and Nominating Committee oversees risks related to corporate governance and the selection of Board nominees.

 

            Each of the Committee Chairs reports to the full Board regarding materials risks as deemed appropriate.

 

Committees of our Board of Directors

 

As of January 19, 2009, our Board of Directors has an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee established in accordance with the Exchange Act and NASDAQ rules.  During the fiscal year ended December 31, 2011, the Audit Committee met 2 times, the Compensation Committee met 1 time and the Corporate Governance and Nominating Committee met 1 time.  A brief description of each committee is set forth below.

 

·

Audit Committee – The purpose of the Audit Committee is to provide assistance to our Board of Directors in fulfilling their oversight responsibilities relating to our consolidated financial statements and financial reporting process and internal controls in consultation with our independent registered public accountants and internal auditors. The Audit Committee is also responsible for ensuring that the independent registered public accountants submit a formal written statement to us regarding relationships and services which may affect the auditor’s objectivity and independence. The Board appointed Si Zhaoqing, Michelle Sun and Xiao Liwu to serve as members of the Audit Committee, with Si Zhaoqing serving as Chairman, on January 19, 2009.  Our Audit Committee financial expert is Michelle Sun, an independent director.

 

 

·

Compensation Committee – The purpose of the Compensation Committee is to review and make recommendations to our Board of Directors regarding all forms of compensation to be provided to our executive officers and directors, including stock compensation and loans, and all bonus and stock compensation to all employees. As of January 15, 2009, Xie Kewei, Xiao Liwu and Si Zhaoqing serve as members of the Compensation Committee, with Xie Kewei serving as Chairman.

 

·

Corporate Governance and Nominating Committee – The purpose of the Nominating Committee is to review the composition and evaluate the performance of the Board, recommend persons for election to the Board and evaluate director compensation.  The Nominating Committee is also responsible for reviewing the composition of committees of the Board and recommending persons to be members of such committees, and maintaining compliance of committee membership with applicable regulatory requirements.  The Nominating Committee does not have a formal diversity policy.  Although the Board does not currently have formal specific minimum criteria for nominees, substantial relevant and diverse business and industry experience would generally be considered important qualifying criteria, as would the ability to attend and prepare for Board and shareholder meetings.  We have not adopted procedures by which security holders may recommend nominees to our Board of Directors. As of January 15, 2009, Xiao Liwu, Xie Kewei and Si Zhaoqing serve as members of the Corporate Governance and Nominating Committee, with Xiao Liwu serving as Chairman.

 

ITEM 11.

Executive Compensation

 

Compensation Discussion and Analysis

 

The Company has a very basic compensation program for its officers as set forth in the summary compensation table below.  As of December 31, 2011, we did not have any “Grants of Plan-Based Awards”, “Outstanding Equity Awards”, “Option Exercises and Stock Vested”, “Pension Benefits”, “Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans”, or “Potential Payments Upon Termination or Change in Control” to report.

 

Summary Compensation Table

 

The following table sets forth compensation information for services rendered by our named executive officers during the last 2 completed fiscal years. The compensation listed below which will be paid to our current officers will be paid by SkyAce. The following information includes the U.S. dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.  

 

 

Summary Compensation Table

 

Name And  Principal Function (a)		Year (b)				Salary ($) (c)				Bonus ($) (d)				Stock  Awards ($) (e)				Option  Awards ($) (f)				Non- Equity  Incentive  Plan  Compen- sation ($) (g)				Non- qualified  Deferred  Compen- sation  Earnings ($) (h)				All Other  Compensation ($) (i)				Total ($) (j)
Xue Ying, Chief			2011				75,000				0				0				0				0				0				0				75,000
Executive Officer			2010				75,000				0				0				0				0				0				0				75,000
and Secretary
Li Honglin,			2011				75,000				0				0				0				0				0				0				75,000
President			2010				75,000				0				0				0				0				0				0				75,000
Jing Yan, Chief			2011				85,000				0				0				0				0				0				0				85,000
Financial Officer			2010				85,000				0				0				0				0				0				0				85,000
Xie Xiaoyan, Chief			2011				40,000				0				0				0				0				0				0				40,000
Operating			2010				40,000				0				0				0				0				0				0				40,000
Officer

  

 Executive Compensation – Narrative Disclosure

 

The Company did not provide compensation to executive officers other than the standard compensation arrangement set forth in the table above.

 

Director Compensation

 

We did not provide any compensation to our Directors during the fiscal year ended December 31, 2011. We may establish certain compensation plans (e.g. options, cash for attending meetings, etc.) with respect to Directors in the future.

 

Additional Narrative Disclosure

 

Employment Agreements

 

There are currently no employment agreements by and between WLOL and its officers, directors or employees.

 

Benefit Plans

 

During the fiscal year ended December 31, 2010, we had no stock option, retirement, pension or profit-sharing programs for the benefit of its directors, officers or other employees however our Board may recommend adoption of one or more such programs in the future.

 

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth each person known by us to be the beneficial owner of five percent (5%) or more of our common stock, all directors individually and all directors and officers as a group as of March 29, 2012. Each person named below has sole voting and investment power with respect to the shares shown unless otherwise indicated.

   

Name and Address of Beneficial Owner(1)		Amount of Direct Ownership				Amount of Indirect Ownership				Total Beneficial Ownership				Percentage of Class(2)
Li Honglin, Chairman of the Board and President			0				160,387,500	(3)			160,387,500	(3)			82.25	%
Xue Ying, Chief Executive Officer, Secretary and Director			0				160,387,500	(4)			160,387,500	(4)			82.25	%
Jing Yan, Chief Financial Officer			0				0				0				0	%
Xie Xiaoyan, Director			0				0				0				0	%
Xiao Liwu, Director			0				0				0				0	%
Xie Kewei, Director			0				0				0				0	%
Si Zhaoqing, Director			0				0				0				0	%
Michelle Sun, Director			0				0				0				0	%
ALL DIRECTORS AND OFFICERS AS A GROUP (8 PERSONS):			0				160,387,500				160,387,500				82.25	%
Pioneer Creation Holdings Limited  2nd Floor, Abbott Building Road Town  Tortola British Virgin Islands			160,387,500								160,387,500				82.25	%

  

  

(1)

Unless otherwise noted, each beneficial owner has the same address as WLOL.

 

(2)

Applicable percentage of ownership is based on 195,000,000 shares of our common stock outstanding as of March 29, 2011 (post forward split), together with securities exercisable or convertible into shares of common stock within sixty (60) days of March 29, 2012 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Note that affiliates are subject to Rule 144 and Insider trading regulations - percentage computation is for form purposes only.

 

(3)

Li Honglin may be considered to beneficially own 80,193,750 shares (post forward split) by virtue of his 50% ownership in Pioneer Creation Holdings Limited and 80,193,750 shares (post forward split) by virtue of his spouse’s (Xue Ying’s) 50% ownership in Pioneer Creation Holdings Limited, which beneficially owns 160,387,500 shares (post forward split) of our common stock.

 

(4)

Xue Ying may be considered to beneficially own 80,193,750 shares (post forward split) by virtue of her 50% ownership in Pioneer Creation Holdings Limited and 80,193,750 shares (post forward split) by virtue of her spouse’s (Li Honglin’s) 50% ownership in Pioneer Creation Holdings Limited, which owns 160,387,500 shares (post forward split) of our common stock.

 

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

 

Related Party Transactions

 

The Company provided shipping agency and freight forwarding services to Winland Container Lines Ltd., a company which is controlled by relatives of the Chairman and Chief Executive Officer of the Company. For the years ended December 31, 2011 and 2010, the Company recognized charter income for the vessel Winland Dalian of $0 and $153,507, respectively, and the Company recognized service revenues of $1,977,090 and $2,164,073, respectively. For the years ended December 31, 2011 and 2010, the Company paid $37,504,248 and $24,556,744 of expenses to ports, and received $36,061,231 and $26,572,089 of payments from ports on behalf of Winland Container Lines Ltd., respectively. The outstanding balance due from Winland Container Lines Ltd. of $3,708,466 at December 31, 2011 was interest-free, unsecured and was subsequently settled in January 2012.

 

Dalian Winland Shipping Co., Ltd ("DWSC") is controlled by the Chairman and Chief Executive Officer of the Company. DWSC rented an office to the Company. The rental fees for the office of the Company were $44,362 and $44,194 for the years ended December 31, 2011 and 2010, respectively. The vessel management fees were $0 and $18,000 for the years ended December 31, 2011 and 2010, respectively. For the years ended December 31, 2011 and 2010, on behalf of DWSC, the Company paid $0 and $2,234,843, and received $2,357 and $2,155,825, respectively. The outstanding balance due to DWSC of $22,312 at December 31, 2011 and $1,341,453 at March 28, 2012 is interest-free, unsecured and has no fixed repayment term.

 

Dalian Winland Group Co., Ltd ("DWIG") is controlled by the Chairman and Chief Executive Officer of the Company. The Company recognized relevant agency service fees of $98,854 and $0 for years ended December 31, 2011 and December 31, 2010, respectively. Rent for vessel Andong was $9,400 and $0 for the years ended December 31, 2011 and 2010, respectively. The Company received delay compensation of $185,000 and $0 for years ended December 31, 2011 and December 31, 2010, respectively. The Company paid $16,207,499 and $6,440,547 on behalf of DWIG for the years ended December 31, 2011 and 2010, respectively. The Company collected $14,398,597 and $8,430,902 on behalf of DWIG for the years ended December 31, 2011 and 2010, respectively. The Company recognized interest expense of $0 and $92,200 for the years ended December 31, 2011 and 2010, respectively. The outstanding balance due from DWIG of $217,125 at December 31, 2011 and $886,663 at March 28, 2012 is interest-free, unsecured and has no fixed repayment term.

 

Dalian Master Well Ship Management Co., Ltd ("Dalian Master") is controlled by the Chairman and Chief Executive Officer of the Company and operates as the vessel management company for the Company. The vessel management fees for the years ended December 31, 2011 and 2010 were $265,800 and $232,200, respectively. The Company paid $0 and $217,116 on behalf of Dalian Master for the years ended December 31, 2011 and 2010, respectively. The Company collected $0 and $6,540 on behalf of Dalian Master for the years ended December 31, 2011 and 2010, respectively. The outstanding balance due to Dalian Master of $216,200 at December 31, 2011and $259,400 at March 28, 2012 is interest-free, unsecured, and has no fixed repayment term.

 

Winland Shipping Japan Co., Ltd ("Winland Japan") is controlled by the Chairman and Chief Executive Officer of the Company. The Company recognized relevant agency service fees of $0 and $15,674 for the years ended December 31, 2011 and 2010, respectively. The Company paid $36,865 and $71,322 and received $44,514 and $47,951 on behalf of Winland Japan for the years ended December 31, 2011 and 2010, respectively. The outstanding balance due from Winland Japan of $63,698 at December 31, 2011 and $52,798 at March 28, 2012 is interest-free, unsecured and has no fixed repayment term.

 

 

Rich Forth Investment Limited ("Rich") is controlled by relatives of the Chairman and Chief Executive Officer of the Company and operates as a vessel management company for the Company. The vessel management fee was $44,100 and $52,200 for the years ended December 31, 2011 and 2010, respectively. The Company paid $11,470,939 and $416,679, and collected $13,616,168 and $1,651,015 for the years ended December 31, 2011 and 2010, respectively. The Company recognized interest expense for long-term notes payable of $948,945 and $231,160 for the years ended December 31, 2011 and 2010, respectively. The outstanding balance due to Rich of $4,155,092 at December 31, 2011 and $4,746,140 at March 28, 2012 is interest-free, unsecured and has no fixed repayment term. 

 

The Company has a long-term note payable to Rich dated June 1, 2010 which was used to build the vessel Fon Tai in the principal amount of $4,085,000. Such note is due on March 31, 2016 and bears interest at the rate of 5.841% on the unpaid principal balance per annum, with a fixed quarterly repayment of principal of $215,000 commencing June 2011. Interest payment commenced June 1, 2010, as amended on April 1, 2011. During the fiscal year ended December 31, 2011, the Company paid $238,744 in accrued interest and as of December 31, 2011 and March 28, 2012, $3,870,000 and $3,655,000 was outstanding under this note, respectively.

 

The Company has a long-term note payable to Rich dated June 1, 2010 which was used to build the vessel Rui Lee in the principal amount of $2,450,000. Such note is due on June 30, 2016 and bears interest at the rate of 5.841% on the unpaid principal balance per annum, with a fixed quarterly repayment of principal of $122,500 commencing in the third quarter of 2011. Interest payment commenced June 1, 2010, as amended on April 1, 2011. During the fiscal year ended December 31, 2011, the Company paid $93,972 in accrued interest and as of December 31, 2011 and March 28, 2012, $2,327,500 and $2,205,000 was outstanding under this note, respectively.

 

Guarantee Transactions

 

The Company’s former VIE, DWIL, obtained a short-term bank loan from Dalian Bank for $1,512,450 on November 4, 2010. The interest payment was due monthly at an annual interest rate of 7.784%. The loan principal was due October 21, 2011. The loan was guaranteed by DWIG and an unrelated party.

 

The Company obtained a loan from Dialease Maritime S.A. in the principal amount of $12,670,000 in July, 2005 which was due on August 1, 2011. Monthly interest payment was at 1-month USD LIBOR plus 1.75% per annum (2.05% at December 31, 2011), secured by the vessel Winland Dalian, assignment of insurance of the vessel and guaranteed by the Chairman of the Company. Principal was repaid every month in 72 equal installments of $175,972 from September 2005. During the fiscal year ended December 31, 2011, the Company paid $8,434 in accrued interest and as of December 31, 2011 and March 28, 2012, there was no outstanding balance under the loan.

 

The Company obtained a loan from Dialease Maritime S.A. in the principal amount of $4,200,000 in August, 2006 which is due on July 21, 2012. Monthly interest payment is at 1-month USD LIBOR plus 1.75% per annum (2.05% at December 31, 2011), secured by the vessel Win Honey, assignment of insurance of the vessel and guaranteed by the Chairman of the Company. Principal is repaid every month in 72 equal installments of $58,333 from August 2006. During the fiscal year ended December 31, 2011, the Company paid $14,087 in accrued interest and as of December 31, 2011 and March 28, 2012, $408,290 and $233,288 was outstanding under the loan, respectively.

 

The Company obtained a loan from Dialease Maritime S.A. in the principal amount of $14,490,000 in August, 2009 which is due on September 18, 2016. Monthly interest payment is at 1-month JPY LIBOR plus 2.30% per annum (2.44% at December 31, 2011), secured by the vessel Baoshun, assignment of insurance of the vessel and guaranteed by the Chairman of the Company. Principal is repaid every month in 84 equal installments of $109,773 from September 2009. During the fiscal year ended December 31, 2011, the Company paid $345,508 in accrued interest and as of December 31, 2011 and March 28, 2012, $11,526,129 and $11,196,810 was outstanding under the loan, respectively.

 

 

 

Under the Company's $37,000,000 loan facility with China Merchants Bank, the drawdown from the loan facilities due on September 21, 2012 has an interest rate at the 3-month USD LIBOR plus 1.5% per annum (2.08% at December 31, 2011). The principal payment is fixed at $497,500 quarterly, starting September 21, 2011, with final payment of $497,500 on May 5, 2021. The interest is accrued from June 29, 2010 and paid quarterly starting December 21, 2010 until the principal is paid. The loan is secured by the vessel Rui Lee, and guaranteed by the Chairman and the CEO of the Company. During the fiscal year ended December 31, 2011, the Company paid $236,988 in accrued interest and as of December 31, 2011 and March 28, 2012, $18,905,000 and $18,407,500 was outstanding under this drawdown, respectively. 

 

Under the Company's $37,000,000 loan facility with China Merchants Bank, the drawdown from the loan facilities due on June 21, 2014 has an interest rate at the 3-month USD LIBOR plus 1.5% per annum (2.08% at December 31, 2011). The principal payment is fixed at $427,500 quarterly, starting March 21, 2011, with final payment of $427,500 due December 21, 2020. The interest is accrued from July 9, 2010 and paid quarterly starting December 21, 2010 until the principal payoff. The loan is secured by the vessel Fon Tai, and guaranteed by the Chairman and the CEO of the Company. During the fiscal year ended December 31, 2011, the Company paid $292,201 in accrued interest and as of December 31, 2011 and March 28, 2012, $15,390,000 and $14,962,500 was outstanding under this drawdown, respectively. 

 

Policies and Procedures for Related-Party Transactions

 

As is more fully summarized in the Company’s Code of Ethics as referenced as Exhibit 14.1 herein, all employees, executives and directors of the Company must fully disclose the nature of any related party transaction to the Company’s Chief Financial Officer.  If determined to be material to the Company by the Chief Financial Officer, the Company’s Audit Committee must review and approve in writing in advance such related party transactions.  The most significant related party transactions, particularly those involving the Company’s directors or executive officers, must be reviewed and approved in writing in advance by the Company’s Board of Directors.  The Company must report all such material related party transactions under applicable accounting rules, federal securities laws, and SEC rules and regulations, and securities market rules.  Any dealings with a related party must be conducted in such a way that no preferential treatment is given to the Company’s business.

 

Promoters

 

None.

 

Director Independence

 

The following directors are independent: Xiao Liwu, Xie Kewei, Si Zhaoqing and Michelle Sun.

 

The following directors are not independent: Li Honglin, Xue Ying and Xie Xiaoyan. 

 

Promoters and Certain Control Persons

 

None.

 

 

  

ITEM 14.

Principal Accountant Fees and Services

 

The firm of Weinberg & Company, P.A. acted as our principal accountant from October 28, 2008 through December 22, 2011. The firm of MaloneBailey, LLP acts as our principal accountant and has served in such capacity since December 22, 2011. The following is a summary of fees incurred for services rendered by Weinberg and MaloneBailey, LLP, in the aggregate:

 

		2011				2010
Audit fees		$	334,625			$	340,000
Audit related fees			-				-
Tax fees			2,500				3,000
Other fees			-				-
Total		$	337,125			$	343,000

 

Audit Committee Pre-Approval

 

The policy of the Audit Committee is to pre-approve all audit and non-audit services provided by the independent accountants. These services may include audit services, audit-related services, tax fees, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services. The Audit Committee has delegated pre-approval authority to certain committee members when expedition of services is necessary. The independent accountants and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent accountants in accordance with this pre-approval delegation, and the fees for the services performed to date. All of the services described above in this Item 14 were approved in advance by the Audit Committee of the Board of Directors during the fiscal year ended December 31, 2011.

 

PART IV

 

ITEM 15.

Exhibits and Financial Statement Schedules

 

(a)

Financial Statements and Schedules

 

The financial statements are set forth under Item 8 of this Annual Report. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.

 

(b)

Exhibits

 

EXHIBIT NO.		DESCRIPTION		LOCATION
2.1		Share Exchange Agreement, dated August 12, 2008, by and among Trip Tech, Inc., SkyAce Group Limited and Pioneer Creation Holdings Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.1		Articles of Incorporation of Trip Tech, Inc.		Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 as filed with the SEC on May 14, 2007

 

 

3.2		Amended and Restated Bylaws of Trip Tech, Inc. dated as of August 27, 2008		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on September 29, 2008
3.3		Memorandum and Articles of Association of SkyAce Group Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

3.4		Certificate of Incorporation of SkyAce Group Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.5		Memorandum and Articles of Association of Plentimillion Group Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.6		Certificate of Incorporation of Plentimilllion Group Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.7		Memorandum and Articles of Association of Best Summit Enterprises Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.8		Certificate of Incorporation of Best Summit Enterprises Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.9		Memorandum and Articles of Association of Wallis Development Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

3.10		Certificate of Incorporation of Wallis Development Limited		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.11		Articles of Association of Beijing Huate Xingye Keji Co. Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.12		Certificate of Incorporation of Beijing Huate Xingye Keji Co. Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.13		Certificate of Correction to Trip Tech’s Articles of Incorporation, dated August 11, 2008		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
3.14		Certificate of Amendment to Certificate of Incorporation of the Company, dated September 24, 2008		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on September 29, 2008
3.15		Certificate of Corporate Resolutions Designating Series A Preferred Stock of the Company, dated August 12, 2008		Incorporated by reference to Exhibit 3.15 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 31, 2009

 

 

3.16		Certificate of Amendment to Certificate of Incorporation of the Company, dated March 11, 2011 (name change, increase of authorized and forward split)		Incorporation by reference to the Company’s Current Report on Form 8-K as filed with the SEC on March 28, 2011
10.1		Exclusive Technology Consultation Service Agreement, dated March 31, 2008, by and among Beijing Huate Xingye Keji Co. Ltd. and Winland International		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

10.2		Exclusive Technology Consultation Service Agreement, dated March 31, 2008, by and among Beijing Huate Xingye Keji Co. Ltd. and Winland Logistics		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.3		Exclusive Technology Consultation Service Agreement, dated March 31, 2008, by and among Beijing Huate Xingye Keji Co. Ltd. and Shipping Online		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.4		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and among Wallis Development Limited, Dalian Winland International Shipping Agency Co., Ltd. and Dalian Winland Group Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.5		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and among Wallis Development Limited, Dalian Winland International Shipping Agency Co., Ltd. and Dalian Weihang Logistic Agent Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

10.6		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and among Wallis Development Limited, Dalian Winland International Shipping Agency Co., Ltd. and Dalian Winland Shipping Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.7		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and between Wallis Development Limited, Dalian Winland International Logistic Co., Ltd. and Dalian Winland Group Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.8		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and between Wallis Development Limited, Dalian Winland International Logistic Co., Ltd. and Dalian Winland Shipping Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.9		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and between Wallis Development Limited, Dalian Winland International Logistic Co., Ltd. and Dalian Winland International Shipping Agency Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

 

10.10		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and among Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and Li Honglin		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.11		Exclusive Equity Interest Purchase Agreement, dated March 31, 2008, by and among Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and Xue Ying		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

10.12		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.13		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Dalian Winland Shipping Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.14		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Dalian Weihang Logistic Agent Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.15		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Dalian Winland International Logistic Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

10.16		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.17		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Winland Shipping Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.18		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Li Honglin		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.19		Equity Interest Pledge Agreement, dated March 31, 2008, by and between Beijing Huate Xingye Keji Co. Ltd. and Xue Ying		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.20		Powers of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co., Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Weihang Logistic Agent Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd. For Dalian Winland International Shipping Agency Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.21		Powers of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co., Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Winland International Shipping Agency Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd. for Dalian Winland International Logistic Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008

 

 

10.22		Powers of Attorney, dated March 31, 2008, executed by Li Honglin and Xue Ying in favor of Beijing Huate Xingye Keji Co. Ltd. and Dalian Shipping Online Network Co., Ltd.		Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on August 12, 2008
10.23		Memorandum of Agreement, dated June 3, 2009, by and between Mario Shipping Corporation and Winland Shipping Co. Ltd.		Incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009

 

10.24		Addendum No. 1 to Memorandum of Agreement dated June 4, 2009 (Bao Shun)		Incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009
10.25		Addendum No. 2 to Memorandum of Agreement dated July 14, 2009 (Bao Shun)		Incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009

  

10.26		Loan Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)		Incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009
10.27		Amendment to Loan Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)		Incorporated by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009
10.28		First Preferred Panamanian Ship Mortgage		Incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009
10.29		Deed of Guarantee		Incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q as filed wit hthe SEC on November 13, 2009
14.1		Code of Ethics		Incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB as filed with the SEC on March 28, 2008
16.1		Auditor Letter of Weinberg & Company, P.A., dated December 29, 2011		Provided herewith
21		List of Subsidiaries		Provided herewith
31.1		Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Provided herewith
31.2		Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Provided herewith
32.1		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002		Furnished herewith

 

 

32.2		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002		Furnished herewith
99.1		Audit Committee Charter, dated January 15, 2009		Incorporated by reference Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on January 20, 2009
99.2		Compensation Committee Charter, dated January 15, 2009		Incorporated by reference Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on January 20, 2009
99.3		Corporate Governance and Nominating Committee Charter, dated January 15, 2009		Incorporated by reference Exhibit 99.3 to the Company’s Current Report on Form 8-K as filed with the SEC on January 20, 2009
101. INS		XBRL Instance Document		Provided herewith
101. CAL		XBRL Taxonomy Extension Calculation Link base Document		Provided herewith
101. DEF		XBRL Taxonomy Extension Definition Link base Document		Provided herewith
101. LAB		XBRL Taxonomy Label Link base Document		Provided herewith
101. PRE		XBRL Extension Presentation Link base Document		Provided herewith
101. SCH		XBRL Taxonomy Extension Scheme Document		Provided herewith

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on our behalf by the undersigned, thereunto duly authorized.

 

	WINLAND OCEAN SHIPPING CORP.
Date: March 30, 2012
	By:	/s/ Xue Ying
		Name: Xue Ying
		Titles: Chief Executive Officer, Principal Executive Officer, Secretary and Director
		/s/ Jing Yan
		Name: Jing Yan
		Titles: Chief Financial Officer and Principal Accounting Officer

 

In accordance with the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.

 

Signatures		Title		Date
		Chief Executive Officer,
/s/ Xue Ying		Principal Executive Officer,
Name: Xue Ying		Secretary and Director		March 30, 2012
/s/ Li Honglin		Chairman of the Board and
Name: Li Honglin		President		March 30, 2012
		Chief Financial Officer and
/s/ Jing Yan		Principal Financial and
Name: Jing Yan		Accounting Officer		March 30, 2012
/s/ Xie Xiaoyan
Name: Xie Xiaoyan		Director		March 30, 2012
/s/ Xiao Liwu
Name: Xiao Liwu		Director		March 30, 2012
/s/ Xie Kewei
Name: Xie Kewei		Director		March 30, 2012
/s/ Si Zhaoqing
Name: Si Zhaoqing		Director		March 30, 2012
/s/ Michelle Sun
Name: Michelle Sun		Director		March 30, 2012