Attached files
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EX-21 - Winland Ocean Shipping Corp | v190056_ex21.htm |
EX-31.2 - Winland Ocean Shipping Corp | v190056_ex31-2.htm |
EX-32.2 - Winland Ocean Shipping Corp | v190056_ex32-2.htm |
EX-32.1 - Winland Ocean Shipping Corp | v190056_ex32-1.htm |
EX-31.1 - Winland Ocean Shipping Corp | v190056_ex31-1.htm |
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 1
TO
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: For the Fiscal
Year Ended December 31, 2009
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
File Number 333-142908
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(Exact
name of registrant as specified in its charter)
Texas
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20-5933927
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(State
or other jurisdiction of
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(I.R.S.
Employer
|
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incorporation
or organization)
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Identification
No.)
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Rm
703, 7/F, Bonham Trade Centre, 50 Bonham Strand, Sheung Wan, Hong Kong,
China
(Address,
including zip code, of principal executive offices)
00852-28549088
(Registrants’
telephone number, including area code)
Securities Registered Under Section
12(b) of the Exchange Act: None.
Securities Registered Under Section
12(g) of the Exchange Act: None.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act. Yes x No o
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes o No
x
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o Accelerated
filer o Non-accelerated
filer x
Smaller
Reporting Company o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No
x
Aggregate
market value of the voting stock held by non-affiliates of the registrant based
upon the closing price as of June 30, 2009 was approximately
$115,375,000.
The
number of outstanding shares of the registrant’s common stock on March 22, 2009
was 130,000,000.
EXPLANATORY
NOTE
We are
filing this Amendment No. 1 to its Annual Report on Form 10-K to enhance certain
disclosures made in Item 3, in our Results of Operations, Liquidity and Capital
Resources and Material Commitments/Tabular Disclosure of Contractual Obligations
sub-sections of Item 7 and in Notes 3, 6 and 15 to our financial statements for
the years ended December 31, 2008 and 2009 which are included
herewith. We also corrected our designation as a non-accelerated
filer on the front cover of this Amendment No. 1 and have updated Exhibit 21
which list out our subsidiaries at December 31, 2009. All other Items
in this Amendment No. 1 remain unchanged.
- 2
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WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
ANNUAL
REPORT ON FORM 10-K
FOR
THE YEAR ENDED DECEMBER 31, 2009
Index
TABLE OF
CONTENTS
PART
I
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ITEM
1.
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Business
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4
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ITEM
1B.
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Unresolved
Staff Comments
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17
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ITEM
2.
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Properties
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17
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ITEM
3.
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Legal
Proceedings
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18
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ITEM
4.
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(Removed
and Reserved)
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18
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PART
II
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||
ITEM
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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18
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ITEM
7.
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Management‘s
Discussion and Analysis of Financial Condition and Results of
Operations
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20
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ITEM
8.
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Financial
Statements and Supplementary Data
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31
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ITEM
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
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32
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ITEM
9AT.
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Controls
and Procedures
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32
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ITEM
9B.
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Other
Information
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32
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ITEM
10.
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Directors,
Executive Officers, and Corporate Governance
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33
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ITEM
11.
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Executive
Compensation
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36
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ITEM
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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38
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ITEM
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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38
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ITEM
14.
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Principal
Accountant Fees and Services
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40
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PART
IV
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||
ITEM
15.
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Exhibits
and Financial Statement Schedules
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40
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SIGNATURES
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45
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- 3
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PART
I
ITEM
1. Business
Forward
Looking Statements
The
following is management’s discussion and analysis of certain significant factors
which have affected the financial position and operating results of Winland
Online Shipping Holdings Corporation (formerly Trip Tech, Inc. and hereinafter,
“Winland” or
“WLOL” and
together with its subsidiaries and its variable interest entities, the “Company”) during the
periods included in the accompanying consolidated and combined financial
statements, as well as information relating to the plans of our current
management. This report includes forward-looking statements. Generally, the
words “believes” “anticipates”, “may”, “will”, “should”, “expect”, “intend”,
“estimate”, “continue” and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the U.S.
Securities and Exchange Commission (the “SEC”) from time to
time, which could cause actual results or outcomes to differ materially from
those projected. Undue reliance should not be placed on these forward-looking
statements which speak only as of the date hereof. We undertake no obligation to
update these forward-looking statements.
The
following discussion and analysis should be read in conjunction with our
consolidated and combined financial statements and the related notes thereto and
other financial information contained elsewhere in this report.
Acquisition
of SkyAce Group Limited
On August
12, 2008, Trip Tech, Inc. (n/k/a WLOL and sometimes referred to herein as “Trip Tech” when
referring to the operations of the Company prior to the Exchange, as defined
below) entered into a Share Exchange Agreement with SkyAce Group Limited (“SkyAce”), a British
Virgin Islands company and Pioneer Creation Holdings Limited (“PCH”), a British
Virgin Islands company and the sole stockholder of SkyAce. As a result of the
share exchange, the Company acquired all of the issued and outstanding
securities of SkyAce from PCH in exchange for 76,925,000 newly-issued shares of
the Company’s common stock, par value $0.001 per share and 1,000,000 shares of
the Company’s Series A Preferred Stock which such preferred shares were
convertible into (and subsequently did convert into) 30,000,000 shares of common
stock (the “Exchange”). On August
12, 2008, PCH beneficially owned 82.25% of the voting capital stock of the
Company. As a result of the Exchange, SkyAce became a wholly-owned subsidiary of
WLOL. On October 23, 2008, PCH converted its 1,000,000 shares of Series A
Preferred Stock into 30,000,000 shares of common stock. As a result, the total
outstanding shares of common stock increased to 130,000,000, and PCH now
directly owns 82.25% of the voting capital stock of WLOL.
The
following is disclosure regarding WLOL, SkyAce and SkyAce’s two wholly-owned
subsidiaries: (a) Plentimillion Group Limited (“PGL”), a British Virgin Islands
holding company, the principal business activities of which are (through its
wholly-owned subsidiaries) ocean transportation and chartering brokerage and (b)
Best Summit Enterprise Limited (“BSL” and together
with PGL, the “SkyAce
Group”), a British Virgin Islands holding company which controls (as is
more fully described below) (i) Dalian Winland International Shipping Agency Co.
Ltd., a company organized under the laws of the People’s Republic of China
(“PRC”), the
principal activities of which include shipping agency services, booking cargo
space, storage of goods and customs declaration (“DWIS”), (ii) Dalian
Winland International Logistic Co. Ltd., a company organized under the laws of
the People’s Republic of China (“PRC”), the principal
activities of which include freight forwarding services and logistics shipping
agency services (“DWIL”) and (iii)
Dalian Shipping Online Network Co. Ltd., a company organized under the laws of
the PRC, the principal activities of which include online services for its
members (“DSON”
or “Shipping
Online”, and together with DWIS and DWIL, the “Winland International
Group”).
- 4
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Prior
Operations of Trip Tech
Trip Tech
was incorporated in Texas on November 17, 2006 to enter the online travel
industry and to establish a large scale, full service online travel company.
Immediately prior to the Exchange, Trip Tech was a development stage
internet-based travel company operating with a functional “branded” travel
website. Since Trip Tech’s inception, Trip Tech established its corporate
existence as a publicly held corporation, raised founder capital, and designed
and installed a functional “branded” travel website. As of the date immediately
prior to the Exchange, Trip Tech had not been able to raise additional funds
through either debt or equity offerings. As a result of the foregoing, Trip Tech
began to explore its options regarding the development of a new business plan
and direction. On August 12, 2008, Trip Tech consummated the Exchange with
SkyAce and the Pioneer Creation Holdings Limited.
Our
common stock is currently traded on the Over-The-Counter Bulletin Board under
the symbol “WLOL”. Immediately prior to the Exchange, Trip Tech was considered a
“blank check” company with US$40,963 in assets and a net loss of US$34,965 for
the fiscal year ending February 29, 2008. On the date of the closing of
the Exchange, the Company did not have any liabilities.
Current
Operations of the Company (General Development of Business)
SkyAce
SkyAce is
a holding company founded in the British Virgin Islands on September 22,
2006 with no
significant operations. SkyAce was formed solely for the purpose of
acquiring PGL and BSL from Mr. Li Honglin and Ms. Xue Ying, each of
whom had owned fifty percent (50%) of both PGL and BSL and each of
whom now own fifty percent (50%) of SkyAce. SkyAce has authorized capital of
US$50,000 consisting of 50,000 ordinary shares authorized, two (2) of which are
currently issued and outstanding and held by Trip Tech as a result of the
Exchange. Li Honglin, a Director and the President of Winland, serves as a
Director of SkyAce. Xue Ying, a Director, the Chief Executive Officer and the
Secretary of Winland, also serves as a Director of SkyAce.
PGL
PGL is
a holding company founded in the British Virgin Islands on July 5,
2006. PGL was formed solely for the purpose of acquiring each of the
following wholly-owned subsidiaries from Li Honglin and Xue Ying (both of whom
previously owned fifty percent (50%) of each of the following entities), which
such transfers occurred between January 1, 2008 and March 31, 2008:
(a)
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Winland
Shipping Co., Ltd., a company organized under the laws of Hong Kong on
August 11, 2000 (“Winland
Shipping”);
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(b)
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Kinki
International Industrial Limited, a company organized under the laws of
Hong Kong on May 2, 2006 (“Kinki”);
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(c)
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Bestline
Shipping Limited, a company organized under the laws of Hong Kong on
January 27, 1994 (“Bestline”);
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(d)
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Lancrusier
Development Co., Limited, a company organized under the laws of Hong Kong
on July 11, 1995 (“Lancrusier”);
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(e)
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Win
Star Shipping Co., Ltd., a company organized under the laws of St. Vincent
and the Grenadines (“SVG”) on June 21, 2000 (“Win
Star”);
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(f)
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Bodar
Shipping Co., Ltd., a company organized under the laws of SVG on January
7, 2004 (“Bodar”);
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(g)
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Winland
Dalian Shipping S.A., a company organized under the laws of Panama and
registered in Hong Kong on June 8, 2005 (“Winland
Dalian”);
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(h)
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Treasure
Way Shipping Limited, a company organized under the laws of Hong Kong on
May 27, 2002 (“Treasure
Way”).
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PGL acquired
the following additional entities in 2008:
- 5
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(i)
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Win
Eagle Shipping Co., Ltd., a company organized under the laws of Malta on
July 29, 2002 (“Win
Eagle”);
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(j)
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Win
Bright Shipping Co., Ltd. a company organized under the laws of Malta on
February 8, 2002 (“Win
Bright”);
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(k)
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Win
Ever Shipping Co., Ltd., a company organized under the laws of Malta on
February 8, 2002 (“Win
Ever”).
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(l)
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Win
Glory S.A., a company organized under the laws of Panama and registered in
Hong Kong on April 2, 2003 (“Win
Glory”).
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(m)
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Win
Moony Shipping Co., Ltd., a company organized under the laws of Malta on
September 26, 2003 (“Win
Moony”).
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PGL acquired
the following entities in 2009:
(n)
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Win
Grace Shipping Co., Ltd., a company organized under the laws of Malta on
September 4, 2003 (“Win
Grace”).
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(o)
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Win
Hope Shipping Co., Ltd., a company organized under the laws of Malta on
June 14, 2001 (“Win
Hope”).
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PGL established
the following entities in 2009:
(p)
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Bodar
Shipping S.A. is incorporated and registered in Panama on February 12,
2009 (“Bodar
Shipping”).
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(q)
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Win
Moony Shipping S.A. was incorporated and registered in Panama on April 30,
2009 (“Win
Shipping”).
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(r)
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Bao
Shun Shipping S.A. was incorporated and registered in Panama on June 10,
2009 (“Bao
Shun”).
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(s)
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Winland
International Shipping Co., Limited is incorporated and registered in Hong
Kong on August 27, 2009 ("Winland
International").
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PGL and
each of its wholly-owned subsidiaries set forth above (collectively, the “PGL Group”) are
engaged in ocean transportation of dry bulk cargoes worldwide through the
ownership and operation of dry bulk vessels. The principal business activities
of the PGL Group are ocean transportation and chartering. The operations of
each of the Company’s vessels are managed by Winland Shipping, while the
chartering businesses are managed by Kinki and Bestline. Winland International's
primary business is to develop and expand the global shipping
market. Lancrusier’s primary business is management and accounting, while
Win Star, Bodar, Winland Dalian, Treasure Way, Win Eagle, Win Bright, Win Ever,
Win Glory, Win Moony, Win Grace, Win Hope and Bao Shun collectively own 12 of
the Company’s vessels.
BSL
SkyAce’s
wholly-owned subsidiary BSL was incorporated in the British Virgin Islands
on November 30, 2006. BSL sole business is to act as a holding company for
its wholly-owned subsidiary, HK Wallis Development Limited, a company organized
under the laws of Hong Kong on December 9, 2006 (“Wallis”). The sole
business of Wallis is to act as a holding company for its wholly-owned
subsidiary, Beijing Huate Xingye Technology Co., Ltd., a company organized under
the laws of the PRC on March 18, 2008 (“Beijing Huate”).
Beijing Huate was formed with the purpose of producing IT software, developing
new products and adopting advanced and applicable technology and scientific
management methods to create economic benefits for its stockholders. It does
this by controlling, through Exclusive Technical Consulting and Service
Agreements and related transaction documents dated as of March 31, 2008
(collectively, the “Service Agreements”,
each of which are referenced as Exhibits herein), DWIS, DWIL and
DSON.
- 6
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In
compliance with the PRC’s foreign investment restrictions on internet
information services and other laws and regulations, the Company conducts all of
its internet information and media services and advertising in China through
DWIS, DWIL and Shipping Online, each a domestic variable interest entity
(also referred to in this Annual Report as a “VIE”). In accordance
with ASC 810 (formerly SFAS No. 46R, “Consolidation of Variable Interest
Entities”), a VIE is to be consolidated by a company if that company is subject
to a majority of the risk of loss for the VIE or is entitled to receive a
majority of the VIE’s residual returns. Upon executing the Service Agreements,
DWIS, DWIL and Shipping Online (collectively also known as the “VIEs”) are all
considered VIEs and the Company, through its ownership and control of SkyAce,
BSL, Wallis and Beijing Huate, is considered their primary
beneficiary.
Pursuant
to the Service Agreements, Beijing Huate provides on-going technical services
and other services to the VIEs in exchange for substantially all net income of
the VIEs. In addition, the stockholders of the VIEs have pledged all of their
shares in the VIEs to Beijing Huate, representing one hundred percent (100%) of
the total issued and outstanding capital stock of the VIEs, as collateral for
non-payment under the Service Agreements or for fees on technical and other
services due thereunder. Beijing Huate also has the power to appoint all
directors and senior management personnel of the VIEs.
DWIS
Dalian
Winland International Shipping Agency Co., Ltd. (“DWIS”) was
incorporated under the laws of the PRC on December 5, 2002 by three (3)
investors, namely, Dalian Winland Industry Group Co., Ltd. (“DWIG”), Dalian
Winland Shipping Co., Ltd. (“DWSC”) and Dalian
Weihang Freight Forwarding Co., Ltd. (“DWFF”). At
establishment, the percentage of each party’s equity interest was 51%, 41.5% and
7.5%, respectively. DWIG was incorporated by Li Honglin and Xue Ying having a
60% and 40% interest, respectively. DWSC was incorporated by DWIG and Xue Ying
having a 60% and 40% interest, respectively. DWFF was incorporated by Li Honglin
and Xue Ying having a 66.7% and 33.3% interest, respectively. Thus, Li Honglin
and Xue Ying had owned a 50.5425% and 49.4575% of DWIS indirectly at inception.
According to a share trust instrument agreement executed in February 2005, Li
Honglin transferred 0.5425% of his interest in DWIS to Xue Ying. Thereafter, Li
Honglin and Xue Ying own 50% each of DWIS as at December 31, 2009 and 2008. The
principal activities of DWIS include shipping agency services, booking cargo
space, storage of goods, and declaration of customs. On August 18, 2009, DWIS
disposed of the Haoyue vessel to a related party, Dalian Winland Shipping Co.,
Ltd. The net cash proceeds were $1,272,685, after deducting tax expenses of
$28,350 from the gross proceeds of $1,301,035.
DWIL
Dalian
Winland International Logistic Co., Ltd. (“DWIL”) was
incorporated under the laws of the PRC on July 28, 2003 by three (3) investors,
namely, DWIG, DWSC and DWIS. At establishment, the percentage of each party’s
equity interest was 51%, 47.6% and 1.4%, respectively, and Li Honglin and Xue
Ying owned 48.4436% and 51.5564% of DWIL indirectly at inception, respectively.
According to a share trust instrument agreement executed in February 2005, Xue
Ying transferred 1.5564% of her interest in DWIL to Li Honglin. Thereafter, Li
Honglin and Xue Ying each owned 50% of DWIL as of December 31, 2009 and 2008.
The principal activities of DWIL are freight forwarding services logistics
shipping agency services. DWIL owns one of the Company’s vessels.
Shipping
Online
Dalian
Shipping Online Network Co., Ltd. (“DSON” or “Shipping Online”) was
incorporated under the laws of the PRC on February 20, 2003 by two (2)
investors, namely, Li Honglin and Xue Ying. At establishment, the percentage of
each party’s equity interest was 80% and 20%, respectively. According to a share
trust instrument executed in February 2005, Li Honglin transferred 30% of his
interest of Shipping Online to Xue Ying. Thereafter, Li Honglin and Xue Ying
each owned 50% of Shipping Online as at December 31, 2009 and 2008. The
principal activities of Shipping Online are providing online services to its
members.
- 7
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Summary
of Current Business of the Company
The
Company is a comprehensive, modern international shipping company with its world
headquarters based in China. The Company is mainly engaged in a comprehensive
range of international shipping and logistics services such as bulk cargo
transportation, chartering, shipping agents, logistics, ship trading, spare
parts supplies, crew recruitment and shipping porter operation, as well as
relevant industry news and data analysis and advertising.
The
Company's core business is international bulk cargo transportation. It has an
ocean shipping fleet of 13 vessels, with a self-owned carrying capacity of over
200,000 tons. Through monthly voyage charters and time charters, the
Company can provide carrying capacity of about 1,000,000 tons with shipping
lines to major ports around the world.
In
addition, the Company owns and operates an industrial online portal called
“Shipping Online” which is accessed on the internet at http://www.sol.com.cn.
This website functions as a business platform, providing on-line and off-line
integrated international shipping and logistics services, such as bulk cargo
chartering, container booking, shipping agents, ship trading and building, spare
parts supplies, crew recruitment, as well as shipping news and data analysis;
the off-line operating team is made up of industrial elites and a logistics
network with branches in Beijing, Tianjin, Dalian, Yingkou, Qingdao,
Zhangjiagang, Lianyungang and Shanghai. These branches collectively provide a
full service system with a combination of integrated group and localized
branches.
Providing
comprehensive shipping and logistics services through the internet is not only
the innovation and creation of the Company, but is also the basis of the
transition for the entire shipping industry from a traditional business model to
a modern business model. The Company believes it will create a broad space for
development and lead the accelerated development of the entire shipping
industry.
Our
operating revenue in 2006 reached US$59.2 million, of which the net profit was
nearly US$7.4 million; as the global shipping market experienced a breakthrough
in development, the Company achieved annual operating revenues of US$70.3
million in 2007, net income of US$21.4 million, enjoying approximately 200%
growth as compared with 2006. The operating revenue of 2008 reached $84.2
million, net income of $19.1 million. However, the operating revenue and net
income for the year ended December 31, 2009 dropped to 50.2 million and a
resulted net loss of $7.0 million.
The
performance for the current reporting period was significantly impacted by the
global financial crisis which resulted in a severely depressed shipping market,
offset by the positive output from management initiatives of cost control and
the implementation of our shipping online portal. The Company intends to
steadily expand its capacity and enlarge the size of its ocean transport fleet
by acquiring additional vessels or businesses at lower prices in light of the
current slump in the shipping market. The Company intends to continue to push
forward with its comprehensive shipping and logistics services with Shipping
Online in order to expand its market share.
On June
3, 2009, Winland Shipping and Bao Shun Shipping S.A. entered into a Memorandum
of Agreement (“MOA”) with Mario
Shipping Corporation (“MSC”) for the
purchase by the Company from MSC of a 2003 built handysize vessel (20,212 gross
tonnage, 10,948 net tonnage) known as “Bao Shun” for a price of
US$20,700,000. On June 4, 2009, the MOA was amended to nominate Bao
Shun Shipping S.A. as the actual buyer that would remain fully responsible for
performing under the MOA, and on July 14, 2009 the MOA was further amended to
change the expected time of delivery to the period of July 14, 2009 to October
10, 2009 and to modify certain payment and interest terms. On August 14,
2009, the Company paid ten percent (10%) of the purchase price for the vessel
(approximately US$2,070,000) in cash.
On
September 25, 2009, the parties to the MOA closed on the purchase of the vessel
whereby the Company paid the balance on the purchase price of US$18,630,000 as
well as acquisition cost of $181,125. The Company funded $14,490,000
through a long-term loan with Dialease Maritime S.A. which is secured by the
vessel “Bao Shun”, and funded $3,000,000 via a long-term note. The Company paid
the remaining balance of $1,321,125 in cash. The loan is to be repaid
in eighty-four (84) monthly payments with an interest rate at the Japanese LIBOR
plus 2.3%.
- 8
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Brief
History of the Company’s Shipping Business
The
Company was founded in 1993 as a chartering business. Since the market was
dominated by State-owned enterprises at that time, the attitude and level of
service was generally not satisfying to customers. Li Honglin, the founder of
the Company, seized the opportunity to privately establish the Company by
himself, giving full play to the advantages of service and price. The Company
gradually received recognition from a large number of corporate
customers.
With
gradual accumulation of capital and experience, as well as an acute grasp of
market trends, the Company leased its first vessel in 1995. In 1997, in light of
the outbreak of the Southeast Asian financial crisis, the global shipping market
experienced a downturn. Having an optimistic view on market prospects and a
stable support of customer resources, the Company seized the opportunity to
lease more vessels at a lower price, becoming a ship owner by direct purchase of
vessels in 1998. After 2000, the Company expanded its fleet through the purchase
of between 3-4 ships annually.
By the
end of 2004, in order to become a modern comprehensive shipping company with
sustainable development and innovation potential, the Company developed a
strategy to provide traditional maritime services on the internet and created a
new industry business and profitability model by integration of traditional
shipping services and internet e-commerce.
To
achieve this strategic planning, at the end of 2004 the Company launched the
famous domestic online shipping portal “Shipping Online” and began providing
network-based shipping services. Shipping Online is a maritime shipping portal
and integrates traditional business practices into designing and developing
on-line services for the most important parts of the international shipping
industry. Shipping Online provides comprehensive platform solutions, and
includes an industry trading platform and business operations platform based on
our original information and marketing platform.
The
operating income directly and indirectly generated from e-commerce services
generated by Shipping Online has become an important added component of the
Company’s revenues as well as an enormous publicity value which we believe will
continue to advance the Company’s growth beyond the original shipping business
of the Company. DWIS and DWIL provide one-stop, multi-level professional
shipping services in each link of the value chain through Shipping
Online.
Market
Segments of the Company
Bulk
Cargo Transportation and Chartering
The three
main categories for international sea transportation are bulk cargo, container
liner transport and oil and gas transport, of which bulk cargo transport
occupies more than a forty percent (40%) market share and is generally
considered the most important market segment of the shipping
industry.
The bulk
cargo transportation market can be further divided on the basis of the tonnage.
The industry uses the following terms to describe such subsets of the bulk cargo
transport market (from large to small size): The Capesize vessels market, the
Panamax vessels market, the Supramax vessels market and the Handysize vessels
market. The Company's fleet is primarily concentrated in the latter two
categories, namely, the Supramax and Handysize vessel markets.
The
Company conducts its shipping business through the Plentimillion Group and its
two (2) main businesses are dry bulk shipping (voyage chartering and time
chartering) and vessel chartering. During the fiscal years ended 2009 and 2008,
49.7% and 68.3% of SkyAce’s revenue was generated from dry bulk shipping
revenues, respectively.
E-Commerce
& Comprehensive Logistics Services
E-commerce
services of the shipping industry mainly provide various professional services
to enterprises in shipping, logistics, foreign trade, ship, marine, and other
areas. Therefore, e-commerce services of the shipping industry have
corresponding market segmentations in accordance with their respective customer
groups and type of services. The three most common market segments are as
follows:
- 9
-
·
|
Shipping Information
Services. Shipping websites of this type provide shipping
information, statistics and data, market analysis, comments, transaction
reports and other information services. Website sponsors are mainly
research institutions and media with a full range of government
background, such as “Chinese Shipping” by the Shanghai Shipping Exchange,
the “CNET” by "China Shipping Weekly" under the Chinese Association of
Traffic and Transportation. These shipping websites provide information
services mainly by relying on their ability to obtain and report
information, but without any business transaction information. This is the
most common e-commerce service subset in the shipping
industry.
|
·
|
Shipping
Transactions. With the popularity of e-commerce services, more and
more shipping companies understand that the internet is playing an
increasingly important role on when they conduct business. Therefore a
large number of shipping companies have begun to release information on
their own products and services on the internet for promotion and the
ability for customers to search their product. Such trend has formed an
online trading market for the purpose of online transactions. If the
shipping company timely posts information to benefit cargo owners and
charter companies it will enhance the operational efficiency of vessels.
When ship-owners desire to conduct ship trading, they can now choose to
release relevant information on a shipping portal, resulting in more
buyers and sellers to choose from yielding a better return. Shipping
e-commerce websites of this type mainly provide a platform for business
information and inquiry services and a direct link between member
companies who can make off-line transactions and provide a trading
platform for exchanges on business information. This is the second most
common e-commerce service subset in the shipping
industry.
|
·
|
Shipping
Operations. The ultimate goal for enterprises is to not only access
information but also to effectively use such information in actual
business transactions. The two subsets above merely provide business with
access to information. In order to enable customers to complete a
transaction, Shipping Online assists customers in completing transactions
directly through its network as an agent. As an agent, Shipping Online
provides bulk cargo chartering, container online booking, spare parts and
materials supply online services and ship sales. Such services go beyond
the simple model of providing information by providing a practical and
efficient operational platform for its member shipping
companies.
|
Market
Share and Competition
Bulk
Cargo Transportation
In the
segment markets of Supramax and Handysize vessels for bulk cargo transportation,
with 13 self-owned vessels and ships by voyage charter and time charter, the
Company’s transport capacity is approximately 1 million tons monthly, which is
in the medium-sized level in Far East region with higher visibility and
influence. Four decades of service with stability and quality help it to
consolidate a large number of loyal clients including some Chinese State-owned
large enterprises such as China Capital Steel, China Bao Steel, China Minmetals,
China National Petroleum and China Petrochemical, and other famous international
enterprises, including Japan’s MARUBENI, MITSUBISHI and NIPPON, Korea’s POSCO
and LG, Singapore’s LIVEN and Switzerland’s STEEL BASE.
With
respect to competition, the Company competes with about 5 large State-owned
shipping enterprises in China like COSCO, China Shipping and we also compete
with approximately 100 small shipping companies (companies generally having 5 or
less vessels). The Company generally ranks among the top 10 in its industry
class with respect to size. The competitive advantages and disadvantages for
each class of competition (including the Company’s current situation) are as
follows:
Enterprise
Type
|
Main
Advantages
|
Main
Disadvantages
|
||
China
Large State- Owned Enterprises (approximately 5
enterprises)
|
· large fleet
with strong transport capacity
· Easy
acquisition of large state cargo owners as a State-owned
enterprise
|
· Low
efficiency and slow market reaction
· Difficulty
with cost
control
|
- 10
-
· High
visibility and marketability
· Rich
resources, favorable policies
|
· Weak service
awareness, unstable staff
·Operation
without flexibility and autonomy
|
|||
The
Company
|
·Advanced
operation model, high-level internet application
·Flexible
decision-making of management, fast market reaction
·Good cost
control and scale effect
·Stable staff,
rich market experience
·Strong service
awareness and innovation
|
·Single vessel
with small transport capacity, cargo resource
constraints
·Relative small
fleet size
·Little
government background, little favor policy
·Narrow
financing and low growth rate
|
||
Small
Shipping Companies (approximately 100 enterprises)
|
·Flat-styled
management, relatively high efficient
decision-making
·Good service
awareness, quick market reaction
|
·Small-sized
fleet, inefficient transport capacity
·Lack of
industrial experience, unstable customer resources
·Single
business, weak risk control
·High cost, no
scale effect
|
From the
comparison above it can be seen that the Company is a modern shipping company
with innovative thinking. Compared with China's large state-owned enterprises,
we have some constraints and relative disadvantages, however we believe we also
have great potential for development. If the Company can rapidly expand its
fleet size, update its capacity configuration and continue to reap the
advantages of internet application and software strength, we believe it is
possible to rapidly expand the scale of business and to access to larger space
for our development in the future.
E-Commerce
(Comprehensive Logistics Services)
There are
less than ten comprehensive websites in the shipping industry in China, and
Shipping Online’s website http://www.sol.com.cn
is one of the leading websites overall in the industry according to www.chinarank.org.cn,
which is operated by the Internet Society of China. With respect to
the e-commerce market subsets, Shipping Online is still a market follower with
respect to what we call “Shipping Information Services” (the obtainment and
dissemination of industry information such as news and statistics) and thus,
cannot provide information in the most-timely fashion compared with our
state-owned competitors. However, we have adopted a competitive strategy of
providing the most comprehensive and systemic shipping information through
Shipping Online.
With
respect to the industry subsection of the e-commerce market we call “Shipping
Transactions”, Shipping Online was the first company to enter into such market,
has the most experience with such market and is generally considered a leader in
the provision of such services. The Company has rich experience in the shipping
business and the Company’s management has laid a solid professional foundation
for the design of online products and offline consulting
services.
- 11
-
With
respect to the industry subsection we call “Shipping Operations”, which is much
more professional and complex, namely, the providing direct online operation to
shipping enterprises, Shipping Online is the first e-commerce enterprise to deal
directly with the shipping orders. On the one hand, we have stable business
orders through Shipping Online, on the other hand our professional offline team
can deal with orders in a timely manner, and provide the operations at the scene
through local subsidiaries and member enterprises.
With
respect to competition, Shipping Online is the first company in China to promote
shipping services on the internet and is the first company to put it into
practice. Therefore, we are unique in a vast majority of the online operations
without competition in such areas. Through long-term practice and experience, we
have established a relatively high entry barrier and therefore own a competitive
advantage, which we believe will enable us to maintain the competitive edge for
a long time in the future.
Shipping
Online’s management team is very familiar with the shipping industry and has a
profound understanding and grasp of the business needs of shipping companies,
which provides products and services tailored to the needs of shipping companies
and an unparalleled professional practicality. It is difficult for competitors
to learn and imitate in a short period of time. Even if they can fully copy the
shipping webpage, they cannot easily obtain the professional experience of our
operational processes and off-line support. Once the business needs have
changed, the internet services and processes must continuously adjust and
optimize in order to meet the specific needs of enterprises. Thus, rapid market
reaction and adjustment are problematic barriers for competitors in a short
term.
Furthermore,
an online order must be achieved under the professional support of an off-line
team. An e-commerce portal only provides information and cannot complete
transactions. It is at best a distribution center of information. Shipping
Online’s off-line operational team entered the shipping market in 1993 and has
more than 10 years of operational experience with freight forwarders, cargo
agents, shipping agents, bulk cargo carting, sale and maintenance, spare part
supply and other fields of application. The efficient systematic matching
between off-line operations and online orders is a significant barrier for
competitors.
The
Company’s Products and Services
Introduction
As one of
the most comprehensive modern international shipping companies in China and Asia
based on the Internet, the Company is mainly engaged in a comprehensive range of
online and off-line international shipping services such as bulk cargo
transportation, chartering, shipping agents, international logistics, ship
trading, spare parts supplies, crew recruitment and shipping porter operation,
as well as relevant industry news and data analysis and
advertising.
Bulk
Cargo Ocean Transportation Services
The
Company has 13 self-owned vessels, with transport capacity of over 200,000 tons.
Through vessels by “voyage charter” and “time charter”, the Company’s transport
capacity is approximately 1 million tons monthly for main lines in the world.
The Capacity of a single vessel is from 3,000 tons to 40,000 tons. Our vessels
sail under the Flags of St. Vincent, Malta, Panama, China and Hong Kong. The
vessels are able to carry various types of cargo and provide multi-level and
wide range of maritime transport services.
Online
Chartering Services
The
Company’s online chartering services are transaction services specifically
designed for ship owners, charter agents, and various trading companies to
achieve efficient interactions between ships and cargo (that is, matching
suitable cargo for a suitable ship). To achieve this goal, we provide a service
that automatically matches ship and cargo information in terms of ports, so that
our on-line members can directly search by port name (or other key word) and use
the information to meet their business needs.
To
provide our online members fast, efficient and convenient transactions, our
website has established a special chartering operation team which not only
collects ship and cargo information from around the world, but also directly
provides agency services to our members. Utilizing our experienced ship and
cargo agents, members save on the cost of finding their counterparts on their
own. At present, we have a staff of 10 persons that rely on information provided
by our members every day and on various types of empty ship information, and our
team also uses their own channels to collect information. They can provide
online interactions to hundreds of vessels and provide professional, efficient
chartering services for many ship and cargo owners.
- 12
-
Online
Container Booking Business
Container
booking is an important aspect of importing and exporting, and one that is
unavoidable to many small and medium-sized cargo owners. Considering costs and
efficiency, shipping companies generally do not provide direct booking services
to small and medium-sized cargo owners. Instead, they authorize several major
professional agents to accept booking, and costs related to such logistics
increase for each additional agent. Generally speaking, agents are regional and
unitary, that is, they only have certain advantages in their respective city or
line, while the trading company often is not subject to the restrictions of
geographical and export lines. Therefore, they sometimes are required to choose
a number of agents to provide services which increases their operational
complexity and management costs.
Shipping
Online fully understands the problems that such traditional model brings to
cargo owners. We offer online booking that makes use of the advantages of the
internet in the dissemination and gathering of information collected with
respect to container export booking orders of the same route from main port
cities. This allows our members to reduce the number of intermediaries and as a
result, obtain a lower price. Shipping Online reduces the costs of
transportation for cargo owners and offers a more stable supply for shipping
companies. Following this “gathering cargo resources, centralizing purchase”
principle, when we launched online booking services, we obtained recognition by
cargo owners and laid a good foundation for the market. The Company developed a
profit model from such innovation through chartering for cargo owners and
providing relevant operation services. We obtained profits from both price
difference and operational fees. Based on the import and export of over 100
million TEUs in China in 2009, this market size is at least US$5 billion (“TEU” means
“twenty-foot equivalent unit”, an industry standard term used to describe a
cargo container 20 feet long and 8 feet wide).
Online
Ship Trading, Building and Maintenance Services
There are
two main models of ship trading, building and maintenance services available in
Shipping Online. One is a self-help transactions model among member companies,
that is, member companies freely distribute information on or search for ship
trading or maintenance or building information of all kinds and directly
establish contacts with each other and then consummate a deal; the other main
model is that we are appointed by a member to complete a transaction whereby the
Company generates a 1% -3% commission from such transactions.
In order
to increase the quantity and quality of information on ship trading, we
encourage domestic member enterprises to release more information. We rely on an
English version of the website as well as foreign channels of long-established
cooperation in order to obtain abundant international ship trading information
and thus serve as a communication bridge between domestic and foreign
market.
With
respect to ship repairing and manufacturing services, China has become the
world's second largest shipbuilding base second only to the South Korea, and
there has been a growing number of foreign shipping companies making
shipbuilding orders to domestic repairing and manufacturing factories. We
provide updated information on the competitive products and production capacity
offered by these factories on our multilingual website for customers, accept
shipbuilding inquiries abroad as a representative of ship owners and generate a
commission equal to 1% -2% of the shipbuilding price.
Online
Supplies Services of Spare Parts and Materials
With
China's rapid economic development, China has become the world's processing
factory. With respect to ship spare parts and common materials, China's products
of good quality at a low price are recognized by the world over. The procurement
of spare parts and materials are often made when a ship is calls at a port in
China. However, language and other barriers often result in poor communication
and low efficiency of procurement. Common practitioners are generally local
small companies, and there is no domestic large-scale supplier in China. In
fact, in accordance with the estimates on the above market, procurement of spare
parts and materials in China and abroad every year reaches US$3 billion.
Therefore in accordance with international norms on spare parts manuals, we
provide over 100,000 categorized types of spare parts and materials on our
website, and we accept online orders 24-hours a day. Such online marketplace
greatly improves the accuracy and efficiency of procurement and is in line with
our core network of suppliers for spare parts and materials and ship agents
established in major cities in China. Goods are distributed quickly to the
vessel at low cost, which is ideal for foreign shipping
companies.
- 13
-
Online
Crew Recruitment Service
The
online recruitment services provided by Online Shipping are different from
ordinary talent recruitment services in light of the stringent international
restrictions for qualifications on different levels of work. Crew members are
certified by professional service providers and therefore, we have developed an
online crew recruitment system to account for the four integral customer groups:
ship owners, crew service companies, crew training schools and crew members.
Recruiting information and training information are published by the employing
units and resumes are posted by crew members so as to achieve an optimal
allocation of human resources. With the increase of the vessel’s capacity in
recent years, the crew market, especially the senior crew market, is facing a
serious shortage. Thus, the crew recruitment service market is full of great
opportunities. Through steady development, the online crew recruitment channel
in Shipping Online has become China's leading platform for large-scale
recruitment of crew members. Because many ship owner companies access Shipping
Online for its offering of crew recruitment services, we believe Shipping Online
has laid a good foundation for the Company to promote other business services to
these member enterprises.
Shipping
Online Information Services
Shipping
Online provides comprehensive professional news services on ships, ports,
maritime and trade for member companies. Through various channels we collect and
summarize information on major industrial events with a global scope. We also
gather statistical data in various fields to release in Shipping Online in
categories for free reading by member companies so as to enhance customer
loyalty.
In
addition to industry news, statistics and other industrial information, we
provide market price indices, transaction reports, analyses and other decision
support information, particularly in several major businesses in the shipping
industry, such as the Baltic series indices and market comments, the tankers
transport market index, prices and comments on new ships, second-hand ships and
the ship-dismantling markets, international fuel market prices and comments, the
China Costal Bulk Freight Index and market analysis and the China Containerized
Freight Index. These professional information services provide an important
platform for member companies to understand markets and expand their
businesses.
Shipping
Online Marketing Platform Services
Compared
with traditional media such as television, newspapers and magazines, internet
media is more cost-effective, especially for a non-popular industry such as the
shipping industry. Industrial portal advertising values are much higher than
that of news portal sites because customer groups are more concentrated and pure
in industrial portals and advertisements therein are much more persistent. Many
shipping companies have come to realize these points and in recent years, they
have gradually expanded their promotion investment in the network. We believe
that the industrial portals are the best platforms for marketing activities of
small and medium sized enterprises.
Shipping
Online, a vertical portal in the shipping field, provides to its member
companies a series of marketing services such as enterprise website building,
network advertising, corporate interviews and event reports, to help increase
member company visibility rapidly and to promote the business growth of such
enterprises. Our advertising clients include American ABB, Germany MARES,
Singapore Singhai Marine Services, the Hong Kong Supermar Machinery, China
Marine and Seaman Service, Yingkou Port Affairs Group, Xiamen Port Affairs Group
and International Shipping Agency ISB.
- 14
-
Developmental
Strategies of the Company
Growth
Strategies
We have
established a two-step strategy for the development of the Company. The first
step is to enhance the integration of competitive business, such as bulk cargo
transport and the online business of Shipping Online, and gradually turn the
original business team to off-line operations of Shipping Online and provide
comprehensive shipping services based on the internet, namely, “improve the
offline business based on the internet”. The second step is to further intensify
the marketing promotion of e-commerce platform and network building of Shipping
Online once Shipping Online matures and stabilizes its online business, and to
expand the sources and increase the number of online business orders. We believe
the expansion of our online business will bring about steady expansion of the
off-line business, and the model can be reproduced in other major shipping
countries in the world. We believe Shipping Online will eventually become one of
the most comprehensive, modern shipping and logistics service providers in the
industry.
Sales
Strategies
The
Company acts as a modernized shipping company which supplies comprehensive
shipping logistics services based on the internet. The Company has the following
sales strategies:
·
|
Internet Sales
Strategy. In light of lower efficiency and higher costs, the
traditional shipping operating model is becoming the choke point of
further development in the shipping industry. However, the emergence of
e-commerce offers a clear way of breaking through the choke point.
Shipping Online is one of the most famous and most influenced portal
websites in the field of the shipping logistics. Every day, a mass of
member companies log on the internet to issue and inquire about all kinds
of shipping supply and demand information. We believe that this can supply
the Company with a steady source of information for developing its
business. Through active feedback from member companies, the Company can
reduce the costs of expanding its business and gain considerable sales
income. At the same time, we believe that Shipping Online will be able to
expand its popularity and influence, such as advertising in the search
engine and the plane media, co-organizing important exhibitions about the
industry, and organizing and undertaking all types of selection
activities.
|
·
|
“From Point to
Surface” Sales Strategy. The shipping logistics comprehensive
services offered by the Company through Shipping Online can supply
shipping companies with overall business solutions. Usually, member
companies will approach our website in order to obtain a certain service,
however they realize after being exposed to all of the other services we
offer that they need several other services. Our “from point to surface”
sales strategy aims to first assist the member in solving its initial
business issue or issues, and then introduce such member to our overall
products and services, and encourage the member to introduce these
services to its colleagues. Also, we will offer favorable package
discounts. We believe such strategy will help us expand our business and
increase our sales.
|
·
|
“Member Developing
Member” Sales Strategy. Many of the member companies of the
Shipping Online contact us actively through introductions made by their
friends. We pay great attention to the public praise promotion between the
clients. We encourage the existing member companies to introduce other
companies to join the Shipping Online and to provide discounts or awards
to such members for their contribution to the development of the customers
in order to expand our sales.
|
·
|
Bit By Bit Local Sales
Strategy. As a China-based shipping company, the Company divides
its primary sales objects into three parts according to its scale of
business and regional advantage. The Company will input the advantage
resources in turn from inner to outside according to the chart below. We
will supply familiar clients in familiar markets with preponderant
services in order to maintain stable corporate operations and efficient
use of our
resources.
|
- 15
-
Sales
Channels
The
Company has been focusing on two channels. First, the Company has sought
cooperation with the medium and large cargo owners and trading companies with
long term transport agreements. Second, the Company has joined several agency
groups. The Company reports its vessels’ open schedule to, and will receive
cargo information from, the agents. This can increase the velocity and operating
efficiency of the ships. These two sales channels cannot work without Shipping
Online. Other than these two sales channels and the implementation of our sales
strategies as discussed above, we mainly rely on telemarketing. We believe we
will gradually rebuild and expand the range and scale of business of the
existing branches, and build sales and service branches within China and abroad
in port cities to supply the localized demographic services. We will demonstrate
and promote network solutions directly to the shipping companies in order to
increase the sales effects. In small and medium sized cities, we are planning to
develop an agency sales network and target local companies which have a good
reputation and recognize the corporate pattern of development in order to
cooperatively build a profitable sales and services network.
Business
Development
Plan For Expanding Transport
Capacity. In order to further increase the scale effect of our fleet
transport and to supply our clients a more convenient and well rounded maritime
transport service, we are planning to renew and expand the capacity of our
transport business by importing larger ships. Not only would this
increase the variety of cargo transported, but this would increase the variety
of targeted clients. We are actively increasing the Company’s level of internet
and information application, increasing the operating efficiency and reducing
operating costs in order to more closely supply clients with more transparent
services.
Planning For Promotion of
Shipping Online. With respect to network promotion, the Company will
implement measures to ensure that our website appears more frequently and more
prominently in online search engines. With respect to traditional
media, we plan to carry on integration and promotion in shipping magazines and
newspapers at home and abroad in order to increase our image. Additionally, we
are planning to put up a billboard in the area of the port docks of the
important port cities in order to reinforce our brand image of the Shipping
Online in the shipping industry, the logistics industry and foreign trade
industry.
Plan For Technical
R&D. The Company’s technical R&D planning is divided into three
parts: one is to enforce the technicality and convenience of the Shipping
Online’s services through increasing the research and understanding to the needs
of the clients; another is, for the shipping companies, to develop business
operational systems which can be installed and used in the client’s local
computers based on the internet information resources; another is to continue to
speed up the integration of inside and outside information of the shipping
companies, and develop corporate information portal system which can cover the
entire supply chains.
Planning for the National
Marketing Network. With the increase of the membership companies of the
Shipping Online and the continued expansion of the comprehensive internet-based
services, we need to build a sales and service network covering the national
main port cities, to shorten the response time of customer services and increase
the speed of solving problems. In 2010, the Company will continue to alter and
rebuild the existing eight branches, including those in Beijing, Shanghai,
Tianjin, Qingdao, Dalian, Yingkou, Zhangjiagang and Lianyungang, to meet the
needs of the membership sales and member service of the Shipping
Online. From 2010 to 2012, the Company intends to complete the construction
of the branches in such port cities as Ningbo, Xiamen, Shenzhen (or Guangzhou)
and Guangxi province. After 2012, the Company intends to select
between 10 to 15 freshwater port cities and other grade one or two inland cities
to develop a sales agency network, and to form a marketing and services network
which covers the main national customers.
Planning for the Expansion
of Personnel. The Company attaches great importance to the cultivation of
professional talents, especially those who are accomplished in the shipping
industry and in the internet e-commerce industry. In order to cooperate with the
establishment of the branches above, the Company will continue to train and
employ qualified management talent. Through continuously improving the Company’s
corporate management structure, management systems and retention of talent and
promotion practices, the Company provides its personnel with a favorable working
atmosphere and opportunity for development. The Company will continue
to improve its hiring, human resources development, performance evaluation and
training management practices.
Research
and Development (R&D)
The
Company’s R&D is mainly devoted to our e-commerce business in two areas, the
product and service R&D of Shipping Online and the management information
system R&D for our off-line shipping business. Currently, there are six (6)
persons responsible for such R&D, all of which have earned at least their
bachelors degree. Core technical personnel have worked with the Company for
years, have engaged in system development for the shipping industry in the area
of Internet, and have a deep understanding of the shipping industry and its
business processes. The Company also owns the core technique in the area of
exploring the shipping website called network gate and an industry system
application related to the shipping industry.
- 16
-
The
Company spent US$98,660 (which is reflected in WLOL’s General and Administrative
Expenses) for the year ended December 31, 2009, US$41,379 (which are reflected
in WLOL’s General and Administrative Expenses) for the year ended
December 31, 2008 and US$8,636 (included in Skyace’s General and Administrative
Expenses) for the year ended December 31, 2007 on Company-sponsored research and
development activities as determined in accordance with US GAAP. The Company
plans to spend US$120,000 during fiscal year 2010 and US$151,000 during fiscal
year 2011 on Company-sponsored research and development activities.
Employees
As of the
date of this Annual Report, the Company has approximately 228
employees.
Intellectual
Property
The
Company currently does not own any trademarks or patents. However, the Company
did receive notification of acceptable of trademark registration for the
trademarks “Winland” and “Shipping Online” from the Trademark Office of the
State of Administration for Industry and Commerce on December 7, 2005 and
September 27, 2005, respectively. The Company currently has three main domain
names: www.sol.com.cn, www.winlandshipping.com
and www.shippingonline.cn.
These three domain names are all in good standing.
ITEM
1B. Unresolved
Staff Comments
None.
ITEM
2.
Properties
All land
in China is owned by the State. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case
of land used for industrial purposes, the land use rights are granted for a
period of 50 years. This period may be renewed at the expiration of the initial
and any subsequent terms. Granted land use rights are transferable and may be
used as security for borrowings and other obligations.
The
Company has the following material office and land leases:
Lessee
|
Property
Address
|
Square
Meters
|
Lessor
|
Commencement
Date (Month
and Year)
|
Termination
Date (Month
and Year)
|
Rental
Amount per
Year (US$)
|
|||||||||
DSON
|
Room
A2, Floor 23, Summit Building, No.4 Shanghai Rd., Zhongshan District,
Dalian, China
|
54.98
|
Li
Honglin
|
January
2010
|
December
2010
(Renews
Every Year)
|
3,510.21
|
|||||||||
DWIS
|
Room
D1, Floor 23, Summit Building, No.4 Shanghai Rd., Zhongshan District,
Dalian, China
|
40.94
|
Li
Honglin
|
January
2010
|
December
2010
(Renews
Every Year)
|
3,510.21
|
|||||||||
DWIL
|
Room
C2, Floor 23, Summit Building, No.4 Shanghai Rd., Zhongshan District,
Dalian, China
|
54.98
|
Xue
Ying
|
January
2010
|
December
2010
(Renews
Every Year)
|
3,510.21
|
|||||||||
DWIL—Beijing
Branch
|
Room
1418, Jingguang Business Center, Chaoyang District, Beijing,
China
|
70.93
|
Jingguang
Business Center Management Co.
|
December
2009
|
November
2011
(Renew
Every Year)
|
14,946.18
|
|||||||||
DWIS
and DWIL- Shanghai Branch
|
Unit
E, Building 19, 855 S. Pudong Rd., Shanghai, China
|
140.85
|
Xing
Tai Real Estate Co.
|
January
2009
|
January
2011
(Renew
Every Two Years)
|
32,332.53
|
|||||||||
PGL
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
591.53
|
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
43,877.61
|
|||||||||
DSON
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
207.04
|
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
15,357.64
|
|||||||||
DWIS
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
88.73
|
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
6,581.64
|
|||||||||
DWIL
|
No.305
Zhongshan Rd.,Shahekou District, Dalian, China
|
295.76
|
Dalian
Winland Shipping Co., Ltd
|
January
2010
|
December
2010
(Renews
Every Year)
|
21,938.81
|
- 17
-
We
believe that all of our properties and equipment have been adequately
maintained, are generally in good condition, and are suitable and adequate for
our business.
ITEM
3. Legal
Proceedings
The
Company settled a litigation claim in September 2009 in connection with an oil
pollution accident that occurred in 2006 in Korea. The amount of the settlement
was $505,112 and was recorded as other expense in the consolidated statement of
(loss) income for the year ended December 31, 2009. The insured
underwriter settled the accident in 2006. Since then, the Company had not known
any further claim related to such accident until January 2009 when the Company
received the Korean court order which showed the claim was made on October 6,
2008. The
Company settled the claim in September 2009 after adjudication was made on
September 18, 2009, and the Company recognized the expense
immediately.
As of
December 31, 2009, the claim of $501,640.34 (including interest) by Sinoriches
Global Ltd. for voyage charter contract dispute is in arbitration.
In the
normal course of business, we are named as a defendant in lawsuits in which
claims are asserted against us. In our opinion, the liabilities, if any, which
may ultimately result from such lawsuits, are not expected to have a material
adverse effect on our financial position, results of operations or cash
flows.
ITEM
4. Submission
of Matters to a Vote of Security Holders
None.
PART
II
ITEM 5.
|
Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
|
Market
For the Company’s Common Equity
Our
common stock has traded on the OTCBB under the symbol “WLOL” since October 17,
2008. There has been an extremely limited public market for our common stock.
Set forth below is a table showing the high and low bids for each quarter
within the last 2 fiscal years from which information is available as provided
to us from Pink Sheets, LLC. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions:
- 18
-
High
|
Low
|
|||||||
Year
Ended December 31, 2008
|
||||||||
January
2 through March 31
|
NONE
|
NONE
|
||||||
April
1 through June 13 (before a 1.480973971 split)
|
||||||||
June
16 through June 30 (after a 1.480973971 split)
|
NONE
|
NONE
|
||||||
July
1 through August 8
|
NONE
|
NONE
|
||||||
August
11 through September 30 (after a 2 for 1 split)
|
$
|
4.05
|
$
|
1.50
|
||||
October
1 through December 31
|
$
|
4.00
|
$
|
1.15
|
||||
Year
Ended December 31, 2009
|
||||||||
January
2 through March 31
|
$
|
3.25
|
1.20
|
|||||
April
1 through June 30
|
$
|
5.65
|
1.20
|
|||||
July
1 through September 30
|
$
|
5.50
|
4.25
|
|||||
October
1 through December 31
|
$
|
4.50
|
2.25
|
When the
trading price of our common stock is below US$5.00 per share, the common stock
is considered to be a “penny stock” that is subject to rules promulgated by the
SEC (Rule 15-1 through 15g-9) under the Exchange Act. These rules impose
significant requirements on brokers under these circumstances, including:
(a) delivering to customers the SEC’s standardized risk disclosure
document; (b) providing customers with current bid and ask prices;
(c) disclosing to customers the brokers-dealer’s and sales representatives
compensation; and (d) providing to customers monthly account
statements.
Dividends
Dividends
paid by WLOL, if any, will be contingent upon our revenues and earnings, if any,
capital requirements and financial conditions. The payment of dividends, if any,
will be within the discretion of the Board of Directors of the Company. WLOL
presently intends to retain all earnings, if any, for use in our business
operations and accordingly, the Board does not anticipate declaring any cash
dividends for the foreseeable future.
Holders
of Common Equity
As of
December 31, 2009, we had issued and outstanding One Hundred Thirty Million
(130,000,000) shares of our common stock to 18 holders of record and zero (0)
shares of preferred stock. The Company believes that it has more stockholders
since many of its shares are held in "street" name. See also the “Security
Ownership of Certain Beneficial Owners and Management” above for a table setting
forth (a) each person known by us to be the beneficial owner of five percent
(5%) or more of our common stock and (b) all directors and officers individually
and all directors and officers as a group as of March 22, 2010.
Securities
Authorized for Issuance under Equity Compensation Plans
As of
December 31, 2009, we had no compensation plans (including individual
compensation arrangements) under which our equity securities are authorized for
issuance.
Recent
Sales of Unregistered Securities
As of
December 31, 2009, there were 130,000,000 shares of common stock issued and
outstanding and zero (0) shares of preferred stock issued and outstanding and
during the fiscal year ended December 31, 2009, there were no issuances or sales
of any of the Company’s unregistered securities. We have never
utilized an underwriter for an offering of our securities.
- 19
-
Options
and Warrants
As of
December 31, 2009, and as of the date of this Annual Report, we have no
outstanding options or warrants.
Transfer
Agent and Registrar
Corporate
Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver,
Colorado 80209 currently acts as our transfer agent and registrar.
ITEM
7. Management‘s
Discussion and Analysis of Financial Condition and Results of
Operations
Forward
Looking Statements
The
following is management’s discussion and analysis of certain significant factors
which have affected our financial position and operating results during the
periods included in the accompanying consolidated financial statements, as well
as information relating to the plans of our current management. This Annual
Report includes forward-looking statements. Generally, the words “believes ”,
“anticipates”, “ may ”, “ will ”, “ should ”, “ expect ”, “ intend ”,
“estimate”, “continue” and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this Annual Report or other reports or documents we file with the
SEC from time to time, which could cause actual results or outcomes to differ
materially from those projected. Undue reliance should not be place on these
forward-looking statements which speak only as of the date hereof. We undertake
no obligation to update these forward-looking statements.
The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Annual Report.
Summary
of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of WLOL and its
subsidiaries and variable interest entities (“VIEs”) (the “Company”) as
follows:
I.
Subsidiaries and Holding Companies:
a)
|
SkyAce
is wholly-owned subsidiary of WLOL and incorporated under the law of
British Virgin islands (“BVI”).
|
b)
|
Plentimillion
Group Limited (“PGL”) is a wholly-owned subsidiary of SkyAce and
incorporated in BVI.
|
c)
|
Best
Summit Enterprise Limited (“BSL”) is a wholly-owned subsidiary of SkyAce
and incorporated in BVI.
|
d)
|
Hong
Kong Wallis Development Limited (“Wallis”) is registered in Hong Kong and
is a wholly-owned subsidiary of
BSL.
|
e)
|
Beijing
Huate Xingye Technology Limited (“Huate”) was registered in the People’s
Republic of China (“PRC”) on March 18, 2008 and is a wholly-owned
subsidiary of Wallis.
|
II.
Subsidiaries of PGL - Businesses in transportation and chartering:
f)
|
Winland
Shipping Co., Limited, is registered in Hong
Kong.
|
- 20
-
g)
|
Win
Star Shipping Co., Limited, is incorporated and registered in St. Vincent
and the Grenadines (“S.V.G.”).
|
h)
|
Bodar
Shipping Co., Limited, is incorporated and registered in
S.V.G.
|
i)
|
Winland
Dalian Shipping S.A. is incorporated in Panama and registered in Hong
Kong,
|
j)
|
Treasure
Way Shipping Limited is incorporated and registered in Hong
Kong.
|
k)
|
Win
Eagle Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
l)
|
Win
Ever Shipping Co., Limited, is incorporated and registered in Valletta,
Malta.
|
m)
|
Win
Bright Shipping Co., Limited is incorporated and registered in Valletta,
Malta.
|
n)
|
Kinki
International Industrial Limited is registered in Hong Kong, managing
chartering business of vessels.
|
o)
|
Bestline
Shipping Limited is registered in Hong Kong, managing chartering business
of vessels.
|
p)
|
Lancrusier
Development Co., Limited is registered in Hong Kong, management and
accounting of the above companies.
|
q)
|
Win
Glory S.A. is incorporated in Panama, registered in Hong
Kong.
|
r)
|
Win
Grace Shipping Co., Limited is incorporated and registered in
Malta.
|
s)
|
Win
Hope Shipping Co., Limited is incorporated and registered in
Malta.
|
t)
|
Win
Moony Shipping Co., Limited is incorporated and registered in
Malta.
|
u)
|
Bodar
Shipping S.A. is incorporated and registered in
Panama.
|
v)
|
Win
Moony Shipping S.A. is incorporated and registered in
Panama.
|
w)
|
Bao
Shun Shipping S.A. is incorporated and registered in
Panama.
|
x)
|
Winland
International Shipping Co., Limited is incorporated and registered in Hong
Kong.
|
III. VIEs
- Businesses in Shipping Agency, Freight Forwarding and Online
Services:
To comply
with the People’s Republic of China (“PRC”) laws and regulations, the Company
provides substantially all of its shipping agency and freight forwarding
services and online services in China via its VIEs. These VIEs are wholly-owned
by certain related parties or directors of the Company.
The
following is a summary of the VIEs of the Company:
y)
|
Dalian
Winland International Shipping Agency Co. Ltd. (“DWIS”) is incorporated
under the laws of the PRC. The principal activity of DWIS is shipping
agency services.
|
z)
|
Dalian
Winland International Logistic Co. Ltd. (“DWIL”) is incorporated under the
laws of PRC. The principal activity of DWIL is freight forwarding
services.
|
aa)
|
Dalian
Shipping Online Network Co. Ltd. (“DSON” or “Shipping Online”) is
incorporated under the laws of PRC. The principal activities of DSON are
providing online service for the
members.
|
- 21
-
On March
31, 2008, the Company entered into exclusive technical service agreements with
DWIS, DWIL and DSON under which the Company provides technical and other
services to DWIS, DWIL and DSON in exchange for substantially all of the net
income of DWIS, DWIL and DSON. All voting rights of DWIS, DWIL and DSON are
assigned to the Company, and the Company has the right to appoint all directors
and senior management personnel of DWIS, DWIL and DSON. In addition,
shareholders of DWIS, DWIL and DSON have pledged their equity interests in DWIS,
DWIL and DSON as collateral to the Company for the non-payment of the fees for
technical and other services due to the Company.
The
Company applied the provision of ASC 810 (formerly SFAS No. 46R, Consolidation of Variable Interest
Entities ), a variable interest entity (“VIE”) to be consolidated by a
company if that company is subject to a majority of the risk of loss for the
VIEs or is entitled to receive a majority of the VIEs’ residual
returns. As a result, DWIS, DWIL and DSON became the Company’s VIEs effective as
of January 1, 2008.
The
Company adopted ASC 805 (formerly SFAS No. 141), which requires the consolidated
financial statements for the periods ended December 31, 2009 and 2008 be
presented as though the transfer of net assets or exchange of VIEs’ interests
had occurred at the beginning of the period. Financial statements of all VIEs
have been included in the Company’s consolidated financial statements as of
December 31, 2009 and 2008.
Inter-company
balances and transactions have been eliminated in consolidation.
Concentrations
The
Company’s major customers who accounted for the following percentages of total
revenue and accounts receivable are as follows:
|
Sales
|
Accounts Receivable
|
||||||||||||||
Major
Customers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Company
A
|
6.98
|
%
|
-
|
0.43
|
%
|
-
|
||||||||||
Company
B
|
2.76
|
%
|
-
|
-
|
-
|
|||||||||||
Company
C
|
2.32
|
%
|
-
|
-
|
-
|
|||||||||||
Company
D
|
1.67
|
%
|
-
|
-
|
-
|
|||||||||||
Company
E
|
1.46
|
%
|
0.98
|
%
|
-
|
-
|
||||||||||
Company
F
|
-
|
3.91
|
%
|
-
|
-
|
|||||||||||
Company
G
|
-
|
2.65
|
%
|
-
|
-
|
|||||||||||
Company
H
|
-
|
1.89
|
%
|
-
|
-
|
|||||||||||
Company
I
|
-
|
1.06
|
%
|
-
|
-
|
The
Company’s major oil suppliers who accounted for the following percentages of
total oil purchases and total accounts payable are as follows:
|
Oil Purchases
|
Accounts Payable
|
||||||||||||||
Major
Suppliers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Company
H
|
22.18
|
%
|
22.60
|
%
|
4.55
|
%
|
-
|
|||||||||
Company
I
|
18.42
|
%
|
-
|
7.31
|
%
|
-
|
||||||||||
Company
J
|
17.87
|
%
|
11.28
|
%
|
-
|
2.08
|
%
|
|||||||||
Company
K
|
12.04
|
%
|
23.63
|
%
|
0.39
|
%
|
-
|
|||||||||
Company
L
|
9.97
|
%
|
-
|
-
|
-
|
|||||||||||
Company
M
|
-
|
8.69
|
%
|
-
|
6.57
|
%
|
||||||||||
Company
N
|
-
|
8.30
|
%
|
-
|
1.49
|
%
|
- 22
-
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. Actual results could differ materially from those
estimates.
Fair
Value of Financial Instruments
Fair Value of Financial Instruments
- ASC 820-10 (formerly SFAS 157) establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy prioritizes the inputs into three levels based on the extent to which
inputs used in measuring fair value are observable in the market.
These
tiers include:
(I)
|
Level 1—defined as
observable inputs such as quoted prices in active
markets;
|
(II)
|
Level 2—defined as inputs
other than quoted prices in active markets that are either directly or
indirectly observable; and
|
(III)
|
Level 3—defined as
unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own
assumptions.
|
The
carrying amounts of financial assets and liabilities, such as cash and cash
equivalents, accounts receivable, short-term and long-term loans, accounts
payable, notes payable and other payables, approximate their fair values because
of the short maturity of these instruments.
Inventories
Inventories
of the Company are composed of fuel oil and diesel oil. Inventories are stated
at the lower of cost or net realizable value (market value). The cost is
determined on the basis of weighted average. Net realizable value is based on
estimated selling prices less any further costs expected to be incurred for
disposal.
Accounts
Receivable
Accounts
receivable include receivables from shippers and ship owners, net of a provision
for doubtful accounts. At each balance sheet date, all potentially uncollectible
accounts are assessed individually for purposes of determining the appropriate
provision for doubtful accounts. At December 31, 2009 and 2008, the Company had
no allowance for doubtful accounts.
Vessels
and Depreciation Policy
Vessels
are carried at cost less accumulated depreciation and impairment
losses. Vessels are stated as cost which consists of the contract
price of the directly purchased vessels or present value of minimum lease
payments for the vessels acquired by capital lease, and any direct expenditure
incurred upon acquisition for major improvements and delivery.
Depreciation
is computed using the straight-line method over the estimated useful life of the
vessels, after considering the estimated residual value. The residual
value ranges from 0.4% to 6% of the imputed original cost at the birth date of
each vessel. Management estimates the useful lives of the vessels to be 25 years
from the birth dates. As all the vessels were acquired second hand, the Company
specified the depreciation periods by deducting the periods used before purchase
from 25 years.
The costs
of significant replacements, renewals and improvements are capitalized and
depreciated over the shorter of the vessel’s remaining estimated useful life or
the estimated life of the renewal or improvement. Expenditures
for routine maintenance and repairs are expensed as incurred.
- 23
-
Fixed
Assets
Fixed
assets are carried at cost less accumulated depreciation and amortization.
Depreciation is provided over the fixed assets’ estimated useful lives, using
the straight-line method. Estimated useful lives are as follows:
Motor
vehicles
|
5
years
|
Office
equipment
|
5
years
|
The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and improvements are capitalized.
Dry
Dock Fees
Vessels
must undergo regular inspection, monitoring and maintenance, referred to as dry
docking, to maintain the required operating certificates. International Maritime
Organization (IMO) regulations generally require that vessels be dry docked
every five years. Because dry docking enables a vessel to continue operating in
compliance with IMO requirements, the costs of these scheduled dry dockings are
customarily capitalized and are then amortized over a 60-month period beginning
with the accounting period following the vessel’s release from dry
docking.
Impairment
of Long-Term Assets
Long-term
assets of the Company are reviewed annually to determine whether their carrying
value has become impaired, pursuant to the guidelines established in FASB
Codification 360-10-35-17 (Statement of Financial Accounting Standards (“SFAS”)
No. 144). The Company considers assets to be impaired if the carrying value
exceeds the future projected cash flows from the related operations. The
Company also re-evaluates the periods of amortization to determine whether
subsequent events and circumstances warrant revised estimates of an asset’s
useful life. There were no impairments for the years ended December 31, 2009 and
2008.
Revenue
Recognition
Revenue
is recognized based on the following four criteria:
(I)
|
That
the amount of revenue can be measured
reliably;
|
(II)
|
The
probability that the economic benefits will flow to the
Company;
|
(III)
|
Whether
the stage of completion at the balance sheet date can be measured
reliably;
|
(IV)
|
Whether the costs
incurred, or to be incurred can be measured
reliably.
|
For dry
bulk shipping service, the allocation of revenue between reporting periods is
based on relative transit time in each reporting period with expenses recognized
as incurred.
For
chartering brokerage services, sales are recognized when a ship leaves
port.
For
shipping agency and freight forwarding services, sales are recognized when a
ship leaves port.
For
online services, sales are recognized according to the stage of completion in
accordance with the service period defined in executed contracts.
Retirement
Benefits
Retirement
benefits in the form of contributions, under defined contribution retirement
plans to the relevant authorities are charged to operations as incurred.
Retirement benefits amounting to $125,372 and $115,070 were charged to
operations for the years ended December 31, 2009 and 2008,
respectively.
- 24
-
Income
Tax
Deferred
tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain.
Earnings
(Loss) Per Share
Basic
earnings (loss) per share are computed by dividing income (loss) available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings (loss) per share are computed in a similar
manner to basic earnings (loss) per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. The Company does not have any dilutive securities
for the years ended December 31, 2009 and 2008.
Foreign
Currency Translation
Assets
and liabilities of foreign subsidiaries are translated into United States
dollars at currency exchange rates in effect at period-end and revenues and
expenses are translated at average exchange rates in effect for the period.
Gains and losses resulting from foreign currency transactions are included in
results of operations. Gains and losses resulting from the translation of
foreign subsidiaries’ balance sheets are included as a separate component of
shareholders’ equity.
|
December 31, 2009
|
December 31, 2008
|
||||||
Period
end RMB: US$ exchange rate
|
6.8372
|
6.8542
|
||||||
Average
period RMB: US$ exchange rate
|
6.8457
|
7.0842
|
Comprehensive
Income (Loss)
Comprehensive
income (loss) is defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other disclosures,
all items that are required to be recognized under current accounting standards
as components of comprehensive income (loss) should be reported in a financial
statement that is presented with the same prominence as other financial
statements. The Company’s only current component of comprehensive income (loss)
is the foreign currency translation adjustment.
Reporting
Segments
Accounting
standards require public business enterprises to report information about each
of their operating business segments that exceed certain quantitative thresholds
or meet certain other reporting requirements. Operating business segments have
been defined as components of an enterprise for which separate financial
information is available and which financial information is evaluated regularly
by the chief operating decision maker in deciding how to allocate resources and
in assessing performance. The Company has determined that it has three
reportable segments: (1) Dry bulk shipping, (2) Chartering brokerage, and (3)
Other activities segment.
·
|
Dry Bulk Shipping Service – Our
dry bulk shipping service operates a fleet of thirteen vessels that
provides marine shipping services for dry and liquid bulk cargo shipping.
The segment contributed 50% and 68% of combined operating revenues for the
years ended December 31, 2009 and 2008,
respectively.
|
- 25
-
·
|
Chartering Brokerage Service –
Our chartering brokerage service provides ship chartering services for
unrelated shipping companies and shippers. The segment contributed 41% and
26% of the Company’s consolidated operating revenues for the years ended
December 31, 2009 and 2008,
respectively.
|
·
|
Other activities – Our other
activities segment is comprised of shipping agency and freight forwarding
services, and online services. Shipping agency and freight forwarding
services provide transportation and logistic services to shippers in the
PRC. Online services provide internet services for members. These
operating segments were not separately reported as they do not meet any of
the quantitative thresholds under ASC 280-10 (formerly SFAS No. 131,
Disclosures
about Segments of an Enterprise and Related Information). Other activities segment
contributed 9% and 6% of the Company’s consolidated operating revenues for
the years ended December 31, 2009 and 2008,
respectively.
|
Recent
Accounting Pronouncements
On July
1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162). ASC 105-10 establishes the FASB ASC as
the source of authoritative accounting principles recognized by the FASB to be
applied in preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America. The adoption of
this standard had no impact on the Company’s consolidated financial
statements.
Effective
January 1, 2009, the Company adopted ASC 805 (formerly SFAS No. 141 (R),
Business Combinations).
ASC 805 requires an acquirer to measure the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree at
their fair values on the acquisition date, with goodwill being the excess value
over the net identifiable assets acquired. The adoption of ASC 805 did not have
any effect on the Company’s consolidated financial statements as of December 31,
2009.
Effective
January 1, 2009, the Company adopted ASC 810-10 (formerly SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements). This Statement establishes accounting
and reporting standards that require (1) the ownership interests in
subsidiaries’ non-parent owners to be clearly presented in the equity section of
the balance sheet; (2) the amount of consolidated net income attributable to the
parent and to the noncontrolling interest be clearly identified and presented on
the face of the consolidated statement of income; (3) that changes in a parent’s
ownership interest while the parent retains its controlling financial interest
in its subsidiary be accounted for consistently; (4) that when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and the gain or loss on the
deconsolidation of the subsidiary be measured using the fair value of any
noncontrolling equity; and (5) that entities provide disclosures that clearly
identify the interests of the parent and the interests of the noncontrolling
owners. The adoption of ASC 810-10 did not have a significant effect on the
Company’s consolidated financial statements as of December 31,
2009.
Effective
January 1, 2009, the Company adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ), which amends SFAS No. 133 and
expands disclosures to include information about the fair value of derivatives,
related credit risks and a company's strategies and objectives for using
derivatives. The adoption of ASC 815-10 did not have a material effect on the
Company’s consolidated financial statements as of December 31,
2009.
Effective
January 1, 2009, the Company adopted ASC 815-40 (formerly Emerging Issues Task
Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
07-05”). ASC 815-40
addresses the determination of whether an instrument (or an embedded feature) is
indexed to an entity's own stock, which is the first part of the scope exception
in paragraph 11(a) of FASB SFAS No. 133 , Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”). If an instrument (or an
embedded feature) that has the characteristics of a derivative instrument under
paragraphs 6–9 of SFAS 133 is indexed to an entity's own stock, it is still
necessary to evaluate whether it is classified as stockholders' equity (or would
be classified as stockholders' equity if it were a freestanding instrument).
Other applicable authoritative accounting literature, including Issues EITF
00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company Own Stock, and EITF 05-2, The Meaning of “Conventional Debt
Instrument” in Issue No. 00-19, provide guidance for determining whether
an instrument (or an embedded feature) is classified as stockholders' equity (or
would be classified as stockholders' equity if it were a freestanding
instrument). ASC 815-40 does not address the second part of the scope exception
in paragraph 11(a) of SFAS 133. The adoption of ASC 815-40 did not have a
material effect on the consolidated financial statements as of December 31,
2009.
- 26
-
On
April 1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies),
which amends Statement 141(R) and eliminates the distinction between contractual
and non-contractual contingencies. Under ASC 805, an acquirer is required to
recognize at fair value an asset acquired or liability assumed in a business
combination that arises from a contingency if the acquisition-date fair value of
that asset or liability can be determined during the measurement period. If the
acquisition-date fair value cannot be determined, the acquirer applies the
recognition criteria in SFAS No. 5, Accounting for Contingencies
and Interpretation 14, “Reasonable Estimation of the Amount of a Loss – and
interpretation of FASB Statement No. 5,” to determine whether the
contingency should be recognized as of the acquisition date or after it. The
adoption of ASC 805 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt ASC 320-10 for our interim and annual reporting periods ending
after June 15, 2009. ASC 320-10 does not require disclosures for periods
presented for comparative purposes at initial adoption. ASC 320-10 requires
comparative disclosures only for periods ending after initial adoption. The
adoption of ASC 320-10 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by APB Opinion No. 28, Interim Financial Reporting .
We are required to adopt ASC 825-10 for our interim and annual reporting periods
ending after June 15, 2009. ASC 825-10 does not require disclosures for
periods presented for comparative purposes at initial adoption. ASC 825-10
requires comparative disclosures only for periods ending after initial adoption.
The adoption of ASC 825-10 did not have a material effect on the
consolidated financial statements as of December 31, 2009.
In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167) Amendments to FASB
Interpretation No. 46(R), which require an enterprise to perform an analysis and
ongoing reassessments to determine whether the enterprises’ variable interest or
interests give it a controlling financial interest in a variable interest entity
and amends certain guidance for determining whether an entity is a variable
interest entity. It also requires enhanced disclosures that will provide users
of financial statements with more transparent information about an enterprises’
involvement in a variable interest entity. ASC 810-10 is effective as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009 and for all interim reporting periods after that. The
adoption of ASC 810-10 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
- 27
-
Results
of Operations
Results
of Operations for the Years Ended December 31, 2009 Compared With the Year Ended
December 31, 2008 (in U.S. dollars, except otherwise as indicated)
|
For The Year Ended December 31,
|
|||||||||||||||||||||||
|
2009
|
2008
|
Increase (Decrease)
|
|||||||||||||||||||||
|
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
In Amount
|
In %
|
||||||||||||||||||
Revenues
|
50,178,721
|
100.0
|
%
|
84,206,001
|
100.0
|
%
|
(34,027,280
|
)
|
(40.4
|
)%
|
||||||||||||||
Vessel
operating costs
|
40,200,329
|
80.1
|
%
|
48,243,078
|
57.3
|
%
|
(8,042,749
|
)
|
(16.7
|
)%
|
||||||||||||||
Service
costs
|
3,423,667
|
6.8
|
%
|
5,151,894
|
6.1
|
%
|
(1,728,227
|
)
|
(33.5
|
)%
|
||||||||||||||
Depreciation
and amortization
|
7,481,360
|
14.9
|
%
|
7,035,338
|
8.4
|
%
|
446,022
|
6.3
|
%
|
|||||||||||||||
General
and administrative expense
|
4,106,919
|
8.2
|
%
|
3,647,435
|
4.3
|
%
|
459,484
|
12.6
|
%
|
|||||||||||||||
Selling
expense
|
343,289
|
0.7
|
%
|
-
|
0.0
|
%
|
343,289
|
100.0
|
%
|
|||||||||||||||
Interest
expense, net
|
627,836
|
1.3
|
%
|
817,202
|
1.0
|
%
|
(189,366
|
)
|
(23.2
|
)%
|
||||||||||||||
Other
expense, net
|
649,731
|
1.3
|
%
|
209,227
|
0.2
|
%
|
440,504
|
210.5
|
%
|
|||||||||||||||
Income
tax expense
|
(90,084
|
)
|
(0.2
|
)%
|
(17,827
|
)
|
0.0
|
%
|
(72,257
|
)
|
405.3
|
%
|
||||||||||||
Net
loss from discontinued operation
|
(214,461
|
)
|
(0.4
|
)%
|
(12,663
|
)
|
0.0
|
%
|
(201,798
|
)
|
1593.6
|
%
|
||||||||||||
Net
(loss) income
|
(6,958,955
|
)
|
(13.9
|
)%
|
19,071,337
|
22.6
|
%
|
(26,030,292
|
)
|
(136.5
|
)%
|
|||||||||||||
Weighted
average shares outstanding
|
||||||||||||||||||||||||
-
Basic
|
130,000,000
|
115,877,596
|
14,122,404
|
12.2
|
%
|
|||||||||||||||||||
-
Diluted
|
130,000,000
|
115,877,596
|
14,122,404
|
12.2
|
%
|
|||||||||||||||||||
Net
(loss) income per share
|
||||||||||||||||||||||||
-
Basic
|
(0.05
|
)
|
0.16
|
(0.21
|
)
|
(131.3
|
)%
|
|||||||||||||||||
-
Diluted
|
(0.05
|
)
|
0.16
|
(0.21
|
)
|
(131.3
|
)%
|
Revenues
Our
revenues are derived from the operation of:
·
|
Dry
bulk shipping
|
·
|
Chartering
brokerage
|
·
|
Other activities which represent
shipping agency services, freight forwarding services, and online
services.
|
Of the
total revenues, dry bulk shipping, chartering brokerage and other activities
contributed 50%, 41% and 9% for the year ended December 31, 2009, compared with
68%, 26% and 6% for the year ended December 31, 2008, respectively.
For the
year ended December 31, 2009, total revenues decreased by approximately $34.0
million, or 40.4%, to $50.2 million from $84.2 million for the year ended
December 31, 2008. This decrease consisted of a dry bulk shipping decline of
$32.5 million, or 56.6%; a chartering brokerage decline of $1.2 million, or
5.6%; and other activities decline of $0.2 million, or 5.1%.
The
significant decrease in revenue was due to the severity of the decline in the
global shipping market as the impact of the global financial crisis and the
economic recession has broadened and deepened since late 2008. The Baltic Dry
Index, a leading indicator of the global dry bulk shipping market, dropped
approximately 57% for the year ended December 31, 2009 as compared with the same
period of 2008.
Among
other activities, online services grew significantly. We believe this growth
reflected the management’s strategic decision to implement and market the
shipping online portal more aggressively at the beginning of 2009.
Vessel
Operating Costs
Vessel
operating costs include mainly fuel costs, port fees and crew wages which were
incurred in the operation of dry bulk shipping, and vessel chartering costs
which were incurred in the business of chartering brokerage. For the year ended
December 31, 2009, vessel operating expenses decreased by approximately $8.0
million, or 16.7%, to $40.2 million, compared with $48.2 million for the year
ended December 31, 2008. This decrease is principally attributable to the
4% decreased business volume, which resulted in the decrease in fuel and related
consumption. The change was also attributable to the 13% decrease in the fuel
rate.
- 28
-
Service
Costs
Service
costs were incurred in the operation of other activities in our freight
forwarding services. For the year ended December 31, 2009, service costs
decreased by approximately $1.7 million, or 33.5%, to $3.4 million, compared
with $5.2 million for the year ended December 31, 2008. This decrease was in
line with the decreased revenue generated from the operation of our freight
forwarding services.
Depreciation
and Amortization
Depreciation
of vessels and amortization of deferred dry dock fees increased by approximately
$0.4 million, or 6.3%, to $7.5 million for the year ended December 31, 2009,
compared with $7.0 million for the year ended December 31, 2008. Since one
vessel was dry docked earlier than its anticipated schedule, the remaining
unamortized dry dock fees for this vessel was expensed in 2009. This
caused the increased amortization of dry dock fees of
$474,603.
General
and Administrative Expenses
General
and administrative expenses, which included mainly wages and professional
service fees, increased by approximately $0.5 million, or 12.6%, to $4.1 million
for the year ended December 31, 2009 from $3.6 million for the year ended
December 31, 2008. This increase is mainly attributable to the general costs
incurred in connection with a vessel under major repair of
$1,002,006. In 2009, the vessel Winland Dalian had been under major
repair without operation and therefore not generating revenue.
Selling
Expenses
Selling
expenses were commissions paid to promote our dry bulk shipping and chartering
brokerage business, which reflected the management’s strategy of expanding the
business initiated at the beginning of 2009. For the year ended December 31,
2009, selling expenses were $0.3 million.
Interest
Expense, Net
Net
interest expense declined significantly by approximately $0.2 million, or 23.2%,
to $0.6 million for the year ended December 31, 2009, compared with
approximately $0.8 million for the year ended December 31, 2008. This decrease
is primarily attributable to an average interest rate decline of 1.07% on
long-term loans and decreased previous long-term loans principal balance
resulted from the payments of $3,140,991 made in 2009, offset by a new long-term
loan of $14,490,000 and note payable of $3,000,000 initiated from the new vessel
purchased in late 2009.
Other
Expense, Net
Other
expense increased by approximately $0.4 million, or 210.5%, to $0.6 million for
the year ended December 31, 2009, compared with $0.2 million for the year ended
December 31, 2008. This increase is mainly attributable to the settlement of a
litigated claim of $505,112.
Income
Tax Expense
Income
tax was imposed on the taxable income from other activities. For the year ended
December 31, 2009, income tax expense was approximately $0.09 million as
compared with $0.02 million for the year ended December 31, 2008. This
difference is mainly attributable to changes in deferred tax of $0.1
million.
Net
Loss from Discontinued Operation
Net loss
from discontinued operation was approximately $0.2 million for the year ended
December 31, 2009, compared with net loss from discontinued operation of $0.01
million for the year ended December 31, 2008. Due to the depressed shipping
market in 2009, the disposed vessel suffered a loss from its operation before
the operation was discontinued for the year ended December 31,
2009.
- 29
-
Net
(Loss) Income
Net
income decreased by approximately $26.0 million, or 136.5%, to a net loss of
$7.0 million for the year ended December 31, 2009 from a net income of $19.1
million for the year ended December 31, 2008. This decrease is primarily
attributable to the significant decline in revenues of $34.0 million, increased
depreciation and amortization expense of $0.4 million, increased selling expense
and other expenses of $0.3 million, partially offset by the cumulative effect of
other factors aforementioned.
As a
percentage of revenue, net (loss) income was (13.9%) and 22.6% for the year
ended December 31, 2009 and 2008, respectively. This change was a reflection of
the unprecedented macro-economic environment affecting the shipping market
negatively worldwide.
Net
(Loss) Income Per Share
For both
basic and diluted shares, net (loss) income per share decreased by $0.21, or
131.3%, to net loss of $(0.05) per share for the year ended December 31, 2009
from $0.16 per share for the year ended December 31, 2008. This decrease is
attributable to decreased net income of $26.0 million, offset by an increase of
14,122,404 shares in 2009.
Liquidity
and Capital Resources
Working
Capital
We
had a working capital deficit of approximately $10.1 million at December 31,
2009 as compared to working capital of approximately $1.7 million at December
31, 2008. This is principally attributable to decreased cash and cash
equivalents of $4.7 million resulting from cash used in investing activities of
$20.9 million to purchase a vessel, offset by cash provided by operating and
financing activities of $2.4 million and $12.6 million, respectively, for the
year ended December 31, 2009. The decreased working capital is secondly due to
the increased current portion of long-term loans and notes payable which
resulted from multiple financing activities for the year ended December 31,
2009.
In
compliance with International Maritime Organization (IMO) regulations, vessels
must undergo regular inspection, monitoring and maintenance, referred to as “dry
docking”, to maintain their required operating certificates. IMO regulations
generally require vessels to be dry docked every 60 months. Dry
docking requirements may be more or less stringent, depending on the
jurisdiction under which a vessel’s flag is registered. To improve
liquidity, the Company changed the registrations of the flags of two of its
vessels to a jurisdiction which requires less dry docking for vessels to
maintain their operating certificates and with lower dry docking
fees. With these new registrations, the dry docking fees of these two
vessels decreased by $1,770,528 in 2009. The Company believes dry
dock fees will continue to decrease while such vessels keep meeting the
standards of certification and inspection. To increase its cash resources, the
Company obtained a short-term bank loan of $1,170,070, a long-term loan of
$14,490,000 and a long-term note of $3,000,000 during the year ended December
31, 2009. The long-term debt was principally used to purchase a new vessel.
Additionally, on March 5, 2010, the Company obtained an extension of the due
date of two notes payable to related parties amounting to $2,961,739 to July 19,
2012. Also in 2010, the Company obtained commitments from certain shareholders
and related parties to provide working capital to the Company, if needed, in the
form of notes payable or personal loans. We believe our working capital
will increase and liquidity will be improved. We believe the Company has
sufficient cash to sustain operation for the next 12 months.
Operating
Activities
Net cash
provided by operating activities during the years ended December 31, 2009 and
2008 was $2,380,199 and $23,933,016, respectively, a decrease of $21,552,817 or
90.1%. This decrease in cash flow from operating activities was
mainly due to the decrease in revenue from $84,206,001 during the year
ended December 31, 2008 to $50,178,721 during the year ended December 31, 2009
which caused the decrease in net income of $12,112,382 to a net loss of
$6,958,955.
Investing
Activities
Net cash
used in investing activities for the year ended December 31, 2009 was $19.6
million. This was due to acquiring a new vessel at the cost of $20.9 million,
offset by the net cash proceeds of $1.3 million from disposition of a
vessel.
- 30
-
For the
year ended December 31, 2008, net cash used in investing activities was $0.09
million which was used to purchase fixed assets.
Financing
Activities
Net cash
provided by our financing activities was $12,583,783 for the year ended December
31, 2009 compared to cash used of $18,664,650 for 2008. The difference of
$31,248,233 was primarily due to proceeds from a long-term loan of $14,490,000
and a long-term note payable of $3,000,000, which contributed to our financing
of a vessel purchase, and a short-term loan of $1,170,070 to improve working
capital, offset by repayments to long-term loans and related parties of
$3,140,991 and $2,374,819, respectively.
To face
the challenges of a global financial crisis and a depressed shipping market, we
have taken effective initiatives to pursue profitability by pushing forward the
implementation of our online portal, which has resulted in sales increases on
the segment of online services. We have developed cost control strategies on
cutting vessel management costs as well as general management
costs. We have carried out our strategies to collect outstanding
balances while maintaining strong business relationships with our customers. We
also negotiate with our vendors to extend our credit term. To improve liquidity,
we changed the registrations of the flags of two vessels. With new
registrations, we believe dry dock fees will continue to decrease while such
vessels keep meeting the standards of certification and inspection.
Our
principal capital sources are cash flows from operations, bank loans, notes
payable, and personal loans. We believe that cash flow from our operations will
improve as business operations rebound and global economy showing signs of
recovery. We believe that existing cash and resources from our credit facilities
are sufficient to meet our projected operating requirements for the next
year.
Capital
Expenditures
We will
make major capital expenditures in connection with purchase of new vessels
and we will finance such capital expenditures through bank loans. We expect we
will incur capital expenditures on developing our shipping online portal and by
marketing our shipping online services. We expect other major capital
expenditures to include funding dry dockings of our fleet to preserve the
quality of our vessels as well as to comply with international shipping
standards and environmental laws and regulations in 2010. We will finance these
capital expenditures from the cash flows from our operations, notes payable and
personal loans, if needed.
Material
Commitments/Tabular Disclosure of Contractual Obligations
Payments Due by Period
|
||||||||||||||||||||
Total
|
Less
Than 1
Year
|
1-3
Years
|
3-5
Years
|
More Than 5
Years
|
||||||||||||||||
Long-term
loans obligations
|
$ | 19,488,443 | $ | 4,128,908 | $ | 5,150,642 | $ | 2,634,552 | $ | 7,574,341 | ||||||||||
Long-term
notes payable obligations
|
5,867,573 | 3,326,132 | 1,071,436 | 1,470,005 | - | |||||||||||||||
Non-cancelable
leases obligations
|
100,314 | 89,443 | 10,871 | - | - |
Off-Balance
Sheet Arrangements
None.
ITEM 8.
|
Financial Statements and
Supplementary Data
|
Reference
is made to the “F” pages herein comprising a portion of this Annual Report
on Form 10-K.
- 31
-
ITEM 9.
|
Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosures
|
None.
ITEM
9AT.
|
Controls and
Procedures
|
Evaluation
of Disclosure Controls and Procedures
We are
required to maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our reports under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
In
connection with the preparation of this Form 10-K for the year ended
December 31, 2009, our management, under the supervision of the Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of disclosure
controls and procedures. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control systems are met. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of December 31, 2009.
Management’s
Annual Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control
structure and procedures over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f)) under the Exchange Act. Our management
conducted an assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2009 based on the framework set forth in
Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our internal control over financial reporting as of December 31,
2009 were effective.
This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
ITEM 9B.
|
Other
Information
|
Effective
as of March 22, 2010, the Company changed its business address and telephone
number from 305 Zhongshan Road, Shahekou District, Dalian, The People’s Republic
of China 116021, telephone 86-411-39660000 to Room 703, 7/F, Bonham Trade
Centre, 50 Bonham Strand, Sheung Wan, Hong Kong, China, telephone number
00852-28549088.
- 32
-
PART
III
ITEM 10.
|
Directors, Executive Officers,
and Corporate Governance
|
Set forth
below are the names of WLOL’s directors and officers, their business experience
during the last 5 years, their ages and all positions and offices that they
shall hold with the Company as of the date of this Annual Report.
Name
|
|
Age
|
|
Position(s)
|
Xue
Ying
|
39
|
Chief
Executive Officer, Secretary and Director
|
||
Li
Honglin
|
45
|
Chairman
of the Board and President
|
||
Jing
Yan
|
42
|
Chief
Financial Officer
|
||
Xie
Xiaoyan
|
40
|
Chief
Operating Officer, Director
|
||
Xiao
Liwu
|
44
|
Independent
Director
|
||
Xie
Kewei
|
45
|
Independent
Director
|
||
Si
Zhaoqing
|
50
|
Independent
Director
|
||
Michelle
Sun
|
37
|
Independent
Director
|
Family
Relationships
There are
no family relationships by, between or among the members of the Board or other
executives, except that Li Honglin and Xue Ying are husband and wife. None of
our directors and officers are directors or executive officers of any company
that files reports with the SEC except as set forth in the “Biographies of
Officers and Directors” section below.
Term
of Office
Our
directors are appointed for a one-year term and each director shall hold office
until the annual meeting of shareholders following his/her election or until
his/her successor is elected and qualified. The Board of Directors shall elect
the officers of the Company at each annual meeting of the Board of Directors.
The Board of Directors may appoint such other officers and agents as it shall
deem necessary and shall determine the salaries of all officers and agents from
time to time. The officers shall hold office until their successors are chosen
and qualified.
Biographies
of Officers and Directors
Xue Ying. Ms. Xue has served
as Chief Executive Officer, Secretary and as a Director of WLOL effective as of
August 12, 2008. Ms. Xue also serves as a Director of SkyAce and as a Director
of Plentimillion. In April 1993, together with her husband, Li Honglin, Ms. Xue
founded Dalian Weihang Freight Forwarding Co., Ltd., a freight forwarding
company in Dalian, China which carried out the business of freight forwarding
agency and chartering and is the predecessor entity to the Company. Ms. Xue also
was in charge of the corporate administrative work for the Company. Ms. Xue
developed the Company for the next (10) years. Ms. Xue graduated from the law
department of Nanjing University majoring in business law in 1992 and she earned
her EMBA at China Europe International Business Administration College in
Shanghai in 2007.
Jing Yan. Ms. Jing has served
as Chief Financial Officer of WLOL effective as of August 12, 2008. Prior to
joining WLOL, Ms. Jing owned her own CPA firm since 2004. With her extensive
financial and accounting knowledge, along with comprehensive experience, Ms.
Jing had been distinguished as a trusted advisor to investors and executives on
financial, accounting and tax matters. Prior to 2004, Ms Jing worked
for Han's Technologies, Inc. and ISP Channel (n/k/a Softnet Technology
Corp. (SOFN.OB)). In this sector, she has played an important role in raising
funds, exercising management decision-making, and practicing accounting system
implementation. Ms. Jing holds a MBA degree in accounting from California State
University and a BA degree in management from Shanghai Maritime University in
China. Ms. Jing is also an active Certified Public Accountant.
- 33
-
Li Honglin. Mr. Li has served
as President and a Director of WLOL effective as of August 12, 2008. Mr. Li also
serves as Chairman of the Board of SkyAce. Mr. Li began his career working with
the Dandong Ocean Shipping Company in Liaoning province, China. After five (5)
years working with Dandong, Mr. Li established Dalian Weihang Freight Forwarding
Co., Ltd. In 1993, a freight forwarding agency company in Dalian, China and the
predecessor entity to the Company. Mr. Li founded the Company with his wife, Xue
Ying, and in 1995, the Company purchased its first vessel. After ten (10) years
of development, Mr. Li has expanded the Company into several fields of the
international marine shipping business, from freight forwarding agency, shipping
agency, ship chartering, ship management to bulk cargo ocean transport,
container liner transport and shipping portal operation. Mr. Li Honglin has
expertise in strategy management and in the operation of ocean transport
companies. At the same time, he has a forward-looking insight into the
development trend of the international ocean transport market and has an
abundant ability of dealing with the risk. Mr. Li is a graduate of the Shanghai
Ocean Shipping Institute (now known as the Shanghai Maritime
University).
Xie Xiaoyan. Ms. Xie has
served as a Director of WLOL effective as of August 12, 2008 and as Chief
Operating Officer of WLOL since September 26, 2008. In 1993, she joined the
Company as a secretary. After that, she used to serve as a cashier and operation
administrator. In 2000, she began to take charge of the operation and management
of the fleet. Moreover, she also has a deep understanding and grasp of the
international shipping market. She used to participate in the core work such as
a series of ship-purchase and sales, exploration of the new market and new
business and so on, and has built up a long-term steady cooperation relationship
with prime clients and related companies in the industry. She is one of founders
of the Company. Ms. Xie graduated from Jinzhou Normal College with a major in
foreign languages in 1991.
Xiao Liwu. Mr. Xiao has served
as a Director of WLOL effective as of August 12, 2008. Mr. Xiao currently serves
as President for Ningbo Penavico-ccl International Freight Forwarding Co. Ltd.
in Ningbo, China and has served in such capacity for the past five (5) years.
Xiao entered the logistics industry after graduating from Shanghai Maritime
University in 1988. Mr. Xiao is considered a professional in the field of
logistics.
Xie Kewei. Mr. Xie has served
as a Director of WLOL effective as of August 12, 2008. Mr. Xie currently serves
as Managing Director for China Container Line Co. Ltd. Shanghai Company and has
served in such capacity since January 2002. Mr. Xie has devoting himself to the
container transportation service for more than ten (10) years. He is also
considered a professional in shipping industry. Mr. Xie earned his bachelor’s
degree from Shanghai Maritime University at 1988.
Si Zhaoqing. Mr. Si has served
as a Director of WLOL effective as of August 12, 2008. Mr. Si currently serves
as President of the China CITIC Bank branch in Jinzhou, Dalian and has served in
such capacity since January 2008. Prior to that, Mr. Si served as Vice President
of the Qingni branch of China CITIC Bank for five (5) years, during which Mr. Si
was in charge of both the credit department and the accounting department. Mr.
Si is an expert in financing and economic field and he is also a respected
advisor. Mr. Si earned his bachelor’s degree from Dalian Fisheries University in
1982.
Michelle Sun. Ms. Sun has
served as a Director of WLOL effective as of August 12, 2008. Ms. Sun currently
serves for Harrison Accounting Group, Inc. in California since 2000. Ms. Sun has
extensive experience from a variety of client assignments, including those in
manufacturing, real estate, construction, retail, transportation, medical and
nonprofit industries. Ms. Sun has nearly 10 years of experience in the
accounting field and is also a Certified Public Accountant in the State of
California.
Director
Qualifications and Experience
The
following table identifies some of the experience, qualifications, attributes
and skills that the Board considered in making its decision to appoint and
nominate directors to our Board. This information supplements the biographical
information provided above. The vertical axis displays the primary factors
reviewed by the Board in evaluating a board candidate.
- 34
-
|
Ms. Xue
|
Ms. Jing
|
Mr. Li
|
Ms. Xie
|
Mr. Xiao
|
Mr. Xie
|
Mr. Si
|
Ms. Sun
|
|||||||
Experience,
Qualification, Skill or Attribute
|
x
|
x
|
x
|
x
|
x
|
x
|
x
|
x
|
|||||||
Professional
standing in chosen field
|
|||||||||||||||
Expertise
in shipping or related industry
|
x
|
x
|
x
|
x
|
x
|
x
|
|||||||||
Expertise
in technology or related industry
|
|||||||||||||||
Audit
Committee Financial Expert (actual or potential)
|
x
|
x
|
x
|
x
|
|||||||||||
Civic
and community involvement
|
|||||||||||||||
Other
public company experience
|
x
|
||||||||||||||
Diversity
by race, gender or culture
|
|||||||||||||||
Specific
skills/knowledge:
|
|||||||||||||||
-shipping
|
x
|
x
|
x
|
x
|
x
|
x
|
|||||||||
-technology
|
|||||||||||||||
-governance
|
x
|
x
|
x
|
Legal
Proceedings
None of
the members of the Board or other executives has been involved in any bankruptcy
proceedings, criminal proceedings, any proceeding involving any possibility of
enjoining or suspending members of our Board or other executives from engaging
in any business, securities or banking activities, and have not been found to
have violated, nor been accused of having violated, any federal or state
securities or commodities laws.
Compliance
with Section 16(A) of the Exchange Act
We are
not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
and therefore, our officers, directors and greater than ten percent (10%)
stockholders are not required under Section 16(a) of the Exchange Act to file
reports of ownership and changes in ownership with the SEC.
Board
Leadership Structure, Executive Sessions of Non-Management
Directors
Ms. Xue
currently serves as the chief executive officer of the Company and Mr. Li
serves as Chairman of the Board. The Board has chosen to separate the chief
executive officer and Board chair positions because it believes it is
appropriate in light of our corporate structure and this structure benefits the
interests of all share owners.
The
Company’s non-management directors meet without management present at each of
the Board’s regularly scheduled in-person meetings. If the Board convenes for a
special meeting, the non-management directors will meet in executive session if
circumstances warrant.
Risk
Oversight
The Board
oversees the business of the Company and considers the risks associated with the
Company’s business strategy and decisions. The Board implements its risk
oversight function both as a whole and through its Committees. In
particular:
·
|
The Audit Committee oversees
risks related to the Company’s financial statements, the financial
reporting process, accounting and legal matters. The Audit Committee meets
in executive session with each of the Company’s Chief Financial Officer,
Vice President of Internal Audit and with representatives of our
independent registered public accounting
firm.
|
·
|
The Compensation Committee
manages risks related to the Company’s compensation philosophy and
programs. The Compensation Committee reviews and approves compensation
programs and engages the services of compensation consultants to ensure
that it adopts appropriate levels of compensation commensurate with
industry standards.
|
·
|
The Governance and Nominating
Committee oversees risks related to corporate governance and the selection
of Board nominees.
|
- 35
-
Each
of the Committee Chairs reports to the full Board regarding materials risks as
deemed appropriate.
Committees
of our Board of Directors
As of
January 19, 2009, our Board of Directors has an Audit Committee, a Compensation
Committee and a Corporate Governance and Nominating Committee established in
accordance with the Exchange Act and NASDAQ rules. Since January 15,
2009, the Audit Committee met 3 times, the Compensation Committee met 1 time and
the Corporate Governance and Nominating Committee met 1 time. A brief
description of each committee is set forth below.
·
|
Audit
Committee – The
purpose of the Audit Committee is to provide assistance to our Board of
Directors in fulfilling their oversight responsibilities relating to our
consolidated financial statements and financial reporting process and
internal controls in consultation with our independent registered public
accountants and internal auditors. The Audit Committee is also responsible
for ensuring that the independent registered public accountants submit a
formal written statement to us regarding relationships and services which
may affect the auditor’s objectivity and independence. The Board
appointed Si Zhaoqing, Michelle Sun and Xiao Liwu to serve as members of
the Audit Committee, with Si Zhaoqing serving as Chairman, on January 19,
2009. Our Audit Committee financial expert is Michelle Sun, an
independent director.
|
·
|
Compensation
Committee – The
purpose of the Compensation Committee is to review and make
recommendations to our Board of Directors regarding all forms of
compensation to be provided to our executive officers and directors,
including stock compensation and loans, and all bonus and stock
compensation to all employees. As of January 15, 2009, Xie Kewei, Xiao
Liwu and Si Zhaoqing serve as members of the Compensation Committee, with
Xie Kewei serving as
Chairman.
|
·
|
Corporate
Governance and Nominating Committee – The purpose of the
Nominating Committee is to review the composition and evaluate the
performance of the Board, recommend persons for election to the Board and
evaluate director compensation. The Nominating Committee is
also responsible for reviewing the composition of committees of the Board
and recommending persons to be members of such committees, and maintaining
compliance of committee membership with applicable regulatory
requirements. The Nominating Committee does not have a formal
diversity policy. Although the Board does not currently have
formal specific minimum criteria for nominees, substantial relevant and
diverse business and industry experience would generally be considered
important qualifying criteria, as would the ability to attend and prepare
for Board and shareholder meetings. We have not adopted
procedures by which security holders may recommend nominees to our Board
of Directors. As of January 15, 2009, Xiao Liwu, Xie Kewei and Si
Zhaoqing serve as members of the Corporate Governance and Nominating
Committee, with Xiao Liwu serving as
Chairman.
|
ITEM 11.
|
Executive
Compensation
|
Summary
Compensation Table
The
following table sets forth compensation information for services rendered by our
named executive officers during the last 2 completed fiscal years. The
compensation listed below which will be paid to our current officers will be
paid by SkyAce. The following information includes the U.S. dollar value of base
salaries, bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
- 36
-
Summary Compensation
Table
Name And
Principal Function
(a)
|
Year
(b)
|
Salary
(US$)
(c)
|
Bonus
(US$)
(d)
|
Stock
Awards
(US$)
(e)
|
Option
Awards
(US$)
(f)
|
Non-
Equity
Incentive
Plan
Compen-
sation
(US$)
(g)
|
Non-
qualified
Deferred
Compen-
sation
Earnings
(US$)
(h)
|
All Other
Compensation
(US$)
(i)
|
Total
(US$)
(j)
|
|||||||||||||||||||||||||||
Xue
Ying, Chief
Executive
Officer
and
Secretary
|
2009
2008
|
150,000
150,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
150,000
150,000
|
|||||||||||||||||||||||||||
Li
Honglin, President
|
2009
2008
|
150,000
150,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
150,000
150,000
|
|||||||||||||||||||||||||||
Jing
Yan, Chief
Financial
Officer
|
2009
2008
|
120,000
120,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
120,000
120,000
|
|||||||||||||||||||||||||||
Xie
Xiaoyan, Chief
Operating
Officer
|
2009
2008
|
80,000
80,000
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
-0-
-0-
|
80,000
80,000
|
As of
December 31, 2009, we did not have any “Grants of Plan-Based Awards”,
“Outstanding Equity Awards”, “Option Exercises and Stock Vested”, “Pension
Benefits”, “Nonqualified Defined Contribution and Other Nonqualified Deferred
Compensation Plans”, or “Potential Payments Upon Termination or Change in
Control” to report.
Executive
Compensation – Narrative Disclosure
The
Company did not provide compensation to executive officers other than the
standard compensation arrangement set forth in the table above.
Director
Compensation
We did
not provide any compensation to our Directors during the fiscal year ended
December 31, 2009. We may establish certain compensation plans (e.g. options,
cash for attending meetings, etc.) with respect to Directors in the
future.
Additional
Narrative Disclosure
Employment
Agreements
There are
currently no employment agreements by and between WLOL and its officers,
directors or employees.
Benefit
Plans
During
the fiscal year ended December 31, 2009, we had no stock option, retirement,
pension or profit-sharing programs for the benefit of its directors, officers or
other employees, however our Board may recommend adoption of one or more such
programs in the future.
In
accordance with Chinese law, DWIS, DWIL and DWON offer a welfare program
pursuant to which it pays pension, accident, medical, birth, job and house
allowance payments for all contract employees of the Company and its
affiliates.
- 37
-
ITEM 12.
|
Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
|
The
following table sets forth each person known by us to be the beneficial owner of
five percent (5%) or more of our common stock, all directors individually and
all directors and officers as a group as of March 22, 2010. Each person named
below has sole voting and investment power with respect to the shares shown
unless otherwise indicated.
Name and Address of Beneficial
Owner(1)
|
|
Amount of
Direct
Ownership
|
|
Amount of
Indirect
Ownership
|
|
Total
Beneficial
Ownership
|
|
Percentage
of Class(2)
|
|
|
Li
Honglin, Chairman of the Board and President
|
0
|
106,925,000
|
(3)
|
106,925,000
|
(3)
|
82.25
|
%
|
|||
Xue
Ying, Chief Executive Officer, Secretary and Director
|
0
|
106,925,000
|
(4)
|
106,925,000
|
(4)
|
82.25
|
%
|
|||
Jing
Yan, Chief Financial Officer
|
0
|
0
|
0
|
0
|
%
|
|||||
Xie
Xiaoyan, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Xiao
Liwu, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Xie
Kewei, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Si
Zhaoqing, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
Michelle
Sun, Director
|
0
|
0
|
0
|
0
|
%
|
|||||
ALL
DIRECTORS AND OFFICERS AS A GROUP (8 PERSONS):
|
0
|
106,925,000
|
106,925,000
|
82.25
|
%
|
|||||
Pioneer
Creation Holdings Limited
2nd
Floor, Abbott Building
Road
Town
Tortola
British Virgin Islands
|
106,925,000
|
106,925,000
|
82.25
|
%
|
(1)
|
Unless otherwise noted, each
beneficial owner has the same address as
WLOL.
|
(2)
|
Applicable percentage of
ownership is based on 130,000,000 shares of our common stock outstanding
as of March 22, 2010, together with securities exercisable or convertible
into shares of common stock within sixty (60) days of March 22, 2010 for
each stockholder. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power
with respect to securities. Shares of common stock are deemed to be
beneficially owned by the person holding such securities for the purpose
of computing the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person. Note that affiliates are subject to Rule
144 and Insider trading regulations - percentage computation is for form
purposes only.
|
(3)
|
Li Honglin may be considered to
beneficially own 53,462,500 shares by virtue of his 50% ownership in
Pioneer Creation Holdings Limited and 53,462,500 shares by virtue of his
spouse’s (Xue Ying’s) 50% ownership in Pioneer Creation Holdings Limited,
which beneficially owns 106,925,000 shares of our common
stock.
|
(4)
|
Xue Ying may be considered to
beneficially own 53,462,500 shares by virtue of her 50% ownership in
Pioneer Creation Holdings Limited and 53,462,500 shares by virtue of her
spouse’s (Li Honglin’s) 50% ownership in Pioneer Creation Holdings
Limited, which owns 106,925,000 shares of our common
stock.
|
ITEM 13.
|
Certain Relationships and Related
Transactions, and Director
Independence
|
Related
Party Transactions
The
Company provided shipping agency and freight forwarding services to Winland
Container Lines Ltd., a company controlled by the Chairman and CEO of the
Company. For the years ended December 31, 2009 and 2008, the Company
recognized service revenue of $1,361,558, and $1,624,860, respectively. For the
years ended December 31, 2009 and 2008, the Company paid $3,586,440 and
$2,299,713 of expenses to related ports and received $4,609,946 and $4,155,446
of payments from related ports on behalf of Winland Container Lines Ltd. The
outstanding balance at December 31, 2009 was interest-free, unsecured and has
been subsequently settled.
- 38
-
The
Company paid $27,746,305 and $1,366,667 of expenses on behalf of Dalian Winland
Group Co., Ltd., a company controlled by the Chairman and CEO of the Company,
for the years ended December 31, 2009 and 2008, respectively. The
Company collected $27,112,627 and $40,281,647 on behalf of Dalian Winland Group
Co., Ltd. for the years ended December 31, 2009 and 2008, respectively. For the
years ended December 31, 2009 and 2008, the Company recognized interest expense
of $90,680 and $90,455, respectively. The outstanding receivable
balance of $16,113 at December 31, 2009 is interest-free, unsecured and has no
fixed repayment term.
Dalian
Winland Shipping Co., Ltd., a company controlled by the Chairman and Chief CEO
of the Company, operates as a vessel management company for the Company. The
vessel management fee for the two vessels was $30,000 and $36,000 for the years
ended December 31, 2009 and 2008, respectively. The Company recognized relevant
service revenue of $0 and $146,757 for the years ended December 31, 2009 and
2008, respectively. For the years ended December 31, 2009 and 2008, on behalf of
Dalian Winland Shipping Co., Ltd., the Company paid $195,407 and $7,015,600, and
received $1,274,413 and $3,663,903, respectively. The Company recognized
interest expense of $57,407 and $138,003 for the years ended December 31, 2009
and 2008, respectively. The Company disposed of vessel Haoyue to Dalian Winland
Shipping Co., Ltd.for $1,287,077.
Dalian
Master Well Ship Management Co., Ltd., a company controlled by the Chairman and
CEO of the Company, operates as a vessel management company for the Company. The
vessel management fees for the years ended December 31, 2009 and 2008 was
$229,800 and $259,200, respectively. The Company paid $341,763 and $751,901 on
behalf of Dalian Master Well Ship Management Co., Ltd. for the years ended
December 31, 2009 and 2008, respectively. The Company collected $70,548 and
$83,468 on behalf of Dalian Master Well Ship Management Co., Ltd. for the years
ended December 31, 2009 and 2008, respectively. The outstanding balance of
$7,200 at December 31, 2009 is interest-free, unsecured, and have no fixed
repayment term.
Winland
Shipping Japan Co., Ltd. is controlled by the Chairman and Chief Executive
Officer of the Company. The Company recognized relevant agency service fees of
$685,079 and $67,546 for the years ended December 31, 2009 and 2008,
respectively. The Company paid $743,846 and $0 on behalf of Winland Shipping
Japan Co., Ltd. for the years ended December 31, 2009 and 2008, respectively.
The outstanding balance of $13,707 at December 31, 2009 is interest-free,
unsecured and has no fixed repayment term.
The
Company believes that each of the related party transactions set forth above to
be fair and reasonable and made at arms length with such related party. The
Company’s Audit Committee, which is comprised of solely independent directors,
has also ratified each of these related party transactions after careful review
and analysis.
Policies
and Procedures for Related-Party Transactions
As is
more fully summarized in the Company’s Code of Ethics as referenced as Exhibit
14.1 herein, all employees, executives and directors of the Company must fully
disclose the nature of any related party transaction to the Company’s Chief
Financial Officer. If determined to be material to the Company by the
Chief Financial Officer, the Company’s Audit Committee must review and approve
in writing in advance such related party transactions. The most
significant related party transactions, particularly those involving the
Company’s directors or executive officers, must be reviewed and approved in
writing in advance by the Company’s Board of Directors. The Company
must report all such material related party transactions under applicable
accounting rules, federal securities laws, and SEC rules and regulations, and
securities market rules. Any dealings with a related party must be
conducted in such a way that no preferential treatment is given to the Company’s
business.
Promoters
None.
Director
Independence
The
following directors are independent: Xiao Liwu, Xie Kewei, Si Zhaoqing and
Michelle Sun.
The
following directors are not independent: Li Honglin, Xue Ying and Xie
Xiaoyan.
Promoters
and Certain Control Persons
None.
- 39
-
ITEM 14.
|
Principal Accountant Fees and
Services
|
The firm
of Weinberg & Company, P.A. acts as our principal accountant and has acted
in such capacity since October 28, 2008. The following is a summary of fees
incurred for services rendered.
2009
|
2008
|
|||||||
Audit
fees
|
$
|
295,000
|
$
|
460,146
|
||||
Audit
related fees
|
-
|
-
|
||||||
Tax
fees
|
3,000
|
-
|
||||||
Other
fees
|
-
|
-
|
||||||
Total
|
$
|
298,000
|
$
|
460,146
|
Audit
Committee Pre-Approval
The
policy of the Audit Committee is to pre-approve all audit and non-audit services
provided by the independent accountants. These services may include audit
services, audit-related services, tax fees, and other services. Pre-approval is
generally provided for up to one year and any pre-approval is detailed as to the
particular service or category of services. The Audit Committee has delegated
pre-approval authority to certain committee members when expedition of services
is necessary. The independent accountants and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent accountants in accordance with this pre-approval
delegation, and the fees for the services performed to date. All of the services
described above in this Item 14 were approved in advance by the Audit Committee
of the Board of Directors during the fiscal year ended December 31,
2009.
PART
IV
ITEM 15.
|
Exhibits and Financial Statement
Schedules
|
(a)
|
Financial
Statements and Schedules
|
The
financial statements are set forth under Item 8 of this Annual Report.
Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.
(b)
|
Exhibits
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
LOCATION
|
2.1
|
Share
Exchange Agreement, dated August 12, 2008, by and among Trip Tech, Inc.,
SkyAce Group Limited and Pioneer Creation Holdings Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.1
|
Articles
of Incorporation of Trip Tech, Inc.
|
Incorporated
by reference to Exhibit 3.1 to the Company’s Registration Statement on
Form SB-2 as filed with the SEC on May 14, 2007
|
||
3.2
|
Amended
and Restated Bylaws of Trip Tech, Inc. dated as of August 27,
2008
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on September 29, 2008
|
||
3.3
|
Memorandum
and Articles of Association of SkyAce Group
Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
- 40
-
3.4
|
Certificate
of Incorporation of SkyAce Group Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.5
|
Memorandum
and Articles of Association of Plentimillion Group Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.6
|
Certificate
of Incorporation of Plentimilllion Group Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.7
|
Memorandum
and Articles of Association of Best Summit Enterprises
Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.8
|
Certificate
of Incorporation of Best Summit Enterprises Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.9
|
Memorandum
and Articles of Association of Wallis Development Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.10
|
Certificate
of Incorporation of Wallis Development Limited
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.11
|
Articles
of Association of Beijing Huate Xingye Keji Co. Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.12
|
Certificate
of Incorporation of Beijing Huate Xingye Keji Co. Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.13
|
Certificate
of Correction to Trip Tech’s Articles of Incorporation, dated August 11,
2008
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
3.14
|
Certificate
of Amendment to Certificate of Incorporation of the Company, dated
September 24, 2008
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on September 29, 2008
|
||
3.15
|
Certificate
of Corporate Resolutions Designating Series A Preferred Stock of the
Company, dated August 12, 2008
|
Incorporated
by reference to Exhibit 3.15 to the Company’s Annual Report on Form 10-K
as filed with the SEC on March 31, 2009
|
||
10.1
|
Exclusive
Technology Consultation Service Agreement, dated March 31, 2008, by and
among Beijing Huate Xingye Keji Co. Ltd. and Winland
International
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12,
2008
|
- 41
-
10.2
|
Exclusive
Technology Consultation Service Agreement, dated March 31, 2008, by and
among Beijing Huate Xingye Keji Co. Ltd. and Winland
Logistics
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.3
|
Exclusive
Technology Consultation Service Agreement, dated March 31, 2008, by and
among Beijing Huate Xingye Keji Co. Ltd. and Shipping
Online
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.4
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Winland International Shipping Agency
Co., Ltd. and Dalian Winland Group Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.5
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Winland International Shipping Agency
Co., Ltd. and Dalian Weihang Logistic Agent Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.6
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Winland International Shipping Agency
Co., Ltd. and Dalian Winland Shipping Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.7
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and between
Wallis Development Limited, Dalian Winland International Logistic Co.,
Ltd. and Dalian Winland Group Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.8
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and between
Wallis Development Limited, Dalian Winland International Logistic Co.,
Ltd. and Dalian Winland Shipping Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.9
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and between
Wallis Development Limited, Dalian Winland International Logistic Co.,
Ltd. and Dalian Winland International Shipping Agency Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.10
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and
Li Honglin
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.11
|
Exclusive
Equity Interest Purchase Agreement, dated March 31, 2008, by and among
Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and
Xue Ying
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
- 42
-
10.12
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.13
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland Shipping Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.14
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Weihang Logistic Agent Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.15
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland International Logistic Co.,
Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.16
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.17
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Winland Shipping Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.18
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Li Honglin
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.19
|
Equity
Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
Huate Xingye Keji Co. Ltd. and Xue Ying
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.20
|
Powers
of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co.,
Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Weihang Logistic Agent
Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd. For Dalian
Winland International Shipping Agency Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.21
|
Powers
of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co.,
Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Winland International
Shipping Agency Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd.
for Dalian Winland International Logistic Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.22
|
Powers
of Attorney, dated March 31, 2008, executed by Li Honglin and Xue Ying in
favor of Beijing Huate Xingye Keji Co. Ltd. and Dalian Shipping Online
Network Co., Ltd.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the
SEC on August 12, 2008
|
||
10.23
|
Memorandum
of Agreement, dated June 3, 2009, by and between Mario Shipping
Corporation and Winland Shipping Co. Ltd.
|
Incorporated
by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13,
2009
|
- 43
-
10.24
|
Addendum No.
1 to Memorandum of Agreement dated June 4, 2009 (Bao
Shun)
|
Incorporated
by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.25
|
Addendum
No. 2 to Memorandum of Agreement dated July 14, 2009 (Bao
Shun)
|
Incorporated
by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.26
|
Loan
Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)
|
Incorporated
by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.27
|
Amendment
to Loan Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)
|
Incorporated
by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.28
|
First
Preferred Panamanian Ship Mortgage
|
Incorporated
by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
10.29
|
Deed
of Guarantee
|
Incorporated
by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form
10-Q as filed wit hthe SEC on November 13, 2009
|
||
14.1
|
Code
of Ethics
|
Incorporated
by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB
as filed with the SEC on March 28, 2008
|
||
21
|
List
of Subsidiaries
|
Provided
herewith
|
||
31.1
|
Certifications
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
Provided
herewith
|
||
31.2
|
Certifications
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
Provided
herewith
|
||
32.1
|
Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
the Sarbanes-Oxley Act Of 2002
|
Provided
herewith
|
||
32.2
|
Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
the Sarbanes-Oxley Act Of 2002
|
Provided
herewith
|
||
99.1
|
Audit
Committee Charter, dated January 15, 2009
|
Incorporated
by reference Exhibit 99.1 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 20, 2009
|
||
99.2
|
Compensation
Committee Charter, dated January 15, 2009
|
Incorporated
by reference Exhibit 99.2 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 20, 2009
|
||
99.3
|
Corporate
Governance and Nominating Committee Charter, dated January 15,
2009
|
Incorporated
by reference Exhibit 99.3 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 20,
2009
|
- 44
-
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Annual Report to be signed on our behalf by the
undersigned, thereunto duly authorized.
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
|
||
Date:
July 8, 2010
|
||
By:
|
/s/ Xue
Ying
|
|
Name:
Xue Ying
|
||
Titles:
Chief Executive Officer, Principal Executive Officer, Secretary
and
Director
|
||
/s/ Jing
Yan
|
||
Name:
Jing Yan
|
||
Titles:
Chief Financial Officer and Principal Accounting
Officer
|
In
accordance with the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the dates indicated.
Signatures
|
Title
|
Date
|
||
Chief
Executive Officer,
|
||||
/s/
Xue Ying
|
Principal
Executive Officer,
|
|||
Name:
Xue Ying
|
Secretary
and Director
|
July
8, 2010
|
||
/s/
Li Honglin
|
Chairman
of the Board and
|
|||
Name:
Li Hongling
|
President
|
July
8, 2010
|
||
Chief
Financial Officer and
|
||||
/s/
Jing Yan
|
Principal
Financial and
|
|||
Name:
Jing Yan
|
Accounting
Officer
|
July
8, 2010
|
||
/s/
Xie Xiaoyan
|
||||
Name:
Xie Xiaoyan
|
Director
|
July
8, 2010
|
||
/s/
Xiao Liwu
|
||||
Name:
Xiao Liwu
|
Director
|
July
8, 2010
|
||
/s/
Xie Kewei
|
||||
Name:
Xie Kewei
|
Director
|
July
8, 2010
|
||
/s/
Si Zhaoqing
|
||||
Name:
Si Zhaoqing
|
Director
|
July
8, 2010
|
||
/s/
Michelle Sun
|
||||
Name:
Michelle Sun
|
Director
|
July
8,
2010
|
- 45
-
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
FINANCIAL
STATEMENTS
TABLE
OF CONTENTS
Page
|
||
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
|
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008
|
F-3
|
|
CONSOLIDATED
STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME FOR THE YEARS
ENDED DECEMBER 31, 2009 AND 2008
|
F-5
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
|
F-7
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
|
F-8
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009
AND 2008
|
F-10
|
F-1
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of:
Winland
Online Shipping Holdings Corp. and Subsidiaries
We have
audited the accompanying consolidated balance sheets of Winland Online Shipping
Holdings Corp. and subsidiaries (the “Company”) as of December 31, 2009 and
2008, and the related consolidated statements of (loss) income and comprehensive
(loss) income, changes in shareholders’ equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
was not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Winland Online
Shipping Holdings Corp. and subsidiaries as of December 31, 2009 and 2008 and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/
Weinberg & Company, P.A.
Boca
Raton, Florida
March 12,
2010
F-2
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
ASSETS
December 31, 2009
|
December 31, 2008
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$
|
3,530,724
|
$
|
8,233,588
|
||||
Accounts
receivable
|
1,881,584
|
1,719,599
|
||||||
Inventories
|
1,839,146
|
2,560,644
|
||||||
Prepayments
|
688,117
|
763,931
|
||||||
Other
receivables and other assets
|
683,010
|
56,902
|
||||||
Deferred
tax assets
|
1,538
|
5,427
|
||||||
Due
from related parties
|
1,113,643
|
760,256
|
||||||
Other
assets of discontinued operation
|
-
|
2,305
|
||||||
Total
current assets
|
9,737,762
|
14,102,652
|
||||||
Vessels,
net
|
42,597,403
|
25,087,795
|
||||||
Fixed
assets, net
|
151,041
|
236,194
|
||||||
Deferred
dry dock fees, net
|
9,311,647
|
11,034,686
|
||||||
Other
intangible assets
|
3,657
|
3,647
|
||||||
Long-term
assets of discontinued operation
|
-
|
1,324,112
|
||||||
Total
long-term assets
|
52,063,748
|
37,686,434
|
||||||
TOTAL
ASSETS
|
$
|
61,801,510
|
$
|
51,789,086
|
See
accompanying notes to consolidated financial statements.
F-3
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
LIABILITIES AND
SHAREHOLDERS’ EQUITY
December 31, 2009
|
December 31, 2008
|
|||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$
|
6,893,862
|
$
|
5,026,648
|
||||
Short-term
bank loan
|
1,170,070
|
-
|
||||||
Current
portion of long-term loans
|
4,128,908
|
2,811,672
|
||||||
Current
portion of long-term notes payable, net of discount of $693,012 and
$13,345 at December 31, 2009 and 2008, respectively
|
3,326,132
|
273,469
|
||||||
Advances
from customers
|
793,334
|
629,594
|
||||||
Payroll
payable
|
903,964
|
969,351
|
||||||
Due
to related parties
|
20,907
|
768,586
|
||||||
Taxes
payable
|
51,250
|
9,707
|
||||||
Deferred
revenue
|
159,688
|
97,506
|
||||||
Other
current liabilities and accrued liabilities
|
2,375,613
|
1,713,371
|
||||||
Other
liabilities of discontinued operation
|
-
|
125,479
|
||||||
Total
current liabilities
|
19,823,728
|
12,425,383
|
||||||
LONG-TERM
LIABILITIES
|
||||||||
Long-term
loans
|
15,359,535
|
5,327,762
|
||||||
Long-term
notes payable, net of discount of $1,407,170 and $0 at December 31, 2009
and 2008, respectively
|
2,541,441
|
2,954,393
|
||||||
Deferred
tax liabilities
|
1,150
|
5,231
|
||||||
Total
long-term liabilities
|
17,902,126
|
8,287,386
|
||||||
TOTAL
LIABILITIES
|
37,725,854
|
20,712,769
|
||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
SHAREHOLDERS’
EQUITY
|
||||||||
Preferred
stock, $0.001 per share; 20,000,000 shares authorized; 0 share
issued and outstanding
|
-
|
-
|
||||||
Common
stock, $0.001 per share; 200,000,000 shares authorized, 130,000,000 shares
issued and outstanding
|
130,000
|
130,000
|
||||||
Additional
paid-in capital
|
3,322,966
|
3,322,966
|
||||||
Accumulated
other comprehensive income
|
716,805
|
758,511
|
||||||
Retained
earnings
|
19,905,885
|
26,864,840
|
||||||
Total
Shareholders’ Equity
|
24,075,656
|
31,076,317
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
61,801,510
|
$
|
51,789,086
|
See
accompanying notes to consolidated financial statements.
F-4
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
(LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
2009
|
2008
|
|||||||
REVENUES
|
$
|
50,178,721
|
$
|
84,206,001
|
||||
COSTS
AND EXPENSES
|
||||||||
Vessel
operating costs
|
40,200,329
|
48,243,078
|
||||||
Service
costs
|
3,423,667
|
5,151,894
|
||||||
Depreciation
and amortization
|
7,481,360
|
7,035,338
|
||||||
General
and administrative expenses
|
4,106,919
|
3,647,435
|
||||||
Selling
expenses
|
343,289
|
-
|
||||||
TOTAL
COSTS AND EXPENSES
|
55,555,564
|
64,077,745
|
||||||
OTHER
EXPENSES
|
||||||||
Interest
expense, net
|
627,836
|
817,202
|
||||||
Other
expense, net
|
649,731
|
209,227
|
||||||
(LOSS)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(6,654,410
|
)
|
19,101,827
|
|||||
INCOME
TAX EXPENSE
|
(90,084
|
)
|
(17,827
|
)
|
||||
(LOSS)
INCOME FROM CONTINUING OPERATIONS
|
(6,744,494
|
)
|
19,084,000
|
|||||
DISCONTINUED
OPERATION
|
||||||||
Gain
from disposition of discontinued operation
|
5,195
|
-
|
||||||
Loss
from discontinued operation
|
(219,656
|
)
|
(12,663
|
)
|
||||
NET
LOSS FROM DISCONTINUED OPERATION
|
(214,461
|
)
|
(12,663
|
)
|
||||
NET
(LOSS) INCOME
|
(6,958,955
|
)
|
19,071,337
|
|||||
OTHER
COMPREHENSIVE INCOME
|
||||||||
Foreign
currency translation (loss) gain
|
(41,706
|
)
|
383,173
|
|||||
COMPREHENSIVE
(LOSS) INCOME
|
$
|
(7,000,661
|
)
|
$
|
19,454,510
|
See
accompanying notes to consolidated financial statements.
F-5
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
(LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
2009
|
2008
|
|||||||
Weighted
average shares outstanding
|
||||||||
-
Basic
|
130,000,000
|
115,877,596
|
||||||
-
Diluted
|
130,000,000
|
115,877,596
|
||||||
(Loss)
income from continuing operations per share
|
||||||||
-
Basic
|
$
|
(0.05
|
)
|
$
|
0.16
|
|||
-
Diluted
|
$
|
(0.05
|
)
|
$
|
0.16
|
|||
Loss
from discontinued operation per share
|
||||||||
-
Basic
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
-
Diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
Net
(loss) income per share
|
||||||||
-
Basic
|
$
|
(0.05
|
)
|
$
|
0.16
|
|||
-
Diluted
|
$
|
(0.05
|
)
|
$
|
0.16
|
See
accompanying notes to consolidated financial statements.
F-6
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
Common Stock
|
Preferred Stock
|
|||||||||||||||||||||||||||||||
Shares
|
Par Value
|
Shares
|
Par Value
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Income
|
Retained
Earnings
|
Total
|
|||||||||||||||||||||||||
BALANCE
AT JANUARY
1, 2008
|
76,925,000
|
$
|
76,925
|
1,000,000
|
$
|
1,000
|
$
|
3,342,287
|
$
|
375,338
|
$
|
7,793,503
|
$
|
11,589,053
|
||||||||||||||||||
Foreign
currency translation gain
|
-
|
-
|
-
|
-
|
-
|
383,173
|
-
|
383,173
|
||||||||||||||||||||||||
Recapitalization
|
23,075,000
|
23,075
|
-
|
-
|
9,679
|
-
|
-
|
32,754
|
||||||||||||||||||||||||
Conversion
of preferred stock to common stock
|
30,000,000
|
30,000
|
(1,000,000
|
)
|
(1,000
|
)
|
(29,000
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
19,071,337
|
19,071,337
|
||||||||||||||||||||||||
BALANCE
AT JANUARY
1, 2009
|
130,000,000
|
$
|
130,000
|
-
|
-
|
$
|
3,322,966
|
$
|
758,511
|
$
|
26,864,840
|
$
|
31,076,317
|
|||||||||||||||||||
Foreign
currency translation loss
|
-
|
-
|
-
|
-
|
-
|
(41,706
|
)
|
-
|
(41,706
|
)
|
||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,958,955
|
)
|
(6,958,955
|
)
|
||||||||||||||||||||||
BALANCE
AT DECEMBER
31, 2009
|
130,000,000
|
$
|
130,000
|
-
|
$
|
-
|
$
|
3,322,966
|
$
|
716,805
|
$
|
19,905,885
|
$
|
24,075,656
|
See
accompanying notes to consolidated financial statements.
F-7
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss) income
|
$
|
(6,958,955
|
)
|
$
|
19,071,337
|
|||
Net
loss from discontinued operation
|
214,461
|
12,663
|
||||||
(Loss)
income from continuing operations
|
(6,744,494
|
)
|
19,084,000
|
|||||
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities:
|
||||||||
Depreciation
|
3,473,518
|
3,502,099
|
||||||
Amortization
of deferred dry dock fees
|
4,007,842
|
3,533,239
|
||||||
Discount
on long-term notes payable
|
200,189
|
44,765
|
||||||
Amortization
of capital lease obligations
|
-
|
72,175
|
||||||
Deferred
taxes
|
(193
|
)
|
100,020
|
|||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
Decrease In:
|
||||||||
Accounts
receivable
|
(161,985
|
)
|
922,678
|
|||||
Inventories
|
721,498
|
(931,672
|
)
|
|||||
Prepayments
|
78,119
|
2,887,198
|
||||||
Other
receivables and other assets
|
(625,049
|
)
|
2,661,078
|
|||||
Deferred
revenue
|
62,183
|
-
|
||||||
Deferred
dry dock fees
|
(2,367,612
|
)
|
(4,630,014
|
)
|
||||
Increase
(Decrease) In:
|
||||||||
Accounts
payable
|
1,768,336
|
(1,045,016
|
)
|
|||||
Advance
from customers
|
163,739
|
(2,488,439
|
)
|
|||||
Accrued
expenses
|
(503,143
|
)
|
(225,655
|
)
|
||||
Taxes
payable
|
41,542
|
(136,964
|
)
|
|||||
Other
current liabilities
|
1,073,396
|
397,708
|
||||||
Net
cash provided by continuing operations
|
1,187,886
|
23,747,200
|
||||||
Net
cash provided by discontinued operation
|
1,192,313
|
185,816
|
||||||
Net
cash provided by operating activities
|
2,380,199
|
23,933,016
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase
of a vessel
|
(20,881,125
|
)
|
-
|
|||||
Purchases
of fixed assets
|
(16,700
|
)
|
(87,239
|
)
|
||||
Proceeds
from disposition of discontinued operation, net
|
1,272,685
|
-
|
||||||
Net
cash used in investing activities
|
(19,625,140
|
)
|
(87,239
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from/(repayments of) short-term loan
|
1,170,070
|
(1,000,000
|
)
|
|||||
Repayments
of long-term loans
|
(3,140,991
|
)
|
(2,811,672
|
)
|
||||
Proceeds
from long-term loans
|
14,490,000
|
-
|
||||||
Proceeds
from/(repayments of) long-term notes payable
|
2,439,523
|
(2,297,889
|
)
|
|||||
Repayments
of capital lease obligations
|
-
|
(1,514,100
|
)
|
|||||
Repayments
to related parties
|
(2,374,819
|
)
|
(3,181,257
|
)
|
||||
Proceeds
from related parties
|
-
|
40,354,139
|
||||||
Payment
of dividends
|
-
|
(48,213,871
|
)
|
|||||
Net
cash provided by (used in) financing activities
|
12,583,783
|
(18,664,650
|
)
|
See
accompanying notes to consolidated financial statements.
F-8
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
2009
|
2008
|
|||||||
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(4,661,158
|
)
|
5,181,127
|
|||||
Effect
of exchange rate changes on cash
|
(41,706
|
)
|
379,203
|
|||||
Cash
and cash equivalents at beginning of period
|
8,233,588
|
2,673,258
|
||||||
CASH AND CASH EQUIVALENTS AT END OF
YEAR
|
$
|
3,530,724
|
$
|
8,233,588
|
||||
SUPPLEMENTARY CASH FLOW
INFORMATION:
|
||||||||
Interest
paid
|
$
|
627,836
|
$
|
496,667
|
||||
Income
taxes paid
|
$
|
44,287
|
$
|
53,859
|
See
accompanying notes to consolidated financial statements.
F-9
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
Winland
Online Shipping Holdings Co. was incorporated under the laws of Texas on
November 17, 2006. On September 23, 2008, Trip Tech, Inc. changed its name to
Winland Online Shipping Holdings Corporation (“WLOL”).
On August
12, 2008, Trip Tech, Inc. (“Trip Tech”) entered into a share exchange agreement
with SkyAce Group Limited (“SkyAce”) and Pioneer Creation Holdings Limited
(“PCH”). PCH is the sole shareholder of SkyAce. As a result of the share
exchange, Trip Tech acquired all of the issued and outstanding securities of
SkyAce from PCH in exchange for 76,925,000 newly-issued shares of Trip Tech’s
common stock, par value $0.001 per share and 1,000,000 shares of Series A
Preferred Stock, which such Preferred Shares would be converted into 30,000,000
shares of Common upon Trip Tech amending its Articles of Incorporation to
sufficiently increase the number of authorized shares of Common Stock in order
to effect such issuance. SkyAce became a wholly-owned subsidiary of WLOL. At the
time of the merger, WLOL had 23,075,000 shares of common stock. On September 23,
2008, the authorized shares were increased to 200,000,000 shares. On Octobers
23, 2008, 1,000,000 shares of preferred stock, par value of $0.001 were
converted into 30,000,000 shares of common stock. As a result, the total
outstanding shares of common stock increased to 130,000,000, and PCH owned
82.25% of the voting capital stock of WLOL.
The
exchange transaction was accounted for as a reverse acquisition in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 805 (formerly Statement of Financial Accounting Standards
(“SFAS”) No. 141, Business Combinations). The
acquisition was accounted for as the recapitalization of SkyAce. Accordingly,
the consolidated and combined statements of income include the results of
operations of SkyAce from January 1, 2008, and the results of operations of WLOL
from the acquisition date through December 31, 2009.
SkyAce
declared a dividend of $48,213,871 on December 31, 2007 and paid it on March 31,
2008.
WLOL and
subsidiaries (the “Company”) is mainly engaged in a comprehensive range of
online and off-line international shipping services such as dry bulk shipping,
chartering, shipping agency, and international logistics.
2. LIQUIDITY
The
Company incurred a net loss of $6,958,955 for the year ended December 31, 2009.
The Company also had a working capital deficit of $10,085,966 at December 31,
2009. This was principally due to the Company using cash to purchase a new
vessel, and to pay long-term loans. To improve liquidity, the Company changed
the registrations of the flags of two of its vessels. With new registrations,
the Company believes dry dock fees will continue to decrease while such vessels
keep meeting the standards of certification and inspection. To increase its cash
resources, the Company obtained a short-term bank loan of $1,170,070 (See Note
8), a long-term loan of $14,490,000 (see Note 9), and a long-term note of
$3,000,000 (see Note 10). The long-term debt was principally used to purchase a
new vessel. Additionally, on March 5, 2010 the Company obtained an extension of
the due date of two notes payable to related parties amounting to $2,961,739 to
July 19, 2012. See Notes 10 and 17. Also in 2010, the Company obtained
commitments from certain shareholders and related parties to provide working
capital to the Company, if needed, in the form of notes payable or personal
loans.
F-10
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis
of Presentation
The
audited consolidated financial statements of Winland Online Shipping Holdings
Corporation have been prepared in accordance with U.S. generally accepted
accounting principles and pursuant to the requirements for reporting on Form
10-K.
(b)
Principles of Consolidation
The
consolidated financial statements include the accounts of WLOL and its
subsidiaries and variable interest entities (“VIEs”) (the “Company”) as
follows:
I.
Subsidiaries and Holding Companies:
a)
|
SkyAce is wholly-owned subsidiary
of WLOL and incorporated under the law of British Virgin islands
(“BVI”).
|
b)
|
Plentimillion Group Limited
(“PGL”) is a wholly-owned subsidiary of SkyAce and incorporated in
BVI.
|
c)
|
Best Summit Enterprise Limited
(“BSL”) is a wholly-owned subsidiary of SkyAce and incorporated in
BVI.
|
d)
|
Hong Kong Wallis Development
Limited (“Wallis”) is registered in Hong Kong and is a
wholly-owned subsidiary of
BSL.
|
e)
|
Beijing Huate Xingye Technology
Limited (“Huate”) was registered in the People’s Republic of China (“PRC”)
on March 18, 2008 and is a wholly-owned subsidiary of
Wallis.
|
II.
Subsidiaries of PGL - Businesses in transportation and chartering:
f)
|
Winland Shipping Co., Limited, is
registered in Hong Kong.
|
g)
|
Win Star Shipping Co., Limited,
is incorporated and registered in St. Vincent and the Grenadines
(“S.V.G.”).
|
h)
|
Bodar Shipping Co., Limited, is
incorporated and registered in
S.V.G.
|
i)
|
Winland Dalian Shipping S.A. is
incorporated in Panama and registered in Hong
Kong,
|
j)
|
Treasure Way Shipping Limited is
incorporated and registered in Hong
Kong.
|
F-11
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Principles of Consolidation (Continued)
II.
Subsidiaries of PGL - Businesses in transportation and chartering
(Continued)
k)
|
Win Eagle Shipping Co., Limited,
is incorporated and registered in Valletta,
Malta.
|
l)
|
Win Ever Shipping Co., Limited,
is incorporated and registered in Valletta,
Malta.
|
m)
|
Win Bright Shipping Co., Limited,
is incorporated and registered in Valletta,
Malta.
|
n)
|
Kinki International Industrial
Limited is registered in Hong Kong, managing chartering business of
vessels.
|
o)
|
Bestline Shipping Limited is
registered in Hong Kong, managing chartering business of
vessels.
|
p)
|
Lancrusier Development Co.,
Limited is registered in Hong Kong, management and accounting of the above
companies.
|
q)
|
Win Glory S.A. is incorporated in
Panama, registered in Hong
Kong.
|
r)
|
Win Grace Shipping Co., Limited
is incorporated and registered in
Malta.
|
s)
|
Win Hope Shipping Co., Limited is
incorporated and registered in
Malta.
|
t)
|
Win Moony Shipping Co., Limited
is incorporated and registered in
Malta.
|
u)
|
Bodar Shipping S.A. is
incorporated and registered in
Panama.
|
v)
|
Win Moony Shipping S.A. is
incorporated and registered in
Panama.
|
w)
|
Bao Shun Shipping S.A. is
incorporated and registered in
Panama.
|
x)
|
Winland International Shipping
Co., Limited is incorporated and registered in Hong
Kong.
|
III. VIEs
- Businesses in Shipping Agency, Freight Forwarding and Online
Services:
To comply
with the People’s Republic of China (“PRC”) laws and regulations, the Company
provides substantially all its shipping agency and freight forwarding services
and online services in China via its VIEs. These VIEs are wholly-owned by
certain related parties or directors of the Company.
The
following is a summary of the VIEs of the Company:
y)
|
Dalian Winland International
Shipping Agency Co. Ltd. (“DWIS”) is incorporated under the laws of the
PRC. The principal activity of DWIS is shipping agency
services.
|
z)
|
Dalian Winland International
Logistic Co. Ltd. (“DWIL”) is incorporated under the laws of PRC. The
principal activity of DWIL is freight forwarding
services.
|
aa)
|
Dalian Shipping Online Network
Co. Ltd. (“DSON” or “Shipping Online”) is incorporated under the laws of
PRC. The principal activities of DSON are providing online service for the
members.
|
F-12
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Principles of Consolidation (Continued)
On March
31, 2008, the Company entered into exclusive technical service agreements with
DWIS, DWIL and DSON under which the Company provides technical and other
services to DWIS, DWIL and DSON in exchange for substantially all net income of
DWIS, DWIL and DSON. All voting rights of DWIS, DWIL and DSON are assigned to
the Company, and the Company has the right to appoint all directors and senior
management personnel of DWIS, DWIL and DSON. In addition, shareholders of DWIS,
DWIL and DSON have pledged their equity interests in DWIS, DWIL and DSON as
collateral to the Company for the non-payment of the fees for technical and
other services due to the Company.
The
Company applied the provision of ASC 810 (formerly SFAS No. 46R, Consolidation of Variable Interest
Entities ), a variable interest entity (“VIE”) to be consolidated by a
company if that company is subject to a majority of the risk of loss for the
VIEs or is entitled to receive a majority of the VIEs’ residual
returns. As a result, DWIS, DWIL and DSON became the Company’s VIEs since
January 1, 2008.
The
Company adopted ASC 805 (formerly SFAS No. 141), which requires the consolidated
financial statements for the periods ended December 31, 2009 and 2008 be
presented as though the transfer of net assets or exchange of VIEs’ interests
had occurred at the beginning of the period. Financial statements of all VIEs
have been included in the Company’s consolidated financial statements as of
December 31, 2009 and 2008.
Inter-company
balances and transactions have been eliminated in consolidation.
(c)
Concentrations
The
Company’s major customers who accounted for the following percentages of total
revenue and accounts receivable are as follows:
Sales
|
Accounts Receivable
|
|||||||||||||||
Major
Customers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Daewoo
International Corporation
|
6.98
|
%
|
-
|
0.43
|
%
|
-
|
||||||||||
Biz&
Shipping Co., Ltd. Seoul, Korea
|
2.76
|
%
|
-
|
-
|
-
|
|||||||||||
Winning
Shipping (HK) Co., Ltd.
|
2.32
|
%
|
-
|
-
|
-
|
|||||||||||
Dynaroy
Corporation SDN BHD
|
1.67
|
%
|
-
|
-
|
-
|
|||||||||||
Cargill
Ocean Transportation (Singapore) Pte. Ltd.
|
1.46
|
%
|
0.98
|
%
|
-
|
-
|
||||||||||
Universe
Co. Ltd. Taibei
|
-
|
3.91
|
%
|
-
|
-
|
|||||||||||
Cargill
Ocean Transportation (Singapore) Pte. Ltd.
|
-
|
2.65
|
%
|
-
|
-
|
|||||||||||
China
Int’l Fund Limited
|
-
|
1.89
|
%
|
-
|
-
|
|||||||||||
Liven
Agrichem Pte. Ltd.
|
-
|
1.06
|
%
|
-
|
-
|
F-13
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c)
Concentrations (Continued)
The
Company’s major oil suppliers who accounted for the following percentages of
total oil purchases and total accounts payable are as follows:
Oil Purchases
|
Accounts Payable
|
|||||||||||||||
Major
Suppliers
|
For The Year Ended
December 31, 2009
|
For The Year Ended
December 31, 2008
|
December 31,
2009
|
December 31,
2008
|
||||||||||||
Singapore
Petroleum Company (Hong Kong) Limited
|
22.18
|
%
|
22.60
|
%
|
4.55
|
%
|
-
|
|||||||||
A/S
Dan Bunkering Ltd.
|
18.42
|
%
|
-
|
7.31
|
%
|
-
|
||||||||||
Raffles
Bunkering Pte Ltd.
|
17.87
|
%
|
11.28
|
%
|
-
|
2.08
|
%
|
|||||||||
Seabridge
Bunkering Pte Ltd.
|
12.04
|
%
|
23.63
|
%
|
0.39
|
%
|
-
|
|||||||||
United
Bunkering & Trading (HK) Ltd.
|
9.97
|
%
|
-
|
-
|
-
|
|||||||||||
Trans-Tec
Services Inc.
|
-
|
8.69
|
%
|
-
|
6.57
|
%
|
||||||||||
Chimbusco
Pan Nation Petro-Chemical Co., Ltd.
|
-
|
8.30
|
%
|
-
|
1.49
|
%
|
(d) Use
of Estimates
The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. Actual results could differ materially from those
estimates.
(e) Fair Value of Financial
Instruments
Fair Value of Financial Instruments
- ASC 820-10 (formerly SFAS 157) establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy prioritizes the inputs into three levels based on the extent to which
inputs used in measuring fair value are observable in the market.
These
tiers include:
(I)
|
Level 1—defined as
observable inputs such as quoted prices in active
markets;
|
(II)
|
Level 2—defined as inputs
other than quoted prices in active markets that are either directly or
indirectly observable; and
|
(III)
|
Level 3—defined as
unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own
assumptions.
|
The
carrying amounts of financial assets and liabilities, such as cash and cash
equivalents, accounts receivable, short-term and long-term loans, accounts
payable, notes payable and other payables, approximate their fair values because
of the short maturity of these instruments.
F-14
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Inventories
Inventories
of the company are composed of fuel oil and diesel oil. Inventories are stated
at the lower of cost or net realizable value (market value). The cost is
determined on the basis of weighted average. Net realizable value is based on
estimated selling prices less any further costs expected to be incurred for
disposal.
(g)
Accounts Receivables
Accounts
receivables include receivables from shippers and ship owners, net of a
provision for doubtful accounts. At each balance sheet date, potentially
uncollectible accounts are assessed individually for purposes of determining the
appropriate provision for doubtful accounts. At December 31, 2009 and 2008, the
Company has no allowance for doubtful accounts.
(h)
Vessels and Depreciation Policy
Vessels
are carried at cost less accumulated depreciation and impairment
losses.
Vessels
are stated as cost which consists of the contract price of the directly
purchased vessels or present value of minimum lease payments for the vessels
acquired by capital lease, and any direct expenditure incurred upon acquisition
for major improvements and delivery.
Depreciation
is computed using the straight-line method over the estimated useful life of the
vessels, after considering the estimated residual value. The residual
value ranges from 0.4% to 6% of the imputed original cost at the birth date of
each vessel. Management estimates the useful lives of the vessels to be 25 years
from the birthdates. As all the vessels were second hand, the Company specified
the depreciation periods by deducting the periods used before purchase from 25
years.
The costs
of significant replacements, renewals and betterments are capitalized and
depreciated over the shorter of the vessel’s remaining estimated useful life or
the estimated life of the renewal or betterment. Expenditures for routine
maintenance and repairs are expensed as incurred.
(i) Fixed
Assets
Fixed
assets are carried at cost less accumulated depreciation and amortization.
Depreciation is provided over their estimated useful lives, using the
straight-line method. Estimated useful lives are as follows:
Motor
vehicles
|
5
years
|
|
Office
equipment
|
5
years
|
The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized. Also see Note
5.
F-15
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Dry
Dock Fees
Vessels
must undergo regular inspection, monitoring and maintenance, referred to as dry
docking, to maintain the required operating certificates. International Maritime
Organization (IMO) regulations generally require that vessels be dry docked
every five years. Because dry docking enable the vessel to continue operating in
compliance with IMO requirements, the costs of these scheduled dry docking are
customarily capitalized and are then amortized over a 60-month period beginning
with the accounting period following the vessel’s release from dry docking. Also
see Note 6.
(k)
Impairment of Long-Term Assets
Long-term
assets of the Company are reviewed annually as to whether their carrying value
has become impaired, pursuant to the guidelines established in FASB Codification
360-10-35-17 (Statement of Financial Accounting Standards (“SFAS”) No.
144). The Company considers assets to be impaired if the carrying value
exceeds the future projected cash flows from the related operations. The
Company also re-evaluates the periods of amortization to determine whether
subsequent events and circumstances warrant revised estimates of useful lives.
There were no impairments for the years ended December 31, 2009 and
2008.
(l)
Revenue Recognition
Revenue
is recognized based on the following four criteria:
(I)
|
The
amount of revenue can be measured
reliably;
|
(II)
|
It
is probable that the economic benefits will flow to the
Company;
|
(III)
|
The
stage of completion at the balance sheet date can be measured
reliably;
|
(IV)
|
The
costs incurred, or to be incurred can be measured
reliably.
|
For dry
bulk shipping service, the allocation of revenue between reporting periods is
based on relative transit time in each reporting period with expenses recognized
as incurred.
For
chartering brokerage services, sales are recognized when the ship leaves
port.
For
shipping agency and freight forwarding services, sales are recognized when the
ship leaves port.
For
online services, sales are recognized according to the stage of completion in
accordance with the service period defined in executed contracts.
(m)
Retirement Benefits
Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to operations as incurred.
Retirement benefits amounting to $125,372 and $115,070 were charged to
operations for the years ended December 31, 2009 and 2008,
respectively.
F-16
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n)
Income Tax
Deferred
tax assets and liabilities are recognized for the future tax consequence
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain. Also see Note 12.
(o)
Earnings (Loss) Per Share
Basic
earnings (loss) per share are computed by dividing income (loss) available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings (loss) per share is computed similar to
basic earnings (loss) per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. The Company does not have dilutive securities for the
years ended December 31, 2009 and 2008.
(p)
Foreign Currency Translation
Assets
and liabilities of foreign subsidiaries are translated into United States
dollars at currency exchange rates in effect at period-end and revenues and
expenses are translated at average exchange rates in effect for the period.
Gains and losses resulting from foreign currency transactions are included in
results of operations. Gains and losses resulting from translation of foreign
subsidiaries balance sheets are included as a separate component of
shareholders’ equity.
December 31, 2009
|
December 31, 2008
|
|||||||
Period
end RMB: US$ exchange rate
|
6.8372
|
6.8542
|
||||||
Average
period RMB: US$ exchange rate
|
6.8457
|
7.0842
|
(q)
Comprehensive Income (Loss)
Comprehensive
income (loss) is defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other disclosures,
all items that are required to be recognized under current accounting standards
as components of comprehensive income (loss) should be reported in a financial
statement that is presented with the same prominence as other financial
statements. The Company’s only current component of comprehensive income (loss)
is the foreign currency translation adjustment.
F-17
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r)
Reporting Segments
Accounting
standards require public business enterprises to report information about each
of their operating business segments that exceed certain quantitative threshold
or meet certain other reporting requirements. Operating business segments have
been defined as a component of an enterprise about which separate financial
information is available and is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has determined that there are three reportable
segments: (1) Dry bulk shipping, (2) Chartering brokerage, and (3) Other
activities segment.
Dry Bulk
Shipping Service - Dry bulk shipping service operates a fleet of thirteen
vessels that provides marine shipping services for dry and liquid bulk cargo
shipping. The segment contributed 50% and 68% of combined operating revenues for
the years ended December 31, 2009 and 2008, respectively.
Chartering
Brokerage Service - Chartering brokerage service provides ship chartering
services for unrelated shipping companies and shippers. The segment contributed
41% and 26% of consolidated operating revenues for the years ended December 31,
2009 and 2008, respectively.
Other
activities - Other activities segment comprises shipping agency and freight
forwarding services, and online services. Shipping agency and freight forwarding
service provides transportation and logistic services to shippers in the PRC.
Online services provide internet services for members. These operating segments
were not separately reported as they do not meet any of the quantitative
thresholds under ASC 280-10 (formerly SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information). Other activities segment contributed
9% and 6% of consolidated operating revenues for the years ended December 31,
2009 and 2008, respectively.
Also see
Note 14.
(s)
Recent Accounting Pronouncements
On July
1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162). ASC 105-10 establishes the FASB ASC as
the source of authoritative accounting principles recognized by the FASB to be
applied in preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America. The
adoption of this standard had no impact on the Company’s consolidated
financial statements.
Effective
January 1, 2009, the Company adopted ASC 805 (formerly SFAS No. 141 (R),
Business Combinations).
ASC 805 requires an acquirer to measure the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree at
their fair values on the acquisition date, with goodwill being the excess value
over the net identifiable assets acquired. The adoption of ASC 805 did not have
any effect on the Company’s consolidated financial statements as of December 31,
2009.
F-18
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Recent Accounting Pronouncements (Continued)
Effective
January 1, 2009, the Company adopted ASC 810-10 (formerly SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements). This Statement establishes accounting
and reporting standards that require the ownership interests in subsidiaries’
non-parent owners be clearly presented in the equity section of the balance
sheet; requires the amount of consolidated net income attributable to the parent
and to the noncontrolling interest be clearly identified and presented on the
face of the consolidated statement of income; requires that changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently; requires that when a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value and the gain or loss
on the deconsolidation of the subsidiary be measured using the fair value of any
noncontrolling equity; requires that entities provide disclosures that clearly
identify the interests of the parent and the interests of the noncontrolling
owners. The adoption of ASC 810-10 did not have a significant effect on the
Company’s consolidated financial statements as of December 31,
2009.
Effective
January 1, 2009, the Company adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ), which amends SFAS No. 133 and
expands disclosures to include information about the fair value of derivatives,
related credit risks and a company's strategies and objectives for using
derivatives. The adoption of ASC 815-10 did not have a material effect on the
consolidated financial statements as of December 31, 2009.
Effective
January 1, 2009, the Company adopted ASC 815-40 (formerly Emerging Issues Task
Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
07-05”). ASC 815-40
addresses the determination of whether an instrument (or an embedded feature) is
indexed to an entity's own stock, which is the first part of the scope exception
in paragraph 11(a) of FASB SFAS No. 133 , Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”). If an instrument (or an
embedded feature) that has the characteristics of a derivative instrument under
paragraphs 6–9 of SFAS 133 is indexed to an entity's own stock, it is still
necessary to evaluate whether it is classified in stockholders' equity (or would
be classified in stockholders' equity if it were a freestanding instrument).
Other applicable authoritative accounting literature, including Issues EITF
00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company Own Stock, and EITF 05-2, The Meaning of “Conventional Debt
Instrument” in Issue No. 00-19, provides guidance for determining whether
an instrument (or an embedded feature) is classified in stockholders' equity (or
would be classified in stockholders' equity if it were a freestanding
instrument). ASC 815-40 does not address that second part of the scope exception
in paragraph 11(a) of SFAS 133. The adoption of ASC 815-40 did not have a
material effect on the consolidated financial statements as of December 31,
2009.
On
April 1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies),
which amends Statement 141(R) and eliminates the distinction between contractual
and non-contractual contingencies. Under ASC 805, an acquirer is required to
recognize at fair value an asset acquired or liability assumed in a business
combination that arises from a contingency if the acquisition-date fair value of
that asset or liability can be determined during the measurement period. If the
acquisition-date fair value cannot be determined, the acquirer applies the
recognition criteria in SFAS No. 5, Accounting for Contingencies
and Interpretation 14, “Reasonable Estimation of the Amount of a Loss – and
interpretation of FASB Statement No. 5,” to determine whether the
contingency should be recognized as of the acquisition date or after it. The
adoption of ASC 805 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
F-19
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Recent Accounting Pronouncements (Continued)
ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. It did not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. We are
required to adopt ASC 320-10 for our interim and annual reporting periods ending
after June 15, 2009. ASC 320-10 does not require disclosures for periods
presented for comparative purposes at initial adoption. ASC 320-10 requires
comparative disclosures only for periods ending after initial adoption. The
adoption of ASC 320-10 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
On
April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1
and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments) to require
disclosures about fair value of financial instruments in interim period
financial statements of publicly traded companies and in summarized financial
information required by APB Opinion No. 28, Interim Financial Reporting .
We are required to adopt ASC 825-10 for our interim and annual reporting periods
ending after June 15, 2009. ASC 825-10 does not require disclosures for
periods presented for comparative purposes at initial adoption. ASC 825-10
requires comparative disclosures only for periods ending after initial adoption.
The adoption of ASC 825-10 did not have a material effect on the
consolidated financial statements as of December 31, 2009.
In June
2009, the FASB issued ASC 810-10 (formerly SFAS No. 167) Amendments to FASB
Interpretation No. 46(R), which require an enterprise to perform an analysis and
ongoing reassessments to determine whether the enterprises variable interest or
interests give it a controlling financial interest in a variable interest entity
and amends certain guidance for determining whether an entity is a variable
interest entity. It also requires enhanced disclosures that will provide users
of financial statements with more transparent information about an enterprises
involvement in a variable interest entity. ASC 810-10 is effective as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009 and for all interim reporting periods after that. The
adoption of ASC 810-10 did not have a material effect on the consolidated
financial statements as of December 31, 2009.
F-20
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
4. VESSELS
The
Company’s current fleet consists of thirteen vessels as bulk carriers as of
December 31, 2009 and 2008. Among the thirteen vessels, two of them denoted (a)
were acquired by syndicated loans and are still under pledge, also see Note 9;
nine vessels denoted (b) were acquired through capital leases; a vessel denoted
(c) was acquired through the long-term notes payable from related parties, also
see Note 10; and one remaining vessel denoted (d) was acquired through the
long-term loan and long-term note payable, also see Note 9 and 10.
The
vessels of the Company consist of the following:
|
|
December 31, 2009
|
December 31, 2008
|
||||||
At
cost:
|
|||||||||
Win
Hope
|
(b)
|
$
|
2,679,285
|
$
|
2,679,285
|
||||
Win
Ever
|
(b)
|
1,737,966
|
1,737,966
|
||||||
Win
Bright
|
(b)
|
1,739,258
|
1,739,258
|
||||||
Win
Eagle
|
(b)
|
3,560,852
|
3,560,852
|
||||||
Win
Glory
|
(b)
|
2,503,697
|
2,503,697
|
||||||
Win
Grace
|
(b)
|
3,677,861
|
3,677,861
|
||||||
Win
Moony
|
(b)
|
3,682,178
|
3,682,178
|
||||||
Win
Star
|
(b)
|
3,336,600
|
3,336,600
|
||||||
Winland
Dalian
|
(a)
|
18,243,139
|
18,243,139
|
||||||
Win
Honey
|
(a)
|
4,500,000
|
4,500,000
|
||||||
Bodar
|
(b)
|
4,985,441
|
4,985,441
|
||||||
Andong
|
(c)
|
2,961,739
|
2,954,393
|
||||||
Baoshun
|
(d)
|
20,881,125
|
-
|
||||||
$
|
74,489,141
|
$
|
53,600,670
|
||||||
December 31, 2009
|
December 31, 2008
|
||||||||
Less: Accumulated
depreciation
|
|||||||||
Win
Hope
|
(b)
|
$
|
2,009,463
|
$
|
1,768,328
|
||||
Win
Ever
|
(b)
|
1,564,169
|
1,564,169
|
||||||
Win
Bright
|
(b)
|
1,565,332
|
1,565,332
|
||||||
Win
Eagle
|
(b)
|
3,204,767
|
3,204,767
|
||||||
Win
Glory
|
(b)
|
2,119,201
|
1,797,297
|
||||||
Win
Grace
|
(b)
|
3,310,075
|
2,804,369
|
||||||
Win
Moony
|
(b)
|
3,313,961
|
2,761,634
|
||||||
Win
Star
|
(b)
|
3,002,940
|
3,002,940
|
||||||
Winland
Dalian
|
(a)
|
4,743,216
|
3,648,628
|
||||||
Win
Honey
|
(a)
|
1,522,969
|
1,269,844
|
||||||
Bodar
|
(b)
|
4,486,897
|
4,486,897
|
||||||
Andong
|
(c)
|
797,056
|
638,670
|
||||||
Baoshun
|
(d)
|
251,692
|
-
|
||||||
$
|
31,891,738
|
$
|
28,512,875
|
||||||
Vessels,
net
|
$
|
42,597,403
|
$
|
25,087,795
|
Vessel
depreciation expense for the years ended December 31, 2009 and 2008 was
$3,377,081 and $3,383,542 respectively.
F-21
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
4. VESSELS
(CONTINUED)
In 2009,
the vessel Winland Dalian had been under major repair without operation. The
indirect costs of $1,002,106, mainly including management fees, sailor costs,
and repair costs, were recorded as general and administrative expenses for the
year ended December 31, 2009.
The
Company pledged the following vessels as collateral against long-term loans.
Also see Note 9.
|
December 31, 2009
|
December 31, 2008
|
||||||
Net Book Value
|
||||||||
Winland
Dalian
|
$
|
13,499,923
|
$
|
14,594,511
|
||||
Win
Honey
|
2,977,031
|
3,230,156
|
||||||
Baoshun
|
20,629,433
|
-
|
||||||
Total
|
$
|
37,106,387
|
$
|
17,824,667
|
Insurance
Costs:
There are
four kinds of marine insurance for the Company which insures the vessels and
shipping business as follows:
Insurance Type
|
Coverage
|
Insurance Premium
For The Year Ended December 31,
|
||||||||||
|
2009
|
2008
|
||||||||||
Hull
insurance
|
$
|
71,240,000
|
$
|
1,017,985
|
$
|
1,157,052
|
||||||
Protection
& indemnity insurance
|
99,460,000
|
1,010,180
|
920,598
|
|||||||||
Freight
demurrage and defense insurance
|
95,058
|
90,935
|
||||||||||
Delay
insurance
|
47,970
|
60,495
|
||||||||||
Total
|
$
|
2,171,193
|
$
|
2,229,080
|
Insurance
costs are amortized on a straight-line basis over the beneficial periods and are
recorded in vessel expenses in the consolidated statements of income and
comprehensive income for the years ended December 31, 2009 and 2008. Annual
premium expenses were $2,171,193 and $2,229,080 for the years ended December 31,
2009 and 2008, respectively. Prepaid insurance was $26,950 and $0 as of
December 31, 2009 and 2008, respectively.
F-22
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
5. FIXED
ASSETS
Fixed
assets consist of the following:
|
December 31, 2009
|
December 31, 2008
|
||||||
At
cost:
|
||||||||
Motor
vehicles
|
$
|
244,612
|
$
|
244,005
|
||||
Office
equipment
|
204,031
|
369,607
|
||||||
Leasehold
improvement
|
181,671
|
-
|
||||||
630,314
|
613,612
|
|||||||
Less: Accumulated
depreciation
|
||||||||
Motor
vehicles
|
159,458
|
117,516
|
||||||
Office
equipment
|
174,298
|
259,902
|
||||||
Leasehold
improvement
|
145,517
|
-
|
||||||
479,273
|
377,418
|
|||||||
Fixed
assets, net
|
$
|
151,041
|
$
|
236,194
|
Depreciation
expense for the years ended December 31, 2009 and 2008 was $96,437 and $118,557,
respectively.
6. DEFERRED
DRY DOCK FEES
Deferred
dry dock fees consist of the
following:
|
December 31, 2009
|
December 31, 2008
|
||||||
Cost
|
$
|
17,608,753
|
$
|
21,594,143
|
||||
Less:
Accumulated amortization
|
8,297,106
|
10,559,457
|
||||||
Deferred
dry dock fees, net
|
$
|
9,311,647
|
$
|
11,034,686
|
Amortization
expense for the years ended December 31, 2009 and 2008 was $4,007,842 and
$3,533,239, respectively.
Amortization
expense for the next five years and thereafter is as follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$
|
3,241,386
|
||
2011
|
2,689,722
|
|||
2012
|
1,990,157
|
|||
2013
|
1,232,212
|
|||
2014
|
158,170
|
|||
Total
|
$
|
9,311,647
|
F-23
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
6. DEFERRED
DRY DOCK FEES (CONTINUED)
The
roll-forward of the beginning and ending balance of deferred dry dock fees
consist of the following:
|
December 31, 2009
|
December 31, 2008
|
||||||
Balance
at January 1, 2009
|
$ | 11,034,686 | $ | 9,937,910 | ||||
Addition
of deferrals
|
2,284,803 | 4,630,015 | ||||||
Less:
Amortization expense
|
(4,007,842 | ) | (3,533,239 | ) | ||||
Deferred
dry dock fees, net
|
$ | 9,311,647 | $ | 11,034,686 |
The
Company’s vessels are required to be drydocked approximately every 60 months for
major repairs and maintenance that cannot be performed while the vessels are
operating. The Company defers the costs associated with the drydockings as they
occur and amortizes these costs on a straight-line basis over the period between
drydockings. Cost deferred as part of a vessel’s drydocking include actual costs
incurred at the drydocking yard; cost of travel, lodging and subsistence of
personnel sent to the drydocking site to supervise; and the cost of hiring a
third party to oversee the drydocking. If the vessel is drydocked earlier than
originally anticipated, any remaining deferred drydock costs that have not been
amortized are expensed at the beginning of the next drydock. Amortization
expense for drydocking for the years ended December 31, 2009 and 2008 was
$4,007,842 and $3,533,239, respectively. All other costs incurred during
drydocking are expensed as incurred.
7. DUE
TO/FROM RELATED PARTIES
Due
to/from related parties consist of the following:
(I) Due From Related Parties
|
December 31, 2009
|
December 31, 2008
|
|||||||||
Winland
Container Lines Ltd.
|
a
|
)
|
$
|
1,097,384
|
$
|
759,042
|
|||||
Dalian
Winland Group Co., Ltd
|
b
|
)
|
16,113
|
-
|
|||||||
Due
from employees
|
c
|
)
|
146
|
1,214
|
|||||||
Total
due from related parties
|
$
|
1,113,643
|
$
|
760,256
|
|||||||
(II) Due
To Related Parties
|
December 31, 2009
|
December 31, 2008
|
|||||||||
Dalian
Winland Group Co., Ltd
|
b
|
)
|
$
|
-
|
$
|
526,885
|
|||||
Dalian
Winland Shipping Co., Ltd
|
d
|
)
|
-
|
120,664
|
|||||||
Dalian
Master Well Ship Management Co., Ltd
|
e
|
)
|
7,200
|
48,614
|
|||||||
Winland
Shipping Japan Co., Ltd
|
f
|
)
|
13,707
|
72,423
|
|||||||
Total
due to related parties
|
$
|
20,907
|
$
|
768,586
|
a)
|
Winland Container Lines Ltd. is
controlled by the Chairman and Chief Executive Officer of the Company. The
Company provided shipping agency and freight forwarding services to
Winland Container Lines Ltd. For the years ended December 31, 2009 and
2008, the Company recognized service revenue of $1,361,558, and
$1,624,860, respectively. For the years ended December 31, 2009 and 2008,
the Company paid $3,586,440 and $2,299,713 of expenses to related ports
and received $4,609,946 and $4,155,446 of payments from related ports on
behalf of Winland Container Lines Ltd. The outstanding balances at
December 31, 2009 and 2008 are interest-free, unsecured and they were
subsequently settled.
|
F-24
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
7.
|
DUE TO/FROM RELATED PARTIES
(CONTINUED)
|
b)
|
Dalian Winland Group Co., Ltd
(“DWIG”) is controlled by the Chairman and Chief Executive Officer of the
Company. The Company paid $27,746,305 and $1,366,667 of expenses on behalf
of DWIG for the years ended December 31, 2009 and 2008,
respectively. The Company collected $27,112,627 and $40,281,647
on behalf of DWIG for the years ended December 31, 2009 and 2008,
respectively. For the years ended December 31, 2009 and 2008, the Company
recognized interest expense of $90,680 and $90,455, respectively. Also see
Note 10. The outstanding receivable balance at December 31, 2009 is
interest-free, unsecured and has no fixed repayment
term.
|
c)
|
Due from/to employees are
interest-free, unsecured and have no fixed repayment terms. The amounts
due from/to employees primarily represent advances to sales personnel, or
prepaid by sales personnel of the Company for business and travelling
related expenses.
|
d)
|
Dalian Winland Shipping Co., Ltd
(“DWSC”) is controlled by the Chairman and Chief Executive Officer of the
Company. It operates as a vessel management company for the Company. The
vessel management fee for the two vessels was $30,000 and $36,000 for the
years ended December 31, 2009 and 2008, respectively. The Company
recognized relevant service revenue of $0 and $146,757 for the years ended
December 31, 2009 and 2008, respectively. For the years ended December 31,
2009 and 2008, on behalf of DWSC, the Company paid $195,407 and
$7,015,600; and received $1,274,413 and $3,663,903, respectively. The
Company recognized interest expense of $57,407 and $138,003 for the years
ended December 31, 2009 and 2008, respectively. Also see Note 10. The
Company disposed of vessel Haoyue to DWSC for $1,287,077. Also see Note
13.
|
e)
|
Dalian Master Well Ship
Management Co., Ltd is controlled by the Chairman and Chief Executive
Officer of the company. It operates as the vessel management company for
the Company. The vessel management fees for the years ended December 31,
2009 and 2008 was $229,800 and $259,200, respectively. The Company paid
$341,763 and $751,901 on behalf of Dalian Master Well Ship Management Co.,
Ltd, for the years ended December 31, 2009 and 2008, respectively. The
Company collected $70,548 and $83,468 on behalf of Dalian Master Well Ship
Management Co., Ltd, for the years ended December 31, 2009 and 2008,
respectively. The outstanding balances at December 31, 2009 and 2008 are
interest-free, unsecured, and have no fixed repayment
term.
|
f)
|
Winland Shipping Japan Co., Ltd
is controlled by the Chairman and Chief Executive Officer of the Company.
The Company recognized relevant agency service fees of $685,079 and
$67,546 for the years ended December 31, 2009 and 2008, respectively. The
Company paid $743,846 and $0 on behalf of Winland Shipping Japan Co., Ltd,
for the years ended December 31, 2009 and 2008, respectively. The
outstanding balances at December 31, 2009 and 2008 are interest-free,
unsecured and have no fixed repayment
term.
|
Also see
Note 10 for long-term notes payable to related parties.
8.
|
SHORT-TERM
BANK LOAN
|
The
Company obtained a short-term bank loan from Shanghai Pudong Development Bank
for $1,170,070 on July 10, 2009. The loan principal is due July 6, 2010. The
interest payment is due quarterly at an annual interest rate of 5.31%. Interest
expense was $29,820 for the year ended December 31, 2009. The loan is guaranteed
by the Chairman and CEO of the Company.
F-25
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
9.
|
LONG-TERM
LOANS
|
Long-term
loans consist of the following:
|
December 31, 2009
|
December 31, 2008
|
||||||
Loans
from Dialease Maritime S.A.:
|
||||||||
Due
on August 1, 2011, monthly interest payment is 1-month LIBOR plus 1.75%
per annum, and the actual rate at December 31, 2009 is 2.03 %, secured by
the vessel Winland Dalian (also see Note 4), assignment of insurance of
the vessel, and guaranteed by the Chairman of the Company. Principal is
repaid every month in 72 equal installments from September
2005.
|
$
|
3,519,456
|
$
|
5,631,120
|
||||
Due
on July 21, 2012, monthly interest payment is 1-month LIBOR plus 1.75% per
annum, and the actual rate at December 31, 2009 is 2.03%, secured by the
vessel Win Honey (also see Note 4), assignment of insurance of the vessel,
and guaranteed by the Chairman of the Company. Principal is repaid every
month in 72 equal installments from August 2006.
|
1,808,306
|
2,508,314
|
||||||
Term
of the loan is 7 years with interest 1-month LIBOR plus 2.30% per annum,
monthly payment composed of principle and interest is fixed at $109,773,
initial payment is due on October 24, 2009, secured by the vessel Baoshun
(also see Notes 2 and 4).
|
14,160,681
|
-
|
||||||
Total
long-term loans
|
19,488,443
|
8,139,434
|
||||||
Less:
Current portion
|
4,128,908
|
2,811,672
|
||||||
Long-term
portion
|
$
|
15,359,535
|
$
|
5,327,762
|
Interest
expense for the years ended December 31, 2009 and 2008 was $249,924 and
$447,578, respectively.
The
repayment schedule for the principal amount of long-term loans is as
follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$
|
4,128,908
|
||
2011
|
3,425,076
|
|||
2012
|
1,725,566
|
|||
2013
|
1,317,276
|
|||
2014
|
1,317,276
|
|||
Thereafter
|
7,574,341
|
|||
Total
|
$
|
19,488,443
|
F-26
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
10. LONG-TERM
NOTES PAYABLE
Long-term
notes payable consists of the following:
|
December 31, 2009
|
December 31, 2008
|
|||||||||
Notes
payable to unrelated party:
|
|||||||||||
Win
Grand Shipping Limited, net of discount of $13,345 at December 31, 2008,
paid off on September 17, 2009
|
$
|
-
|
$
|
273,469
|
|||||||
Sea
Carrier Shipping Co., Ltd., net of discount of $2,100,182 at December 31,
2009, expire at September 25, 2014, fixed repayment of $2,897 per day,
monthly payment due one month in advance.
|
a)
|
2,905,834
|
-
|
||||||||
Subtotal
|
2,905,834
|
273,469
|
|||||||||
Notes
payable to related companies:
|
|||||||||||
Dalian
Winland Shipping Co. , Ltd. due July 19, 2010, at an interest rate of 5%
per annum
|
b)
|
1,148,131
|
1,145,283
|
||||||||
Dalian
Winland Group Co., Ltd. due July 19, 2010, at an interest rate of 5% per
annum
|
c)
|
1,813,608
|
1,809,110
|
||||||||
Subtotal
|
2,961,739
|
2,954,393
|
|||||||||
Total
long-term notes payable
|
5,867,573
|
3,227,862
|
|||||||||
Less:
Current portion
|
3,326,132
|
273,469
|
|||||||||
Long-term
portion
|
$
|
2,541,441
|
$
|
2,954,393
|
The
amortization of discounts on notes payable for the years ended December 31, 2009
and 2008 was $200,189 and $44,765, respectively.
The
long-term note denoted a) was used to purchase the vessel Baoshun. Also see Note
4.
The
long-term notes obtained from DWSC and DWIG, two related parties, denoted b) and
c) were both used to purchase the vessel Andong. Also see Notes 4 and 7. The due
date of these notes were extended to July 19, 2012 on March 5, 2010. See Note
17.
Interest
expense for the years ended December 31, 2009 and 2008 was $148,087 and
$228,458, respectively.
The
repayment schedule for long-term notes payable is as follows:
Years Ended December 31,
|
Amount
|
|||
2010
|
$
|
3,326,132
|
||
2011
|
467,665
|
|||
2012
|
603,771
|
|||
2013
|
771,315
|
|||
2014
|
698,690
|
|||
Total
|
$
|
5,867,573
|
F-27
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
11. COMMITMENTS
The
Company leases office space under operating leases. Lease expense was $190,069
and $131,341 for the years ended December 31, 2009 and 2008,
respectively.
As of
December 31, 2009, future minimum payments required under non-cancelable leases
are:
Years Ended December 31,
|
Amount
|
|||
2010
|
89,443
|
|||
2011
|
10,871
|
|||
Total
|
$
|
100,314
|
12. INCOME
TAX
(a)
Income Tax Expense
Dalian
Winland International Shipping Agency Co. Ltd., Dalian Winland International
Logistic Co. Ltd. and Dalian Shipping Online Network Co. Ltd. are incorporated
under the laws of PRC and subjected by Chinese tax law. On March 16, 2007, the
National People’s Congress of China approved the Corporate Income Tax Law of the
People’s Republic of China (the “new CIT Law”), which was effective on January
1, 2008. Under the new CIT Law, the corporate income tax rate applicable to
these companies starting from January 1, 2008 is 25%.
Winland
Shipping Co., Limited, Treasure Way Shipping Limited, Kinki International
Industrial Limited, Bestline Shipping Limited, Lancrusier Development Co.,
Limited, and Winland International Shipping Co., Limited are incorporated and
registered in Hong Kong. All the income derived from these companies is exempt
from income tax under the local tax law; there is no income tax expense for the
years ended December 31, 2009 and 2008.
Win Star
Shipping Co., Limited and Bodar Shipping Co., Limited are incorporated and
registered in St. Vincent and Grenadines. Win Eagle Shipping Co., Limited, Win
Ever Shipping Co., Limited, and Win Bright Shipping Co., Limited are
incorporated and registered in Valletta, Malta. These five companies obtained
tax exemptions from the local governments, so they did not have any tax expense
for the year ended December 31, 2009 and 2008. Winland Dalian Shipping S.A. and
Win Glory S.A. are incorporated in Panama and are registered in HongKong. Win
Grace Shipping Co., Limited, Win Hope Shipping Co., Limited, Win Moony Shipping
Co., Limited are incorporated and registered in Valletta, Malta. Bodar Shipping
S.A., Win Moony Shipping S.A., and Bao Shun Shipping S.A. are incorporated and
registered in Panama. Since these companies are exempt from income tax under the
local tax law, they did not have any income tax for the years ended December 31,
2009 and 2008.
Effective
January 1, 2007, the Company adopted ASC 740-10 (formerly FASB Interpretation
No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FASB statement No.109,
Accounting for Income
Taxes). ASC 740-10 addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under ASC 740-10, we may recognize the tax benefit from an
uncertainty tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement. ASC 740-10 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased
disclosures.
F-28
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
12. INCOME
TAX (CONTINUED)
(a)
|
Income Tax Expense
(Continued)
|
Income
tax expense for the years ended December 31, 2009 and 2008 is summarized as
follows:
For The Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Current
|
$
|
(90,277
|
)
|
$
|
82,193
|
|||
Deferred
|
193
|
(100,020
|
)
|
|||||
Income
tax expense
|
$
|
(90,084
|
)
|
$
|
(17,827
|
)
|
The
Company’s income tax expense differs from the “expected” tax expense for the
years ended December 31, 2009 and 2008 (computed by applying the Hong Kong CIT
rate of 17.5 and PRC CIT rate of 25 to income before income taxes) as
follows:
For The Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Computed
“expected” benefit (expense)
|
$
|
1,163,567
|
$
|
(3,440,129
|
)
|
|||
Favorable
tax rates
|
(1,253,651
|
)
|
3,422,302
|
|||||
Income
tax expense
|
$
|
(90,084
|
)
|
$
|
(17,827
|
)
|
The tax
effects of temporary differences that give rise to the Company’s net deferred
tax assets and liabilities as of December 31, 2009 and 2008 are as
follows:
|
December 31, 2009
|
December 31, 2008
|
||||||
Deferred
tax assets (liabilities):
|
||||||||
Current
portion:
|
||||||||
General
and administrative expenses
|
$
|
-
|
$
|
6,718
|
||||
Service
revenue and commissions
|
2,434
|
(631
|
)
|
|||||
Valuation
allowance-short term
|
(732
|
)
|
(660
|
)
|
||||
Other
income
|
(164
|
)
|
-
|
|||||
Subtotal
|
1,538
|
5,427
|
||||||
Non-current
portion:
|
||||||||
Depreciation
expense
|
(31,454
|
)
|
(9,276
|
)
|
||||
Net
operating loss
|
135,585
|
97,740
|
||||||
Valuation
allowance
|
(105,281
|
)
|
(93,695
|
)
|
||||
Subtotal
|
(1,150
|
)
|
(5,231
|
)
|
||||
Net
deferred tax assets
|
$
|
388
|
$
|
196
|
F-29
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
12. INCOME
TAX (CONTINUED)
(b)
|
Tax Holiday
Effect
|
For 2009
and 2008 the Hong Kong corporate income tax rate was 17.5%. Certain subsidiaries
of the Company which were registered in Hong Kong are entitled to tax exemptions
as long as they do not operate in Hong Kong under the local tax law. Since these
companies do not have operations in Hong Kong, they did not have any income tax
expense for the years ended December 31, 2009 and 2008.
The
combined effects of the income tax expense exemptions and reductions available
to the Company for the years ended December 31, 2009 and 2008 is as
follows:
2009
|
2008
|
|||||||
Tax
holiday (benefit) expense
|
$
|
(1,253,651
|
)
|
$
|
3,422,302
|
|||
Basic
net (loss) income per share excluding tax holiday
effect
|
$
|
(0.04
|
)
|
$
|
0.14
|
13. DISCONTINUED
OPERATION
On August
18, 2009, the Company disposed of the Haoyue vessel to a related party, Dalian
Winland Shipping Co., Ltd. The net cash proceeds were $1,272,685, after
deducting tax expense of $28,350 from the gross proceeds of $1,301,035. Also see
Note 7.
The
following represents the vessel at the date of disposal:
|
August 18, 2009
|
|||
Vessel,
net
|
$
|
1,267,490
|
||
Net
asset
|
1,267,490
|
|||
Gross
proceeds from disposition
|
1,301,035
|
|||
Less:
Tax expense
|
(28,350
|
)
|
||
Net
proceeds
|
1,272,685
|
|||
Gain
from disposition of discontinued operation
|
$
|
5,195
|
In
accordance with ASC 205-20 (formerly SFAS 144, Accounting for the Impairment or
Disposal of Long-lived Assets ), the results of operations of Haoyue was
presented separately as discontinued operation in the consolidated statement of
loss and assets or liabilities of discontinued operation in the consolidated
balance sheet at December 31, 2008. The losses from the discontinued operation
of $ $214,461 were reflected in the Company’s statements of income (loss) and
comprehensive income (loss) for the year ended December 31, 2009.
F-30
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
13. DISCONTINUED
OPERATION (CONTINUED)
The
following is the unaudited pro forma net income of the Company for the years
ended December 31, 2009 and 2008 assuming the disposition of Haoyue was
completed on January 1, 2009 and 2008.
|
For The Year Ended December 31,
|
|||||||
|
2009
|
2008
|
||||||
Net
(loss) income
|
$
|
(6,744,494
|
)
|
$
|
19,084,001
|
|||
Weighted
average shares, basic and diluted
|
130,000,000
|
115,877,596
|
||||||
Net
(loss) income per share, basic and diluted
|
$
|
(0.05
|
)
|
$
|
0.16
|
F-31
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
14. SEGMENT
INFORMATION
The
Company determined that there are three reportable segments: (1) Dry bulk
shipping, (2) Chartering brokerage, and (3) Other activities segment. The other
activities segment comprises shipping agency, freight forwarding services and
online services. These operating segments were not separately reported as they
do not meet any of the quantitative thresholds under ASC 280-10 (formerly SFAS
No. 131, Disclosures about Segments of an Enterprise and Related
Information).
The
Company's segment information as of and for the years ended December 31, 2009
and 2008 are as follows:
The Year Ended
December 31, 2009
|
Dry Bulk
Shipping
|
Chartering
Brokerage
|
Other
Activities
|
Corporate
and
Eliminations
|
Consolidated
|
|||||||||||||||
Sales
to unaffiliated customers
|
$
|
24,935,494
|
$
|
20,785,940
|
$
|
4,457,287
|
$
|
-
|
$
|
50,178,721
|
||||||||||
Intersegment
sales
|
-
|
-
|
91,111
|
(91,111
|
)
|
-
|
||||||||||||||
Net
sales
|
24,935,494
|
20,785,940
|
4,548,398
|
(91,111
|
)
|
50,178,721
|
||||||||||||||
Costs
|
22,189,056
|
18,102,384
|
3,423,667
|
(91,111
|
)
|
43,623,996
|
||||||||||||||
Depreciation
and amortization
|
7,385,421
|
-
|
95,939
|
-
|
7,481,360
|
|||||||||||||||
Other
operating expenses
|
3,890,543
|
310,204
|
1,332,663
|
284,449
|
5,817,859
|
|||||||||||||||
Gain
from disposition of discontinued operation
|
-
|
-
|
5,195
|
-
|
5,195
|
|||||||||||||||
(Loss)
income from discontinued operation
|
(219,974
|
)
|
-
|
318
|
-
|
(219,656
|
)
|
|||||||||||||
Net
(loss) income
|
$
|
(8,749,500
|
)
|
$
|
2,373,352
|
$
|
(298,358
|
)
|
$
|
(284,449
|
)
|
$
|
(6,958,955
|
)
|
||||||
December 31, 2009
|
||||||||||||||||||||
Identifiable
assets
|
$
|
44,537,934
|
$
|
10,900,478
|
$
|
9,340,286
|
$
|
(2,977,188
|
)
|
$
|
61,801,510
|
The Year Ended
December 31, 2008
|
Dry Bulk
Shipping
|
Chartering
Brokerage
|
Other
Activities
|
Corporate
and
Eliminations
|
Consolidated
|
|||||||||||||||
Sales
to unaffiliated customers
|
$
|
57,482,423
|
$
|
22,027,720
|
$
|
4,695,858
|
$
|
-
|
$
|
84,206,001
|
||||||||||
Intersegment
sales
|
-
|
-
|
632,508
|
(632,508
|
)
|
-
|
||||||||||||||
Net
sales
|
57,482,423
|
22,027,720
|
5,328,366
|
(632,508
|
)
|
84,206,001
|
||||||||||||||
Costs
|
31,287,747
|
18,884,795
|
3,854,938
|
(632,508
|
)
|
53,394,972
|
||||||||||||||
Depreciation
and amortization
|
6,964,312
|
-
|
71,026
|
-
|
7,035,338
|
|||||||||||||||
Other
operating expenses
|
2,550,950
|
29,622
|
1,575,157
|
535,962
|
4,691,691
|
|||||||||||||||
(Loss)
income from discontinued operation
|
-
|
-
|
(12,663
|
)
|
-
|
(12,663
|
)
|
|||||||||||||
Net
income (loss)
|
$
|
16,679,414
|
$
|
3,113,303
|
$
|
(185,418
|
)
|
$
|
(535,962
|
)
|
$
|
19,071,337
|
||||||||
December 31, 2008
|
||||||||||||||||||||
Identifiable
assets
|
$
|
25,514,626
|
$
|
19,129,175
|
$
|
9,701,281
|
$
|
(2,555,996
|
)
|
$
|
51,789,086
|
F-32
WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
(FORMERLY
TRIP TECH, INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER
31, 2009 AND 2008
14. SEGMENT
INFORMATION (CONTINUED)
Information
for Company’s sales by geographical area for the years ended December 31, 2009
and 2008 are as follows:
|
For The Year Ended December 31,
|
|||||||
|
2009
|
2008
|
||||||
Sales
to unaffiliated customers:
|
||||||||
Japan,
Korea and Russia
|
$
|
27,734,345
|
$
|
33,682,400
|
||||
PRC
|
12,848,185
|
21,051,500
|
||||||
Southern
and Eastern Asia
|
6,883,315
|
16,841,200
|
||||||
Mediterranean
and Red Sea
|
-
|
8,420,600
|
||||||
Other
|
2,712,876
|
4,210,301
|
||||||
Total
|
$
|
50,178,721
|
$
|
84,206,001
|
15. LITIGATION
The
Company settled a litigation claim in September 2009 in connection with an oil
pollution accident that occurred in 2006 in Korea. The amount of the settlement
was $505,112 and was recorded as other expense in the consolidated statement of
(loss) income for the year ended December 31, 2009.
The
insured underwriter settled the accident in 2006. Since then, the Company had
not known any further claim related to such accident until January 2009 when the
Company received the Korean court order which showed the claim was made on
October 6, 2008. The
Company settled the claim in September 2009 after adjudication was made on
September 18, 2009, and the Company recognized the expense
immediately.
16. CONTINGENCIES
The
Company signed a voyage charter contract with Sinoriches Global Ltd. on
June 11, 2007. The Company canceled the contract on June 18, 2007.
Sinoriches Global Ltd. filed an arbitration claim of $501,640 including interest
for the dispute. As of December 31, 2009, the case is in the process of
exchanging documents and evidence for arbitration. The Company does not believe
the case will result in a significant unfavorable outcome.
17. SUBSEQUENT
EVENT
The
Company registered and incorporated For Tai Shipping Co., Ltd. and Won Lee
Shipping Co., Ltd. on March 1, 2010 in Hong Kong.
On March
5, 2010, the Company obtained an extension of the due date of two
long-term notes payables totalling $2,961,739 with related
parties from July 19, 2010 to July 19, 2012.
F-33