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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

(Mark One)

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the period from _________________ to __________________

Commission File Number 333-134991

_______________________________________________

BAOSHINN CORPORATION

(Exact name of registrant as specified in its charter)

______________________________________________

Nevada

 

20-3486523

(State or other jurisdiction of  

 

(I.R.S. Employer  

incorporation or organization)  

 

Identification No.)  

 

 

 

 

 

 

A-B 8/F Hart Avenue

 

 

Tsimshatsui, Kowloon, Hong Kong

 

N/A

(Address of principal executive offices)  

 

(zip code)  

Registrant‘s telephone number, including area code:

(852) 2815-1355

_____________________________________________

 

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

 

None.

 

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

Common Stock, $.001 par value per share

(Title of Class)

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

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

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

1

 

 


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]

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

Large accelerated filer [  ]

Accelerated filer [  ]

Non-accelerated filer [  ]

Smaller reporting company [ X ]

(Do not check if a smaller reporting company)

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

|  | Yes   | X | No.

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

655,000 common shares @ $0.02* = $13,100

*Average of bid and ask closing prices on June 30, 2011.

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

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

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

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

2,140,000 common shares issued and outstanding as of December 31, 2011

DOCUMENTS INCORPORATED BY REFERENCE:

None.

FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Baoshinn Corporation (the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.



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TABLE OF CONTENTS

PART I

 

Page

Item 1.

Business

4

   

Item 1A.

Risk Factors

10

   

Item 1B.

Unresolved Staff Comments

10

   

Item 2.

Properties

11

   

Item 3

Legal Proceedings

11

   

Item 4.

Mine Safety Disclosures

11

   

PART II

  

Item 5.

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

12

   

Item 6.

Selected Financial Data

13

   

Item 7.

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

13

   

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

22

   

Item 8.

Financial Statements and Supplementary Data

23

 

Report of Independent Registered Public Accounting Firm

23-24

 

Consolidated Balance Sheet

25

 

Consolidated Statement of Income

26

 

Consolidated Statement of Cash Flows

27

 

Consolidated Statements of Stockholders’ Equity and             Comprehensive Income

28

 

Notes to Consolidated Financial Statements

29

   

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

50

   

Item 9A.

Controls and Procedures

51

   

Item 9B.

Other Information

51

   

PART III

  

Item 10.

Directors, Executive Officers and Corporate Governance

51

   

Item 11.

Executive Compensation

53

   

Item 12.

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

54

   

Item 13.

Certain Relationships and Related Transactions, and Director Independence

55

   

Item 14.

Principal Accounting Fees and Services

57

   

Item 15.

Exhibits, Financial Statement Schedules

57

   
 

Signatures

59



3



PART I

ITEM 1.  BUSINESS.

Background

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

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

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

 

Effective on October 19, 2011, each of ten (10) shares of the Company’s Common Stock, par value $.001 per share, issued and outstanding immediately prior to that date, the “Old Common Stock” were automatically and without any action on the part of the shareholders, reclassified and changed into one (1) share of the Company’s outstanding Common Stock, the “New Common Stock”

Government Approval/Regulations

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

1.

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

2.

Its only business is travel-related and tourism.

3.

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

4.

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

5.

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

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



4



Baoshinn International Express Background

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

Chartered Flights

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

Business Objective

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

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

Description of Services

Ticketing Agency

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

Hotel/Accommodation Arrangement

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

Inbound Division

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



5

China Division

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

Corporate Division

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

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

Operation

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

BSIE has 17 employees, and BSHL has 15 employees as of the end of 2011.

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

Ordinary Membership of the TIC shall meet the following criteria:

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

Market Overview

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

1.

In 2010, there were 36.03 million visitors to Hong Kong, a growth of 21.8%% compared to 2009. Source: Hong Kong Tourism Board, 2010.

2.

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



6


 

3.

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

4.

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

 

PEOPLES REPUBLIC OF CHINA

Market Overview

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


 

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Total Overnight Visitors Spending Per Capita (HKD$)

4.588

4.904

5.041

4.478

4.663

4.799

5.122

5.439

5.770

6.728

Percentage Growth (%)

0.5

6.9

4.2

11.2

4.1

2.9

6.7

6.2

6.1

16.6

Source:  Hong Kong Tourism Board, 2010

·

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

·

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

Travel Policy Changes

·

Benefiting from the progressive extension of the Individual Visit Scheme (IVS), Mainland China was the origin for more than half the total visitors to Hong Kong in 2010.

·

The Individual Visit Scheme (IVS) was originally implemented in July, 2003. On July 1, 2004, IVS was launched in a total of 32 cities in southern and eastern China, permitting residents to travel to Hong Kong as individuals. Previously the Chinese Government only allowed groups to travel to Hong Kong. During 2010, 14.24 million Mainland visitors traveled to Hong Kong under IVS, representing 62.8% of the total Mainland arrivals, which is 34.5% more than in 2009.



7


·

Starting in July, 2002, Mainland China Visitors were allowed to exchange foreign currencies freely in unlimited amounts with commercial banks. In January 2005, the Chinese Government increased the cash limit that may be carried by visitors from Mainland China to Hong Kong from US$749 to US$2,497.

 Source: Hong Kong Tourism Board, 2010.

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

Marketing Strategies

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

Our marketing strategies include the following:

·

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

·

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

·

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

·

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

·

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

·

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

·

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



8


·

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

·

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

Marketing Techniques

Air Tickets wholesale (core business):

·

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

·

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

·

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

·

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

·

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

·

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

·

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

Corporate travel:

Our current market techniques to promote corporate are:

·

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

·

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

·

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

·

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

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

Our current market techniques to promote inbound travel are:

·

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

·

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

·

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

Competition and Market Trends

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

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

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



9

Limitations & Regulations

·

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

·

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

·

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

·

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

·

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

·

Fewer people in China have credit cards.

·

As a developing country, consumers in China are not confident in internet transactions. They are more likely to accept physical human contact, or a paper ticket where they can see what they get.

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

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

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

Employees

We have approximately 32 employees in Hong Kong.

ITEM 1A.  RISK FACTORS.

Not Applicable as a smaller reporting company.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

 

10

ITEM 2.  PROPERTIES.

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


Name of Landlord

Property location

Rental Charges Monthly

Duration

Lease Contract Under

Wan Shinn Motors

Company Limited

Room A&B, 8/F, 8 Hart Avenue,

Tsim Sha Tsui, Kowloon.

$3,094

01/01/2010 -

12/31/2011

Bao Shinn International Express

     

Tak Shing Investment Co. Ltd.

Room 208 Tak shing House. 20 Des Voeux Road Central, Hong Kong

$4,965

07/28/2010 -

07/27/2012

Bao Shinn Holidays Limited

 

 

Twelve Months Ending

December 31:

Future Minimum

Lease Payments

$

  

December 31, 2012

29,819

  

December 31, 2013

-

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

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

ITEM 3.  LEGAL PROCEEDINGS.

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

ITEM 4.  MINE SAFETY DISCLOSURES.

Not Applicable.

 

11

 

PART II

 

ITEM 5.  MARKET FOR REGISTRANT‘S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

(a)

MARKET INFORMATION. Our common shares are quoted for trading on the OTC Bulletin Board under the symbol “BHNN”. The closing price of our common stock, as reported by the OTC Bulletin Board on December 31, 2011, was $.02.

 

National Association of Securities Dealers OTC Bulletin Board*

Quarter End

High

Low

March 31, 2008

.40

.30

June 30, 2008

.39

.10

September 30, 2008

.10

.07

December 31, 2008

.21

.07

March 31, 2009

.21

.21

June 30, 2009

.21

.02

September 30, 2009

.02

.02

December 31, 2009

.02

.02

March 31, 2010

.02

.02

June 30, 2010

.021

.021

September 30, 2010

.022

.022

December 31, 2010

.045

.045

March 31, 2011

.025

.02

June 30, 2011

.02

.02

September 30, 2011

.02

.02

December 31, 2011

.02

.02

*

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

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

(b)

HOLDERS. As of December 31, 2011, we had approximately 25 shareholders of record who held 2,140,000 shares of the Company‘s common stock. This number of shareholders does not include shareholders whose shares are held in street or nominee names. We believe that as of December 31, 2011, there are approximately 73 beneficial owners of our Common Stock, when these shareholders are considered.

(c)

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

 

 

12

(d)

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

 

 

 

 

 

 

 

Plan Category

 

 

 

Number of Securities to

Be Issued Upon Exercise

of Outstanding Options,

Warrants and Rights

 

 

 

Weighted-Average Exercise Price of

Outstanding Options,

Warrants and Rights

Number of Securities

Remaining Available

for Future Issuance

Under Equity

Compensation Plans

(Excluding Securities

 Reflected in Column)

Equity compensation plans approved by security holders

None

Nil

Nil

(e)

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

ITEM 6.  SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS.

 

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

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

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

 

 

13

A.

Operating Results

We are a relatively small consolidator of hotel accommodations and airline tickets in Hong Kong. We aggregate information on hotels and flights and enable our customers to make informed and cost-effective hotel and flight bookings. Our customers are mainly retail travel agencies in Hong Kong, and corporate travelers. We generate a very small portion of our revenue from referral commissions when we refer our clients to other travel product providers such as package tour companies. We also receive incentive commissions from our travel services supplier such as airlines based on our contract with suppliers.

In the twelve months ended December 31, 2011, we derived 98.5%, 0.3% and 1.2% of our total revenues from our retail & corporate clients, referral commissions and airline incentive commissions respectively.

Major Factors Affecting the Travel Industry

A variety of factors affect the travel industry in Hong Kong, and hence our results of operations and financial condition, including:

Growth in the Overall Economy and Demand for Travel Services in Hong Kong. We expect that our financial results will continue to be affected by the overall growth of the economy and demand for travel services in Hong Kong and the rest of the world. Hong Kong economy is highly influenced by China’s economy. Any adverse changes in economic conditions of China and the rest of the world, such as the global financial crisis and economic downturn, could have a material adverse effect on the travel industry in Hong Kong, which in turn would harm our business.

Seasonality in the Travel Service Industry. The travel service industry is characterized by seasonal fluctuations and accordingly our revenues may vary from quarter to quarter. To date, the revenues generated during the summer season of each year generally are higher than those generated during the winter season, mainly because the summer season coincides with the peak business and leisure travel season, while the winter season of each year includes the Christmas and Chinese New Year holiday, during which our customers reduce their business activities.

Disruptions in the Travel Industry. Individual travelers tend to modify their travel plans based on the occurrence of events such as:

·

The outbreak of HIN1 influenza, avian flu, SARS or any other serious contagious diseases;

·

Increased oil prices resulting fuel surcharge;

·

Increased occurrence of travel-related accidents;

·

Natural disasters or severe weather conditions;

·

Terrorist attacks or threats of terrorist attacks or war;

·

Any travel restrictions or security procedures

In early 2003, several regions in Asia, including Hong Kong and China, were affected by the outbreak of SARS. The travel industry in China, Hong Kong and some other parts of Asia suffered tremendously as a result of the outbreak of SARS. Furthermore,

In 2009, an outbreak of H1N1 influenza (swine flu) occurred in Mexico and the United States and human cases of the swine flu were discovered in China and Hong Kong.

In 2010, the political instability and riots in Thailand disrupted all the holiday travelers canceled holiday booking to the region.

In 2011, the earthquake, Tsunami and nuclear power station failure in Japan resulted in major airlines in Hong Kong temporarily canceling all the flights to Japan. Our business and operating results were adversely affected by these events.

Major Factors Affecting the Our Business

Our main business comes from retail and corporate travelers, however, we are also vulnerable to all the above general factors, which affect the travel industry. In particular, we are more sensitive to the disruption in the Southeast Asia region including Philippines, Thailand, Indonesia, Malaysia, and Taiwan.

During 2010, our biggest travel destination market was Thailand, and Thailand had a politically volatile year with marches and demonstrations disrupting tourist travel. The Hong Kong government issued several travel advisories for Thailand (Bangkok in particular), which caused a decline in ticket sales. The political situation in Thailand stabilized by the end of 2010.

 

 

14

 

 

Results of Operations for the twelve months ended December 31, 2011 compared to the twelve months ended December 31, 2010

The following table sets forth a summary of our consolidated statements of operations for the periods indicated.

 

 

Twelve months Ended

December 31 2011

 

 Twelve months Ended

December 31, 2010

 

 

 $

 

 $


 

 

 

 


Retail and Corporate revenue

 37,956,836

 

 30,161,944


Referral Commission from travel booking services

 112,419

 

 117,873


Incentive commissions

 471,055

 

 320,610


 

 

 

 


Net sales

 38,540,310

 

 30,600,427


Cost of sales

 (37,134,094)

 

 (29,252,793)


 

 

 

 


Gross profit

 1,406,216

 

 1,347,634


Other operating income

 38,755

 

 59,226


Depreciation

 (20,407)

 

 (21,601)

 

Administrative and other operating expenses

 (1,313,978)

 

 (1,284,499)

 
 

 

 

 


Income/(Loss) from operations

 110,586

 100,760


Other non-operating income - Note 6

 9,672


 4,917

 

Interest expenses – Note 7

 (1,685)

 

 (1,779)

 
 

 

 

 


Income/(Loss) before income taxes

 118,573

 

 103,898


Income taxes - Note 8

 (9,111)

 

 (24,433)


 

 

 

 


Net Income/(Loss)

 109,462

 

 79,465


Non-controlling interest

 (20,689)

 

 (53,711)

 
 

 

 

 


Net Income/(Loss) attributable to The Group

 88,773

 

 25,754



15

Revenues

Revenues Composition and Sources of Revenue Growth

 

 We have experienced revenue growth in the past 12 months.  Our total revenues grew from USD 30.6 million for the twelve months ended December 31, 2010 to USD 38.5 million for the twelve months ended December 31, 2011, representing a grow rate of  26%.

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


 

Twelve months ended

 December 31, 2011

Twelve months ended

December 31, 2010

 


 
 

%

%

 

Retail and Corporate revenue

 98.5%

 98.6%

 

Commission from travel booking services

 0.3%

 0.4%

 

Incentive commissions

 1.2%

 1.0%

 
 

 

 

 

Total revenue

 100%

 100%

 

We generate our revenues primarily from retail and corporate business. Our source of growth also mainly comes from growth in the primary and corporate business.  We are not relying on referral commissions and incentive commissions as our retail source of revenue, because these commissions represent a fraction of our total revenues. We refer our clients to other travel product providers when we cannot provide services our clients are seeking. We see such referrals as an added value service in terms of widening our client base. We also do not rely on airline incentive commission, as the airlines are cutting back on these commissions due to online booking technologies, which have become more prevalent in the past ten years. As a result, airlines are more and more reluctant to give away commissions to travel agencies. Instead we have developed our relationships with airlines in order to obtain better wholesale pricing.

Retail and Corporate Revenue

Revenues from retail and corporate travel services are recognized when the travel service provided by us is completely delivered. We present revenue from such transactions on a gross basis in the consolidated statements of comprehensive income, as we act as a principal, thereby assuming inventory and credit risks.  We also have the primary obligation to the airlines or hotels for cancelled air tickets, packaged tour products or hotel reservations. We also have discretion in determining the service prices. As a result of this, we can change the product by combining air ticket and hotel accommodations with local car transportation and other ancillary services to create a holiday package or business travel solution for our customers.

Retail and corporate revenue is our main source of revenue growth. Retail and corporate revenue grew from $30.2 Million in the twelve months ended December 31, 2010 to $38 Million in the twelve months ended December 31, 2011, representing a growth rate of 25.8%. We attribute the growth mainly to the stable global economic recovery in the twelve months ended December 31, 2011 compared to the twelve months ended December 31, 2010. We see an increase of transaction volume in terms of increased numbers of travelers in both our retail agency section and corporate travel section.

We also believe we had a relatively stable year in 2011 compared to 2010 in terms of general travel disruption events, as previously discussed. We have had difficult years from 2008 to 2010 due to multiple negative factors previously mentioned. The uncertainty of global economy recovery from the 2008 financial crisis, lead to a significant reduction of business travelers. We saw our corporate clients limit business travel expenses as cost reduction strategy. With the 2009 outbreak of H1N1 influenza (swine flu), we also saw a significant reduction in the number of retail flight bookings.


16



During 2010, our biggest travel destination market, Thailand, had a politically volatile year, with marches and demonstrations disrupting tourist travel. The Hong Kong government issued several travel advisories for Thailand (Bangkok in particular) which caused a decline in ticket sales. The political situation in Thailand had stabilized by the end of the year. However the negative impact from Thailand was offset by the improving global economic recovery.

We maintained our good relations with the various airlines specializing in the South Asia region. We were recognized by Eva Airline as its top selling agent in Hong Kong in 2010. Eva Airlines operates both short haul routes within Southeast Asia and long haul routes, including North America and Europe. We have also been appointed as a first tier agent for two additional airlines, i.e., HongKong Airlines & HongKong Express during 2009. Hong Kong Airlines mainly operated flights originating from Hong Kong to destinations in Asian cities, including Bangkok, Kuala Lumpur, Manila, and major cities in Japan. HongKong express mainly operates flights originating from Hong Kong to mainland China second tier cities, including Changsha, Fuzhou, Hangzhou, Hefei, Guiyang etc.

Referral fees for travel booking services

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

Incentive commission from travel suppliers

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

Cost of Sales and Gross Profit

 

Costs of sales are costs directly attributable to rendering our revenues, which consist primarily of payments for travel costs to airlines and suppliers. Cost of sales accounted for 96.4% of our revenue in the twelve months ended December 31, 2011 and 95.6% of our revenues in the twelve months ended December 31, 2010.

The table below sets forth the cost of sales as a percentage of revenue for the periods indicated.


 

Twelve months ended

December 31, 2011

Twelve months ended

December 31,  2010

 

$

 

$

 

Total revenue

38,540,310

  

      30,600,427

 

Cost of sales

  (37,134,094)

96.4%

 

(29,252,793)

95.6%

Gross profit

              1,406,216

           3.6%

 

           1,347,634

   4.4%



17

Increase in Cost of Sales

Our cost of sales increased from 95.6% in the twelve months ended December 31, 2010 to 96.4% in the twelve months ended December 31, 2011. A large part of the increase in the cost of sales is directly related to the increase in the fuel surcharge that the airlines levy. This surcharge is dependent upon the price of jet fuel, which is affected by the price of oil. In 2011 the fuel surcharge increased approximately 30%. We in turn pass this surcharge on to our clients.

Decrease in gross profit margin

Our gross profit margin rate decreased from 4.4% for the twelve months ended December 31, 2010, to 3.6% for the twelve months ended December 31 2011. The fuel surcharges lead to an increase in air ticket price, however the gross profit per ticket stayed the same, consequently the gross profit margin rate decreases.

Fuel surcharges are announced at the end of each month. In our experience however, we find that the prices tend to be sticky on the upside, as the airlines try to protect themselves from the volatile price swings that the commodities markets have experienced. We anticipate these fuel surcharges will remain high for the time being, with the airlines preferring to offer discounts as a way to incentivize consumers to travel, rather than decreasing the surcharge.

Operating Expenses

Overview

Total operating expenses for the twelve months ended December 31, 2011 were $1,313,978 or 3.4% of revenues, while the operating expenses for twelve months ended December 31, 2010 were $1,284,499 or 4.2% of revenues. Our operating expenses decreased slightly regardless of the high inflation in Hong Kong. This is mainly attributed to our cost reduction strategy, which we began implementing in 2007.

The Table below sets forth the main category of our expenses both in dollar amount and as a percentage of total revenue with the periods indicated,

 

Twelve months ended December 31, 2011

% of Revenue

Twelve months ended December 31, 2010

% of Revenue

Salaries, commission, allowance

$912,064

2.4%

$894,046

2.9%

Legal & Professional fees

   24,487

0.1%

   35,912

0.1%

Office Rental

  96,703

0.2%

  96,877

0.3%

Other operating expenses

280,724

0.7%

257,664

0.9%

 

$1,313,978

3.4%

$1,284,499

4.2%

Salaries, Commissions and Allowances

Salaries, Commissions and Allowances increased slightly from $894,046 for the twelve months ended December 31, 2010 to $912,064 for the twelve months ended December 31, 2011, reflecting an increase in salaries in line with the general inflation rate in Hong Kong.

Legal and Professional Fees

Legal and professional fees for the twelve months ended December 31, 2011 were $24,487 or 0.1% of revenues, while the legal and professional fees for twelve months ended December 31, 2010 were $35,912 or 0.1% of revenues. Legal and professional fees in the year ended in 2011 were lower compared to the year ended in 2010, mainly due to additional SEC comments we responded to in that year.

 

18

 


Office Rental

Office rental for the twelve months ended December 31, 2011 was $96,703 or 0.2% of revenues, while the Office rental for the twelve months ended December 31, 2010 were $96,877 or 0.3% of revenues.  Office rental expenses in the current period were consistent with the same period last year.

Other General and Administration Expenses

Other expenses for the twelve months ended December 31, 2011 were $280,724 or 0.7% of revenues, while the other expenses for the twelve months ended December 31, 2010 were $257,664 or 0.9% of revenues. The expenses in the current period were consistent with the same period last year.

 

Other operating income


  

Twelve months  Ended

 

Twelve months     Ended

  

Dec 31, 2011

 

Dec 31, 2010

  

audited

 

audited

     

GDS commission income

 

5,793

 

-

Refund Write back

 

-

 

24,580

Management service income

 

32,962

 

34,646

   

 

 
  

38,755

 

59,226

Commission Income

Commission income for the twelve months ended December 31, 2011 was $5,793 compared to nil for the twelve months ended December, 2010. During the twelve months ended December, 2011, we increased the number of tickets booked through a lower percentage commission booking system, which resulted in lower commissions.

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

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

We encourage our consultants to use the GDS that has the best compensation structure, however, a balance between operational efficiency is also considered. Some airlines are more user friendly with a specific GDS, also with each travel consultancy’s experience with different systems, we leave it to the consultant’s discretion to choose the GDS the consultant prefers.


19

Management Service Income

Management service income represents compensation from a related party, Bao Shinn Express Company Limited (“BSEL”). BSEL currently holds 38.55% of our outstanding common stock. We have provided management services to BSEL on business operations and general travel industry knowledge. Management service income from BSEL was $32,962 in the twelve months ended December 31, 2011, compared to $34,646 in the twelve months ended December 31, 2010.

We recognize the management service as “other operating income”, as our management team is part of its operation team. Accordingly, the revenue generated by the management team is considered part of our operations.

Refund Write back

There was no refund write back for the year ended December 31, 2011 compared to the refund write back of $24,580, which we received in the previous year.

Exchange Gain

The exchange gain was $2,214 for the twelve months ended December 31, 2011 compared to nil in the twelve months ended December 31, 2010. This was attributable to a more stable rate of the Hong Kong Dollar against foreign currencies, including the U.S. Dollar, RMB and the Thai Baht for the twelve months ended December 31, 2011.

We pay overseas suppliers in their currency, and charge our customers in HK dollars, with the exchange rate determined at the point of invoicing. Because of the timing difference between payments and receipts, we incur exchange differences in transactions with overseas suppliers. We recognize the gain or loss as “non-operational income or expense” because these gains or losses are not generated by operations.

Interest Income

This interest was earned from bank savings and fixed deposit accounts. Interest income was $22 for the twelve months ended December 31, 2011, compared to $16 for the twelve months ended December 31, 2010.  This lower interest earning reflected a very low bank interest note prevailing for the past few years, since the 2008 financial crisis.

 

Net Income

Our net income was $88,773 for the twelve months ended December 31, 2011, compared to a net income of $25,754 for the twelve months ended December 31, 2010. The increase in net income for the twelve months ended December 31, 2011 compared to the same period last year was mainly due to the improvement in the global economy in the twelve months ended December 31, 2011 compared to the twelve months ended December 31, 2010, which resulted from an increase in gross profit as well as our strict implementation of our cost reduction initiative since 2007.

 

B.

Liquidity and Capital Resources

Operating Activities Going Concern

We had a net income of $88,773 for the twelve months ended December 31, 2011 and a net loss since inception of $1,167,418. On December 31, 2010 we had cash on hand of $547,485. The accumulative loss has raised substantial doubt about our ability to continue as a going concern. These doubts were outlined in our independent auditor’s report on our consolidated financial statements for the year ended December 31, 2011, which are included in this annual report on Form 10-K. Although our consolidated financial statements raise substantial doubt about our ability to continue as a going concern, they did not include any adjustments relating to recoverability and classification of recorded assets, or the amounts or classifications of liabilities that might be necessary in the event we cannot continue as a going concern. Certain of our shareholders have verbally agreed to provide continuing financial support to us for future losses we may incur.

 

 

20

 

Liquidity


The following table sets forth the summary of our cash flows for the periods indicated:


 


          For Twelve Months        

Ended

Dec 31, 2011



For Twelve Months

Ended

Dec 31, 2010

 

(audited)


(audited)

 

$


$

 

 



Net cash flows generated from/( used in) operating activities

 831,159

 

 396,955

 

 


 

Net cash flows (used in)/provided by investing activities

 (13,848)


(10,758)

 

 


 

Net cash flows provided by/(used in) financing activities

 (4,753)


(96,962)

    

Net increase/(decrease) in cash and cash equivalents

812,558

 

289,235

Effect of foreign currency translation

 1,314


(1,905)

Cash and cash equivalents - beginning of year

 547,485


260,155

  




Cash and cash equivalents - end of period


1,361,357



547,485

Operating Activities

Net cash generated in operating activities was $831,159 for the twelve months ended December 31, 2011, compared to net cash provided by operating activities of $396,955 for the twelve months ended December 31, 2010. The increasing cash generated during the twelve months ended December 31, 2011 is mainly due to increased transaction volume.

Investing Activities  

Net cash used in investing activities was $13,848 for the twelve months ended December 31, 2011, compared to net cash used in investing activities of $10,758 for the twelve months ended December 31, 2010. The cash used in investing activities is mainly for the purchase of new office equipment and computer hardware.

 

21

 

Financing Activities

For the twelve months ended December 31, 2011 and 2010, there were no external financing activities. From time to time, related parties of the company finance the working capital requirement for operations on a temporary basis.  This financing is provided in the form of advance temporary loans to the Company.

The net cash used from a related party’s loan was $4,753 for the twelve months ended December 31, 2011.  These funds were used to help bridge the working capital gap, compared to loans of $96,962 from related parties during the twelve months ended December 31, 2010. The decrease in borrowing from related parties is due to better working capital flow from operations.


The amounts due to related parties are interest-bearing loans that earn interest at a rate of 5.5% (2010: 5.5%) per annum.  These loans are unsecured and have no fixed repayment terms.

A.

Off-balance Sheet Arrangements

The Company does not have off-balance sheet arrangements as of December 31, 2011.

B.

Tabular Disclosure of Contractual Obligations

The Company’s known contractual obligations as of December 31, 2011 are disclosed in the following table:


Contractual obligations

Payment due by period

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

Long Term Debt Obligations

0

0

0

0

0

Capital Lease Obligations

0

0

0

0

0

Operating Lease Obligations

29,819

29,819

0

0

0

Purchase Obligations

0

0

0

0

0

Other Long Term Obligations

0

0

0

0

0

Total

29,819

29,819

0

0

0

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

Not Applicable.

 

22

 

 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.             

Baoshinn Corporation

Consolidated Financial Statements

For the Year Ended December 31, 2011and 2010

(Stated in US Dollars)

 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of

Baoshinn Corporation


We have audited the accompanying consolidated balance sheet of Baoshinn Corporation (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2011 and the related consolidated statements of income, stockholders’ equity and comprehensive income and cash flows for the year ended December 31, 2011.  These consolidated financial statements are the responsibility of The Group’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Group and its subsidiaries as of December 31, 2011 and the consolidated results of their operations and their cash flows for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.


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

 

Albert Wong & Co.

Certified Public Accountants

Hong Kong

March 30, 2012

 

23



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 


To the Board of Directors and Stockholders of Baoshinn Corporation

 

We have audited the accompanying consolidated balance sheet of Baoshinn Corporation (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2010 and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the year ended December 31, 2010.  These consolidated financial statements are the responsibility of The Group’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Group and its subsidiaries as of December 31, 2010 and the consolidated results of their operations and their cash flows for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.


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


Dominic K.F. Chan & Co.

Certified Public Accountants

Hong Kong

March 30, 2011



24



BAOSHINN CORPORATION


CONSOLIDATED BALANCE SHEET

(Stated in US Dollars)


 

At December 31,

 

2011


2010

 

$


$

ASSETS



 

   Current Assets



 

Cash and cash equivalents

1,361,357

547,485

Accounts receivable

2,058,647

1,713,856

      Deferred cost – note 13

2,078,605

1,200,598

      Restricted cash

12,877

12,861

Deposits, prepaid expenses and other receivables – Note 9

986,485

774,075

      Amount due from related party – note 12

4,437

-

      Income tax prepaid

15,311

-

 




Total Current Assets

6,517,719


4,248,875

Plant and equipment – Note 10

34,789

41,475

 



TOTAL ASSETS

6,552,508


4,290,350

 




LIABILITIES AND STOCKHOLDERS’ EQUITY




 




LIABILITIES




   Current Liabilities




Accounts payable

3,080,100


1,810,395

Deferred revenue – note 13

2,094,307


1,217,300

Other payables and accrued liabilities – Note 11

438,019


414,354

Income tax payable

-


18,568

Amounts due to related parties – Note 12

-


300

 



Total current liabilities

5,612,426


3,460,917

 



TOTAL LIABILITIES

5,612,426


3,460,917

 




COMMITMENTS AND CONTINGENCIES – Note 18




 




STOCKHOLDERS’ EQUITY




Common stock




Par value : 2011 - US$0.01 (2010: US$0.001)




Authorized: 2011 – 300,000,000 common shares, 100,000,000 preferred shares (2010:200,000,000 common shares)




Issued and outstanding: 2011 – 2,140,000 shares (2010 – 21,400,000)

21,400


21,400

Additional paid-in capital

1,793,596


1,793,596

Accumulated other comprehensive income

(399)


(1,329)

Accumulated deficit

(1,078,645)


(1,167,418)

 




TOTAL STOCKHOLDERS’ EQUITY OF THE GROUP

735,952


646,249

ATTRIBUTABLE TO NON-CONTROLLING INTERESTS

204,130


183,184

 




ATTRIBUTBLE TO THE GROUP

940,082


829,433

 




TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

6,552,508


4,290,350

See notes to consolidated financial statement.

 

 

25


BAOSHINN CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(Stated in US Dollars)


 

 For Year Ended

 31 Dec, 2011

 

 For Year Ended

31 Dec, 2010

 

 

 $

 

 $


 

 

 

 


Retail and Corporate revenue

 37,956,836

 

 30,161,944


Commission from travel booking services

 112,419

 

 117,873


Incentive commissions

 471,055

 

 320,610


 

 

 

 


Net sales

 38,540,310

 

 30,600,427


Cost of sales

 (37,134,094)

 

 (29,252,793)


 

 

 

 


Gross profit

 1,406,216

 

 1,347,634


Other operating income – Note 5

 38,755

 

 59,226


Depreciation

 (20,407)

 

 (21,601)

 

Administrative and other operating expenses

 (1,313,978)

 

 (1,284,499)

 
 

 

 

 


Income from operations

110,586

100,760


Other non-operating income - Note 6

9,672


4,917

 

Interest expenses – Note 7

 (1,685)

 

 (1,779)

 
 

 

 

 


Income before income taxes

 118,573

 

 103,898


Income taxes - Note 8

 (9,111)

 

 (24,433)


 

 

 

 


Net Income

 109,462

 

 79,465


Non-controlling interest

 (20,689)

 

 (53,711)

 
 

 

 

 


Net Income attributable to the Company

 88,773

 

 25,754


 

 

 

 


Earnings per share of common stock – Note 4

 

 

 


  - Basic

4.15 cents

 

1.20 cents*


  - Diluted

4.15 cents

 

1.19 cents*


 

 

 

 


Weighted average number of common stock – Note 4

 

 

 


  - Basic

 2,140,000

 

 2,140,000*


  - Diluted

 2,140,000

 

 2,168,851*


 

*As the number of common shares outstanding decreases as a result of a reverse stock split during the year ended December 31, 2011, the computations of basic and diluted EPS shall be adjusted retroactively for all periods presented to reflect that change in capital structure.


See notes to consolidated financial statements

 

 

 

26





BAOSHINN CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in US Dollars)



 


For Year Ended

Dec 31, 2011



For Year Ended Dec 31, 2010

 
 

$


$

 

Cash flows from operating activities

 



 

Net Income

 88,773


 25,754

 

Adjustments to reconcile net income to net cash flows provided by operating activities:

 


 

 

Depreciation

 20,407


 21,601

 

   Bad debts written off

 21,781


 9,773

 

   Stock based compensation

 -


 15,333

 

   Non-controlling interest

 20,689


 53,711

 

Changes in operating assets and liabilities:

 


 

 

Accounts receivable

 (366,572)


 (522,918)

 

   Deferred cost

 (878,007)


 (783,947)

 

Deposits, prepaid expenses and other receivables

 (212,410)


 14,628

 

Accounts payable

1,269,705

605,932

 

Deferred revenue

877,007

797,869

 

Other payables and accrued liabilities

 23,665


 146,788

 

Income tax payable

 (33,879)


 12,431

 
 


 

Net cash flows generated from operating activities

831,159


396,955

 
 


 

Cash flows from investing activity


 

Acquisition of plant and equipment

(13,848)


(10,758)

 
 
 

Net cash flows (used in) investing activity

(13,848)


(10,758)

 
 


 

Cash flows from financing activities


 

Amounts due from related parties

(4,437)


87,029

 

Amounts due to related parties

(300)

(113,253)

 

Increase in restricted cash

(16)

(12,861)

 

Dividend paid to non-controlling interest

-

(57,877)

 
 


 

Net cash flows (used in) financing activities

(4,753)


(96,962)

 
 


 

Net increase in cash and cash equivalents

812,558


289,235

 

Effect of foreign currency translation on cash and cash equivalents

1,314


(1,905)

 

Cash and cash equivalents - beginning of year

547,485


260,155

 
 


 

Cash and cash equivalents - end of year

1,361,357


547,485

 
 


 

Supplemental disclosures for cash flow information :


 

Cash paid for :


 

Interest

456


736

 

Income taxes

42,985


12,002

 
 



 

See notes to consolidated financial statements.



27



BAOSHINN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

 (Stated in US Dollars)


       

 Accumulated

 

 

 

 

     

Additional

 

 other

 

 

 

 

 

Common stock

 

paid-in

   comprehensive

 Accumulated

 
 

 Shares

 

 Amount

 

   capital

 

 Income

deficit

 

 Total

 

 

 

 $

 

$

 

 $

 $

 

 $

 

 

 

 

   

 

 

 

 

 

Balance, December 31, 2009

21,400,000

 

21,400

 

1,778,263

 

32

 

(1,193,172)

 

606,523

Stock based compensation

    

15,333

 

-

 

-

 

15,333

Comprehensive income

      


 


 


Net Income

-

 

-

 

-

 

-

 

25,754

 

25,754

Foreign currency translation

      


 


 


adjustments

-

 

-

 

-

 

(1,361)

 

-

 

(1,361)

Total comprehensive income

-

 

-

 

-

 

(1,361)

 

25,754

 

24,393

Balance, December 31, 2010

21,400,000

 

21,400

 

1,793,596

 

(1,329)

 

(1,167,418)

 

646,249

Comprehensive income

      


 


 


Net Income

-

 

-

 

-

 

-

 

88,773

 

88,773

Foreign currency translation

      


 


 


adjustments

-

 

-

 

-

 

930

 

-

 

930

Total comprehensive income

-

 

-

 

-

 

930

 

88,773

 

89,703

       


 


 


Reverse stock split

(19,260,000)

 

-

 

-

 

-

 

-

 

-

       


 


 


Balance, December 31, 2011

2,140,000

 

21,400

 

1,793,596

 

(399)

 

(1,078,645)

 

735,952

See notes to consolidated financial statements


28



BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1.

Corporation information

Baoshinn Corporation (the “Company”) was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc.

On May 10, 2002, Bao Shinn International Express Limited (“BSIE”), a privately-held corporation, was incorporated in Hong Kong.

On March 31, 2006, the Company consummated a merger (the “merger”) with BSIE by issuing 16,500,000 shares in the share exchange transaction for 100% of the issued and outstanding shares of BSIE common stock.  As a result of the share exchange transaction, BSIE became our wholly-owned subsidiary.

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

During the year ended March 31, 2009, Baoshinn Corporation and its subsidiaries (collectively referred to as the Group) issued 2,400,000 restricted common shares of $0.001 per share at a value of $0.3 per share with a net proceeds of approximately $624,000 and redeemed 2,500,000 restricted common shares and these shares are classified as not issued and outstanding.

Effective on October 19, 2011, each of ten (10) shares of the Company’s Common Stock, par value $.001 per share, issued and outstanding immediately prior to the Effective Time, the “Old Common Stock” shall automatically and without any action on the part of the holder thereof, be reclassified as and changed, pursuant, into one (1) share of the Company’s outstanding Common Stock, the “New Common Stock”

 

2.

Description of business

 

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

 

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

 

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



29


BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3.

Going concern

 

The financial statements have been prepared in accordance with generally accepted principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Although the Company generated a net profit of $88,773 for the year ended December 31, 2011 and $25,754 for the year ended December 31, 2010, it had an accumulated deficit of $1,078,645 and $1,167,418 as at December 31, 2011 and 2010.

 

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

4.

Summary of significant accounting policies

Basis of presentation and consolidation

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

 

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

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

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

 

Use of estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of


 

30

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

4.

Summary of significant accounting policies (Continued)

 

contingent assets and liabilities at the dates of the financial statements, aswell as the reported amounts of revenues and expenses during the reporting year.  These accounts and estimates include, but are not limited to, the valuation of accounts receivable, deferred income taxes and the estimation on useful lives of plant and equipment.  Actual results could differ from those estimates.

 

Concentrations of credit risk

 

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

 

Concentrations of supplier risk

 

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

 

Cash and cash equivalents

 

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

 

Restricted cash

 

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

 

Accounts receivable

 

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

 

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


31

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

 

The Group had experienced the bad debts of $21,781 and $9,773 during the year ended December 31, 2011 and 2010 respectively.

 

Plant and equipment

 

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

 

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


 

Furniture and fixtures

20% - 50%

  
 

Office equipment

20%

  

 

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

 

Revenue recognition

 

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

 

The Group also evaluates the presentation of revenue on a gross versus a net basis through application of Emerging Issues Task Force No. (“EITF”) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The consensus of this literature is that the presentation of revenue as “the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee” is a matter of judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the factors that should be considered are: whether the Group is the primary obligor in the arrangement (strong indicator); whether it has general inventory risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the


32

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.

Summary of significant accounting policies (Continued)

 

evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the conclusion drawn is that the Group performs as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis.

 

Revenue recognition(Continued)

 

The Group has the following three types of revenues:

-

Retail and corporate travel service revenues,

-

Referral fee for travel booking services, and

-

Incentive commission from travel suppliers.

 

Retail and corporate travel service revenues

 

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

 

Referral fee for travel booking services

 

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

 

Incentive commission from travel suppliers

 

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



 

33

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

4.

  Summary of significant accounting policies (Continued)

 

Deferred revenue

 

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

 

Deferred cost

 

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

 

Advertising expenses

 

Advertising expenses are charged to expense as incurred.


Year Ended

Year Ended

 

Dec 31, 2011

Dec 31, 2010

 

$10,247

$5,534

 

 

Income Taxes

 

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

 

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

 

Comprehensive income

 

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



34


BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

4.

Summary of significant accounting policies (Continued)

 

Foreign currency translation

 

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

 

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


  

Year ended

 

Year ended

  

Dec 31, 2011

 

Dec 31, 2010

Year end HK$ : US$ exchange rate

 

7.766

 

7.775

Average yearly HK$ : US$ exchange rate

 

7.783

 

7.769

 

Fair value of financial instruments

 

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

 


35

 


BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

4.

  Summary of significant accounting policies (Continued)


Basic and diluted earnings per share


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

The calculation of diluted weighted average common shares outstanding for the year ended December 31, 2011 is based on the estimate fair value of the Group’s common stock during such periods applied to options using the treasury stock method to determine if they are dilutive.


Effective on October 19, 2011, each of ten (10) shares of the Company’s Common Stock, par value $.001 per share, issued and outstanding immediately prior to the Effective Time, the “Old Common Stock” shall automatically and without any action on the part of the holder thereof, be reclassified as and changed, pursuant, into one (1) share of the Company’s outstanding Common Stock, the “New Common Stock”

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


 

Year Ended

31 Dec, 2011

 

Year Ended

31 Dec, 2010

 

$

 

$

Numerator for basic and diluted

 earnings per share:

   

Net Income

88,773

25,754

 

Denominator:

Basic weighted average shares

2,140,000*

2,140,000

Effect of dilutive securities

-

28,851

 

Diluted weighted average shares

2,140,000*

2,168,851

 

Basic earnings per share

4.15 cents*

1.20 cents

 

Diluted earnings per share

4.15 cents*

1.19 cents

 

*All the stock options were expired on March 31, 2011 without any exercise, therefore basic earnings per share is equal to diluted earnings per share.

 

 

 

36



BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)


4.     Summary of significant accounting policies (Continued)

 

Stock-Based Compensation

 

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

 

During the year ended December 31, 2011, the Group did not record stock-based compensation expense.

 

During the year ended December 31, 2010, the Group recorded stock-based compensation of $15,333.

 

Related parties transactions

 

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

 

Commitments and contingencies

 

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

 

Recently issued accounting pronouncements

 

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Group’s fiscal year 2012); early adoption is permitted.  The Group is currently evaluating the impact of adopting ASU 2009-14 on its financial statements.In February 2010, the FASB issued ASU 2010-09 which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. The adoption of is guidance on January 1, 2010 did not have a material effect on the Company’s financial statements.


37

 BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)


4.     Summary of significant accounting policies (Continued)


Recently issued accounting pronouncements (Continued)

 

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU intends to improve consistency in the application of fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The ASU clarifies the application of existing fair value measurement and disclosure requirements including 1) the application of concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of non-financial assets and are not relevant when measuring the fair value of financial assets or any liabilities, 2) measuring the fair value of an instrument classified in shareholders’ equity from the perspective of a market participant that holds that instrument as an asset, and 3) disclosures about quantitative information regarding the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The guidance in this ASU is effective for the first interim and annual period beginning after December 15, 2011, and should be applied prospectively. Early adoption is not permitted. This ASU will have no impact on our results of operations.

 

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” This ASU is aimed at increasing the prominence of other comprehensive income in the financial statements. The new guidance eliminates the option to present comprehensive income and its components in the Statement of Changes in Shareholders’ Equity, and requires the disclosure of comprehensive income and its components in one of two ways: a single continuous statement or in two separate but consecutive statements. The single continuous statement would present other comprehensive income and its components on the income statement. Under the two-statement approach, the first statement would include components of net income and the second statement would include other comprehensive income and its components. The ASU does not change the items that must be reported in other comprehensive income. This ASU will have no impact on our results of operations.

 

The guidance in this ASU is effective for the first interim and annual period beginning after December 15, 2011, and should be applied retrospectively for all periods presented in the financial statements. Early adoption is permitted.

 

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05”. This ASU defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income. The deferral is temporary until the Board reconsiders the operational concerns and needs of financial statement users. The Board has not yet established a timetable for its reconsideration. The requirements to present other comprehensive income in a single continuous statement or two consecutive statements and other requirements of ASU 2011-05, as amended by ASU 2011-12, are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011.



38

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)


4.     Summary of significant accounting policies (Continued)

 

Recently issued accounting pronouncements (Continued)

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU intends to improve consistency in the application of fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The ASU clarifies the application of existing fair value measurement and disclosure requirements including 1) the application of concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of non-financial assets and are not relevant when measuring the fair value of financial assets or any liabilities, 2) measuring the fair value of an instrument classified in shareholders’ equity from the perspective of a market participant that holds that instrument as an asset, and 3) disclosures about quantitative information regarding the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The guidance in this ASU is effective for the first interim and annual period beginning after December 15, 2011, and should be applied prospectively. Early adoption is not permitted. This ASU will have no impact on our results of operations.

 

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” This ASU is aimed at increasing the prominence of other comprehensive income in the financial statements. The new guidance eliminates the option to present comprehensive income and its components in the Statement of Changes in Shareholders’ Equity, and requires the disclosure of comprehensive income and its components in one of two ways: a single continuous statement or in two separate but consecutive statements. The single continuous statement would present other comprehensive income and its components on the income statement. Under the two-statement approach, the first statement would include components of net income and the second statement would include other comprehensive income and its components. The ASU does not change the items that must be reported in other comprehensive income. This ASU will have no impact on our results of operations.

 

The guidance in this ASU is effective for the first interim and annual period beginning after December 15, 2011, and should be applied retrospectively for all periods presented in the financial statements. Early adoption is permitted.

 

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05”. This ASU defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income. The deferral is temporary until the Board reconsiders the operational concerns and needs of financial statement users. The Board has not yet established a timetable for its reconsideration. The requirements to present other comprehensive income in a single continuous statement or two consecutive statements and other requirements of ASU 2011-05, as amended by ASU 2011-12, are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011.



39

 

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 


4.     Summary of significant accounting policies (Continued)

 

Recently issued accounting pronouncements (Continued)

 

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities”. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. The amendments are effective for annual reporting periods beginning on or after January 1, 2013. An entity would be required to provide the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU will not impact our results of operations.

 

5.

Other operating income


   

Year Ended

 

Year Ended

   

Dec 31, 2011

 

Dec 31, 2010

   

$

 

$

      
 

GDS commission income

 

5,793

 

-

 

Refund Write back

 

-

 

24,580

 

Management service income

 

32,962

 

34,646

    

 

 
   

38,755

 

59,226


6.

Other non-operating income


   

Year Ended

 

Year Ended

   

Dec 31, 2011

 

Dec 31, 2010

   

 $

 

$

   

 

  
 

Gain on exchange

 

 2,214

 

-

 

Interest income

 

 22

 

16

 

Sundry income

 

 7,436

 

4,901

   


 

 
   

 9,672

 

4,917


 

 

40

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

7.

Interest expenses

   

Year Ended

 

Year Ended

   

Dec 31, 2011

 

Dec 31, 2010

   

$

 

$

      
 

Bank charges

 

1,229

 

1,043

 

Interest expense

 

456

 

736

    

 

 
   

1,685

 

1,779

 

8.

Income taxes

The Company and its subsidiaries file separate income tax returns.

 

The Company is incorporated in the United States, and is subject to United States federal and state income taxes. The Company did not generate taxable income in the United States in 2011 and 2010.

 

The subsidiaries are incorporated in Hong Kong, and are subject to Hong Kong Profits Tax at 16.5% for the year ended December 31, 2011 and 2010.

 

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

 

The following table accounts for the differences between the actual tax provision and the amounts obtained by applying the applicable statutory income tax rate of 16.5% to income before taxes for the year ended December 31, 2011 and 2010.

 

 

 

41

 

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)


8.

Income taxes (Continued)


 

Year Ended

 

Year Ended

 

December 31, 2011

 

December 31, 2010

 

$

 

$

    

Income before taxes

118,573

103,898

 

 

 

 

 

Computed tax benefit at Hong Kong

 

 

 

 

income tax rate

22,195

34,235

 

Valuation allowance adjustment

(14,117)

(596)

 

Non-taxable items

(3)

(11,690)

 

Non-deductible expenses

 73

65

 

Others

963

2,419

  
  

9,111

24,433


Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. For the year ended December 31, 2011 and 2010, the Group has tax loss carrying-forwards, which does not recognize deferred tax assets as it is not probable that future taxable profits against which the losses can be utilized will be available in the relevant tax jurisdiction and entity.

 

The Company did not have operation in the U.S.A., all business operations are carrying out in Hong Kong. Accordingly, the Company did not have taxable income in the U.S.A. The Company did not file the U.S. federal income tax returns Form 1120 with Form 5471 for foreign subsidiaries. Late filing might cause $10,000 penalty each year for each late filing Form 5471 under Internal Revenue Code Section 6038(b)(1). U.S, Internal Revenue Service allow waive of penalty in case of uncontrollable delay. The company is currently in the process of applying for waiving of penalty.

 

The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months.

 

9.

Deposits, prepaid expenses and other receivables


   

At December 31,

   

2011

 

2010

   

$

 

$

      
 

Security deposits to suppliers [1]

 

935,906

 

699,732

 

Prepayments and other receivables

 

17,240

 

43,679

 

Utility, rental and other deposits

 

33,339

 

30,664

      
   

986,485

 

774,075

   


  

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

 

 

42

 

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

10.     Plant and equipment


    

At December 31,

    

 2011

 

2010

    

 $

 

$

 

Cost

  


  
 

Furniture and fixtures

  

53,324

 

51,333

 

Office equipment

  

73,329

 

61,472

       
    

126,653

 

112,805

       
 

Accumulated depreciation

     
 

Furniture and fixtures

  

37,162

 

26,913

 

Office equipment

  

54,702

 

44,417

       
    

91,864

 

71,330

    


 


 

Net

  


 


 

Furniture and fixtures

  

16,162

 

24,420

 

Office equipment

  

18,627

 

17,055

       
    

34,789

 

41,475

 

Depreciation expenses for the year ended December 31, 2011 are $20,407 (2010: $21,601).

11.

Other payables and accrued liabilities


    

At December 31,

    

 2011

 

2010

    

$

 

$

       
 

Sale deposits received

  

223,930

 

165,447

 

Accrued expenses

  

136,983

 

199,693

 

Other payables

  

77,106

 

49,214

       
    

438,019

 

414,354


 

43

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

12.

Amount due from/(to) related party

 

Amount due from/(to) related party are as follows:


    

At 31 December

    

2011

 

2010

    

$

 

$

       
 

Amount due from related party

  

4,437

 

-

       
 

Amount due to related party

  

-

 

300

       

 

At December 31, 2011 and 2010, the amount due from/(to) related party, represent advances from shareholder of the Group, are interest free, unsecured and have no fixed repayment terms.

 

Amounts due from/(to) related parties were $28,931 (2010: $53,449) and $8,841 (2010: $45,502) including in accounts receivable and payable respectively which are trade in nature.

 

13.

Deferred cost and revenue

 

Cost and revenue is deferred when the Group paid and received payment in advance of the completion of delivery of travel services respectively as at the year end.

 

14.

Stock options

The Group has stock options plans that allow it to grant options to its key employees. Over the course of employment. In the year ended March 31, 2008, a total of 300,000 and 80,000 of vested and non-vested options respectively were granted to key employees of the Group at a striking price of $0.35 per share, exercisable for a term of three years which vest immediately under the vesting conditions.

 

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

 

The fair value of these options at the date of grant was estimated to be $0.1533 and $0.1125 for vested and non-vested options per unit respectively using the Black-Scholes option pricing model with the following weighted average assumptions: expected life of three years; risk-free interest rate of 3.07%; expected dividend yield of 0% and an expected volatility of 47.77%. The stock-based compensation expense recorded in the year ended December 31, 2010 was $15,333 which was charged to the consolidated statement of operations and credited to contribute surplus.


 


44


BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

14.     Stock options (Continued)


  


   

Weighted

  


Weighted

average

  

Number of

average

remaining

  

 options

exercise price

life

  

 

    

Balance as of December 31, 2011

 

-

 

0.35

 

0.25


 


 


 


Exercisable as of December 31, 2009

 

230,000

 

0.35

 

1.25

  


    

Exercisable during the year

 

100,000

 

0.35

  


Exercisable as of December 31, 2010

 


330,000

 


0.35

 


0.25

  


    

Exercisable during the year

 

-

 

0.35

  
  


    

Expired during the year

 

(330,000)

    
  


    

Exercisable as of December 31, 2011

 

-

 

0.35

 

0

 

All of the options the company issued were expired during the year ended 31 December 2011. No option was exercised by any of the employees before expired.

 

15.

Concentration of credit

 

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


 

Year ended

 

Year ended

 

Dec 31, 2011

 

Dec 31, 2010

Company A

20%

 

16%

 

Details of the accounts receivable from the one customer with the largest receivable balances at December 31, 2011 and 2010 are as follows:


 

Percentage of account receivable

 

December 31

 

2011

 

2010

Company A

16%

 

18%


 

45

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

16.

Pension plans

 

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

 

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

 

The assets of the schemes are controlled by trustees and held separately from those of the Group.  Total pension cost was $31,504 during year ended December 31, 2011 (2010: $31,629).

 

17.

   Fair Value Measurements

 

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

 

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

 

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

 

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

 

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

 

The effective date for certain aspects of ASC 820 was deferred and are currently being evaluated by The Group. Areas impacted by the deferral relate to nonfinancial assets and liabilities that are measured at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. The effects of these remaining aspects of ASC 820 are to be applied by the Group to fair value measurements prospectively beginning November 1, 2010. The adoption of the remaining aspects of ASC 820 is not expected to have a material impact on its financial condition or results of operations.

 

 

 

46

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

17.  

Fair Value Measurements (Continued)

 

The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at December 31, 2011 and 2010:


    

Fair Value Measurements at reporting date using

  


December 31, 2011

 

 

Quoted Price in active Markets for identical assets

(level 1)

 

 

Significant Other Observable Inputs

(Level 2)

 


Significant Other Unobservable Inputs

(Level 3)

  

$

 

$

 

$

 

$

Assets

        

Restricted cash

 

12,877

 

12,877

 

-

 

-

Cash and cash equivalents

 

1,361,357

 

1,361,357

 

-

 

-


    

Fair Value Measurements at reporting date using

  


 

 

 

December 31, 2010

 


Quoted Price in active Markets for identical assets

(level 1)

 


Significant Other Observable Inputs

(Level 2)

 


Significant Other Unobservable Inputs

(Level 3)

  

$

 

$

 

$

 

$

Assets

        

Restricted cash

 

12,861

 

12,861

 

-

 

-

Cash and cash equivalents

 

547,485

 

547,485

 

-

 

-

 

18.

  Commitments and contingencies

 

Operating leases commitments

 

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


December 31

  

$

    

2011

  

73,748

2012

  

-

    


  

73,748

Rental expenses for the year ended December 31, 2011 were $96,703 (2010: $96,877).

 

 

 

47

 

 

BAOSHINN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

 

19.

Related party transactions

 

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





Related party


 

 

Nature of relationship and control



 

Description of transactions

 

 

 

 

Year

ended

December 31, 2011

 

 

 

 

Year

ended

December 31, 2010

   

$

 

$

      

Bao Shinn Express Company Limited

Shareholder

38.6%

Sales of air tickets and tour packages

 

(190,739)

 

 

(159,653)

      
  

Management service income

 

(35,853)

 

 

(34,436)

      
  

Purchase of air tickets and tour packages

 

41,882

 

 

57,797

      
  

Loan interest paid

-

 

121

      
  

Amount due

From/(to)

4,437

 

(300)

      

HK Airlines

Holidays Travel Company Limited

Bao Shinn Express Company Limited is the major shareholder

 

Sales of air tickets and tour packages

 

 

(1,032,937)

 

 

 

(1,113,244)

      
  

Interest paid

14

 

-

      
  

Purchase of air tickets and tour packages

-

 

7,950

      
  

Account receivable

28,640

 

53,449

      
  

Account payables

(7,772)

 

(19,236)

      


 

48

 

 

BAOSHINN CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

19.

Related party transactions (continued)

 




Related party


 

 

Nature of relationship and control



 

Description of transactions

 

 

 

 

Year

ended

December 31, 2011

 

 

 

 

Year

ended

December 31, 2010


  

$

 

$

 

H.C. Patterson and

Company Limited

Bao Shinn Express Company Limited is the major shareholder

 

Purchase of air tickets and tour packages

 

 

46,661

 

 

 

17,356

  

Sale of air tickets and tour packages

 

(46,482)

 

 

-

      
  

Account payables

(1,069)

 

(26,266)

      
  

Account receivables

291

 

-

      

 

Grand Power Express International Limited

Chiu Tong, Ricky is the connecting related person

 

Sales of air tickets and tour packages

 

 

-

 

 

 

(27,892)

20.

Segment Information

 

FASB Accounting Standard Codification Topic 280 (ASC 280) “Segment Reporting” (Formerly known as SFAS No.131, Disclosures about Segments of an Enterprise and Related Information), establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

 

For management purposes, the Group is regarded as a single segment, being engaged in the provision of travel agent services. These principal activities and geographical market are substantially based in Hong Kong and the Mainland China. Accordingly, no geographical segment information is presented.

 

21.

Reclassification

 

$11,779 including in other receivables in 2010 have been reclassified to account receivables and account payables which increase by $18,097 and $6,318 respectively to conform to the 2011 presentation.

 

22.

Subsequent Events

 

The Company has evaluated all other subsequent events as of March 30, 2012 and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements.



49

 



 

 

 

ITEM 9A.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation these officers have concluded that as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective and were adequate to insure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms.

 

Management’s Report on Internal Control over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting is supported by written policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations which may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.

 

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment, management used the framework set forth in the report entitled “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, or (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this evaluation, management concluded that the Company’s internal control over financial reporting were effective as of December 31, 2011.

 


50

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

Regulatory Statement

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. As a “Smaller Reporting Company” management’s report was not subject to attestation by the Company’s registered public accounting firm.

 

ITEM 9B.  OTHER INFORMATION.

None.

 

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth certain information regarding the Company’s directors and executive officers for the fiscal year ended December 31, 2011:

The following table provides information concerning our officers and directors. All directors hold office until the next annual meeting of stockholders or until their successors have been elected and qualified.


Name and Address

Age

Position(s)

Sean Webster

40

President, C.F.O., Director

Benny Kan

47

C.E.O., Director

Mike Lam

40

Director, Secretary

The directors named above serve for one year terms or until their successors are elected or they are re-elected at the annual stockholders’ meeting. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement, none of which currently exists or is contemplated. There is no arrangement or understanding between any of our directors or officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to the Company’s board.

Sean Webster has been the President and Chief Financial Officer of Baoshinn Corporation since March 25, 2008. Mr. Webster has been the Chief Operating Officer, Chief Financial Officer, Treasurer and Secretary of Biopack Environmental Solutions, Inc. since October 6, 2008 and also serves as its Chief Technology Officer and Principal Accounting Officer. Mr. Webster has been Senior Vice President of Finance & Business Development of Grand Power Logistics Group Inc., since April 8, 2008. From January 1999 to April 1999, Mr. Webster served as an Investment Associate at Yorkton Securities, Inc. in Calgary, Canada. Since May, 1999 he served as an Investment Advisor (Investment Dealers Association of Canada, Registered Representative) at Blackmont Capital Inc. until October 2008 (now called Macquarie Private Wealth). He served as Lead Broker for Grand Power Logistics Group Inc.'s (TSX-V:GPW) initial public offering in November 2004 on the TSX Venture Exchange. Mr. Webster graduated from the University of Calgary in 1996 with BA in Economics, and a minor in Management and Commerce.

Mr. Benny Kan, C.E.O., Director. Mr. Kan joined the group in 2003. Mr. Kan has served as C.E.O. and Director of Baoshinn Corporation since March 31, 2006 when the company incorporated. Mr. Kan was the company CFO fromMarch 31, 2006 to March 25, 2008. Before that, he was General Manager of Million Tour, King’s Travel Services Ltd. and King Travel Co. Ltd, where he managed ticketing and customer services and operation for nearly 20 years. Mr. Kan has extensive experience in ticketing, holiday options, accommodation wholesales and travel agency management. Mr. Kan is also a member of board of directors of Bao Shinn International Express Ltd., and Bao Shinn Holidays Limited both subsidiaries of Baoshinn Corporation.

Mr. Mike Lam, Director and Secretary, and he has served as a director since March 31, 2006. Mr. Lam will hold these positions until he resigns or his successor is elected. Mr. Lam has over 10 years of experience in air cargo and logistics services. With his extensive knowledge on sales and pricing, he has developed relationships with local and overseas clients. Since May 2000, Mr. Lam has served as General Manager of Grand Power Express and, since May, 1997 he has served as General Manager of Grand Power Express Forwarders Co. Ltd., and Grand Power Express Tourism Col Ltd. (Macau). Mr. Lam was the general manager of Grand Power Express Tourism Co Ltd. in Macao prior to joining the Company. He has more than 15 years experience working in the Travel industry. Mr. Lam spent the past 3 years in Grand Power Express Tourism Co Ltd.

(b) Significant Employees.

As of the date hereof, we have no other significant employees.

(c) Family Relationships.

None

(d) Involvement in Certain Legal Proceedings.

None.

 

51

 

Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended December 31, 2011, the Company does not believe that any person required to make filings under Section 16(a) during such fiscal year failed to file such reports or filed such reports late.

 

Code of Ethics

Our board of directors adopted a Code of Business Conduct and Ethics that applies to, all our officers, directors, employees and agents. Certain provisions of the Code apply specifically to our president and secretary (being our principle executive officer, principle financial officer and principle accounting officer, controller), as well as persons performing similar functions. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

1.

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2.

Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

3.

Compliance with applicable governmental laws, rules and regulations;

4.

The prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person identified in our Code of Business Conduct and Ethics; and

5.

Accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all of our company’s senior officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly senior officers, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal and state securities laws. Any senior officer who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to our management.

We will provide a copy of our code of ethics without charge to any person that requests it. Any such request should be made in writing to the attention of Benny Kan, Chief Executive Officer, Baoshinn Corporation, A-B, 8/F Hart Avenue, Tsimshatsui, Kowloon, Hong Kong.

 

52

Nominating Committee

We do not have a separate nominating committee. Management believes that it is not necessary to have a separate nomination committee, because our entire board acts as our nominating committee.

Audit Committee

Our Board of Directors acts as our audit committee and we do not have an audit committee charter. We do not have a qualified financial expert on the Board at this time, because we have not been able to hire a qualified candidate. Further, we believe that we have inadequate financial resources at this time to hire such an expert.

Compensation Committee

Our board of directors acts as our compensation committee, and due to this fact we believe it is not necessary for us to have a separate compensation committee.

ITEM 11.  EXECUTIVE COMPENSATION.

The following table sets forth the cash compensation paid by the Company to its President and all other executive officers for services rendered during the fiscal year ended December 31, 2011.

SUMMARY COMPENSATION TABLE


(All amounts in US$ 000‘s)

Long Term Compensation

Total

Compensation

Awards

Payouts

 

 

Name & Principal Position

 

 

 

Period

 

 

 

Salary

 

 

 

Bonus

 

Other Annual Comp.

 

Restricted Stock Awards

 

Securities Underlying Options/ SARs (#)

 

 

 

LTIP Payouts

 

 

 

All Other Compensation

 

Sean Webster

12 months ended December 31,2011

14,846

0

0

0

0

0

0

0

 

12 months ended December 31,2010

0

0

0

0

0

0

0

0

Mike Lam

12 months ended December 31,2011

0

0

0

0

0

0

0

 
 

12 months ended December 31,2010

0

0

0

0

0

0

0

0

Benny Kan

12 months ended December 31,2011

71,093

0

0

0

0

0

0

0

 

12 months ended December 31,2010

71,672

0

0

0

0

0

0

0

No other executive received any compensation from the Company and any of its subsidiaries for the previous three years.

(a)

Option/SAR Grants

The Company has stock option plans that allow it to grant options to its key employees. Over the course of employment, the Company may issue vested or non-vested stock options to an employee.

In March, 2008 the Company implemented a vested and non-vested stock option plan and all the options granted under those plans expired March 31, 2011.

 

53

 

In the year ended March 31, 2008, a total of 300,000 of vested and 80,000 non-vested options were granted to employees of the Company at a price of $0.35 per share, exercisable for a term of three years.  No stock options have been granted to any of the officers or directors of the Company.

No stock options have been exercised by any employees, officers or directors since we were founded.

(b)

Long-Term Incentive Plans and Awards

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans

have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of our officers, directors, employees or consultants since we were founded.

(c)

Compensation of Directors

The members of the Board of Directors are not compensated for acting as such. There are no arrangements pursuant to which directors are or will be compensated in the future for any services provided as a director. There were no reimbursement expenses paid to any director.

(d)

Employment Contracts, Termination of Employment, Change-in-Control Arrangements.  

There are no employment or other contracts or arrangements with our officers or directors. There are no compensation plans or arrangements, including payments to be made by us with respect to our officers, directors, employees or consultants that would result from the resignation, retirement or any other termination of such directors, officers, employees or consultants. There are no arrangements for compensation to our directors, officers, employees or consultants that would result from a change-in-control.


ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, 2011, by (i) each person who is known by us to own beneficially more than 5% of our outstanding common stock; (ii) each of our officers and directors; and (iii) all our directors and officers as a group.

 

54



 

Name and Address of Beneficial Owner

Amount & Nature of Beneficial Ownership

Percentage of Class(2)

Sean Webster

13th Floor, Yoo Hoo Tower, 38-42 Kwai Fung Crescent

Kwai Chung, New Territories, Hong Kong

0

0

Bao Shinn Express Co. Ltd.[1]

Unit E, 8/F, 8 Hart Avenue, Tsimshatsui, Kowloon, Hong Kong

825,000

38.551%

Benny Kan

1105 Tao Shue House, Lei Muk Shue Est., Kwai Chung, Kowloon, Hong Kong

181,500

8.481%

Mike Lam

Unit E, 8/F, 8 Hart Avenue, Tsimshatsui, Kowloon, Hong Kong

82,500

3.855%

Wong Yun Leung

Unit E, 8/F, 8 Hart Avenue, Tsimshatsui, Kowloon, Hong Kong

396,000

18.505%

All Officers and Directors as a Group

1,485,000

69.392%

[1] Ricky Chiu beneficially owns 50% of this Company.

[2] Applicable percentage ownership is based on 2,140,000 shares of our common stock outstanding as of December 31, 2011. There are no options, warrants, rights, conversion privileges or similar right to acquire the common stock of the Company outstanding as of December 31, 2011, other than those described in Item 11 above.

 

(a)

Changes in Control

We do not anticipate at this time any changes in control of the Company. There are no arrangements either in place or contemplated which may result in a change of control of the Company. There are no provisions within the Articles or the Bylaws of the Company that would delay or prevent a change of control.

(b)

Future Sales by Existing Shareholders

As of March 29, 2011, there are a total of 25 Stockholders of record holding 2,140,000 shares of our common stock, excluding the shareholders that hold our shares in street name. 1,485,000 of our outstanding shares of common stock are “restricted securities”, as that term is defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Securities Act. Under Rule 144, such shares can be publicly sold, subject to certain restrictions commencing six (6) months after the acquisition of such shares.

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

In the ordinary course of business, BSIE, our wholly-owned subsidiary, purchases and sells air tickets and tour packages to Bao Shinn Express Company Limited (“BSEL”). BSEL holds 38.551% of our outstanding shares of common stock.  The statement of operations for the periods presented includes the following related party transactions:

 

 

 

 

Related party

Nature of relationship and control

 

Description of transactions

Year

ended

December 31, 2011

 

Year

ended

December 31, 2010

   

$

 

$

      

Bao Shinn Express Company Limited

Shareholder

38.6%

Sales of air tickets and tour packages

 

(190,739)

 

 

(159,653)

      
  

Management service income

 

(35,853)

 

 

(34,436)

      
  

Purchase of air tickets and tour packages

 

41,882

 

 

57,797

      
  

Loan interest paid

-

 

121

      
  

Amount due

From/(to)

 

4,437

 

 

(300)

      

 

 

 

55



 

 

Related party

Nature of relationship and control

 

Description of transactions

Year

ended

December 31, 2011

 

Year

ended

December 31, 2010

   

$

 

$

      

HK Airlines

Holidays Travel Company Limited

Bao Shinn Express Company Limited is the major shareholder

 

Sales of air tickets and tour packages

 

 

(1,032,937)

 

 

 

(1,113,244)

      
  

Interest paid

14

 

-

      
  

Purchase of air tickets and tour packages

-

 

7,950

      
  

Account receivable

28,640

 

53,449

      
  

Account payables

(7,772)

 

(19,236)

      

 

H.C. Patterson and

Company Limited

Bao Shinn Express Company Limited is the major shareholder

Purchase of air tickets and tour packages

46,661

 

17,356

  

Sale of air tickets and tour packages

(46,482)

 

-

      
  

Account payables

(1,069)

 

(26,266)

      
  

Account receivables

291

 

-

      

Grand Power Express International Limited

Chiu Tong, Ricky is the connected person

Sales of air tickets and tour packages

 

-

 

 

(27,892)

 



56

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

Albert Wong & Co. is the Company’s independent registered public accountant.

Audit Fees

The aggregate fees billed by Albert Wong & Co. for professional services rendered for the audits of our annual financial statements in connection with statutory and regulatory filings were $25,697 for the year ended December 31, 2011

The aggregate fees billed by Dominic K.F. Chan & Co. (“DKFC”), our previous auditor, for professional services rendered for the audits of our annual financial statements in connection with statutory and regulatory filings were $25,743 for the year ended December 31, 2010.

Audit-Related Fees

The aggregate fees billed by DKFC for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements were $8,544 for the year ended December 31, 2011 and $8,431 for the year ended December 31, 2010.

Tax Fees

The aggregate fees billed by DKFC for professional services for tax compliance, tax advice and tax planning were $0 for the year ended December 31, 2011 and $0 for the year ended December 31, 2010.

All Other Fees

The aggregate fees billed by DKFC for other products and services were $0 for the year ended December 31, 2011 and $0 for the year ended December 31, 2010.

Pre-approval Policy

We do not currently have a separate audit committee. The services described above were approved by our Board of Directors, which serves as our audit committee.

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Index to Exhibits

  

Exhibit  

Description  

 

 

*3.1

Certificate of Incorporation

  

*3.2

Amended and Restated Certificate of Incorporation

  

*3.3

By-laws

  

*4.0

Stock Certificate

  

14

Code of Ethics

  

31.1

Certification of the Company‘s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant‘s Annual Report on Form 10-K for the year ended December 31, 2011.



57



31.2

Certification of the Company‘s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant‘s Annual Report on Form 10-K for the year ended December 31, 2011.

32.1

Certification of the Company‘s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

32.2

Certification of the Company‘s Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

______________________________________

  
 

*Filed as an exhibit to the Company‘s registration statement on Form SB-2, as filed with the Securities and Exchange Commission on June 14, 2006, and incorporated herein by this reference.

SIGNATURES


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

 

 

 

 

 

BAOSHINN CORPORATION

  

 

  

Dated: April 13, 2012

By:  

/s/  Sean Webster

 

Name: 

 Sean Webster

 

Title:  

 President


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

 

 

 

 

Title

 

 

Date

 

 

 

 

 

 

 

 

 

/s/ Sean Webster

 

 

 President/CFO/Director

 

 

April  13, 2012

 

Sean Webster

 

 

 

 

 

 

 

        

   /s/ Benny Kan


Benny Kan

 

 

 CEO/Director

 

 

April  13, 2012

 

 

       
        

  /s/ Mike Lam

  

 Secretary/Director

  

April  13, 2012

 

Mike Lam

       



58