UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





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





For
the quarterly period ended September 30, 2010





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


For the transition period from
______to______.





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


(Exact
name of registrant as specified in Charter)





TEXAS
              
              333-142908
              
              20-5933927(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (Commission
      File No.)
              
              (IRS
      Employee Identification No.)





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





(Address
of Principal Executive Offices)





00852-28549088


(Issuer
Telephone number)





(Former
Name or Former Address if Changed Since Last Report)





Check
whether the issuer (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 issuer was required to file such reports), and (2)has been
subject to such filing requirements for the past 90 days. Yes  ̈     Nox





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





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





Large
      Accelerated Filer  ̈
              Accelerated
      Filer  ̈
              Non-Accelerated
      Filer x
              Smaller
      Reporting Company  ̈





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





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of November 9, 2010: 130,000,000 shares of common stock.








TABLE
OF CONTENTS





PART
      I FINANCIAL INFORMATIONITEM
      1.
                                          FINANCIAL
      STATEMENTS
                                          F-1ITEM
      2.
                                          MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                          3ITEM
      3.
                                          QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                          16ITEM
      4.
                                          CONTROLS
      AND PROCEDURES
                                          16PART
      II OTHER INFORMATION
                                          16ITEM
      1.
                                          LEGAL
      PROCEEDINGS
                                          16ITEM
      1A.
                                          RISK
      FACTORS
                                          17ITEM
      2.
                                          UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                                          30ITEM
      3.
                                          DEFAULTS
      UPON SENIOR SECURITIES
                                          30ITEM
      4.
                                          SUBMISSION
      OF MATTERS TO A VOTE OF SECURITYHOLDERS
                                          30ITEM
      5.
                                          OTHER
      INFORMATION
                                          30ITEM
      6.
                                          EXHIBITS
                                          30SIGNATURES
                                          36




2





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


AND
SUBSIDIARIES





FINANCIAL
STATEMENTS


TABLE
OF CONTENTS





CONDENSED
      CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 (UNAUDITED) AND
      DECEMBER 31, 2009
                  
                  
                  F-2CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
      FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
      (UNAUDITED)
                  
                  
                  F-4CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER
      30, 2010 AND 2009 (UNAUDITED)
                  
                  
                  F-5NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE
      MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)
                  
                  
                  F-7




F-1





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


AND
SUBSIDIARIES


CONDENSED CONSOLIDATED
BALANCE SHEETS





ASSETS





September 30, 2010
                
                
                December 31, 2009(Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
                
                $
                3,546,137
                
                
                $
                3,530,724Accounts
      receivable
                
                
                3,852,070
                
                
                
                1,881,584Inventories
                
                
                2,563,285
                
                
                
                1,839,146Prepayments
                
                
                2,490,957
                
                
                
                688,117Other
      receivables and other assets
                
                
                557,626
                
                
                
                683,010Deferred
      tax assets
                
                
                -
                
                
                
                1,538Due
      from related parties
                
                
                1,975,881
                
                
                
                1,113,643Total
      current assets
                
                
                14,985,956
                
                
                
                9,737,762Vessels,
      net
                
                
                40,441,486
                
                
                
                42,597,403Vessels
      under construction
                
                
                27,091,047
                
                
                
                -Fixed
      assets, net
                
                
                156,674
                
                
                
                151,041Deferred
      dry dock fees, net
                
                
                7,896,895
                
                
                
                9,311,647Other
      intangible assets
                
                
                3,656
                
                
                
                3,657Deferred
      tax assets
                
                
                34
                
                
                
                -Total
      long-term assets
                
                
                75,589,792
                
                
                
                52,063,748TOTAL
      ASSETS
                
                $
                90,575,748
                
                
                $
                61,801,510





See
accompanying notes to condensed consolidated financial
statements.





F-2





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


AND
SUBSIDIARIES


CONDENSED CONSOLIDATED
BALANCE SHEETS





LIABILITIES AND
SHAREHOLDERS’ EQUITY





September 30, 2010
                
                
                December 31, 2009(Unaudited)CURRENT
      LIABILITIESAccounts
      payable
                
                $
                9,070,866
                
                
                $
                6,893,862Short-term
      bank loan
                
                
                -
                
                
                
                1,170,070Current
      portion of long-term loans
                
                
                6,230,492
                
                
                
                4,128,908Current
      portion of long-term notes payable, net of discount of $618,022
      and$693,012 at September 30, 2010 and December 31, 2009,
      respectively
                
                
                2,291,883
                
                
                
                3,326,132Advances
      from customers
                
                
                1,976,427
                
                
                
                793,334Payroll
      payable
                
                
                903,363
                
                
                
                903,964Due
      to related parties
                
                
                591,239
                
                
                
                20,907Taxes
      payable
                
                
                11,795
                
                
                
                51,250Deferred
      revenue
                
                
                159,063
                
                
                
                159,688Other
      current liabilities and accrued liabilities
                
                
                2,566,771
                
                
                
                2,375,613Total
      current liabilities
                
                
                23,801,899
                
                
                
                19,823,728LONG-TERM
      LIABILITIESLong-term
      loans
                
                
                18,661,240
                
                
                
                15,359,535Long-term
      notes payable, net of discount of $953,658 and $1,407,170
                  at
      September 30, 2010 and December 31, 2009, respectively
                
                
                17,763,310
                
                
                
                2,541,441Deferred
      tax liabilities
                
                
                -
                
                
                
                1,150Total
      long-term liabilities
                
                
                36,424,550
                
                
                
                17,902,126TOTAL
      LIABILITIES
                
                
                60,226,449
                
                
                
                37,725,854COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS’
      EQUITYPreferred
      stock, $0.001 per share;  20,000,000 shares
      authorized;
                  0
      share issued and outstanding
                
                
                -
                
                
                
                -Common
      stock, $0.001 per share; 200,000,000 shares authorized,
      130,000,000
                  shares
      issued and outstanding
                
                
                130,000
                
                
                
                130,000Additional
      paid-in capital
                
                
                3,322,966
                
                
                
                3,322,966Accumulated
      other comprehensive income
                
                
                785,154
                
                
                
                716,805Retained
      earnings
                
                
                26,111,179
                
                
                
                19,905,885Total
      Shareholders’ Equity
                
                
                30,349,299
                
                
                
                24,075,656TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                
                $
                90,575,748
                
                
                $
                61,801,510





See
accompanying notes to condensed consolidated financial
statements.





F-3





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


AND
SUBSIDIARIES


CONDENSED CONSOLIDATED
STATEMENTS OF


INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)


(UNAUDITED)





Three Months EndedSeptember30,
                
                
                NineMonths
      EndedSeptember30,2010
                
                
                2009
                
                
                2010
                
                
                2009REVENUES
                
                $
                19,266,425
                
                
                $
                11,841,798
                
                
                $
                55,266,164
                
                
                $
                36,368,521COSTS
      AND EXPENSESVessel
      operating costs
                
                
                14,249,245
                
                
                
                9,586,920
                
                
                
                38,276,906
                
                
                
                30,757,559Service
      costs
                
                
                810,878
                
                
                
                505,173
                
                
                
                2,363,173
                
                
                
                2,488,842Depreciation
      and amortization
                
                
                1,538,447
                
                
                
                1,770,878
                
                
                
                4,955,766
                
                
                
                5,513,270General
      and administrative expenses
                
                
                784,194
                
                
                
                748,348
                
                
                
                2,279,115
                
                
                
                2,057,126Selling
      expenses
                
                
                81,219
                
                
                
                88,907
                
                
                
                262,553
                
                
                
                253,064TOTAL
      COSTS AND EXPENSES
                
                
                17,463,983
                
                
                
                12,700,226
                
                
                
                48,137,513
                
                
                
                41,069,861OTHER
      EXPENSESInterest
      expense, net
                
                
                (336,148
                )
                
                
                (43,478
                )
                
                
                (998,546
                )
                
                
                (131,978
                )Other
      income (expense), net
                
                
                125,577
                
                
                
                (149,229
                )
                
                
                100,720
                
                
                
                (218,667
                )INCOME
      (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
                
                
                1,591,871
                
                
                
                (1,051,135
                )
                
                
                6,230,825
                
                
                
                (5,051,985
                )INCOME
      TAX EXPENSE
                
                
                (8,387
                )
                
                
                (16,049
                )
                
                
                (25,531
                )
                
                
                (49,060
                )INCOME
      (LOSS) FROM CONTINUING OPERATIONS
                
                
                1,583,484
                
                
                
                (1,067,184
                )
                
                
                6,205,294
                
                
                
                (5,101,045
                )DISCONTINUED
      OPERATIONGain
      from disposition of discontinued operation
                
                
                -
                
                
                
                5,195
                
                
                
                -
                
                
                
                5,195Loss
      from discontinued operation
                
                
                -
                
                
                
                (108,004
                )
                
                
                -
                
                
                
                (230,747
                )NET
      LOSS FROM DISCONTINUED OPERATION
                
                
                -
                
                
                
                (102,809
                )
                
                
                -
                
                
                
                (225,552
                )NET
      INCOME (LOSS)
                
                
                1,583,484
                
                
                
                (1,169,993
                )
                
                
                6,205,294
                
                
                
                (5,326,597
                )OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain (loss)
                
                
                49,310
                
                
                
                3,863
                
                
                
                68,349
                
                
                
                (41,635
                )COMPREHENSIVE
      INCOME (LOSS)
                
                $
                1,632,794
                
                
                $
                (1,166,130
                )
                
                $
                6,273,643
                
                
                $
                (5,368,232
                )WEIGHTED
      AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
                
                
                130,000,000
                
                
                
                130,000,000
                
                
                
                130,000,000
                
                
                
                130,000,000NET
      INCOME (LOSS) PER SHARE, BASIC AND DILUTED
                
                $
                0.01
                
                
                $
                (0.01
                )
                
                $
                0.05
                
                
                $
                (0.04
                )





See
accompanying notes to condensed consolidated financial
statements.





F-4





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)


Nine Months Ended September
    30,2010
                
                
                2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                
                $
                6,205,294
                
                
                $
                (5,326,597
                )Net
      gain from discontinued operation
                
                
                -
                
                
                
                225,552Income
      (loss) from continuing operations
                
                
                6,205,294
                
                
                
                (5,101,045
                )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Depreciation
                
                
                2,259,815
                
                
                
                2,446,262Amortization
      of deferred dry dock fees
                
                
                2,695,951
                
                
                
                3,067,008Amortization
      of  long-term note payable discount
                
                
                528,502
                
                
                
                13,345Deferred
      taxes
                
                
                354
                
                
                
                12,754Loss
      on disposal of fixed assets
                
                
                7,647
                
                
                
                -Changes
      in operating assets and liabilities:(Increase)
      Decrease In:Accounts
      receivable
                
                
                (1,970,486
                )
                
                
                (224,363
                )Inventories
                
                
                (724,139
                )
                
                
                238,433Prepayments
                
                
                (1,802,840
                )
                
                
                (110,677
                )Other
      receivables and other assets
                
                
                125,530
                
                
                
                (665,107
                )Deferred
      dry dock fees
                
                
                (1,281,199
                )
                
                
                (1,977,352
                )Increase
      (Decrease) In:Accounts
      payable
                
                
                2,177,004
                
                
                
                509,288Advances
      from customers
                
                
                1,183,093
                
                
                
                280,750Payroll
      payable
                
                
                (601
                )
                
                
                (295,714
                )Taxes
      payable
                
                
                (39,455
                )
                
                
                (1,060
                )Deferred
      revenue
                
                
                (626
                )
                
                
                34,323Other
      current liabilities and accrued liabilities
                
                
                191,158
                
                
                
                222,386Net
      cash provided by (used in) continuing operations
                
                
                9,555,002
                
                
                
                (1,550,769
                )Net
      cash provided by discontinued operation
                
                
                -
                
                
                
                1,170,483Net
      cash provided by (used in) operating activities
                
                
                9,555,002
                
                
                
                (380,286
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of fixed assets
                
                
                (71,064
                )
                
                
                (3,744
                )Advances
      for vessels under construction
                
                
                (4,141,047
                )
                
                
                -Purchase
      of a vessel
                
                
                -
                
                
                
                (20,881,125
                )Proceeds
      from disposition of discontinued operation, net
                
                
                -
                
                
                
                1,272,685Net
      cash used in investing activities
                
                
                (4,212,111
                )
                
                
                (19,612,184
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:(Repayments
      to)/proceeds from short-term loans
                
                
                (1,170,070
                )
                
                
                1,170,001(Repayments
      to)/proceeds from long-term loans
                
                
                (3,096,711
                )
                
                
                12,381,246(Repayments
      to)/proceeds from long-term notes payable
                
                
                (790,881
                )
                
                
                2,720,359Repayments
      to related parties
                
                
                (292,052
                )
                
                
                (2,120,849
                )Net
      cash (used in) provided by financing activities
                
                
                (5,349,714
                )
                
                
                14,150,757





See
accompanying notes to condensed consolidated financial
statements.





F-5





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)


Nine Months Ended September
    30,2010
                        
                        
                        2009NET
      DECREASE IN CASH AND CASH EQUIVALENTS
                        
                        
                        (6,823
                        )
                        
                        
                        (5,841,713
                        )Effect
      of exchange rate changes on cash
                        
                        
                        22,236
                        
                        
                        
                        (41,635
                        )Cash
      and cash equivalents at beginning of period
                        
                        
                        3,530,724
                        
                        
                        
                        8,233,588CASH AND CASH EQUIVALENTS AT END OF
      PERIOD
                        
                        $
                        3,546,137
                        
                        
                        $
                        2,350,240SUPPLEMENTARY CASH FLOW
      INFORMATION:Interest
      paid
                        
                        $
                        1,019,647
                        
                        
                        $
                        242,902Income
      taxes paid
                        
                        $
                        47,631
                        
                        
                        $
                        36,597




SUPPLEMENTARY
NON-CASH DISCLOSURES:
 
 1. 
During the nine months ended September 30, 2010, advance for vessels under
construction of $22,950,000 was facilitated through proceeds from long-term
loans of $8,500,000 and notes payable of $14,450,000.
  See
accompanying notes to condensed consolidated financial
statements.


F-6





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS


FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009


(UNAUDITED)





1.  ORGANIZATION
AND PRINCIPAL ACTIVITIES





Winland
Online Shipping Holdings Co. was incorporated under the laws of Texas on
November 17, 2006. On September 23, 2008, Trip Tech, Inc. changed its name to
Winland Online Shipping Holdings Corporation (“WLOL”).





On August
12, 2008, Trip Tech, Inc. (“Trip Tech”) entered into a share exchange agreement
with SkyAce Group Limited (“SkyAce”) and Pioneer Creation Holdings Limited
(“PCH”). PCH is the sole shareholder of SkyAce. As a result of the share
exchange, Trip Tech acquired all of the issued and outstanding securities of
SkyAce from PCH in exchange for 76,925,000 newly-issued shares of Trip Tech’s
common stock, par value $0.001 per share and 1,000,000 shares of Series A
Preferred Stock, which such Preferred Shares would be converted into 30,000,000
shares of Common upon Trip Tech amending its Articles of Incorporation to
sufficiently increase the number of authorized shares of Common Stock in order
to effect such issuance. SkyAce became a wholly-owned subsidiary of WLOL. At the
time of the merger, WLOL had 23,075,000 shares of common stock. On September 23,
2008, the authorized shares were increased to 200,000,000 shares. On Octobers
23, 2008, 1,000,000 shares of preferred stock, par value of $0.001 were
converted into 30,000,000 shares of common stock. As a result, the total
outstanding shares of common stock increased to 130,000,000, and PCH owned
82.25% of the voting capital stock of WLOL.





The
exchange transaction was accounted for as a reverse acquisition. The acquisition
was accounted for as the recapitalization of SkyAce. Accordingly, the condensed
consolidated and combined statements of income include the results of operations
of SkyAce from January 1, 2008, and the results of operations of WLOL from the
acquisition date through September 30, 2010.





WLOL and
subsidiaries (the “Company”) is mainly engaged in a comprehensive range of
online and off-line international shipping services, including: dry bulk
shipping service and chartering brokerage services, which serve internationally,
freight forwarding services, shipping agency services, and online services,
which serve mainly in the People’s Republic of China (“PRC”).





2.    LIQUIDITY





The
Company had a working capital deficit of $8,815,943 as of September 30, 2010. As
of September 30, 2010, the Company has attained several preliminary shipping
contracts for the two new vessels which are expected to be delivered in December
2010 and March 2011, respectively (See Note 5). To improve liquidity, the
Company obtained an extension of the due date of two notes payable to related
parties amounting to $2,961,739 to July 19, 2012. See Note 10. Also, the Company
obtained written commitments from certain shareholders and related parties to
provide working capital to the Company, if needed, in the form of notes payable
or personal loans.





3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





(a)  Basis
of Presentation





The
unaudited condensed consolidated financial statements of Winland Online Shipping
Holdings Corporation have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial information and pursuant to
the requirements for reporting on Form 10-Q, Accordingly, they do not include
all the information and footnotes required by accounting principles generally
accepted in the United States of America for annual financial statements.
However, the information included in these interim financial statements reflects
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for the fair presentation of the
consolidated financial position and the consolidated results of operations.
Results shown for interim periods are not necessarily indicative of the results
to be obtained for a full year. The condensed consolidated balance sheet
information as of December 31, 2009 was derived from the audited consolidated
financial statements included in the Company’s Annual Report on Form 10-K. These
interim financial statements should be read in conjunction with that
report.





F-7





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS


FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009


(UNAUDITED)





3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





(b) 
Principles of Consolidation





The
condensed consolidated financial statements include the accounts of WLOL and its
subsidiaries and variable interest entities (“VIEs”) (the “Company”) as
follows:





I.
Subsidiaries and Holding Companies:





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





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





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





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





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





II.
Subsidiaries of PGL - Businesses in transportation and chartering:





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





g)
            Win Star Shipping Co., Limited,
      is incorporated and registered in St. Vincent and the Grenadines
      (“S.V.G.”).





h)
            Bodar Shipping Co., Limited, is
      incorporated and registered in
S.V.G.





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





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





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





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





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





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





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





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





q)
            Win Glory S.A. is incorporated in
      Panama, registered in Hong
Kong.





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





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




F-8





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





(b) 
Principles of Consolidation (Continued)





II.
Subsidiaries of PGL - Businesses in transportation and chartering
(Continued)





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





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





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





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





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





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





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





III. VIEs
- Businesses in Shipping Agency, Freight Forwarding and Online
Services:





To comply
with the People’s Republic of China (“PRC”) laws and regulations, the Company
provides substantially all its shipping agency and freight forwarding services
and online services in China via its VIEs. These VIEs are wholly-owned by
certain related parties or directors of the Company.





The
following is a summary of the VIEs of the Company:





aa)
            Dalian Winland International
      Shipping Agency Co. Ltd. (“DWIS”) is incorporated under the laws of the
      PRC. The principal activity of DWIS is shipping agency
      services.





bb)
            Dalian Winland International
      Logistic Co. Ltd. (“DWIL”) is incorporated under the laws of PRC. The
      principal activity of DWIL is freight forwarding
      services.





cc)
            Dalian Shipping Online Network
      Co. Ltd. (“DSON” or “Shipping Online”) is incorporated under the laws of
      PRC. The principal activities of DSON are providing online service for the
      members.





F-9




WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)





3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





(b) 
Principles of Consolidation (Continued)





On March
31, 2008, the Company entered into exclusive technical service agreements with
DWIS, DWIL and DSON under which the Company provides technical and other
services to DWIS, DWIL and DSON in exchange for substantially all net income of
DWIS, DWIL and DSON. All voting rights of DWIS, DWIL and DSON are assigned to
the Company, and the Company has the right to appoint all directors and senior
management personnel of DWIS, DWIL and DSON. In addition, shareholders of DWIS,
DWIL and DSON have pledged their equity interests in DWIS, DWIL and DSON as
collateral to the Company for the non-payment of the fees for technical and
other services due to the Company.





The
Company applied the provision of ASC 810, Consolidation of Variable Interest
Entities, a variable interest entity (“VIE”) to
be consolidated by a company if that company is subject to a majority of the
risk of loss for the VIEs or is entitled to receive a majority of the VIEs’
residual returns. As a result, DWIS, DWIL and DSON became the Company’s VIEs
since January 1, 2008.





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





(c) 
Concentrations





The
Company’s major customers who accounted for the following percentages of total
revenue and accounts receivable are as follows:




Sales
                
                
                Accounts ReceivableMajor Customers
                
                ForTheNine
                  MonthsEnded
                  September30,2010
                
                
                ForTheNine
                  MonthsEnded
                  September30,2009
                
                
                September30,
                  2010
                
                
                December31,
                  2009(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)G U
      Shipping Pte., Ltd.
                
                
                15.67%
                
                
                
                -
                
                
                
                -
                
                
                
                -





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




Oil Purchases
                
                
                Accounts PayableMajor Suppliers
                
                ForTheNine
                  MonthsEnded
                  September30,2010
                
                
                ForTheNine
                  MonthsEnded
                  September30,2009
                
                
                September30,
                  2010
                
                
                December31,
                  2009(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)Dan-Bunkering
      Ltd.
                
                
                21.57%
                
                
                
                6.31%
                
                
                
                -
                
                
                
                7.31%World
      Fuel Services
                
                
                13.09%
                
                
                
                9.86%
                
                
                
                -
                
                
                
                -Raffles
      Bunkering Pte Ltd.
                
                
                12.96%
                
                
                
                -
                
                
                
                -
                
                
                
                -United
      Bunkering & Trading (HK) Ltd.
                
                
                10.34%
                
                
                
                5.25%
                
                
                
                1.70%
                
                
                
                -




F-10





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





(d)  Use
of Estimates





The
preparation of the condensed consolidated financial statements in conformity
with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. Actual results could differ materially from those
estimates.





(e)
            Fair Value of Financial
      Instruments





Fair Value of Financial Instruments- ASC 820-10 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. The hierarchy prioritizes
the inputs into three levels based on the extent to which inputs used in
measuring fair value are observable in the market.





These
tiers include:





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


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


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





The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, and short-term bank loan approximate their fair values due to the
short-term nature of these instruments.





The
carrying value of long-term loans and long-term notes payable approximate their
fair value due to the variable interest rates nature thereof. The fair values
are estimated based on the current rates offered to the Company for debt of
similar terms and maturities.





(f)
Vessels Under Construction





Vessels
under construction are stated at cost. They are not depreciated until the
vessels are completed and ready for use. Interest and finance costs relating to
vessels, barges and other equipment under construction are capitalized to
properly reflect the cost of assets acquired. The capitalized interest as part
of vessels under construction was $530,308 for the nine months ended September
30, 2010.





(g)
Revenue Recognition





Revenue
is recognized based on the following four criteria:





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





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





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





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




F-11




WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





(g)
Revenue Recognition (Continued)





For dry
bulk shipping service, the allocation of revenue between reporting periods is
based on relative transit time in each reporting period with expenses recognized
as incurred.





For
chartering brokerage services, sales are recognized when the ship leaves
port.





For
shipping agency and freight forwarding services, sales are recognized when the
ship leaves port.





For
online services, sales are recognized according to the stage of completion in
accordance with the service period defined in executed contracts.





(h)
Earnings (Loss) Per Share





Basic
earnings (loss) per share are computed by dividing income (loss) available to
common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings (loss) per share is computed similar to
basic earnings (loss) per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. The Company does not have dilutive securities for the
three and nine months ended September 30, 2010 and 2009.





(i)
Foreign Currency Translation





Assets
and liabilities of foreign subsidiaries are translated into United States
dollars at currency exchange rates in effect at period-end and revenues and
expenses are translated at average exchange rates in effect for the period.
Gains and losses resulting from foreign currency transactions are included in
results of operations. Gains and losses resulting from translation of foreign
subsidiaries balance sheets are included as a separate component of
shareholders’ equity.




September
      30, 2010
                
                
                December
      31, 2009
                
                
                September
      30, 2009Period
      end RMB: US$ exchange rate
                
                
                6.6981
                
                
                
                6.8372
                
                
                
                -Average
      period RMB: US$ exchange rate
                
                
                6.7676
                
                
                
                -
                
                
                
                6.8455





(j)
Comprehensive Income (Loss)





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




F-12





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


3.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





(k)
Reporting Segments





Accounting
standards require public business enterprises to report information about each
of their operating business segments that exceed certain quantitative threshold
or meet certain other reporting requirements. Operating business segments have
been defined as a component of an enterprise about which separate financial
information is available and is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has determined that there are three reportable
segments: (1) Dry bulk shipping, (2) Chartering brokerage, and (3) Other
activities segment.





Dry Bulk
Shipping Service - Dry bulk shipping service operates a fleet of thirteen
vessels that provides marine shipping services for dry and liquid bulk cargo
shipping. The segment contributed 64% and 47% of combined operating revenues for
the nine months ended September 30, 2010 and 2009, respectively.





Chartering
Brokerage Service - Chartering brokerage service provides ship chartering
services for unrelated shipping companies and shippers. The segment contributed
30% and 44% of consolidated operating revenues for the nine months ended
September 30, 2010 and 2009, respectively.





Other
activities - Other activities segment comprises shipping agency and freight
forwarding services, and online services. Shipping agency and freight forwarding
service provides transportation and logistic services to shippers in the PRC.
Online services provide internet services for members. These operating segments
were not separately reported as they do not meet any of the quantitative
thresholds under ASC 280-10, Disclosure about Segments of an Enterprise and
Related Information. Other activities segment contributed 6% and 9% of
consolidated operating revenues for the nine months ended September 30, 2010 and
2009, respectively. Also see Note 13.





(l)
Recent Accounting Pronouncements





In June
2009, the FASB issued ASC 810-10 Amendments to FASB Interpretation No. 46(R),
which require an enterprise to perform an analysis and ongoing reassessments to
determine whether the enterprises variable interest or interests give it a
controlling financial interest in a variable interest entity and amends certain
guidance for determining whether an entity is a variable interest entity. It
also requires enhanced disclosures that will provide users of financial
statements with more transparent information about an enterprises involvement in
a variable interest entity. ASC 810-10 is effective as of the beginning of
each reporting entity’s first annual reporting period that begins after November
15, 2009 and for all interim reporting periods after that. The adoption of ASC
810-10 did not have a material effect on the Company’s condensed
consolidated financial statements as of September 30, 2010.





In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires disclosure of transfers of assets and liabilities between Level 1 and
Level 2 of the fair value measurement hierarchy, including the reasons and the
timing of the transfers and information on purchases, sales, issuance, and
settlements on a gross basis in the reconciliation of the assets and liabilities
measured under Level 3 of the fair value measurement hierarchy. This guidance is
effective for the Company beginning March 1, 2010. The adoption of this guidance
did not have a material effect on the Company’s condensed consolidated financial
statements as of September 30, 2010.




F-13





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


4.    VESSELS





The
Company’s current fleet consists of thirteen vessels as bulk carriers as of
September 30, 2010 and December 31, 2009. Among the thirteen vessels, two of
them denoted (a) were acquired by syndicated loans and are still under pledge,
also see Note 9; nine vessels denoted (b) were acquired through capital leases;
a vessel denoted (c) was acquired through long-term notes payable from related
parties, also see Note 10; and one remaining vessel denoted (d) was acquired
through a long-term loan and a long-term note payable. Also see Notes 9 and
10.





The
vessels of the Company consist of the following:





September30, 2010
                          
                          
                          December 31, 2009(Unaudited)At
      cost:Win
      Hope
                          (b)
                          
                          $
                          2,679,286
                          
                          
                          $
                          2,679,285Win
      Ever
                          (b)
                          
                          
                          1,737,965
                          
                          
                          
                          1,737,966Win
      Bright
                          (b)
                          
                          
                          1,739,258
                          
                          
                          
                          1,739,258Win
      Eagle
                          (b)
                          
                          
                          3,560,852
                          
                          
                          
                          3,560,852Win
      Glory
                          (b)
                          
                          
                          2,503,697
                          
                          
                          
                          2,503,697Win
      Grace
                          (b)
                          
                          
                          3,677,861
                          
                          
                          
                          3,677,861Win
      Moony
                          (b)
                          
                          
                          3,682,178
                          
                          
                          
                          3,682,178Win
      Star
                          (b)
                          
                          
                          3,336,600
                          
                          
                          
                          3,336,600Winland
      Dalian
                          (a)
                          
                          
                          18,243,139
                          
                          
                          
                          18,243,139Win
      Honey
                          (a)
                          
                          
                          4,500,000
                          
                          
                          
                          4,500,000Bodar
                          (b)
                          
                          
                          4,985,441
                          
                          
                          
                          4,985,441Andong
                          (c)
                          
                          
                          3,023,259
                          
                          
                          
                          2,961,739Baoshun
                          (d)
                          
                          
                          20,881,125
                          
                          
                          
                          20,881,125$
                          74,550,661
                          
                          
                          $
                          74,489,141September 30, 2010
                          
                          
                          December 31, 2009(Unaudited)Less:  Accumulated
      depreciationWin
      Hope
                          (b)
                          
                          $
                          2,190,312
                          
                          
                          $
                          2,009,463Win
      Ever
                          (b)
                          
                          
                          1,564,169
                          
                          
                          
                          1,564,169Win
      Bright
                          (b)
                          
                          
                          1,565,332
                          
                          
                          
                          1,565,332Win
      Eagle
                          (b)
                          
                          
                          3,204,767
                          
                          
                          
                          3,204,767Win
      Glory
                          (b)
                          
                          
                          2,253,328
                          
                          
                          
                          2,119,201Win
      Grace
                          (b)
                          
                          
                          3,310,075
                          
                          
                          
                          3,310,075Win
      Moony
                          (b)
                          
                          
                          3,313,961
                          
                          
                          
                          3,313,961Win
      Star
                          (b)
                          
                          
                          3,002,940
                          
                          
                          
                          3,002,940Winland
      Dalian
                          (a)
                          
                          
                          5,564,158
                          
                          
                          
                          4,743,216Win
      Honey
                          (a)
                          
                          
                          1,712,813
                          
                          
                          
                          1,522,969Bodar
                          (b)
                          
                          
                          4,486,897
                          
                          
                          
                          4,486,897Andong
                          (c)
                          
                          
                          933,654
                          
                          
                          
                          797,056Baoshun
                          (d)
                          
                          
                          1,006,769
                          
                          
                          
                          251,692$
                          34,109,175
                          
                          
                          $
                          31,891,738Vessels,
      net
                          
                          
                          $
                          40,441,486
                          
                          
                          $
                          42,597,403





Vessel
depreciation expense for the nine months ended September 30, 2010 and 2009 was
$2,199,647 and $2,378,661 respectively.





The
Company pledged the following vessels as collateral against long-term loans.
Also see Note 9.





F-14





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


4.    VESSELS
(CONTINUED)





September30, 2010
                  
                  
                  December 31, 2009(Unaudited)Net Book ValueWinland
      Dalian
                  
                  $
                  12,678,982
                  
                  
                  $
                  13,499,923Win
      Honey
                  
                  
                  2,787,188
                  
                  
                  
                  2,977,031Baoshun
                  
                  
                  19,874,356
                  
                  
                  
                  20,629,433Total
                  
                  $
                  35,340,526
                  
                  
                  $
                  37,106,387





There are
four kinds of marine insurance for the Company which insures the vessels and
shipping business as follows:





Insurance
                
                Coverage
                
                
                Insurance Premium
                  For The Nine Months Ended September
      30,2010
                
                
                2009(Unaudited)
                
                
                (Unaudited)Hull
      insurance
                
                $
                66,520,000
                
                
                $
                800,046
                
                
                $
                748,243Protection
      & indemnity insurance
                
                
                94,740,000
                
                
                
                823,339
                
                
                
                747,926Freight
      demurrage and defense insurance
                
                
                62,240,000
                
                
                
                81,361
                
                
                
                70,354Delay
      insurance
                
                
                500,000
                
                
                
                43,100
                
                
                
                46,019Others
                
                
                
                
                
                
                34,382
                
                
                
                6,308Total
                
                
                
                
                
                $
                1,782,228
                
                
                $
                1,618,850





Insurance
costs are amortized on a straight-line basis over the beneficial periods and are
recorded in vessel expenses in the condensed consolidated statements of income
(loss) and comprehensive income (loss) for the three and nine months ended
September 30, 2010 and 2009. The premium expenses were $1,782,228 and $1,618,850
for the nine months ended September 30, 2010 and 2009, respectively. The
prepayment for insurance was $0 and $26,950 as of September 30, 2010 and
December 31, 2009, respectively.





5.    VESSELS
UNDER CONSTRUCTION





The
Company entered an agreement on May 20, 2010 to transfer two Novation Agreements
dated August 15, 2009 with reference made to two ship building contracts
previously executed on December 6, 2006 between a third party and the ship
builder for the construction of vessels HT073 and HT074. The contract amount of
$29,950,000 for each vessel included the ship building contract price of
$28,500,000 due to the ship yard and a contract transfer fee of $1,450,000 due
to Rich Forth Investment Limited (“Rich”), a related party which is controlled
by the relative of the Chairman of the Company. The contract transfer fees
reimbursed Rich for costs incurred in connection with building the ships,
including a finder’s fee and interest that Rich paid to third parties for
amounts borrowed to pay the finder’s fee. The amounts shown in the accompanying
condensed consolidated balance sheets include milestone installments related to
the ship building contract term, contract transfer fees, other direct costs
incurred during the construction periods, and capitalized interest, all of which
are capitalized to properly reflect the cost of assets acquired and not
depreciated until the vessels are completed and ready for use. Vessels under
construction as of September 30, 2010 consist of the following (also see Notes
9, 10 and 11):





Vessel
                      Name
                    
                    Expected
                      Delivery Date
                    
                    Contract
                      Amount
                    
                    
                    Construction
                      Costs
                    
                    
                    Other
                      Direct Costs
                    
                    
                    Finder’s
                      Fees
                    
                    
                    Capitalized
                      Interest
                    
                    
                    TotalHT073
                    
                    December
      15, 2010
                    
                    $
                    29,950,000
                    
                    
                    $
                    14,250,000
                    
                    
                    $
                    539,833
                    
                    
                    $
                    1,425,000
                    
                    
                    $
                    289,186
                    
                    
                    $
                    16,504,019HT074
                    
                    March
      15, 2011
                    
                    $
                    29,950,000
                    
                    
                    $
                    8,550,000
                    
                    
                    $
                    370,906
                    
                    
                    $
                    1,425,000
                    
                    
                    $
                    241,122
                    
                    
                    $
                    10,587,028Total
                    
                    
                    
                    $
                    59,900,000
                    
                    
                    $
                    22,800,000
                    
                    
                    $
                    910,739
                    
                    
                    $
                    2,850,000
                    
                    
                    $
                    530,308
                    
                    
                    $
                    27,091,047





F-15





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


6.
            FIXED
      ASSETS





Fixed
assets consist of the following:





September30, 2010
                    
                    
                    December 31, 2009(Unaudited)At
      cost:Motor
      vehicles
                    
                    $
                    291,321
                    
                    
                    $
                    244,612Office
      equipment
                    
                    
                    214,426
                    
                    
                    
                    204,031Leasehold
      improvement
                    
                    
                    185,444
                    
                    
                    
                    181,671691,191
                    
                    
                    
                    630,314Less:  Accumulated
      depreciationMotor
      vehicles
                    
                    
                    176,979
                    
                    
                    
                    159,458Office
      equipment
                    
                    
                    181,136
                    
                    
                    
                    174,298Leasehold
      improvement
                    
                    
                    176,402
                    
                    
                    
                    145,517534,517
                    
                    
                    
                    479,273Fixed
      assets, net
                    
                    $
                    156,674
                    
                    
                    $
                    151,041





Depreciation
expense for the nine months ended September 30, 2010 and 2009 was $60,168 and
$67,601, respectively.





7.    DEFERRED
DRY DOCK FEES





Deferred
dry dock feesconsist of the
following:





September30, 2010
                    
                    
                    December 31, 2009(Unaudited)Cost
                    
                    $
                    14,878,493
                    
                    
                    $
                    17,608,753Less:
      Accumulated amortization
                    
                    
                    6,981,598
                    
                    
                    
                    8,297,106Deferred
      dry dock fees, net
                    
                    $
                    7,896,895
                    
                    
                    $
                    9,311,647





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





Period Ended September 30,
                                
                                Amount2011
                                
                                $
                                2,958,3122012
                                
                                
                                2,540,1012013
                                
                                
                                1,678,5462014
                                
                                
                                595,9662015
                                
                                
                                123,970Total
                                
                                $
                                7,896,895





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





September30, 2010
                  
                  
                  December 31, 2009(Unaudited)Beginning
      balance
                  
                  $
                  9,311,647
                  
                  
                  $
                  11,034,686Addition
      of deferrals
                  
                  
                  1,281,199
                  
                  
                  
                  2,284,803Less:
      Amortization expense
                  
                  
                  (2,695,951
                  )
                  
                  
                  (4,007,842
                  )Deferred
      dry dock fees, net
                  
                  $
                  7,896,895
                  
                  
                  $
                  9,311,647




F-16





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


7.    DEFERRED
DRY DOCK FEES (CONTINUED)





The
Company’s vessels are required to be drydocked approximately every 60 months for
major repairs and maintenance that cannot be performed while the vessels are
operating. The Company defers the costs associated with the drydockings as they
occur and amortizes these costs on a straight-line basis over the period between
drydockings. Cost deferred as part of a vessel’s drydocking include actual costs
incurred at the drydocking yard, cost of travel, lodging and subsistence of
personnel sent to the drydocking site to supervise, and the cost of hiring a
third party to oversee the drydocking. If the vessel is drydocked earlier than
originally anticipated, any remaining deferred drydock costs that have not been
amortized are expensed at the beginning of the next drydock. Amortization
expense for drydocking for the nine months ended September 30, 2010 and 2009 was
$2,695,951 and $3,067,008, respectively. All other costs incurred during
drydocking are expensed as incurred.





8.    DUE
TO/FROM RELATED PARTIES





Due
to/from related parties consist of the following:





(I)   Due
      From Related Parties
                                
                                
                                
                                
                                September30, 2010
                                
                                
                                December 31, 2009(Unaudited)Winland
      Container Lines Ltd.
                                
                                
                                a
                                )
                                
                                $
                                1,895,958
                                
                                
                                $
                                1,097,384Dalian
      Winland Group Co., Ltd
                                
                                
                                b
                                )
                                
                                
                                79,923
                                
                                
                                
                                16,113Due
      from employees
                                
                                
                                c
                                )
                                
                                
                                -
                                
                                
                                
                                146Total
      due from related parties
                                
                                
                                
                                
                                
                                $
                                1,975,881
                                
                                
                                $
                                1,113,643(II) Due
      To Related Parties
                                
                                
                                
                                
                                
                                September30, 2010
                                
                                
                                December 31, 2009(Unaudited)Dalian
      Winland Shipping Co., Ltd
                                
                                
                                d
                                )
                                
                                
                                43,949
                                
                                
                                
                                -Dalian
      Master Well Ship Management Co., Ltd
                                
                                
                                e
                                )
                                
                                
                                226,360
                                
                                
                                
                                7,200Winland
      Shipping Japan Co., Ltd
                                
                                
                                f
                                )
                                
                                
                                8,726
                                
                                
                                
                                13,707Rich
      Forth Investment Limited
                                
                                
                                g
                                )
                                
                                
                                312,205
                                
                                
                                
                                -Total
      due to related parties
                                
                                
                                
                                
                                
                                $
                                591,240
                                
                                
                                $
                                20,907





a)
            Winland
      Container Lines Ltd. is controlled by the Chairman and Chief Executive
      Officer of the Company. The Company provided shipping agency and freight
      forwarding services to Winland Container Lines Ltd. For the nine months
      ended September 30, 2010 and 2009, the Company recognized charter income
      for the vessel Winland Dalian of $153,507 and $0, respectively; the
      Company recognized service revenues of $1,410,518 and $1,045,131,
      respectively. For the nine months ended September 30, 2010 and 2009, the
      Company paid $21,651,111 and $3,175,312 of expenses to ports, and received
      $22,439,143 and $425,797 of payments from ports on behalf of Winland
      Container Lines Ltd., respectively. The outstanding balances at September
      30, 2010 and December 31, 2009 are interest-free, unsecured and they have
      been subsequently settled.





F-17





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


8.    DUE
TO/FROM RELATED PARTIES (CONTINUED)





b)
              Dalian Winland Group Co., Ltd
      (“DWIG”) is controlled by the Chairman and Chief Executive Officer of the
      Company. The Company paid $9,033,868 and $19,896,581 of expenses on behalf
      of DWIG for the nine months ended September 30, 2010 and 2009,
      respectively.  The Company collected $8,900,636 and $22,976,257
      on behalf of DWIG for the nine months ended September 30, 2010 and 2009,
      respectively. For the nine months ended September 30, 2010 and 2009, the
      Company recognized interest expense for long-term notes payable of $68,709
      and $69,924, respectively. Also see Note 10. The outstanding balances at
      September 30, 2010 and December 31, 2009 are interest-free, unsecured and
      have no fixed repayment term. They have been subsequently settled after
      September 30, 2010.


c)
              Due
      from employees are interest-free, unsecured and have no fixed repayment
      terms. The amounts due from employees primarily represent advances to
      sales personnel for business and travel related
  expenses.


d)
              Dalian
      Winland Shipping Co., Ltd (“DWSC”) is controlled by the Chairman and Chief
      Executive Officer of the Company. It operates as a vessel management
      company for the Company. It operated one and two vessels for the Company
      for the nine months ended September 30, 2010 and 2009, respectively. The
      vessel management fees were $13,500 and $25,500 for the nine months ended
      September 30, 2010 and 2009, respectively. The Company also recognized
      service revenue of $0 and $1,285,516 for the nine months ended September
      30, 2010 and 2009, respectively. For the nine months ended September 30,
      2010 and 2009, on behalf of DWSC, the Company paid $13,500 and $104,703,
      and received $0 and $997,736, respectively. The Company recognized
      interest expense for long-term notes payable of $43,498 and $43,000 for
      nine months ended September 30, 2010 and 2009, respectively. See Note 10.
      The outstanding balance at September 30, 2010 is interest-free, unsecured
      and has no fixed repayment term.


e)
              Dalian
      Master Well Ship Management Co., Ltd is controlled by the Chairman and
      Chief Executive Officer of the Company. It operates as a vessel management
      company for the Company. The vessel management fees for the nine months
      ended September 30, 2010 and 2009 were $153,900 and $194,400,
      respectively. The Company paid $0 and $117,379 on behalf of Dalian Master
      Well Ship Management Co., Ltd, for the nine months ended September 30,
      2010 and 2009, respectively. The Company collected $65,260 and $70,549 on
      behalf of Dalian Master Well Ship Management Co., Ltd, for the nine months
      ended September 30, 2010 and 2009, respectively. The outstanding balances
      at September 30, 2010 and December 31, 2009 are interest-free, unsecured,
      and have no fixed repayment term.


f)
              Winland Shipping Japan Co., Ltd
      is controlled by the Chairman and Chief Executive Officer of the Company.
      The Company recognized agency service fees of $44,599 and $353,695 for the
      nine months ended September 30, 2010 and 2009, respectively. The Company
      paid $81,792 and $370,483 on behalf of Winland Shipping Japan Co., Ltd,
      for the nine months ended September 30, 2010 and 2009, respectively. The
      Company collected $32,796 and $0 on behalf of Winland Shipping Japan Co.,
      Ltd, for the nine months ended September 30, 2010 and 2009, respectively.
      The outstanding balances at September 30, 2010 and December 31, 2009 are
      interest-free, unsecured and have no fixed repayment
      term.


g)
            Rich
      Forth Investment Limited is controlled by the relative of the Chairman of
      the Company. It operates as a vessel management company for the Company.
      The vessel management fee was $37,800 and $0 for the nine months ended
      September 30, 2010 and 2009, respectively. The Company paid $457,115 and
      $0, and collected $600,097 and $0 for the nine months ended September 30,
      2010 and 2009, respectively. The Company recognized interest expense for
      long-term notes payable of $131,423 and $0 for nine months ended September
      30, 2010 and 2009, respectively. See Note 10. The outstanding balance at
      September 30, 2010 is interest-free, unsecured and has no fixed repayment
      term.




F-18





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


9.    LONG-TERM
LOANS





Long-term
loans consist of the following:


September30,
                            2010
                          
                          
                          December 31,
                            2009(Unaudited)Loans
      from Dialease Maritime S.A.:Due
      on August 1, 2012, monthly interest payment is 1-month LIBOR plus 1.75%
      per annum, and the actual rate at September 30, 2010 is 2.29%, secured by
      the vessel Winland Dalian (also see Note 4), assignment of insurance of
      the vessel, and guaranteed by the Chairman of the Company. Principal is
      repaid every month in 72 equal installments from September
      2005.
                          
                          $
                          1,935,708
                          
                          
                          $
                          3,519,456Due
      on July 21, 2012, monthly interest payment is 1-month LIBOR plus 1.75% per
      annum, and the actual rate at September 30, 2010 is 2.29%, secured by the
      vessel Win Honey (also see Note 4), assignment of insurance of the vessel,
      and guaranteed by the Chairman of the Company. Principal is repaid every
      month in 72 equal installments from August 2006.
                          
                          
                          1,283,300
                          
                          
                          
                          1,808,306Due
      on September 24, 2016 with interest at the 1-month Japanese Yen LIBOR plus
      2.30% per annum, and the actual rate at September 30, 2010 is 2.46%,
      secured by the vessel Baoshun (also see Note 4). Principal is repaid every
      month in 84 equal installments of $109,773 from October 24, 2009 with
      final payment of $5,269,068.
                          
                          
                          13,172,724
                          
                          
                          
                          14,160,681Loan
      facility of $37,000,000 from China Merchants Bank:Drawdown
      from the loan facilities due on September 21, 2012, with interest rate at
      the 3-month LIBOR plus 1.5% per annum, and the actual rate at September
      30, 2010 is 2.05%. The principal payment is fixed at $497,500 quarterly
      for 5 quarters, starting June 21, 2011, with final payment of
      $312,500 on September 21, 2012. The interest is accrued from June 29, 2010
      and paid quarterly starting December 21, 2010 till the principal is paid.
      The loan is secured by the vessel HT074, and guaranteed by the Chairman
      and the CEO of the Company (also see Notes 5 and 15).
                          
                          
                          2,800,000
                          
                          
                          
                          -Drawdown
      from the loan facilities due on June 21, 2014, with interest rate at the
      3-month LIBOR plus 1.5% per annum, and the actual rate at September 30,
      2010 is 2.05%. The principal payment is fixed at $427,500 quarterly
      for  13 quarters, starting March 21, 2011, with final payment of
      $142,500 due June 21, 2014. The interest is accrued from July 9, 2010 and
      paid quarterly starting December 21, 2010 till the principal payoff. The
      loan is secured by the vessel HT073, and guaranteed by the Chairman and
      the CEO of the Company (also see Notes 5 and 15).
                          
                          
                          5,700,000
                          
                          
                          
                          -Total
      long-term loans
                          
                          
                          24,891,732
                          
                          
                          
                          19,488,443Less:
      Current portion
                          
                          
                          6,230,492
                          
                          
                          
                          4,128,908Long-term
      portion
                          
                          $
                          18,661,240
                          
                          
                          $
                          15,359,535




F-19





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


9.    LONG-TERM
LOANS (CONTINUED)





Interest
expense for the nine months ended September 30, 2010 and 2009 was $325,057 and
$118,633, respectively.





The
interest on the loan facility which were used to build the vessel HT073 and
HT074 was capitalized as part of vessels under construction. The capitalized
interest for the nine months ended September 30, 2010 was $40,885.





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





Period Ended September 30,
                  
                  Amount2011
                  
                  $
                  6,230,4922012
                  
                  
                  5,415,5682013
                  
                  
                  3,027,2762014
                  
                  
                  2,314,7762015
                  
                  
                  1,317,276Thereafter
                  
                  
                  6,586,344Total
                  
                  $
                  24,891,732




F-20





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


10.    LONG-TERM
NOTES PAYABLE





Long-term
notes payable consists of the following:


September30,
      2010
                        
                        
                        December 31, 2009(Unaudited)Notes
      payable to unrelated party:Sea
      Carrier Shipping Co., Ltd., net of discount of $1,571,679 and $2,100,182
      at September 30, 2010 and December 31, 2009, respectively, due September
      25, 2014, fixed repayment of $2,897 per day, monthly payment due one month
      in advance.
                        
                        
                        a
                        )
                        
                        $
                        2,643,454
                        
                        
                        $
                        2,905,834Sea
      Carrier Shipping Co., Ltd., Due December 31, 2015, at an interest rate of
      1% on unpaid principal balance per month, fixed monthly repayment for
      principal starting January 1, 2011, interest payment starting June 1,
      2010.
                        
                        
                        b
                        )
                        
                        
                        3,850,000
                        
                        
                        
                        -Sea
      Carrier Shipping Co., Ltd., Due March 31, 2016, at an interest rate of 1%
      on unpaid principal balance per month, fixed monthly repayment for
      principal starting April 1, 2011, interest payment starting June 1,
      2010.
                        
                        
                        c
                        )
                        
                        
                        3,850,000
                        
                        
                        
                        -Subtotal
                        
                        
                        
                        
                        
                        
                        10,343,454
                        
                        
                        
                        2,905,834Notes
      payable to related companies:Dalian
      Winland Shipping Co., Ltd., due July 19, 2012, at an interest rate of 5%
      per annum
                        
                        
                        d
                        )
                        
                        
                        1,148,131
                        
                        
                        
                        1,148,131Dalian
      Winland Group Co., Ltd., due July 19, 2012, at an interest rate of 5% per
      annum
                        
                        
                        e
                        )
                        
                        
                        1,813,608
                        
                        
                        
                        1,813,608Rich
      Forth Investment Limited, due December 31, 2015, at an interest rate of
      5.841% on unpaid principal balance per annum, fixed monthly repayment for
      principal starting January 1, 2011, interest payment starting June 1,
      2010.
                        
                        
                        f
                        )
                        
                        
                        4,300,000
                        
                        
                        
                        -Rich
      Forth Investment Limited, due March 31, 2016, at an interest rate of
      5.841% on unpaid principal balance per annum, fixed monthly repayment for
      principal starting April 1, 2011, interest payment starting June 1,
      2010.
                        
                        
                        g
                        )
                        
                        
                        2,450,000
                        
                        
                        
                        -Subtotal
                        
                        
                        
                        
                        
                        
                        9,711,739
                        
                        
                        
                        2,961,739Total
      long-term notes payable
                        
                        
                        
                        
                        
                        
                        20,055,193
                        
                        
                        
                        5,867,573Less:
      Current portion
                        
                        
                        
                        
                        
                        
                        2,291,883
                        
                        
                        
                        3,326,132Long-term
      portion
                        
                        
                        
                        
                        
                        $
                        17,763,310
                        
                        
                        $
                        2,541,441





The
long-term note denoted a) was used to purchase the vessel Baoshun (see Note 4).
The amortization of discount on this long-term note for the nine months ended
September 30, 2010 and 2009 was $528,502 and $13,345, respectively.





The
long-term notes obtained from DWSC and DWIG, two related parties, denoted d) and
e) were both used to purchase the vessel Andong. Also see Notes 4 and 8. The
interest expense on these long-term notes for the nine months ended September
30, 2010 and 2009 was $112,207 and $110,924, respectively.




F-21


WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


10.    LONG-TERM
NOTES PAYABLE (CONTINUED)





The
long-term notes denoted b) and f) were used to build the vessel HT073, c) and g)
were used to build the vessel HT074 (see Note 5). The interest on these
long-term notes was capitalized as part of vessels under construction. The
capitalized interest for the nine months ended September 30, 2010 was
$439,423.





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




Period Ended September 30,
                
                Amount2011
                
                $
                2,291,8832012
                
                
                6,418,9972013
                
                
                3,614,6722014
                
                
                3,802,1412015
                
                
                2,890,000Thereafter
                
                
                1,037,500Total
                
                $
                20,055,193





11.    COMMITMENTS





The
Company leases office space under operating leases. Lease expense was $171,269
and $87,426 for the nine months ended September 30, 2010 and 2009,
respectively.





As of
September 30, 2010, future minimum payments required under non-cancelable leases
are:





Period Ended September 30,
                  
                  Amount2011
                  
                  $
                  79,1572012
                  
                  
                  8,623Total
                  
                  $
                  87,780





The
Company chartered a vessel on May 9, 2010 from a third party with a chartering
period of 5 months at $28,500 per day. As of September 30, 2010, chartering
costs incurred were $4,132,500. The future chartering commitment is $285,000 for
10 days.





The
Company entered an agreement on May 20, 2010 to transfer two Novation Agreements
dated August 15, 2009 with reference made to two ship building contracts
previously executed on December 6, 2006 for the construction of two vessels. As
of September 30, 2010, the future payments required for the balance of the ship
building contracts are as follows:





Period Ended September 30,
                    
                    HT073
                    
                    
                    HT074
                    
                    
                    Amount2011
                    
                    $
                    11,400,000
                    
                    
                    $
                    17,100,000
                    
                    
                    $
                    28,500,0002012
                    
                    
                    950,000
                    
                    
                    
                    950,000
                    
                    
                    
                    1,900,0002013
                    
                    
                    950,000
                    
                    
                    
                    950,000
                    
                    
                    
                    1,900,0002014
                    
                    
                    950,000
                    
                    
                    
                    950,000
                    
                    
                    
                    1,900,000Total
                    
                    $
                    14,250,000
                    
                    
                    $
                    19,950,000
                    
                    
                    $
                    34,200,000





The
Company will substantially pay for the balance of the ship building contracts
with the $37,000,000 loan facility. See Note 9.





F-22





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


12.    INCOME
TAX





(a)
            Income
      Tax Expense





Dalian
Winland International Shipping Agency Co. Ltd., Dalian Winland International
Logistic Co. Ltd. and Dalian Shipping Online Network Co. Ltd. are incorporated
under the laws of PRC and subjected by Chinese tax law. On March 16, 2007, the
National People’s Congress of China approved the Corporate Income Tax Law of the
People’s Republic of China (the “new CIT Law”), which was effective on January
1, 2008. Under the new CIT Law, the corporate income tax rate applicable to
these companies starting from January 1, 2008 is 25%.





Winland
Shipping Co., Limited, Treasure Way Shipping Limited, Kinki International
Industrial Limited, Bestline Shipping Limited, Lancrusier Development Co.,
Limited, Winland International Shipping Co., Limited, Fon Tai Shipping Co.,
Limited and Won Lee Shipping Co., Limited are incorporated and registered in
Hong Kong. All the income derived from these companies is exempt from income tax
under the local tax law; there is no income tax expense for the nine months
ended September 30, 2010 and 2009.





Win Star
Shipping Co., Limited and Bodar Shipping Co., Limited are incorporated and
registered in St. Vincent and Grenadines. Win Eagle Shipping Co., Limited, Win
Ever Shipping Co., Limited, and Win Bright Shipping Co., Limited are
incorporated and registered in Valletta, Malta. These five companies obtained
tax exemptions from the local governments, so they did not have any tax expense
for the nine months ended September 30, 2010 and 2009. Winland Dalian Shipping
S.A. and Win Glory S.A. are incorporated in Panama and are registered in
HongKong. Win Grace Shipping Co., Limited, Win Hope Shipping Co., Limited, Win
Moony Shipping Co., Limited are incorporated and registered in Valletta, Malta.
Bodar Shipping S.A., Win Moony Shipping S.A., and Bao Shun Shipping S.A. are
incorporated and registered in Panama. Since these companies are exempt from
income tax under the local tax law, they did not have any income tax for the
nine months ended September 30, 2010 and 2009.





Effective
January 1, 2007, the Company adopted ASC 740-10, Accounting for Uncertainty in
Income Taxes, that addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under ASC 740-10, we may recognize the tax benefit from an
uncertainty tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement. ASC 740-10 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures.





Income
tax expense for the nine months ended September 30, 2010 and 2009 is summarized
as follows:





For The Nine Months Ended September
      30,2010
                  
                  
                  2009(Unaudited)
                  
                  
                  (Unaudited)Current
                  
                  $
                  (25,177
                  )
                  
                  $
                  (36,306
                  )Deferred
                  
                  
                  (354
                  )
                  
                  
                  (12,754
                  )Income
      tax expense
                  
                  $
                  (25,531
                  )
                  
                  $
                  (49,060
                  )





The
Company’s income tax expense differs from the “expected” tax expense for the
nine months ended September 30, 2010 and 2009 (computed by applying the Hong
Kong CIT rate of 16.5% and PRC CIT rate of 25% to income before income taxes) as
follows:





F-23





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


12.    INCOME
TAX (CONTINUED)





(a)
            Income
      Tax Expense (Continued)





For The Nine Months Ended September
      30,2010
                  
                  
                  2009(Unaudited)
                  
                  
                  (Unaudited)Computed
      “expected” (expense) benefit
                  
                  $
                  (986,010
                  )
                  
                  $
                  898,164Favorable
      tax rates
                  
                  
                  960,479
                  
                  
                  
                  (947,224
                  )Income
      tax expense
                  
                  $
                  (25,531
                  )
                  
                  $
                  (49,060
                  )





The tax
effects of temporary differences that give rise to the Company’s net deferred
tax assets and liabilities as of September 30, 2010 and December 31, 2009 are as
follows:





September 30, 2010
                  
                  
                  December 31, 2009(Unaudited)Deferred
      tax assets (liabilities):Current
      portion:Service
      revenue and commissions
                  
                  $
                  -
                  
                  
                  $
                  2,434Valuation
      allowance-short term
                  
                  
                  -
                  
                  
                  
                  (732
                  )Other
      income
                  
                  
                  -
                  
                  
                  
                  (164
                  )Subtotal
                  
                  
                  -
                  
                  
                  
                  1,538Non-current
      portion:Depreciation
      expense
                  
                  
                  (51,565
                  )
                  
                  
                  (31,454
                  )Accrued
      financial expense
                  
                  
                  (15,170
                  )
                  
                  
                  -Net
      operating loss
                  
                  
                  234,360
                  
                  
                  
                  135,585Valuation
      allowance
                  
                  
                  (167,591
                  )
                  
                  
                  (105,281
                  )Subtotal
                  
                  
                  34
                  
                  
                  
                  (1,150
                  )Net
      deferred tax assets
                  
                  $
                  34
                  
                  
                  $
                  388





(b)
            Tax
      Holiday Effect





For the
nine months ended September 30, 2010 and 2009, the Hong Kong corporate income
tax rate was 16.5%. Certain subsidiaries of the Company which were registered in
Hong Kong are entitled to tax exemptions as long as they do not operate in Hong
Kong under the local tax law. Since these companies do not have operations in
Hong Kong, they did not have any income tax expense for the nine months ended
September 30, 2010 and 2009.





The
combined effects of the income tax expense exemptions and reductions available
to the Company for the nine months ended September 30, 2010 and 2009 are as
follows:





F-24





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


12.    INCOME
TAX (CONTINUED)





(b)
            Tax
      Holiday Effect (Continued)





For The Nine Months Ended September
      30,2010
                    
                    
                    2009(Unaudited)
                    
                    
                    (Unaudited)Tax
      holiday benefit (expense)
                    
                    $
                    960,479
                    
                    
                    $
                    (947,224
                    )Basic
      net income (loss) per share excluding tax holiday
      effect
                    
                    $
                    0.04
                    
                    
                    $
                    (0.03
                    )





13.    SEGMENT
INFORMATION





The
Company determined that there are three reportable segments: (1) Dry bulk
shipping, (2) Chartering brokerage, and (3) Other activities segment. The other
activities segment comprises shipping agency, freight forwarding services and
online services. These operating segments were not separately reported as they
do not meet any of the quantitative thresholds under ASC 280-10, Disclosures
about Segments of an Enterperise and Related Information.





The
Company's segment information as of September 30, 2010 and December 31, 2009,
and for the nine months ended September 30, 2010 and 2009 are as
follows:





Nine Months Ended
                      September 30, 2010
                      (Unaudited)
                    
                    Dry Bulk
                      Shipping
                    
                    
                    Chartering
                      Brokerage
                    
                    
                    Other
                      Activities
                    
                    
                    Corporate
                      and
                      Eliminations
                    
                    
                    ConsolidatedSales
      to unaffiliated customers
                    
                    $
                    35,329,097
                    
                    
                    $
                    16,627,099
                    
                    
                    $
                    3,309,968
                    
                    
                    $
                    -
                    
                    
                    $
                    55,266,164Intersegment
      sales
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    88,167
                    
                    
                    
                    (88,167
                    )
                    
                    
                    -Net
      sales
                    
                    
                    35,329,097
                    
                    
                    
                    16,627,099
                    
                    
                    
                    3,398,135
                    
                    
                    
                    (88,167
                    )
                    
                    
                    55,266,164Costs
                    
                    
                    24,258,325
                    
                    
                    
                    14,106,747
                    
                    
                    
                    2,363,174
                    
                    
                    
                    (88,167
                    )
                    
                    
                    40,640,079Depreciation
      and amortization
                    
                    
                    4,897,582
                    
                    
                    
                    -
                    
                    
                    
                    58,184
                    
                    
                    
                    -
                    
                    
                    
                    4,955,766Other
      operating expenses
                    
                    
                    1,928,685
                    
                    
                    
                    268,885
                    
                    
                    
                    1,093,771
                    
                    
                    
                    173,684
                    
                    
                    
                    3,465,025Net
      income (loss)
                    
                    $
                    4,244,505
                    
                    
                    $
                    2,251,467
                    
                    
                    $
                    (116,994
                    )
                    
                    $
                    (173,684
                    )
                    
                    $
                    6,205,294September 30, 2010
    (Unaudited)Identifiable
      assets
                    
                    $
                    74,926,635
                    
                    
                    $
                    13,524,282
                    
                    
                    $
                    9,321,997
                    
                    
                    $
                    (7,197,166
                    )
                    
                    $
                    90,575,748




F-25





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


13.    SEGMENT
INFORMATION (CONTINUED)





Nine Months Ended
                      September 30, 2009
                      (Unaudited)
                    
                    Dry Bulk
                      Shipping
                    
                    
                    Chartering
                      Brokerage
                    
                    
                    Other
                      Activities
                    
                    
                    Corporate
                      and
                      Eliminations
                    
                    
                    ConsolidatedSales
      to unaffiliated customers
                    
                    $
                    17,023,160
                    
                    
                    $
                    16,060,356
                    
                    
                    $
                    3,285,005
                    
                    
                    $
                    -
                    
                    
                    $
                    36,368,521Intersegment
      sales
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    103,173
                    
                    
                    
                    (103,173
                    )
                    
                    
                    -Net
      sales
                    
                    
                    17,023,160
                    
                    
                    
                    16,060,356
                    
                    
                    
                    3,388,178
                    
                    
                    
                    (103,173
                    )
                    
                    
                    36,368,521Costs
                    
                    
                    17,132,616
                    
                    
                    
                    13,913,211
                    
                    
                    
                    2,303,747
                    
                    
                    
                    (103,173
                    )
                    
                    
                    33,246,401Depreciation
      and amortization
                    
                    
                    5,328,175
                    
                    
                    
                    -
                    
                    
                    
                    185,095
                    
                    
                    
                    -
                    
                    
                    
                    5,513,270Other
      operating expenses
                    
                    
                    1,241,642
                    
                    
                    
                    207,769
                    
                    
                    
                    1,170,138
                    
                    
                    
                    90,346
                    
                    
                    
                    2,709,895Gain
      from disposition of discontinued operation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    5,195
                    
                    
                    
                    -
                    
                    
                    
                    5,195(Loss)
      income from discontinued operation
                    
                    
                    (231,065
                    )
                    
                    
                    -
                    
                    
                    
                    318
                    
                    
                    
                    -
                    
                    
                    
                    (230,747
                    )Net
      (loss) income
                    
                    $
                    (6,910,338
                    )
                    
                    $
                    1,939,376
                    
                    
                    $
                    (265,289
                    )
                    
                    $
                    (90,346
                    )
                    
                    $
                    (5,326,597
                    )December 31, 2009Identifiable
      assets
                    
                    $
                    44,537,934
                    
                    
                    $
                    10,900,478
                    
                    
                    $
                    9,340,286
                    
                    
                    $
                    (2,977,188
                    )
                    
                    $
                    61,801,510





The
Company's segment information and for the three months ended September 30, 2010
and 2009 are as follows:





Three Months Ended
                  September 30, 2010
                  (Unaudited)
                
                Dry Bulk
                  Shipping
                
                
                Chartering
                  Brokerage
                
                
                Other
                  Activities
                
                
                Corporate
                  and
                  Eliminations
                
                
                ConsolidatedSales
      to unaffiliated customers
                
                $
                13,124,045
                
                
                $
                5,026,391
                
                
                $
                1,115,989
                
                
                $
                -
                
                
                $
                19,266,425Intersegment
      sales
                
                
                -
                
                
                
                -
                
                
                
                39,915
                
                
                
                (39,915
                )
                
                
                -Net
      sales
                
                
                13,124,045
                
                
                
                5,026,391
                
                
                
                1,155,904
                
                
                
                (39,915
                )
                
                
                19,266,425Costs
                
                
                10,136,077
                
                
                
                4,152,703
                
                
                
                811,258
                
                
                
                (39,915
                )
                
                
                15,060,123Depreciation
      and amortization
                
                
                1,518,088
                
                
                
                -
                
                
                
                20,359
                
                
                
                -
                
                
                
                1,538,447Other
      operating expenses
                
                
                582,530
                
                
                
                96,995
                
                
                
                344,184
                
                
                
                60,662
                
                
                
                1,084,371Net
      income (loss)
                
                $
                887,350
                
                
                $
                776,693
                
                
                $
                (19,897
                )
                
                $
                (60,662
                )
                
                $
                1,583,484




F-26





WINLAND
ONLINE SHIPPING HOLDINGS CORPORATION
 AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS
 FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)


13.    SEGMENT
INFORMATION (CONTINUED)





Three Months Ended
                  September 30, 2009
                  (Unaudited)
                
                Dry Bulk
                  Shipping
                
                
                Chartering
                  Brokerage
                
                
                Other
                  Activities
                
                
                Corporate
                  and
                  Eliminations
                
                
                ConsolidatedSales
      to unaffiliated customers
                
                $
                6,691,944
                
                
                $
                4,292,554
                
                
                $
                857,300
                
                
                $
                -
                
                
                $
                11,841,798Intersegment
      sales
                
                
                -
                
                
                
                -
                
                
                
                33,687
                
                
                
                (33,687
                )
                
                
                -Net
      sales
                
                
                6,691,944
                
                
                
                4,292,554
                
                
                
                890,987
                
                
                
                (33,687
                )
                
                
                11,841,798Costs
                
                
                5,960,658
                
                
                
                3,724,279
                
                
                
                440,843
                
                
                
                (33,687
                )
                
                
                10,092,093Depreciation
      and amortization
                
                
                1,706,548
                
                
                
                -
                
                
                
                64,330
                
                
                
                -
                
                
                
                1,770,878Other
      operating expenses
                
                
                480,189
                
                
                
                80,742
                
                
                
                479,550
                
                
                
                5,530
                
                
                
                1,046,011Gain
      from disposition of discontinued operation
                
                
                -
                
                
                
                -
                
                
                
                5,195
                
                
                
                -
                
                
                
                5,195(Loss)
      income from discontinued operation
                
                
                (108,512
                )
                
                
                -
                
                
                
                508
                
                
                
                -
                
                
                
                (108,004
                )Net
      (loss) income
                
                $
                (1,563,963
                )
                
                $
                487,533
                
                
                $
                (88,033
                )
                
                $
                (5,530
                )
                
                $
                (1,169,993
                )





Information
for Company’s sales by geographical area for the three and nine months ended
September 30, 2010 and 2009 are as follows:





For The Three Months Ended September
      30,
                    
                    
                    For The Nine Months Ended September
      30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009(Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)Sales
      to unaffiliated customers:Japan,
      Korea and Russia
                    
                    $
                    2,066,363
                    
                    
                    $
                    8,289,258
                    
                    
                    $
                    6,026,974
                    
                    
                    $
                    20,380,965PRC
                    
                    
                    6,405,818
                    
                    
                    
                    1,184,180
                    
                    
                    
                    17,574,624
                    
                    
                    
                    9,888,692Southern
      and Eastern Asia
                    
                    
                    8,818,356
                    
                    
                    
                    2,368,360
                    
                    
                    
                    25,936,879
                    
                    
                    
                    5,601,464Other
                    
                    
                    1,975,888
                    
                    
                    
                    -
                    
                    
                    
                    5,727,687
                    
                    
                    
                    497,400Total
                    
                    $
                    19,266,425
                    
                    
                    $
                    11,841,798
                    
                    
                    $
                    55,266,164
                    
                    
                    $
                    36,368,521





14.   CONTINGENCIES





The
Company signed a voyage charter contract with Sinoriches Global Ltd. on
June 11, 2007. The Company canceled the contract on June 18, 2007.
Sinoriches Global Ltd. filed an arbitration claim of $501,640 including interest
for the dispute. As of September 30, 2010, the case is in the process of
exchanging documents and evidence for arbitration. The Company does not believe
the case will result in a significant unfavorable outcome.





15.   SUBSEQUENT
EVENT





In
October 2010, the Company borrowed an additional $11,400,000 of the $37
million loan facility from China Merchant Bank Co., Ltd. to finance the
construction of vessel HT 073 and HT074, respectively. Also see Notes 5 and
9.  As of November 10, 2010, the Company has $17,100,000 available
under the loan facility for vessels HT073 and HT074.




In
November 4, 2010, the Company obtained a short-term bank loan from Bank of
Dalian Co., Ltd. for $1.47 million. The loan principal is due on October 21,
2011. The interest payment is due monthly at an annual interest rate of
7.784%.
  F-27


ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





Forward
Looking Statements





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





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





Acquisition
of SkyAce Group Limited





On August
12, 2008, Trip Tech, Inc. (n/k/a WLOL and sometimes referred to herein as “Trip Tech” when
referring to the operations of the Company prior to the Exchange, as defined
below) entered into a Share Exchange Agreement with SkyAce Group Limited (“SkyAce”), a British
Virgin Islands company and Pioneer Creation Holdings Limited (“PCH”), a British
Virgin Islands company and the sole stockholder of SkyAce. As a result of the
share exchange, the Company acquired all of the issued and outstanding
securities of SkyAce from PCH in exchange for 76,925,000 newly-issued shares of
the Company’s common stock, par value $0.001 per share and 1,000,000 shares of
the Company’s Series A Preferred Stock which such preferred shares were
convertible into (and subsequently did convert into) 30,000,000 shares of common
stock (the “Exchange”).  On
August 12, 2008, PCH beneficially owned 82.25% of the voting capital stock of
the Company. As a result of the Exchange, SkyAce became a wholly-owned
subsidiary of WLOL.  On October 23, 2008, PCH converted its 1,000,000
shares of Series A Preferred Stock into 30,000,000 shares of common stock. As a
result, the total outstanding shares of common stock increased to 130,000,000,
and PCH now directly owns 82.25% of the voting capital stock of
WLOL.





The
following is disclosure regarding WLOL, SkyAce and SkyAce’s two wholly-owned
subsidiaries: (a) Plentimillion Group Limited (“PGL”), a British
Virgin Islands holding company, the principal business activities of which are
(through its wholly-owned subsidiaries) dry bulk shipping services and
chartering brokerage services and (b) Best Summit Enterprise Limited (“BSL” and together
with PGL, the “SkyAce
Group”), a British Virgin Islands holding company which controls (as is
more fully described below) (i) Dalian Winland International Shipping Agency Co.
Ltd., a company organized under the laws of the People’s Republic of China
(“PRC”), the
principal activities of which include shipping agency services, booking cargo
space, storage of goods and customs declaration (“DWIS”), (ii) Dalian
Winland International Logistics Co. Ltd., a company organized under the laws of
the PRC, the principal activities of which include freight forwarding services
and logistics shipping agency services (“DWIL”) and (iii)
Dalian Shipping Online Network Co. Ltd. (“Shipping Online”), a
company organized under the laws of the PRC, the principal activities of which
include online services for its members.




3


Prior
Operations of Trip Tech




Trip Tech
was incorporated in Texas on November 17, 2006 to enter the online travel
industry and to establish a large scale, full service online travel company.
Immediately prior to the Exchange, Trip Tech was a development stage
internet-based travel company operating with a functional “branded” travel
website. Since Trip Tech’s inception, Trip Tech established its corporate
existence as a publicly held corporation, raised founder capital, and designed
and installed a functional “branded” travel website. As of the date immediately
prior to the Exchange, Trip Tech had not been able to raise additional funds
through either debt or equity offerings. As a result of the foregoing, Trip Tech
began to explore its options regarding the development of a new business plan
and direction. On August 12, 2008, Trip Tech consummated the Exchange with
SkyAce and the PCH.





Our
common stock is currently quoted on the OTCQB under the symbol “WLOL”.
Immediately prior to the Exchange, Trip Tech was considered a “blank check”
company with US$40,963 in assets and a net loss of US$34,965 for the fiscal year
ending February 29, 2008.  On the date of the closing of the Exchange, the
Company did not have any liabilities.





Current
Operations of the Company (General Development of Business)





SkyAce





SkyAce is
a holding company founded in the British Virgin Islands on September 22,
2006with no
significant operations. SkyAce was formed solely for the purpose of
acquiring PGL and BSL from Mr. Li Honglin and Ms. Xue Ying, each of
whom had owned fifty percent (50%) of both PGL and BSL and each of
whom now own fifty percent (50%) of SkyAce. SkyAce has authorized capital of
US$50,000 consisting of 50,000 ordinary shares authorized, two of which are
currently issued and outstanding and held by Trip Tech as a result of the
Exchange. Li Honglin, a Director and the President of Winland, serves as a
Director of SkyAce. Xue Ying, a Director, the Chief Executive Officer and the
Secretary of Winland, also serves as a Director of SkyAce.





PGL





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





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





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





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





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





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





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





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




4





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





PGL acquired
the following additional entities in 2008:





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





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





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





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





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





PGL acquired
the following entities in 2009:





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





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





PGL established
the following entities in 2009:





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





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





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





(s)
            Winland International Shipping
      Co., Limited is incorporated and registered in Hong Kong on August 27,
      2009 ("Winland
      International").





PGL
established the following entities in 2010:





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





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





PGL and
each of its wholly-owned subsidiaries set forth above (collectively, the “PGL Group”) are
engaged in ocean transportation of dry bulk cargoes worldwide through the
ownership and operation of dry bulk vessels. The principal business activities
of the PGL Group are ocean transportation and chartering. The operations of
each of the Company’s vessels are managed by Winland Shipping, while the
chartering businesses are managed by Kinki and Bestline. Lancrusier’s primary
business is management and accounting.  Win Star, Winland Dalian,
Treasure Way, Win Eagle, Win Bright, Win Ever, Win Glory, Win Grace, Win Hope,
Bodar Shipping, Win Shipping and Bao Shun collectively own 12 of the Company’s
vessels.  Bodar and Win Moony are in the process of winding down and
have no operations.  Winland International's primary business is to
develop and expand the global shipping market. Fon Tai and Won Lee each own
one vessel which are currently under construction and are expected to be
delivered and operational by December 15, 2010 and March 15, 2011,
respectively.  DWIL also owns one vessel, as described
below.


5





BSL





SkyAce’s
wholly-owned subsidiary BSL was incorporated in the British Virgin Islands
on November 30, 2006. BSL sole business is to act as a holding company for
its wholly-owned subsidiary, Wallis Development Limited, a company organized
under the laws of Hong Kong on December 9, 2006 (“Wallis”). The sole
business of Wallis is to act as a holding company for its wholly-owned
subsidiary, Beijing Huate Xingye Keji Co., Ltd., a company organized under the
laws of the PRC on March 18, 2008 (“Beijing Huate”).
Beijing Huate was formed with the purpose of producing IT software, developing
new products and adopting advanced and applicable technology and scientific
management methods to create economic benefits for its stockholders. It does
this by controlling, through Exclusive Technical Consulting and Service
Agreements and related transaction documents dated as of March 31, 2008
(collectively, the “Service Agreements”,
each of which are referenced as Exhibits herein), DWIS, DWIL and Shipping
Online.





In
compliance with the PRC’s foreign investment restrictions on internet
information services and other laws and regulations, the Company conducts all of
its internet information and media services and advertising in China through
DWIS, DWIL and Shipping Online, each a domestic variable interest entity
(also referred to in this Quarterly Report collectively as the “VIEs”). In accordance
with FASB Interpretation No. 46R “Consolidation of Variable Interest Entities”,
an Interpretation of Accounting Research Bulletin No. 51, and ASC 810-10
(formerly SFAS No. 167) “Amendments to FASB Interpretation No. 46(R)”, a VIE is
to be consolidated by a company if that company is subject to a majority of the
risk of loss for the VIE or is entitled to receive a majority of the VIE’s
residual returns. Upon executing the Service Agreements, DWIS, DWIL and
Shipping Online are all considered VIEs and the Company, through its ownership
and control of SkyAce, BSL, Wallis and Beijing Huate, their primary
beneficiary.





Pursuant
to the Service Agreements, Beijing Huate provides on-going technical services
and other services to the VIEs in exchange for substantially all net income of
the VIEs. In addition, the stockholders of the VIEs have pledged all of their
shares in the VIEs to Beijing Huate, representing one hundred percent (100%) of
the total issued and outstanding capital stock of the VIEs, as collateral for
non-payment under the Service Agreements or for fees on technical and other
services due thereunder. Beijing Huate also has the power to appoint all
directors and senior management personnel of the VIEs.





DWIS





DWIS was
incorporated under the laws of the PRC on December 5, 2002 by three investors,
namely, Dalian Winland Industry Group Co., Ltd. (“DWIG”), Dalian
Winland Shipping Co., Ltd. (“DWSC”) and Dalian
Weihang Freight Forwarding Co., Ltd. (“DWFF”). At
establishment, the percentage of each party’s equity interest was 51%, 41.5% and
7.5%, respectively. DWIG was incorporated by Li Honglin and Xue Ying having a
60% and 40% interest, respectively. DWSC was incorporated by DWIG and Xue Ying
having a 60% and 40% interest, respectively. DWFF was incorporated by Li Honglin
and Xue Ying having a 66.7% and 33.3% interest, respectively. Thus, Li Honglin
and Xue Ying had owned a 50.5425% and 49.4575% of DWIS indirectly at
inception.  According to a share trust instrument agreement executed
in February 2005, Li Honglin transferred 0.5425% of his interest in DWIS to Xue
Ying. Thereafter, Li Honglin and Xue Ying own 50% each of DWIS as of September
30, 2010 and 2009. The principal activities of DWIS include shipping agency
services, booking cargo space, storage of goods, and declaration of customs. On
August 18, 2009, DWIS disposed of the Haoyue vessel to a related party, Dalian
Winland Shipping Co., Ltd. The net cash proceeds were $1,272,685, after
deducting tax expenses of $28,350 from the gross proceeds of
$1,301,035.


6





DWIL





DWIL was
incorporated under the laws of the PRC on July 28, 2003 by three investors,
namely, DWIG, DWSC and Winland International. At establishment, the percentage
of each party’s equity interest was 51%, 47.6% and 1.4%, respectively, and Li
Honglin and Xue Ying owned 48.4436% and 51.5564% of DWIL indirectly at
inception, respectively.  According to a share trust instrument
agreement executed in February 2005, Xue Ying transferred 1.5564% of her
interest in DWIL to Li Honglin. Thereafter, Li Honglin and Xue Ying each owned
50% of DWIL as of September 30, 2010 and 2009. The principal activities of DWIL
are freight forwarding services and logistics shipping agency services. DWIL
owns one of the Company’s vessels.





Shipping
Online





Shipping
Online was incorporated under the laws of the PRC on February 20, 2003 by two
investors, namely, Li Honglin and Xue Ying. At establishment, the percentage of
each party’s equity interest was 80% and 20%, respectively. According to a share
trust instrument executed in February 2005, Li Honglin transferred 30% of his
interest of Shipping Online to Xue Ying. Thereafter, Li Honglin and Xue Ying
each owned 50% of Shipping Online as at December 31, 2009 and 2008. On January
19, 2010, DWIL invested RMB500,000 in Shipping Online, increasing its
capitalization from RMB500,000 to RMB1,000,000. Thereafter, DWIL, Li Honglin and
Xue Ying owned 50%, 25% and 25% of the equity interests in Shipping Online as of
September 30, 2010. The principal activities of Shipping Online are providing
online services to its members.





Summary
of Current Business of the Company





The
Company is a comprehensive, modern international shipping company with its world
headquarters based in the PRC. The Company is mainly engaged in a comprehensive
range of international shipping and logistics services such as bulk cargo
transportation, chartering, shipping agents, logistics, ship trading, spare
parts supplies, crew recruitment and shipping porter operation, as well as
relevant industry news and data analysis and advertising.





The
Company's core business is international bulk cargo transportation. It has an
ocean shipping fleet of 13 vessels, with a self-owned carrying capacity of
nearly 200,000 tons.  Through monthly voyage charters and time
charters, the Company can provide carrying capacity of about 1,000,000 tons with
shipping lines to major ports around the world.





In
addition, the Company owns and operates an industrial online portal called
“Shipping Online” which is accessed on the internet at http://www.sol.com.cn.
This website functions as a business platform, providing on-line and off-line
integrated international shipping and logistics services, such as bulk cargo
chartering, container booking, shipping agents, ship trading and building, spare
parts supplies, crew recruitment, as well as shipping news and data analysis;
the off-line operating team is made up of industrial elites and a logistics
network with branches in Beijing, Tianjin, Dalian, Yingkou, Qingdao,
Zhangjiagang, Lianyungang and Shanghai. These branches collectively provide a
full service system with a combination of integrated group and localized
branches.





Providing
comprehensive shipping and logistics services through the internet is not only
the innovation and creation of the Company, but is also the basis of the
transition for the entire shipping industry from a traditional business model to
a modern business model. The Company believes it will create a broad space for
development and lead the accelerated development of the entire shipping
industry.





Our
operating revenue in 2006 reached US$59.2 million, of which the net profit was
nearly US$7.4 million.  As the global shipping market experienced a
breakthrough in development, the Company achieved annual operating revenues of
US$70.3 million in 2007, net income of US$21.4 million, enjoying approximately
200% growth as compared with 2006. The operating revenue of 2008 reached $84.2
million, net income of $19.1 million. The operating revenue of 2009 was $50.2
million. The operating revenue and net income for the nine months ended
September 30, 2010 was $55,266,164 and $6,205,294, respectively, compared with
operating revenue of $36,368,521, a net loss of $5,326,597 for the corresponding
period of 2009, respectively.


7





The
Company intends to steadily expand its capacity and enlarge the size of its
ocean transport fleet by constructing new vessels and by acquiring additional
vessels or businesses at lower prices in light of the current slump in the
shipping market. The Company intends to continue to push forward with its
comprehensive shipping and logistics services with Shipping Online in order to
expand its market share.





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





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





On March
26, 2010, the Company obtained a term loan facility of $37 million from China
Merchant Bank Co., Ltd. to finance the construction of two new vessels. As of
September 30, 2010, we drew down $8,500,000 and as of the date of this filing,
we drew down $19,900,000 from the loan facility and executed four new notes
payable totaling $14,450,000 in the aggregate for purposes of building such
vessels in June 2010.





On May
20, 2010, Fon Tai entered into a novation agreement, which was subsequently
amended on May 21, 2010, whereby Fon Tai assumed all of the rights and
obligations of Rich Forth Investments Limited ("Rich"), a related party which is
controlled by a relative of the Chairman of the Company, under a shipbuilding
contract with JiangSu Hantong Ship Heavy Industry Co., Ltd. ("JiangSu") previously
executed on December 6, 2006 for the construction of one 57,000dwt bulk carrier
vessel. The contract amount of $29,950,000 included the ship building contract
price of $28,500,000 due to JiangSu and a contract transfer fee of $1,450,000
due to Rich for reimbursement for costs incurred in connnection with the
construction. JiangSu agreed to deliver the new vessel on or before December 15,
2010.





Also, on
May 20, 2010, Won Lee entered into a novation agreement, which was subsequently
amended on May 21, 2010, whereby Won Lee assumed all of the rights and
obligations of Rich under a shipbuilding contract with JiangSu for the
construction of one 57,000dwt bulk carrier vessel. The contract amount of
$29,950,000 included the ship building contract price of $28,500,000 due to
JiangSu and a contract transfer fee of $1,450,000 due to Rich for reimbursement
for costs incurred in connnection with the construction. JiangSu agreed to
deliver the new vessel to Won Lee on or before March 15, 2011.





Summary
of Significant Accounting Policies and Estimates





Use
of Estimates





The
preparation of the condensed consolidated financial statements in conformity
with generally accepted accounting principles of the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the condensed consolidated financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. Actual results could differ materially from those
estimates.


8





Revenue
Recognition





Revenue
is recognized based on the following four criteria:





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





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





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





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





For dry
bulk shipping service, the allocation of revenue between reporting periods is
based on relative transit time in each reporting period with expenses recognized
as incurred.





For
chartering brokerage services, sales are recognized when the ship leaves
port.





For
shipping agency and freight forwarding services, sales are recognized when the
ship leaves port.





For
online services, sales are recognized according to the stage of completion in
accordance with the service period defined in executed contracts.





Recent
Accounting Pronouncements





In June
2009, the FASB issued ASC 810-10 Amendments to FASB Interpretation No. 46(R),
which require an enterprise to perform an analysis and ongoing reassessments to
determine whether the enterprises variable interest or interests give it a
controlling financial interest in a variable interest entity and amends certain
guidance for determining whether an entity is a variable interest entity. It
also requires enhanced disclosures that will provide users of financial
statements with more transparent information about an enterprises involvement in
a variable interest entity. ASC 810-10 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009 and for all interim reporting periods after that. The adoption of ASC
810-10 did not have a material effect on the Company’s condensed
consolidated financial statements as of September 30, 2010.





In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires disclosure of transfers of assets and liabilities between Level 1 and
Level 2 of the fair value measurement hierarchy, including the reasons and the
timing of the transfers and information on purchases, sales, issuance, and
settlements on a gross basis in the reconciliation of the assets and liabilities
measured under Level 3 of the fair value measurement hierarchy. This guidance is
effective for the Company beginning March 1, 2010. The adoption of this guidance
did not have a material effect on the Company’s condensed consolidated financial
statements as of September 30, 2010.





Results
of Operations





Results
of Operations for the Nine Months Ended September 30, 2010 Compared With the
Nine Months Ended September 30, 2009 (in U.S. dollars, except otherwise as
indicated)





For The Nine Months Ended September
      30,2010
                        
                        
                        2009
                        
                        
                        ChangeAmount
                        
                        
                        % of
                          Revenues
                        
                        
                        Amount
                        
                        
                        % of
                          Revenues
                        
                        
                        In Amount
                        
                        
                        In %Revenues
                        
                        
                        55,266,164
                        
                        
                        
                        100.0
                        %
                        
                        
                        36,368,521
                        
                        
                        
                        100.0
                        %
                        
                        
                        18,897,643
                        
                        
                        
                        52.0
                        %Vessel
      operating expenses
                        
                        
                        38,276,906
                        
                        
                        
                        69.3
                        %
                        
                        
                        30,757,559
                        
                        
                        
                        84.6
                        %
                        
                        
                        7,519,347
                        
                        
                        
                        24.4
                        %Service
      costs
                        
                        
                        2,363,173
                        
                        
                        
                        4.3
                        %
                        
                        
                        2,488,842
                        
                        
                        
                        6.8
                        %
                        
                        
                        (125,669
                        )
                        
                        
                        (5.0
                        )%Depreciation
      and amortization
                        
                        
                        4,955,766
                        
                        
                        
                        9.0
                        %
                        
                        
                        5,513,270
                        
                        
                        
                        15.2
                        %
                        
                        
                        (557,504
                        )
                        
                        
                        (10.1
                        )%General
      and administrative expenses
                        
                        
                        2,279,115
                        
                        
                        
                        4.1
                        %
                        
                        
                        2,057,126
                        
                        
                        
                        5.7
                        %
                        
                        
                        221,989
                        
                        
                        
                        10.8
                        %Selling
      expenses
                        
                        
                        262,553
                        
                        
                        
                        0.5
                        %
                        
                        
                        253,064
                        
                        
                        
                        0.7
                        %
                        
                        
                        9,489
                        
                        
                        
                        3.7
                        %Interest
      expense, net
                        
                        
                        (998,546
                        )
                        
                        
                        (1.8
                        )%
                        
                        
                        (131,978
                        )
                        
                        
                        (0.4
                        )%
                        
                        
                        (866,568
                        )
                        
                        
                        656.6
                        %Other
      income (expense), net
                        
                        
                        100,720
                        
                        
                        
                        0.2
                        %
                        
                        
                        (218,667
                        )
                        
                        
                        (0.6
                        )%
                        
                        
                        319,387
                        
                        
                        
                        (146.1
                        )%Income
      tax expense
                        
                        
                        (25,531
                        )
                        
                        
                        0.0
                        %
                        
                        
                        (49,060
                        )
                        
                        
                        (0.1
                        )%
                        
                        
                        (23,529
                        )
                        
                        
                        (48.0
                        )%Net
      income (loss)
                        
                        
                        6,205,294
                        
                        
                        
                        11.2
                        %
                        
                        
                        (5,326,597
                        )
                        
                        
                        (14.6
                        )%
                        
                        
                        11,531,891
                        
                        
                        
                        (216.5
                        )%Weighted
      average shares outstanding
                        
                        
                        130,000,000
                        
                        
                        
                        
                        
                        
                        
                        130,000,000
                        
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        0.0
                        %Net
      income (loss) per share
                        
                        
                        0.05
                        
                        
                        
                        
                        
                        
                        
                        (0.04
                        )
                        
                        
                        
                        
                        
                        
                        0.09
                        
                        
                        
                        (225.0
                        )%





Revenues





Our
revenues are derived from the operation of:





·
            Dry
      bulk shipping;


·
            Chartering
      brokerage; and


·
            Other
      activities which represent shipping agency services, freight forwarding
      services, and online services.





Of the
total revenues, dry bulk shipping, chartering brokerage and other activities
contributed 64%, 30% and 6% for the nine months ended September 30, 2010,
respectively, compared with 47%, 44% and 9% for the comparable period in 2009,
respectively.





For the
nine months ended September 30, 2010, total revenues increased by approximately
$18.9 million, or 52.0%, to $55.3 million from $36.4 million for the nine months
ended September 30, 2009. This increase mainly resulted from the strong
performance of our dry bulk shipping segment, which increased $18.3 million, or
107.5%, as well as from an increase in revenues of $0.6 million, or 3.5%, from
our chartering brokerage business and $0.02 million, or 0.8%, from our other
activities segment.





The
increase in the dry bulk shipping segment was driven by the acquisition of a new
vessel in September 25, 2009, and the utilization of a new chartering vessel in
May 9, 2010.  The increase also reflected the improvement of the
global shipping market from the financial crisis and economic recession in place
since late 2008.  The Baltic Dry Index, a leading indicator of the
global dry bulk shipping market, increased approximately 17% for the nine months
ended September 30, 2010 as compared with the same period of 2009.





Among
other activities, online services continued to grow significantly. We believe
this growth reflected management’s strategic decision to implement and market
the shipping online portal more aggressively at the beginning of
2009.


9





Vessel
Operating Expenses





Vessel
operating expenses included mainly fuel costs, port fees, chartering fees and
crew wages, which were incurred in the operation of dry bulk shipping, and
vessel chartering costs which were incurred in the business of chartering
brokerage. For the nine months ended September 30, 2010, vessel operating
expenses increased by $7.5 million, or 24.4%, to $38.3 million, compared with
$30.8 million for the comparable period in 2009. This increase is principally
attributable to the $4.1 million chartering fee of a vessel for the nine months
ended September 30, 2010 compared with no such transaction for the same period
in 2009. The increase is also due to the increased business volume of 24% of our
dry bulk shipping business, which resulted in the increase in fuel and related
consumption, and the 32% increase in the Intermediate Fuel Oil
rate.





Service
Costs





Service
costs were incurred in the operation of other activities in our freight
forwarding and online services. For the nine months ended September 30, 2010,
service costs decreased by $0.1 million, or 5.0%, to $2.4 million, compared with
$2.5 million for the comparable period in 2009. This decrease was in line with
the approximately $0.2 million, or 7%, decreased revenue derived from freight
forwarding services, offset by $0.1 million convention organizing cost incurred
from online services.





Depreciation
and Amortization





Depreciation
of vessels and amortization of deferred dry dock fees decreased by approximately
$0.5 million, or 10.1%, to $5.0 million for the nine months ended September 30,
2010, compared with $5.5 million for the same period in 2009. This decrease is
primarily attributable to the decreased amortization of deferred dry dock fees
of $0.4 million for two vessels which were fully amortized in 2009. The deferred
dry dock fees for these two vessels to be amortized commencing in 2010 decreased
by $2.5 million, or 72%, compared with the deferred dry dock fees which had
amortized over the past five years and were totally amortized as of
2009.  The decrease is also due to the decreased depreciation of $0.2
million which resulted from the accumulated effect of the depreciation schedules
of multiple vessels.





General
and Administrative Expenses





General
and administrative expenses, which included mainly wages, public relations and
professional service fees increased by approximately $0.2 million, or 10.8%, to
$2.3 million for the nine months ended September 30, 2010 from $2.1 million for
the same period in 2009. This increase is primarily attributable to the
supplemental charge of $0.13 million on the operations of our vessels “Andong”
and “Haoyue” for the previous years of 2007, 2008 and 2009 in compliance with
the Chinese government regulations.





Selling
Expenses





Selling
expenses were commissions paid to promote our dry bulk shipping and chartering
brokerage businesses. For the nine months ended September 30, 2010, selling
expenses increased by $0.01 million, or 3.7%, to $0.26 million compared with
$0.25 million for the corresponding period in 2009. The increase reflected the
management’s commission plan to promote for more businesses.





Interest
Expense, Net





Net
interest expense increased significantly by approximately $0.9 million, or
656.6%, to $1.0 million for the nine months ended September 30, 2010, compared
with approximately $0.1 million for corresponding period in 2009. This increase
is primarily attributable to a new long-term loan of $14,490,000 and a note
payable of $3,000,000 initiated from the purchase of a new vessel in late
2009.




10





Other
Income (Expense), Net





Other
income was approximately $0.1 million for the nine months ended September 30,
2010, compared with other expense of $0.2 million for the nine months ended
September 30, 2009. This change is the cumulative effect of the currency
translation resulting from the operating activities and other immaterial
factors.





Income
Tax Expense





Income
tax was imposed on the taxable income from other activities. For the nine months
ended September 30, 2010, income tax expense decreased by $0.02 million, or 48%,
to $0.03 million, compared with $0.05 million for the same period in 2009. This
decrease is mainly attributable to the decreased taxable income of $0.08 million
from other activities segment of our business during the nine months ended
September 30, 2010 as compared with the same period in 2009.





Net
Income (Loss)





Net
income increased by approximately $11.5 million, or 216.5%, to a net income of
$6.2 million for the nine months ended September 30, 2010 from a net loss of
$(5.3) million for the same period in 2009. This increase is primarily
attributable to the 52.0% increase in revenues, the 5.0% decrease in service
cost and the 10.1% decrease in depreciation and amortization expenses, partially
offset by the increase of 24.4% in vessel operating expenses and the cumulative
effect of the other aforementioned factors.





As a
percentage of revenue, net income was 11.2% compared with a net loss of (14.6)%
for the nine months ended September 30, 2010 and 2009, respectively. This change
reflected the improvement in the global shipping market from the financial
crisis and economic recession in place since late 2008.





Net
Income (Loss) Per Share





For both
basic and diluted shares, net income (loss) per share increased by $0.09, or
225.0%, to net income of $0.05 per share for the nine months ended September 30,
2010 from a net loss of $(0.04) per share for the same period of
2009.  This increase is attributable to the increase in net income of
$11.5 million for the nine months ended September 30, 2010 as compared to the
same period in 2009.


11


Results
of Operations for the Three Months Ended September 30, 2010 Compared With the
Three Months Ended September 30, 2009 (in U.S. dollars, except otherwise as
indicated)





For The Three Months Ended September
      30,2010
                
                
                2009
                
                
                ChangeAmount
                
                
                % of
                  Revenues
                
                
                Amount
                
                
                % of
                  Revenues
                
                
                In Amount
                
                
                In %Revenues
                
                
                19,266,245
                
                
                
                100.0
                %
                
                
                11,841,798
                
                
                
                100.0
                %
                
                
                7,424,627
                
                
                
                62.7
                %Vessel
      operating expenses
                
                
                14,249,245
                
                
                
                74.0
                %
                
                
                9,586,920
                
                
                
                81.0
                %
                
                
                4,662,325
                
                
                
                48.6
                %Service
      costs
                
                
                810,878
                
                
                
                4.2
                %
                
                
                505,173
                
                
                
                4.3
                %
                
                
                305,705
                
                
                
                60.5
                %Depreciation
      and amortization
                
                
                1,538,447
                
                
                
                8.0
                %
                
                
                1,770,878
                
                
                
                15.0
                %
                
                
                (232,431
                )
                
                
                (13.1
                )%General
      and administrative expenses
                
                
                784,194
                
                
                
                4.1
                %
                
                
                748,348
                
                
                
                6.3
                %
                
                
                35,846
                
                
                
                4.8
                %Selling
      expenses
                
                
                81,219
                
                
                
                0.4
                %
                
                
                88,907
                
                
                
                0.8
                %
                
                
                (7,688
                )
                
                
                (8.6
                )%Interest
      expense, net
                
                
                (336,148
                )
                
                
                (1.7
                )%
                
                
                (43,478
                )
                
                
                (0.4
                )%
                
                
                (292,670
                )
                
                
                673.1
                %Other
      (expense) income, net
                
                
                125,577
                
                
                
                0.7
                %
                
                
                (149,229
                )
                
                
                (1.3
                )%
                
                
                274,806
                
                
                
                (184.2
                )%Income
      tax expense
                
                
                (8,387
                )
                
                
                0.0
                %
                
                
                (16,049
                )
                
                
                (0.1
                )%
                
                
                7,662
                
                
                
                (47.7
                )%Net
      income (loss)
                
                
                1,583,484
                
                
                
                8.2
                %
                
                
                (1,169,993
                )
                
                
                (9.9
                )%
                
                
                2,753,477
                
                
                
                (235.3
                )%Weighted
      average shares outstanding
                
                
                130,000,000
                
                
                
                
                
                
                
                130,000,000
                
                
                
                
                
                
                
                -
                
                
                
                0.0
                %Net
      income (loss) per share
                
                
                0.01
                
                
                
                
                
                
                
                (0.01
                )
                
                
                
                
                
                
                0.02
                
                
                
                (200.0
                )%





Revenues





Our
revenues are derived from the operation of:





·
            Dry
      bulk shipping;


·
            Chartering
      brokerage; and


·
            Other
      activities which represent shipping agency services, freight forwarding
      services, and online services.





Of the
total revenues, dry bulk shipping, chartering brokerage and other activities
contributed 68%, 26% and 6% for the three months ended September 30, 2010,
respectively, compared with 57%, 36%, and 7% for the comparable period in 2009,
respectively.





For the
three months ended September 30, 2010, total revenues increased by approximately
$7.4 million, or 62.7%, to $19.3 million from $d11.8 million for the three
months ended September 30, 2009. This increase mainly resulted from the strong
performance of our dry bulk shipping segment which increased $6.4 million, or
96.1%, as well as increased revenues of $0.7 million, or 17.1%, from our
chartering brokerage business and $0.3 million, or 30.2%, from our other
activities segment.





The
increase in the dry bulk shipping segment was driven by the acquisition of a new
vessel on September 25, 2009, and the utilization of a new chartering vessel on
May 9, 2010.





Among
other activities, online services continued to grow significantly. We believe
this growth reflected the management’s strategic decision to implement and
market the shipping online portal more aggressively at the beginning of
2009.


12





Vessel
Operating Expenses





Vessel
operating expenses included mainly fuel costs, port fees, chartering fees and
crew wages, which were incurred in the operation of dry bulk shipping, and
vessel chartering costs which were incurred in the business of chartering
brokerage. For the three months ended September 30, 2010, vessel operating
expenses increased by $4.7 million, or 48.6%, to $14.2 million, compared with
$9.6 million for the comparable period in 2009. This increase is principally
attributable to the $2.6 million chartering fee of a vessel for the three months
ended September 30, 2010 compared with no such transaction for the same period
in 2009. The increase is also due to the increase in business volume of 17%,
which resulted in the increase in fuel and related consumption.





Service
Costs





Service
costs were incurred in the operation of other activities in our freight
forwarding and online services. For the three months ended September 30, 2010,
service costs increased by $0.3 million, or 60.5%, to $0.8 million, compared
with $0.5 million for the comparable period in 2009. This increase was in line
with the approximately $0.2 million, or 39% increase in revenue derived from our
freight forwarding services. The increase was also due to $0.1 million
convention organizing cost incurred from online services.





Depreciation
and Amortization





Depreciation
of vessels and amortization of deferred dry dock fees decreased by approximately
$0.2 million, or 13.1%, to $1.5 million for the three months ended September 30,
2010, compared with $1.8 million for the same period in 2009. This decrease is
mainly attributable to the decreased amortization of deferred dry dock fees of
$0.1 million for two vessels which were fully amortized in 2009. The deferred
dry dock fees for these two vessels to be amortized commencing in 2010 decreased
by $2.5 million, or 72% compared with the deferred dry dock fees which had
amortized over the past five years and were totally amortized as of 2009. The
decrease is also due to the decreased depreciation of $0.1 million which
resulted from the accumulated effect of the depreciation schedules of multiple
vessels.





General
and Administrative Expenses





General
and administrative expenses, which included mainly wages and professional
service fees, increased by approximately $0.03 million, or 4.8%, to $0.78
million, compared with $0.75 million for the three months ended September 30,
2010 and 2009, respectively. The increase is primarily attributable to the
hiring of 4 new personnel.





Selling
Expenses





Selling
expenses were commissions paid to promote our dry bulk shipping and chartering
brokerage businesses. For the three months ended September 30, 2010, selling
expenses decreased by $0.01 million, or 8.6%, to $0.08 million compared with
$0.09 million for the corresponding period in 2009. The decrease reflected the
Company’s adjustment on the commission plan following market
changes.





Interest
Expense, Net





Net
interest expense increased significantly by approximately $0.29 million, or
673.1%, to $0.34 million for the three months ended September 30, 2010, compared
with approximately $0.04 million for the corresponding period in 2009. This
increase is primarily attributable to a new long-term loan of $14,490,000 and a
note payable of $3,000,000 initiated from a new vessel purchased in late
2009.




13





Other
Income (Expense), Net





Other
income was approximately $0.1 million for the three months ended September 30,
2010, compared with other expense of $0.1 million for the three months ended
September 30, 2009. This change reflected $0.15 million insurance coverage from
a previous claim.





Income
Tax Expense





Income
tax was imposed on the taxable income from other activities. For the three
months ended September 30, 2010, income tax expense decreased by $0.01 million,
or 47.7%, to $0.01 million, compared with $0.02million for the same period in
2009. This decrease is mainly attributable to the decreased taxable income of
$0.04 million from other activities segment of our business during the three
months ended September 30, 2010 as compared with the same period in
2009.





Net
Income (Loss)





Net
income increased by approximately $2.8 million, or 235.3%,  to a net
income of $1.6 million for the three months ended September 30, 2010 from a net
loss of $(1.2) million for the same period in 2009. This increase is primarily
attributable to the 62.7% increase in revenues, offset by the 48.6% increase in
vessel operating expenses and the cumulative effect of the other aforementioned
factors.





As a
percentage of revenue, net income was 8.2% compared with a net loss of (9.9)%
for the three months ended September 30, 2010 and 2009, respectively. This
change reflected the improvement in the global shipping market from the
financial crisis and economic recession in place since late 2008.





Net
Income (Loss) Per Share





For both
basic and diluted shares, net income (loss) per share increased by $0.02 to net
income of $0.01 per share for the three months ended September 30, 2010 from a
net loss of $(0.01) per share for the same period of 2009.  This
increase is attributable to the increase in net income of $2.8 million for the
three months ended September 30, 2010.





Liquidity
and Capital Resources





Working
Capital





We had a
working capital deficit of approximately $8.8 million at September 30, 2010 as
compared to a working capital deficit of approximately $10.1 million at December
31, 2009. This improvement of $1.3 million is principally attributable to the
net income of $6.2 million earned for the nine months ended September 30,
2010.





To face
the challenges of a global financial crisis and a depressed shipping market
since late 2008, we have taken effective initiatives to pursue profitability by
pushing forward the implementation of our online portal, which has resulted in
sales increases on the segment of online services. We have developed cost
control strategies on cutting vessel management costs as well as general
management costs. We have carried out our strategies to collect outstanding
balances while maintaining strong business relationships with our customers. We
have also negotiated (and continue to negotiate) with our vendors to extend our
credit terms.





To
increase our cash resources, on March 5, 2010 the Company obtained an extension
of the due dates to July 19, 2012 of two notes payable to related parties
amounting to $2,961,739. On March 26, 2010, the Company obtained a term loan
facility of $37 million from China Merchant Bank Co., Ltd. to finance the
construction of two new vessels. As of September 30, 2010, we drew down
$8,500,000 and as of the date of this filing, we drew down $19,900,000 from the
loan facility and executed four new notes payable totaling $14,450,000 in the
aggregate for purposes of building such vessels. In
November 2010, the Company obtained a short-term bank loan for $1.47 million.Also in 2010, the Company obtained commitments from certain shareholders
and related parties to provide working capital to the Company, if needed, in the
form of notes payable or personal loans. We believe our working capital will
increase and liquidity will be improved. We also believe the Company has
sufficient cash to sustain operations for the next 12 months.


14





Operating
Activities





Net cash
provided by operating activities was $9.6 million and cash used of $0.4 million
for the nine months ended September 30, 2010 and 2009, respectively. The
significant change in cash flow from operating activities was mainly due to the
increase in revenue of $18.9 million, which caused the net income of $6.2
million from the net loss of $5.3 million for the comparable
periods.





Investing
Activities





For the
nine months ended September 30, 2010, the Company used $4.2 million in
investment activities, which mainly included $4.1 million used for the
construction of two new vessels. For the nine months ended September 30, 2009,
the Company spent $19.6 million in investment activities, which included $20.9
million on deposit for a vessel purchase.





Financing
Activities





Net
cash used in our financing activities was $5.3 million for the nine
months ended September 30, 2010. This amount is mainly attributable to the
repayments of short-term loans of $1.2 million and long-term loans of $3.1
million.





For the
nine months ended September 30, 2009, net cash provided by financing activities
was $14.2 million, mainly attributable to the proceeds from long-term loans,
long-term notes payable and short-term loans of $14.49 million, $2.7 million,
and $1.2 million, respectively, offset by repayments to related parties of $2.1
million.





Capital
Expenditures





We expect
to make major capital expenditures in connection with the construction of two
new vessels and we will finance such capital expenditures through bank loans and
notes payable. We expect we will incur capital expenditures on developing our
shipping online portal and by marketing our shipping online services. We expect
other major capital expenditures to include funding dry dockings of our fleet to
preserve the quality of our vessels as well as to comply with international
shipping standards and environmental laws and regulations during the remainder
of 2010.





Capital
Resources





We will
finance capital expenditures on the construction of two new vessels through bank
loans.  On March 26, 2010, the Company obtained a term loan facility
in the amount of $37 million. As of this filing date, there is a $17,100,000
credit balance of this facility. We intend to finance other capital expenditures
mainly from cash flows from our operations, and from notes payable and personal
loans, if needed. We believe that cash flow from our operations will improve as
business operations rebound and as the global economy gradually recovers. We
believe that existing cash and resources from our credit facilities are
sufficient to meet our projected operating requirements during the next 12
months.





Material
Commitments/Tabular Disclosure of Contractual Obligations





Payments Due by PeriodTotal
                                            
                                            
                                            Less Than
                                              1 Year
                                            
                                            
                                            1-3
                                              Years
                                            
                                            
                                            3-5
                                              Years
                                            
                                            
                                            More Than 5
                                              YearsLong-term
      loans obligations
                                            
                                            $
                                            24,891,732
                                            
                                            
                                            $
                                            6,230,492
                                            
                                            
                                            $
                                            8,442,844
                                            
                                            
                                            $
                                            3,632,052
                                            
                                            
                                            $
                                            6,586,344Long-term
      notes payable obligations
                                            
                                            
                                            20,055,193
                                            
                                            
                                            
                                            2,291,883
                                            
                                            
                                            
                                            10,033,669
                                            
                                            
                                            
                                            6,692,141
                                            
                                            
                                            
                                            1,037,500Non-cancelable
      leases obligations
                                            
                                            
                                            87,780
                                            
                                            
                                            
                                            79,157
                                            
                                            
                                            
                                            8,623
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Vessel
      chartering obligations
                                            
                                            
                                            285,000
                                            
                                            
                                            
                                            285,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Shipbuilding
      obligations
                                            
                                            
                                            34,200,000
                                            
                                            
                                            
                                            28,500,000
                                            
                                            
                                            
                                            3,800,000
                                            
                                            
                                            
                                            1,900,000
                                            
                                            
                                            
                                            -




15





Off-Balance
Sheet Arrangements





None.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Interest
Rate Risk





The
Company is exposed to market risk from floating interest rates, which could
impact its results of operations and financial condition. The Company minimizes
market risk via its operating and financing activities. As of September 30,
2010, the Company’s debt consisted of $24,891,732 in long-term loans at various
margin above the LIBOR. For the nine months ended September 30, 2010, actual
interest rates on the outstanding debt ranged from 2.05% to 2.46%. The weighted
average interest rate was 2.30%.





Foreign
Currency and Exchange Rate Risk





The
shipping industry’s functional currency is the U.S. dollar. The Company
generates a majority of its revenues in U.S. dollars. The majority of the
Company’s operating expenses are in U.S. dollars, and the majority of the
Company’s investing and all of its financing activities are in U.S.
dollars.  The Company does not intend to use financial derivatives to
mitigate the risk of exchange rate fluctuations for its operating, investing and
financing activities. For the nine months ended September 30, 2010, the exchange
rate for Renminbi against the U.S. dollar was in the region of RMB6.6746 to
RMB6.8336 against USD1.00. The moving average translation rate was RMB
6.7676 against USD1.00.





ITEM
4. CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures





Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rule 13a-15(e) under the Exchange
Act. Based on this evaluation, our management, including our principal executive
officer and our principal financial officer, concluded that our disclosure
controls and procedures were effective as of September 30, 2010, to ensure that
information required to be disclosed by us in the reports filed or submitted by
us under the Exchange Act (i) is recorded, processed, summarized and
reported within the time period specified in SEC rules and forms, and
(ii) is accumulated and communicated to our management, including our
principal executive officer and our principal financial officer, as appropriate
to allow appropriate decisions on a timely basis regarding required
disclosure.





Internal
Control over Financial Reporting





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





PART
II - OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





In the
normal course of business, we are named as a defendant in lawsuits in which
claims are asserted against us. In our opinion, the liabilities, if any, which
may ultimately result from such lawsuits, are not expected to have a material
adverse effect on our financial position, results of operations or cash flows.
The Company signed a voyage charter contract with Sinoriches Global Ltd. on
June 11, 2007. The Company canceled the contract on June 18, 2007.
Sinoriches Global Ltd. filed an arbitration claim of $501,640 including interest
for the dispute. As of September 30, 2010, the case is in the process of
exchanging documents and evidence for arbitration. The Company does not believe
the case will result in a significant unfavorable outcome.


16





ITEM
1A. RISK FACTORS





The
financial condition, business, operations, and prospects of the Company involve
a high degree of risk. You should carefully consider the risks and uncertainties
described below, which constitute the material risks relating to the Company,
and the other information in this report. If any of the following risks are
realized, the Company’s business, operating results and financial condition
could be harmed and the value of the Company’s stock could suffer. This means
that investors and stockholders of the Company could lose all or a part of their
investment.





RISKS
RELATING TO THE PEOPLE’S REPUBLIC OF CHINA





The
Company has operating subsidiaries with operations conducted in the PRC.
Accordingly, their businesses, financial condition and results of operations may
be influenced by the political, economic and legal environments in the PRC and
by the general state of the PRC economy.





Certain
Political and Economic Considerations Relating to China Could Adversely Affect
Our Company.





The PRC
is transitioning from a planned economy to a market economy. While the PRC
government has pursued economic reforms since its adoption of the open-door
policy in 1978, a large portion of the PRC economy is still operating under
five-year plans and annual state plans. Through these plans and other economic
measures, such as control on foreign exchange, taxation and restrictions on
foreign participation in the domestic market of various industries, the PRC
government exerts considerable direct and indirect influence on the economy.
Many of the economic reforms carried out by the PRC government are unprecedented
or experimental, and are expected to be refined and improved.





Other
political, economic and social factors can also lead to further readjustment of
such reforms. This refining and readjustment process may not necessarily have a
positive effect on our operations or future business development. Our operating
results may be adversely affected by changes in the PRC’s economic and social
conditions as well as by changes in the policies of the PRC government, such as
changes in laws and regulations (or the official interpretation thereof),
measures which may be introduced to control inflation, changes in the interest
rate or method of taxation, and the imposition of additional restrictions on
currency conversion.





The
Chinese Government Exerts Substantial Influence Over The Manner In Which We Must
Conduct Our Business Activities Which Could Adversely Affect Our
Company.





China
only recently has permitted provincial and local economic autonomy and private
economic activities. The Chinese government has exercised and continues to
exercise substantial control over virtually every sector of the Chinese economy
through regulation and State ownership. Our ability to operate in China may be
harmed by changes in its laws and regulations, including those relating to
taxation, import and export tariffs, environmental regulations, land use rights,
property and other matters. We believe that our operations in China are in
material compliance with all applicable legal and regulatory requirements.
However, the central or local governments of these jurisdictions may impose new,
stricter regulations or interpretations of existing regulations that would
require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations.





Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof, and could require us to divest ourselves of any
interest we then hold in China.


17





The
Chinese Legal System Has Inherent Uncertainties That Could Limit The Legal
Protections Available To You.





Our
contractual arrangements with our VIEs in China are governed by the laws of the
PRC. China’s legal system is based upon written statutes. Prior court decisions
may be cited for reference but are not binding on subsequent cases and have
limited value as precedents. Since 1979, the Chinese legislative bodies have
promulgated laws and regulations dealing with economic matters such as foreign
investment, corporate organization and governance, commerce, taxation and trade.
However, because these laws and regulations are relatively new, and because of
the limited volume of published decisions and their non-binding nature, the
interpretation and enforcement of these laws and regulations involve
uncertainties, and therefore you may not have legal protections for certain
matters in China.





Even
If We Are In Compliance With Chinese Governmental Regulations Relating To
Foreign Investment Prohibitions, The Chinese Government May Prevent Us From
Advertising Or Distributing Content That It Believes Is Inappropriate And We May
Be Liable For Such Content Or We May Have To Stop Profiting From Such
Content.





China has
enacted regulations governing Internet access and the distribution of news and
other information. In the past, the Chinese government has stopped the
distribution of information over the Internet that it believes to violate
Chinese law, including content that it believes is obscene, incites violence,
endangers national security, is contrary to the national interest or is
defamatory. In addition, we may not publish certain news items without
permission from the Chinese government. Furthermore, the Ministry of Public
Security has the authority to cause any local Internet service provider to block
any web site maintained outside China at its sole discretion. Even if we comply
with Chinese governmental regulations relating to foreign investment
prohibitions, if the Chinese government were to take any action to limit or
prohibit the distribution of information through our network or to limit or
regulate any current or future content or services available to users on our
network, our business could be significantly harmed.





Because
the definition and interpretation of prohibited content is in many cases vague
and subjective, it is not always possible to determine or predict what and how
content might be prohibited under existing restrictions or restrictions that
might be imposed in the future.





We are
also subject to potential liability for content on http://www.sol.com.cn
that is deemed inappropriate and for any unlawful actions of our subscribers and
other users of our systems. Furthermore, we are required to delete content that
clearly violates the laws of China and report content that we suspect may
violate Chinese law. It is difficult to determine the type of content that may
result in liability for us, and if we are wrong, we may be prevented from
operating our web sites.





Some
Of Our Assets Are Located In China, Any Dividends Of Proceeds From Liquidation
Is Subject To The Approval Of The Relevant Chinese Government
Agencies.





Some of
our assets are located inside China. Under the laws governing foreign invested
enterprises in China, dividend distribution and liquidation are allowed but
subject to special procedures under the relevant laws and rules. Any dividend
payments will be subject to the decision of our Board of Directors and subject
to foreign exchange rules governing such repatriation. Any liquidation is
subject to both the relevant government agency’s approval and supervision as
well the foreign exchange control. This may generate additional risk for our
investors in case of dividend payments and liquidation.





Future
Inflation In China May Inhibit Our Activity To Conduct Business In
China.





In recent
years, the Chinese economy has experienced periods of rapid expansion and high
rates of inflation, which have led to the adoption by Chinese government, from
time to time, of various corrective measures designed to restrict the
availability of credit or regulate growth and contain inflation. While inflation
has been more moderate since 1995, high inflation may in the future cause the
Chinese government to impose controls on credit and/or prices, or to take other
action, which could inhibit economic activity in China and thereby harm our
business operations.


18





Currency
Conversion And Exchange Rate Volatility Could Adversely Affect Our Financial
Condition.





The PRC
government imposes control over the conversion of Renminbi into foreign
currencies. Under the current unified floating exchange rate system, the
People’s Bank of China (PBOC) publishes an exchange rate, which we refer to as
the PBOC exchange rate, based on the previous day’s dealings in the inter-bank
foreign exchange market. Financial institutions authorized to deal in foreign
currency may enter into foreign exchange transactions at exchange rates within
an authorized range above or below the PBOC exchange rate according to market
conditions.





Pursuant
to the Foreign Exchange Control Regulations of the PRC issued by the State
Council which came into effect on April 1, 1996, and the Regulations on the
Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which
came into effect on July 1, 1996, regarding foreign exchange control, conversion
of Renminbi into foreign exchange by Foreign Investment Enterprises (“FIEs”), for use on
current account items, including the distribution of dividends and profits to
foreign investors, is permissible. FIEs are permitted to convert their after-tax
dividends and profits to foreign exchange and remit such foreign exchange to
their foreign exchange bank accounts in the PRC. Conversion of Renminbi into
foreign currencies for capital account items, including direct investment,
loans, and security investment, is still under certain restrictions. On January
14, 1997, the State Council amended the Foreign Exchange Control Regulations and
added, among other things, an important provision, which provides that the PRC
government shall not impose restrictions on recurring international payments and
transfers under current account items.





Enterprises
in the PRC (including FIEs) which require foreign exchange for transactions
relating to current account items, may, without approval of the State
Administration of Foreign Exchange, or SAFE, effect payment from their foreign
exchange account or convert and pay at the designated foreign exchange banks by
providing valid receipts and proofs.





Convertibility
of foreign exchange in respect of capital account items, such as direct
investment and capital contribution, is still subject to certain restrictions,
and prior approval from the SAFE or its relevant branches must be
sought.





Since
1994, the exchange rate for Renminbi against the United States dollars has
remained relatively stable. However, in 2005, the Chinese government announced
that would begin pegging the exchange rate of the Chinese Renminbi against a
number of currencies, rather than just the U.S. Dollar. As our operations are
primarily in China, any significant revaluation of the Chinese Renminbi may
materially and adversely affect our cash flows, revenues and financial
condition. For example, to the extent that we need to convert United States
dollars into Chinese Renminbi for our operations, appreciation of this currency
against the United States dollar could have a material adverse effect on our
business, financial condition and results of operations. Conversely, if we
decide to convert Chinese Renminbi into United States dollars for other business
purposes and the United States dollar appreciates against this currency, the
United States dollar equivalent of the Chinese Renminbi we convert would be
reduced.





The
Value Of Our Securities Will Be Affected By The Foreign Exchange Rate Between
U.S. Dollars And Renminbi.





The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and Renminbi, and between those currencies and other currencies in which
our sales may be denominated. For example, to the extent that we need to convert
U.S. dollars into Renminbi for our operational needs and should the Renminbi
appreciate against the U.S. dollar at that time, our financial position, the
business of the Company, and the price of our common stock may be harmed.
Conversely, if we decide to convert our Renminbi into U.S. dollars for the
purpose of declaring dividends on our common stock or for other business
purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar
equivalent of our earnings from our China operations would be
reduced.


19





You
May Experience Difficulties In Effecting Service Of Legal Process, Enforcing
Foreign Judgments Or Bringing Original Actions In China Based On United States
Or Other Foreign Laws Against Us.





We
conduct our operations in China and some of our assets are located in China. In
addition, some of our Directors and executive officers reside within China. As a
result, it may not be possible to effect service of process within the United
States or elsewhere outside China upon such directors or executive officers,
including with respect to matters arising under U.S. federal securities laws or
applicable state securities laws. Moreover, our Chinese counsel has advised us
that China does not have treaties with the U.S. and many other countries that
provide for the reciprocal recognition and enforcement of judgment of courts. As
a result, recognition and enforcement in China of judgments of a court of the
U.S. or any other jurisdiction in relation to any matter may be difficult or
impossible.





Underdeveloped
Telecommunications Infrastructure Has Limited, And May Continue To Limit, The
Growth Of The Internet Market In China Which, In Turn, Could Limit Our Ability
To Grow Our Business.





The
telecommunications infrastructure in China is not well developed. Although
private sector ISPs exist in China, almost all access to the Internet is
accomplished through ChinaNet, China’s primary commercial network, which is
owned and operated by China Telecom and China Netcom under the administrative
control and regulatory supervision of MII. The underdeveloped Internet
infrastructure in China has limited the growth of Internet usage in China. If
the necessary Internet infrastructure is not developed, or is not developed on a
timely basis, future growth of the Internet in China could be limited and our
business could be harmed.





Our Significant
Amount Of Deposits In Certain Banks In China May Be At Risk If These Banks Go
Bankrupt During Our Deposit Period.





We had
approximately $2.65 million at September 30, 2010 in banks in China, which
constitutes all of our total cash. The terms of these deposits are, in general,
up to twelve (12) months. Historically, deposits in Chinese banks are secure due
to the state policy on protecting depositors’ interests. However, China
promulgated a new Bankruptcy Law in August 2006, which became effective on
June 1, 2007, which contains a separate article expressly stating that the
State Council may promulgate implementation measures for the bankruptcy of
Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a
Chinese bank may go bankrupt. In addition, since China’s concession to WTO,
foreign banks have been gradually permitted to operate in China and have been
severe competitors against Chinese banks in many aspects, especially since the
opening of Renminbi business to foreign banks in late 2006. Therefore, the risk
of bankruptcy of those banks in which we have deposits has increased. In the
event of bankruptcy of one of the banks which holds our deposits, we are
unlikely to recover our deposits back in full since we are unlikely to be
classified as a secured creditor based on PRC laws.





RISKS
RELATING TO OUR BUSINESS





Cyclical
Patterns In The Global Shipping Industry Will Have a Substantial Impact On Our
Overall Business Performance





The
Internet-based shipping and logistics services integrated the shipping industry
and the Internet industry. The Company's operating performance will also depend
on the development of these two industries. Ocean transportation business is the
core business of the Company. The cyclical changes of the ocean transportation
industry and the cyclical changes of the global shipping industry will have a
substantial impact on the business performance of the Company. With a sustained
operating history and anti-risk experience for over 15 years, as well as
integrated shipping and logistics services through the Internet, the Company
will offset the risk to some extent, but the overall performance will inevitably
be affected.


20





Stringent
Regulations In China Could Force Us To Change Our Online Business Practices
Which Could Have a Negative Impact On Our Business





The
Internet industry is currently at the outbreak of the growth period in China,
but the related industrial legislature is not sound, and some non-standard
operations, dishonesty of e-commerce websites had a certain negative impact on
the image of industry as a whole, resulting in strengthened supervision and
administration on the Internet e-commerce industry by state departments.
Shipping Online will face more stringent regulations which could change how we
conduct our business and have a negative impact on our business.





If
We Do Not Quickly Respond To E-Commerce Trends and Market Conditions And
Increase Our Online Transaction Volume of Business We Could Lose Strategic
Opportunities For The Rapid Promotion Of Our Services Which Could Adversely
Affect Our Business





When the
Company entered the shipping market in 1993, it experienced several ups and
downs in the industry. Although we have accumulated rich anti-risk experience
and are mature and stable in the ocean transportation for bulk cargo and
associated traditional shipping services, e-commerce provided by is still a
relatively new service model in the shipping industry. Although the Internet has
already been proven in many other fields to greatly promote the development of
traditional business, as a brand-new operation mode of the transactions, it may
face some doubt from the enterprises at the initial stage, and may also
experience setbacks, exploration and reiteration in the process of growth.
Secondly, although there are higher access barriers to conduct business, as the
necessary trend in the development of the shipping industry, fierce competition
in the market is bound to affect the industry in the future. If the Company does
not quickly increase its online transaction volume of business and localization
of orders and services, it is possible we could see losses of strategic
opportunity for the rapid promotion of services which could have an adverse
effect our business.





Costs
And Revenues In The Shipping Industry Are Volatile Which Could Adversely Affect
Our Business.





The
shipping industry historically has experienced volatility in freight rates, the
cost of fuel oil, the cost and availability of crew, port charges and currency
exchange rates, as well as in vessel charter rates and values, due to changes in
the level and pattern of global economic activity and the highly competitive
nature of the world shipping industry. Changes to marine regulatory regimes in
the ports at which the Company’s vessels call also may increase the costs. The
Company’s revenue is influenced by a number of factors that are difficult to
predict with certainty, including global and regional economic conditions,
developments in international trade, changes in seaborne, and other
transportation patterns, weather patterns, port congestion, canal closures,
political developments, and armed conflicts, acts of terrorism, embargoes, and
strikes. Demand for the transportation services is influenced by the demand for
the goods the Company ship, including steel products, metal concentrates and
agricultural commodities, which in turn is affected by general economic
conditions, commodity prices and competition. A decrease in demand for these
products could adversely affect the results of operations.





High or Volatile Oil Prices Could
Adversely Affect The Global Economy And Our Results Of
Operations.





If oil
prices remain high for an extended period of time, or experience prolonged
volatility, the global economy could weaken significantly. Global recession or
depression would significantly reduce the demand for ocean freight while the
fuel costs would be increasing. A significant reduction in the demand for ocean
freight would have a material and adverse impact on the Company’s results of
operations and financial condition. In addition, the results of operations would
be adversely affected if the Company were unable to pass increased fuel costs on
to our customers.




21





Failure
To Comply With International Safety Regulations May Subject The Company To
Increased Liability Which May Adversely Affect Our Insurance Coverage Resulting
In A Denial Of Access To, Or Detention In, Certain Ports Which Could Adversely
Affect Our Business.





The
operation of the vessels is affected by the requirements of the International
Maritime Organization's International Safety Management Code for the Safe
Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code
requires ship owners and bareboat chatterers to develop and maintain an
extensive "Safety Management System" that includes the adoption of a safety and
environmental protection policy setting forth instructions and procedures for
safe operation and describing procedures for dealing with emergencies. The
Company’s failure to comply with the ISM Code may subject us to increased
liability, may invalidate existing insurance or decrease available insurance
coverage for the affected vessels and may result in a denial of, access to, or
detention in certain ports, all of which could materially and adversely affect
the Company’s results of operations and liquidity.





The
Shipping Industry Has Inherent Operational Risks, And Such Risks May Not Be
Adequately Covered By Insurance Exposing Us To Risk Of Loss Of Our Vessels Which
Would Adversely Affect Our Business





The
operation of any oceangoing vessel carries with it an inherent risk of marine
disaster, environmental mishaps and collision or property losses. In the course
of operating a vessel, marine disasters such as oil spills and other
environmental mishaps, cargo loss or damage, business interruption due to
political developments, labor disputes, strikes and adverse weather conditions
could result in loss of revenues, liabilities or increased costs. The Company
transports bulk cargoes such as fertilizer, salt and coal which, if not
transported properly, could pose a risk to our vessels and to the environment.
The Company cannot assure you that any insurance they maintain would be
sufficient to cover the cost of damages or the loss of income resulting from a
vessel being removed from operation or that any insurance claims would be paid
or that insurance will be obtainable at reasonable rates in the future. Any
significant loss or liability for which the Company are not insured, or for
which the insurers fail to pay the Company, could have a material adverse effect
on the Company’s financial condition. In addition, the loss of a vessel would
adversely affect the Company’s cash flows and results of
operations.





As
The Company’s Fleet Of Vessels Ages, The Risks Associated With Older Vessels
could Adversely Affect Our Business Operations.





In
general, the costs to maintain an oceangoing vessel in good operating condition
increase with the age of the vessel. As of December 31, 2009, the average age of
the 13 vessels in the Company-controlled fleet was 21.92 years. The Company
estimates that the economic useful life of most bulk carriers is approximately
25 years, however most of the vessels in the industry are used for more than 30
years or more, if the vessel can pass the annual survey. The length of a
vessel’s useful life depends on market conditions, the type of cargo being
carried and the level of maintenance. Some of the Company’s dry bulk carriers
are used to transport products such as coal, salt or fertilizer that may damage
the vessels and reduce their useful life, if the Company does not follow
specified maintenance and cleaning routines. Older vessels may develop
unexpected mechanical and operational problems despite adherence to regular
survey schedules and proper maintenance. Due to improvements in engine
technology, older vessels typically are less fuel-efficient than more recently
constructed vessels. Cargo insurance rates increase with the age of a vessel.
Governmental regulations and safety or other equipment standards related to the
age of vessels may require expenditures for alterations or the addition of new
equipment, to the vessels and may restrict the type of activities in which the
vessels may engage. The Company cannot assure you that they will be able to
operate the vessels profitably during the remainder of their projected useful
lives or that they will be able to sell the vessels profitably when the Company
no longer can utilize them in the fleet.





Our
Vessels May Suffer Damage Whereby Such Vessels Would Need To Be Drydocked
Unexpectedly Which Could Adversely Affect Our Cash Flows and Results of
Operations.





If a
vessel suffers damage, it may need to be repaired at a drydocking facility. The
costs of drydock repairs are unpredictable and can be substantial. The loss of
earnings while the vessel is being repaired and the repositioning of the
Company’s vessels in response to the unexpected drydocking, as well as the
actual costs of the repairs, would have a material adverse effect on our cash
flows and results of operations. The Company may not have insurance that is
sufficient to cover all of these costs or losses.




22





Risks
Associated With The Purchase And Operation Of Secondhand Vessels Could Adversely
Affect Our Future Operating Results





In
addition to constructing new vessels, the Company’s current business strategy
also partly involves growing through the purchase of secondhand vessels.
Secondhand vessels generally car: y no warranties from the sellers or
manufacturers. Although the Company inspects secondhand vessels prior to
purchase, an inspection normally would not provide the Company with the same
knowledge about their condition that the Company would have if they had been
built for and operated exclusively by the Company. Secondhand vessels may have
conditions or defects that the Company was not aware of when it bought the
vessel and that may require the Company to undertake costly repairs. These
repairs may require the Company to put a vessel into drydock, which would reduce
the fleet utilization. The costs of drydock repairs are unpredictable and can be
substantial. The loss of earnings while the vessels were being repaired and
repositioned, as well as the actual cost of those repairs, would decrease the
income from operations. The Company may not have insurance that is sufficient to
cover all of these costs or losses and may have to pay drydocking costs not
covered by our insurance. The Company’s future operating results could be
adversely affected if some of the secondhand vessels do not perform as we
expect.





In
Order To Comply With PRC Regulatory Requirements, We Operate Our Main Business
Through A Company With Which We Have A Contractual Relationship (the VIEs) But
In Which We Do Not Have Controlling Ownership. If The PRC Government Determines
That Our Agreements With the VIEs Are Not In Compliance With
Applicable Regulations, Our Business In The PRC Could Be Adversely
Affected.





The
Chinese government restricts foreign investment in Internet-related and
advertising businesses, including Internet access, distribution of content over
the Internet and advertising via the Internet. Accordingly, we operate our
Internet-related businesses in China through Shipping Online, a VIE, which is
owned by Li Honglin and Xue Ying. We control Shipping Online and
operate its business through contractual arrangements and these individual
owners, but we have no equity control over Shipping Online. Accordingly, we
cannot be sure that the PRC government would view our operating arrangements to
be in compliance with PRC licensing, registration or other regulatory
requirements, with existing policies or with requirements or policies that may
be adopted in the future. If we are determined not to be in compliance, the PRC
government could revoke our business and operating licenses, require us to
discontinue or restrict our operations, restrict our right to collect revenues,
block our web site, require us to restructure our business, corporate structure
or operations, impose additional conditions or requirements with which we may
not be able to comply, impose restrictions on our business operations or on our
customers, or take other regulatory or enforcement actions against us that could
be harmful to our business. We may also encounter difficulties in obtaining
performance under or enforcement of related contracts.





We
Rely on Contractual Arrangements With the VIEs For Our Operations,
Which May Not Be As Effective In Providing Control Over This Entity As Direct
Ownership.





Because
PRC regulations restrict our ability to provide Internet content, MVAS (Mobile
Value-Added Services) and advertising services directly in China, we are
dependent on our VIEs in which we have little or no equity ownership interest
and must rely on contractual arrangements to control and operate these
businesses. These contractual arrangements may not be as effective in providing
control over these entities as direct ownership. For example, the VIEs could
fail to take actions required for our business or fail to maintain our China web
sites despite their contractual obligation to do so. These companies are able to
transact business with parties not affiliated with us. If these companies fail
to perform under their agreements with us, we may have to rely on legal remedies
under Chinese law, which we cannot be sure would be effective. In addition, we
cannot be certain that the individual equity owners of the VIEs would always act
in the best interests of the VIEs, especially if they leave the
VIEs.




23


Substantially
all profits generated from our VIEs are paid to the subsidiaries of ours in
China through related party transactions under contractual agreements. We
believe that the terms of these contractual agreements are in compliance with
the laws in China. The tax authorities in China have examined some of these
contractual agreements in the past and have not raised any comment. However, due
to the uncertainties surrounding the interpretation of the transfer pricing
rules relating to related party transactions in China, it is possible that in
the future tax authorities in China may challenge the transfer prices that we
have used for related party transactions among our entities in China. In the
event the tax authorities challenge our VIE structure, we may be forced to
restructure our business operation, which could have a material adverse effect
on our business.





We
Cannot Predict Whether We Will Meet Internal or External Expectations Of Future
Performance.





We
believe that our future success depends on our ability to significantly increase
revenue from the provision of our services. Accordingly, our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies with a limited operating history. These risks include
our ability to:





·
            offer new and innovative
      services;





·
            respond effectively to
      competitive pressures and address the effects of strategic relationships
      or corporate combinations;





·
            maintain our current, and develop
      new, strategic
relationships;





·
            increase awareness of our
      services and continue to build customer loyalty;
  and





·
            attract and retain qualified
      management, consultants and
employees.





We
Cannot Assure You That Our Organic Growth Strategy Will Be
Successful.





One of
our growth strategies is to grow organically through increasing our services by
increasing our market share and entering new markets globally. However, many
obstacles to increasing our market share and entering such new markets exist,
including, but not limited to, costs associated with increasing market share and
entering into such markets and attendant marketing efforts. We cannot,
therefore, assure you that we will be able to successfully overcome such
obstacles and establish our services in any additional markets. Our inability to
implement this organic growth strategy successfully may have a negative impact
on our ability to grow and on our future financial condition, results of
operations or cash flows.





Our
Business And Growth Could Suffer If We Are Unable To Hire And Retain Key
Personnel That Are In High Demand.





We depend
upon the continued contributions of our senior management and other key
personnel, including external experts and advisers. The loss of the services of
any of our executive officers or other key personnel could have a material
adverse effect on our business, operations, revenues or prospects. We do not
maintain key man insurance on the lives of these individuals at present. As we
plan to expand, we will have to attract managerial staff. We may not be able to
identify and retain qualified personnel due to our lack of understanding of
different cultures and lack of local contacts. This may impede any potential
expansion. Our future success will also depend on our ability to attract and
retain highly skilled and qualified technical, engineering, managerial, finance,
marketing, security and customer service personnel in China. Qualified
individuals are in high demand, and we may not be able to successfully attract,
assimilate or retain the personnel we need to succeed.




24


We
May Not Be Able To Manage Our Expanding Operations Effectively, Which Could Harm
Our Business.





We
anticipate expanding our business as we address growth in our customer base and
market opportunities. In addition, the geographic dispersion of our operations
as a result of overall internal growth requires significant management resources
that our locally-based competitors do not need to devote to their operations. In
order to manage the expected growth of our operations and personnel, we will be
required to improve and implement operational and financial systems, procedures
and controls, and expand, train and manage our growing employee base. Further,
our management will be required to maintain and expand our strategic
relationships necessary to our business. We cannot assure you that our current
and planned personnel, systems, procedures and controls will be adequate to
support our future operations. If we are not successful in establishing,
maintaining and managing our personnel, systems, procedures and controls, our
business will be materially and adversely affected.





If
We Need Additional Capital To Fund Our Growing Operations, We May Not Be Able To
Obtain Sufficient Capital And May Be Forced To Limit The Scope Of Our
Operations.





We may
experience increased capital needs and we may not have enough capital to fund
our future operations without additional capital investments. Our capital needs
will depend on numerous factors, including (i) our profitability; (ii) the
success of our competitors; (iii) the amount of our capital expenditures; and
(iv) new investments. We cannot assure you that we will be able to obtain
capital in the future to meet our needs.





If we
cannot obtain additional funding, we may be required to:





·
              reduce our
      investments;


·
              limit our expansion efforts;
      and


·
            decrease or eliminate capital
      expenditures.





Such
reductions could materially adversely affect our business and our ability to
compete. Even if we do find a source of additional capital, we may not be able
to negotiate terms and conditions for receiving the additional capital that are
acceptable to us. Any future capital investments could dilute or otherwise
materially and adversely affect the holdings or rights of our existing
stockholders. We cannot give you any assurance that any additional financing
will be available to us, or if available, will be on terms favorable to
us.





Concerns
About The Security Of Electronic Commerce Transactions And Confidentiality Of
Information On The Internet May Reduce Use Of Our Network And Impede
Growth.





A
significant barrier to electronic commerce and communications over the Internet
in general has been a public concern over security and privacy, especially the
transmission of confidential information. If these concerns are not adequately
addressed, they may inhibit the growth of the Internet and other online services
generally, especially as a means of conducting commercial transactions. If a
well-publicized Internet breach of security were to occur, general Internet
usage could decline, which could reduce traffic to our destination sites and
impede our growth.





We
May Not Be Able To Adequately Protect Our Intellectual Property, Which Could
Cause Us To Be Less Competitive.





We rely
on a combination of trademark, patent and trade secret laws and restrictions on
disclosure to protect our intellectual property rights. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our products and technology. Monitoring unauthorized
use of our products is difficult and costly, and we cannot be certain that the
steps we have taken will prevent misappropriations of our products and
technology, particularly in foreign countries where the laws may not protect our
proprietary rights as fully as in the United States. From time to time, we may
have to resort to litigation to enforce our intellectual property rights, which
could result in substantial costs and diversion of our resources.




25





We
May Be Exposed To Infringement Claims By Third Parties, Which, If Successful,
Could Cause Us To Pay Significant Damage Awards.





Third
parties may initiate litigation against us alleging infringement of their
proprietary rights. In the event of a successful claim of infringement and our
failure or inability to develop non-infringing products and technology or
license the infringed or similar product or technology on a timely basis, our
business could be harmed. In addition, even if we are able to license the
infringed or similar product or technology, license fees could be substantial
and may adversely affect our results of operations.





The
Law Of The Internet Remains Largely Unsettled, Which Subjects Our Business To
Legal Uncertainties That Could Harm Our Business.





Due to
the increasing popularity and use of the Internet and other online services, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution, antitrust and characteristics and
quality of products and services. Furthermore, the growth and development of the
market for electronic commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on companies conducting
business online. The adoption of any additional laws or regulations may decrease
the growth of the Internet or other online services, which could, in turn,
decrease the demand for our products and services and increase our cost of doing
business.





Moreover,
the applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet
and other online services could significantly disrupt our
operations.





We
May Be Subject To Claims Based On The Content We Provide Over Our Network and
the Products And Services Sold On Our Network, Which, If Successful, Could Cause
Us To Pay Significant Damage Awards.





As a
publisher and distributor of content and a provider of services over the
Internet, we face potential liability for defamation, negligence, copyright,
patent or trademark infringement and other claims based on the nature and
content of the materials that we publish or distribute; the selection of
listings that are accessible through our services and media properties, or
through content and materials that may be posted by users on our website; losses
incurred in reliance on any erroneous information published by us; unsolicited
email, lost or misdirected messages, illegal or fraudulent use of email or
interruptions or delays in email service; and product liability, warranty and
similar claims to be asserted against us by end users who purchase goods and
services through http://www.sol.com.cn
and any future e-commerce services we may offer.





We may
incur significant costs in investigating and defending any potential claims,
even if they do not result in liability. Although we carry general liability
insurance, our insurance may not cover potential claims of this type and may not
be adequate to indemnify us against all potential liabilities.





Our
Operations Could Be Disrupted By Unexpected Network Interruptions Caused By
System Failures, Natural Disasters Or Unauthorized Tampering With Our
Systems.





The
continual accessibility of our website and the performance and reliability of
our network infrastructure are critical to our reputation and our ability to
attract and retain users, advertisers and merchants. Any system failure or
performance inadequacy that causes interruptions in the availability of our
services or increases the response time of our services could reduce our appeal
to advertisers and consumers. Factors that could significantly disrupt our
operations include: system failures and outages caused by fire, floods,
earthquakes, power loss, telecommunications failures and similar events;
software errors; computer viruses, break-ins and similar disruptions from
unauthorized tampering with our computer systems; and security breaches related
to the storage and transmission of proprietary information, such as credit card
numbers or other personal information.


26





We have
limited backup systems and redundancy. In the past, we experienced an
unauthorized tampering of the mail server of our China website which briefly
disrupted our operations. Future disruptions or any of the foregoing factors
could damage our reputation, require us to expend significant capital and other
resources and expose us to a risk of loss or litigation and possible liability.
We do not carry sufficient business interruption insurance to compensate for
losses that may occur as a result of any of these events. Accordingly, our
revenues and results of operations may be adversely affected if any of the above
disruptions should occur.





We
May Be Classified As A Passive Foreign Investment Company, Which Could Result In
Adverse U.S. Tax Consequences To U.S. Investors.





Based
upon the nature of our income and assets, we may be classified as a passive
foreign investment company, or PFIC, by the United States Internal Revenue
Service for U.S. federal income tax purposes. This characterization could result
in adverse U.S. tax consequences to you. For example, if we are a PFIC, our U.S.
investors will become subject to increased tax liabilities under U.S. tax laws
and regulations and will become subject to more burdensome reporting
requirements. The determination of whether or not we are a PFIC is made on an
annual basis, and those determinations depend on the composition of our income
and assets, including goodwill, from time to time. We intend to operate our
business so as to minimize the risk of PFIC treatment, however you should be
aware that certain factors that could affect our classification as PFIC are out
of our control. For example, the calculation of assets for purposes of the PFIC
rules depends in large part upon the amount of our goodwill, which in turn is
based, in part, on the then market value of our shares, which is subject to
change. Similarly, the composition of our income and assets is affected by the
extent to which we spend the cash we have raised on acquisitions and capital
expenditures. In addition, the relevant authorities in this area are not clear
and so we operate with less than clear guidance in our effort to minimize the
risk of PFIC treatment. Therefore, we cannot be sure whether we are not and will
not be a PFIC for the current or any future taxable year. In the event we are
determined to be a PFIC, our stock may become less attractive to U.S. investors,
thus negatively impacting the price of our stock.





RISKS
RELATING TO OUR COMMON STOCK





Our
common stock Price Is Volatile And Could Decline In The Future.





The stock
market in general and the market price for other companies based in the PRC have
experienced extreme stock price fluctuations. In some cases, these fluctuations
have been unrelated to the operating performance of the affected companies. Many
companies in China have experienced dramatic volatility in the market prices of
their common stock. We believe that a number of factors, both within and outside
of our control, could cause the price of our common stock to fluctuate, perhaps
substantially. Factors such as the following could have a significant adverse
impact on the market price of our common stock:





·
            announcements of technological
      innovations by us or our
competitors;





·
            our ability to obtain additional
      financing and, if available, the terms and conditions of the
      financing;





·
            our financial position and
      results of operations;





·
            litigation;





·
            period-to-period fluctuations in
      our operating results;





·
            changes in estimates of our
      performance by any securities
analysts;




27





·
            new regulatory requirements and
      changes in the existing regulatory
  environment;





·
            the issuance of new equity
      securities in a future
offering;





·
            changes in interest
      rates;





·
            changes in environmental
      standards;





·
            market conditions of securities
      traded on the OTCBB;





·
            investor perceptions of us and
      the shipping industry generally;
and





·
            general economic and other
      national conditions.





We
May Have Difficulty Raising Necessary Capital To Fund Operations As A Result Of
Market Price Volatility For Our Shares Of common stock.





In recent
years, the securities markets in the United States have experienced a high level
of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations that have not necessarily been
related to the operations, performances, underlying asset values or prospects of
such companies. For these reasons, our shares of common stock can also be
expected to be subject to volatility resulting from purely market forces over
which we will have no control. If our business development plans are successful,
we may require additional financing to continue to develop and exploit existing
and new technologies and to expand into new markets. The exploitation of our
technologies may, therefore, be dependent upon our ability to obtain financing
through debt and equity or other means.





Our
common stock Is Considered A “Penny Stock” And As A Result, Related
Broker-Dealer Requirements Affect Its Trading And Liquidity.





Our
common stock is considered to be a “penny stock” since it meets one or more of
the definitions in Rules 15g-2 through 15g-6 promulgated under
Section 15(g) of the Exchange Act.  These include but are not
limited to the following: (i) the common stock trades at a price less than
$5.00 per share; (ii) the common stock is not traded on a “recognized”
national exchange; (iii) the common stock is not quoted on the NASDAQ Stock
Market, or (iv) the common stock is issued by a company with average
revenues of less than $6.0 million for the past three (3) years. The
principal result or effect of being designated a “penny stock” is that
securities broker-dealers cannot recommend our common stock to investors, thus
hampering its liquidity.





Section 15(g)
and Rule 15g-2 require broker-dealers dealing in penny stocks to provide
potential investors with documentation disclosing the risks of penny stocks and
to obtain a manually signed and dated written receipt of the documents before
effecting any transaction in a penny stock for the investor’s account. Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any of our shares.





Moreover,
Rule 15g-9 requires broker-dealers in penny stocks to approve the account
of any investor for transactions in such stocks before selling any penny stock
to that investor. This procedure requires the broker-dealer to (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock transactions;
(iii) provide the investor with a written statement setting forth the basis
on which the broker-dealer made the determination in (ii) above; and
(iv) receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor’s financial situation,
investment experience and investment objectives.


28





Compliance
with these requirements may make it more difficult for holders of our common
stock to resell their shares to third parties or to otherwise dispose of them in
the market or otherwise.





Shares
Eligible For Future Sale May Adversely Affect The Market Price Of Our common
stock.





From time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of common stock by means of ordinary brokerage transactions in the
open market pursuant to Rule 144, promulgated under the Securities Act of
1933, as amended, subject to certain limitations. Any substantial sale of our
common stock pursuant to Rule 144 may have an adverse effect on the market
price of our common stock.





One
Stockholder, Which is 50% Controlled By Our Chairman of the Board and President
and 50% Controlled By Our Chief Executive Officer and Secretary, Exercises
Significant Control Over Matters Requiring Stockholder Approval.





One
stockholder has voting power equal to eighty-two and one quarter percent
(82.25%) of our voting securities as of the date of this report. Moreover, the
stockholder is 50% controlled by Li Honglin, our Chairman of the Board and
President and 50% controlled by Xue Ying, our Chief Executive Officer and
Secretary. As a result, the Stockholder and our Chairman of the Board, through
such stock ownership, exercise control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership in the Stockholder may
also have the effect of delaying or preventing a change in control of us that
may be otherwise viewed as beneficial by stockholders other than the
Stockholder.





We
May Incur Significant Costs To Ensure Compliance With U.S. Corporate Governance
And Accounting Requirements.





We may
incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the SEC. We expect all of these applicable rules and
regulations to increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. We also expect that these
applicable rules and regulations may make it more difficult and more expensive
for us to obtain director and officer liability insurance and we may be required
to accept reduced policy limits and coverage or incur substantially higher costs
to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified individuals to serve on our Board or as
executive officers. We cannot predict or estimate the amount of additional costs
we may incur or the timing of such costs.





We
May Be Required To Raise Additional Financing By Issuing New Securities With
Terms Or Rights Superior To Those Of Our Shares Of common stock, Which Could
Adversely Affect The Market Price Of Our Shares Of common stock.





We may
require additional financing to fund future operations, including expansion in
current and new markets, development and acquisition, capital costs and the
costs of any necessary implementation of technological innovations or
alternative technologies. We may not be able to obtain financing on favorable
terms, if at all. If we raise additional funds by issuing equity securities, the
percentage ownership of our current stockholders will be reduced, and the
holders of the new equity securities may have rights superior to those of the
holders of shares of common stock, which could adversely affect the market price
and the voting power of shares of our common stock. If we raise additional funds
by issuing debt securities, the holders of these debt securities would similarly
have some rights senior to those of the holders of shares of common stock, and
the terms of these debt securities could impose restrictions on operations and
create a significant interest expense for us.




29





Standards
For Compliance With Section 404 Of The Sarbanes-Oxley Act Of 2002 Are Uncertain,
And If We Fail To Comply In A Timely Manner, Our Business Could Be Harmed And
Our Stock Price Could Decline.





Rules
adopted by the SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
require annual assessment of our internal control over financial reporting, and
attestation of our assessment by our independent registered public accountants.
The standards that must be met for management to assess the internal control
over financial reporting as effective are new and complex, and require
significant documentation, testing and possible remediation to meet the detailed
standards and will impose significant additional expenses on us. We may
encounter problems or delays in completing activities necessary to make an
assessment of our internal control over financial reporting. In addition, the
attestation process by our independent registered public accountants is new and
we may encounter problems or delays in completing the implementation of any
requested improvements and receiving an attestation of our assessment by our
independent registered public accountants. If we cannot assess our internal
control over financial reporting as effective, or our independent registered
public accountants are unable to provide an unqualified attestation report on
such assessment, investor confidence and share value may be negatively
impacted.





ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES





None.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS





None.





ITEM
5. OTHER INFORMATION





None.





ITEM
6. EXHIBITS





(a) Exhibits:





EXHIBIT
                  NO.
                
                DESCRIPTION
                
                LOCATION2.1
                
                Share
      Exchange Agreement, dated August 12, 2008, by and among Trip Tech, Inc.,
      SkyAce Group Limited and Pioneer Creation Holdings Limited
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.1
                
                Articles
      of Incorporation of Trip Tech, Inc.
                
                Incorporated
      by reference to Exhibit 3.1 to the Company’s Registration Statement on
      Form SB-2 as filed with the SEC on May 14, 20073.2
                
                Amended
      and Restated Bylaws of Trip Tech, Inc. dated as of August 27,
      2008
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on September 29, 20083.3
                
                Memorandum
      and Articles of Associationof SkyAce Group
      Limited
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 2008




30





3.4
            
            Certificate
      of Incorporation of SkyAce Group Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.5
            
            Memorandum
      and Articles of Association of Plentimillion Group Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.6
            
            Certificate
      of Incorporation of Plentimilllion Group Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.7
            
            Memorandum
      and Articles of Association of Best Summit Enterprises
    Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.8
            
            Certificate
      of Incorporation of Best Summit Enterprises Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.9
            
            Memorandum
      and Articles of Association of Wallis Development Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.10
            
            Certificate
      of Incorporation of Wallis Development Limited
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.11
            
            Articles
      of Association of Beijing Huate Xingye Keji Co. Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.12
            
            Certificate
      of Incorporation of Beijing Huate Xingye Keji Co. Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 20083.13
            
            Certificate
      of Correction to Trip Tech’s Articles of Incorporation, dated August 11,
      2008
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 2008




3.14
            
            Certificate
      of Amendment to Certificate of Incorporation of the Company, dated
      September 24, 2008
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on September 29, 20083.15
            
            Certificate
      of Corporate Resolutions Designating Series A Preferred Stock of the
      Company, dated August 12, 2008
            
            Incorporated
      by reference to Exhibit 3.15 to the Company’s Annual Report on Form 10-K
      as filed with the SEC on March 31, 200910.1
            
            Exclusive
      Technology Consultation Service Agreement, dated March 31, 2008, by and
      among Beijing Huate Xingye Keji Co. Ltd. and Winland
      International
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 2008




31





10.2
            
            Exclusive
      Technology Consultation Service Agreement, dated March 31, 2008, by and
      among Beijing Huate Xingye Keji Co. Ltd. and Winland
    Logistics
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.3
            
            Exclusive
      Technology Consultation Service Agreement, dated March 31, 2008, by and
      among Beijing Huate Xingye Keji Co. Ltd. and Shipping
    Online
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.4
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and among
      Wallis Development Limited, Dalian Winland International Shipping Agency
      Co., Ltd. and Dalian Winland Group Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.5
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and among
      Wallis Development Limited, Dalian Winland International Shipping Agency
      Co., Ltd. and Dalian Weihang Logistic Agent Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.6
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and among
      Wallis Development Limited, Dalian Winland International Shipping Agency
      Co., Ltd. and Dalian Winland Shipping Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.7
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and between
      Wallis Development Limited, Dalian Winland International Logistics Co.,
      Ltd. and Dalian Winland Group Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.8
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and between
      Wallis Development Limited, Dalian Winland International Logistics Co.,
      Ltd. and Dalian Winland Shipping Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 2008





10.9
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and between
      Wallis Development Limited, Dalian Winland International Logistics Co.,
      Ltd. and Dalian Winland International Shipping Agency Co.,
      Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.10
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and among
      Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and
      Li Honglin
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.11
            
            Exclusive
      Equity Interest Purchase Agreement, dated March 31, 2008, by and among
      Wallis Development Limited, Dalian Shipping Online Network Co., Ltd. and
      Xue Ying
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 2008




32





10.12
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.13
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Dalian Winland Shipping Co.,
      Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.14
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Dalian Weihang Logistic Agent Co.,
      Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.15
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Dalian Winland International Logistics Co.,
      Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.16
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Dalian Winland Group Co.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.17
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Winland Shipping Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.18
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Li Honglin
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.19
            
            Equity
      Interest Pledge Agreement, dated March 31, 2008, by and between Beijing
      Huate Xingye Keji Co. Ltd. and Xue Ying
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.20
            
            Powers
      of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co.,
      Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Weihang Logistic Agent
      Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd. For Dalian
      Winland International Shipping Agency Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.21
            
            Powers
      of Attorney, dated March 31, 2008, executed by Dalian Winland Group Co.,
      Ltd., Dalian Winland Shipping Co., Ltd. and Dalian Winland International
      Shipping Agency Co., Ltd. in favor of Beijing Huate Xingye Keji Co. Ltd.
      for Dalian Winland International Logistics Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 2008




33





10.22
            
            Powers
      of Attorney, dated March 31, 2008, executed by Li Honglin and Xue Ying in
      favor of Beijing Huate Xingye Keji Co. Ltd. and Dalian Shipping Online
      Network Co., Ltd.
            
            Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on August 12, 200810.23
            
            Memorandum
      of Agreement, dated June 3, 2009, by and between Mario Shipping
      Corporation and Winland Shipping Co. Ltd.
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200910.24
            
            Addendum No.
      1 to Memorandum of Agreement dated June 4, 2009 (Bao
      Shun)
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200910.25
            
            Addendum
      No. 2 to Memorandum of Agreement dated July 14, 2009 (Bao
      Shun)
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200910.26
            
            Loan
      Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200910.27
            
            Amendment
      to Loan Agreement (Mitsubishi UFJ Lease Finance Co., Ltd.)
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200910.28
            
            First
      Preferred Panamanian Ship Mortgage
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200910.29
            
            Deed
      of Guarantee
            
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q as filed with
      the SEC on November 13, 200921
            `
            List
      of Subsidiaries
            
            Incorporated
      by reference to Exhibit 21 to Amendment No. 1 to the Company’s Annual
      Report on Form 10-K/A as filed with the SEC on July 8,
  201031.1
            
            Certifications
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
            
            Provided
      herewith31.2
            
            Certifications
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
            
            Provided
      herewith32.1
            
            Certification
      Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
      the Sarbanes-Oxley Act Of 2002
            
            Provided
      herewith32.2
            
            Certification
      Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
      the Sarbanes-Oxley Act Of 2002
            
            Provided
      herewith




34





99.1
            
            Audit
      Committee Charter, dated January 15, 2009
            
            Incorporated
      by reference Exhibit 99.1 to the Company’s Current Report on Form 8-K as
      filed with the SEC on January 20, 200999.2
            
            Compensation
      Committee Charter, dated January 15, 2009
            
            Incorporated
      by reference Exhibit 99.2 to the Company’s Current Report on Form 8-K as
      filed with the SEC on January 20, 200999.3
            
            Corporate
      Governance and Nominating Committee Charter, dated January 15,
      2009
            
            Incorporated
      by reference Exhibit 99.3 to the Company’s Current Report on Form 8-K as
      filed with the SEC on January 20,
2009




35


SIGNATURES





Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Amendment No. 1 to Form
10-Q to be signed on its behalf by the undersigned, thereunto duly
authorized.





Date: November
      10, 2010
            By:
            /s/ Xue YingName:
            Xue
      YingIts:
            Chief
      Executive Officer, Principal Executive Officer,Secretary
      and DirectorDate: November
      10, 2010
            By:
            /s/ Jing YanName:
            Jing
      YanIts:
            Chief
      Financial Officer, Principal Financial andAccounting
      Officer


36