UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q





þ
            QUARTERLY  REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended March 31, 2009ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from ________________ to
      ________________





Commission
file number:  000- 52746


SINOHUB,
INC.


(Exact
name of registrant as specified in its charter)





Delaware
              
              87-0438200(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      or organization)
              
              Identification
      No.)6/F,
      Bldg 51, Rd 5, Qiongyu Blvd.
                Technology
      Park, Nanshan District
                Shenzhen,
      People’s Republic of China
              
              518057(Address
      of principal executive offices)
              
              (Zip
      Code)





86 755 2661
2106





(Registrant’s
telephone number, including area code)





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


Yes 
þ      
    No  o


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 during the 12
months (or for such shorter period that the registrant was required to submit
and post such files).  Yes  o  No  o




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




Large
      accelerated filer
                  o
                  
                  Accelerated
      filer
                  oNon-accelerated
      filer
                  o
                  
                  Smaller
      Reporting Company
                  þ




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





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


Class
                  
                  Outstanding
      at March 31, 2009Common
      Stock, $0.001 par value per share
                  
                  24,580,798
      shares







1




SINOHUB,
INC.


FORM
10-Q





TABLE
OF CONTENTS










PART I - FINANCIAL
      INFORMATION
                3Item
      1. Financial Statements
                3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                19Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
                22Item
      4T. Controls and Procedures
                22PART
      II - OTHER INFORMATION
                23Item
      1. Legal Proceedings
                23Item
      1A. Risk Factors
                23Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                23Item
      3. Defaults Upon Senior Securities
                24Item
      4. Submission of Matters to a Vote of Security Holders
                24Item
      5. Other Information
                24Item
      6. Exhibits
                24SIGNATURES
                25




Except
as otherwise required by the context, all references in this report to "we",
"us”, "our", “SinoHub” or "Company" refer to the consolidated operations of
SinoHub, Inc., a Delaware corporation, and its wholly owned
subsidiaries.




2





PART
I - FINANCIAL INFORMATION





Item
1.  Financial Statements








SINOHUB,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





ASSETS
              
              March
      31,
                2009
              
              
              December
      31,
                2008(Unaudited)
              
              
              (Audited)CURRENT
      ASSETSCash
      and cash equivalents
              
              $
              4,866,000
              
              
              $
              5,860,000Restricted
      cash
              
              
              633,000
              
              
              
              374,000Accounts
      receivable, net of allowance
              
              
              29,620,000
              
              
              
              22,282,000Inventories,
      net
              
              
              1,574,000
              
              
              
              435,000Prepaid
      expenses and other
              
              
              623,000
              
              
              
              370,000Total
      current assets
              
              
              37,316,000
              
              
              
              29,321,000PROPERTY
      AND EQUIPMENT, NET
              
              
              608,000
              
              
              
              703,000TOTAL
      ASSETS
              
              $
              37,924,000
              
              
              $
              30,024,000LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIESAccounts
      payable
              
              $
              4,705,000
              
              
              $
              764,000Accrued
      expenses and other
              
              
              310,000
              
              
              
              234,000Bank
      borrowings
              
              
              5,760,000
              
              
              
              2,123,000Income
      and other taxes payable
              
              
              1,590,000
              
              
              
              3,391,000Total
      current liabilities
              
              
              12,365,000
              
              
              
              6,512,000STOCKHOLDERS’
      EQUITYPreferred
      stock, $0.001 par value, 5,000,000 shares authorized;
                no
      shares issued
              
              
              -
              
              
              
              -Common
      stock, $0.001 par value, 100,000,000 shares authorized;
                24,580,798 shares
      and 24,501,989 shares issued and outstanding
                as
      of March 31, 2009 and December 31, 2008, respectively
              
              
              25,000
              
              
              
              25,000Additional
      paid-in capital
              
              
              11,555,000
              
              
              
              11,529,000Retained
earningsUnappropriated
              
              
              12,415,000
              
              
              
              10,424,000Appropriated
              
              
              724,000
              
              
              
              724,000Accumulated
      other comprehensive income
              
              
              840,000
              
              
              
              810,000Total
      stockholders’ equity
              
              
              25,559,000
              
              
              
              23,512,000TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              37,924,000
              
              
              $
              30,024,000




The
accompanying notes are an integral part of these condensed consolidated
financial statements.




3




SINOHUB,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND


COMPREHENSIVE
INCOME (UNAUDITED)




Three
      months ended March 31,2009
                        
                        
                        2008NET
      SALESSupply
      chain management services
                        
                        $
                        1,778,000
                        
                        
                        $
                        522,000Electronic
      components
                        
                        
                        16,314,000
                        
                        
                        
                        11,096,000Total
      net sales
                        
                        
                        18,092,000
                        
                        
                        
                        11,619,000COST
      OF SALESSupply
      chain management services
                        
                        
                        82,000
                        
                        
                        
                        148,000Electronic
      components
                        
                        
                        14,175,000
                        
                        
                        
                        9,632,000Total
      cost of sales
                        
                        
                        14,257,000
                        
                        
                        
                        9,780,000GROSS
      PROFIT
                        
                        
                        3,835,000
                        
                        
                        
                        1,838,000OPERATING
      EXPENSESSelling,
      general and administrative
                        
                        
                        923,000
                        
                        
                        
                        497,000Professional
      services
                        
                        
                        229,000
                        
                        
                        
                        -Depreciation
                        
                        
                        104,000
                        
                        
                        
                        98,000Amortization
      of stock option compensation
                        
                        
                        13,000
                        
                        
                        
                        -Total
      operating expenses
                        
                        
                        1,269,000
                        
                        
                        
                        595,000INCOME
      FROM OPERATIONS
                        
                        
                        2,566,000
                        
                        
                        
                        1,243,000OTHER
      INCOME (EXPENSE)Interest
      expense
                        
                        
                        (25,000
                        )
                        
                        
                        (77,000
                        )Interest
      income
                        
                        
                        7,000
                        
                        
                        
                        5,000Other,
      net
                        
                        
                        3,000
                        
                        
                        
                        7,000Total
      other income (expense)
                        
                        
                        (14,000
                        )
                        
                        
                        (65,000
                        )INCOME
      BEFORE INCOME TAXES
                        
                        
                        2,552,000
                        
                        
                        
                        1,178,000Income
      tax expense
                        
                        
                        562,000
                        
                        
                        
                        90,000NET
      INCOME
                        
                        
                        1,990,000
                        
                        
                        
                        1,088,000OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain
                        
                        
                        30,000
                        
                        
                        
                        285,000COMPREHENSIVE
      INCOME
                        
                        $
                        2,020,000
                        
                        
                        $
                        1,373,000SHARE
      AND PER SHARE DATANet
      income per share-basic
                        
                        $
                        0.08
                        
                        
                        $
                        0.06Weighted
      average number of shares-basic
                        
                        
                        24,580,798
                        
                        
                        
                        18,290,000Net
      income per share-diluted
                        
                        $
                        0.08
                        
                        
                        $
                        0.06Weighted
      average number of shares-diluted
                        
                        
                        25,155,977
                        
                        
                        
                        18,422,380




The
accompanying notes are an integral part of these condensed consolidated
financial statements.




4




SINOHUB,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)








Three
      months ended March 31,2009
                                
                                
                                2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                                
                                $
                                1,990,000
                                
                                
                                $
                                1,088,000Adjustments
      to reconcile net income to cash provided by (used in)
      operation:Depreciation
                                
                                
                                104,000
                                
                                
                                
                                98,000Stock
      option compensation amortization
                                
                                
                                13,000
                                
                                
                                
                                -Changes
      in operating assets and liabilities:Accounts
      receivable
                                
                                
                                (7,308,000
                                )
                                
                                
                                (906,000
                                )Inventories
                                
                                
                                (1,138,000
                                )
                                
                                
                                422,000Prepaid
      expenses and other
                                
                                
                                (253,000
                                )
                                
                                
                                154,000Accounts
      payable
                                
                                
                                3,940,000
                                
                                
                                
                                (2,015,000
                                )Accrued
      expenses and other
                                
                                
                                76,000
                                
                                
                                
                                232,000Income
      and other taxes payable
                                
                                
                                (1,805,000
                                )
                                
                                
                                (1,385,000
                                )Net
      cash used in operating activities
                                
                                
                                (4,381,000
                                )
                                
                                
                                (2,312,000
                                )CASH
      FLOWS FROM INVESTING ACTIVITIES(Increase)
      Release of restricted cash
                                
                                
                                (259,000
                                )
                                
                                
                                3,002,000Purchase
      of property and equipment
                                
                                
                                (29,000
                                )
                                
                                
                                (26,000
                                )Net
      cash (used in) provided by investment activities
                                
                                
                                (288,000
                                )
                                
                                
                                2,976,000CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from exercise of stock options issued for services, net of
      costs
                                
                                
                                13,000
                                
                                
                                
                                -Payments
      to related company
                                
                                
                                -
                                
                                
                                
                                (1,411,000
                                )Bank
      borrowing proceeds
                                
                                
                                5,760,000
                                
                                
                                
                                2,192,000Bank
      borrowing repayments
                                
                                
                                (2,123,000
                                )
                                
                                
                                -Net
      cash provided by financing activities
                                
                                
                                3,650,000
                                
                                
                                
                                781,000EFFECT
      OF EXCHANGE RATES ON CASH
                                
                                
                                25,000
                                
                                
                                
                                344,000NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                                
                                
                                (994,000
                                )
                                
                                
                                1,789,000CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                                
                                
                                5,860,000
                                
                                
                                
                                4,283,000CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                                
                                $
                                4,866,000
                                
                                
                                $
                                6,072,000SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid for interest expense
                                
                                $
                                25,000
                                
                                
                                $
                                46,000Cash
      paid for income tax
                                
                                $
                                2,187,481
                                
                                
                                $
                                -




The accompanying notes are an
integral part of thesecondensedconsolidated financial
statements.





5




SINOHUB,
INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 1.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
 
  Overview
  SinoHub,
Inc. (the “Company”) provides products and services to suppliers and purchasers
of electronic components in connection with the manufacture and assembly of
electronic products in the People’s Republic of China (the “PRC” or
“China”).  Over 90% of the Company’s revenues are derived from the
sale of electronic components and assemblies to contract manufacturers and
design houses which are engaged in the manufacture of mobile phones, network
equipment and other electronics products in the PRC.  These sales
occur either as procurement-fulfillment projects or as one-off electronic
component sales.
  In
connection with the supply of such components and products, the Company also
provides supply chain management services from which we derive less than 10% of
our revenues.
  The
accompanying condensed consolidated financial statements of the Company were
prepared in accordance with accounting principles generally accepted in the
United States and reflect all adjustments of a normal recurring nature, which
are, in the opinion of management, necessary for a fair presentation of the
consolidated financial position and results of operations for the periods
presented. The consolidated financial results of operations for the interim
periods are not necessarily indicative of results for the full
year.
  These
consolidated financial statements do not include all the information or notes
necessary for a complete presentation and, accordingly, should be read in
conjunction with the Company’s audited consolidated financial statements and
accompanying notes for the years ended December 31, 2008 and 2007.
 
  History
and Basis of Reporting
  SinoHub,
Inc. (formerly known as Liberty Alliance, Inc.) is a Delaware corporation,
originally organized in Utah in 1986, and subsequently merged and reorganized as
Liberty Alliance, Inc. in Delaware in 1991.  Liberty Alliance, Inc.
filed for bankruptcy in 1994 and the filing was closed in
1995.  Liberty Alliance, Inc. remained dormant until 2006 when it
began preparing to become a public shell company and seek new business
opportunities.  In August 2006 the Company changed its name to
Vestige, Inc., and in September 2006 the Company changed its name back to
Liberty Alliance, Inc.
  In May
2008, Liberty Alliance, Inc., SinoHub Acquisition Corp., known as the Merger
Sub, SinoHub, Inc., known as the Acquired Sub, and Steven L. White, the
principal stockholder of Liberty Alliance, entered into an Agreement and Plan of
Merger pursuant to which the Merger Sub agreed to merge with and into the
Acquired Sub, with the Acquired Sub being the surviving
corporation.  In connection with the merger, Liberty Alliance, Inc.
issued to the stockholders of the Acquired Sub 18,290,000 shares (as adjusted
for reverse stock split) of the Company’s common stock in exchange for all the
outstanding shares of the Acquired Sub’s preferred and common stock and the
Company assumed options exercisable for additional shares of common
stock.  At the closing, Liberty Alliance, Inc. also issued 510,000
shares (as adjusted for reverse stock split) of the Company’s common stock to
certain consultants for services rendered in connection with the
Merger.  The vast majority of these shares were issued to a
consultant, JCGlobal, who provided consulting services to help the company
engage SEC counsel and investment bankers in the process of the Company’s
Chinese operations becoming part of a public entity through a reverse merger and
raising a private investment in public equity.  In particular,
JCGlobal advised the Company directly in consummating a reverse merger involving
a NASD over-the-counter bulletin board shell company.  Immediately
following the merger, the Company had 20,000,000 shares of common stock
outstanding and options exercisable for an additional 489,451 shares (as
adjusted for reverse stock split) of common stock.  The conclusion of
these events was deemed to be a reverse takeover transaction, or RTO, after
which the original stockholders of the Company held approximately 6% of the
issued and outstanding shares of the Company’s common stock on a fully diluted
basis and the Acquired Sub’s stockholders, including the shares issued to
consultants, held approximately 94% of the Company’s issued and outstanding
shares of common stock.
  6
  In June
2008, the Company approved a reverse stock split of 1 share for every 3.5 common
stock shares outstanding; outstanding common stock shares and stock options were
adjusted to account for the effects of the reverse stock split.
  In July
2008, the Company changed its name from Liberty Alliance, Inc. to SinoHub, Inc.
and the Acquired Sub changed its name from SinoHub, Inc. to SinoHub
International, Inc.
  For
financial reporting purposes, the RTO has been accounted for as a
recapitalization of the Company whereby the historical financial statements and
operations of the Acquired Sub become the historical financial statements of the
Company, with no adjustment to the carrying value of assets and liabilities.
Share and per share amounts reflect the effects of the recapitalization and
reverse stock split for all periods presented.  In addition, the
presentation for all periods includes equity transactions of the Acquired Sub as
adjusted for the effects of the recapitalization and reverse stock
split.
  Organization
Structure
 
 The
current operations of the Company include the following
subsidiaries:
 
 SinoHub
International, Inc. was incorporated in March 1999 as a Delaware C corporation
in the United States of America.  This company is the holding company
for the Chinese and Hong Kong subsidiaries listed below. SinoHub International,
Inc. is wholly owned by SinoHub, Inc.
 
 SinoHub
Electronics Shenzhen, Ltd.  was incorporated in September 2000 in the
People’s Republic of China to provide one-stop SCM services for electronic
manufacturers and distributors in southern China.  SinoHub Electronics
Shenzhen, Ltd. is wholly owned by SinoHub International, Inc.
 
 SinoHub
SCM Shenzhen, Ltd. was incorporated in December 2001 in the PRC to hold an
import and export license in the PRC. SinoHub SCM Shenzhen, Ltd. purchases and
sells electronic component parts and provides Customs clearance services to our
customers. 100% of the equity interest in SinoHub SCM Shenzhen, Ltd. is held on
behalf of SinoHub by SinoHub Electronics Shenzhen, Ltd. through a Declaration of
Trust with SinoHub Electronics Shenzhen, Ltd. dated January 30, 2008. Through
this trust agreement, SinoHub Electronics Shenzhen, Ltd. owns 100% of the
beneficial interest in SinoHub SCM Shenzhen, Ltd. and accordingly, SinoHub SCM
Shenzhen, Ltd. is treated as a wholly owned subsidiary of the Company for
accounting purpose.
 
 SinoHub
SCM Shanghai, Ltd. was incorporated in March 2005 in the PRC to provide one-stop
SCM services for electronic manufacturers and distributors in northern China.
SinoHub SCM Shanghai, Ltd. is wholly owned by SinoHub Electronics Shenzhen,
Ltd.
 
 SinoHub
Electronics Shanghai, Ltd. was incorporated in July 2005 in the PRC to provide
one-stop SCM services for electronic manufacturers and distributors in the PRC.
SinoHub Electronics Shanghai, Ltd. is wholly owned by SinoHub International,
Inc.
 
 B2B
Chips, Limited was incorporated in June 2006 in Hong Kong to purchase and sell
electronic components. B2B Chips is wholly owned by SinoHub Electronics
Shenzhen, Ltd.
 
 SinoHub
Technology (Hong Kong) Limited was incorporated in May 2007 in Hong Kong and has
not yet commenced business.  SinoHub Technology (Hong Kong) Limited is
wholly owned subsidiary of B2B Chips.
  7
  Principles
of Consolidation
  The
accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in
consolidation.
  Use
of Estimates
  The
preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
  Concentrations
and Risks
  Substantially
all of Company's assets are located in the PRC and Hong Kong and substantially
all of the Company's revenues were derived from customers located in the
PRC.  In addition, financial instruments that potentially subject the
Company to significant concentrations of credit risk consist primarily of
accounts receivable.  The Company mitigates credit risk through
procedures that include determination of credit limits, credit approvals, and
related monitoring procedures to ensure delinquent receivables are
collected.
  Cash
and Cash Equivalents
  For
purpose of the statements of cash flows, cash and cash equivalents include cash
on hand and demand deposits with a bank with a maturity of less than three
months.  Cash amounts held as security for the Company’s bank loans
are reported as restricted cash and are not included with cash or cash
equivalents on the balance sheet until the security for such funds has been
released.
  Accounts
Receivable
  The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts.  An allowance for doubtful
accounts is established and recorded based on managements’ assessment of
customer credit history, overall trends in collections and write-offs, and
expected exposures based on facts and prior experience.
  Inventories
  Inventories
are stated at cost, cost being determined on a first in first out
method.  No allowance is made for excess or obsolete inventories as
inventories are held for a short period of time and are substantially related to
specific customer order commitments.  Inventory consists of electronic
components purchased from suppliers.
  Property
and Equipment
 
 Property
and equipment are stated at cost, less accumulated
depreciation.  Expenditures for additions, major renewals and
betterments are capitalized and expenditures for maintenance and repairs are
charged to expense as incurred.  Depreciation is provided on a
straight-line basis, less estimated residual values over the assets’ estimated
useful lives.  The estimated useful lives are as follows:
  Plant
      and machinery
                      5
      YearsMotor
      vehicles
                      5
      YearsFurniture,
      fixtures and equipment
                      2
      to 5 Years
 Long-lived
assets held and used by the Company are reviewed for impairment whenever changes
in circumstances or events indicate that the carrying amount of an asset may not
be recoverable.  For purposes of evaluating the recoverability of
long-lived assets, the Company considers various factors, including future cash
flows, to determine whether the carrying amount exceeds fair value, and in that
case, the asset is written down to fair value.
  8
  Financial
Instruments
  The
Company analyzes all financial instruments that may have features of both
liabilities and equity under SFAS 150, “Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity,” SFAS No 133,
“Accounting for Derivative Instruments and Hedging Activities” and EITF 00-19,
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock.”  At present, there are no such
instruments in the financial statements.  The Company also analyzes
registration rights agreements associated with any equity instruments issued to
determine if penalties triggered for late filing should be accrued under FSP
EITF 00-19-2, “Accounting for Registration Payment Arrangements.”
  Fair
Value of Financial Instruments
  SFAS No.
107, "Disclosure About Fair Value of Financial Instruments," requires certain
disclosures regarding the fair value of financial instruments.  Fair
value of financial instruments is made at a specific point in time, based on
relevant information about financial markets and specific financial
instruments.  As these estimates are subjective in nature, involving
uncertainties and matters of significant judgment, they cannot be determined
with precision. Changes in assumptions can significantly affect estimated fair
values.
 
 SFAS
No. 157 “Fair Value
Measurements” defines fair value as the price that would be received
from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair
value measurements for assets and liabilities required or permitted to be
recorded at fair value, the Company considers the principal or most advantageous
market in which it would transact and it considers assumptions that market
participants would use when pricing the asset or liability.
 
 SFAS
No. 157 establishes a fair value hierarchy that requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. A financial instrument’s categorization within
the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. SFAS 157 establishes three levels of
inputs that may be used to measure fair value:
 
 Level 1 - Level 1 applies to
assets or liabilities for which there are quoted prices in active markets for
identical assets or liabilities.
 
 Level 2 - Level 2 applies to
assets or liabilities for which there are inputs other than quoted prices
included within Level 1 that are observable for the asset or liability such as
quoted prices for similar assets or liabilities in active markets; quoted prices
for identical assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which significant inputs are observable or can be derived principally from,
or corroborated by, observable market data.
 
 Level 3 - Level 3 applies to
assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the
assets or liabilities.
 
 The
carrying value of cash and cash equivalents, accounts receivable, accounts
payable, accrued expenses, bank borrowings, notes payable and other liabilities
approximate their fair values because of the short-term nature of these
instruments.  Management believes the Company is not exposed to
significant interest or credit risks arising from these financial
instruments.
 
 The
Company’s operations are primarily based in the PRC, which may give rise to
significant foreign currency risks and opportunities from fluctuations and the
degree of volatility of foreign exchange rates between the United States dollar
(“USD”) and the Chinese Renminbi (“RMB”).In July 2005, the PRC
allowed the RMB to fluctuate within a narrow range ending its decade-old
valuation peg to the USD.  Since this change in 2005, the RMB has
experienced positive trends in valuation against the USD; such trends are
reflected in part by the foreign currency translation gains reported in the
Company’s financial statements.
  9
  Derivative
Instruments
  The
Company does not utilize derivative or hedge instruments in its financing
activities.
  Stock-Based
Compensation
  The
Company adopted SFAS No. 123R, “Share-Based Payments.”  This
Statement requires a public entity to measure the cost of services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award.  That cost will be recognized over the period during
which services are received.  Stock compensation for stock granted to
non-employees has been determined in accordance with SFAS 123R and the Emerging
Issues Task Force consensus Issue No. 96-18, "Accounting for Equity Instruments
that are issued to Other than Employees for Acquiring, or in Conjunction with
Selling Goods or Services" ("EITF 96-18"), as the fair value of the
consideration received or the fair value of equity instruments issued, whichever
is more reliably measured.
 
 Revenue
Recognition
 
 The
Company reports revenue from supply chain management, or SCM, services and
electronic components sales. Revenues for supply chain management services are
earned from both the SCM and procurement-fulfillment programs and are primarily
based on a percentage of inventory value handled for a customer.  The
Company recognizes revenue from SCM services when the services are
provided.  Revenues from electronic components sales are based on
quoted prices and are recognized at the time of shipment to
customers.  Sales are recorded net of discounts and
allowances.  In all cases, revenue is recognized when there is
persuasive evidence of an arrangement, delivery has occurred or services
rendered, the sales price is determinable, and collectability is reasonably
assured.
  Income Taxes
  The
Company accounts for income taxes under the SFAS No. 109, “Accounting for Income
Taxes.”  Under SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.  Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
included the enactment date.
 
 Foreign
Currency Translation
  SinoHub,
Inc., SinoHub International, Inc., B2B Chips, Ltd., and SinoHub Technology Hong
Kong, Ltd. maintain accounting records using the functional currencies, USD and
Hong Kong Dollars (“HKD”) of the respective countries in which they are doing
business.  SinoHub SCM Shenzhen, Ltd., SinoHub Electronics Shenzhen,
Ltd., SinoHub SCM Shanghai, Ltd. and SinoHub Electronics Shanghai, Ltd. maintain
accounting records using RMB as the functional currency.
 
 The
Company uses the United State Dollar (“USD”) as its reporting
currency.  The Company accounts for foreign currency translation
pursuant to SFAS No. 52, “Foreign Currency Translation” (“SFAS No.
52”).  The subsidiaries’  functional currencies are the Hong
Kong Dollar (“HKD”) and Chinese Renminbi (“RMB”).  Under SFAS No. 52,
all assets and liabilities are translated into United States dollars using the
current exchange rate at the balance sheet date.  The capital and
various reserves are translated at historical exchange rates prevailing at the
time of the transactions while income and expense items are translated at the
average exchange rate for the period.  Translation adjustments are
included in other comprehensive income (loss) for the period.
  10
  Foreign
currency transactions during the year are translated to the applicable
functional currencies at the approximate rates of exchange on the dates of
transactions.  Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated at the approximate rates of
exchange at that date.  Non-monetary assets and liabilities are
translated at the rates of exchange prevailing at the time the asset or
liability was acquired.  Exchange gains or losses are recorded in the
statement of operations.
  Comprehensive
Income
  The
foreign currency translation gain or loss resulting from the translation of the
financial statements expressed in HKD and RMB to USD is reported as other
comprehensive income in the statements of operations and stockholders’
equity.
 
 Earnings
Per Share
  Earnings
per share in accordance with the provisions of SFAS No. 128, "Earnings Per
Share."  SFAS 128 requires presentation of basic and diluted earnings
per share in conjunction with the disclosure of the methodology used in
computing such earnings per share.  Basic earnings per share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average common shares outstanding during the
period.  Diluted earnings per share takes into account the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock using the treasury
method.
  Segments
  The
Company operates in one business segment.
  Recent
Accounting Pronouncements
  On
April 9, 2009, the Financial Accounting Standards Board (“FASB”) issued
FASB Staff Position (“FSP”) No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments”. FAS 107-1 and APB 28-1
amend FASB Statement No. 107, “Disclosures about Fair Value of Financial
Instruments,” to require disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies as well as in annual
financial statements. FAS 107-1 and APB 28-1 also amend APB Opinion No. 28,
“Interim Financial Reporting,” to require those disclosures in summarized
financial information at interim reporting periods. FAS 107-1 and APB 28-1 will
be effective on April 1, 2009. FAS 107-1 and APB 28-1 do not require
disclosures for earlier periods presented for comparative purposes at initial
adoption. In periods after initial adoption, FAS 107-1 and APB 28-1 require
comparative disclosures only for periods ending after initial adoption. The
Company is currently evaluating whether the adoption of FAS 107-1 and APB 28-1
will have a significant effect on its consolidated financial
statements.
  On
April 9, 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments”. FAS 115-2
and FAS 124-2 amend the other-than-temporary impairment guidance in US GAAP
for debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. FAS 115-2 and FAS 124-2 do not
amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. FAS 115-2 and FAS 124-2
will be effective on April 1, 2009. FAS 115-2 and FAS 124-2 do not require
disclosures for earlier periods presented for comparative purposes at initial
adoption. In periods after initial adoption, FAS 115-2 and FAS 124-2 require
comparative disclosures only for periods ending after initial adoption. The
Company is currently evaluating whether the adoption of FAS 115-2 and FAS 124-2
will have a significant effect on its consolidated financial position or results
of operations.
  11
  On
April 9, 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly”. FAS
157-4 provides additional guidance for estimating fair value in accordance with
FASB Statement No. 157, “Fair Value Measurements”, when the volume and
level of activity for the asset or liability have significantly decreased. FAS
157-4 also includes guidance on identifying circumstances that indicate a
transaction is not orderly. FAS 157-4 emphasizes that even if there has been a
significant decrease in the volume and level of activity for the asset or
liability and regardless of the valuation technique(s) used, the objective of a
fair value measurement remains the same. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between
market participants at the measurement date under current market conditions. FAS
157-4 will be effective on April 1, 2009 and will be applied prospectively.
FAS 157-4 does not require disclosures for earlier periods presented for
comparative purposes at initial adoption. In periods after initial adoption, FAS
157-4 requires comparative disclosures only for periods ending after initial
adoption. The Company is currently evaluating whether the adoption of FAS 157-4
will have a significant effect on its consolidated financial position or results
of operations.
  2.           BANK
BORROWINGS AND FINANCING ARRANGEMENTS
  The
Company has secured financing facilities (RMB based) with certain PRC banks to
support its business operations. As of March 31, 2009, the facilities with each
bank were as follows:
 
 -
              Letter
      of credit facility with one bank in the amount of $3,200,000 to support
      its component sales business.  Restricted cash balances are
      required as security for draws against the facility and an annual
      commitment fee of 0.1% is assessed.  In addition, the bank
      requires a third party guarantor. The third-party guarantor required the
      Company to pay it a fee of $80,000 for providing its guaranty. The
      facility renews each year and is available through August 2009. The
      Company also has a $1,460,000 Customs duty import facility and a
      $2,200,000 Customs export refund facility through this bank to support
      short term duty collections for its component sales
      business.  These facilities renew each year and are available
      through February 2010.
 
 -
              Letter
      of credit facility with another bank in the amount of $4,400,000 to
      support its component sales business. Restricted cash balances are
      required as security for draws against the facility and the bank requires
      guarantors from a subsidiary and shareholders and lien on a PRC property
      owned by a director and his spouse. In addition, the bank requires a third
      party guarantor.  The third-party guarantor required the Company
      to pay it a fee of $72,000 for providing its guaranty. The facility
      is available through September,
2009.
 
 Borrowings
      against these facilities at March 31, 2009 and December 31, 2008 were as
      follows:
 
 2009
                                                
                                                
                                                2008Note
      payable to a bank, annual interest rate 5.54%, due January
      2009
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                121,000Note
      payable to a bank, annual interest rate 5.54%, due January
      2009
                                                
                                                
                                                -
                                                
                                                
                                                
                                                156,000Note
      payable to a bank, annual interest rate 6.19%, due February
      2009
                                                
                                                
                                                -
                                                
                                                
                                                
                                                954,000Note
      payable to a bank, annual interest rate 6.83%, due March
    2009
                                                
                                                
                                                -
                                                
                                                
                                                
                                                730,000Note
      payable to a bank, annual interest rate 5.54%, due March
    2009
                                                
                                                
                                                -
                                                
                                                
                                                
                                                162,000Note
      payable to a bank, annual interest rate 5.54%, due June
    2009
                                                
                                                
                                                730,000
                                                
                                                
                                                
                                                -Note
      payable to a bank, annual interest rate 3.6%, due May 2009
                                                
                                                
                                                73,000
                                                
                                                
                                                
                                                -Note
      payable to a bank, annual interest rate 3.6%, due June
2009
                                                
                                                
                                                91,000
                                                
                                                
                                                
                                                -Note
      payable to a bank, annual interest rate 3.6%, due April
    2009
                                                
                                                
                                                1,108,000
                                                
                                                
                                                
                                                -Note
      payable to a bank, annual interest rate 3.6%, due May 2009
                                                
                                                
                                                1,650,000
                                                
                                                
                                                
                                                -Note
      payable to a bank, annual interest rate 4%, due June
      2009
                                                
                                                
                                                2,108,000
                                                
                                                
                                                
                                                -
 5,760,000
                    
                    
                    
                    2,213,000Less
      : current maturities
                    
                    
                    5,760,000
                    
                    
                    
                    2,213,000Long
      -term portion
                    
                    $
                    -
                    
                    
                    $
                    -
  12
  Interest
expense paid for three months ended March 31, 2009 and for the year 2008 was
$25,000 and $251,000, respectively.
   3.           COMMITMENTS
AND CONTINGENCIES
  Commitments
 
 The
Company leases warehouse and office spaces from third parties under operating
leases which expire at various dates from May 2010 through July
2013.  Rent expense for three months ended March 31, 2009 and 2008 was
$112,000 and $38,000, respectively.  At March 31, 2009, the Company
has outstanding commitments with respect to operating leases, which are due as
follows:
 
 2009
                              
                              $
                              293,0002010
                              
                              
                              400,0002011
                              
                              
                              266,0002012
                              
                              
                              153,0002013
                              
                              
                              89,000$
                              1,201,000
 
 Contingencies
 
 The
Company accounts for loss contingencies in accordance with SFAS 5,“Accounting for Loss
Contingencies” and other related guidelines. Set forth below is a description of
certain loss contingencies as of March 31, 2009 and management’s opinion as to
the likelihood of loss in respect of loss contingency.
 
 Pursuant
to the Securities Purchase Agreement entered into between the Company and a
group of accredited investors (“Securities Purchase Agreement”) on September 10,
2008, the Company was obligated to make efforts to file a registration statement
with the SEC for the registration of 6,609,789 shares of Common Stock offered by
selling stockholders to be declared effective by the Securities and Exchange
Commission on or before January 9, 2009. The Company received an extension of
this date to February 20, 2009 from the accredited investors.  If the
Company did not timely file the registration statement or cause it to be
declared effective by the required dates, then each selling shareholder will be
entitled to liquidated damages, payable in cash or Common Stock, at the
Company’s option, equal to 1% of the aggregate purchase price paid by such
selling shareholder for the securities, amounting to approximately $75,000 in
the aggregate, and an additional 1% for each month that the Company does not
file the registration statement or cause it to be declared effective. As
provided by such extension, if the Company did not cause the registration
statement to be declared effective by May 12, 2009, the liquidated damages would
be calculated as if the deadline for effectiveness were January 9, 2009, the
original deadline under the Registration Rights
Agreement.  Notwithstanding the foregoing, in no event would
liquidated damages exceed 10% of the aggregate gross proceeds of the offering to
the selling shareholders, or total liquidated damages of about
$750,000.
 
 On
February 19, 2009, the Company entered into a Second Waiver and General Release
Agreement (the “Waiver”) with respect to the Registration Rights Agreement (the
“Registration Rights Agreement”), dated September 10, 2008, among the Company
and the investors identified therein.   The Waiver extended until
May 12, 2009 the deadline by which the registration statement that was filed by
the Company pursuant to the Registration Rights Agreement was required to become
effective before the Company would be required to pay to the investors
liquidated damages, payable in cash or Common Stock, at the Company’s option,
equal to 1% of the aggregate purchase price paid by the investors for the
securities purchased in the private placement in connection with which the
Registration Rights Agreement was executed, and an additional 1% for each month
that the Company did not cause it to be declared effective, with maximum
liquidated damages of 10% of the aggregate gross proceeds of the
Offering.  The registration statement that was filed by the Company
pursuant to the Registration Rights Agreement became effective on May 12, 2009,
thus eliminating the possibility that the Company would have to pay liquidated
damages to these investors. Accordingly, no provision has been made by the
Company to the above liquidated damages as of March 31, 2009.
 
 13
  4.           EARNINGS
PER SHARE
  The
elements for calculation of earnings per share for three months ended March 31,
2009 and 2008 were as follows:
 
 Three
      months ended March,2009
                              
                              
                              2008Net
      income for basic and diluted earnings per share
                              
                              $
                              1,990,000
                              
                              
                              $
                              1,088,000Weighted
      average shares used in basic computation
                              
                              
                              24,580,798
                              
                              
                              
                              18,290,000Effect
      of dilutive stock options and warrants
                              
                              
                              575,179
                              
                              
                              
                              132,380Weighted
      average shares used in diluted computation
                              
                              
                              25,155,977
                              
                              
                              
                              18,422,380Earnings
      per share:Basic
                              
                              $
                              0.08
                              
                              
                              $
                              0.06Diluted
                              
                              $
                              0.08
                              
                              
                              $
                              0.06
 
   
 5.           STOCKHOLDERS’
EQUITY
  Merger and Reverse Stock
Split
 
 The
Company’s reverse merger transaction has been accounted for as a
recapitalization of the Company whereby the historical financial statements and
operations of the Acquired Sub become the historical financial statements of the
Company, with no adjustment of the carrying value of the assets and
liabilities.  In connection with the reverse merger, the principal
stockholder of Liberty Alliance, Inc. contributed 5,203,907 shares of common
stock (adjusted for reverse stock split) held by him back to the Company for nil
consideration.  Following the reverse merger, Liberty Alliance, Inc.
issued to the stockholders of the Acquired Sub 18,290,000 shares (as adjusted
for one for 3.5 reverse stock split) of the Company’s common stock in exchange
for all the outstanding shares of the Acquired Sub’s common stock comprising
10,282,288 shares of common stock and 6,933,334 shares of Acquired Sub’s
preferred stock, of which 3,000,000 were designated Series A Convertible
Preferred Stock (convertible into 3,000,000 shares of Acquired Sub’s common
stock), 2,333,334 shares were designated Series B Convertible Preferred Stock
(convertible into 2,333,334 shares of Acquired Sub’s common stock), and
1,600,000 shares are designated Series C Convertible Preferred Stock
(convertible into 1,600,000 shares of Acquired Sub’s common
stock).  The Company also assumed options outstanding exercisable for
additional 489,451 shares (as adjusted for reverse stock split) shares of common
stock.  At the closing, Liberty Alliance, Inc. also issued
510,000 shares (as adjusted for reverse stock split) of the Company’s common
stock to certain consultants for services rendered in connection with the
Merger. Immediately following the merger, the Company had 20,000,000 shares of
common stock outstanding and options exercisable for an additional 489,451
shares (as adjusted for reverse stock split) of common stock.
 
 The
financial statements have been prepared as if the reverse merger transaction had
occurred retroactively at the beginning of the periods presented. Share and
per share amounts reflect the effects of the recapitalization and reverse stock
split for all periods presented.  Accordingly, all of the outstanding
shares of the Acquired Sub’s common stock and preferred stock at the completion
date of the reverse merger transaction have been exchanged and converted to
18,290,000 shares (as adjusted for reverse stock split) of the Company’s common
stock for all periods presented.  In addition, the presentation for
all periods includes equity share transactions of the Acquired Sub as adjusted
for the effects of the recapitalization and reverse stock split.  All
costs associated with the transaction were expensed as incurred.
  14
  Equity
Share Transactions
 
 In
January 2009 certain employees exercised their stock options to purchase an
aggregate of 78,809 shares of common stock for an aggregate price of
$13,000.
   6. STOCK
OPTIONS
 
 The
Company granted qualified stock options under the Company’s 2000 Incentive Stock
Option Plan (the “2000 ISOP”) and 2008 Incentive Stock Option Plan (the “2008
ISOP”). At March 31, 2009, stock options to purchase 600,555 shares of common
stock at an exercise price ranging from $0.09 to $2.48 per share were
outstanding. The exercise prices were determined by the Board at the time of
grant.  In each case the exercise price was not less than the fair
market value of the common stock as determined by the Board in good faith taking
into account such factors as recent issuances of preferred stock with an
appropriate discount factored in relative to the common shares.  The
exercise prices  for options issued under the 2000 ISOP following the
sale of preferred stock by the Company during November and December of 2007
represent a discount to the issuance price of $0.78 for such preferred stock
taking into account the added value of the conditions in the preferred stock
(for example, it was redeemable with 10% appreciation). The exercise prices for
options issued under the 2008 ISOP represent the closing price of the Company’s
common stock on the business day preceding the grant date.  The stock
options granted become exercisable (“vested”) as to 25% of the original number
of shares on the first anniversary of the grant date and as to an additional
6.25% of the original number of shares at the end of each successive three-month
period following the first anniversary of the grant date until the fourth
anniversary of the grant date. Unless earlier terminated, these stock options
granted shall expire ten years after the grant date.  Following the
reverse merger, all preferred stock which were convertible on the basis of one
share of preferred stock for one share of common stock issued were exchanged for
common stock of Liberty Alliance, Inc. retroactively adjusted for all periods
presented.
 
 The fair
value of stock options granted was estimated at the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
  Expected
                      Life
                    Expected
                      Volatility
                    Dividend
                      Yield
                    Risk
      Free
                      Interest
      Rate
                    Grant
      Date
                      Fair
      ValueThe
      2000 ISOP5
      years
                    175%
                    0%
                    2.5%
                    $0.09
      - $0.19The
      2008 ISOP1
      year
                    89.59%
      - 121%
                    0%
                    2.5%
                    $0.47
      - $0.93
 
 Expected
Volatility: Expected volatility is computed based on the standard deviation
of the continuously compounded rate of return of days when the stock price
changed over the past five years.
 
 Dividend
Yield: The expected dividend yield is zero.  The Company has not paid
a dividend and does not anticipate paying dividends in the foreseeable
future.
 
 Risk Free
Rate: Risk-free interest rate of 2.5% was used.  The risk-free
interest rate was based on U.S. Treasury yields with a remaining term that
corresponded to the expected term of the option calculated on the granted
date.
  15
  Expected
Life:  The expected life was determined based on the option’s
contractual term and employees’ expected early exercise and post-vesting
employment termination behavior.
 
 Stock
compensation expense was recognized based on awards expected to
vest.  There was no estimated forfeiture as the Company has a short
history of issuing options. SFAS No. 123R requires forfeiture to be estimated at
the time of grant and revised in subsequent periods, if necessary, if actual
forfeitures differ from those estimates.
 
 The
Company granted 41,500 during 2009 with a total fair value of approximately
$39,000. The Company recognized $13,000 and $Nil in stock compensation expense
for the three months ended March 31, 2009 and 2008, respectively. At March 31,
2009, unamortized compensation cost related to stock options was
$236,000.
 
 The
following is a summary of the stock options activity:
  Number
      of
                  Options
                  Outstanding
                
                
                Weighted-
                  Average
                  Exercise
                  PriceBalance
      at December 31, 2007
                
                
                502,199
                
                
                $
                0.17Granted
                
                
                252,524
                
                
                $
                1.03Forfeited
                
                
                (23,382
                )
                
                
                -Exercised
                
                
                (71,166
                )
                
                $
                0.11Balance
      at December 31, 2008
                
                
                660,175
                
                
                $
                0.50Granted
                
                
                41,500
                
                
                $
                2.42Forfeited
                
                
                -
                
                
                
                -Exercised
                
                
                (78,809
                )
                
                $
                0.17Balance
      at March 31, 2009
                
                
                622,866
                
                
                $
                0.67
 
 The
following is a summary of the status of options outstanding at March 31,
2009:
 
 Outstanding
      Options
                  
                  Exercisable
      OptionsExercise
      Price
                  Number
                  
                  Average
                    Remaining
                    Contractual
                    Life
                  
                  Average
                    Exercise
                    Price
                  
                  Number
                  
                  Weighted
                    Average
                    Exercise
      Price$0.09
                  12,706
                  
                  6.3 years
                  
                  $0.09
                  
                  11,655
                  
                  $0.09$0.12
                  64,508
                  
                  8.0 years
                  
                  $0.12
                  
                  32,784
                  
                  $0.12$0.19
                  251,628
                  
                  8.7 years
                  
                  $0.19
                  
                  83,072
                  
                  $0.19$1.02
                  250,000
                  
                  9.5 years
                  
                  $1.02
                  
                  0
                  
                  $1.02$2.48
                  2,524
                  
                  9.8 years
                  
                  $2.48
                  
                  0
                  
                  $2.48$2.42
                  41,500
                  
                  10  years
                  
                  $2.42
                  
                  0
                  
                  $2.48Total
                  622,866
                  
                  
                  
                  
                  
                  127,511
                  
                  $0.17
 
 7.           RELATED
PARTY TRANSACTIONS
 
 On
January 17, 2008, SinoHub’s subsidiary SinoHub Electronics Shenzhen, Ltd.
acquired beneficial ownership of SinoHub SCM Shanghai, Ltd.  from Sai
Lin Xu with the shares of SinoHub SCM Shanghai, Ltd. being held for the benefit
of SinoHub Electronics Shenzhen, Ltd. by a trustee pursuant to a Declaration of
Trust   In accordance with the terms of the Declaration of
Trust, no material monetary payment was associated with this acquisition because
through the Declaration of Trust, SinoHub Electronics Shenzhen had borne all
costs.  The trustee was the mother-in-law of a director of the
Company.
  The
Company distributed electronic components to and resold electronic products
purchased from a company owned jointly by the Chairman and the President of the
Company.  In addition, the related company provided certain
warehousing and logistics services to the Company during the development of its
Hong Kong operation in 2008.  During the three months ended March 31,
2009 and 2008, the Company sold goods totaling approximately $Nil and $600,000
respectively to the related company and purchased goods totaling approximately
$Nil and $800,000 respectively from the related company. At March 31, 2009
and December 31, 2008, there was no amount outstanding between the Company and
the related company.
 
 16
  A PRC
property owned by the Company’s chief executive officer and his spouse is
pledged to a bank to secure a loan agreement dated September 25, 2008 for $4.4
million with Commercial Industrial Bank of Fujian (CIB) and repayable on
September 25, 2009. The loans from CIB generally have 1 year terms with
repayment in full required at the end of the term and a new loan agreement put
in place at that time. .  The president of the Company  and
his spouse provided guarantees to the same bank to secure the same
facility.  No consideration was paid for these pledges and guarantees,
although  Linda Marie Hetue, the spouse of the Company’s chief
executive officer, received shares of the Company’s common stock in 2007 in
consideration with a similar pledge to secure a prior bank
facility.
 
 
 8.           INCOME
TAXES
  The
Company and its subsidiaries are subject to income taxes on an “entity” basis
that is, on income arising in or derived from the tax jurisdiction in which each
entity is domiciled.  It is management's intention to reinvest all the
income earned by the Company’s subsidiaries outside of the
US.  Accordingly, no US federal income taxes have been provided on
earnings of foreign based subsidiaries.
 
 The
Company and its wholly owned subsidiary, SinoHub International, Inc. are
incorporated in the United States and have incurred operating losses since
inception.  The Company has operating loss carry forwards (NOLs) for
income taxes purposes of approximately $1,174,000 at March 31, 2009 which may be
available to reduce future years’ taxable income.  These NOLs will
expire, if not utilized, commencing in 2028.  Management believes the
realization of tax benefits from these NOLs is uncertain due to the Company’s
current operating history and continuing losses in the US for tax
purposes.  Accordingly, a full deferred tax asset valuation allowance
has been provided and no deferred tax benefit has been recorded.
  The
Company’s subsidiaries in Hong Kong are subject to Hong Kong profits tax at a
statutory rate of 17.5%.  No provision for Hong Kong profits tax was
required as these entities incurred losses during three months ended March 31,
2009 and 2008.  There are no tax loss carry forward provisions in Hong
Kong.
  The
Company’s subsidiaries in China were subject to China income tax at a statutory
rate of 25% in 2009 and 2008.  However, these subsidiaries are located
in special economic regions and/or qualify as “new or high-technology
enterprises” that are allowed special tax reductions until 2012.  The
Company’s subsidiaries in China was subject to special tax rate was 19% in 2009
and 18% in 2008.
 
 Income
tax expense for three months ended March 31, 2009 and 2008 is summarized as
follows:
 
 2009
                        
                        2008Current
                        
                        $
                        562,000
                        
                        
                        $
                        90,000Deferred
                        
                        
                        -
                        
                        
                        
                        -$
                        562,000
                        
                        
                        $
                        90,000
 
                        The
reconciliation of income taxes computed at the statutory income tax rates to
total income taxes for three months ended March 31, 2009 and 2008 is as
follows:
 
 2009
                    
                    
                    
                    
                    
                    2008Income
      before income taxes
                    
                    $
                    2,552,000
                    
                    
                    
                    100
                    %
                    
                    $
                    1,178,000
                    
                    
                    
                    100
                    %China
      income taxes at statutory rate
                    
                    $
                    638,000
                    
                    
                    
                    25
                    %
                    
                    $
                    295,000
                    
                    
                    
                    25
                    %China
      qualified income tax exemptions
                    
                    $
                    (76,000
                    )
                    
                    
                    (3
                    %)
                    
                    $
                    (205,000
                    )
                    
                    
                    (17
                    %)Income
      tax expense
                    
                    $
                    562,000
                    
                    
                    
                    22
                    %
                    
                    $
                    90,000
                    
                    
                    
                    8
                    %
 
 17
 
 9.           CONCENTRATIONS
AND RISKS
 
 99% of
the Company’s assets were located in China.
 
 During
the three months ended March 31, 2009 and 2008, 13% and 0% of revenues were
derived from sales made outside of China, respectively.
 
 Major
customers and sales to those customers as a percentage of total sales were as
follows:
 
 Customer
      A
                    
                    
                    Customer
      BFor three months endedMarch
      31, 2009
                    
                    
                    10%
                    
                    
                    
                    7%March
      31, 2008
                    
                    
                    10%
 
 
 At of
March 31, 2009, accounts receivable from those customers were approximately $4.4
million.
 
 Major
suppliers and purchases from those suppliers as a percentage of total purchases
were as follows:
 
 Vendor
      A
                  
                  
                  Vendor
      B
                  
                  
                  Vendor
      CFor three months endedMarch
      31, 2009
                  
                  
                  
                  
                  
                  
                  5%
                  
                  
                  
                  3%December
      31, 2008
                  
                  
                  
                  
                  
                  
                  12%
                  
                  
                  
                  10%
                  
                  
                  
                  11%
 
 At of
March 31, 2009, accounts payable to those suppliers were approximately
$25,000.
 
 
 10.          SUBSEQUENT
EVENTS
 
 On May 7,
2009, SinoHub closed abank line facility with the Shenzhen branch of the Hangzhou Bank in the
amount of approximately $6,400,000 to support its component sales
business.  The full amount of the line, if available, may be used to
obtain letters of credit (LCs), and up to roughly $1.46 million of the line may
be used as a revolving cash line.  Under the terms of the loan
agreement, Hangzhou Bank will issue LCs to SinoHub SCM Shenzhen for terms of up
to 120 days, and SinoHub SCM Shenzhen is required to make a cash deposit equal
to 20% of the face amount of any LCs issued.  Interest on the cash
line will be at least 1.1 times the base deposit interest rate as announced by
the People’s Bank of China, which is currently 4.12%. The bank required
guarantees from certain of our shareholders, none of whom is receiving any
consideration for such guarantees.The facility is
available through April, 2010, and the term of any individual loan thereunder
will be determined at the time of the loan by mutual agreement of the bank and
SinoHub SCM Shenzhen.
 
 On
February 19, 2009, the Company entered into a Second Waiver and General Release
Agreement (the “Waiver”) with respect to the Registration Rights Agreement (the
“Registration Rights Agreement”), dated September 10, 2008, among the Company
and the investors identified therein.   The Waiver extended until
May 12, 2009 the deadline by which the registration statement that was filed by
the Company pursuant to the Registration Rights Agreement was required to become
effective before the Company would be required to pay to the investors
liquidated damages, payable in cash or Common Stock, at the Company’s option,
equal to 1% of the aggregate purchase price paid by the investors for the
securities purchased in the private placement in connection with which the
Registration Rights Agreement was executed, and an additional 1% for each month
that the Company did not cause it to be declared effective, with maximum
liquidated damages of 10% of the aggregate gross proceeds of the
Offering.  The registration statement that was filed by the Company
pursuant to the Registration Rights Agreement became effective on May 12, 2009,
thus eliminating the possibility that the Company would have to pay liquidated
damages to these investors.
 
 18
 
 Item
2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations
 
 The following discussion and
analysis of our financial condition and results of operations should be read in
conjunction with the unaudited condensed consolidated financial statements and
the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and
the audited consolidated financial statements and notes thereto and management’s
discussion and analysis of financial condition and results of operations
included in the Company’s second amended Annual Report on Form 10-K for the year
ended December 31, 2008, which was filed with the Securities and Exchange
Commission on May 12, 2008 (the “2008 10-K”). This Quarterly Report on Form 10-Q
contains “forward-looking statements” within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. These statements are often
identified by the use of words such as “may,” “will,” “expect,” “believe,”
“anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar
expressions or variations. Such forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results and the timing
of certain events to differ materially from future results expressed or implied
by such forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those identified below, and
those discussed in the section titled “Risk Factors,” set forth in Part I,
Item 1A of the 2008 10-K.   The forward-looking statements
in this Quarterly Report on Form 10-Q represent our views as of the date of this
Quarterly Report on Form 10-Q. We anticipate that subsequent events and
developments will cause our views to change. However, while we may elect to
update these forward-looking statements at some point in the future, we have no
current intention of doing so except to the extent required by applicable law.
You should, therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of this Report on
Form 10-Q.   All amounts
are expressed in United States Dollars.
  The
following discussion should be read in conjunction with the Company’s Form 10-K
for the year ended December 31, 2008, and the unaudited financial statements and
the related notes that appear elsewhere in this report.
 
 OVERVIEW
 
 RESULTS
OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO MARCH 31,
2008
 
 Overall
Results
 
 The
Company reported net income for three months ended March 31,2009
of $1.9 million compared to $1.1 million in the year-earlier period, an increase
of 83%.
 
 Net
Sales
 
 Net sales
for three months ended March 31, 2009 were $18.1 million, up 56% from $11.6
million recorded in the year-earlier period.  The Company reports net
sales on the basis of two business categories, supply chain management services
and electronic component sales.  In three months ended March 31, 2009,
net sales of supply chain management services increased 241% to $1.8 million
from $0.5 million in the year-earlier period.  This increase was
primarily based on the addition of several large mobile phone design house
customers who we believe were attracted to SinoHub by our online software
system, SinoHub SCM.  In three months ended March 31, 2009, net sales
of electronic components increased 47% to $16.3 million from $11.1 million in
the year-earlier period.  We believe the driving force behind this
increase was the Company’s ability to obtain from its supplier customers better
pricing for its manufacturer customers than they were able to achieve on their
own, and new functionality in SinoHub SCM, such as bill of material management
and bar code handling, that made it easier for manufacturer customers to operate
their supply chains.
  19
  Gross
Profit
 
 The
Company recorded gross profit of $3.8 million in three months ended March 31,
2009, compared with $1.8 million in the year-earlier period.  The
gross profit margin for three months ended March 31, 2009 increased to 21.2%
from 15.8% in the year-earlier period.  This was mainly attributable
to growth in higher margin supply chain management services.
 
 Selling,
General and Administrative Expenses
 
 Selling,
general and administrative expenses increased 86% to $923,000 in three months
ended March 31, 2009 from $497,000 in the year-earlier period to support the
general growth in sales and expanded operations.  These expenses were
5.2% of revenues in three months ended March 31, 2009 compared to 4.3% in the
year-earlier period.
 
 Income
from Operations
 
 The
Company recorded income from operations of $2.6 million in three months ended
March 31, 2009, as compared with operating income of $1.2 million in the
year-earlier period, a 106% increase.
 
 Income
Taxes
 
 The
Company’s effective tax rate was estimated at 22% in three months ended March
31, 2009 compared to 7.6% in the year-earlier period. The statutory tax rate in
the PRC of 25% in 2009 and 2008 was reduced in both periods by favorable tax
preferences experienced by the Company’s operations in special economic zones as
designated by the Chinese government.  The trend toward a higher
effective tax rate is expected to continue as preferences lapse over
time.  The Chinese government recently lowered the corporate income
tax rate from 33% to 25%.  In Shenzhen, where the Company does most of
its business, the special economic zone status means the corporate income tax
rate for 2008 was 18% and, barring further changes, it is 19% in
2009.  The stated intention of the Chinese government is to gradually
increase the corporate tax rate in special economic zones such as in Shenzhen to
the national level, which is 25% at present.  Income tax estimates in
interim periods have varied as the Company has adjusted provisions and accruals
in light of actual tax filings.
 
 Foreign
Currency Translation Gain and Comprehensive Net Income
 
 The
Company reported foreign currency translation gains of $30,000 in three months
ended March 31, 2009, compared with foreign currency translation gains of
$285,000 in the year-earlier period.  Comprehensive net income (net
income plus foreign currency translation gains) was $2.0 million in three months
ended March 31, 2009, compared with $1.4 million in the year-earlier
period.
 
 
 CONSOLIDATED
FINANCIAL CONDITION AND LIQUIDITY
 
 Liquidity
and Capital Resources
 
 The
Company’s strategic plans include continued expansion and support of our SCM
Platform and electronic component sales, including procurement-fulfillment
programs.  As a result of the working capital investments necessary to
support these plans, the Company will continue to require cash and financing
resources to meet or exceed its objectives. The Company’s cost of capital
increased with the private financing we closed on September 10, 2008 for net
proceeds of approximately $6.5 million. Since gross proceeds were approximately
$7.5 million the cost burden of $1 million represented 13.3%.  Our
cost of capital with China Construction Bank and Industrial and Commercial Bank
of China was approximately 4% at March 31, 2009.  Most of the working
capital the Company intends to raise in the near to medium term is expected to
come from Chinese banks, which, to date, have not been affected by the global
credit crisis nearly as much as the US and European banks. As disclosed in
footnote 10. to the financial statements, in a subsequent event SinoHub
increased its bank credit facilities with a new line from Hangzhou
Bank.  While there can be no assurance that we will not experience a
problem in the future, to date we have not had any collection problems with any
procurement-fulfillment project funded.
  20
  We
believe that SinoHub’s procurement-fulfillment and electronic component sales
business can be expanded with additional funds depending on how quickly we can
build out new infrastructure and hire additional staff.  This is
because the electronics business in China is very large relative to the size of
the Company’s business.  Additional working capital would enable us to
purchase more electronic components from our suppliers, which should lower our
costs, and thus enhance our profitability.  Increased volume would
also likely enable the Company to get favorable terms from suppliers which would
lower our need for additional financing from third parties.  Moreover,
the addition of warehouse space to support the Company’s growth will require
capital investment.  Accordingly, if SinoHub is unsuccessful in
raising additional working capital, the Company’s growth will be adversely
affected.
 
 We intend
to raise these funds through the sale of additional equity or debt, long-term
debt financings, and operating cash flows.  Due to the risk factors
referenced in this document there can be no assurance that we will be successful
in raising the additional funds necessary to carry out management’s plans for
the future on acceptable terms or at all.  Our ability to obtain
additional capital will also depend on market conditions, national and global
economies and other factors beyond our control.  We cannot be sure
that we will be able to implement or capitalize on various financing
alternatives.  The terms of any debt or equity funding that we may
obtain in the future may be unfavorable to us and to our
stockholders.
 
 At March
31, 2009 and December 31, 2008, the Company had cash and cash equivalents of
$4.9 million and $5.9 million, respectively.  During three months
ended March 31, 2009, the net amount of cash used in the Company’s operating
activities was $4.4 million, the net amount of cash used in investing activities
was $288,000, and the net amount of cash provided by financing activities was
$3.7 million.  Exchange rate changes decreased cash flow effects by
$25,000 in three months ended March 31, 2009.
 
 The
Company advances money to procurement-fulfillment customers to purchase
electronic components.  We only purchase standard components which are
readily saleable.  When a manufacturer customer give us a
procurement-fulfillment project, the customer inputs a bill of materials with
their supplier and inputs price information into SinoHub SCM.  Our job
is to purchase these electronic components, substituting our suppliers if we can
get a better price and, when we have the entire bill of materials assembled,
import the components into China and deliver the components to the customer’s
factory floor. Our typical procurement-fulfillment sale to a customer requires
the customer to post a deposit of 15% to 20% of the cost of the components and
we generally provide 30 day payment terms.  The terms begins when the
project is approved, but SinoHub does not actually pay for the components until
we receive them and in some cases we receive terms from the suppliers, with our
cost of borrowing of approximately 0.4% per month in three months ended March
31, 2009.
 
 Cash
Flows from Operating Activities
 
 The
Company maintains a significant investment in working capital, primarily
accounts receivable and inventories. Accounts receivable and inventories
represented approximately 84% and 76% of total assets at March 31, 2009 and
December 31, 2008, respectively.
 
 The net
amount of cash used in the Company’s operating activities during three months
ended March 31, 2009 was $4.4 million, which primarily included earnings from
operations that were more than offset by investments in accounts receivable and
inventory to support the Company’s business growth.  For 2008, net
cash used in operating activities was $2.3 million for the same
reason.
  21
  Cash
Flows from Investing Activities
 
 The net
amount of cash used in investing activities during three months ended March 31,
2009 was $288,000 primarily the result of restricted cash
buildup.  During 2008, investing activities generated $3 million,
primarily the result of releasing restricted cash.
 
 Cash
Flows from Financing Activities
 
 The net
amount of cash provided by financing activities during three months ended March
31, 2009 was $3.7 million, primarily the result of bank
borrowings.  For 2008, the net amount of cash provided by financing
activities was $0.8 million, The source of cash during the first three months of
2008 was net borrowings from banks offset by an increase of $1.4
million in the amount due from a related company.
 
 
 OFF-BALANCE
SHEET ARRANGEMENTS
 
 We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to our
investors.
 
 
 Item
3.  Quantitative and Qualitative Disclosures About
Market Risk
 
 As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide the information requested by this item , as provided by
Regulation S-K Item 305(e).
 
 Item 4T.Controls and
Procedures
  Disclosure
Controls and Procedures
 
 Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report.  The term “disclosure
controls and procedures” means controls and other procedures that are designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized, and reported, within the time periods specified in the SEC’s rules
and forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its CEO and CFO, as appropriate, to allow timely decisions to be made
regarding required disclosure.  Although the Company's disclosure
controls and procedures were designed by management, with the participation of
our CEO and CFO, to provide reasonable assurance of achieving these objectives,
it should be noted that any system of controls and procedures, however well
designed and operated, can provide only reasonable, and not absolute, assurance
that the objectives of the system are met and that management necessarily
applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.  Based upon the Company’s evaluation as of
the end of the period covered by this report, the Company’s CEO and CFO
concluded that the Company’s disclosure controls and procedures were
effective.
 
 Changes in Internal Control over
Financial Reporting
 
 There
have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act)
during the fiscal period to which this report relates that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
  22
  The
Company’s management, including the Company’s CEO and CFO, does not expect that
the Company’s internal control over financial reporting will prevent all errors
and all fraud. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree or compliance with the policies or procedures may
deteriorate.”
 
 
 PART
II - OTHER INFORMATION
 
 Item
1.  Legal Proceedings
  None.
 
 
 Item
1A.  Risk Factors
 
 As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide the information requested by this item.
  
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
  On
January 19, 2009 certain employees exercised their stock options to purchase an
aggregate of 76,977 shares of common stock for an aggregate price of
$11,575.  These shares were offered and sold in reliance on the
exemption from registration afforded by Rule 701 promulgated under the
Securities Act.  While Rule 701 is generally unavailable to issuers
subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), at the time of such issuances the staff of the
Division of Corporation Finance of the Securities and Exchange Commission had
issued its Devon Energy
Corporation no action letter (available May 12, 1989) based on a
situation in which, following a corporate acquisition, the acquired private
company’s stock plan and options were assumed by the publicly registered parent
company and the options were converted into options to purchase stock of the
parent, sales of stock pursuant to the exercise of such options may be made in
reliance on Rule 701.  The options exercised by the employees were in
all instances issued by SinoHub International in accordance with the terms of
Rule 701 prior to the Merger and assumed by the Company pursuant to the terms of
the Merger.
  On
January 26, 2009 an employee exercised stock options to purchase an aggregate of
1,832 shares of common stock for an aggregate price of $225.  These
shares were offered and sold in reliance on the exemption from registration
afforded by Rule 701 promulgated under the Securities Act.  While Rule
701 is generally unavailable to issuers subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
at the time of such issuances the staff of the Division of Corporation Finance
of the Securities and Exchange Commission had issued its Devon Energy Corporation no
action letter (available May 12, 1989) based on a situation in which, following
a corporate acquisition, the acquired private company’s stock plan and options
were assumed by the publicly registered parent company and the options were
converted into options to purchase stock of the parent, sales of stock pursuant
to the exercise of such options may be made in reliance on Rule
701.  The options exercised by the employees were in all instances
issued by SinoHub International in accordance with the terms of Rule 701 prior
to the Merger and assumed by the Company pursuant to the terms of the
Merger.
  23
  Item
3.  Defaults Upon Senior Securities
  None.
  
 Item
4.  Submission of Matters to a Vote of Security
Holders
  None.
 
 
 Item
5.  Other Information
  None.
 
 
 Item
6.  Exhibits
  Exhibit No.
                    
                    Title
      of Document31.1
                    
                    Certification
      of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended31.2
                    
                    Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended32.1*
                    
                    Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive
      Officer)32.2*
                    
                    Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial
      Officer)
  *These
certificates are furnished to, but shall not be deemed to be filed with, the
Securities and Exchange Commission.
    24
  SIGNATURES
  In
accordance with the requirements of the Securities Exchange Act of 1934, as
amended,, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
 
 SINOHUB,
      INC.Date:  May
      15, 2009
                By:
                /s/
      Henry T. CochranHenry
      T. CochranChief
      Executive Officer
    Date: May
      15, 2009
                By:
                /s/
      Li De HaiLi
      De HaiChief
      Financial Officer
                  (Principal
      Financial and Accounting Officer)
      25