UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

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

For the transition period from ______to______.

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

(Exact name of registrant as specified in Charter)

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

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

(Address of Principal Executive Offices)

00852-28549088

(Issuer Telephone number)

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

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes ¨ Nox

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

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

Large Accelerated Filer ¨

Accelerated Filer ¨

Non-Accelerated Filer x

Smaller Reporting Company ¨

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

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

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

	ITEM 1.	FINANCIAL STATEMENTS	F-1

	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16

	ITEM 4.	CONTROLS AND PROCEDURES	16

PART II OTHER INFORMATION			16

	ITEM 1.	LEGAL PROCEEDINGS	16

	ITEM 1A.	RISK FACTORS	17

	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30

	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	30

	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS	30

	ITEM 5.	OTHER INFORMATION	30

	ITEM 6.	EXHIBITS	30

SIGNATURES			36

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

FINANCIAL STATEMENTS

TABLE OF CONTENTS

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009			F-2

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)			F-4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)			F-5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)			F-7

F-1

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30, 2010		December 31, 2009
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	3,546,137	$	3,530,724
Accounts receivable		3,852,070		1,881,584
Inventories		2,563,285		1,839,146
Prepayments		2,490,957		688,117
Other receivables and other assets		557,626		683,010
Deferred tax assets		-		1,538
Due from related parties		1,975,881		1,113,643
Total current assets		14,985,956		9,737,762

Vessels, net		40,441,486		42,597,403
Vessels under construction		27,091,047		-
Fixed assets, net		156,674		151,041
Deferred dry dock fees, net		7,896,895		9,311,647
Other intangible assets		3,656		3,657
Deferred tax assets		34		-
Total long-term assets		75,589,792		52,063,748

TOTAL ASSETS	$	90,575,748	$	61,801,510

See accompanying notes to condensed consolidated financial statements.

F-2

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

	September 30, 2010		December 31, 2009
	(Unaudited)
CURRENT LIABILITIES
Accounts payable	$	9,070,866	$	6,893,862
Short-term bank loan		-		1,170,070
Current portion of long-term loans		6,230,492		4,128,908
Current portion of long-term notes payable, net of discount of $618,022 and $693,012 at September 30, 2010 and December 31, 2009, respectively		2,291,883		3,326,132
Advances from customers		1,976,427		793,334
Payroll payable		903,363		903,964
Due to related parties		591,239		20,907
Taxes payable		11,795		51,250
Deferred revenue		159,063		159,688
Other current liabilities and accrued liabilities		2,566,771		2,375,613
Total current liabilities		23,801,899		19,823,728

LONG-TERM LIABILITIES
Long-term loans		18,661,240		15,359,535
Long-term notes payable, net of discount of $953,658 and $1,407,170 at September 30, 2010 and December 31, 2009, respectively		17,763,310		2,541,441
Deferred tax liabilities		-		1,150
Total long-term liabilities		36,424,550		17,902,126

TOTAL LIABILITIES		60,226,449		37,725,854

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock, $0.001 per share; 20,000,000 shares authorized; 0 share issued and outstanding		-		-
Common stock, $0.001 per share; 200,000,000 shares authorized, 130,000,000 shares issued and outstanding		130,000		130,000
Additional paid-in capital		3,322,966		3,322,966
Accumulated other comprehensive income		785,154		716,805
Retained earnings		26,111,179		19,905,885
Total Shareholders’ Equity		30,349,299		24,075,656

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	90,575,748	$	61,801,510

See accompanying notes to condensed consolidated financial statements.

F-3

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009

REVENUES	$	19,266,425		$	11,841,798		$	55,266,164		$	36,368,521

COSTS AND EXPENSES
Vessel operating costs		14,249,245			9,586,920			38,276,906			30,757,559
Service costs		810,878			505,173			2,363,173			2,488,842
Depreciation and amortization		1,538,447			1,770,878			4,955,766			5,513,270
General and administrative expenses		784,194			748,348			2,279,115			2,057,126
Selling expenses		81,219			88,907			262,553			253,064
TOTAL COSTS AND EXPENSES		17,463,983			12,700,226			48,137,513			41,069,861

OTHER EXPENSES

Interest expense, net		(336,148	)		(43,478	)		(998,546	)		(131,978	)
Other income (expense), net		125,577			(149,229	)		100,720			(218,667	)

INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES		1,591,871			(1,051,135	)		6,230,825			(5,051,985	)

INCOME TAX EXPENSE		(8,387	)		(16,049	)		(25,531	)		(49,060	)

INCOME (LOSS) FROM CONTINUING OPERATIONS		1,583,484			(1,067,184	)		6,205,294			(5,101,045	)

DISCONTINUED OPERATION

Gain from disposition of discontinued operation		-			5,195			-			5,195
Loss from discontinued operation		-			(108,004	)		-			(230,747	)

NET LOSS FROM DISCONTINUED OPERATION		-			(102,809	)		-			(225,552	)

NET INCOME (LOSS)		1,583,484			(1,169,993	)		6,205,294			(5,326,597	)

OTHER COMPREHENSIVE INCOME

Foreign currency translation gain (loss)		49,310			3,863			68,349			(41,635	)

COMPREHENSIVE INCOME (LOSS)	$	1,632,794		$	(1,166,130	)	$	6,273,643		$	(5,368,232	)

WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED		130,000,000			130,000,000			130,000,000			130,000,000

NET INCOME (LOSS) PER SHARE, BASIC AND DILUTED	$	0.01		$	(0.01	)	$	0.05		$	(0.04	)

See accompanying notes to condensed consolidated financial statements.

F-4

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	6,205,294		$	(5,326,597	)
Net gain from discontinued operation		-			225,552
Income (loss) from continuing operations		6,205,294			(5,101,045	)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		2,259,815			2,446,262
Amortization of deferred dry dock fees		2,695,951			3,067,008
Amortization of long-term note payable discount		528,502			13,345
Deferred taxes		354			12,754
Loss on disposal of fixed assets		7,647			-

Changes in operating assets and liabilities:

(Increase) Decrease In:
Accounts receivable		(1,970,486	)		(224,363	)
Inventories		(724,139	)		238,433
Prepayments		(1,802,840	)		(110,677	)
Other receivables and other assets		125,530			(665,107	)
Deferred dry dock fees		(1,281,199	)		(1,977,352	)

Increase (Decrease) In:
Accounts payable		2,177,004			509,288
Advances from customers		1,183,093			280,750
Payroll payable		(601	)		(295,714	)
Taxes payable		(39,455	)		(1,060	)
Deferred revenue		(626	)		34,323
Other current liabilities and accrued liabilities		191,158			222,386
Net cash provided by (used in) continuing operations		9,555,002			(1,550,769	)

Net cash provided by discontinued operation		-			1,170,483

Net cash provided by (used in) operating activities		9,555,002			(380,286	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets		(71,064	)		(3,744	)
Advances for vessels under construction		(4,141,047	)		-
Purchase of a vessel		-			(20,881,125	)
Proceeds from disposition of discontinued operation, net		-			1,272,685
Net cash used in investing activities		(4,212,111	)		(19,612,184	)

CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments to)/proceeds from short-term loans		(1,170,070	)		1,170,001
(Repayments to)/proceeds from long-term loans		(3,096,711	)		12,381,246
(Repayments to)/proceeds from long-term notes payable		(790,881	)		2,720,359
Repayments to related parties		(292,052	)		(2,120,849	)
Net cash (used in) provided by financing activities		(5,349,714	)		14,150,757

See accompanying notes to condensed consolidated financial statements.

F-5

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2010			2009

NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,823	)		(5,841,713	)
Effect of exchange rate changes on cash		22,236			(41,635	)
Cash and cash equivalents at beginning of period		3,530,724			8,233,588

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,546,137		$	2,350,240

SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid	$	1,019,647		$	242,902
Income taxes paid	$	47,631		$	36,597

SUPPLEMENTARY NON-CASH DISCLOSURES:

1. During the nine months ended September 30, 2010, advance for vessels under construction of $22,950,000 was facilitated through proceeds from long-term loans of $8,500,000 and notes payable of $14,450,000.

See accompanying notes to condensed consolidated financial statements.

F-6

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

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

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

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

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

2. LIQUIDITY

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

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

F-7

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of Consolidation

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

I. Subsidiaries and Holding Companies:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

F-8

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of Consolidation (Continued)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

F-9

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of Consolidation (Continued)

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

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

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

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

Sales

Accounts Receivable

Major Customers

For The Nine

Months Ended

September 30, 2010

For The Nine

Months Ended

September 30, 2009

September 30,

2010

December 31,

2009

(Unaudited)

G U Shipping Pte., Ltd.

15.67%

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

	Oil Purchases				Accounts Payable
Major Suppliers	For The Nine Months Ended September 30, 2010		For The Nine Months Ended September 30, 2009		September 30, 2010		December 31, 2009
	(Unaudited)		(Unaudited)		(Unaudited)

Dan-Bunkering Ltd.		21.57%		6.31%		-		7.31%
World Fuel Services		13.09%		9.86%		-		-
Raffles Bunkering Pte Ltd.		12.96%		-		-		-
United Bunkering & Trading (HK) Ltd.		10.34%		5.25%		1.70%		-

F-10

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Use of Estimates

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

(e)	Fair Value of Financial Instruments

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

These tiers include:

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

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

(III)

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

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

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

(f) Vessels Under Construction

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

(g) Revenue Recognition

Revenue is recognized based on the following four criteria:

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

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

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

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

F-11

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Revenue Recognition (Continued)

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

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

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

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

(h) Earnings (Loss) Per Share

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

(i) Foreign Currency Translation

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

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

(j) Comprehensive Income (Loss)

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

F-12

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Reporting Segments

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

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

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

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

(l) Recent Accounting Pronouncements

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

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

F-13

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

4. VESSELS

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

The vessels of the Company consist of the following:

		September 30, 2010		December 31, 2009
		(Unaudited)
At cost:
Win Hope	(b)	$	2,679,286	$	2,679,285
Win Ever	(b)		1,737,965		1,737,966
Win Bright	(b)		1,739,258		1,739,258
Win Eagle	(b)		3,560,852		3,560,852
Win Glory	(b)		2,503,697		2,503,697
Win Grace	(b)		3,677,861		3,677,861
Win Moony	(b)		3,682,178		3,682,178
Win Star	(b)		3,336,600		3,336,600
Winland Dalian	(a)		18,243,139		18,243,139
Win Honey	(a)		4,500,000		4,500,000
Bodar	(b)		4,985,441		4,985,441
Andong	(c)		3,023,259		2,961,739
Baoshun	(d)		20,881,125		20,881,125
		$	74,550,661	$	74,489,141

		September 30, 2010		December 31, 2009
		(Unaudited)
Less: Accumulated depreciation
Win Hope	(b)	$	2,190,312	$	2,009,463
Win Ever	(b)		1,564,169		1,564,169
Win Bright	(b)		1,565,332		1,565,332
Win Eagle	(b)		3,204,767		3,204,767
Win Glory	(b)		2,253,328		2,119,201
Win Grace	(b)		3,310,075		3,310,075
Win Moony	(b)		3,313,961		3,313,961
Win Star	(b)		3,002,940		3,002,940
Winland Dalian	(a)		5,564,158		4,743,216
Win Honey	(a)		1,712,813		1,522,969
Bodar	(b)		4,486,897		4,486,897
Andong	(c)		933,654		797,056
Baoshun	(d)		1,006,769		251,692
		$	34,109,175	$	31,891,738
Vessels, net		$	40,441,486	$	42,597,403

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

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

F-14

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

4. VESSELS (CONTINUED)

	September 30, 2010		December 31, 2009
	(Unaudited)
Net Book Value
Winland Dalian	$	12,678,982	$	13,499,923
Win Honey		2,787,188		2,977,031
Baoshun		19,874,356		20,629,433
Total	$	35,340,526	$	37,106,387

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

Insurance	Coverage		Insurance Premium For The Nine Months Ended September 30,
			2010		2009
			(Unaudited)		(Unaudited)

Hull insurance	$	66,520,000	$	800,046	$	748,243
Protection & indemnity insurance		94,740,000		823,339		747,926
Freight demurrage and defense insurance		62,240,000		81,361		70,354
Delay insurance		500,000		43,100		46,019
Others				34,382		6,308
Total			$	1,782,228	$	1,618,850

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

5. VESSELS UNDER CONSTRUCTION

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

Vessel Name	Expected Delivery Date	Contract Amount		Construction Costs		Other Direct Costs		Finder’s Fees		Capitalized Interest		Total
HT073	December 15, 2010	$	29,950,000	$	14,250,000	$	539,833	$	1,425,000	$	289,186	$	16,504,019
HT074	March 15, 2011	$	29,950,000	$	8,550,000	$	370,906	$	1,425,000	$	241,122	$	10,587,028
Total		$	59,900,000	$	22,800,000	$	910,739	$	2,850,000	$	530,308	$	27,091,047

F-15

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

6.	FIXED ASSETS

Fixed assets consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
At cost:
Motor vehicles	$	291,321	$	244,612
Office equipment		214,426		204,031
Leasehold improvement		185,444		181,671
		691,191		630,314

Less: Accumulated depreciation
Motor vehicles		176,979		159,458
Office equipment		181,136		174,298
Leasehold improvement		176,402		145,517
		534,517		479,273
Fixed assets, net	$	156,674	$	151,041

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

7. DEFERRED DRY DOCK FEES

Deferred dry dock fees consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Cost	$	14,878,493	$	17,608,753
Less: Accumulated amortization		6,981,598		8,297,106
Deferred dry dock fees, net	$	7,896,895	$	9,311,647

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

Period Ended September 30,	Amount
2011	$	2,958,312
2012		2,540,101
2013		1,678,546
2014		595,966
2015		123,970
Total	$	7,896,895

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

	September 30, 2010			December 31, 2009
	(Unaudited)
Beginning balance	$	9,311,647		$	11,034,686
Addition of deferrals		1,281,199			2,284,803
Less: Amortization expense		(2,695,951	)		(4,007,842	)
Deferred dry dock fees, net	$	7,896,895		$	9,311,647

F-16

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

7. DEFERRED DRY DOCK FEES (CONTINUED)

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

8. DUE TO/FROM RELATED PARTIES

Due to/from related parties consist of the following:

(I) Due From Related Parties			September 30, 2010		December 31, 2009
			(Unaudited)

Winland Container Lines Ltd.	a	)	$	1,895,958	$	1,097,384
Dalian Winland Group Co., Ltd	b	)		79,923		16,113
Due from employees	c	)		-		146
Total due from related parties			$	1,975,881	$	1,113,643

(II) Due To Related Parties			September 30, 2010		December 31, 2009
			(Unaudited)

Dalian Winland Shipping Co., Ltd	d	)		43,949		-
Dalian Master Well Ship Management Co., Ltd	e	)		226,360		7,200
Winland Shipping Japan Co., Ltd	f	)		8,726		13,707
Rich Forth Investment Limited	g	)		312,205		-
Total due to related parties			$	591,240	$	20,907

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

F-17

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

8. DUE TO/FROM RELATED PARTIES (CONTINUED)

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

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

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

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

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

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

F-18

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

9. LONG-TERM LOANS

Long-term loans consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Loans from Dialease Maritime S.A.:
Due on August 1, 2012, monthly interest payment is 1-month LIBOR plus 1.75% per annum, and the actual rate at September 30, 2010 is 2.29%, secured by the vessel Winland Dalian (also see Note 4), assignment of insurance of the vessel, and guaranteed by the Chairman of the Company. Principal is repaid every month in 72 equal installments from September 2005.	$	1,935,708	$	3,519,456

Due on July 21, 2012, monthly interest payment is 1-month LIBOR plus 1.75% per annum, and the actual rate at September 30, 2010 is 2.29%, secured by the vessel Win Honey (also see Note 4), assignment of insurance of the vessel, and guaranteed by the Chairman of the Company. Principal is repaid every month in 72 equal installments from August 2006.		1,283,300		1,808,306

Due on September 24, 2016 with interest at the 1-month Japanese Yen LIBOR plus 2.30% per annum, and the actual rate at September 30, 2010 is 2.46%, secured by the vessel Baoshun (also see Note 4). Principal is repaid every month in 84 equal installments of $109,773 from October 24, 2009 with final payment of $5,269,068.		13,172,724		14,160,681

Loan facility of $37,000,000 from China Merchants Bank:
Drawdown from the loan facilities due on September 21, 2012, with interest rate at the 3-month LIBOR plus 1.5% per annum, and the actual rate at September 30, 2010 is 2.05%. The principal payment is fixed at $497,500 quarterly for 5 quarters, starting June 21, 2011, with final payment of $312,500 on September 21, 2012. The interest is accrued from June 29, 2010 and paid quarterly starting December 21, 2010 till the principal is paid. The loan is secured by the vessel HT074, and guaranteed by the Chairman and the CEO of the Company (also see Notes 5 and 15).		2,800,000		-

Drawdown from the loan facilities due on June 21, 2014, with interest rate at the 3-month LIBOR plus 1.5% per annum, and the actual rate at September 30, 2010 is 2.05%. The principal payment is fixed at $427,500 quarterly for 13 quarters, starting March 21, 2011, with final payment of $142,500 due June 21, 2014. The interest is accrued from July 9, 2010 and paid quarterly starting December 21, 2010 till the principal payoff. The loan is secured by the vessel HT073, and guaranteed by the Chairman and the CEO of the Company (also see Notes 5 and 15).		5,700,000		-

Total long-term loans		24,891,732		19,488,443

Less: Current portion		6,230,492		4,128,908

Long-term portion	$	18,661,240	$	15,359,535

F-19

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

9. LONG-TERM LOANS (CONTINUED)

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

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

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

Period Ended September 30,	Amount
2011	$	6,230,492
2012		5,415,568
2013		3,027,276
2014		2,314,776
2015		1,317,276
Thereafter		6,586,344
Total	$	24,891,732

F-20

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

10. LONG-TERM NOTES PAYABLE

Long-term notes payable consists of the following:

			September 30, 2010		December 31, 2009
			(Unaudited)
Notes payable to unrelated party:
Sea Carrier Shipping Co., Ltd., net of discount of $1,571,679 and $2,100,182 at September 30, 2010 and December 31, 2009, respectively, due September 25, 2014, fixed repayment of $2,897 per day, monthly payment due one month in advance.	a	)	$	2,643,454	$	2,905,834

Sea Carrier Shipping Co., Ltd., Due December 31, 2015, at an interest rate of 1% on unpaid principal balance per month, fixed monthly repayment for principal starting January 1, 2011, interest payment starting June 1, 2010.	b	)		3,850,000		-

Sea Carrier Shipping Co., Ltd., Due March 31, 2016, at an interest rate of 1% on unpaid principal balance per month, fixed monthly repayment for principal starting April 1, 2011, interest payment starting June 1, 2010.	c	)		3,850,000		-

Subtotal				10,343,454		2,905,834

Notes payable to related companies:
Dalian Winland Shipping Co., Ltd., due July 19, 2012, at an interest rate of 5% per annum	d	)		1,148,131		1,148,131
Dalian Winland Group Co., Ltd., due July 19, 2012, at an interest rate of 5% per annum	e	)		1,813,608		1,813,608
Rich Forth Investment Limited, due December 31, 2015, at an interest rate of 5.841% on unpaid principal balance per annum, fixed monthly repayment for principal starting January 1, 2011, interest payment starting June 1, 2010.	f	)		4,300,000		-
Rich Forth Investment Limited, due March 31, 2016, at an interest rate of 5.841% on unpaid principal balance per annum, fixed monthly repayment for principal starting April 1, 2011, interest payment starting June 1, 2010.	g	)		2,450,000		-

Subtotal				9,711,739		2,961,739

Total long-term notes payable				20,055,193		5,867,573

Less: Current portion				2,291,883		3,326,132

Long-term portion			$	17,763,310	$	2,541,441

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

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

F-21

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

10. LONG-TERM NOTES PAYABLE (CONTINUED)

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

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

Period Ended September 30,	Amount
2011	$	2,291,883
2012		6,418,997
2013		3,614,672
2014		3,802,141
2015		2,890,000
Thereafter		1,037,500
Total	$	20,055,193

11. COMMITMENTS

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

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

Period Ended September 30,	Amount
2011	$	79,157
2012		8,623
Total	$	87,780

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

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

Period Ended September 30,	HT073		HT074		Amount
2011	$	11,400,000	$	17,100,000	$	28,500,000
2012		950,000		950,000		1,900,000
2013		950,000		950,000		1,900,000
2014		950,000		950,000		1,900,000
Total	$	14,250,000	$	19,950,000	$	34,200,000

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

F-22

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

12. INCOME TAX

(a)	Income Tax Expense

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

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

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

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

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

	For The Nine Months Ended September 30,
	2010			2009
	(Unaudited)			(Unaudited)

Current	$	(25,177	)	$	(36,306	)
Deferred		(354	)		(12,754	)
Income tax expense	$	(25,531	)	$	(49,060	)

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

F-23

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

12. INCOME TAX (CONTINUED)

(a)	Income Tax Expense (Continued)

	For The Nine Months Ended September 30,
	2010			2009
	(Unaudited)			(Unaudited)

Computed “expected” (expense) benefit	$	(986,010	)	$	898,164
Favorable tax rates		960,479			(947,224	)
Income tax expense	$	(25,531	)	$	(49,060	)

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

	September 30, 2010			December 31, 2009
	(Unaudited)
Deferred tax assets (liabilities):
Current portion:
Service revenue and commissions	$	-		$	2,434
Valuation allowance-short term		-			(732	)
Other income		-			(164	)
Subtotal		-			1,538

Non-current portion:
Depreciation expense		(51,565	)		(31,454	)
Accrued financial expense		(15,170	)		-
Net operating loss		234,360			135,585
Valuation allowance		(167,591	)		(105,281	)
Subtotal		34			(1,150	)

Net deferred tax assets	$	34		$	388

(b)	Tax Holiday Effect

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

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

F-24

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

12. INCOME TAX (CONTINUED)

(b)	Tax Holiday Effect (Continued)

	For The Nine Months Ended September 30,
	2010		2009
	(Unaudited)		(Unaudited)

Tax holiday benefit (expense)	$	960,479	$	(947,224	)
Basic net income (loss) per share excluding tax holiday effect	$	0.04	$	(0.03	)

13. SEGMENT INFORMATION

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

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

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

September 30, 2010 (Unaudited)
Identifiable assets	$	74,926,635	$	13,524,282	$	9,321,997		$	(7,197,166	)	$	90,575,748

F-25

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

13. SEGMENT INFORMATION (CONTINUED)

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

December 31, 2009
Identifiable assets	$	44,537,934		$	10,900,478	$	9,340,286		$	(2,977,188	)	$	61,801,510

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

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

F-26

WINLAND ONLINE SHIPPING HOLDINGS CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMEENTS

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

(UNAUDITED)

13. SEGMENT INFORMATION (CONTINUED)

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

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

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

14. CONTINGENCIES

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

15. SUBSEQUENT EVENT

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

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

F-27

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

Forward Looking Statements

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

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

Acquisition of SkyAce Group Limited

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

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

Prior Operations of Trip Tech

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

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

Current Operations of the Company (General Development of Business)

SkyAce

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

PGL

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

(a)

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

(b)

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

(c)

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

(d)

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

(e)

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

(f)

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

(g)

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

(h)

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

PGL acquired the following additional entities in 2008:

(i)

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

(j)

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

(k)

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

(l)

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

(m)

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

PGL acquired the following entities in 2009:

(n)

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

(o)

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

PGL established the following entities in 2009:

(p)

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

(q)

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

(r)

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

(s)

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

PGL established the following entities in 2010:

(t)

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

(u)

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

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

BSL

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

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

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

DWIS

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

DWIL

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

Shipping Online

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

Summary of Current Business of the Company

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

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

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

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

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

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

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

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

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

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

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

Summary of Significant Accounting Policies and Estimates

Use of Estimates

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

Revenue Recognition

Revenue is recognized based on the following four criteria:

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

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

(III)

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

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

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

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

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

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

Recent Accounting Pronouncements

Results of Operations

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

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

Weighted average shares outstanding		130,000,000						130,000,000						-			0.0	%
Net income (loss) per share		0.05						(0.04	)					0.09			(225.0	)%

Revenues

Our revenues are derived from the operation of:

Dry bulk shipping;

Chartering brokerage; and

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

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

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

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

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

Vessel Operating Expenses

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

Service Costs

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

Depreciation and Amortization

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

General and Administrative Expenses

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

Selling Expenses

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

Interest Expense, Net

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

Other Income (Expense), Net

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

Income Tax Expense

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

Net Income (Loss)

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

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

Net Income (Loss) Per Share

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

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

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

Weighted average shares outstanding		130,000,000						130,000,000						-			0.0	%
Net income (loss) per share		0.01						(0.01	)					0.02			(200.0	)%

Revenues

Our revenues are derived from the operation of:

Dry bulk shipping;

Chartering brokerage; and

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

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

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

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

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

Vessel Operating Expenses

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

Service Costs

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

Depreciation and Amortization

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

General and Administrative Expenses

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

Selling Expenses

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

Interest Expense, Net

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

Other Income (Expense), Net

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

Income Tax Expense

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

Net Income (Loss)

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

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

Net Income (Loss) Per Share

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

Liquidity and Capital Resources

Working Capital

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

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

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

Operating Activities

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

Investing Activities

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

Financing Activities

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

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

Capital Expenditures

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

Capital Resources

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

Material Commitments/Tabular Disclosure of Contractual Obligations

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

Off-Balance Sheet Arrangements

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

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

Foreign Currency and Exchange Rate Risk

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

Internal Control over Financial Reporting

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

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

RISKS RELATING TO THE PEOPLE’S REPUBLIC OF CHINA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RISKS RELATING TO OUR BUSINESS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

offer new and innovative services;

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

maintain our current, and develop new, strategic relationships;

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

attract and retain qualified management, consultants and employees.

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

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

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

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

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

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

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

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

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

	·	reduce our investments;

	·	limit our expansion efforts; and

decrease or eliminate capital expenditures.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RISKS RELATING TO OUR COMMON STOCK

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

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

announcements of technological innovations by us or our competitors;

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

our financial position and results of operations;

litigation;

period-to-period fluctuations in our operating results;

changes in estimates of our performance by any securities analysts;

new regulatory requirements and changes in the existing regulatory environment;

Winland Online Shipping Holdings Corp 10-Q