LOGIQ, INC. - Annual Report: 2012 (Form 10-K)

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This annual report on Form 10-K and other reports that we file with the SEC contain statements that are considered forward-looking statements.  Forward-looking statements give the Company’s current expectations, plans, objectives, assumptions or forecasts of future events.  All statements other than statements of current or historical fact contained in this annual report, including statements regarding the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” and similar expressions.  These statements are based on the Company’s current plans and are subject to risks and uncertainties, and as such the Company’s actual future activities and results of operations may be materially different from those set forth in the forward looking statements.  Any or all of the forward-looking statements in this annual report may turn out to be inaccurate and as such, you should not place undue reliance on these forward-looking statements.  The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs.  The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions due to a number of factors, including:

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dependence on key personnel;

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competitive factors;

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continued growth of e-commerce markets;

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the operation of our business; and

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general economic conditions in the Asia-Pacific Region and in the United States.

These forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.  In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this annual report.

USE OF TERMS

Except as otherwise indicated by the context, all references in this report to:

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“Sitoa Global,” “Company,” “we,” or “our,” unless the context otherwise requires, are to Sitoa Global Inc.

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“SEC” are to the United States Securities and Exchange Commission;

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“Securities Act” are to the Securities Act of 1933, as amended;

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“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

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“U.S. dollar,” “USD,” “US$” and “$” are to the legal currency of the United States; and

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“China,” “Chinese” and “PRC” are to the People’s Republic of China.

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Available Information

The Company’s website is www.sitoaglobal.com, where information about the Company may be reviewed and obtained.  In addition, the Company’s filings with the Securities and Exchange Commission (“SEC”) may be accessed at the internet address of the SEC, which is http://www.sec.gov.  Also, the public may read and copy any materials that the Company files with at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

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PART I

ITEM 1. BUSINESS

Overview

Sitoa Global specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions.  Its solutions and services enable e-commerce transactions with speed and efficiency, and allow an interactive and engaging customer experience as well as targeted marketing and advertising.

The Company’s revenues are generated from one-time integration fees for the implementation of e-commerce solutions as well as recurring license and service fees including revenue share arrangements.  The Company has been hosting five e-commerce solutions:

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4-GS, Ltd. is a B2B e-commerce platform that optimizes supply chain sourcing for international enterprise customers through B2B Search Engine Optimization (SEO), e-catalog and inventory management systems and a transaction platform.

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ZBL Cybermarketing, Ltd. is a Search Engine Marketing (SEM) and Search Engine Optimization (SEO) provider in Northern China and utilizes the Company’s e-commerce solutions to identify and engage targeted consumer segments and optimize purchase conversions.

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iMedia, Ltd. is a mobile advertising platform that enables online vendors to reach and engage its customer audience through mobile ads and apps.  

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Chunjie365 is a bi-lingual e-commerce site in China targeting consumer and corporate online customers looking to purchase both U.S. specialty products and Chinese gift items that are rare and unique.  

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Sonsi is a destination e-commerce site for women sizes 12 and up and allows them to purchase retail clothing products.

We service 4-GS, ZBL Cybermarketing and i-Media under the strategic partnership agreement with Soconison Technology Ventures, dated July 11, 2011.  

The Company entered into a strategic partnership agreement with a division of China International Trust and Investment Corporation (CITIC) on July 9, 2012.  CITIC utilizes the Company’s software technology and catalog management system for the development of its Business-to-Business (“B2B”) trading platform.

Our corporate headquarters are located at Room 4304, 43/F China Resources Building 26 Harbour Road, Wan Chai, Hong Kong HKSAR and our telephone number is (408) 548-7520.  Although we maintain a website at www.sitoaglobal.com, we do not intend that information available on our website be incorporated into this filing.

Our Growth Strategy

We aim to position ourselves as a provider in e-commerce solutions and services.  We have identified the following factors critical to the achievement of this goal:

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Enable our current customers to continue growing their e-commerce business

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Leverage our business development relationships to acquire new customers

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Continue utilizing our efficient cost structure, and source technical and engineering personnel in Asia for servicing our customers

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Develop new technologies and service products

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Identify opportunities to acquire technologies or companies to accelerate the growth of the Company.

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Growth of the E-Commerce Industry

We believe there are a number of factors that are contributing to the continued growth of e-commerce: (i) adoption of the Internet continues to increase globally; (ii) broadband technology is increasingly being used to deliver Internet service enabling the delivery of richer content as well as larger files to consumers; (iii) Internet users are becoming increasingly comfortable with the process of buying products online; (iv) the functionality of online stores continues to improve, offering a broader assortment of payment options with more promotion alternatives; (v) businesses are placing more emphasis on their online channel, reaching a larger audience at comparatively lower costs than other methods; and (vi) concerns about conflicts between online and traditional sales channels continue to subside.  We believe that the Company will be able to participate in the growth of the e-commerce industry be leveraging its current business model.

Competition

Our business is rapidly evolving and highly competitive.  Our current and potential competitors include:  (1) physical-world retailers, vendors, distributors, and manufacturers of our products; (2) other online e-commerce and mobile e-commerce sites; (3) a number of indirect competitors, including media companies, web portals, comparison shopping websites, and web search engines, either directly or in collaboration with other retailers; (4) companies that provide e-commerce services, including website development, fulfillment, and customer service; (5) companies that provide infrastructure web services or other information storage or computing services or products.  We believe that the principal competitive factors in our e-commerce business include selection, price, and convenience, including fast and reliable fulfillment.  Many of our current and potential competitors have greater resources, longer histories, more customers, and greater brand recognition.  They may secure better terms from suppliers, adopt more aggressive pricing and devote more resources to technology, infrastructure, fulfillment, and marketing.  Other companies also may enter into business combinations or alliances that strengthen their competitive positions.

Employees

The Company has a core team of 5 employees and consultants focused on project management and technology development.  It sources technical and engineering personnel in Asia on an outsourced basis to develop e-commerce solutions and provide ongoing hosting services to individual customers.  Competition for qualified personnel in the industry is intense. The Company’s future success will depend, in part, on its continued ability to attract and retain qualified personnel.

Transfer Agent

We have engaged Nevada Agency and Trust Company as our stock transfer agent.  Nevada Agency and Trust Company is located at 50 West Liberty Street, Reno, Nevada 89501.

Regulations

The servers for our online e-commerce platform are located in Hong Kong. The Hong Kong government or regulatory agencies may block or suspend our internet transmission capabilities if we are deemed to be in violation of the following content regulations for online services:

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Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) – We are subject to the laws, rules and regulations regarding trading. The Securities and Futures Commission is responsible for: maintaining and promoting the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry. The Commission may suppress illegal, dishonorable and improper practices in the securities and futures industry; to take appropriate steps in relation to the securities and futures industry. Regardless of the communication or delivery medium used, the Commission will continue to apply the general anti-fraud and anti-manipulation

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provisions of the relevant Ordinances in its enforcement actions. If any person responsible for activities over the Internet is found to have acted in contravention of the provisions of the Ordinances or appears to have been involved in any misconduct whether in Hong Kong or elsewhere, the Commission may exercise its regulatory powers (including prosecution or taking other disciplinary actions as may be required); and when necessary, the Commission may consider other regulatory means available to it including seeking cooperation from foreign regulators and law enforcement agencies to take joint enforcement action, if necessary. We are prohibited from carrying on any regulated activity, as defined under the Securities and Futures Ordinance, such as dealing in securities and/or futures contracts, unless we have been granted the appropriate license(s) from the Commission.

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Personal Data (Privacy) Ordinance (Cap. 486 of the Laws of Hong Kong) – We are subject to data privacy laws, rules and regulations that regulate the use of customer data. In Hong Kong we are governed by the Personal Data (Privacy) Ordinance and as a data user we are prohibited from doing or engaging in any practice that contravenes the data protection principles set out therein.

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Telecommunications Ordinance (Cap. 106 of the Laws of Hong Kong), Crimes Ordinance (Cap. 200 of the Laws of Hong Kong) and Theft Ordinance (Cap. 210 of the Laws of Hong Kong) – Provisions under the Telecommunications Ordinance, Crimes Ordinance and Theft Ordinance make it an offense for unauthorized access to computer by telecommunication, to access a computer with criminal or dishonest intent, and extend the meaning of criminal damage to include misuse of computer programs or data, and burglary to include unlawfully causing a computer to function other than as it has been established and altering, erasing or adding any computer program or data. In this respect, any of the abovementioned computer related crimes committed by any staff, employees or agents, will subject us to possible criminal charges and/or investigations.

These rules and regulations are administered by the three branches of Hong Kong’s Commerce and Economic Development Bureau: (i) the Commerce, Industry and Tourism Branch (responsible for policy matters on Hong Kong's external commercial relations, inward investment promotion, intellectual property protection, industry and business support, tourism, consumer protection and competition), (ii) the Communications and Technology Branch (responsible for policy matters on broadcasting, film-related issues, overall view of creative (including film) industry, development of telecommunications, innovation and technology, and control of obscene and indecent articles); and (iii) the Office of the Government Chief Information Officer (responsible for policy, strategy and execution of information technology programs and initiatives).

If any of these government agencies acts to block or limit access to our website or adopt policies restricting our customers from providing us with accurate and up-to-date information, the value of our electronic trading platform could be negatively impacted, which would adversely affect our ability to offer compelling hiring and marketing solutions and subscriptions to our customers, enterprises, and professional organizations.

ITEM 1A. RISK FACTORS

We operate in a highly competitive environment in which there are numerous factors which can influence our business, financial position or results of operations and which can also cause the market value of our common stock to decline. Many of these factors are beyond our control and therefore, are difficult to predict. The following section sets forth what we believe to be the principal risks that could affect us, our business or our industry, and which could result in a material adverse impact on our financial results or cause the market price of our common stock to fluctuate or decline.

RISKS RELATED TO OUR BUSINESS

We are subject to risks associated with changing technologies in the e-commerce industry, which could place us at a competitive disadvantage.

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expertise and development capability; innovation; reliability and timeliness of delivery; operational flexibility; customer service; and overall management.

Our success depends on our ability to continue to meet our customers’ changing requirements and specifications with respect to these and other criteria. There can be no assurance that we will be able to address technological advances or introduce new offerings that may be necessary to remain competitive within the e-commerce industry.

Systems failures could cause interruptions in our services or decreases in the responsiveness of our services which could harm our business.

If our systems fail to perform, we could experience disruptions in operations, slower response times or decreased customer satisfaction. Our ability to facilitate e-commerce transactions successfully and provide high quality customer service depends on the efficient and uninterrupted operation of our computer and communications hardware and software systems. These systems have in the past experienced periodic interruptions and disruptions in operations, which we believe will continue to occur from time to time. Our systems also are vulnerable to damage or interruption from human error, natural disasters, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. We do not have fully redundant capabilities. Any systems failure that causes an interruption in our services or decreases the responsiveness of our services could impair our reputation, damage our brand name and materially adversely affect our business, financial condition and results of operations and cash flows.

Our cost structure is partially fixed. If our revenues decline and we are unable to reduce our costs, our profitability will be adversely affected.

Our cost structure is partially fixed. We base our cost structure on historical and expected levels of demand for our services, as well as our fixed operating infrastructure, such as computer hardware and software, hosting facilities and security and staffing levels. If demand for our services declines and, as a result, our revenues decline, we may not be able to adjust our cost structure on a timely basis and our profitability may be materially adversely affected.

Attrition of customer accounts and failure to attract new accounts could have a material adverse effect on our business, financial condition and results of operations and cash flows.  Even if we do attract new customers, we may fail to attract the customers in a cost-effective manner, which could materially adversely affect our profitability and growth.

Although we offer e-commerce solutions and services designed to support and retain our customers, our efforts to attract new customers or prevent attrition of our existing customers may not be successful. If we are unable to retain our existing customers or acquire new customers in a cost-effective manner, our business, financial condition and results of operations and cash flows would likely be adversely affected. Although we have spent significant resources on business development and related expenses and plan to continue to do so, these efforts may not be cost-effective at attracting new customers.

Any future acquisitions may result in significant transaction expenses, integration and consolidation risks and risks associated with entering new markets, and we may be unable to profitably operate our consolidated company.

Although our growth strategy has not focused historically on acquisitions, we may in the future selectively pursue acquisitions and new businesses. Any future acquisitions may result in significant transaction expenses and present new risks associated with entering additional markets or offering new products and services, and integrating the acquired companies. Because acquisitions historically have not been a core part of our growth strategy, we do not have significant experience in successfully completing acquisitions. We may not have sufficient management, financial and other resources to integrate companies we acquire or to successfully operate new businesses and we may be unable to profitably operate our expanded company. Additionally, any new businesses that we may acquire, once integrated with our existing operations, may not produce expected or intended results.

We may be unable to respond to customers' demands for new e-commerce solutions and service offerings and our business, financial condition and results of operations and cash flows may be materially adversely affected.

Our customers may demand new e-commerce solutions and service offerings.  If we fail to identify these demands from customers or update our offerings accordingly, new offerings provided by our competitors may render our existing solutions

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and services less competitive. Our future success will depend, in part, on our ability to respond to customers' demands for new offerings on a timely and cost-effective basis and to adapt to address the increasingly sophisticated requirements and varied needs of our customers and prospective customers. We may not be successful in developing, introducing or marketing new offerings. In addition, our new offerings may not achieve market acceptance. Any failure on our part to anticipate or respond adequately to customer requirements, or any significant delays in the development, introduction or availability of new offerings or enhancements of our current offerings could have a material adverse effect on our business, financial condition and results of operations and cash flows.

We may be unable to respond to the evolving industry practices and technology solutions, and our business, financial condition and results of operations and cash flows may be materially adversely affected.

To remain competitive as an e-commerce solutions and services provider, we must continue to invest in research and development of new technology solutions in order to keep up with the ever evolving industry practices and enhancements to our existing solutions. The process of developing new technologies, products and services is complex and expensive. The introduction of new solutions by our competitors, the market acceptance of competitive solutions based on new or alternative technologies or the emergence of new industry practices could render our solutions less competitive.

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations, agreements with third parties and make sales in Asia, which may experience corruption. Our activities in Asia create the risk of unauthorized payments or offers of payments by one of the employees, consultants or agents of our company, because these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. Also, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

RISKS RELATED TO THE MARKET FOR OUR STOCK

The market price of our common stock can become volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings.

The market price of our common stock can become volatile. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include:

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our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;

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changes in financial estimates by us or by any securities analysts who might cover our stock;

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speculation about our business in the press or the investment community;

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significant developments relating to our relationships with our customers or suppliers;

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stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;

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customer demand for our business solutions;

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investor perceptions of our industry in general and our Company in particular;

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the operating and stock performance of comparable companies;

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general economic conditions and trends;

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announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;

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changes in accounting standards, policies, guidance, interpretation or principles;

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loss of external funding sources;

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sales of our common stock, including sales by our directors, officers or significant stockholders; and

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addition or departure of key personnel.

Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our management’s attention and resources.

Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you want to sell your interest in us.

Our common stock is quoted on the over-the-counter electronic quotation system maintained by the OTC Markets which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTCQB, an over-the-counter electronic quotation system maintained by the OTC Markets. The OTCQB is a significantly more limited than a trading market such as the New York Stock Exchange or NASDAQ. The OTCQB is a less liquid market for the trading of our common stock by existing and potential stockholders, and so trading of our common stock on the OTCQB could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. We plan to list our common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing.

We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. If our common stock becomes a “penny stock,” we may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by the Penny Stock Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

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We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock.

We may require additional financing to fund future operations, develop and exploit existing and new products and to expand into new markets. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us.

We do not intend to pay dividends for the foreseeable future.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.

ITEM IB.  UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES

The Company’s current executive offices are located at Room 4304, 43/F China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong HKSAR.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

Synnex Corp. v. Sitoa International, Inc., et al.

The Company has been joined as third-party defendant in Synnex Corp. v. Sitoa International, Inc., et al., filed in the Superior Court of California, Alameda County.  On October 1, 2010, Synnex Corp., a supplier of electronics products, originally brought suit against Sitoa Corporation, an internet re-seller controlled by our former Chief Executive Officer, Mr. Calbert Lai, alleging liability for approximately $54,000 of unpaid product.  Sitoa Corporation admitted owing the amount but contended that this liability should be set off against Synnex's liability to Sitoa Corporation for lost profits and other damages suffered by them, due to a pricing error committed by Synnex in December 2009.  On October 14, 2010, Sitoa Corporation answered the original complaint and filed a cross-complaint against Synnex, seeking to recover damages for the pricing error.  

On October 11, 2011, Synnex amended its complaint to include the Company as a defendant, under the mistaken belief that the Company is responsible for the debts and obligations of Sitoa Corporation, including the $54,000 that is the subject of Synnex’s complaint.

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We do not believe that Synnex’s claim against the Company has any merit.  We originally changed our name to Sitoa Global, Inc. in anticipation of a merger with Sitoa Corporation which was never consummated.  Instead, we entered into a software licensing agreement with Sitoa Corporation, in connection with which Mr. Calbert Lai, the Chief Executive Officer of Sitoa Corporation, was appointed as our Chief Executive Officer.  However, on March 1, 2012, we rescinded and terminated the software licensing agreement, pursuant to a Rescission and Termination Agreement, dated March 1, 2012, between the Company and Sitoa Corporation, and Mr. Lai resigned from his position with the Company.  As such, we are no longer affiliated with Sitoa Corporation and we were not affiliated with Sitoa Corporation at the time when the issue in question occurred.  Furthermore, Sitoa Corporation has admitted to owing the amount claimed by Synnex in the case.  Trial in the case resulted in a verdict by the jury in the amount of $1,560,000 for lost profits and other damages in the favor of Sitoa Corporation on October 31, 2012.  Synnex has since filed motions for new trial and appeal.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

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

Common Stock

We are authorized to issue 350,000,000 shares of Common Stock, at a par value $0.002 per share.  The holders of Common Stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders.  There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors then up for election.  The holders of Common Stock are entitled to receive ratably such dividends when, as and if declared by the Board of Directors out of funds legally available therefore.  In the event we have liquidation, dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining which are available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the Common Stock.  Holders of shares of Common Stock, as such, have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the Common Stock.

Market Information

The Company’s Common Stock currently only trades on the OTCQB operated by OTC Markets Inc. under the symbol “STOA”.  The Company’s Common Stock commenced trading under this symbol on June 8, 2011, and previously traded under the symbol “SOBM” from March 2, 2007 until June 7, 2011 on the OTC Pink.

The following historical quotations obtained online at www.yahoo.com reflects the high and low bids for our Common Stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

As of March 25, 2013, the Company’s Common Stock closed at a price of $0.0044.

Holders

As of March 28, 2013, there are 96,645,019 shares of Common Stock issued and outstanding held by 173 shareholders of record.

Dividend Policy

We have never paid any cash dividends and have no plans to do so in the foreseeable future.  Our future dividend policy will be determined by our Board of Directors and will depend upon a number of factors, including our financial condition and performance, our cash needs and expansion plans, income tax consequences and the restrictions that applicable laws and other arrangements then impose.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of the end of the fiscal year ended December 31, 2012, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance, aggregated as follows: (i) all compensation plans previously approved by security holders; and (ii) all compensation plans not previously approved by security holders.

Recent Sales of Unregistered Securities

On January 20, 2012, the Company issued 250,000 shares of its common stock in a private placement with an accredited investor, for aggregate proceeds of $10,000, or $0.04 per share, pursuant to a Securities Purchase Agreement, dated January 20, 2012, between the Company and the investor. The issuance of shares to the investor was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and Regulation D promulgated thereunder.

On February 17, 2012, the Company issued 125,000 shares of its common stock in a private placement with an accredited investor, for aggregate proceeds of $10,000, or $0.08 per share, pursuant to a Securities Purchase Agreement, dated February 17, 2012, between the Company and the investor. The issuance of shares to the investor was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and Regulation D promulgated thereunder.

On March 13, 2012, the Company issued 1,000,000 shares of its common stock to a convertible note holder with respect to the conversion of $40,000 in outstanding principal pursuant to the convertible debenture issued by the Company on December 1, 2008 in the amount of $40,000 at a conversion price of $0.04 per share.  The issuance of shares to the note holder was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and Regulation D promulgated thereunder.

On March 28, 2012, the Company entered into a Securities Purchase Agreement to issue 1,250,000 shares of its common stock in a private placement with Dennis Schmal, a Director of the Board, for aggregate proceeds of $50,000, or $0.04 per share. The issuance of shares to the investor will be made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and Regulation D promulgated thereunder.

On July 31, 2012, the Company issued 3,333,333 shares of the Company’s common stock in an offshore transaction to a division of China International Trust and Investment Corporation (“CITIC”) in connection with a strategic partnership agreement, under which CITIC licensed the Company’s software technology to expand select Business-to-Business (“B2B”) marketplaces.  In exchange, CITIC paid the Company an upfront, non-refundable licensing fee of US$500,000.  The issuance of the shares was an offshore transaction pursuant to Rule 903 of Regulation S of the Securities Act, on the basis that the sale of the securities was completed in an “offshore transaction,” as defined in Rule 902(h) of Regulation S.  

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The Company did not engage in any directed selling efforts (as defined in Regulation S) in the United States in connection with the sale of the securities and the investors represented that it was not a U.S. person, as defined in Regulation S, and was not acquiring the securities for the account or benefit of a U.S. person.  The investors also acknowledged that the securities had not been registered pursuant to the Securities Act and that the securities may not be offered or sold in the United States unless the securities are registered under the Securities Act or are exempt from the registration requirements of the Securities Act.

On July 31, 2012, the Company issued 3,333,333 shares of common stock in an offshore transaction to an investor, in exchange for aggregate proceeds of $500,000, or $0.15 per share. This issuance of shares in the offshore transaction was pursuant to Rule 903 of Regulation S of the Securities Act, on the basis that the sale of the securities was completed in an “offshore transaction,” as defined in Rule 902(h) of Regulation S.  The Company did not engage in any directed selling efforts (as defined in Regulation S) in the United States in connection with the sale of the securities and the investors represented that it was not a U.S. person, as defined in Regulation S, and was not acquiring the securities for the account or benefit of a U.S. person.  The investors also acknowledged that the securities had not been registered pursuant to the Securities Act and that the securities may not be offered or sold in the United States unless the securities are registered under the Securities Act or are exempt from the registration requirements of the Securities Act.

On July 31, 2012, the Company issued 1,875,000 shares of common stock to IRG Limited (“Financial Advisor”) as consideration for its financial advisory services to the Company.  The issuance to the Financial Advisor was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering.  

From September 27, 2012 through December 19, 2012, $57,000 in principal pursuant to a debenture note issued by the Company on September 1, 2009 was converted by the note holders into 9,608,135 shares of the Company’s common stock. We believe that the issuances were exempt from registration under Regulation S and/or Section 4(2) under the Securities Act as the securities were issued without involving a public offering and Regulation D promulgated thereunder.

From January 7, 2013 through March 18, 2013, $141,000 in principal pursuant to a debenture note issued by the Company on December 27, 2012 was converted by the note holders into 48,499,087 shares of the Company’s common stock. We believe that the issuances were exempt from registration under Regulation S and/or Section 4(2) under the Securities Act as the securities were issued without involving a public offering and Regulation D promulgated thereunder.

Purchase of Equity Securities by the Company and Affiliated Purchasers

Not Applicable.

ITEM 6. SELECTED FINANCIAL DATA

The Company, as a “smaller reporting company” (as defined by §229.10(f)(1)), is not required to provide the information required by this Item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following plan of operation together with our financial statements and related notes appearing elsewhere in this annual report.  This plan of operation contains forward-looking statements that involve risks, uncertainties, and assumptions.  The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.

11

Overview

Sitoa Global specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions.  Its solutions and services enable e-commerce transactions with speed and efficiency, and allow an interactive and engaging customer experience as well as targeted marketing and advertising.

The Company’s revenues are generated from one-time integration fees for the implementation of e-commerce solutions as well as recurring license and service fees including revenue share agreements.  The Company has been hosting five e-commerce solutions:

1.

4-GS, Ltd. is a B2B e-commerce platform that optimizes supply chain sourcing for international enterprise customers through B2B Search Engine Optimization (SEO), e-catalog and inventory management systems and a transaction platform.

2.

ZBL Cybermarketing, Ltd. is a Search Engine Marketing (SEM) and Search Engine Optimization (SEO) provider in Northern China and utilizes the Company’s e-commerce solutions to identify and engage targeted consumer segments and optimize purchase conversions.

3.

iMedia, Ltd. is a mobile advertising platform that enables online vendors to reach and engage its customer audience through mobile ads and apps.  

4.

Chunjie365 is a bi-lingual e-commerce site in China targeting consumer and corporate online customers looking to purchase both U.S. specialty products and Chinese gift items that are rare and unique.  

5.

Sonsi is a destination e-commerce site for women sizes 12 and up and allows them to purchase retail clothing products.

The Company entered into a strategic partnership agreement with a division of China International Trust and Investment Corporation (CITIC) on July 9, 2012.  CITIC utilizes the Company’s software technology and catalog management system for the development of its Business-to-Business (“B2B”) trading platform.

Plan of Operations

The Company believes that it can participate in the growth of e-commerce as a provider of e-commerce solutions and services.  It believes that it has established a viable business model and a technology base that can further grow through referrals and business development activities.  The Company expects to continue utilizing its efficient cost structure, and source technical and engineering personnel in Asia for servicing its customers.  The Company is also pursuing initiatives to identify opportunities to acquire technologies or companies that can accelerate the growth of the Company.

Need for Additional Capital

To become profitable and competitive, and execute strategic transactions, we may have to raise additional capital.  If we are unable to raise additional equity capital to develop our business and continue earning revenues, we might have to suspend or cease operations and our investors may lose their investment.

We have no assurance that future financings will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Equity financing could result in additional dilution to existing shareholders.

For the Fiscal Year Ended December 31, 2012

Liquidity and Capital Resources

Our registered independent auditors for the year ended December 31, 2012 have issued a going concern opinion.  This means that there is substantial doubt that we can continue as an on-going business for the next 12 months unless we obtain additional capital or generate revenues to pay our bills.  Potential sources of revenues are our three customers for whom we are currently hosting e-commerce solutions.  Our other source for cash at this time is investments by others in the Company. 

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On December 31, 2012, we had a working capital of $354,349 compared with a working capital deficit of $477,511 on December 31, 2011. The increase is primarily due to an increase of our cash sourced from financings and licensing fees.  Operating activities used $692,021 in cash in the twelve months ended December 31, 2012.  Investing activities in the 12 months ended December 31, 2012 used $157,461 in the twelve months ended December 31, 2012.  Financing activities provided $1,114,764 in the twelve months ended December 31, 2012.

We expect to continue utilizing our efficient cost structure by sourcing personnel in Asia for servicing our customers.  In order to accelerate the growth of the Company, we will also consider raising additional funding from investors.

We may not have enough working capital to complete our plan of operations.  If it turns out that we have not raised enough capital to complete our anticipated business development, we will try to raise additional funds from private placements or loans.  There is no assurance that we will raise additional capital in the future or that future financings will be available to us on acceptable terms.  If we require additional capital and are unable to raise it, we may have to suspend or cease operations.

Revenue Recognition

The Company recognizes revenue from providing hosting and integration services and licensing the use of its technology platform to its customers.  The Company recognizes revenue when all of the following conditions are satisfied:  (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer (for licensing, revenue is recognized when the Company’s technology is used to provide hosting and integration services); (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is probable.  Integration revenue was recognized when integration was completed and accepted by the customer.  Monthly hosting fees are recognized when billed.

We earned revenue from providing hosting and integration services to 4-GS, Ltd., ZBL Cybermarketing, Ltd., i-Media, Ltd., Chunjie365 and Sonsi Inc.  We charge 4-GS, ZBL Cybermarketing and i-Media monthly minimum integration and hosting fees plus additional professional hourly fees for project management and consulting.  The fee arrangement with those three companies is covered under the strategic partnership agreement with Soconison Technology Ventures, dated July 11, 2011.  Soconison Technology Ventures is a shareholder in 4-GS, ZBL Cybermarketing and i-Media.  From Chunjie365, we receive a license fee and revenue share of their e-commerce transactions.  From Sonsi, we earn monthly minimum hosting fees plus hourly professional fees for additional integration services.

Results of Operation for the Fiscal Year ended December 31, 2012

Service Revenue

Service Revenues were $4,268,379 and $847,344 for the twelve months ended December 31, 2012 and 2011, respectively.  The increase is due to recognizing revenue from our customers.

Cost of Service

Cost of Service was $4,398,145 and $649,937 for the twelve months ended December 31, 2012 and 2011, respectively.  The increase is due to the development, integration and hosting of e-commerce solutions for our customers.  

Operating Expenses

General and administrative expenses:  General and administrative expenses were $828,635 and $1,204,250 for the twelve months ended December 31, 2012 and 2011, respectively.  The decrease is due to the completion of our previous corporate restructuring.    

Stock-based compensation:  Stock-based compensation expenses were $383,333 and $875,000 for the twelve months ended December 31, 2012 and 2011, respectively.  The decrease is due to cancellation of share options to our former CEO.

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Interest Expense 

Interest expense was $0 and $18,007 for the twelve months ended December 31, 2012 and 2011, respectively.  The decrease is due to the conversion of the accrued and unpaid interest, and the principal amount of $250,000 pursuant to the convertible debenture issued by the Company on November 11, 2008.  

Net Loss

The Company had a net loss of $1,338,801 for the twelve months ended December 31, 2012 as compared to a net loss of $1,899,850 for the twelve months ended December 31, 2011.  The decrease is due to the completion of our previous corporate restructuring.    

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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15

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Sitoa Global, Inc.

We have audited the accompanying balance sheets of Sitoa Global, Inc. (the “Company”), as of December 31, 2012 and the related statements of operations, stockholders’ deficit and cash flows, for the year ended December 31, 2012.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over finance reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and the results of its operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations. These conditions raise substantial doubt about its abilities to continue as going concern.  Management’s plans regarding those matters also are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Dominic K.F. Chan & Co

Certified Public Accountants

Hong Kong, 26 March, 2013

F-1

F-2

F-3

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F-5

SITOA GLOBAL INC.

Notes to Financial Statements

1. BASIS OF PRESENTATION – GOING CONCERN

The Company specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions.  Its solutions and services enable e-commerce transactions with speed and efficiency, and allow an interactive and engaging customer experience as well as targeted marketing and advertising.

The Company’s revenues are generated from one-time integration fees for the implementation of e-commerce solutions as well as recurring license and service fees including revenue shares.  The Company currently hosts five existing e-commerce solutions and entered into a partnership agreements to develop additional e-commerce solutions.

These financial statements of Sitoa Global Inc. (the “Company”) have been prepared on a going-concern basis which assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future.     

The Company experienced losses during 2012 amounting to $1,338,801, which raises substantial doubt about the Company's ability to continue as a going concern.  The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations.  There are no assurances that the Company will be successful in achieving these goals.

The Company believes that it can continue to receive revenues from its customers.  The Company expects to continue utilizing its efficient cost structure by sourcing personnel in Asia for servicing its customers.  In order to accelerate the growth of the Company, it will also consider raising additional funding from investors.

These financial statements do not give effect to adjustments to the amounts and classifications to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of the Company’s 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 financial statements and the reported amounts of revenues and expenses during the reporting period.  Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.

CERTAIN RISKS AND UNCERTAINTIES

The Company relies on leased hardware and software from third parties to offer its e-commerce solutions and services.  Management believes that alternate sources are available; however, disruption or termination of these relationships could adversely affect our operating results in the near-term.  The Company currently has three customers who provide all of the Company’s recurring revenue.  Loss of any one of these customers would have a significant impact on the Company’s revenue.

SEGMENT REPORTING

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by our chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.  

F-6

SITOA GLOBAL INC.

Notes to Financial Statements

Sitoa Global specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions.  We identify our reportable segments as those customer groups that represent more than 10% of our combined revenue or gross profit or loss of all reported operating segments.  We manage our business on the basis of the one reportable segment e-commerce solutions and service provider.  The accounting policies for segment reporting are the same as for the Company as a whole.  We do not segregate assets by segments since our chief operating decision maker, or decision making group, does not use assets as a basis to evaluate a segment’s performance.

CASH AND CASH EQUIVALENTS

Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased.

EQUIPMENT

Equipment is carried at cost less a provision for depreciation on a straight-line basis over their estimated useful lives. Estimated useful life of the computer equipment is 3 years.

SHORT TERM INVESTMENT

Short term investment that are classified as trading is measured subsequently at fair value in the statement of financial position.  Unrealized holding gains and losses for short term investment are included in earnings.

RECLASSIFICATION

Certain prior year amounts have been reclassified to conform with the current year presentation.

STOCK-BASED COMPENSATION

The Company accounts for stock based compensation by recognizing the fair value of stock compensation as an expense in the calculation of net income (loss). The Company recognizes stock compensation expense in the period in which the employee is required to provide service, which is generally over the vesting period of the individual equity instruments. Stock options issued in lieu of cash to non-employees for services performed are recorded at the fair value of the options at the time they are issued and are expensed as service is provided.

LOSS PER SHARE

Basic earnings (loss) per share of common stock is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share of common stock is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding during the period, including vested and unvested stock options that are in the money.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, accounts payable, interest payable, shareholder loans and other current liabilities. The carrying values of financial instruments reflected in these financial statements approximate their fair values due to the short-term maturity of the instruments.  

F-7

SITOA GLOBAL INC.

Notes to Financial Statements

REVENUE RECOGNITION

The Company recognizes revenue from providing hosting and integration services and licensing the use of its technology platform to its customers.  The Company recognizes revenue when all of the following conditions are satisfied:  (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer (for licensing, revenue is recognized when the Company’s technology is used to provide hosting and integration services); (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is probable.  We account for our multi-element arrangements, such as instances where we design a custom website and separately offer other services such as hosting, which are recognized over the period for when services are performed.

COST OF SERVICE

Cost of service results from sourcing technical and engineering personnel in Asia on an hourly or project basis in order to develop e-commerce solutions and provide ongoing hosting services to individual customers.  The Company utilizes an outsourced staffing firm with offices in China.

CAPITALIZATION OF SOFTWARE

The Company accounts for internal-use software and website development costs, including the development of its partner marketplaces in accordance with ASC 350-50 (Intangibles – Website cost).  The Company capitalizes internal costs consisting of payroll and direct payroll-related costs of employees who devote time to the development of internal-use software, as well as any external direct costs. It amortizes these costs over their estimated useful lives, which typically range between three to five years. The Company’s judgment is required in determining the point at which various projects enter the stages at which costs may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized. The estimated life is based on management’s judgment as to the product life cycle.  Development cost of various platforms is being expensed.  The Company cannot separate internal cost on a reasonably cost-effective basis between maintenance and upgrades, and cannot assess the ongoing value of its various projects, thus all project costs are expensed as such costs are incurred.

INCOME TAXES

Income taxes are provided for using the asset and liability method whereby deferred tax assets and liabilities are recognized using current tax rates on the difference between the financial statement carrying amounts and the respective tax basis of the assets and liabilities. The Company provides a valuation  allowance on deferred tax assets when it is more likely than not that such assets will not be realized.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting this standard, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognized interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying statements of operation. Accrued interest and penalties are included within the related tax liability in the consolidated balance sheets.

NEW ACCOUNTING PRONOUNCEMENTS

There were various other accounting standards and interpretations recently issued, none of which is expected to have a material impact on the Company's financial position, operations or cash flows.

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SITOA GLOBAL INC.

Notes to Financial Statements

3. SHORT TERM INVESTMENT

The portion of trading gains and losses for the period related to short term investment still held at the reporting date (required by 320-10-50-9(e)) is calculated as follows:

4. ACCOUNTS PAYABLE AND OTHER ACCRUALS

Accounts payable and other accruals consisted of the following:

5. CONVERTIBLE DEBENTURES

As of December 31, 2012, the Company had convertible debentures in the amount of $472,230 outstanding.  The Company’s creditors assigned $402,230 in accounts payables to noteholders on December 27, 2012 who are entitled to convert the outstanding principal amount into common stock at a conversion price at a 45% discount from the lowest trading price in the three days prior to the conversion.

6. STOCKHOLDERS’ DEFICIT

Common Shares

Authorized common shares of the Company consist of 350,000,000 shares with a par value of $0.002 each.

Debt-to-Equity Conversions

On March 13, 2012, the Company issued 1,000,000 shares of its common stock to a convertible note holder with respect to the conversion of $40,000 in outstanding principal pursuant to the convertible debenture issued by the Company on December 1, 2008 in the amount of $40,000 at a conversion price of $0.04 per share. 

F-9

SITOA GLOBAL INC.

Notes to Financial Statements

From September 27, 2012 through December 19, 2012, $57,000 in principal pursuant to a debenture note issued by the Company on September 1, 2009 was converted by the note holders into 9,608,135 shares of the Company’s common stock.

From January 7, 2013 through March 18, 2013, $141,000 in principal pursuant to a debenture note issued by the Company on December 27, 2012 was converted by the note holders into 48,499,087 shares of the Company’s common stock.

Employee Stock Option Plan

The Company has a stock option and incentive plan, the “Stock Option Plan”. The exercise price for all equity awards issued under the Stock Option Plan is based on the fair market value of the common share price which is the closing price quoted on the OTCQB on the last trading day before the date of grant. The stock options generally vest on a monthly basis over a two-year to three-year period, and have a five year life.

The Stock Option Plan allows for the issuance of stock options, stock awards, or other incentives.  An aggregate of 25,000,000 shares are authorized under the Stock Option Plan.  As of December 31, 2012, there are 24,590,000 shares reserved for future grants under the Stock Option Plan.

Stock-Based Compensation

A summary of the Company’s stock option activity during the twelve months ended December 31, 2012 is presented below:

All options outstanding are fully vested as of December 31, 2012.  No new options were granted in the fiscal year 2012.

F-10

SITOA GLOBAL INC.

Notes to Financial Statements

Options outstanding as of December 31, 2012 vested as follows:

The stock-based compensation expense for the years ended December 31, 2012 and 2011 was as follows:

The 410,000 options outstanding as of December 31, 2012 have a weight average remaining contractual term of 2.1 years.

7. INCOME TAXES

Potential benefits of income tax losses have not been recognized in these financial statements because the Company cannot be assured if its more likely-than-not it will utilize the net operating losses carried forward in future years.

Income tax recovery differs from what which would be expected by applying the effective rates to net income (loss) as follows:

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SITOA GLOBAL INC.

Notes to Financial Statements

The Company has accumulated net operating losses totaling approximately $1,876,000 for income tax purposes which expire starting in 2032. The components of the net deferred tax asset at December 31, 2012 and the statutory tax rate, the effective tax rate and the amount of the valuation allowance are scheduled below:

8. CONCENTRATION OF CUSTOMERS

For the twelve months ended December 31, 2012, we earned 38% of our service revenue from 4-GS, 17% from i-Media, 20% from ZBL Cybermarketing, 18% from Chunjie365, and 7% from Sonsi.  We will continue to seek diversifying our revenue sources from our customers but there is no guarantee that the e-commerce solutions that we host will produce revenues.

9. SEGMENT REPORTING INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by our chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.  

Sitoa Global specializes in providing e-commerce solutions and services that facilitate multi-channel B2C (business-to-consumer) and B2B (business-to-business) transactions.  We identify our reportable segments as those customer groups that represent more than 10% of our combined revenue or gross profit or loss of all reported operating segments.  We manage our business on the basis of the one reportable segment e-commerce solutions and service provider.  The accounting policies for segment reporting are the same as for the Company as a whole.  We do not segregate assets by segments since our chief operating decision maker, or decision making group, does not use assets as a basis to evaluate a segment’s performance.  

10. SUBSEQUENT EVENTS

On March 18, 2013, the Company entered into a non-binding Letter of Intent with IRIS Corporation Berhad (KLS 0010; ACE-MKT) (“IRIS”), a leading, diversified, technology company, listed on the Malaysian Stock Exchange and the owner of certain waste-to-energy and other renewable assets, technologies, rights and obligations (the “IRIS Business”) in respect of a proposed transaction in which Sitoa will purchase the IRIS Business in exchange for common shares in Sitoa and IRIS becoming the majority shareholder of Sitoa as a result of the share exchange.

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ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

On April 24, 2012, we dismissed Burr Pilger Mayer, Inc. as our independent registered public accounting firm. On the same date, the Audit Committee Chair approved and authorized the engagement of the accounting firm of Dominic K.F. Chan & Co. as our new independent registered public accounting firm.

Burr Pilger Mayer, Inc.’s report on our financial statements dated March 27, 2012 for the most recent fiscal year ended December 31, 2011 did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles, except that Burr Pilger Mayer, Inc.’s report contained an explanatory paragraph in respect to the substantial doubt as to our ability to continue as a going concern.

In connection with the audit of our financial statements for the most recent fiscal year ended December 31, 2011 through the effective date of dismissal on April 24, 2012, there were no disagreements, resolved or not, with Burr Pilger Mayer, Inc. on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Burr Pilger Mayer, Inc. would have caused them to make reference to the subject matter of the disagreements in connection with their report on the financial statements.

ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures.  Under the direction of James Wang, our Chief Executive and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) there continues to be material weaknesses in the Company’s internal controls over financial reporting, that the weaknesses constitute a “deficiency” and that this deficiency could result in misstatements of the foregoing accounts and disclosures that could result in a material misstatement to the financial statements for the periods covered by this report that would not be detected, and (ii) accordingly, our disclosure controls and procedures were not effective as of December 31, 2012.

Annual Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

1.

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

16

2.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

3.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of December 31, 2012, management assessed the effectiveness of our internal control over financial reporting and based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below.  This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and (2) inadequate segregation of duties consistent with control objectives.  The aforementioned material weaknesses were identified by our Chief Executive Officer and Chief Financial Officer in connection with the review of our financial statements as of December 31, 2012.

Management believes that the material weakness set forth in item (2) above did not have an effect on our financial results.  However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the management's report in this annual report.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Directors, Executive Officers and Significant Employees

The following table sets forth certain information regarding the members of our Board of Directors, executive officers and our significant employees as of March 28, 2013:

James Wang (age 49) has been President & Chief Executive and Financial Officer of the Company since December 20, 2012, and a director of the Company since March 1, 2012.  He was previously a Managing Director of Soconison Technology Ventures, a venture capital firm focused on technology, media and telecom investments, since October 2003.  He is a twenty-five year veteran of technology investing and entrepreneurship and began his career at First Boston as a NASDAQ trader in fledgling companies, incl. Intel, Apple Computer, Microsoft and Lotus Development.  He later transitioned to technology investment banking where he arranged over $800 million in funding for companies in semiconductors, data storage and programmable logic.  Since the mid-1990's Mr. Wang has worked in Silicon Valley as an angel investor and has also started several companies, including a micro storage device company which was sold to Maxtor, and a Storage Area Networking company that was sold to Lucent.  He holds a MS in Computer Science from MIT and a MBA from UCLA.

Dennis Schmal (age 65) has been a member of our Board of Directors since November 2, 2011, and serves as the Chairman of the Board and Corporate Secretary.  Mr. Schmal previously was a partner at Arthur Andersen, where he worked from 1972 through 1999, when he retired. As a senior business advisor with special focus in finance, he has extensive knowledge of financial reporting and holds a CPA certificate (retired).  Mr. Schmal was responsible at Andersen for leading hundreds of audits and consulting projects for a variety of enterprises over several decades. Since his retirement from Andersen, Mr. Schmal has served on the boards of directors of approximately 15 business entities, including both public and private companies.  He currently serves on the boards of directors of Merriman Holdings, Inc. (2003), Wells Fargo Hedge Funds (2008) and Genworth Financial GuideMark Mutual Funds (2007), all of which are public reporting entities.  He also serves as Chairman of the Board of Pacific Metrics Corporation (2006), a private company.  In the last five years, he has also completed service on the boards of directors of Varian Semiconductor and Northbay Bancorp, both public companies, before both companies were sold and merged out of existence.  He serves as the “audit committee finance expert” on all the public entity boards on which he has served.  Mr. Schmal holds a B.S. with summa cum laude honors in business administration with a focus on finance and accounting from California State University, Fresno.

Family Relationships

There are no family relationships between any of the Company’s directors or executive officers.

Involvement in Certain Legal Proceedings

We are not aware of any material legal proceedings that have occurred within the past five years concerning any director, director nominee, or control person which involved a criminal conviction, a pending criminal proceeding, a pending or concluded administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.

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Section 16(a) Beneficial Ownership Reporting Compliance

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC.  The SEC has designated specific due dates for these reports.

Code of Ethics

At the present time, the Company has not adopted a code of ethics.  The Company intends to adopt a code of ethics in the near future.

Audit Committee

At the present time, the Company’s audit committee consists of Messrs. Dennis Schmal and James Wang.  Mr. Schmal is the Chairman of the Audit Committee.  Mr. Wang is considered an interested member of the audit committee as Mr. Wang is the President and CEO of the Company.  

The Company adopted an Audit Committee Charter and Audit Committee Procedures for Whistleblowers on May 22, 2007, which were filed as exhibits 99.1 and 99.2 to the Form 10-QSB filed with the SEC via EDGAR on August 14, 2007, and are incorporated by reference herein.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officer received total annual salary and bonus compensation in excess of $100,000:

Narrative Disclosure to the Summary Compensation Table

See Note 5 to the financial statements as of December 31, 2012 for description of the terms of Stock Option grants and the methods and assumptions used to determine fair value of Option Awards.

The Company entered into an executive employment agreement with Mr. Wang, dated as of December 20, 2012, pursuant to which, the Company is obligated to pay Mr. Wang a monthly salary of $1,000.  

The Company entered into an executive employment agreement with Mr. Yu, dated as of September 1, 2010, pursuant to which, the Company was obligated to pay Mr. Yu an initial monthly base salary of $5,000, which was to be increased to a monthly base salary of $10,000 per month if the Company raised at least $1,000,000 in aggregate financing until his resignation.  The Company also granted Mr. Yu a five-year option to purchase 250,000 restricted shares of the Company’s common stock under the Company’s 2006 Stock Option and Incentive Plan. The option is exercisable at a per share price of $0.60 per share and vests on a monthly basis, over a 24-month period, commencing on September 1, 2010.

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Outstanding Equity Awards at Fiscal Year-End

The following table contains disclosure concerning unexercised options and equity incentive plan awards for each Named Executive Officer outstanding as of the end of the Company’s fiscal year ended December 31, 2012:

See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Securities Authorized for Issuance Under Equity Compensation Plans” for details of the Company’s Stock Option Plan.

Retirement Benefits and Change of Control

Not Applicable.

Director Compensation

The following table discloses the compensation of the directors of the Company for the Company’s fiscal year ended December 31, 2012 (unless already disclosed above):

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information as of March 28, 2013 (the “Determination Date”), with respect to the Company’s directors, Named Executive Officers, and each person who is known by the Company to own beneficially, more than five percent (5%) of the Company’s Common Stock, and with respect to shares owned beneficially by all of the Company’s directors and executive officers as a group.  Common Stock not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire shares within 60 days is treated as outstanding only when determining the amount and percentage of Common Stock owned by such individual.  Except as noted, each person or entity has sole voting and sole investment power with respect to the shares shown.  Unless otherwise specified, the address of each of the persons set forth below is in care of Sitoa Global, Inc., Room 4304, 43/F China Resources Building 26 Harbour Road, Wan Chai, Hong Kong HKSAR.

As of the Determination Date, there are 96,645,019 shares of Common Stock issued and outstanding.

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Securities Authorized for Issuance Under Equity Compensation Plans

See “Item 5. Market For Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Securities Authorized for Issuance Under Equity Compensation Plans” above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

None of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates (other than compensation described under Item 11, “Executive Compensation”) since the beginning of our 2011 fiscal year which are required to be disclosed pursuant to the rules and regulations of the SEC.

Director Independence

None.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table discloses the fees billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended December 31, 2012 and 2011.

Audit Committee’s Pre-Approval Practice  

Our audit committee pre-approves all audit services to be performed by our independent registered public auditor.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS

Financial Statements

The financial statements are set forth under Item 8 of this annual report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.

Exhibits

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 28th day of March, 2013.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

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EXHIBIT INDEX

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