Value Exchange International, Inc. - Quarter Report: 2011 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

 

  X . QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2011

      . TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _____________ to _____________

Commission File Number 000-53537

 

SINO PAYMENTS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		26-3767331
(State of incorporation)		(I.R.S. Employer Identification No.)

 

Unit T25, GF Bangkok Bank Building

18 Bonham Strand West

Sheung Wan, Hong Kong

(Address of principal executive offices)

 

877-205-6270

(Registrant’s telephone number)

with a copy to:

Carrillo, Huettel & Zouvas, LLP

3033 Fifth Ave. Suite 400

San Diego, CA 92103

Telephone (619) 546-6100

Facsimile (619) 546-6060

 

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

Yes  X . No      .

 

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).

(Not required) 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. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

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

Yes      . No  X .

As of April 19, 2011, there were 65,212,842 shares of the registrant’s $.00001 par value common stock issued and outstanding.

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SINO PAYMENTS, INC. *

TABLE OF CONTENTS

		Page
PART I.                 FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4.	CONTROLS AND PROCEDURES	15
PART II.               OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 1A.	RISK FACTORS	15
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	16
ITEM 4.	[REMOVED AND RESERVED]	16
ITEM 5.	OTHER INFORMATION	16
ITEM 6.	EXHIBITS	17

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Sino Payments, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to “Company”, “SNPY”, “we”, “us” and “our” are references to Sino Payments, Inc.

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PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

SINO PAYMENTS, INC.

(A Development Stage Company)

Financial Statements

(unaudited)

February 28, 2011

Index
Balance Sheets (unaudited)	4
Statements of Operations (unaudited)	5
Statements of Cash Flows (unaudited)	6
Notes to the Financial Statements (unaudited)	7

   

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SINO PAYMENTS, INC.

(A Development Stage Company)

Balance Sheets

(unaudited)

	February 28, 2011 $	August 31, 2010 $
ASSETS
Current Assets
Cash	10	10
Total Current Assets	10	10
Investment in joint venture	10,000	–
Total Assets	10,010	10
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	76,633	73,142
Accrued liabilities	66,708	90,346
Due to related party	7,376	8,828
Loan payable	5,000	14,332
Total Liabilities	155,717	186,648
Stockholders’ Deficit
Preferred stock, 100,000,000 shares authorized, $0.00001 par value; no shares issued and outstanding	–	–
Common stock, 100,000,000 shares authorized, $0.00001 par value; 54,521,221 shares issued and outstanding	545	545
Additional paid-in capital	741,932	741,932
Common stock issuable	177,547	–
Deficit accumulated during the development stage	(1,065,731)	(929,115)
Total Stockholders’ Deficit	(145,707)	(186,638)
Total Liabilities and Stockholders’ Deficit	10,010	10

(The accompanying notes are an integral part of these financial statements)

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SINO PAYMENTS, INC.

(A Development Stage Company)

Statements of Expenses

(unaudited)

	For the Three Months Ended	For the Three Months Ended	For the Six Months Ended	For the Six Months Ended	Accumulated from June 26, 2007 (Date of Inception)
	February 28,	February 28,	February 28,	February 28,	to February 28,
	2011	2010	2011	2010	2011
	$	$	$	$	$
Operating Expenses
General and administrative	92,056	125,618	135,547	187,174	1,054,355
Total Operating Expenses	92,056	125,618	135,547	187,174	1,054,355
Other Expense
Interest expense	222	183	692	369	3,029
Loss on settlement of debt	377	5,470	377	7,970	8,347
Net loss	(92,655)	(131,271)	(136,616)	(195,513)	(1,065,731)
Net loss per share, basic and diluted	–	–	–	–
Weighted average number of shares outstanding	54,521,221	51,660,412	54,521,221	50,001,491

(The accompanying notes are an integral part of these financial statements)

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SINO PAYMENTS, INC.

(A Development Stage Company)

Statements of Cash Flows

(unaudited)

	For the Six Months Ended February 28, 2011 $	For the Six Months Ended February 28, 2010 $	Accumulated from June 26, 2007 (Date of Inception) to February 28, 2011 $
Operating Activities
Net loss for the period	(136,616)	(195,513)	(1,065,731)
Adjustments to reconcile net loss to net cash used In operating activities:
Accretion expense	–	3,150	3,600
Loss on settlement of debt	377	7,970	8,347
Shares issuable for settlement of services	52,575	–	52,575
Shares issued for services	–	138,367	608,845
Warrants issued for services	–	2,938	2,938
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	74,682	36,164	238,392
Net cash used in operating activities	(8,982)	(17,224)	(151,034)
Financing Activities
Proceeds from issuance of common stock	–	–	81,130
Proceeds from convertible notes payable	–	–	7,200
Proceeds from promissory note payable	8,982	16,203	39,517
Proceeds from related parties, net	–	1,036	23,197
Net cash provided by financing activities	8,982	17,239	151,044
Increase (Decrease) in cash	–	15	10
Cash, beginning of period	10	7	–
Cash, end of period	10	22	10
Supplemental disclosures:
Interest paid	–	–	–
Income taxes paid	–	–	–
Non-cash investing and financing activities:
Beneficial conversion expense of convertible notes	–	3,150	3,600
Shares issuable for joint venture	10,000	–	10,000

(The accompanying notes are an integral part of these financial statements)

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SINO PAYMENTS, INC.

(A Development Stage Company)

Notes to the Financial Statements

February 28, 2011

(unaudited)

1.

Nature of Operations and Continuance of Business

Sino Payments Inc. (the “Company”) was incorporated in the State of Nevada on June 26, 2007. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company’s principal business is to provide credit and debit card processing services to multinational retailers in Asia.

Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate significant revenue or earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at February 28, 2011, the Company has not generated revenues, has a working capital deficiency of $155,707 and has accumulated losses totaling $1,065,731 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.

Summary of Significant Accounting Policies

a)

Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year end is August 31.  

b)

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

c)

Interim Financial Statements

These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

d)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

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SINO PAYMENTS, INC.

(A Development Stage Company)

Notes to the Financial Statements

February 28, 2011

(unaudited)

2.

Summary of Significant Accounting Policies (continued)

e)

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, and amounts due to related parties.  Pursuant to ASC 820 and 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

f)

Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

g)

Comprehensive Loss

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at February 28, 2011, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

h)

Foreign Currency Translation

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into United States dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.  Foreign currency transactions are primarily undertaken in Hong Kong dollars.  

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SINO PAYMENTS, INC.

(A Development Stage Company)

Notes to the Financial Statements

February 28, 2011

(unaudited)

2.

Summary of Significant Accounting Policies (continued)

i)

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

j)

Recent Accounting Pronouncements

In October 2009, FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.

In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend.  This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis.  The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.  

In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis.  This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.  

In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

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SINO PAYMENTS, INC.

(A Development Stage Company)

Notes to the Financial Statements

February 28, 2011

(unaudited)

2.

Summary of Significant Accounting Policies (continued)

j)

Recent Accounting Pronouncements (continued)

In March 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.”  The amendments in this update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010.  Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this update.  The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements.    

3

Investment in Joint Venture

On November 26, 2010, the Company entered into a joint venture agreement with TAP Investments Group Limited (TAP) and agreed to issue 1,000,000 common shares of the Company in exchange for 51% interest of TAP.  As at February 28, 2011, the common shares have not been issued.  

4.

Loan Payable

On January 10, 2011, the Company entered into a line of credit with an unrelated party for a maximum amount of $100,000, unsecured, due interest at 8% per annum, and due on demand.  As at February 28, 2011, the Company owed $5,000 (August 31, 2010 - $nil) on the line of credit.  During the period ended February 28, 2011, the Company recorded accrued interest of $35 (February 28, 2010 - $nil).

During the year ended August 31, 2010, the Company entered into a line of credit with an unrelated party for a maximum amount of $150,000, unsecured, due interest at 8% per annum, and due on demand.  As at February 28, 2011, the Company owed $nil (August 31, 2010 - $14,332) on the line of credit.  During the period ended February 28, 2011, the Company recorded accrued interest of $510 (February 28, 2010 - $nil).   

5.

Common Shares

All common share issuances for non-cash purposes are valued using the end-of-day trading price based on the date that the shares were issued or authorized by management, unless otherwise indicated.  

a)

On January 28, 2011, the Company authorized the issuance of 2,656,250 common shares for consulting services with a fair value of $53,125.  As at February 28, 2011, the shares have not been issued.  

b)

On January 24, 2011, the Company authorized the issuance of 2,553,971 common shares to directors and officers with a fair value of $65,127 to settle outstanding balances owing of $66,071 resulting in a gain on settlement of debt of $944. As at February 28, 2011, the shares have not been issued.  

c)

On December 10, 2010, the Company authorized the issuance of 4,481,400 common shares with a fair value of $49,295 to settle outstanding notes payable and accrued interest of $18,824 at $0.01 per common share, and consulting services of $29,150, resulting in a loss on settlement of debt of $1,321.  As at February 28, 2011, the shares have not been issued.  

d)

On December 10, 2010, the Company authorized the issuance of 1,000,000 common shares with a fair value of $10,000 as part of their interest in the joint venture agreement, as noted in Note 3. As at February 28, 2011, the shares have not been issued.   

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SINO PAYMENTS, INC.

(A Development Stage Company)

Notes to the Financial Statements

February 28, 2011

(unaudited)

6.

Related Party Transactions

a)

As at February 28, 2011, the Company owed $nil (August 31, 2010 – $1,452) to the President of the Company for payment of general operating expenditures.  The amounts are unsecured, non-interest bearing, and due on demand.

b)

As at February 28, 2011, the Company owes $7,376 (August 31, 2010 - $7,376) to a Director of the Company for payment of general operating expenditures.  The amounts owing are unsecured, non-interest bearing, and due on demand.

7.

Subsequent Events

a)

On March 28, 2011, the Company issued 8,137,650 common shares relating to the issuances noted in Notes 5(a), (c), and (d).  

b)

On April 1, 2011, the Company issued 2,553,971 common shares relating to the issuances noted in Note 5(b).  

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

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS

Working Capital

	February 28,	August 31,
	2011 $	2010 $
Current Assets	10	10
Current Liabilities	155,717	186,648
Working Capital Deficit	155,707	(186,638)

Cash Flows

	Six months ended	Six months ended
	February 28, 2011 $	February 28, 2010 $
Cash Flows from (used in) Operating Activities	(8,982)	(17,224)
Cash Flows from (used in) Financing Activities	8,982	17,239
Net Increase (decrease) in Cash During Period	-	15

Operating Revenues

We have not generated any revenues since inception.

Operating Expenses and Net Loss

Operating expenses for the three and six months ended February 28, 2011 was $92,056 and $135,547 respectively compared with $125,618 and $187,174 for the three months and six months ended February 28, 2010. The decrease in operating expenditures was attributed to technical services incurred on the Company’s credit card agreements in the prior year that were not incurred in the current period.  Furthermore, the Company incurred accretion expense for beneficial conversion of convertible debentures and stock-based compensation for issuance of warrants during the period ended February 28, 2010 that were not incurred during the period ended February 28, 2011.   

Net loss for the six months ended February 28, 2011 was $136,616 compared with $195,513 for the six months ended February 28, 2010.  The decrease in net loss was attributed to the differences noted in operating expenses.  

Liquidity and Capital Resources

As at February 28, 2011, the Company’s cash balance was $10 compared to $10 as at August 31, 2010 and its total assets were $10,010 compared with $10 as at August 31, 2010.  The increase in total assets is attributed to issuable common stock relating to a joint venture investment for which the Company is to issue 1,000,000 common shares with a fair value of $10,000.  The value of the common stock was based on the end-of-day trading price on the date of the joint venture agreement.    

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As at February 28, 2011, the Company had total liabilities of $155,717 compared with total liabilities of $186,648 as at August 31, 2010.  The decrease in total liabilities was attributed to decreases in accounts payable and accrued liabilities of $20,147 due to the lack of sufficient cash flow for the Company to repay its obligations on a timely basis, and decrease of $9,332 in notes payable due to repayment and settlement of existing notes payable during the period.   

As at February 28, 2011, the Company had a working capital deficit of $155,707 compared with a working capital deficit of $186,638 as at August 31, 2010.  The increase in working capital deficit was attributed to day-to-day obligations of the Company that are unpaid given the fact that the Company lacks sufficient cash flow to repay its debts on a timely basis.        

Cashflow from Operating Activities

During the six months ended February 28, 2011, the Company used $8,982 of cash for operating activities compared to the use of $17,224 of cash for operating activities during the six months ended February 28, 2010. During the period, the Company incurred $136,616 of operating expenditures of which the majority comprised of unpaid obligations or expenses due to settlement with common shares.  

Cashflow from Investing Activities

During the six months ended February 28, 2011, the Company did not have any cash transactions related to investing activities.

Cashflow from Financing Activities

During the six months ended February 28, 2011, the Company received $8,982 of cash from financing activities compared to $17,239 for the six months ended February 28, 2010.  During the period ended February 28, 2011, the Company received net proceeds of $8,982 from a promissory note payable that is unsecured, due interest at 8% per annum, and due on demand.      

 

Quarterly Developments

On December 8, 2010, the Company signed a Memorandum of Understanding with TAP Group to discuss and negotiate a potential merger of Tap Group and its subsidiaries into the Company in a cooperative effort to grow their businesses throughout Asia.  

Subsequent Developments

On March 17, 2011, the Company issued a press release announcing that it has received a 5-year service agreement to provide IP transaction processing for credit and debit card sales of SOGO Department Stores, one of the largest and most preferred shopping destinations in Hong Kong and Shanghai.

On March 28, 2011, the Company issued a press release announcing that it has received a service agreement from venture partner TAP Group through the Company’s subsidiary TAP e-Payment Services (HK) Ltd., to provide electronic funds processing integration services to A.S. Watson for stores in Hong Kong and Shanghai.

On March 30, 2011, the Company issued a press release announcing that it has received a service agreement from venture partner TAP Group through the Company’s subsidiary TAP e-Payment Services (HK) Ltd., to provide electronic funds processing integration services to PARK n SHOP for stores in China.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing. 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

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Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

 

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain final government permission to complete the project.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Recently Issued Accounting Pronouncements

In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company adoption of provisions of ASU 2010-11 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

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The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2011. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.  Please refer to our Annual Report on Form 10-K as filed with the SEC on January 13, 2011, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Our management has concluded that, as of February 28, 2011, our internal control over financial reporting is not effective based on these criteria, due to material weaknesses resulting from not having an Audit Committee or financial expert on our Board of Directors and our failure to maintain appropriate cash controls.  

Changes In Internal Control and Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A.   RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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

1.   Quarterly Issuances:

During the quarter, we did not issue any unregistered securities other than as previously disclosed.

2.   Subsequent Issuances:

Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   [REMOVED AND RESERVED]

ITEM 5.   OTHER INFORMATION

 

None.

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ITEM 6.   EXHIBITS

The following exhibits are filed with this Quarterly Report on Form 10-Q:

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SINO PAYMENTS, INC.

Dated: April 19, 2011

By:

/s/ Matthew Mecke

Matthew Mecke

President and CEO

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