Sitoa Builds the Top-Line Moves Toward Cash Flow Breakeven
Ken Nagy, CFA
On May 9, 2012, Sitoa Global Inc. (STOA), an e-commerce facilitator that develops, integrates and hosts B2C (business-to-consumer) social e-commerce sites, reported financial results for its first quarter ended March 31, 2012.
Sitoa reported mixed results with year over year first quarter revenues lifting off to $812,530 from $0 in revenues for the first quarter 2011.
The jump in revenues was a result of providing hosting and integration services to 4-GS, Ltd., ZBL Cybermarketing, Ltd., i-Media, Ltd., Chunjie365 and Sonsi Inc.
While Sitoa seeks to continue to diversify its revenue sources from current and new customers, 43 percent of the Company’s first quarter service revenue was from 4-GS, 17 percent from ZBL Cybermarketing, 14 percent from i-Media, 17 percent from Chunjie365, and 9 percent from Sonsi.
Cost of service for the three months ended March 31, 2012 was $588,100 resulting in gross profit of $224,430 and gross margin of 27.6 percent.
Still, Sitoa’s net loss increased to a net loss of $246,445 for the first quarter of fiscal 2012 compared to a net loss of $166,685 during the three months ended March 31, 2011.
The increase in net loss was primarily a result of higher general and administrative expenses and stock based compensation in the first quarter ended March 31, 2012 compared to the same period of 2011.
General and administrative expense increased to $232,542 during the first quarter 2012 compared to $74,661 in 2011.
The increase in general and administrative expense was mainly a result of servicing customers and business development activities.
Stock based compensation expenses increased to $237,500 during the first quarter 2012 compared to $81,250 for the three months ended March 31, 2011.
The increase in stock based compensation was mostly due to vesting of share options of Sitoa’s former CEO.
It should be noted that the stock based compensation is non-recurring and the Company was close to break-even EPS absent this expense.
Sitoa reiterated some important recent developments including recently entering into partnership agreements to develop additional e-commerce solutions with ShopShip2PH and BCLN Golf, Ltd.
ShopShip2PH is an e-commerce site targeting Overseas Foreign Workers (OFW’s) from the Philippines that live overseas for employment. The site allows the OFW to purchase products online and then have them shipped directly to the Philippines.
The marketplace will feature competitively priced products, compared to what Philippine based specialty importers can attain them for, that are available outside the Philippines.
Similarly, BCLN Golf, Ltd. www.bclngolf.com enables online sales of BCLN’s golf apparel as well as other golf related products from US and European golf specialty companies.
BCLN is the 3rd largest golf apparel designer and retailer in Hong Kong and Mainland China with its products being only sold in pro shops located in golf courses throughout both countries.
In 2011, analysts estimate that the Chinese golf industry generated revenues of over 3 billion yuan (US$500 million) and project it to grow at over 15% per year over the next five years.
Based on a weighted average number of basic and fully diluted common shares of 27.393 million, basic and diluted net loss per share resulted in a net loss of $0.01 per share for the first quarter of fiscal 2012. This compared to a basic and diluted net loss per share of $0.02 based on a weighted average number of basic and fully diluted shares of 9.108 million during the three months ended March 31, 2011.
As of March 31, 2012, the Company reported cash and equivalents of $58,557 and a working capital deficit of $425,673. This compared to cash and equivalents of $40,373 and a working capital deficit of $477,511 on December 31, 2011.
Similarly, Operating activities used $1,766 in cash in the three months ended March 31, 2012.
Still, it should be noted that operations were cash flow positive before auditor fees for the Company’s 10-K.
To view a free copy of our most recent research report on STOA or subscribe to our daily morning email alert, visit Ken Nagy's coverage page at http://scr.zacks.com/.
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