STOA - Sitoa Global Revenue Jumps

Zacks Small Cap Research

By Ken Nagy, CFA

On October 23, 2012, Sitoa Global Inc. (OTC Markets:STOA), an e-commerce facilitator that develops, integrates and hosts B2C (business-to-consumer) social e-commerce sites, reported financial results for its third quarter  and nine months ended September 30, 2012.

Sitoa reported improved results with year over year third quarter revenues jumping by $1.161 million to $1.424 million from $263,537 revenues for the third quarter 2011.

The progress in revenues was a result of increased revenues generated from hosting e-commerce solutions for its current customers.

However, cost of service for the three months ended September 30, 2012 was $1.762 million resulting in a gross loss of $337,015.

The year over year increase was primarily a result of the development and hosting of e-commerce solutions for customers which were performed by an outsourced development team and overseen by the Company’s project management.

It should be noted that $250,000 of deferred license fees that were received in connection with the partnership agreement with CITIC were not recognized in the third quarter that will be recognized in the fourth quarter 2012.

Furthermore, total operating expenses fell year over year by $263,195 to $301,926 during the third quarter fiscal 2012.

The drop was primarily due to a decrease in stock based compensation as a result of the cancellation of share options in connection with the resignation of Sitoa’s former CEO, as well as lower general and administrative expenses.         

Sitoa’s net loss came in flat with third quarter fiscal 2012 net loss improving slightly to a net loss of $638,941 compared to a net loss of $641,619 during the three months ended September 30, 2011.

The slight decrease in net loss was primarily a result of increased revenue recognition from its customers.

Based on a weighted average number of basic and fully diluted common shares of 35.867 million, basic and diluted net loss per share resulted in a net loss of $0.02 per share for the third quarter of fiscal 2012.  This compares to a basic and diluted net loss per share of $0.03 based on a weighted average number of basic and fully diluted shares of 24.277 million during the three months ended September 30, 2011.

Revenues for the nine months ended September 30, 2012 were $3.196 million compared to $263,537 for the nine months of the first nine months of 2011.

The Company’s net loss for the first nine months of 2012 improved by $58,621 to a net loss of $973,991 compared to a net loss of $1.032 million for the comparable period of 2011.

Total operating expense for the nine months ended September 30, 2012 increased year over year by $112,430 to $1.052 million compared to $940,340 for the first nine months of 2011.

The increase in operating expense was primarily a result of the servicing of its customers as well as business development activities.

Based on a weighted average number of basic and fully diluted common shares of 30.815 million, basic and diluted net loss per share resulted in a net loss of $0.03 per share for the first nine months of fiscal 2012.  This compares to a basic and diluted net loss per share of $0.06 based on a weighted average number of basic and fully diluted shares of 16.346 million during the nine months ended September 30, 2011.

The Company’s trend of an improving balance sheet continued with working capital moving into surplus territory from its historical deficit past!

As of September 30, 2012, the Company reported cash and equivalents of $250,000 and a working capital surplus of $269,096. This compares to cash and equivalents of $143,286 and a working capital deficit of $355,944 as of June 30, 2012.

Likewise, year to date, total shareholder’s equity blasted off from a shareholder deficit of $470,00 as of December 31, 2011 to shareholder equity of $273,262 for the quarter ended September 30, 2012.

Sitoa recently entered into a strategic partnership agreement with a division of China International Trust and Investment Corporation (CITIC) in which CITIC will utilize Sitoa’s software technology and catalog management system to develop and expand its evolving Business-to-Business ("B2B") trading platform.

CITIC is a large state-owned multinational conglomerate of the People's Republic of China, and is one of the largest diversified conglomerates in Asia with a balanced development of both financial and non-financial businesses across forty-four subsidiaries.

Furthermore, in 2011, CITIC was listed in the Fortune Global 500 for the third consecutive year, ranking 221st.         

 Sitoa received an investment of $500,000 in a private placement from Ingenium Capital.  The investment was at a price of $0.15 per share where Ingenium has an option to invest an additional $300,000 at a price of $0.30 per share.

Similarly, the Company recently engaged IRG Limited, to explore strategic alternatives to accelerate the growth of the Company and enhance shareholder value.

Management believes that the recent strategic partnership with CITIC, the growth capital investment by Ingenium Capital and the engagement of IRG as Sitoa’s financial advisor, will enable the Company to accelerate its growth as well as explore strategic options.


Please visit Ken Nagy's coverage page at scr.zacks.com to access a free copy of the full research report.

View Comments