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EX-23.1 - CIS WORLD INC | v210069_ex23-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 4
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
CIS
World, Inc.
(Name of
small business issuer in our charter)
Nevada
|
5045
|
26-1707182
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard
Industrial
Classification
Code
Number)
|
IRS
I.D.
|
70
West Madison Street, Suite 1400
First
National Plaza, Chicago, IL 60602
|
60602
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number: 312-214-3138
InCorp
Services, Inc.
375 N.
Stephanie St., Suite 1411
Henderson,
NV 89014
(702)
866-2500
(Name,
address and telephone number of agent for service)
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.
Large
accelerated filer ¨
Accelerated Filer ¨
Non-accelerated
filer ¨ Smaller
reporting company x
CALCULATION
OF REGISTRATION FEE
Title of each class of
securities to be registered
|
Amount to be
registered [1]
|
Proposed
maximum
offering
price per
unit
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration fee
[2] [3]
|
||||||||||||
Common
Stock offered by the Selling Stockholders [4]
|
9,513,658
|
$
|
0.20
|
$
|
1,902,731.60
|
$
|
106.17
|
(1) In
accordance with Rule 416(a), the registrant is also registering hereunder an
indeterminate number of shares that may be issued and resold resulting from
stock splits, stock dividends or similar transactions.
(2) Estimated
in accordance with Rule 457(c) of the Securities Act of 1933 solely for the
purpose of computing the amount of the registration fee based on recent prices
of private transactions.
(3) Calculated
under Section 6(b) of the Securities Act of 1933 as .00005580 of the aggregate
offering price.
(4) Represents
shares of the registrant’s common stock being registered for resale that have
been issued to the selling shareholders named in this registration
statement.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay our effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) may
determine.
PROSPECTUS
CIS
World, Inc.
Selling
shareholders are offering up to 9,513,658 shares of common stock. The
selling shareholders will offer their shares at $0.20 per share until our shares
are quoted on the OTC Bulletin Board and, assuming we secure this qualification,
thereafter at prevailing market prices or privately negotiated
prices. We will not receive proceeds from the sale of
shares from the selling shareholders.
There are
no underwriting commissions involved in this offering. We have agreed
to pay all the costs of this offering. Selling shareholders will pay no offering
expenses.
Prior to
this offering, there has been no market for our securities. Our common stock is
not now listed on any national securities exchange, the NASDAQ stock market, or
the OTC Bulletin Board. There is no guarantee that our securities
will ever trade on the OTC Bulletin Board or other exchange.
This
offering is highly speculative and these securities involve a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. See “Risk Factors” beginning on page
8.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is _________________
2
TABLE OF
CONTENTS
SUMMARY
INFORMATION AND RISK FACTORS
|
4
|
Risk
Factors
|
8
|
USE
OF PROCEEDS
|
18
|
DETERMINATION
OFFERING PRICE
|
18
|
DILUTION
|
18
|
SELLING
SHAREHOLDERS
|
18
|
PLAN
OF DISTRIBUTION
|
21
|
LEGAL
PROCEEDINGS
|
23
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
|
23
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
25
|
DESCRIPTION
OF SECURITIES
|
26
|
INTEREST
OF NAMED EXPERTS
|
27
|
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
|
27
|
DESCRIPTION
OF BUSINESS
|
28
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
32
|
DESCRIPTION
OF PROPERTY
|
40
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
41
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
42
|
EXECUTIVE
COMPENSATION
|
45
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
48
|
FINANCIAL
STATEMENTS
|
49
|
3
SUMMARY
INFORMATION AND RISK FACTORS
You
should carefully read all information in the prospectus, including the financial
statements and their explanatory notes, under the Financial Statements prior to
making an investment decision.
Organization
CIS
World, Inc. is a Nevada corporation formed on November 9, 2007, with registered
address at 375 N. Stephanie St., Suite 1411, Henderson, NV
89014-8909. CIS World, Inc. transacts its business in the U.S.
located in the State of Illinois and has principal office at 70 West Madison
Street, Suite 1400, First National Plaza, Chicago, IL 60602, and contact
telephone number 312-214-3138.
On
December 14, 2008, we established a wholly owned subsidiary, CIS WORLD (HK) LTD,
a wholly-owned subsidiary of CIS World, Inc., is located in Hong Kong, the
address: Flat C, 2F., Eastern Street, Sai Ying Pun, Hong Kong; and contact
number: 0852-60522088.
Business
We are
selling ink printer cartridges and printer consumables to Asia, Europe, North
America and South America.
Our
Products are:
|
¨
|
Refillable Cartridge:
Designed for inkjet printers as such as Epson, Canon, HP, Brother with the
same printing effects as the original cartridge, the refillable cartridge
can be refilled and used for many times. Thus it serves both cost-saving
and environment protective
function.
|
|
¨
|
Continuous Ink Supply
System: Designed for inkjet printers as Epson, Canon, Hp, Brother,
CISS includes ink tanks connected with cartridges and supplies ink
continuously to cartridges. Thus the users need not replace cartridges,
saving cost and achieving environment
protection.
|
From
April 2008 through December 2008, we accomplished a sales amount of $244,362;
and from January 1 to December 31, 2009, we sold total of $
630,967. For the nine months ended September 30, 2010, CIS World, Inc
has total Continue Ink Supply System, Refillable cartridges, Inks and cartridge
related parts revenues of $715,677.
We have
two principal suppliers for the products we sell, although we also purchase from
other suppliers. These principal suppliers are:
4
|
·
|
Kangzhixin
Technology (Shenzhen) Co., Ltd.
(“KZX”)
|
On
December 10, 2008, CIS World and Kangzhixin Technology (Shenzhen) Co., Ltd.
(“KZX”) signed a 3 year contract authorized CIS World as KZX’s exclusive selling
agent- for the products mentioned above in Asia (China is excluded), Europe,
North America, south America and in other regions as agreed. In
general, the cost plus pricing system shall be used by KZX. The prices and terms
offered for CIS World shall be discussed by KZX and CIS World at the time with
terms considering the international trade custom and existing market
competition, so as to realize profits for both parties. If KZX
provides more favorable offers to any other distributors or manufacturers
concerning the Products, KZX shall inform CIS World in written and provide more
favorable terms to CIS World. Kangzhixin Technology (Shenzhen) Co., Ltd.
(“KZX”), manufacturer of our products, which is located at B3 Third Layer of the
east, Fourth Industrial Parks of Rich Briade, Fuyong Neighborhood Bridgehead
Community, Bao’an District, Shenzhen, Guangdong China, produces various
refillable cartridges and continuous ink supply systems. Ms. Wu
Cuixian, a Director of CIS World, owns 39 percent of KZX.
Due to
the unclear description of quality issues and product pricing in original
distribution agreement, both parties revised the distribution agreement to
accurately and clearly define both parties’ responsibilities. The
revised distribution agreement was signed on March 1, 2010, and December 22,
2010 to be effective for the remaining terms of original signed agreement which
will expire on December 10, 2011.
For all
products sold to customers, the Company is responsible for products’ quality
issues, even though KZX provides limited manufacturing warranty. The
Company may return the products to KZX within 14 days after the products
received by the Company.
|
·
|
Shenzhen
DZX Technology Co. (“DZX”) [located at 2nd
FL, A Building, Fuhai Street, Xihe Community, Fuhai Road, Fuyong, Bao’an
District, and Shenzhen, Guangdong,
China]
|
We do not
have any purchasing written agreement with Shenzhen DZX Technology Co., Ltd. and
purchase on a purchase order basis. The products were shipped out at
FOB shipping point Shenzhen, China.
Commencing
in 2009, we also purchased inks and cartridge related parts from a Hong
Kong Dongzhixin Technology Co., Limited, which is located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong. We do not have any
purchasing written agreement with Dongzhixin Technology Co.,
Limited. The products were shipped out at FOB shipping point
Shenzhen, China, and FOB shipping point GuangZhou, China.
5
Purchases
from principal suppliers during the above periods were as follows:
NAME OF
SUPPLIER
|
JANUARY 1,
2008 –
DECEMBER 31,
2008
|
JANUARY 1,
2009 –
DECEMBER 31,
2009
|
JANUARY 1,
2008 –
SEPTEMBER 30,
2010
|
|||||||||
Kangzhixin
Technology (Shenzhen) Co., Ltd. (“KZX”)
|
0 | 111,666 | 611,110 | |||||||||
Shenzhen
DZX Technology Co. (“DZX”)
|
234,963 | 279,384 | 514,347 | |||||||||
Other
Suppliers [1]
|
0 | 198,310 | 346,824 |
[1] CIS
World, Ltd purchased Inks and cartridge related parts from a Hong
Kong Dongzhixin Technology Co., Limited, which is located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong. The products were shipped
out at FOB shipping point Shenzhen, China, and FOB shipping point GuangZhou,
China.
For all
products sold to customers, the Company is responsible for products’ quality
issues, even though KZX provides limited manufacturing warranty. The
Company may return the products to KZX within 14 days after the products
received by the Company.
For all
the products the Company purchased either from KZX or other suppliers, the
Company took the titles of the products. The Company then sold the
products to customers and the products were shipped out at FOB shipping point
Shenzhen, China. The Company is responsible for the return products
by customers and for the physical loss of inventories.
The
Offering
As of the
date of this prospectus, we had 39,535,861 shares of common stock
outstanding.
Selling
shareholders are offering up to 9,513,658 shares of common stock. The
selling shareholders will offer their shares at $0.20 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will pay all expenses of
registering the securities, estimated at approximately $100,000. We
will not receive any proceeds of the sale of these securities.
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. The current
absence of a public market for our common stock may make it more difficult for
you to sell shares of our common stock that you own.
6
Financial
Summary
Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. Therefore, you should carefully read
all the information in this prospectus, including the financial statements and
their explanatory notes before making an investment decision.
STATEMENT
OF LOSS
|
Period
|
|||||||||||||||
|
November 9,
|
|||||||||||||||
|
Nine
|
Year
|
Year
|
2007 (Date of
|
||||||||||||
|
Months
|
Ended
|
Ended
|
Inception)
|
||||||||||||
|
Ended
|
December
|
December
|
Through
|
||||||||||||
|
September 30
|
31
|
31,
|
March 31
|
||||||||||||
2010
|
2009
|
2008
|
2010
|
|||||||||||||
Revenues:
|
715,677 | - | $ | 630,967 | $ | 244,362 | $ | 1,044,390 | ||||||||
COGS:
|
654,873 | - | $ | 589,360 | $ | 234,963 | $ | 983,967 | ||||||||
Gross
Profit
|
60,804 | - | $ | 41,607 | $ | 9,399 | $ | 60,423 | ||||||||
Operating
expenses:
|
62,051 | $ | 108,875 | $ | 93,898 | $ | 222,041 | |||||||||
Net
Loss
|
$ | (1,246 | -) | $ | (67,258 | ) | $ | (84,437 | ) | $ | (161,546 | ) |
BALANCE
SHEETS
September 30
|
December 31
|
December 31
|
December 31
|
|||||||||||||
2010
|
2009
|
2008
|
2007
|
|||||||||||||
ASSETS
|
$ | 159,576 | - | $ | 131,995 | $ | 205,510 | $ | 20,000 | |||||||
LIABILITIES
|
$ | 47,354 | - | $ | 18,531 | $ | 24,741 | $ | 5,126 | |||||||
STOCKHOLDERS’
Equity
|
$ | 112,222 | - | $ | 113,464 | $ | 180,769 | $ | 14,874 | |||||||
TOTAL
LIABILITIES & EQUITY
|
$ | 159,576 | $ | 131,995 | $ | 205,510 | $ | 20,000 |
7
Risk
Factors
In
addition to the other information provided in this prospectus, you should
carefully consider the following risk factors in evaluating our business before
purchasing any of our common stock. All material risks are discussed
in this section.
There is substantial doubt
about our ability to continue as a going concern as a result of our lack of
significant revenues and if we are unable to generate significant revenue or
secure financing we may be required to cease or curtail our
operations.
Our lack
of significant revenues raise substantial doubt about our ability to continue as
a going concern. Our financial statements do not include adjustments
that might result from the outcome of this uncertainty and if we are unable to
generate significant revenue or secure financing we may be required to cease or
curtail our operations.
Any decrease in the
availability, or increase in the cost, of printer cartridges and CISS we
purchase for resale could materially affect our earnings.
Our
operations depend heavily on the availability of printer cartridges and CISS we
resell. We purchase printer cartridges from KZX or DZX and then resell them to
our customers. However, if KZX or DZX is unable or unwilling to provide us with
printer cartridges or CISS on terms favorable to us, we may be unable to provide
certain products and services. This could result in a decrease in profit and
damage to our reputation in our industry. In the event our costs of
acquiring these printer cartridges and CISS increases, we may not be able to
pass these higher costs on to our customers in full or at all. Any increase in
the prices for printer cartridges and CISS could materially increase our costs
and therefore lower our earnings.
Any decrease in the
availability, or increase in the cost, of inks and cartridge related parts we
purchase for resale could materially affect our
earnings.
Commencing
in 2009, our operations also began to depend heavily on the availability inks
and cartridge related parts we acquire from a Hong Kong Dongzhixin
Technology Co., Limited. We do not have any purchasing written agreement with
Dongzhixin Technology Co., Limited. We purchase these products from
them and then resell them to our customers. However, if Dongzhixin Technology
Co., Limited is unable or unwilling to provide us with inks and cartridge
related parts on terms favorable to us, we may be unable to provide certain
products and services. This could result in a decrease in profit and damage to
our reputation in our industry. In the event our costs of acquiring
these inks and cartridge related parts increases, we may not be able to pass
these higher costs on to our customers in full or at all. Any increase in the
prices for inks and cartridge related parts could materially increase our costs
and therefore lower our earnings.
8
The competitive pressures we
face could harm our revenue, gross margin and prospects.
We
encounter aggressive competition from numerous and varied competitors in the
sale of our products. We may have to lower the prices of our products and
services to stay competitive, while at the same time trying to maintain or
improve revenue and gross margin. The markets in which we do business, printing
supplies markets, are highly competitive, and we encounter aggressive price
competition for all of our products from numerous companies globally. Over the
past several years, price competition in the market for printing related
products has been particularly intense as competitors have aggressively cut
prices and lowered their product margins for these products. In addition,
competitors in some of the markets in which we compete with a greater presence
in lower-cost jurisdictions may be able to offer lower prices than we are able
to offer. Our results of operations and financial condition may be adversely
affected by these and other industry-wide pricing pressures.
Due to the international
nature of our business, political or economic changes or other factors could
harm our future revenue, costs and expenses and financial
condition.
Our sales
outside the United States in emerging markets, including Asia and South America
make up 100% of our net revenue. Our future revenue, gross margin, expenses and
financial condition could suffer due to a variety of international factors,
including:
|
¨
|
ongoing
instability or changes in a country's or region's economic or political
conditions, including inflation, recession, interest rate fluctuations and
actual or anticipated military or political
conflicts;
|
|
¨
|
trade
regulations and procedures and actions affecting production, pricing and
marketing of products;
|
|
¨
|
changes
in the regulatory or legal
environment;
|
|
¨
|
differing
technology standards or customer
requirements;
|
|
¨
|
import,
export or other business licensing requirements or requirements relating
to making foreign direct investments, which could affect our ability to
obtain favorable terms for components or lead to penalties or
restrictions;
|
|
¨
|
difficulties
associated with repatriating cash generated or held abroad in a
tax-efficient manner and changes in tax laws;
and
|
|
¨
|
fluctuations
in freight costs and disruptions in the transportation and shipping
infrastructure at important geographic points of exit and entry for our
products and shipments.
|
9
The
factors described above also could disrupt our product and component
manufacturing and key suppliers located outside of the United States. For
example, we rely on manufacturers in China for the production of all of our
products.
Due to
all of our sales being from countries outside of the United States, other
currencies, particularly the Hong Kong dollars, euro, the British pound, Chinese
Yuan Renminbi and the Japanese yen, can have an impact on our results (expressed
in U.S. dollars). Currency variations also contribute to variations in sales of
products and services in impacted jurisdictions. Accordingly, fluctuations in
foreign currency rates could have a material impact on our revenue growth in
future periods. In addition, currency variations can adversely affect margins on
sales of our products in countries outside of the United States and margins on
sales of products that include components obtained from suppliers located
outside of the United States.
We
depend for 70%, a majority of our revenues, on third-party suppliers KZX and DZX
for the products we sell, and to a lesser extent on another supplier Dongzhixin
Technology Co., Limited, and our revenue and gross margin could suffer if we
fail to manage suppliers properly.
Our
operations depend on our ability to anticipate our needs for products and our
suppliers' ability to deliver sufficient quantities of quality products at
reasonable prices in time for us to meet delivery schedules. Supplier problems
that we could face include component shortages, excess supply, risks related to
the terms of our contracts with suppliers, and risks related to our
relationships with KZX, or DZX our major suppliers. Our agreement
with KZX contains various termination provisions, including the right of either
party to terminate the agreement “in written 90 days before the expiration of
[the] agreement.” We have no written agreement with
DZX. Our use of these principal suppliers could exacerbate our
supplier issues. We obtain the majority of our products from these
principal suppliers due to technology, availability, price, quality or other
considerations. If the KZX agreement is terminated or we are otherwise unable to
obtain required supplies from KZX or DZX, replacing our majority source
suppliers could delay sales of our products as replacement suppliers initially
may be subject to capacity constraints or other output limitations. Alternative
sources may not exist or those alternative sources may be unable to produce the
quantities of those components necessary to satisfy our production requirements.
In addition, terms but that may be unilaterally modified or terminated by the
supplier with limited notice and with little or no penalty. The performance of
such one majority source supplier KZX under the agreement (and the
renewal or extension of the agreement upon similar terms) may affect the
quality, quantity and price of supplies to us. And we have no agreement with
DZX.
Commencing
in 2009, we also purchased inks and cartridge related parts from a Hong
Kong Dongzhixin Technology Co., Limited. We do not have any
purchasing written agreement with Dongzhixin Technology Co., Limited and face
similar risks to those described above with respect to our relationship with
Dongzhixin Technology Co., Limited.
10
The loss
of our majority source suppliers, the deterioration of our relationship with the
majority source suppliers, or any unilateral modification to the terms under
which we are supplied components by our majority source suppliers could
adversely affect our revenue and gross margins.
Our revenues are highly
concentrated in several customers which accounts for more than 75% of our
revenues, and our revenues could be reduced if these customers reduce their
orders from us.
In our
fiscal year ended December 31, 2008, the following customers accounted for the
following amounts and percentages of our total revenues:
Name of Customers
|
Amount of
Revenue
|
Percentage of
Total Revenues
|
||||||
Hendra
H
|
$
|
65,027.70
|
27
|
%
|
||||
Hendri
Wongso
|
$
|
43,761.50
|
18
|
%
|
||||
TNY
Trading Co. Ltd
|
$
|
64,228.50
|
26
|
%
|
||||
$
|
173,017.70
|
71
|
%
|
In our
fiscal year end December 31, 2009, the following customers accounted for the
following amounts and percentages of our total revenues:
Name of Customers
|
Amount of
Revenue
|
Percentage of
Total Revenues
|
||||||
Hendra
H
|
$
|
207,202
|
33
|
%
|
||||
Machtec
Comercio Imp& Exp. Ltd
|
$
|
67,388
|
11
|
%
|
||||
Hendri
Wongso
|
$
|
148,915
|
24
|
%
|
||||
Carlos
Alberto Antelo Jimenez
|
$
|
30,674
|
5
|
%
|
||||
Eoasis
|
$
|
29,926
|
5
|
%
|
||||
$
|
484,105
|
78
|
%
|
We have
no agreements with these customers, who purchase from us on purchase orders
only. If we cease
to do business with these customers at current levels and are unable to generate
additional sales with new and existing customers that purchase a similar amount
of our products, our revenues and net income would decline
considerably.
Risks Related to Management
and Personnel
We depend heavily on key
personnel, and turnover of key senior management could harm our
business.
Our
future business and results of operations depend in significant part upon the
continued contributions of our senior management personnel, including Rui Xia
Yuan, Chairman of Board of Directors; Lijun Wu, Director, President & CEO;
Cuixian Wu, Director, Secretary; Honghui Wen, Director, CFO. If we
lose Rui Xia Yuan, Chairman; Lijun Wu, President and CEO, Cuixian Wu, Secretary,
and Honghui Wen, CFO; or if Rui Xia Yuan, Chairman; Lijun Wu, President&
CEO, Cuixian Wu, Secretary, Honghui Wen, CFO fail to perform in their current
positions, or if we are not able to attract and retain skilled employees as
needed, our business could suffer. Significant turnover in our senior management
could significantly deplete our institutional knowledge held by our existing
senior management team. We depend on the skills and abilities of these key
employees in managing the product acquisition, marketing and sales aspects of
our business, any part of which could be harmed by turnover in the
future.
11
Our management has limited
experience in managing the day to day operations of a public company and, as a
result, we may incur additional expenses associated with the management of our
company.
The
management team, including Rui Xia Yuan, Chairman; Lijun Wu, President and CEO;
Cuixian Wu, Secretary; and Honghui Wen , CFO, is responsible for the operations
and reporting of the combined company. The requirements of operating as a small
public company are new to the management team and the employees as a whole. This
may require us to obtain outside assistance from legal, accounting, investor
relations, or other professionals that could be more costly than planned. We may
also be required to hire additional staff to comply with additional SEC
reporting requirements and compliance under the Sarbanes-Oxley Act of 2002. Our
failure to comply with reporting requirements and other provisions of securities
laws could negatively affect our stock price and adversely affect our results of
operations, cash flow and financial condition.
Although we believe that we
currently have adequate internal control over financial reporting, we are
exposed to risks from recent legislation requiring companies to evaluate
internal control over financial reporting.
Section
404 of the Sarbanes-Oxley Act of 2002 ("Section 404") requires our
management to report on the operating effectiveness of the Company's
Internal Controls over financial reporting for the year ending December 31
following the year in which this registration statement is declared effective,
assuming that year is 2010. Enterprise CPAs, Ltd., our independent registered
public accounting firm, will be required to attest to the effectiveness of our
internal control over financial reporting beginning with the year ending
thereafter. We must establish an ongoing program to perform the system and
process evaluation and testing necessary to comply with these requirements. We
expect that the cost of this program will require us to incur expenses and to
devote resources to Section 404 compliance on an ongoing basis.
It is
difficult for us to predict how long it will take to complete management's
assessment of the effectiveness of our internal control over financial
reporting for each year and to remediate any deficiencies in our internal
control over financial reporting. As a result, we may not be able to complete
the assessment and process on a timely basis. In the event that our Chief
Executive Officer, Chief Financial Officer or independent registered public
accounting firm determine that our internal control over financial reporting is
not effective as defined under Section 404, we cannot predict how regulators
will react or how the market prices of our shares will be
affected.
12
Because we do not have an
audit or compensation committee, shareholders will have to rely on the entire
board of directors, none of which are independent, to perform these
functions.
We do not
have an audit or compensation committee comprised of independent
directors. Indeed, we do not have any audit or compensation
committee. These functions are performed by the board of directors as
a whole. No members of the board of directors are independent
directors. Thus, there is a potential conflict in that board members
who are also part of management will participate in discussions concerning
management compensation and audit issues that may affect management
decisions.
Certain
of our stockholders hold a significant percentage of our outstanding voting
securities which could reduce the ability of minority shareholders to effect
certain corporate actions.
Our
officers, directors and majority shareholders are the beneficial owners of
approximately 51% of our outstanding voting securities. As a result, they
possess significant influence and can elect a majority of our board of directors
and authorize or prevent proposed significant corporate transactions. Their
ownership and control may also have the effect of delaying or preventing a
future change in control, impeding a merger, consolidation, takeover or other
business combination or discourage a potential acquirer from making a tender
offer.
Risks Related to our
Operations due to Relationship with Supplier in China
Because
our exclusive supplier is located in China, the following risks could affect the
business of our supplier. If these factors result in cost increases
to our supplier, because our agreement with our supplier is based upon their
costs, the prices of products we buy from our supplier for resale would
increase. If we are unable to increase prices to our customers in
this event, our profitability would be reduced.
Changes in China’s political
or economic situation could increase our suppliers costs.
Economic
reforms adopted by the Chinese government have had a positive effect on the
economic development of the country, but the government could change these
economic reforms or any of the legal systems at any time. This could either
benefit or damage operations and profitability. Some of the things that could
have this effect are:
|
•
|
Level
of government involvement in the
economy;
|
|
•
|
Control
of foreign exchange;
|
13
|
•
|
Methods
of allocating resources;
|
|
•
|
Balance
of payments position;
|
|
•
|
International
trade restrictions; and
|
|
•
|
International
conflict.
|
The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic cooperation and Development, or OECD, in many ways.
For example, state-owned enterprises still constitute a large portion of the
Chinese economy, and weak corporate governance traditions and a lack of flexible
currency exchange policy continue to persist. As a result of these differences,
the business of our supplier could be adversely affected.
The Chinese government
exerts substantial influence over the manner in which our supplier must conduct
its business activities.
Only
recently has China permitted provincial and local economic autonomy and private
economic activities. The Chinese government has exercised and continues to
exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. The central or local governments of the
jurisdictions in which our supplier operates may impose new, stricter
regulations or interpretations of existing regulations that would require
additional expenditures and efforts on its part to ensure our compliance with
such regulations or interpretations.
We may be
unable to enforce our rights due to policies regarding the regulation of foreign
investments in China, which could reduce our ability to compete and our
revenues.
The PRC's
legal system is a civil law system based on written statutes in which decided
legal cases have little value as precedents, unlike the common law system
prevalent in the United States. The PRC does not have a
well-developed, consolidated body of laws governing foreign investment
enterprises. As a result, the administration of laws and regulations by
government agencies may be subject to considerable discretion and variation, and
may be subject to influence by external forces unrelated to the legal merits of
a particular matter. China's regulations and policies with respect to
foreign investments are evolving. Definitive regulations and policies with
respect to such matters as the permissible percentage of foreign investment and
permissible rates of equity returns have not yet been
published. Statements regarding these evolving policies have been
conflicting and any such policies, as administered, are likely to be subject to
broad interpretation and discretion and to be modified, perhaps on a
case-by-case basis. The uncertainties regarding such regulations and policies
present risks which may affect our ability to achieve our business
objectives. If we are unable to enforce any legal rights we may have
under our contracts or otherwise, our ability to compete with other companies in
our industry could be materially and negatively affected and our revenues could
be reduced.
14
It may be difficult for
stockholders to enforce any judgment obtained in the United States against us,
which may limit the remedies otherwise available to our
stockholders.
All
except one of our directors and officers are nationals or residents of
China. All or a substantial portion of the assets of these persons
are located outside the United States. As a result, it may be
difficult for our stockholders to effect service of process within the United
States upon these persons. In addition, there
is uncertainty as to whether the courts of China would
recognize or enforce judgments of U.S. courts obtained against such
officers and/or directors predicated upon the civil
liability provisions of
the securities law of the United States or any state
thereof, or be competent to hear original actions brought in China against such
persons predicated upon
the securities laws of the United States or any state
thereof. Further, China’s treaties do not provide for reciprocal
recognition and enforcement of judgments of U.S. courts.
Risks Related to the Market
for our Stock
Investors may have
difficulty in reselling their shares due to the lack of market or state Blue Sky
laws.
Our
common stock is currently not quoted on any market. No market may ever develop
for our common stock, or if developed, may not be sustained in the
future.
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
15
Accordingly,
our shares should be considered totally illiquid, which inhibits investors’
ability to resell their shares.
We will 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. We
anticipate that our common stock will become a “penny stock”, and we will 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. For transactions
covered by Rule 15g-9, 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.
We do not
anticipate 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.
Sales of our common stock
under Rule 144 could reduce the price of our stock.
There are
19,027,316 shares of our common stock held by non-affiliates and 20,508,545
shares held by affiliates Rule 144 of the Securities Act of 1933 defines as
restricted securities.
All of
our shares held by non-affiliates are currently eligible for resale as they are
either being registered in this offering or may be resold under Rule 144,
however affiliates will still be subject to the resale restrictions of Rule
144. In general, persons holding restricted securities, including
affiliates, must hold their shares for a period of at least six months, may not
sell more than one percent of the total issued and outstanding shares in any
90-day period, and must resell the shares in an unsolicited brokerage
transaction at the market price. The availability for sale of
substantial amounts of common stock under Rule 144 could reduce prevailing
market prices for our securities.
16
If we do not file a
Registration Statement on Form 8-A to become a mandatory reporting company under
Section 12(g) of the Securities Exchange Act of 1934, we will continue as a
reporting company but will not be subject to the proxy statement or other
information requirements of the 1934 Act, our securities can no longer be quoted
on the OTC Bulletin Board, and our officers, directors and 10% stockholders will
not be required to submit reports to the SEC on their stock ownership and stock
trading activity, all of which could reduce the value of your investment and the
amount of publicly available information about us.
As a
result of this offering assuming it is declared effective in the year ended
December 31, 2011, as required under Section 15(d) of the Securities Exchange
Act of 1934, we will file periodic reports with the Securities and Exchange
Commission through December 31, 2011, including a Form 10-K for the year ending
December 31, 2011, assuming this registration statement is declared effective
before that date. At or prior to December 31, 2011, we intend
voluntarily to file a registration statement on Form 8-A which will subject us
to all of the reporting requirements of the 1934 Act. This will require us to
file quarterly and annual reports with the SEC and will also subject us to the
proxy rules of the SEC. In addition, our officers, directors and 10%
stockholders will be required to submit reports to the SEC on their stock
ownership and stock trading activity. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on December
31, 2011. If we do not file a registration statement on Form 8-A at
or prior to December 31, 2011, we will continue as a reporting company that will
not be subject to the proxy rules, Section 16 ownership reporting and short
swing profits provisions or other requirements of the 1934 Act, our securities
can no longer be quoted on the OTC Bulletin Board, and our officers, directors
and 10% stockholders will not be required to submit reports to the SEC on their
stock ownership and stock trading activity.
Special
Information Regarding Forward Looking Statements
Some of
the statements in this prospectus are “forward-looking
statements.” These forward-looking statements involve certain known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, among others, the
factors set forth above under “Risk Factors.” The words “believe,”
“expect,” “anticipate,” “intend,” “plan,” and similar expressions identify
forward-looking statements. We caution you not to place undue
reliance on these forward-looking statements. We undertake no
obligation to update and revise any forward-looking statements or to publicly
announce the result of any revisions to any of the forward-looking statements in
this document to reflect any future or developments. However, the
Private Securities Litigation Reform Act of 1995 is not available to us as a
non-reporting issuer. Further, Section 27A(b)(2)(D) of the Securities
Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that
the safe harbor for forward looking statements does not apply to statements made
in connection with an initial public offering.
17
USE
OF PROCEEDS
Not
applicable. We will not receive any proceeds from the sale of shares
offered by the selling shareholders.
DETERMINATION
OFFERING PRICE
The
offering price has been arbitrarily determined and does not bear any
relationship to our assets, results of operations, or book value, or to any
other generally accepted criteria of valuation. Prior to this offering, there
has been no market for our securities. In order to assure that
selling shareholders will offer their shares at $.20 per share until our shares
are quoted on the OTC Bulletin Board, we will notified our shareholders and our
Transfer Agent that no sales will be allowed prior to the date our shares are
quoted on the OTC Bulletin Board without proof the selling price.
DILUTION
Not
applicable. We are not offering any shares in this registration statement. All
shares are being registered on behalf of our selling shareholders.
SELLING
SHAREHOLDERS
The
selling shareholders named below are selling the securities. The
table assumes that all of the securities will be sold in this offering. However,
any or all of the securities listed below may be retained by any of the selling
shareholders, and therefore, no accurate forecast can be made as to the number
of securities that will be held by the selling shareholders upon termination of
this offering. These selling shareholders acquired their shares by
purchase exempt from registration under section 4(2) of the Securities Act of
1933 or Regulation S under the Securities Act of 1933. We believe
that the selling shareholders listed in the table have sole voting and
investment powers with respect to the securities indicated. We will
not receive any proceeds from the sale of the securities by the selling
shareholders. No selling shareholders are broker-dealers or
affiliates of broker-dealers.
18
Selling Shareholder
|
Total Shares
owned before
Offering
|
Shares to
offered by the
Selling
Shareholders
|
% owned
before
Offering
|
Amount
owned after
the offering,
assuming all
shares sold
[1]
|
% owned
after the
offering,
assuming
all shares
sold [1]
|
Any
Transaction
or
Relationship
in past 3
years
|
||||||||||||||||
CLAUDIA
LEVY
|
20,000 | 10,000 | 0.05 | % | 10,000 | 0.03 | % | |||||||||||||||
SHAN
FU CHEN
|
300,000 | 150,000 | 0.76 | % | 150,000 | 0.38 | % | |||||||||||||||
SIBLY
L.OFFUTT
|
20,000 | 10,000 | 0.05 | % | 10,000 | 0.03 | % | |||||||||||||||
YUN
COYNE
|
500,000 | 250,000 | 1.26 | % | 250,000 | 0.63 | % | |||||||||||||||
ANTHONY
C. BRUCE
|
1,000,000 | 500,000 | 2.53 | % | 500,000 | 1.26 | % | |||||||||||||||
JIA
B CHEN
|
100,000 | 50,000 | 0.25 | % | 50,000 | 0.13 | % | |||||||||||||||
CHANG
FEI ZHENG
|
200,000 | 100,000 | 0.51 | % | 100,000 | 0.25 | % | |||||||||||||||
SURANDY
C. SANDERS
|
100,000 | 50,000 | 0.25 | % | 50,000 | 0.13 | % | |||||||||||||||
ODELL
ROBERTSON
|
20,000 | 10,000 | 0.05 | % | 10,000 | 0.03 | % | |||||||||||||||
EVA
LIANG
|
100,000 | 50,000 | 0.25 | % | 50,000 | 0.13 | % | |||||||||||||||
LIFEN
HUI
|
200,000 | 100,000 | 0.51 | % | 100,000 | 0.25 | % | |||||||||||||||
LINDA
RUAN
|
100,000 | 50,000 | 0.25 | % | 50,000 | 0.13 | % | |||||||||||||||
GRACE
NWAKA WABOMNOR
|
150,000 | 75,000 | 0.38 | % | 75,000 | 0.19 | % | |||||||||||||||
LIAN
ZHI LIU
|
500,000 | 250,000 | 1.26 | % | 250,000 | 0.63 | % | |||||||||||||||
XUE
LAN CHEN
|
100,000 | 50,000 | 0.25 | % | 50,000 | 0.13 | % | |||||||||||||||
OOMMEN
GEORGE
|
50,000 | 25,000 | 0.13 | % | 25,000 | 0.06 | % | |||||||||||||||
RALPH
LOUIS SIRIANNI
|
1,000,000 | 500,000 | 2.53 | % | 500,000 | 1.26 | % | |||||||||||||||
JIANYONG
ZHANG
|
305,935 | 152,968 | 0.77 | % | 152,968 | 0.39 | % | |||||||||||||||
JUAN
ZHEN
|
305,663 | 152,832 | 0.77 | % | 152,832 | 0.39 | % | |||||||||||||||
MEIYAN
LIU
|
102,177 | 51,089 | 0.26 | % | 51,089 | 0.13 | % | |||||||||||||||
HANQUAN
LIU
|
308,124 | 154,062 | 0.78 | % | 154,062 | 0.39 | % | |||||||||||||||
ZHIPING
SU
|
105,648 | 52,824 | 0.27 | % | 52,824 | 0.13 | % | |||||||||||||||
HUAJUAN
WU
|
100,210 | 50,105 | 0.25 | % | 50,105 | 0.13 | % | |||||||||||||||
MINRU
SU
|
100,210 | 50,105 | 0.25 | % | 50,105 | 0.13 | % | |||||||||||||||
QING
CHEN
|
100,210 | 50,105 | 0.25 | % | 50,105 | 0.13 | % | |||||||||||||||
WEI
CUI
|
99,273 | 49,637 | 0.25 | % | 49,637 | 0.13 | % | |||||||||||||||
PING
ZHOU
|
510,043 | 255,022 | 1.29 | % | 255,022 | 0.65 | % | |||||||||||||||
ZHONGXIANG
HUANG
|
510,043 | 255,022 | 1.29 | % | 255,022 | 0.65 | % | |||||||||||||||
YULING
LIANG
|
509,950 | 254,975 | 1.29 | % | 254,975 | 0.64 | % | |||||||||||||||
XIAOMEI
LIU
|
509,950 | 254,975 | 1.29 | % | 254,975 | 0.64 | % | |||||||||||||||
NIYAN
WU
|
509,950 | 254,975 | 1.29 | % | 254,975 | 0.64 | % | |||||||||||||||
SHIWEI
WU
|
406,930 | 203,465 | 1.03 | % | 203,465 | 0.51 | % | |||||||||||||||
LINWANG
ZHANG
|
154,530 | 77,265 | 0.39 | % | 77,265 | 0.20 | % | |||||||||||||||
DANXIA
HUANG
|
101,146 | 50,573 | 0.26 | % | 50,573 | 0.13 | % | |||||||||||||||
HUAN
HUANG
|
516,350 | 258,175 | 1.31 | % | 258,175 | 0.65 | % | |||||||||||||||
FANG
WU
|
151,158 | 75,579 | 0.38 | % | 75,579 | 0.19 | % | |||||||||||||||
XIAOYING
CHEN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
XIANGHUI
LU
|
706,157 | 353,079 | 1.79 | % | 353,079 | 0.89 | % | |||||||||||||||
CHUHUA
LUO
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
ZHENJIA
LIANG
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
YANYUN
LIAO
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
JINBIAO
YUAN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
WANLAN
YUAN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
DONGYANG
YUAN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
SUWEN
CHEN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
XIAOXIA
YUAN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
YANXIA
CHEN
|
304,378 | 152,189 | 0.77 | % | 152,189 | 0.38 | % | |||||||||||||||
WANPING
YUAN
|
202,294 | 101,147 | 0.51 | % | 101,147 | 0.26 | % | |||||||||||||||
JINWANG
WEN
|
357,292 | 178,646 | 0.90 | % | 178,646 | 0.45 | % | |||||||||||||||
JUN
FENG WU
|
254,273 | 127,137 | 0.64 | % | 127,137 | 0.32 | % | |||||||||||||||
LIHENG
WU
|
202,762 | 101,381 | 0.51 | % | 101,381 | 0.26 | % | |||||||||||||||
FENG
YING LUO
|
202,762 | 101,381 | 0.51 | % | 101,381 | 0.26 | % | |||||||||||||||
HONGDONG
DING
|
120,345 | 60,173 | 0.30 | % | 60,173 | 0.15 | % | |||||||||||||||
YING
CHEN
|
99,742 | 49,871 | 0.25 | % | 49,871 | 0.13 | % | |||||||||||||||
CHANGXIN
HAN
|
91,781 | 45,891 | 0.23 | % | 45,891 | 0.12 | % | |||||||||||||||
LING
YANG
|
515,101 | 257,551 | 1.30 | % | 257,551 | 0.65 | % | |||||||||||||||
ZILING
LIU
|
515,101 | 257,551 | 1.30 | % | 257,551 | 0.65 | % | |||||||||||||||
HAIYIN
LIU
|
304,378 | 152,189 | 0.77 | % | 152,189 | 0.38 | % | |||||||||||||||
SUZHEN
CHEN
|
508,545 | 254,273 | 1.29 | % | 254,273 | 0.64 | % | |||||||||||||||
MICHAEL
T. WILLIAMS
|
198,000 | 99,000 | 0.50 | % | 99,000 | 0.25 | % |
Attonney
|
||||||||||||||
Total
|
19,027,316 | 9,513,658 | 48.13 | % | 9,513,658 | 24.06 | % |
19
Blue Sky
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
20
We
currently do not intend to and may not be able to qualify securities for resale
in other states which require shares to be qualified before they can be resold
by our shareholders.
PLAN
OF DISTRIBUTION
Our
common stock is currently not quoted on any market. No market may
ever develop for our common stock, or if developed, may not be sustained in the
future. Accordingly, our shares should be considered totally
illiquid, which inhibits investors’ ability to resell their shares.
Selling
shareholders are offering up to 9,513,658 shares of common stock. The
selling shareholders will offer their shares at $0.20 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will not receive any proceeds of
the sale of these securities. We will pay all expenses of registering
the securities.
The
securities offered by this prospectus will be sold by the selling shareholders
without underwriters and without commissions. The distribution of the
securities by the selling shareholders may be effected in one or more
transactions that may take place in the over-the-counter market or privately
negotiated transactions.
The
selling shareholders may pledge all or a portion of the securities owned as
collateral for margin accounts or in loan transactions, and the securities may
be resold pursuant to the terms of such pledges, margin accounts or loan
transactions. Upon default by such selling shareholders, the pledge in such loan
transaction would have the same rights of sale as the selling shareholders under
this prospectus. The selling shareholders may also enter into exchange traded
listed option transactions, which require the delivery of the securities listed
under this prospectus. After our securities are qualified for quotation on the
OTC Bulletin Board, the selling shareholders may also transfer securities owned
in other ways not involving market makers or established trading markets,
including directly by gift, distribution, or other transfer without
consideration, and upon any such transfer the transferee would have the same
rights of sale as such selling shareholders under this prospectus.
In
addition to the above, each of the selling shareholders will be affected by the
applicable provisions of the Securities Exchange Act of 1934, including, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the securities by the selling shareholders or any such other
person. We have instructed our selling shareholders that they many
not purchase any of our securities while they are selling shares under this
registration statement. We have advised them that we will monitor our
stock transfer records on a regular basis and will void any transaction they
undertake in violation of this restriction.
Upon this
registration statement being declared effective, the selling shareholders may
offer and sell their shares from time to time until all of the shares registered
are sold; however, this offering may not extend beyond two years from the
initial effective date of this registration statement.
21
There can
be no assurances that the selling shareholders will sell any or all of the
securities. In various states, the securities may not be sold unless
these securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied
with.
All of
the foregoing may affect the marketability of our securities. Pursuant to oral
promises we made to the selling shareholders, we will pay all the fees and
expenses incident to the registration of the securities.
Should
any substantial change occur regarding the status or other matters concerning
the selling shareholders or us, we will file a post-effective amendment
disclosing such matters.
OTC Bulletin Board
Considerations
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. We have
engaged in preliminary discussions with an NASD Market Maker to file our
application on Form 211 with the NASD, but as of the date of this prospectus, no
filing has been made. Based upon our counsel’s prior experience, we
anticipate that after this registration statement is declared effective, it will
take approximately 2 – 8 weeks for the NASD to issue a trading
symbol.
The OTC
Bulletin Board is separate and distinct from the NASDAQ stock
market. NASDAQ has no business relationship with issuers of
securities quoted on the OTC Bulletin Board. The SEC’s order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the OTC Bulletin Board.
Although
the NASDAQ stock market has rigorous listing standards to ensure the high
quality of our issuers, and can delist issuers for not meeting those standards,
the OTC Bulletin Board has no listing standards. Rather, it is the
market maker who chooses to quote a security on the system, files the
application, and is obligated to comply with keeping information about the
issuer in our files. The NASD cannot deny an application by a market
maker to quote the stock of a company. The only requirement for
inclusion in the bulletin board is that the issuer be current in our reporting
requirements with the SEC.
Although
we anticipate listing on the OTC Bulletin board will increase liquidity for our
stock, investors may have greater difficulty in getting orders filled because it
is anticipated that if our stock trades on a public market, it initially will
trade on the OTC Bulletin Board rather than on NASDAQ. Investors’ orders
may be filled at a price much different than expected when an order is
placed. Trading activity in general is not conducted as efficiently
and effectively as with NASDAQ-listed securities.
22
Investors
must contact a broker-dealer to trade OTC Bulletin Board
securities. Investors do not have direct access to the bulletin board
service. For bulletin board securities, there only has to be one
market maker.
Bulletin
board transactions are conducted almost entirely manually. Because
there are no automated systems for negotiating trades on the bulletin board,
they are conducted via telephone. In times of heavy market volume,
the limitations of this process may result in a significant increase in the time
it takes to execute investor orders. Therefore, when investors place
market orders - an order to buy or sell a specific number of shares at the
current market price - it is possible for the price of a stock to go up or down
significantly during the lapse of time between placing a market order and
getting execution.
Because
bulletin board stocks are usually not followed by analysts, there may be lower
trading volume than for NASDAQ-listed securities.
LEGAL
PROCEEDINGS
There are
no pending or threatened lawsuits against us.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The board
of directors elects our executive officers annually. A majority vote
of the directors who are in office is required to fill
vacancies. Each director shall be elected for the term of one year,
and until his successor is elected and qualified, or until his earlier
resignation or removal. Our directors and executive officers are as
follows:
Name
|
Age
|
Position
|
|||
Rui
Xia Yuan
|
44
|
Chairman,
Director
|
|||
Honghui
Wen
|
35
|
CFO,
Director
|
|||
Lijun
Wu
|
35
|
President,
CEO, Director
|
|||
Cuixian
Wu
|
31
|
Secretary,
Director
|
Rui Xia
Yuan joined us as Chairman of Board of Directors in January 1, 2009. From
January 1, 1999 to December 31, 2008, she was president of Guangdong YongYang
Toys Factory Co. Ltd., at township of Chasha, Dongguan city, Guanggong Province,
which manufactures and sells toys. In 1983 she received a High
School Diploma from DongGuan High School. As a chairman of the
board, Ms. Rui Xia Yuan contributes her knowledge of the company and a deep
understanding of all aspects of our business, products and markets, as well
substantial experience developing corporate strategy, assessing emerging
industry trends, and business operations.
23
Honghui
Wen joined us as Director and CFO in November 2007. From July 1994 to
September 2000, he was network engineer of Guangdong Maoming Guoxin
Communication Company, a communication company. From September 2000
to February 2002, he was network department manager of Shenzhen EDO Network
Technology Company, an IT company. From February 2002to October 2003,
he was network department manager of Nanning Jiaruite Industry and
Trade Company, a construction company. From October 2003to November
2007, he was manager of Dongguan Jingzhong Plastic & Mould Factory, a
manufacturing company. In 1994, he received a bachelor's degree from
Huazhong University of Science & Technology School. As a member of the
board, Mr. Wen contributes his financial expertise based on his significant
industry and financial experience.
Lijun Wu
joined us as Director, President & CEO in November 2007. From June 1995to June
1999, he was network engineer of Guangdong Gaozhou Post and
Telecommunications Office. From June 1999 to May 2006, he was manager
of Guangdong Shenzhen EDO Network Technology Company, an IT
company. From May 2006 to November 2007, he was manager of Shenzhen
DongZhiXin Science and Technology Company, a manufacturing
company. In 1995, he received a bachelor's degree from
Shantou University. As a member of the board, Mr. Wu
contributes significant industry-specific experience and expertise on our
products and services. Mr. Wu also contributes his knowledge of the
company and a deep understanding of all aspects of our business, products and
markets, as well substantial experience developing corporate strategy, assessing
emerging industry trends, and business operations.
Cuixian
Wu joined us as Secretary and Director in November 2007. From January
2000to May 2006, she was the sales director of Maoming branch of China Unicom
(Guang Dong) Limited, a communications company. From May 2006 to
November 2007, she was sales manager of Shenzhen DongZhiXin Science and
Technology Company, a manufacturing company. As a member of the
board, Ms. Wu contributes the benefits of her executive leadership and
management experience.
Family
Relationships
There are
no family relationships between our officers and directors.
Legal
Proceedings
No
officer, director, or persons nominated for such positions, promoter or
significant employee has been involved in the last ten years in any of the
following:
|
·
|
Any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that
time,
|
|
·
|
Any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses),
|
24
|
·
|
Being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking
activities,
|
|
·
|
Being
found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not
been reversed, suspended, or
vacated.
|
|
·
|
Having
any government agency, administrative agency, or administrative court
impose an administrative finding, order, decree, or sanction against them
as a result of their involvement in any type of business, securities, or
banking activity.
|
|
·
|
Being
the subject of a pending administrative proceeding related to their
involvement in any type of business, securities, or banking
activity.
|
|
·
|
Having
any administrative proceeding been threatened against you related to their
involvement in any type of business, securities, or banking
activity.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth the ownership, as of the date of this prospectus, of
our common stock by each person known by us to be the beneficial owner of more
than 5% of our outstanding common stock, our directors, and our executive
officers and directors as a group. To the best of our knowledge, the
persons named have sole voting and investment power with respect to such shares,
except as otherwise noted. There are not any pending or anticipated
arrangements that may cause a change in control.
The
information presented below regarding beneficial ownership of our voting
securities has been presented in accordance with the rules of the Securities and
Exchange Commission and is not necessarily indicative of ownership for any other
purpose. Under these rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
the security or the power to dispose or direct the disposition of the security.
A person is deemed to own beneficially any security as to which such person has
the right to acquire sole or shared voting or investment power within 60 days
through the conversion or exercise of any convertible security, warrant, option
or other right. More than one person may be deemed to be a beneficial owner of
the same securities. The percentage of beneficial ownership by any person as of
a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such
person has the right to acquire voting or investment power within 60 days, by
the sum of the number of shares outstanding as of such date plus the number of
shares as to which such person has the right to acquire voting or investment
power within 60 days. Consequently, the denominator used for calculating such
percentage may be different for each beneficial owner. Except as otherwise
indicated below and under applicable community property laws, we believe that
the beneficial owners of our common stock listed below have sole voting and
investment power with respect to the shares shown. The business address for
these shareholders is 70 West Madison Street, Suite 1400, First National Plaza,
Chicago, IL 60602.
25
Name
|
Title
|
Number of
Shares
|
% of
Common
Share
|
|||||||
Rui
Xia Yuan
|
Chairman
of Board Directors
|
8,508,545
|
21.52
|
%
|
||||||
Lijun
Wu
|
President,
CEO, Director
|
6,000,000
|
15.18
|
%
|
||||||
Cuixian
Wu
|
Secretary
& Director
|
4,000,000
|
10.12
|
%
|
||||||
Honghui
Wen
|
CFO
& Director
|
2,000,000
|
5.06
|
%
|
||||||
All
officers and directors as a group [4 persons]
|
20,508,545
|
51.88
|
%
|
This
table is based upon information derived from our stock records. Unless otherwise
indicated in the footnotes to this table and subject to community property laws
where applicable, each of the shareholders named in this table has sole or
shared voting and investment power with respect to the shares indicated as
beneficially owned. Except as set forth above, applicable percentages are based
upon 39,535,861 shares of common stock outstanding as of December 31,
2010.
DESCRIPTION
OF SECURITIES
The
following description as a summary of the material terms of the provisions of
our Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws have been filed as exhibits to the registration
statement of which this prospectus is a part.
Common
Stock
We are
authorized to issue 200,000,000 shares of common stock with $0.001 par
value per share. As of the date of this registration statement, there were
39,535,861 shares of common stock issued and outstanding held by 64
shareholders of the record.
26
Each
share of common stock entitles the holder to one vote, either in person or by
proxy, at meetings of shareholders. The holders are not permitted to vote their
shares cumulatively. Accordingly, the shareholders of our common stock who hold,
in the aggregate, more than fifty percent of the total voting rights can elect
all of our directors and, in such event, the holders of the remaining minority
shares will not be able to elect any of such directors. The vote of the holders
of a majority of the issued and outstanding shares of common stock entitled to
vote thereon is sufficient to authorize, affirm, ratify or consent to such act
or action, except as otherwise provided by law.
Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally available. We have
not paid any dividends since our inception, and we presently anticipate that all
earnings, if any, will be retained for development of our business. Any future
disposition of dividends will be at the discretion of our Board of Directors and
will depend upon, among other things, our future earnings, operating and
financial condition, capital requirements, and other factors.
Holders
of our common stock have no preemptive rights or other subscription rights,
conversion rights, redemption or sinking fund provisions. Upon our liquidation,
dissolution or winding up, the holders of our common stock will be entitled to
share ratably in the net assets legally available for distribution to
shareholders after the payment of all of our debts and other liabilities. There
are not any provisions in our Articles of Incorporation or our Bylaws that would
prevent or delay change in our control.
INTEREST
OF NAMED EXPERTS
The
financial statements for the years ended December 31, 2009, 2008, the period
from November 9, 2007 (Date of Inception) to December 31, 2007, and cumulative
from November 9, 2007 (Date of Inception) to December 31, 2009 included in this
prospectus have been audited by Enterprise CPAs, Ltd. which are independent
certified public accountants, to the extent and for the periods set forth in our
report and are incorporated herein in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
The
legality of the shares offered under this registration statement is being passed
upon by Williams Law Group, P.A., Tampa, Florida. Michael T. Williams,
principal of Williams Law Group, P.A., owns 198,000 shares of our common stock,
of which 99,000 are being registered in this offering.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
Our
Bylaws, subject to the provisions of Nevada Law, contain provisions which allow
the corporation to indemnify any person against liabilities and other expenses
incurred as the result of defending or administering any pending or anticipated
legal issue in connection with service to us if it is determined that person
acted in good faith and in a manner which he reasonably believed was in the best
interest of the corporation. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
27
DESCRIPTION
OF BUSINESS
CIS
World, Inc. is a Nevada corporation formed on November 9, 2007, with registered
address at 375 N. Stephanie St., Suite 1411, Henderson, NV
89014-8909. CIS World, Inc. transacts its business in the U.S.
located in the State of Illinois and has principal office at 70 West Madison
Street, Suite 1400, First National Plaza, Chicago, IL 60602 , and contact
telephone number 312-214-3138.
On
December 14, 2008, we established a wholly owned subsidiary, CIS WORLD (HK) LTD,
a wholly-owned subsidiary of CIS World, Inc. , is located in Hong Kong, the
address: Flat C, 2F., Eastern Street, Sai Ying Pun, Hong Kong; and contact
number: 0852-60522088.
Business
We are
selling ink printer cartridges and printer consumables to Asia, Europe, North
America and South America.
Our
Products are:
¨
|
Refillable Cartridge:
Designed for inkjet printers as such as Epson, Canon, HP, Brother with the
same printing effects as the original cartridge, the refillable cartridge
can be refilled and used for many times. Thus it serves both cost-saving
and environment protective
function.
|
¨
|
Continuous Ink Supply
System: Designed for inkjet printers as Epson, Canon, Hp, Brother,
CISS includes ink tanks connected with cartridges and supplies ink
continuously to cartridges. Thus the users need not replace cartridges,
saving cost and achieving environment
protection.
|
From
April 2008 through December 2008, we accomplished a sales amount of $244,362;
and from January 1 to December 31, 2009, we sold total of $
630,967. For the nine months ended September 30, 2010, CIS World, Inc
has total Continue Ink Supply System, Refillable cartridges, Inks and cartridge
related parts revenues of $715,677.
We have
two principal suppliers for the products we sell, although we also purchase from
other suppliers. These principal suppliers are:
|
·
|
Kangzhixin
Technology (Shenzhen) Co., Ltd.
(“KZX”)
|
28
On
December 10, 2008, CIS World and Kangzhixin Technology (Shenzhen) Co., Ltd.
(“KZX”) signed a 3 year contract authorized CIS World as KZX’s exclusive selling
agent- for the products mentioned above in Asia (China is excluded), Europe,
North America, south America and in other regions as agreed. In
general, the cost plus pricing system shall be used by KZX. The prices and terms
offered for CIS World shall be discussed by KZX and CIS World at the time with
terms considering the international trade custom and existing market
competition, so as to realize profits for both parties. If KZX
provides more favorable offers to any other distributors or manufacturers
concerning the Products, KZX shall inform CIS World in written and provide more
favorable terms to CIS World. Kangzhixin Technology (Shenzhen) Co., Ltd.
(“KZX”), manufacturer of our products, which is located at B3 Third Layer of the
east, Fourth Industrial Parks of Rich Briade, Fuyong Neighborhood Bridgehead
Community, Bao’an District, Shenzhen, Guangdong China, produces various
refillable cartridges and continuous ink supply systems. Ms. Wu
Cuixian, a Director of CIS World, owns 39 percent of KZX.
Due to
the unclear description of quality issues and product pricing in original
distribution agreement, both parties revised the distribution agreement to
accurately and clearly define both parties’ responsibilities. The
revised distribution agreement was signed on March 1, 2010, and December 22,
2010 to be effective for the remaining terms of original signed agreement which
will expire on December 10, 2011.
For all
products sold to customers, the Company is responsible for products’ quality
issues, even though KZX provides limited manufacturing warranty. The
Company may return the products to KZX within 14 days after the products
received by the Company.
|
·
|
Shenzhen
DZX Technology Co. (“DZX”) [located at 2nd
FL, A Building, Fuhai Street, Xihe Community, Fuhai Road, Fuyong, Bao’an
District, and Shenzhen, Guangdong,
China]
|
CompanyWe
do not have any purchasingwritten agreement with Shenzhen DZX Technology Co.,
Ltd. and purchase on a purchase order basis. The products were
shipped out at FOB shipping point Shenzhen, China.
Commencing
in 2009, we also purchased inks and cartridge related parts from a Hong
Kong Dongzhixin Technology Co., Limited, which is located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong. We do not have any
purchasing written agreement with Dongzhixin Technology Co.,
Limited. The products were shipped out at FOB shipping point
Shenzhen, China, and FOB shipping point GuangZhou, China.
29
Purchases
from principal suppliers during the above periods were as follows:
NAME OF
SUPPLIER
|
JANUARY 1,
2008 –
DECEMBER 31,
2008
|
JANUARY 1,
2009 –
DECEMBER 31,
2009
|
JANUARY 1,
2008 –
SEPTEMBER 30,
2010
|
|||||||||
Kangzhixin Technology (Shenzhen) Co., Ltd.
(“KZX”)
|
0 | 111,666 | 611,110 | |||||||||
Shenzhen DZX Technology Co.
(“DZX”)
|
234,963 | 279,384 | 514,347 | |||||||||
Other Suppliers [1]
|
0 | 198,310 | 346,824 |
[1] CIS
World, Ltd purchased Inks and cartridge related parts from a Hong
Kong Dongzhixin Technology Co., Limited, which is located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong. The products were shipped
out at FOB shipping point Shenzhen, China, and FOB shipping point GuangZhou,
China.
For all
products sold to customers, the Company is responsible for products’ quality
issues, even though KZX provides limited manufacturing warranty. The
Company may return the products to KZX within 14 days after the products
received by the Company.
For all
the products the Company purchased either from KZX or other suppliers, the
Company took the titles of the products. The Company then sold the
products to customers and the products were shipped out at FOB shipping point
Shenzhen, China. The Company is responsible for the return products
by customers and for the physical loss of inventories.
For all
the products the Company purchased either from KZX, DZX,or other suppliers, the
Company took the titles of the products. The Company then sold the
products to customers and the products were shipped out at FOB shipping point
Shenzhen, China. The Company is responsible for the return products
by customers and for the physical loss of inventories. As of
September 30, 2010, the inventory was $6000..
The
Company used the cost plus pricing system to determine the sell
price. When the Company received customers’ inquiry about price quote
about products, the Company then quoted the price based on the actual purchase
cost of the specific products purchased either from KZX or other suppliers plus
profit margin ranged from 5-10%. The purchase cost from suppliers
including KZX would be market price. If the customers accepted the
quoted selling price, then the customers would place the sales order and arrange
the payment. After the Company received the sales order from
customers, then the Company would arrange the shipment. The Company would
deliver the products after the Company sent invoices and customers paid to the
Company for the sales orders. The customers either pre-paid to the
Company or collection on delivery (COD). Revenue was recognized when
the products were shipped out FOB shipping point
30
Ms. Wu
Cuixian, a Director of CIS World, is an independent director and owns 39 percent
of KZX, although she isn’t actively involved in any day-to-day business activity
of KZX.
Market and
Marketing
We sell
directly to the wholesaler trade companies and printer technology companies in
various countries on a purchase order basis. We have no written
agreements with any of these companies.
Name of Country
|
Name of Customer
|
||
Indonesia
|
TNY
TRADING CO. LTD
|
||
Thailand
|
Skyhorse
Printer Technology
|
||
Malaysia
|
Mewatech
Solutions Enterprise
|
||
Korea
|
Eoasis
|
||
Brazil
|
Torre
Brasil Equipamentes
|
||
Columbia
|
Asia
Supplies Ltd
|
||
Bolivia
|
Carlos
Alberto Antelo Jimenez
|
||
Poland
|
Gellex,
sp. z o.o.(Ltd)
|
||
Indonesia
|
ELLA
Co., Ltd.
|
We
identify our clients through approaches like website research and attending
related trade fairs. We then follow up with contacts to secure
customers.
Our Competition and Our
Market Position
Competition
within the printer cartridge industry is intense. We compete with large printer
manufacturers such as Epson, Canon, HP, Brother that sell their own printer
cartridges and smaller scale private companies. Our competitors also include the
small and medium size companies from the same industry in China. Besides, we are
also confronted with competition from the international traders with greater
capital, manpower and market share. With regard to sales of
refillable cartridge and CISS in China, our major competitors include: Changzhou
Tanli Technology Co,.Ltd., Hangzhou Huifeng Technology Co,.Ltd, Shenzhen NXY
Technology Co,.Ltd. We are a very small competitor in the industry.
We
compete with these companies based mainly upon our cost saving products with
customer warranty, our high quality after sales service, our established sales
network in Southeastern Asia. During the current global economic
recession, our cost saving strategy for our customers are very effective, our
selling price for the similar products is averaged ¼ or 1/5 of our major
competitors’ price, which significantly reduce customers cost.
31
Research and
Development
We have
not incurred research and development expenses in the last fiscal
year.
Our Intellectual
Property
We have
no intellectual property.
Our
Employees
We have
the following number of full time employees:
|
¨
|
Clerical
–1
|
|
¨
|
Administrative
– 1
|
|
¨
|
Management
–2
|
|
¨
|
Sales
–2
|
We have
no part time employees. We have no collective bargaining agreement with our
employees. We consider our relationship with our employees to be
excellent.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes, and
other financial information included in this Form S-1.
Our
Management’s Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking (within the
meaning of section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). Forward-looking statements are, by
their very nature, uncertain and risky. These risks and uncertainties
include international, national, and local general economic and market
conditions; our ability to sustain, manage, or forecast growth; our ability to
successfully make and integrate acquisitions; new product development and
introduction; existing government regulations and changes in, or the failure to
comply with, government regulations; adverse publicity; competition; the loss of
significant customers or suppliers; fluctuations and difficulty in forecasting
operating results; change in business strategy or development plans; business
disruptions; the ability to attract and retain qualified personnel; the ability
to protect technology; the risk of foreign currency exchange rate; and other
risks that might be detailed from time to time in our filing with the Securities
and Exchange Commission.
32
Although
the forward-looking statements in this Registration Statement reflect the good
faith judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because
forward-looking statements are inherently subject to risks and uncertainties,
the actual results and outcomes may differ materially from the results and
outcomes discussed in the forward-looking statements. You are urged
to carefully review and consider the various disclosures made by us in this
report and in our other reports as we attempt to advise interested parties of
the risks and factors that may affect our business, financial condition, and
results of operations and prospects.
Overview
CIS
World, Inc. (the “Company”) incorporated under the laws of Nevada on November 9,
2007. CIS World, Inc. has principle office at 375 N. Stephanie, Suite
1411, Henderson, NV 89104-8909. CIS World, Inc. wholly owned branch
located in the State of Illinois and has principle office at 70 W Madison ST,
Suite 1400, Chicago IL 60602.
Besides
USA branch, CIS World, Inc. also established one subsidiary in Hong
Kong. CIS World, Ltd, as the wholly owned subsidiary, is registered
on December 14, 2007 In Hong Kong. It is a subsidiary on behalf of
CIS World, Inc. to conduct and operate the business of trading services,
distribution, and marketing of the printer consumables parts in Asia including
China, Europe, North and South America. The CIS World, Ltd is
located at Flat C, 2F., Eastern Street, Sai Ying Pun, HongKong.
The
Company’s main business includes sourcing, distribution and marketing of
Continue Ink Supply System and Refillable Cartridges in Asia, Europe, North and
South America.
Various
significant matters could impact our financial condition and results of
operations. Our operations depend heavily on the availability of
printer cartridges and CISS we resell. We purchase printer cartridges from KZX,
or DZX our majority source suppliers, and then resell them to our customers.
However, if we lose our relationship with KZX or DZX and cannot find acceptable
alternative suppliers or if KZX or DZX are unable or unwilling to provide us
with printer cartridges or CISS on terms favorable to us, we may be unable to
sell certain products and services. This could result in a decrease in profit
and damage to our reputation in our industry. In the event our costs
of acquiring these printer cartridges and CISS increases, we may not be able to
pass these higher costs on to our customers in full or at all. Any increase in
the prices for printer cartridges and CISS could materially increase our costs
and therefore lower our earnings. Commencing in 2009, we also purchased
inks and cartridge related parts from a Hong Kong Dongzhixin
Technology Co. We do not have any purchasing written agreement with
Dongzhixin Technology Co., Limited. We face similar risks with
respect to our relationship with Dongzhixin Technology Co.,
Limited.
Our sales
outside the United States in emerging markets, including Asia and South America
make up 100% of our net revenue. Our future revenue, gross margin, expenses and
financial condition could suffer due to a variety of international factors could
disrupt our product and component manufacturing and key suppliers located
outside of the United States. For example, we rely on manufacturers in China for
the production of all of our products.
33
Due to
all of our sales being from countries outside of the United States, other
currencies, particularly the Hong Kong dollars, euro, the British pound, Chinese
Yuan Renminbi and the Japanese yen, can have an impact on our results (expressed
in U.S. dollars). Currency variations also contribute to variations in sales of
products and services in impacted jurisdictions. Accordingly, fluctuations in
foreign currency rates could have a material impact on our revenue growth in
future periods. In addition, currency variations can adversely affect margins on
sales of our products in countries outside of the United States and margins on
sales of products that include components obtained from suppliers located
outside of the United States.
Our
revenues are highly concentrated in several customers which accounts for more
than 85% of our revenues, and our revenues could be reduced if these customers
reduce their orders from us. We have no agreements with these
customers, who purchase from us on purchase orders only. If we cease to do
business with these customers at current levels and are unable to generate
additional sales with new and existing customers that purchase a similar amount
of our products, our revenues and net income would decline
considerably.
From
April 2008 through December 2008, we accomplished a sales amount of $244,362;
and from January 1 to December 31, 2009, we sold total of $ 630,967. For the
nine months ended of September 30, 2010, CIS World, Inc has total Continue Ink
Supply System, Refillable cartridges, Inks and cartridge related parts revenues
of $715,677. The Continue Ink Supply System and Refillable cartridges and
related products were manufactured and supplied by Kang Zhi Xin Science and
Technology (ShenZhen), Ltd, (“KZX”). The Inks and cartridge related
parts were manufactured and supplied by Dongzhixin Technology Co., Limited. The
products were shipped out at FOB shipping point Shenzhen, China, and FOB
shipping point GuangZhou, China.
Results of
Operations
For the
period ended December 31, 2008, and 2009:
Revenue
Since our
company incorporated on November 9, 2007, and started to have sales recognized
in the month of April there was $244,362 revenue realized as of
December 31, 2008 and $630,967 revenue for the period from January 1 to December
31, 2009 as we are getting more loyalty customer and repeated sales
orders.
34
Cost of
Revenue
Our Costs
of Goods Sold, might be increased slightly due to the possible increasing
Chinese Yuan’s currency exchange rate, and labor costs as we originally expected
On the other hand, however, due to the global economic recession and more labor
market pool supply, we may keep our cost of goods sold stable. And our customers
are very cost sensitive, so our sales price was stable too. We did not adjust
our sales price or unit price upward. Because of the current economic
conditions, in fact we did not incur any increase of labor cost and any
fluctuation of Chinese Yuan’s exchange rate since May 2008. Accordingly, we did
not incur any increase of Cost of Goods Sold as we originally expected. Since
our company incorporated on November 9, 2007, and started to have sales
recognized in April, 2008, there was $244,362 revenue realized as of December
31, 2008 and $630,967 revenue for the period from January 1 to December 31,
2009. Accordingly, the cost of goods sold associated with the revenue was
$234,963, and $ 589,360 respectively for the year ending December 31, 2008, and
2009.
Our gross
profit margin in 2008 since the Company started to sell the products in April,
2008 was 4%, and the gross margin for year 2009, was 6%,
respectively.
Expense
Our
expenses consist of selling, general and administrative expenses, and
amortization.
CIS
World, Inc
|
||||||||||||
12/31/2009
|
12/31/2008
|
12/31/2007
|
||||||||||
Expense
|
||||||||||||
Advertising
Expenses
|
3,222 | 2,736 | - | |||||||||
Bank
Service Charges
|
1,252 | 1,152 | - | |||||||||
Business
License & Fees
|
25 | 449 | - | |||||||||
Car/Truck
Expense
|
||||||||||||
Gas
|
628 | 931 | - | |||||||||
Total
Car/Truck Expense
|
628 | 931 | - | |||||||||
Directors
fee
|
28,800 | 6,179 | - | |||||||||
Commission
|
8,765 | - | - | |||||||||
Marketing
and promotion fee
|
2,415 | 25,029 | - | |||||||||
Meals
and Entertainment
|
1,293 | 2,474 | - | |||||||||
Misc
Expense
|
- | 19 | - | |||||||||
Office
Supplies
|
3,053 | 2,082 | - | |||||||||
Organization
Cost
|
- | - | 5,126 | |||||||||
Postage
and Shipping
|
- | 264 | - | |||||||||
Printing
and Reproduction
|
2,988 | 1,152 | - | |||||||||
Professional
Fees
|
||||||||||||
Accounting
Fee
|
972 | - | - | |||||||||
Audit
Fee
|
15,000 | - | - | |||||||||
SEC
Filling Fee
|
1,375 | - | - | |||||||||
Legal
Fees
|
13,738 | 13,980 | - | |||||||||
Total
Professional Fees
|
31,084 | 13,980 | - | |||||||||
Rent
|
14,756 | 11,270 | - | |||||||||
Telephone
and Fax
|
489 | 190 | - | |||||||||
Trade
Show & Exhibition
|
6,318 | 7,697 | - | |||||||||
Travel
|
||||||||||||
Air
Tickets
|
3,019 | 8,709 | - | |||||||||
Hotels
|
337 | 4,042 | - | |||||||||
Taxi
& Local Transportation
|
316 | 710 | - | |||||||||
Travel
- Other
|
- | 4,000 | - | |||||||||
Total
Travel
|
3,672 | 17,462 | - | |||||||||
Utilities
|
||||||||||||
Electricity
Expense
|
- | 374 | - | |||||||||
Gas
|
116 | 459 | - | |||||||||
Total
Utilities
|
116 | 832 | - | |||||||||
Total
Expense
|
$ | 108,875 | $ | 93,898 | $ | 5,126 |
35
We had
total operation expenses of $ 108,875, $93,898, and $5,126, for the fiscal year
ended December 31, 2009, 2008, and 2007 respectively by the Company as selling,
general, and administrative expenses.
We expect
selling, general, and administrative expenses to increase in future periods as
our revenue grow. we initiate incurred a number of marketing and promotional
activities and other related expense in the first business year 2008 to get
started..
Income & Operation
Taxes
We are
subject to income taxes in the U.S., while the Hong Kong branch was subject to
the income tax laws of Hong Kong.
We paid
no income taxes in USA for the year ended December 31, 2009, 2008, and December
31, 2007 due to the net operation loss in USA.
We paid
no income taxes in Hong Kong for the year ended December 31, 2008, and December
31, 2007 due to the net operation loss in Hong Kong.
Net Loss
We
incurred net losses of ($84,437) and ($ 67,258) for the period ended December
31, 2008, and 2009.
For the
nine month period ended September 30, 2010, and 2009:
Revenue
The
Company has $715,677 and $469,367 revenue realized as of September 30, 2010 and
2009 respectively.
36
Cost of
Revenue
The
Company had $715,677 and $469,367 revenue realized as of September 30, 2010 and
2009. Accordingly, the cost of goods sold associated with the revenue was
$654,873, and $452,504 respectively for the nine month period ending September
30, 2010, and 2009.
Expense
Our
expenses consist of selling, general and administrative expenses, and
amortization.
Nine
Month Ended
|
Nine
Month Ended
|
Nine
Month Ended
|
||||||||||
9/30/2010
|
9/30/2009
|
9/30/2008
|
||||||||||
Expense
|
||||||||||||
Advertising
Expense
|
- | - | 2,736 | |||||||||
Bank
Service Charges
|
1,111 | 660 | 835 | |||||||||
Business
License & Fees
|
- | 25 | - | |||||||||
Car/Truck
Expense
|
1,409 | 87 | 628 | |||||||||
Commission
|
1,736 | - | - | |||||||||
Directors
Fees
|
25,200 | - | 3,083 | |||||||||
Marketing
and Promotion Fee
|
- | - | 16,513 | |||||||||
Meals
and Entertainment
|
982 | 627 | 1,625 | |||||||||
Other
Expense
|
- | - | 19 | |||||||||
Office
Supplies
|
595 | 159 | 1,477 | |||||||||
Printing
|
- | - | 760 | |||||||||
Postage
and Shipping
|
- | - | 57 | |||||||||
Total
Professional Fees
|
18,132 | 17,584 | 13,980 | |||||||||
Total
Rent
|
5,076 | 12,015 | 7,265 | |||||||||
Telephone
and Fax
|
222 | 267 | - | |||||||||
Trade
Show & Exhibition
|
6,815 | - | 7,697 | |||||||||
Total
Travel
|
772 | 2,410 | 14,698 | |||||||||
Utilities
|
- | 116 | 361 | |||||||||
Total
Expense
|
62,051 | 33,951 | 71,735 |
We had
total operation expenses of $62,051,and $33,951-, for the period ended September
30,, 2010, 2009respectively by the Company as selling, general, and
administrative expenses.
We expect
selling, general, and administrative expenses to increase in future periods as
our revenue grow. We initiate incurred a number of marketing,
promotional, and travel activities and other related expense in the first
business year 2008 to get started. -
Net Income
(Loss)
We
incurred net loss of ($1,242) and net loss of of $(17,082)for the nine month
period ended September 30, 2010, and 2009.
37
Commitments
and Contingencies
Our
supplier, the manufacturer of our products, Kangzhixin Technology (Shenzhen)
Co., Ltd., or “KZX”, which is located at Fourth Industrial Parks of Rich Bridge,
Fuyong Neighbourhood Bridgehead Community, B3 East Third Layer, Bao An District,
ShenZhen City, Guangdong Province, PR China, produces various Continue Ink
Supply System and Refillable Cartridges (“CISS”). On December 10,
2008, CIS World, Inc. and KZX signed a 3 year contract authorized CIS World for
the products mentioned above in Asia (China is excluded), Europe, North America,
south America and in other regions as agreed. In general, the cost
plus pricing system shall be used by KZX. The prices and terms offered for CIS
World shall be discussed by KZX and CIS World at the time with terms considering
the international trade custom and existing market competition, so as to realize
profits for both parties. If KZX provides more favorable offers to
any other distributors or manufacturers concerning the Products, KZX shall
inform CIS World in written and provide more favorable terms to CIS
World.
Due to
the unclear description of quality issues and product pricing in original
distribution agreement, both parties revised the distribution agreement to
accurately and clearly define both parties’ responsibilities. The
revised distribution agreement was signed on March 1, 2010, and December 22,
2010 respectively to be effective for the remaining terms of original signed
agreement which will expire on December 10, 2011.
For all
products sold to customers, the Company is responsible for products’ quality
issues, even though KZX provides limited manufacturing warranty. The
Company may return the products to KZX within 14 days after the products
received by the Company.
For all
the products the Company purchased either from KZX or other suppliers, the
Company took the titles of the products. The Company then sold the
products to customers and the products were shipped out at FOB shipping point
Shenzhen, China. The Company is responsible for the return products
by customers and for the physical loss of inventories. As of
September 30, 2010, the inventory was $6000..
The
Company used the cost plus pricing system to determine the sell
price. When the Company received customers’ inquiry about price quote
about products, the Company then quoted the price based on the actual purchase
cost of the specific products purchased either from KZX or other suppliers plus
profit margin ranged from 5-10%. The purchase cost from suppliers
including KZX would be market price. If the customers accepted the
quoted selling price, then the customers would place the sales order and arrange
the payment. After the Company received the sales order from
customers, then the Company would arrange the shipment. The Company would
deliver the products after the Company sent invoices and customers paid to the
Company for the sales orders. The customers either pre-paid to the
Company or collection on delivery (COD). Revenue was recognized when
the products were shipped out FOB shipping point
38
Foreign
Currency Translation
The
Company has determined the United States dollars to be its functional currency
for CIS World, Inc.; Hong Kong dollars to be its functional currency in CIS
World (Hong Kong) Limited . Assets and liabilities were translated to
U.S. dollars at the period-end exchange rate. The exchange rate of
issuance of common stocks to shareholders was used as one U.S. dollar to 7.0 HK
dollars. Statement of operations amounts were translated to U.S.
dollars using the historic rate, i.e., the rate at first date of each month
during the year. Gains and losses resulting from translating foreign
currency financial statements are accumulated in other comprehensive income
(loss), a separate component of shareholders’ equity.
Liquidity
and Capital Resources
|
At
September
30
|
At December
31
|
At December
31
|
|||||||||
2010
|
2009
|
2008
|
||||||||||
Current
Ratio
|
3.37- | 7.12 | 8.31 | |||||||||
Cash
|
152,806- | $ | 109,886 | $ | 153,791 | |||||||
Working
Capital
|
112,222- | $ | 113,464 | $ | 180,769 | |||||||
Total
Assets
|
159,576- | $ | 131,995 | $ | 205,510 | |||||||
Total
Liabilities
|
47,354- | $ | 18,531 | $ | 24,741 | |||||||
Total
Equity
|
112,222- | $ | 113,464 | $ | 180,769 | |||||||
Total
Debt/Equity
|
0.42- | 0.16 | 0.14 |
*Current
Ratio = Current Assets /Current Liabilities
** Total
Debt / Equity = Total Liabilities / Total Shareholders Equity.
The
Company had cash and cash equivalents of $153,791 and the working capital of
$180,769 at December 31, 2008; cash and cash equivalent of $109,886 at December
31, 2009 and the working capital of $113,464 at December 31, 2009; and cash and
cash equivalent of $152,806 at September 30, 2010 and the working capital of
$112,222
At
September 30, 2010, we have $152,806in cash. This is sufficient to
fund our operations the next 12 months. We anticipate we will need
$100,000 to fund our proposed operations during the next 12 months, including an
anticipated $50,000 to fund the costs of our being a public
company. We plan to fund our proposed operations including the cost
of being a public company by through revenues from our on-going operations if we
start to generate such revenues. We are also planning to obtain
additional funding by issuing debt or the sale of stock, if market conditions
are appropriate. We are not currently in negotiations with any
lenders or other funding sources and we are not certain that we will be able to
obtain additional funding on terms favorable to us or at
all. Management has orally committed to fund any of these
requirements not funded from operations or from additional debt or equity
capital we may raise. The loan terms will be short-term without
interest charge as needed by the Company to support the daily
operation.
39
The
Company’s lack of operating history and financial resources raise substantial
doubt about its ability to continue as a going concern. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty and if the Company is unable to generate significant revenue or
secure financing, then the Company may be required to cease or curtail its
operations.
DESCRIPTION
OF PROPERTY
We rent
the following properties:
Our
Headquarters
70 W.
Madison St.
Suite
1400
First
National Plaza
Chicago,
IL 60602
|
¨
|
Name
of Landlord: Regus Group
|
|
¨
|
Term
of Lease: Oct 1, 2009 to Sept 30,
2010
|
|
¨
|
Monthly
Rental: $179 US dollars
|
|
¨
|
Adequate
for current needs: yes
|
Wholly-owned Subsidiary in
Hong Kong
|
¨
|
Address:
City/State/Zip: Flat C, 2/F., Eastern Street, Sai Ying Pun, Hong
Kong.
|
|
¨
|
Number
of Square Feet: 300 Square Feet
|
|
¨
|
Name
of Landlord: HK Biz Limited
|
|
¨
|
Term
of Lease: from
1st April 2009 to
31th March 2011
|
|
¨
|
Monthly
Rental: 3000 HK Dollars (HKD were translated to U.S. dollars using the
first date of each month, the current exchange rate is 1 US dollar to 7.79
HKD, i.e., the rent is USD 385 per
month
|
|
¨
|
Adequate
for current needs: √ Yes
|
We do not
intend to renovate, improve, or develop properties. We are not
subject to competitive conditions for property and
currently have no property to insure. We have no policy
with respect to investments in real estate or interests in real estate
and no policy with respect to investments in real estate
mortgages. Further, we have no policy with respect to investments in
securities of or interests in persons primarily engaged in real estate
activities.
40
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Loans from
Officer/Shareholder
As of
December 31, 2007, there was an amount of $4,100 due to our founder, Chairman of
the Board, Ruixia Yuan, for setting up the company. And the same
amount had been paid back to the Ruixia Yuanon January 2008. There
was no writing agreement signed and the balance due was due on demand without
interest charge. And at the period ended December 31, 2008, December
31, 2009, and March 31, 2010, there’s no more balance due to any
officers or shareholders.
Loans to
Officer/Shareholder
In
December 31 2008, the Company advanced $35,359 to the Company’s director and
shareholder Cuixian Wu for Company’s marketing expenses. The advance
for marketing purpose was planning for international trips for international
trade show and exhibition in 2009. Due to Cuixian Wu’s visa
application and other personal reasons, she could not attend the trade
shows. The advancement was treated by the Company no different from
other unrelated employees or personnel for the same purpose of international
business trip planning. The balance was due on demand without interest
charge. And there was no written agreement signed. In June
2009, $2,710 was paid back to the Company; and in September, 2009, the remaining
amount balance of $32 649 was fully paid back to the Company, and there was no
new balance due from officer/shareholders as of December 31, 2009, and September
30,, 2010.
On
November 9, 2007, the Company issued 20,000,000 shares of common stock to the
four founders of the Company, Ruixia Ruan, Lijun Wu, Cuixian Wu and Honghui Wen
at $0.001 per share or $20,000 for initial capital stock subscription
receivable. This receivable was subsequently paid in full during
April 2008.
Our main
supplier, a manufacturer of our products, Kangzhixin Technology (Shenzhen) Co.,
Ltd. (“KZX”), which is located in Shenzhen, Guangdong, China, produces various
refillable cartridges and continuous ink supply systems. On December 10, 2008,
CIS World and KZX signed a 3 year contract authorized CIS World as KZX’s
distributor for the products mentioned above in Asia (China is excluded),
Europe, North America, South America and in other regions as
agreed. On March 1, 2010,, and December 22, 2010, respectively, the
Company revised the distribution agreement with KZX.In general, the cost plus
pricing system shall be used by KZX. The prices and terms offered for CIS World
shall be discussed by KZX and CIS World at the time with terms considering the
international trade custom and existing market competition, so as to realize
profits for both parties. If KZX provides more favorable offers to
any other distributors or manufacturers concerning the Products, KZX shall
inform CIS World in written and provide more favorable terms to CIS
World. Ms. Wu Cuixian, a Director of CIS World, owns 39 percent of
KZX.
41
At the
nine month ended of September 30, 2010 and the years ended December 31, 2009,
and 2008, the Company incurred cost of good sold of $654,873-, $589,360, and
$234,963 respectively. Even though, the Company signed a distribution
agreement with KZX on Dec 10, 2008, in fact, the Company’s products sold to
customers were manufactured by other local Chinese manufacturers on the sales
order basis, there was no purchase with KZX incurred in
2008. Therefore, the dollar value of amount involved in the
transaction with KZX in 2008 was zero. In 2009, the Company purchased
the products from KZX according to the agreement. Among the cost of
goods sold of $589,360 for year ending 2009, $111,666 was from
KZX. There was zero dollar value of the amounts of Ms. Cuixian Wu’s
interest in the transaction of cost of goods sold with KZX.
Except as
set forth above, we have not entered into any material transactions with any
director, executive officer, and promoter, beneficial owner of five percent or
more of our common stock, or family members of such persons.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
There is
no established public trading market for our securities and a regular trading
market may not develop, or if developed, may not be sustained. A
shareholder in all likelihood, therefore, will not be able to resell his or her
securities should he or she desire to do so when eligible for public resales.
Furthermore, it is unlikely that a lending institution will accept our
securities as pledged collateral for loans unless a regular trading market
develops.
Penny Stock
Considerations
Our
shares will be "penny stocks", as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Thus, our shares will be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.
Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer must make a special suitability determination
regarding the purchaser and must receive the purchaser's written consent to the
transaction prior to the sale, unless the broker-dealer is otherwise
exempt.
In
addition, under the penny stock regulations, the broker-dealer is required
to:
|
¨
|
Deliver,
prior to any transaction involving a penny stock, a disclosure schedule
prepared by the Securities and Exchange Commission relating to the penny
stock market, unless the broker-dealer or the transaction is otherwise
exempt;
|
|
¨
|
Disclose
commissions payable to the broker-dealer and our registered
representatives and current bid and offer quotations for the
securities;
|
42
|
¨
|
Send
monthly statements disclosing recent price information pertaining to the
penny stock held in a customer's account, the account's value, and
information regarding the limited market in penny stocks;
and
|
|
¨
|
Make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement
to the transaction, prior to conducting any penny stock transaction in the
customer's account.
|
Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our Common Stock, which may affect the ability of selling
shareholders or other holders to sell their shares in the secondary market, and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be
decreased, with a corresponding decrease in the price of our
securities. Our shares in all probability will be subject to such
penny stock rules and our shareholders will, in all likelihood, find it
difficult to sell their securities.
OTC Bulletin Board
Qualification for Quotation
To have
our shares of Common Stock on the OTC Bulletin Board, a market maker must file
an application on our behalf in order to make a market for our Common
Stock. We have engaged in preliminary discussions with a FINRA Market
Maker to file our application on Form 211 with FINRA, but as of the date of this
Prospectus, no filing has been made. Based upon our counsel's prior
experience, we anticipate that after this registration statement is declared
effective, it will take approximately 2 - 8 weeks for FINRA to issue a trading
symbol and allow sales of our Common Stock under Rule 144.
Sales of our common stock
under Rule 144.
There are
19,027,316 shares of our common stock held by non-affiliates and 20,508,545
shares held by affiliates Rule 144 of the Securities Act of 1933 defines as
restricted securities.
All of
our shares held by non-affiliates are currently eligible for resale as they are
either being registered in this offering or may be resold under Rule 144,
however affiliates will still be subject to the resale restrictions of Rule
144. In general, persons holding restricted securities, including
affiliates, must hold their shares for a period of at least six months, may not
sell more than one percent of the total issued and outstanding shares in any
90-day period, and must resell the shares in an unsolicited brokerage
transaction at the market price. The availability for sale of
substantial amounts of common stock under Rule 144 could reduce prevailing
market prices for our securities.
43
Holders
As of the
date of this registration statement, we had approximately 64 shareholders
of record of our common stock.
Dividends
We have
not declared any cash dividends on our common stock since our inception and do
not anticipate paying such dividends in the foreseeable future. We
plan to retain any future earnings for use in our business. Any
decisions as to future payments of dividends will depend on our earnings and
financial position and such other facts, as the Board of Directors deems
relevant.
Reports to
Shareholders
As a
result of this offering, as required under Section 15(d) of the Securities
Exchange Act of 1934, we will file periodic reports with the Securities and
Exchange Commission through December 31, 2011, including a Form 10-K for the
year ended December 31, 2011, assuming this registration statement is declared
effective before that date. At or prior to December 31, 2011, we
intend voluntarily to file a registration statement on Form 8-A which will
subject us to all of the reporting requirements of the 1934 Act. This will
require us to file quarterly and annual reports with the SEC and will also
subject us to the proxy rules of the SEC. In addition, our officers, directors
and 10% stockholders will be required to submit reports to the SEC on their
stock ownership and stock trading activity. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on December
31, 2011. If we do not file a registration statement on Form 8-A at
or prior to December 31, 2011, we will continue as a reporting company not
subject to the proxy statement or other information requirements of the 1934
Act, our securities can no longer be quoted on the OTC Bulletin Board, and our
officers, directors and 10% stockholders will not be required to submit reports
to the SEC on their stock ownership and stock trading activity.
Where You Can Find
Additional Information
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1. For further information about us and the shares of common
stock to be sold in the offering, please refer to the registration statement and
the exhibits and schedules thereto. The registration statement and exhibits may
be inspected, without charge, and copies may be obtained at prescribed rates, at
the SEC's Public Reference Room at 100 F St., N.E., 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. The
registration statement and other information filed with the SEC are also
available at the web site maintained by the SEC at
http://www.sec.gov.
44
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The table
below summarizes all compensation awarded to, earned by, or paid to our
Principal Executive Officer, our two most highly compensated executive officers
other than our PEO who occupied such position at the end of our latest fiscal
year and up to two additional executive officers who would have been included in
the table below except for the fact that they were not executive officers at the
end of our latest fiscal year, by us, or by any third party where the purpose of
a transaction was to furnish compensation, for all services rendered in all
capacities to us for the years ended December 31, 2009 and 2008.
Name
|
Title
|
Year
|
Salary
|
Bonus
|
Stock
awards
|
Option
awards
|
Non equity
incentive plan
compensation
|
Non
qualified
deferred
compensation
|
All other
compensation
|
Total
|
|||||||||||||||||||||||||||
Rui
Xia Yuan
|
Chairman
|
2008
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||||||||
Lijun
Wu
|
CEO
|
2008
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||||||||
Cuixian
Wu
|
Secretary
|
2008
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||||||||
Honghui
Wen
|
CFO
|
2008
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Summary Equity Awards
Table
The
following table sets forth certain information for our executive officers
concerning unexercised options, stock that has not vested, and equity incentive
plan awards as of December 31, 2009.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END DECEMBER 31, 2009
|
||||||||||||||||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
|
|||||||||||||||||||||||||||
Rui
Xia Yuan
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||||||||
Lijun
Wu
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||||||||
Cuixian
Wu
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||||||||
Honghui
Wen
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
45
Narrative disclosure to
summary compensation and option tables
We have
no written or oral employment agreements or compensation arrangements with our
named executive officers.
At no
time during the last fiscal year with respect to any person listed in the Table
above was there:
|
¨
|
any
outstanding option or other equity-based award repriced or otherwise
materially modified (such as by extension of exercise periods, the change
of vesting or forfeiture conditions, the change or elimination of
applicable performance criteria, or the change of the bases upon which
returns are determined;
|
|
¨
|
any
waiver or modification of any specified performance target, goal or
condition to payout with respect to any amount included in non-stock
incentive plan compensation or
payouts;
|
|
¨
|
any
option or equity grant;
|
|
¨
|
any
non-equity incentive plan award made to a named executive
officer;
|
|
¨
|
any
nonqualified deferred compensation plans including nonqualified defined
contribution plans; or
|
|
¨
|
any
payment for any item to be included under All Other Compensation (column
(i)) in the Summary Compensation
Table.
|
46
Board of
Directors
Director Compensation for
2010
Name
|
Fees
earned
or paid
in cash
($)
|
Stock
awards
($)
|
Option
awards
($)
|
Non-equity
incentive plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All other
compensation
($)
|
Total
($)
|
|||||||||||||||||||||
Rui
Xia Yuan
|
$ |
6300
|
0
|
0
|
0
|
0
|
0
|
$ |
6300
|
|||||||||||||||||||
Lijun
Wu
|
6300
|
0
|
0
|
0
|
0
|
0
|
$ |
6300
|
||||||||||||||||||||
Cuixian
Wu
|
6300
|
0
|
0
|
0
|
0
|
0
|
$ |
6300
|
||||||||||||||||||||
Honghui Wen
|
$ |
6300
|
0
|
0
|
0
|
0
|
0
|
$ |
6300
|
We
have paid $6300 director fees (such as fees for retainer, committee
service, service as chairman of the board or a committee, and meeting
attendance) with each of the directors in year 2010 for the nine month period
ending September 30, 2010..
47
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
48
CIS
WORLD, INC
(A
Development Stage Enterprise)
Audited
Financial Statements
AS
OF DECEMBER 31, 2009, 2008 & 2007
AND
FOR THE PERIOD FROM NOVEMBER 9, 2007
(DATE
OF INCEPTION) TO DECEMBER 31, 2009
49
Table
of Contents
Independent
Auditor’s Report on the Consolidated Financial Statements
|
70
|
Consolidated
Balance Sheet
|
71
|
Consolidated
Statement of Operation
|
72
|
Consolidated
Statement of Shareholders Equity
|
73
|
Consolidated
Statement of Cash Flows
|
74
|
Notes
to Consolidated Financial Statements
|
75
|
Exhibit
A. Operating Expense Details
|
89
|
50
Independent Registered
Public Accounting Firm’s Auditor’s Report on the
Consolidated Financial
Statements
Board
of Directors and Shareholders of CIS World, Inc.
We have
audited the accompanying consolidated balance sheets of CIS World, Inc December
31, 2009, 2008 & 2007 and the related statements of operation, shareholders’
equity, and cash flows for the period from November 9, 2007 (date of inception)
through December 31, 2009. 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 audit.
We
conducted our audit in accordance with 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
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, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of CIS World, Inc. as of
December 31, 2009, 2008, and 2007, and the results of its operations and their
cash flows for the period from November 9, 2007 (date of inception) through
December 31, 2009 in conformity with accounting principles generally accepted in
the United States of America.
The
Company’s lack of operating history and financial resources raise substantial
doubt about its ability to continue as a going concern. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty and if the Company is unable to generate significant revenue or
secure financing, then the Company may be required to cease or curtail its
operations.
/s/ Enterprise CPAs,
Ltd.
Enterprise
CPAs, Ltd.
Chicago,
IL
July 6,
2010
51
CIS
WORLD, INC
(A
Development Stage Enterprise)
CONSOLIDATED
BALANCE SHEET
December 31
|
December 31
|
December 31
|
||||||||||
2009
|
2008
|
2007
|
||||||||||
ASSETS
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
and cash equivalents
|
$ | 109,886 | $ | 153,791 | $ | - | ||||||
Accounts
receivable, net
|
- | - | - | |||||||||
Inventory
|
14,524 | - | - | |||||||||
Total
current assets
|
$ | 124,410 | $ | 153,791 | $ | - | ||||||
Other
current assets:
|
||||||||||||
Stock
subscription receivable
|
- | - | 20,000 | |||||||||
Deposit
|
770 | 1,335 | - | |||||||||
Loan
to shareholder / officer
|
- | 35,359 | - | |||||||||
Prepaid
expense
|
6,815 | 2,025 | - | |||||||||
Prepaid
to supplier
|
- | 13,000 | - | |||||||||
Total
other current assets
|
$ | 7,585 | $ | 51,719 | $ | 20,000 | ||||||
TOTAL
ASSETS
|
$ | 131,995 | $ | 205,510 | $ | 20,000 | ||||||
LIABILITIES
& EQUITY
|
||||||||||||
Current
liabilities:
|
||||||||||||
Account
payable
|
2,662 | 4,488 | 1,026 | |||||||||
Total
current liabilities
|
$ | 2,662 | $ | 4,488 | $ | 1,026 | ||||||
Other
current liabilities:
|
||||||||||||
Loan
from shareholders / officers
|
- | - | 4,101 | |||||||||
Unearned
income
|
15,869 | 20,253 | - | |||||||||
Total
other current liabilities
|
$ | 15,869 | $ | 20,253 | $ | 4,101 | ||||||
Total
liabilities
|
$ | 18,531 | $ | 24,741 | $ | 5,126 | ||||||
Stockholders'
Equity:
|
||||||||||||
Common
stock, $0.001 par value; 200,000,000 shares authorized; 39,535,861 shares
issued and outstanding.
|
$ | 39,536 | $ | 39,536 | $ | 20,000 | ||||||
Paid-in
capital
|
230,871 | 230,871 | - | |||||||||
Deficit
accumulated during the development stage
|
(156,821 | ) | (89,563 | ) | (5,126 | ) | ||||||
Accumulated
other comprehensive loss
|
(122 | ) | (75 | ) | - | |||||||
Total
stockholders' equity
|
$ | 113,464 | $ | 180,769 | $ | 14,874 | ||||||
TOTAL
LIABILITIES & EQUITY
|
$ | 131,995 | $ | 205,510 | $ | 20,000 |
52
CIS
WORLD, INC
(A
Development Stage Enterprise)
CONSOLIDATED
STATEMENT OF LOSS
Period from
|
Cumulative from
|
|||||||||||||||
Year Ended
|
Year Ended
|
November 9, 2007
|
November 9, 2007
|
|||||||||||||
December 31
|
December 31
|
( Date of Inception)
|
( Date of Inception)
|
|||||||||||||
2009
|
2008
|
to December 31,2007
|
to December 31,2009
|
|||||||||||||
Revenues
|
$ | 630,967 | $ | 244,362 | $ | - | $ | 875,329 | ||||||||
Cost
of Goods Sold
|
589,360 | 234,963 | - | 824,323 | ||||||||||||
Gross
Profit
|
$ | 41,607 | $ | 9,399 | $ | - | $ | 51,006 | ||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
- | - | - | - | ||||||||||||
Selling,
general and administrative expenses
|
108,875 | 93,898 | 5,126 | 207,899 | ||||||||||||
Depreciation
and amortization expenses
|
- | - | - | - | ||||||||||||
Total
Operating Expenses
|
$ | 108,875 | $ | 93,898 | $ | 5,126 | $ | 207,899 | ||||||||
Operating
Loss
|
$ | (67,268 | ) | $ | (84,499 | ) | $ | (5,126 | ) | $ | (156,893 | ) | ||||
- | ||||||||||||||||
Investment
income, net
|
$ | 10 | $ | 62 | $ | - | $ | 72 | ||||||||
Interest
Expense, net
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Loss
before income taxes
|
$ | (67,258 | ) | $ | (84,437 | ) | $ | (5,126 | ) | $ | (156,821 | ) | ||||
Loss
tax expense
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Net
Loss
|
$ | (67,258 | ) | $ | (84,437 | ) | $ | (5,126 | ) | $ | (156,821 | ) | ||||
- | ||||||||||||||||
Net
loss per common share- Basic
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
Net
loss per common share- Diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
Other
comprehensive loss, net of tax:
|
||||||||||||||||
Foreign
currency translation adjustments
|
(47 | ) | (75 | ) | - | (122 | ) | |||||||||
Other
comprehensive loss
|
$ | (47 | ) | $ | (75 | ) | $ | - | $ | (122 | ) | |||||
Comprehensive
Loss
|
$ | (67,305 | ) | $ | (84,512 | ) | $ | (5,126 | ) | $ | (156,943 | ) |
53
CIS
WORLD, INC
(A
Development Stage Enterprise)
STATEMENT
OF STOCKHOLDERS EQUITY
The
Period November 9, 2007 ( Date of Inception)
through
December 31, 2009
Deficit
|
||||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Additional
|
During the
|
Other
|
Total
|
|||||||||||||||||||||
Common Stock
|
Paid-in
|
Development
|
Comprehensive
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Stage
|
Income (Loss)
|
Equity
|
|||||||||||||||||||
Issuance
of common stocks
|
||||||||||||||||||||||||
to
shareholders @0.001 per
|
||||||||||||||||||||||||
share
on November 9, 2007
|
20,000,000 | $ | 20,000 | $ | - | $ | - | $ | - | $ | 20,000 | |||||||||||||
Net
loss for the period
|
||||||||||||||||||||||||
ended
December 31, 2007
|
$ | (5,126 | ) | $ | (5,126 | ) | ||||||||||||||||||
Balance,
December 31, 2007
|
20,000,000 | $ | 20,000 | $ | - | $ | (5,126 | ) | $ | - | $ | 14,874 | ||||||||||||
Issuance
of common stocks
|
||||||||||||||||||||||||
to
shareholders @0.01 per
|
||||||||||||||||||||||||
share
on January 31, 2008
|
4,460,000 | $ | 4,460 | $ | 40,140 | $ | - | $ | - | $ | 44,600 | |||||||||||||
Issuance
of common stocks
|
||||||||||||||||||||||||
to
shareholders @0.0137 per
|
||||||||||||||||||||||||
share
on March 31, 2008
|
611,598 | $ | 612 | $ | 7,767 | $ | - | $ | - | $ | 8,379 | |||||||||||||
Issuance
of common stocks
|
||||||||||||||||||||||||
to
shareholders @0.0137 per
|
||||||||||||||||||||||||
share
on April 30, 2008
|
14,266,263 | $ | 14,266 | $ | 181,182 | $ | - | $ | - | $ | 195,448 | |||||||||||||
Issuance
of common stocks
|
||||||||||||||||||||||||
to
Williams @0.01 per share
|
||||||||||||||||||||||||
on
June 30, 2008
|
198,000 | $ | 198 | $ | 1,782 | $ | - | $ | - | $ | 1,980 | |||||||||||||
Adjustment
for Exchange
|
||||||||||||||||||||||||
rate
changes
|
$ | (75 | ) | $ | (75 | ) | ||||||||||||||||||
Net
loss for the period
|
||||||||||||||||||||||||
ended
December 31, 2008
|
$ | (84,437 | ) | $ | (84,437 | ) | ||||||||||||||||||
Balance,
December 31, 2008
|
39,535,861 | $ | 39,536 | $ | 230,871 | $ | (89,563 | ) | $ | (75 | ) | $ | 180,769 | |||||||||||
Adjustment
for Exchange
|
||||||||||||||||||||||||
rate
changes
|
$ | (47 | ) | $ | (47 | ) | ||||||||||||||||||
Net
loss for the period
|
||||||||||||||||||||||||
ended
December 31, 2009
|
$ | (67,258 | ) | $ | (67,258 | ) | ||||||||||||||||||
Balance,
December 31, 2009
|
39,535,861 | $ | 39,536 | $ | 230,871 | $ | (156,821 | ) | $ | (122 | ) | $ | 113,464 |
54
CIS
WORLD, INC
(A
Development Stage Enterprise)
CONSOLIDATED
STATEMENT OF CASH FLOWS
Period from
|
Cumulative from
|
|||||||||||||||
Year Ended
|
Year Ended
|
November 9, 2007
|
November 9, 2007
|
|||||||||||||
December 31,
|
December 31,
|
(date of Inception)
|
(date of Inception)
|
|||||||||||||
2009
|
2008
|
to December 31, 2007
|
to December 31, 2009
|
|||||||||||||
Operating
Activities:
|
||||||||||||||||
Net
loss
|
$ | (67,258 | ) | $ | (84,437 | ) | $ | (5,126 | ) | $ | (156,821 | ) | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
Non-cash
portion of share based legal fee expense
|
- | 1,980 | - | 1,980 | ||||||||||||
Inventory
|
(14,524 | ) | - | - | (14,524 | ) | ||||||||||
Deposit
|
565 | (1,335 | ) | - | (770 | ) | ||||||||||
Loan
to shareholder / officer
|
35,359 | (35,359 | ) | - | - | |||||||||||
Prepaid
expense
|
(4,790 | ) | (2,025 | ) | - | (6,815 | ) | |||||||||
Prepaid
payment to supplier
|
13,000 | (13,000 | ) | - | - | |||||||||||
Account
payable
|
(1,826 | ) | 3,462 | 1,026 | 2,662 | |||||||||||
Unearned
income
|
(4,384 | ) | 20,253 | - | 15,869 | |||||||||||
Loan
from shareholders / officer
|
- | (4,100 | ) | 4,100 | - | |||||||||||
Net
cash provided by operating activities
|
$ | (43,858 | ) | $ | (114,561 | ) | $ | - | $ | (158,419 | ) | |||||
Investing
Activities:
|
||||||||||||||||
Net
cash provided by investing activities
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Financing
Activities:
|
||||||||||||||||
Proceeds
from issuance of common stock
|
- | 268,427 | - | 268,427 | ||||||||||||
Net
cash provided by financing activities
|
$ | - | $ | 268,427 | $ | - | $ | 268,427 | ||||||||
Effect
of Exchange Rate on Cash
|
$ | (47 | ) | $ | (75 | ) | $ | - | $ | (122 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
$ | (43,905 | ) | $ | 153,791 | $ | - | $ | 109,886 | |||||||
Cash
and cash equivalents at beginning of the year
|
$ | 153,791 | $ | - | $ | - | $ | - | ||||||||
Cash
and cash equivalents at end of year
|
$ | 109,886 | $ | 153,791 | $ | - | $ | 109,886 | ||||||||
Supplemental
schedule of non-cash investing and financing activities:
|
||||||||||||||||
Common
stock issued pursuant to stock subscription receivable
-officers
|
$ | - | $ | - | $ | 20,000 | $ | - |
55
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
A- BUSINESS DESCRIPTION
CIS
World, Inc. (the “Company”) was incorporated under the laws of Nevada on
November 9, 2007. CIS World, Inc. has principle office at 375 N.
Stephanie, Suite 1411, Henderson, NV 89104-8909. CIS World, Inc.
wholly owned branch located in the State of Illinois and has its principle
office at 70 W Madison ST, Suite 1400, Chicago IL 60602, and the contact number
is (312)214-3138.
CIS
World, Inc. also established a subsidiary in Hong Kong. CIS World,
Ltd, as the wholly owned subsidiary, was registered on December 14, 2007 in Hong
Kong. It is a subsidiary of CIS World, Inc. to conduct and operate
the business of trading services, distribution, and marketing of the printer
consumables parts in Asia including China, Europe, North and South
America. The CIS World, Ltd is located at Flat C, 2F., Eastern
Street, Sai Ying Pun, Hong Kong, and contact number is
(0852)6052-2088.
The
Company’s main business includes sourcing, distribution and marketing of
Continue Ink Supply System and Refillable Cartridges in Asia, Europe, North and
South America.
These
parts are manufactured in China by Kang Zhi Xin Science and Technology
(ShenZhen), Ltd. (“KZX”). It was established in 2008 specializing in
Continue Ink Supply System and Refillable Cartridges (“CISS”) manufacturing, and
located at Fourth Industrial Parks of Rich Bridge, Fuyong Neighbourhood
Bridgehead Community, B3 East Third Layer, Bao An District, ShenZhen City,
Guangdong Province, PR China. On December 10, 2008, CIS World, Ltd.
signed a three year long-term distribution agreement with Kang Zhi Xin Science
and Technology (ShenZhen), Ltd. KZX gives CIS World, Ltd the right to
import and sell its products in KZX’s trademark and brand name in Asia, Europe,
North and South America. KZX is a Chinese manufacturing company owned
39% by Ms. Cuixian Wu, the secretary of the Company.
Going Concern and Plan of
Operation
The
Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any profit from operations to date. These
conditions raise substantial doubt about its 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.
56
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES
Development Stage
Company
The
Company is considered to be in the development stage as defined FASB ASC Topic
915, “Development Stage
Entities”. The Company has devoted substantially all of its efforts to
the corporate formation, the raising of capital and attempting to raise
sales.
Basis of
accounting
The
financial statements reflect the assets, revenues and expenditures of the
Company on the accrual basis of accounting.
The
Company’s fiscal year end is December 31.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect certain amounts reported in the
financial statements and disclosures. Accordingly, actual results
could differ from those estimates.
Cash and Cash
Equivalents
The
Company considers all highly-liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. As of December 31,
2009, the Company has cash and cash equivalents of $ 109,886.
Organization Cost and
Amortization
The
Company incurred certain travel fees, legal fees and organization cost for
setting up CIS World, Inc. in the State of Nevada, and the Company was
incorporated on November 9, 2007, the cost was $5,126, and fully recorded as
expense as of December 31, 2007.
Property, Plant, and
Equipment Depreciation
Property,
plant, and equipment are stated at cost. Depreciation is being
provided principally by straight line methods over the estimated useful lives of
the assets. As of December 31, 2009, there were no fixed assets in
the Company’s balance sheets.
57
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continue)
Foreign Currency
Translation
The
Company has determined the United States dollars to be its functional currency
for CIS World, Inc; for our Hong Kong branch operations, local currency Hong
Kong Dollar has been determined to be the functional currency. Assets
and liabilities were translated to U.S. dollars at the period-end exchange
rate. Statement of operations amounts were translated to U.S. dollars
using the first date of each month during the year. Gains and losses
resulting from translating foreign currency financial statements are accumulated
in other comprehensive income (loss), a separate component of shareholders’
equity.
Stock-Based
Compensation
The
Company accounts for stock issued for services using the fair value
method. In accordance with FASB ASC Topic 718, “Compensation - Stock
Compensation”, the measurement date of shares issued for services is the date at
which the counterparty’s performance is complete.
Basic and Diluted Net Loss
Per Common Share
The
Company computes per share amounts in accordance with FASB ASC Topic 260,
“Earnings per Share”. ASC 260 requires presentation of basic and
diluted EPS. Basic EPS is computed by dividing the income (loss)
available to Common Shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS is based on the
weighted-average number of shares of common stock and common stock equivalents
outstanding during the periods.
As of
December 31, 2009, the Company only issued one type of shares, i.e., common
shares only. There are no other type of securities were
issued. Accordingly, the diluted and basic net loss per common share
is the same.
Inventory
Inventories
are stated at the lower of cost or market, with cost determined on an average
basis. The cost of inventories was determined on a First-In, First-Out (“FIFO”)
basis.
As of
December 31, 2009, the company has an ending inventory of $14,524.
Prepaid
Expense
As of
December 31, 2009, the company prepaid $6,815 for trade shows and exhibitions
for the year 2010.
58
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Unearned
Income
The
Company delivers the products after the customers pay for the sales order.
Revenue is recognized after the products are shipped out FOB shipping
point. As of December 31, 2009, one Indonesian customer paid $6,980
and one Thai customer paid $8,889 for the sales revenues that all realized in
January 2010. Therefore, the Company has unearned income of $15,869 at December
31, 2009.
Revenue
Recognition
In
accordance with the FASB Accounting Standards Codification (ASC) 605-15-25
“Revenue Recognition for Sales of Product”, the Company recognizes revenue when
it is realized or realizable and earned. The revenue from the product
sales transaction shall be recognized at time of sale if the following
conditions are met:
|
·
|
The
seller's price to the buyer is substantially fixed or determinable at the
date of sale.
|
|
·
|
The
buyer has paid the seller, or the buyer is obligated to pay the seller and
the obligation is not contingent on resale of the
product.
|
|
·
|
The
buyer's obligation to the seller would not be changed in the event of
theft or physical destruction or damage of the
product.
|
|
·
|
The
buyer acquiring the product for resale has economic substance apart from
that provided by the seller.
|
|
·
|
The
seller does not have significant obligations for future performance to
directly bring about resale of the product by the
buyer.
|
|
·
|
The
amount of future returns can be reasonably
estimated.
|
In
accordance with paragraph 4-14 of FASB ASC 605-45, "Reporting Revenues Gross as
a Principal versus Net as an Agent", the Company will recognize revenues on a
gross basis. ASC 605-45, paragraph 4-14 discusses whether revenues
and cost of goods sold to arrive at gross profit and their corresponding assets
and liabilities should be recorded at gross or net. The following
indicators of gross revenue recognition are existed in the Company:
|
·
|
Acts
as principal in the transaction, Entity Is the Primary Obligor in
the Arrangement.
|
|
·
|
Has
risk and rewards of ownership, such as general inventory risk, risk of
loss for collection, delivery and
returns
|
59
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
|
·
|
Takes
title to the products
|
|
·
|
Flexibility
in pricing
|
|
·
|
Assumes
credit risk
|
|
·
|
The
company can change the products or perform part of the service, and the
Company is involved in the determination of products or service
specifications based on customer’s
needs.
|
All the
indicators of net revenue reporting (ASC 605-45, paragraph 16-23) are not
existed in the Company.
The
Company signed a three year distribution agreement with KZX on December 10,
2008, the term will be expire on December 10, 2011. In this
agreement, KZX would be a supplier for the Company, and the Company would
purchase KZX’s Continue Ink Supply System and Refillable Cartridges
(“CISS”). The Company then sells CISS products from KZX and other
related parts purchased from other supplies to customers. KZX extends
to the Company for manufacturer’s limited warranty for products’ quality
issues. Due to the unclear description of quality issues and product
pricing in original distribution agreement, both parties revised the
distribution agreement to accurately and clearly define both parties’
responsibilities. The revised distribution agreement was signed on
March 1, 2010, to be effective for the remaining terms of original signed
agreement which will be expired on December 10, 2011.
Based on
the revised distribution agreement for all products sold to customers, the
Company is responsible for products’ quality issues. KZX
provides limited manufacturing warranty to end-user customers. KZX
warrants products against defects in materials and functionality under normal
use for a period of fourteen (14) days from the date of purchase by the original
end-user purchaser (“Warranty Period”). If a product defect arises and a valid
claim is received within the Warranty Period, at its option and to the extent
permitted by law, KZX will either (1) repair the product defect at no charge,
using new parts or parts equivalent to new in performance and reliability, (2)
exchange the product with a product that is new or equivalent to new in
performance and reliability and is at least functionally equivalent to the
original product, or (3) return the defected products and then refund the full
purchase price of the product. If the products were not covered by
KZX’s limited manufacturing warranty, the Company would take care of the repair,
refund, or replacement at the cost of the Company.
The
Company is obligated to pay suppliers for cartridge sales when customers return
them after the fourteen (14) day’s limited manufacturing warranty
period. Due to the Company’s customers were long-term repeat
wholesalers, the Company replaced the returned products outside of the fourteen
day warranty period with new purchased cartridges to customers. The
Company did not experience the refund for products returned whether within or
outside of the fourteen day warranty period.
60
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
For
returning the products by customers at warranty service, the Company would
instruct customers to send back directly to supplier’s warehouse at Company’s
cost. The Company did not maintain a warehouse for
inventory. The inventory was temporarily located at supplier’s
warehouse at designated space.
For all
the products the Company purchased from other suppliers, the limited
manufacturing warranty was also orally granted by other suppliers, including
DZX. For all the products the Company purchases either from KZX or
other suppliers, the Company takes the titles of the products. The
Company then sells the products to customers and the products were usually
shipped out at FOB shipping point Shenzhen, China, or shipping terms agreed with
customers sales orders. The Company is responsible for the physical
loss of inventories. As of December 31, 2009, the inventory is
$14,524.
The
Company used the cost plus pricing system to determine the sell
price. When the Company received customers’ inquiry about price quote
about products, the Company then quoted the price based on the actual purchase
cost of the specific products purchased either from KZX or other suppliers plus
profit margin ranged from 5-10%.
If the
customers accepted the quoted selling price, quantity, product specifications,
and shipment terms, then the customers would place the sales
order. After receiving customer’s sales order, the Company would
within 24 hours confirm with the customers for all sales
terms. Within three (3) days, with confirmation from suppliers that
all the customers’ terms can be satisfied and the products can be delivered on
time, then the Company issue invoice to customers and request the payment
according to sales order’s selling amount. The customer usually took
3-5 days to make payments. After receipts of customer’s payment, the
Company retained all the collections for the full selling price of the products,
and there were no any portion or any payments were remitted to suppliers
including KZX or DZX.
After
receipts of customers’ payments, then the Company informed the suppliers to
start manufacturing process and placed purchase order, the suppliers would issue
the bills to the Company with the purchase price. The suppliers
usually took 7-20 days to complete manufacturing process. After
finishing the goods, the Company would arrange shipment and directly ship the
products by common carriers to customers. The shipment usually took
3-20 days depends on the carrier type either by air or ocean transportation.
After the customers received the goods, inspected, and sent back the packing
list confirmation with satisfactory. The Company then made payment to
the suppliers according to the bills amount invoiced to the
Company. The suppliers including KZX, DZX, and Dongzhixin Technology
Co issued bills to the Company based on a cost plus basis, i.e., the suppliers
charged their manufacturing cost plus 10%-20% profit margin. The
profit margin percentage varied according to the market price fluctuation, in
average, KZX, DZX, and Dongzhixin Technology Co.’s profit margin percentage was
15%.
61
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
The
Company would assume credit risk for the Company’s sales transaction process, in
which the customers made payment prior to shipment. To minimize such
credit risk, besides the limited manufacturing product warranty, the Company
made orally promises to the customers through the sales transaction process, (1)
for the quality problems, if detected and
confirmed
by customers, the customers can either request refund by returning the products
to the Company, or request to replacement; (2) for the shipping problem, either
delay or shortage of products, the customers can either request refund by
returning the products to the Company, or request to replacement.
The
Company took the sales order based on customers request for product
specification and quantity volumes. Based on customers’ request and
specifications, the Company would confirm with suppliers for the needs of
customers. Based on the feedback from suppliers including KZX or DZX,
the Company would keep communications with customers if the existing alternative
or equivalent specifications developed by suppliers including KZX or DZX were
accepted by customers. After customer’s confirmation and acceptance,
the Company then placed the purchase orders with suppliers and request suppliers
to manufacture the products to satisfy customers’ needs. The
manufacturing process was solely the responsibilities of suppliers, the Company
did not create or design new products but participated and communicated with
customers and suppliers to provide the products with specifications to fit
customer’s needs. If the customers did not want the alternative or
equivalent products specifications, then the Company may suggest customers to
quote from other distributors.
The
Company selected the suppliers mainly based on the quality of products, price,
prompt delivery, customer services. After the revised distribution
agreement with KZX, there are no restrictions for the Company to select any
other suppliers.
The
company started to have sales orders from the month of April, 2008; most of the
customers are from Indonesia, Thailand, Bolivia, Columbia, and
Brazil.
During
the year 2008, CIS World, Inc., purchased the Continue Ink Supply System and
Refillable cartridges from the supplier Shenzhen DZX Technology Co. (DZX) on an
order basis, which is located at 2nd FL, A
Building, Fuhai Street, Xihe Community, Fuhai Road, Fuyong, Bao’an District, and
Shenzhen, Guangdong, China. The Company did not have distribution
agreement with Shenzhen DZX Technology Co., Ltd.
62
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
For the
year ended of December 31, 2008, CIS World, Inc has total Continue Ink Supply
System and Refillable cartridges revenue of $244,362 from the Company’s major
customers. All the
Continue Ink Supply System and Refillable cartridges and related products were
manufactured and supplied by Shenzhen DZX Technology Co in 2008. The
products were shipped out at FOB shipping point Shenzhen,
China. There were no purchases for products manufactured by KZX in
2008.
During
the year 2009, CIS World, Inc expanded its business in Asian, North and South
America. CIS World, Inc. purchased the products and Continue Ink Supply System
and Refillable cartridges from the supplier Shenzhen DZX Technology Co. (“DZX”),
and Kang Zhi Xin Science and Technology (ShenZhen), Ltd, (“KZX”), which is
located at Fourth Industrial Parks of Rich Bridge, Fuyong Neighbourhood
Bridgehead Community, B3 East Third Layer, Bao An District, ShenZhen City,
Guangdong Province, PR China. The Company has signed a distribution agreement
with Kang Zhi Xin Science and Technology (ShenZhen), Ltd, (“KZX”). The Company
did not have any distribution agreements with DZX or any other
suppliers. The Company also purchased Inks and cartridge related
parts on an order basis from Hong Kong Dongzhixin Technology Co., Limited, a
Hong Kong trading company located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong.
For the
year ended of December 31, 2009, CIS World, Inc has total Continue Ink Supply
System, Refillable cartridges, Inks and cartridge related parts revenues of
$630,967. The Continue Ink Supply System and Refillable cartridges
and related products were manufactured and supplied by Shenzhen DZX Technology
Co. (“DZX”), and Kang Zhi Xin Science and Technology (ShenZhen), Ltd,
(“KZX”). The products were shipped out at FOB shipping point
Shenzhen, China, and FOB shipping point GuangZhou, China. For the
total revenue of $630,967, $119,549 was from the sales of the products
manufactured by KZX, $299,108 was from the sales of the products manufactured by
DZX, and rest of $212,310 was from Hong Kong Dongzhixin Technology Co., Limited,
a Hong Kong trading company. Though there was no written distribution
agreement between the Company and DZX, the sales terms of the arrangement would
be equivalent and be consistent with the terms of the arrangement with
KZX.
Operating
Expense
For the
year ended 2009, 2008, and 2007, the Company incurred $108,875, $ 93,898, and
$5,126 operating expense respectively. Detail as showed at Exhibit A
at the end of the financial notes.
Comprehensive
Income
The
company’s comprehensive income is comprised of net income, unrealized gains and
losses on marketable securities classified foreign currency translation
adjustments, and unrealized gains and losses on derivative financial instruments
related to foreign currency hedging.
63
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income
Tax
Income
taxes are provided for tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes. Deferred
taxes are recognized for differences between the basis of assets and liabilities
for financial statement and income tax purposes. The differences in asset and
liability basis relate primarily to organization and start-up costs (use of
different methods and periods to calculate deduction). Deferred taxes are also
recognized for operating losses and tax credits that are available to offset
future income taxes. The deferred tax assets and/or liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
The components of the deferred tax asset and liability are classified as current
and concurrent based on their characteristics. Valuation allowances are provided
for deferred tax assets based on management’s projection of the sufficiency of
future taxable income to realize the assets.
Recent Accounting
Pronouncements
The
following pronouncements have become effective during the period covered by
these financial statements or will become effective after the end of the period
covered by these financial statements:
Pronouncement
|
Issued
|
Title
|
||
ASC
815
|
March
2008
|
Disclosures
about Derivative Instruments and Hedging Activities—an amendment to FASB
Statement No. 133
|
||
ASC
855
|
May
2009
|
Subsequent
Events
|
||
ASC
105
|
June
2009
|
The FASB Accounting Standards
Codification and
the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162
|
||
ASC
820
|
August
2009
|
Fair
Value Measurements and Disclosures – Measuring Liabilities at Fair
Value
|
||
ASC
260
|
September
2009
|
Earnings
per Share – Amendments to Section 260-10-S99
|
||
ASC
820
|
September
2009
|
Investments
in Certain Entities that Calculate Net Asset Value per Share (or Its
Equivalent)
|
||
ASC
605
|
October
2009
|
Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a
consensus of the FASB Emerging Issues Task Force
|
||
ASC
470
|
October
2009
|
Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt
Issuance or Other Financing – a consensus of the FASB Emerging Issues Task
Force
|
||
ASC
860
|
December
2009
|
Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial
Assets
|
||
ASC
505
|
January
2010
|
Accounting
for Distributions to Shareholders with Components of Stock and Cash – a
consensus of the FASB Emerging Issues Task Force
|
||
ASC
810
|
January
2010
|
Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary – a Scope Clarification
|
||
ASC
718
|
January
2010
|
Compensation
– Stock Compensation (Topic 718): Escrowed Share Arrangements and the
Presumption of Compensation
|
||
ASC
820
|
January
2010
|
Fair
Value Measurements and Disclosures (Topic 820): Improving Disclosures
about Fair Value Measurements
|
||
ASC
855
|
February
2010
|
Subsequent
Events (Topic 855): Amendments to Certain Recognition and Disclosure
Requirements
|
||
ASC
810
|
February
2010
|
Consolidation
(Topic 810): Amendments for Certain Investment Funds
|
||
ASC
815
|
|
March
2010
|
|
Derivatives
and Hedging (Topic 815): Scope Exception Related to Embedded Credit
Derivatives
|
64
Management
does not anticipate that the new accounting pronouncements listed above will
have a material impact on our financial statements.
Operating
Leases
The
Company entered into two leases for its corporate offices in under terms of
non-cancelable operating leases. The lease term is from September 29, 2009
through September 30, 2010 and requires a $179 monthly lease payment, and this
office is located at 70 West Madison ST, STE 1400, Chicago IL 60602, USA. Also,
CIS World, Ltd entered into a lease for its Hong Kong branch as well; and the
lease term is from January 1, 2008 through March 31, 2010 and requires a $385
monthly lease payment; and it is located Flat C, 2F, Eastern Street, Sai Ying
Pui, Hong Kong.
NOTE
C – RELATED PARTY TRANSACTIONS
Loans from
Officer/Shareholder
As of
December 31, 2007, there was an amount of $4,100 due to Officer for setting up
the company. And the same amount has been returned to the Officer in January
2008. At December 31, 2008, the balance due to officer or shareholder
is zero, $0.
Loans to Officer /
Shareholder
As
December 31 2008, the Company advanced $35,359 to the Company’s director and
shareholder Cuixian Wu; the outstanding balance is due on demand and no
agreement was signed. As of December 31, 2009, the loan amount was
paid back to the Company, and there was no balance due from officer/shareholders
as of December 31, 2009.
65
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
C – RELATED PARTY TRANSACTIONS (Continued)
Common Shares Issued to
Executive and Non-Executive Officers and Directors
As of
December 31, 2009, total 20,508,545 shares were issued to officers and
directors.
As of
December 31, 2009, total 20,508,545 shares were issued to officers and
directors as follows:
Name
|
Title
|
Total Shares
|
Total Amount
|
% of Common
Share
|
||||||||||
RUIXIA
YUAN
|
CHAIRMAN
|
8,508,545 | $ | 14,967 | 21.52 | % | ||||||||
LI
JUN WU
|
CEO
|
6,000,000 | $ | 6,000 | 15.18 | % | ||||||||
CUIXIAN
WU
|
DIRECTOR
|
4,000,000 | $ | 4,000 | 10.12 | % | ||||||||
HONG
HUI WEN
|
CFO
|
2,000,000 | $ | 2,000 | 5.06 | % | ||||||||
TOTAL
|
20,508,545 | $ | 26,967 | 51.87 | % |
Cost of Goods
Sold
During
the year 2008, CIS World, Ltd purchased the related products and Continue Ink
Supply System and Refillable cartridges from the supplier Shenzhen DZX
Technology Co., Ltd on order basis, which is located at 2nd FL, A
Building, Fuhai Street, Xihe Community, Fuhai Road, Fuyong, Bao’an District, and
Shenzhen, Guangdong, China.
The cost
of goods sold for the year 2008 was $234,963, and there were no sales in 2007,
accordingly there was no cost of goods sold incurred in 2007.
On
December 10, 2008, CIS World, Ltd. signed a three year long-term distribution
agreement with Kang Zhi Xin Science and Technology (ShenZhen), Ltd. (“KZX”), a
manufacturing company in China. KZX gives CIS World, Ltd the right to
import and sell its products in KZX’s trademark and brand name in Asia, Europe,
North and South America. KZX is owned 39% by Ms. Cuixian Wu, a
Director of CIS World, Inc. The two entities, CIS World, Inc., and
Kang Zhi Xin Science and Technology (ShenZhen), Ltd, are under certain common
control relationship according to FASB ASC 850, “Related Party
Disclosures”.
The
products the Company will sell are manufactured in China by Kang Zhi Xin Science
and Technology (ShenZhen), Ltd, (“KZX”). KZX was established in 2008
specializing in Continue Ink Supply System and Refillable Cartridges (“CISS”)
manufacturing, and located at Fourth Industrial Parks of Rich Bridge, Fuyong
Neighbourhood Bridgehead Community, B3 East Third Layer, Bao An District,
ShenZhen City, Guangdong Province, PR China.
66
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
C – RELATED PARTY TRANSACTIONS (Continued)
Cost of Goods Sold
(Continued)
The
management of CIS World, Inc. believes that the purchase price for the parts
from KZX will be market price. CIS World, Inc. and KZX are two totally separated
entities, i.e., CIS World, Inc. is a USA corporation and will fully comply with
USA regulations and USA general accepted accounting principles; KZX is a Chinese
company and it will comply with Chinese legal systems. KZX, as a Chinese local
manufacturer, will record their manufacturing costs and inventories based on the
Chinese accounting regulations rulings.
When CIS
World, Inc. purchases the parts from KZX, CIS World will record the actual costs
paid to KZX as the costs for inventory of CIS World, Inc. There is no any
relationship for KZX’s manufacturing historic costs with CIS World’s inventory
value. Specifically, CIS’s inventory value is equal to the purchase price or
actual cost of the parts purchased from KZX, and the purchase price of the parts
will be fair market price. CIS World, Inc. will adopt the first-in and first-out
inventory system according to generally accepted accounting principles in
USA.
During
the year 2009, CIS World, Ltd also purchased the products and Continue Ink
Supply System and Refillable cartridges from the supplier Shenzhen DZX
Technology Co., and Kang Zhi Xin Science and Technology (ShenZhen), Ltd,
(“KZX”), which is located at Fourth Industrial Parks of Rich Bridge, Fuyong
Neighbourhood Bridgehead Community, B3 East Third Layer, Bao An District,
ShenZhen City, Guangdong Province, PR China. Furthermore, the Company purchased
Inks and cartridge related parts from a Hong Kong Trading Company, Dongzhixin
Technology Co., Limited, which is located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong.
The cost
of goods sold for the year 2009 was $589,360, and the Company has an ending
inventory of $14,524 as of December 31, 2009.
NOTE
D – SHAREHOLDERS’ EQUITY
Common
Stock
Under the
Company’s Articles of Incorporation dated November 9, 2007, the Company is
authorized to issue 200,000,000 shares of capital stock with a par value of
$0.001.
On
November 9, 2007, the Company was incorporated in the State of
Nevada.
67
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
D – SHAREHOLDERS’ EQUITY (Continued)
On
November 9, 2007, the Company issued 20,000,000 shares of common stock to the
four founders of the Company, Ruixia Ruan, Lijun Wu, Cuixian Wu and Honghui Wen
at $0.001 per share or $ 20,000 for initial capital (stock subscription
receivable).
On
January 31, 2008, total 4,460,000 shares were issued at price of $0.01 per share
to 17 shareholders for $44,600.
On March
31, 2008, additional 611,598 common shares were issued to 2 shareholders and
sold at price of $0.0137 per share. The proceeds of $ 8,379 were
received.
On April
30, 2008, one of the Company founder and Chairman Ruixia Ruan purchased
additional 508,545 common shares at $ 0.0137 per share, and the amount of $
6,967 was received. Also, additional 13,757,718 common shares at $ 0.0137 per
share were issued to 40 shareholders for total proceeds of $
188,481.
On June
30, 2008, 198,000 common shares were issued to Williams Law Group at $ 0.01 per
share for the legal service value of $ 1,980.
Therefore,
as of December 31, 2009, there was total of 39,535,861 shares issued and
outstanding.
Stock Subscription
Receivable - Officers
At
November 9, 2007, the Company had receivables from its four founding
stockholders aggregating $20,000 for the purchase of their Company common stock.
The outstanding balance was due on demand and is unsecured. This receivable was
subsequently paid in full during April 2008.
NOTE
E– SUBSEQUENT EVENTS
The
unearned income of $ 15,869 was recognized as sales revenue of the company at
January 2010.
Amendments of Distribution
Agreement
On March
31, 2010, the Company adjusted and modified the distribution agreement with Kang
Zhi Xin Science and Technology (ShenZhen) Ltd. The term of the distribution
agreement is not changed.
68
CIS
WORLD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
F– GOING CONCERN
The
Company is currently in the development stage and their activities consist
solely of corporate formation, raising capital, and attempting to sell products
to generate revenues.
There is
no guarantee that the Company will be able to raise enough capital or generate
revenues to sustain its operations and carry out its business
plan. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.
The
financial statements do not include any adjustments relating to the carrying
amounts of recorded assets or the carrying amounts and classification of
recorded liabilities that may be required should the Company be unable to
continue as a going concern.
As of
December 31, 2009, the cash and cash equivalent balance was $109,886, and there
is cumulative loss of $ 156,821 for the cumulative period from November 9, 2007
(Date of Inception) to December 31, 2009. The management believes
that the revenues will continue be generated and its cash flows will be
maintained to cover all its operational costs and the risk of going concern in
both short-term and long term is significantly low.
The
Company’s lack of operating history and financial resources raise substantial
doubt about its ability to continue as a going concern. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty and if the Company is unable to generate significant revenue or
secure financing, then the Company may be required to cease or curtail its
operations.
69
Exhibit
A Operating Expense Details
12/31/2009
|
12/31/2008
|
12/31/2007
|
||||||||||
Expense
|
||||||||||||
Advertising
Expenses
|
3,222 | 2,736 | - | |||||||||
Bank
Service Charges
|
1,252 | 1,152 | - | |||||||||
Business
License & Fees
|
25 | 449 | - | |||||||||
Car/Truck
Expense
|
||||||||||||
Gas
|
628 | 931 | - | |||||||||
Total
Car/Truck Expense
|
628 | 931 | - | |||||||||
Directors
fee
|
28,800 | 6,179 | - | |||||||||
Commission
|
8,765 | - | - | |||||||||
Marketing
and promotion fee
|
2,415 | 25,029 | - | |||||||||
Meals
and Entertainment
|
1,293 | 2,474 | - | |||||||||
Misc
Expense
|
- | 19 | - | |||||||||
Office
Supplies
|
3,053 | 2,082 | - | |||||||||
Organization
Cost
|
- | - | 5,126 | |||||||||
Postage
and Shipping
|
- | 264 | - | |||||||||
Printing
and Reproduction
|
2,988 | 1,152 | - | |||||||||
Professional
Fees
|
||||||||||||
Accounting
Fee
|
972 | - | - | |||||||||
Audit
Fee
|
15,000 | - | - | |||||||||
SEC
Filling Fee
|
1,375 | - | - | |||||||||
Legal
Fees
|
13,738 | 13,980 | - | |||||||||
Total
Professional Fees
|
31,084 | 13,980 | - | |||||||||
Rent
|
14,756 | 11,270 | - | |||||||||
Telephone
and Fax
|
489 | 190 | - | |||||||||
Trade
Show & Exhibition
|
6,318 | 7,697 | - | |||||||||
Travel
|
||||||||||||
Air
Tickets
|
3,019 | 8,709 | - | |||||||||
Hotels
|
337 | 4,042 | - | |||||||||
Taxi
& Local Transportation
|
316 | 710 | - | |||||||||
Travel
- Other
|
- | 4,000 | - | |||||||||
Total
Travel
|
3,672 | 17,462 | - | |||||||||
Utilities
|
||||||||||||
Electricity
Expense
|
- | 374 | - | |||||||||
Gas
|
116 | 459 | - | |||||||||
Total
Utilities
|
116 | 832 | - | |||||||||
Total
Expense
|
$ | 108,875 | $ | 93,898 | $ | 5,126 |
70
FINANCIAL
STATEMENTS
CIS
WORLD, INC
(A
Development Stage Enterprise)
Unaudited
Financial Statements
As
of September 30, 2010
Table
of Contents
Unaudited
Consolidated Balance Sheet
|
50
|
Unaudited
Consolidated Statement of Operation
|
51
|
Unaudited
Consolidated Statement of Shareholders Equity
|
52
|
Unaudited
Consolidated Statement of Cash Flows
|
53
|
Notes
to Unaudited Consolidated Financial Statements
|
54
|
71
CIS
WORLD, INC
(A
Development Stage Enterprise)
CONSOLIDATED
BALANCE SHEET
September 30
|
December
31
|
December
31
|
||||||||||
2010
|
2009
|
2008
|
||||||||||
|
Unaudited
|
Unaudited
|
Unaudited
|
|||||||||
ASSETS
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
and cash equivalents
|
$ | 152,806 | $ | 109,886 | $ | 153,791 | ||||||
Inventory
|
6,000 | 14,524 | - | |||||||||
Total
current assets
|
$ | 158,806 | $ | 124,410 | $ | 153,791 | ||||||
Other
current assets:
|
||||||||||||
Stock
subscription receivable
|
- | - | - | |||||||||
Deposit
|
770 | 770 | 1,335 | |||||||||
Loan
to shareholder / officer
|
- | - | 35,359 | |||||||||
Prepaid
expense
|
- | 6,815 | 2,025 | |||||||||
Prepaid
to supplier
|
- | - | 13,000 | |||||||||
Total
other current assets
|
$ | 770 | $ | 7,585 | $ | 51,719 | ||||||
TOTAL
ASSETS
|
$ | 159,576 | $ | 131,995 | $ | 205,510 | ||||||
LIABILITIES
& EQUITY
|
||||||||||||
Current
liabilities:
|
||||||||||||
Account
payable
|
47,354 | 2,662 | 4,488 | |||||||||
Total
current liabilities
|
$ | 47,354 | $ | 2,662 | $ | 4,488 | ||||||
Other
current liabilities:
|
||||||||||||
Unearned
income
|
- | 15,869 | 20,253 | |||||||||
Total
other current liabilities
|
$ | - | $ | 15,869 | $ | 20,253 | ||||||
Total
Liabilities
|
$ | 47,354 | $ | 18,531 | $ | 24,741 | ||||||
Stockholders'
Equity:
|
||||||||||||
Common
stock, $0.001 par value; 200,000,000 shares authorized; 39,535,861 shares
issued and outstanding.
|
$ | 39,536 | $ | 39,536 | $ | 39,536 | ||||||
Paid-in
capital
|
230,871 | 230,871 | 230,871 | |||||||||
Deficit
accumulated during the development stage
|
(158,067 | ) | (156,821 | ) | (89,563 | ) | ||||||
Accumulated
other comprehensive loss
|
(118 | ) | (122 | ) | (75 | ) | ||||||
Total
Stockholders' Equity
|
$ | 112,222 | $ | 113,464 | $ | 180,769 | ||||||
TOTAL
LIABILITIES & EQUITY
|
$ | 159,576 | $ | 131,995 | $ | 205,510 |
72
CIS
WORLD, INC
(A
Development Stage Enterprise)
CONSOLIDATED
STATEMENT OF LOSS
Cumulative
from
|
||||||||||||||||||||
Nine
Months Ended
|
Three
Months Ended
|
November
9, 2007
|
||||||||||||||||||
September 30
|
September 30
|
(Date
of Inception)
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
to September 30, 2010
|
||||||||||||||||
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
||||||||||||||||
Revenues
|
$ | 715,677 | $ | 469,367 | $ | 300,498 | $ | 187,620 | $ | 1,591,006 | ||||||||||
Cost
of Goods Sold
|
654,873 | 452,504 | 275,314 | 180,802 | 1,479,196 | |||||||||||||||
Gross
Profit
|
$ | 60,804 | $ | 16,863 | $ | 25,184 | $ | 6,818 | $ | 111,810 | ||||||||||
Operating
Expenses:
|
||||||||||||||||||||
Research
and development
|
- | - | - | - | - | |||||||||||||||
Selling,
general and administrative expenses
|
62,051 | 33,951 | 33,584 | 21,979 | 269,950 | |||||||||||||||
Depreciation
and amortization expenses
|
- | - | - | - | - | |||||||||||||||
Total
Operating Expenses
|
$ | 62,051 | $ | 33,951 | $ | 33,584 | $ | 21,979 | $ | 269,950 | ||||||||||
Operating
Loss
|
$ | (1,247 | ) | $ | (17,088 | ) | $ | (8,400 | ) | $ | (15,161 | ) | $ | (158,140 | ) | |||||
- | ||||||||||||||||||||
Investment
income, net
|
$ | 1 | $ | 6 | $ | - | $ | - | $ | 73 | ||||||||||
Interest
expense, net
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Income
(loss) before income taxes
|
$ | (1,246 | ) | $ | (17,082 | ) | $ | (8,400 | ) | $ | (15,161 | ) | $ | (158,067 | ) | |||||
Income
(loss) tax expense
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Net
Income (loss)
|
$ | (1,246 | ) | $ | (17,082 | ) | $ | (8,400 | ) | $ | (15,161 | ) | $ | (158,067 | ) | |||||
- | ||||||||||||||||||||
Net
Income (loss) per common share- Basic
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
Net
Income (loss) per common share- Diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||||||
Foreign
currency translation adjustments
|
4 | - | - | - | (118 | ) | ||||||||||||||
Other
comprehensive income loss)
|
$ | 4 | $ | - | $ | - | $ | - | $ | (118 | ) | |||||||||
Comprehensive
Income (Loss)
|
$ | (1,242 | ) | $ | (17,082 | ) | $ | (8,400 | ) | $ | (15,161 | ) | $ | (158,185 | ) |
73
CIS
WORLD, INC
(A
Development Stage Enterprise)
STATEMENT
OF STOCKHOLDERS EQUITY
The
Period November 9, 2007 ( Date of Inception)
through
September 30, 20010 ( Unaudited )
Deficit
|
||||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Additional
|
During
the
|
Other
|
Total
|
|||||||||||||||||||||
Common Stock
|
Paid-in
|
Development
|
Comprehensive
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Stage
|
Income (Loss)
|
Equity
|
|||||||||||||||||||
Issuance
of common stocks to shareholders @0.001 per share on November
9, 2007
|
20,000,000 | $ | 20,000 | $ | - | $ | - | $ | - | $ | 20,000 | |||||||||||||
|
||||||||||||||||||||||||
Net
loss for the period ended December 31, 2007
|
$ | (5,126 | ) | $ | (5,126 | ) | ||||||||||||||||||
Balance,
December 31, 2007
|
20,000,000 | $ | 20,000 | $ | - | $ | (5,126 | ) | $ | - | $ | 14,874 | ||||||||||||
Issuance
of common stocks to shareholders @0.01 per share on January 31,
2008
|
4,460,000 | $ | 4,460 | $ | 40,140 | $ | - | $ | - | $ | 44,600 | |||||||||||||
Issuance
of common stocks to shareholders @0.0137 per share on March 31,
2008
|
611,598 | $ | 612 | $ | 7,767 | $ | - | $ | - | $ | 8,379 | |||||||||||||
Issuance
of common stocks to shareholders @0.0137 per share on April 30,
2008
|
14,266,263 | $ | 14,266 | $ | 181,182 | $ | - | $ | - | $ | 195,448 | |||||||||||||
|
||||||||||||||||||||||||
Issuance
of common stocks to Williams @0.01 per share on June 30,
2008
|
198,000 | $ | 198 | $ | 1,782 | $ | - | $ | - | $ | 1,980 | |||||||||||||
Adjustment
for Exchange rate changes
|
$ | (75 | ) | $ | (75 | ) | ||||||||||||||||||
Net
loss for the period ended December 31, 2008
|
$ | (84,437 | ) | $ | (84,437 | ) | ||||||||||||||||||
Balance,
December 31, 2008
|
39,535,861 | $ | 39,536 | $ | 230,871 | $ | (89,563 | ) | $ | (75 | ) | $ | 180,769 | |||||||||||
Adjustment
for Exchange rate changes
|
$ | (47 | ) | $ | (47 | ) | ||||||||||||||||||
Net
loss for the period ended December 31, 2009
|
$ | (67,258 | ) | $ | (67,258 | ) | ||||||||||||||||||
Balance,
December 31, 2009
|
39,535,861 | $ | 39,536 | $ | 230,871 | $ | (156,821 | ) | $ | (122 | ) | $ | 113,464 | |||||||||||
Adjustment
for Exchange rate changes
|
$ | 4 | $ | 4 | ||||||||||||||||||||
Net
loss for the period ended September 30, 2010
|
$ | (1,246 | ) | $ | (1,246 | ) | ||||||||||||||||||
Balance,
September 30, 2010
|
39,535,861 | $ | 39,536 | $ | 230,871 | $ | (158,067 | ) | $ | (118 | ) | $ | 112,222 |
74
CIS
WORLD, INC
(A
Development Stage Enterprise)
CONSOLIDATED
STATEMENT OF CASH FLOWS
Cumulative
from
|
||||||||||||||||||||
Nine
Months Ended
|
Three
Months Ended
|
November
9, 2007
|
||||||||||||||||||
September 30
|
September 30
|
(Date
of Inception) to
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
September 30, 2010
|
||||||||||||||||
|
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
|||||||||||||||
Operating
Activities:
|
||||||||||||||||||||
Net
loss
|
$ | (1,246 | ) | $ | (17,082 | ) | $ | (8,400 | ) | $ | (15,161 | ) | $ | (158,067 | ) | |||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||||||
Non-cash
portion of share based legal fee expense
|
1,980 | |||||||||||||||||||
Inventory
|
8,524 | - | 8,978 | - | (6,000 | ) | ||||||||||||||
Deposit
|
- | (385 | ) | - | (385 | ) | (770 | ) | ||||||||||||
Loan
to shareholder / officer
|
- | 35,359 | - | 32,649 | - | |||||||||||||||
Prepaid
expense
|
6,815 | - | 6,815 | - | - | |||||||||||||||
Prepaid
to supplier
|
- | 13,000 | - | 72,197 | - | |||||||||||||||
Account
payable
|
44,692 | 6,921 | (42,551 | ) | 11,409 | 47,354 | ||||||||||||||
Unearned
income
|
(15,869 | ) | (18,170 | ) | (9,978 | ) | (10,250 | ) | - | |||||||||||
Net
cash provided by operating activities
|
$ | 42,916 | $ | 19,643 | $ | (45,136 | ) | $ | 90,459 | $ | (115,503 | ) | ||||||||
Investing
Activities:
|
||||||||||||||||||||
Net
cash provided by investing activities
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Financing
Activities:
|
||||||||||||||||||||
Proceeds
from issuance of common stock
|
- | - | - | - | 268,427 | |||||||||||||||
Net
cash provided by financing activities
|
$ | - | $ | - | $ | - | $ | - | $ | 268,427 | ||||||||||
Effect
of Exchange Rate on Cash
|
$ | 4 | $ | - | $ | - | $ | - | $ | (118 | ) | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
$ | 42,920 | $ | 19,643 | $ | (45,136 | ) | $ | 90,459 | $ | 152,806 | |||||||||
Cash
and cash equivalents at beginning of the period
|
$ | 109,886 | $ | 153,791 | $ | 197,942 | $ | 82,975 | $ | - | ||||||||||
Cash
and cash equivalents at end of the period
|
$ | 152,806 | $ | 173,434 | $ | 152,806 | $ | 173,434 | $ | 152,806 | ||||||||||
Supplemental
schedule of non-cash investing and financing activities:
|
||||||||||||||||||||
Common
stock issued pursuant to stock subscription receivable
-officers
|
$ | - | $ | - | $ | - | $ | - | $ | - |
75
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
A- BUSINESS DESCRIPTION
CIS
World, Inc. (the “Company”) incorporated under the laws of Nevada on November 9,
2007. CIS World, Inc. has principle office at 375 N. Stephanie, Suite
1411, Henderson, NV 89014-8909. CIS World, Inc. wholly owned branch
located in the State of Illinois and has principle office at 70 W Madison ST,
Suite 1400, Chicago IL 60602, and the contact number is
(312)214-3138. Besides USA branch, CIS World, Inc. also established
one subsidiary in Hong Kong:
CIS
World, Ltd, as the wholly owned subsidiary, is registered on December 14, 2007
In Hong Kong. It is a subsidiary on behalf of CIS World, Inc. to
conduct and operate the business of trading services, distribution, and
marketing of the printer consumables parts in Asia, Europe, North and South
America. The CIS World, Ltd is located at Flat C, 2F., Eastern Street, Sai Ying
Pun, HongKong, and contact number is (0852)6052-2088.
The
Company’s main business includes sourcing, distribution and marketing of
Continue Ink Supply System and Refillable Cartridges in Asia, Europe, North and
South America.
These
parts are manufactured in China by Kang Zhi Xin Science and Technology
(ShenZhen), Ltd. (“KZX”). It was established in 2008 specializing in
Continue Ink Supply System and Refillable Cartridges (“CISS”) in manufacturing,
and located at Fourth Industrial Parks of Rich Bridge, Fuyong Neighbourhood
Bridgehead Community, B3 East Third Layer, Bao An District, ShenZhen City,
Guangdong Province, PR China. On December 10, 2008, CIS World, Ltd.
signed a three years long-term exclusive distribution agreement with Kang Zhi
Xin Science and Technology (ShenZhen), Ltd. KZX gives CIS World, Ltd the
exclusive right of import and sell its products in KZX’s trademark and brand
name in Asia, Europe, North and South America. KZX is a Chinese
manufacturing company owned 39% by Ms. Cuixian Wu, the secretary of the
Company.
Going Concern and Plan of
Operation
The
Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any revenues from operations to date. These
conditions raise substantial doubt about its 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.
76
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES
At
September 30, 2010 and for the nine months then ended, the consolidated
financial statements reflect the assets, revenues and expenditures of the
Company on the accrued basis of accounting. And the consolidated financial
statements of the Company include the accounts of CIS World, Inc and CIS World,
Ltd. All significant intercompany balances and transactions have been eliminated
in consolidation.
The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain amounts
reported in the financial statements and disclosures. Accordingly, actual
results could differ from those estimates.
The
Company has determined the United States dollars to be its functional currency
for CIS World, Inc; Hong Kong dollar and US dollar to be its functional currency
in CIS World, Ltd. Assets and liabilities were translated to U.S. dollars at the
period-end exchange rate. Statement of operations amounts were translated to
U.S. dollars using the first date of each month during the year. Gains and
losses resulting from translating foreign currency financial statements are
accumulated in other comprehensive income (loss), a separate component of
shareholders’ equity.
Cash and Cash
Equivalents
The
Company considers all highly-liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. As of September 30,
2010, the company has cash and cash equivalents of $ 152,806.
Property, Plant, and
Equipment Depreciation
Property,
plant, and equipment are stated at cost. Depreciation is being
provided principally by straight line methods over the estimated useful lives of
the assets. As of September 30, 2010, there were no fixed assets in
the Company’s balance sheet.
77
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based
Compensation
The
Company accounts for stock issued for services using the fair value
method. In accordance with FASB ASC Topic 718,
“Compensation - Stock Compensation”, the measurement date of shares
issued for services is the date at which the counterparty’s performance is
complete.
Basic and Diluted Net Loss
Per Common Share
The
Company computes per share amounts in accordance with FASB ASC Topic 260,
“Earnings per Share”. ASC 260 requires presentation of basic and
diluted EPS. Basic EPS is computed by dividing the income (loss)
available to Common Shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS is based on the
weighted-average number of shares of common stock and common stock equivalents
outstanding during the periods.
As of
September 30, 2010, the Company only issued one type of shares, i.e., common
shares only. There are no other types securities were
issued. Accordingly, the diluted and basic net loss per common share
is the same.
Inventory
Inventories
are stated at the lower of cost or market, with cost determined on an average
basis. The cost of inventories was determined on a First-In, First-Out (“FIFO”)
basis.
As of
September 30, 2010, the company has an ending inventory of $6,000.
Prepaid
Expense
As of
June 30, 2010, the company prepaid $6,815 for the trade shows and exhibitions
expense; from the period of July to September 2010, the $ 6,815 was
expensed.
Revenue
Recognition
In
accordance with the FASB Accounting Standards Codification (ASC) 605-15-25
“Revenue Recognition for Sales of Product”, the Company recognizes revenue when
it is realized or realizable and earned. The revenue from the product
sales transaction shall be recognized at time of sale if the following
conditions are met:
78
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
|
·
|
The
seller's price to the buyer is substantially fixed or determinable at the
date of sale.
|
|
·
|
The
buyer has paid the seller, or the buyer is obligated to pay the seller and
the obligation is not contingent on resale of the
product.
|
|
·
|
The
buyer's obligation to the seller would not be changed in the event of
theft or physical destruction or damage of the
product.
|
|
·
|
The
buyer acquiring the product for resale has economic substance apart from
that provided by the seller.
|
|
·
|
The
seller does not have significant obligations for future performance to
directly bring about resale of the product by the
buyer.
|
|
·
|
The
amount of future returns can be reasonably
estimated.
|
In
accordance with paragraph 4-14 of FASB ASC 605-45, "Reporting Revenues Gross as
a Principal versus Net as an Agent", the Company will recognize revenues on a
gross basis. ASC 605-45 discusses whether revenues and cost of goods
sold to arrive at gross profit and their corresponding assets and liabilities
should be recorded at gross or net. The following indicators of gross
revenue recognition are existed in the Company:
|
·
|
Acts
as principal in the transaction.
|
|
·
|
Has
risk and rewards of ownership, such as general inventory risk, risk of
loss for collection, delivery and
returns
|
|
·
|
Takes
title to the products
|
|
·
|
Flexibility
in pricing
|
|
·
|
Assumes
credit risk
|
|
·
|
The
company can change the products or perform part of the service, and the
Company is involved in the determination of products or service
specifications based on customer’s
needs.
|
All the
indicators of net revenue reporting (ASC 605-45, paragraph 16-23) are not
existed in the Company.
79
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
The
Company signed a three year distribution agreement with KZX on December 10,
2008, The term will be expired on December 10, 2011. In this
agreement, KZX would be a supplier for the Company, and the Company would
purchase KZX’s Continue Ink Supply System and Refillable Cartridges
(“CISS”). The Company then sells CISS products from KZX and other
related parts purchased from other supplies to customers. KZX extends
to the Company for manufacturer’s limited warranty for products’ quality
issues. Due to the unclear description of quality issues and product
pricing in original distribution agreement, both parties revised the
distribution agreement to accurately and clearly define both parties’
responsibilities. The revised distribution agreement was signed on
March 1, 2010, and December 22, 2010 respectively to be effective for the
remaining terms of original signed agreement which will be expired on December
10, 2011.
Based on
the revised distribution agreement for all products sold to customers, the
Company is responsible for products’ quality issues. KZX
provides limited manufacturing warranty to end-user customers. KZX
warrants products against defects in materials and functionality under normal
use for a period of fourteen (14) days from the date of purchase by the original
end-user purchaser (“Warranty Period”). If a product defect arises and a valid
claim is received within the Warranty Period, at its option and to the extent
permitted by law, KZX will either (1) repair the product defect at no charge,
using new parts or parts equivalent to new in performance and reliability, (2)
exchange the product with a product that is new or equivalent to new in
performance and reliability and is at least functionally equivalent to the
original product, or (3) return the defected products and then refund the full
purchase price of the product. If the
products were not covered by KZX’s limited manufacturing warranty, the Company
would take care of the repair, refund, or replacement at the cost of the
Company.
The
Company is obligated to pay suppliers for cartridge sales when customers return
them after the fourteen (14) day’s limited manufacturing warranty
period. Due to the Company’s customers were long-term repeat
wholesalers, the Company replaced the returned products outside of the fourteen
day warranty period with new purchased cartridges to customers. The
Company did not experience the refund for products returned whether within or
outside of the fourteen day warranty period.
80
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
For
returning the products by customers at warranty service, the Company would
instruct customers to send back directly to supplier’s warehouse at Company’s
cost. The Company did not maintain a warehouse for
inventory. The inventory was temporarily located at supplier’s
warehouse at designated space.
For all
the products the Company purchased from other suppliers, the limited
manufacturing warranty was also orally granted by other suppliers, including
DZX. For all the products the Company purchases either from KZX or
other suppliers, the Company takes the titles of the products. The
Company then sells the products to customers and the products were usually
shipped out at FOB shipping point Shenzhen, China, or shipping terms agreed with
customers’ sales orders. The Company is responsible for the physical
loss of inventories. As of September 30, the inventory was
$6000.
For all
the products the Company purchased either from KZX or other suppliers, the
Company took the titles of the products. The Company then sold the
products to customers and the products were shipped out at FOB shipping point
Shenzhen, China. The Company is responsible for the return products
by customers and for the physical loss of inventories.
The
Company used the cost plus pricing system to determine the sell
price. When the Company received customers’ inquiry about price quote
about products, the Company then quoted the price based on the actual purchase
cost of the specific products purchased either from KZX or other suppliers plus
profit margin ranged from 5-10%.
If the
customers accepted the quoted selling price, quantity, product specifications,
and shipment terms, then the customers would place the sales
order. After receiving customer’s sales order, the Company would
within 24 hours confirm with the customers for all sales
terms. Within three (3) days, with confirmation from suppliers that
all the customers’ terms can be satisfied and the products can be delivered on
time, then the Company issue invoice to customers and request the payment
according to sales order’s selling amount. The customer usually took
3-5 days to make payments. After receipts of customer’s payment, the
Company retained all the collections for the full selling price of the products,
and there were no any portion or any payments were remitted to suppliers
including KZX or DZX.
After
receipts of customers’ payments, then the Company informed the suppliers to
start manufacturing process and placed purchase order, the suppliers would issue
the bills to the Company with the purchase price. The suppliers
usually took 7-20 days to complete manufacturing process. After
finishing the goods, the Company would arrange shipment and directly ship the
products by common carriers to customers. The shipment usually took
3-20 days depends on the carrier type either by air or ocean transportation.
After the customers received the goods, inspected, and sent back the packing
list confirmation with satisfactory.
81
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
The Company then made
payment to the suppliers according to the bills amount invoiced to the Company.
The suppliers including KZX, DZX, and Dongzhixin Technology Co. issued
bills to the Company based on a cost plus basis, i.e., the suppliers charged
their manufacturing cost plus 10%-20% profit margin. The profit
margin percentage varied according to the market price fluctuation, in average,
KZX, DZX, and Dongzhixin Technology Co.’s profit margin percentage was
15%.
The
Company may assume credit risk for the Company’s sales transaction process, in
which the customers made payment prior to shipment. To minimize such
credit risk, besides the limited manufacturing product warranty, the Company
made orally promises to the customers through the sales transaction process, (1)
for the quality problems, if detected and confirmed by customers, the customers
can either request refund by returning the products to the Company, or request
to replacement; (2) for the shipping problem, either delay or shortage of
products, the customers can either request refund by returning the products to
the Company, or request to replacement.
The
Company took the sales order based on customers request for product
specification and quantity volumes. Based on customers’ request and
specifications, the Company would confirm with suppliers for the needs of
customers. Based on the feedback from suppliers including KZX or DZX,
the Company would keep communications with customers if the existing alternative
or equivalent specifications developed by suppliers including KZX or DZX were
accepted by customers. After customer’s confirmation and acceptance,
the Company then placed the purchase orders with suppliers and request suppliers
to manufacture the products to satisfy customers’ needs. The
manufacturing process was solely the responsibilities of suppliers, the Company
did not create or design new products but participated and communicated with
customers and suppliers to provide the products with specifications to fit
customer’s needs. If the customers did not want the alternative or
equivalent products specifications, then the Company may suggest customers to
quote from other distributors.
The
Company selected the suppliers mainly based on the quality of products, price,
prompt delivery, customer services. After the revised distribution
agreement with KZX, there were no restrictions for the Company to select any
other suppliers.
For the
period of January 1, 2010 to September 30, 2010, CIS World, Ltd purchased the
products and Continue Ink Supply System and Refillable cartridges from the
supplier Kang Zhi Xin Science and Technology (ShenZhen), Ltd, (“KZX”), which is
located at Fourth Industrial Parks of Rich Bridge, Fuyong Neighbourhood
Bridgehead Community, B3 East Third Layer, Bao An District, ShenZhen City,
Guangdong Province, PR China. Also, the Company purchased Inks and cartridge
related parts from a Hong Kong Trading Company, Dongzhixin Technology Co.,
Limited, which is located at 5th Floor,
SPA Centre, 53-55 Lockhart Road, Waichai, Hong Kong.
82
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
(Continued)
For the
nine months ended of September 30, 2010, CIS World, Inc has total Continue Ink
Supply System, Refillable cartridges, Inks and cartridge related parts revenues
of $715,677. The Continue Ink Supply System and Refillable cartridges and
related products were manufactured and supplied by Kang Zhi Xin Science and
Technology (ShenZhen), Ltd, (“KZX”). The Inks and cartridge related
parts were manufactured and supplied by Dongzhixin Technology Co., Limited. The
products were shipped out at FOB shipping point Shenzhen, China, and FOB
shipping point GuangZhou, China. For the total sales revenue of
$715,677, $551,647 was from the sales of the
products manufactured by KZX, $164,030 was from the sales of the products
manufactured by Hong Kong Dongzhixin Technology Co., Limited, a Hong Kong
trading company. In 2010, there were no purchases from Shenzhen
DZX.
Operating
Expense
Operating
expenses are consisting of director fees, professional fees, rent
expense, trade shows expenses, and other general and administrative
expenses. At the nine months period
ended of September 30, 2010 and 2009, there was a total of $ 62,051 and $ 33,951
operating expenses for the Company respectively. Detail is showed in
Exhibit B.
Income
Tax
Income
taxes are provided for tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes. Deferred
taxes are recognized for differences between the bases of assets and liabilities
for financial statement and income tax purposes. The differences in asset and
liability bases relate primarily to organization and start-up costs (use of
different methods and periods to calculate deduction). Deferred taxes are also
recognized for operating losses and tax credits that are available to offset
future income taxes. The deferred tax assets and/or liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
The components of the deferred tax asset and liability are classified as current
and concurrent based on their characteristics. Valuation allowances are provided
for deferred tax assets based on management’s projection of the sufficiency of
future taxable income to realize the assets.
83
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting
Pronouncements
The
following pronouncements have become effective during the period covered by
these financial statements or will become effective after the end of the period
covered by these financial statements:
Pronouncement
|
Issued
|
Title
|
||
ASC
815
|
March
2008
|
Disclosures
about Derivative Instruments and Hedging Activities—an amendment to FASB
Statement No. 133
|
||
ASC
855
|
May
2009
|
Subsequent
Events
|
||
ASC
105
|
June
2009
|
The FASB Accounting Standards
Codification and
the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162
|
||
ASC
820
|
August
2009
|
Fair
Value Measurements and Disclosures – Measuring Liabilities at Fair
Value
|
||
ASC
260
|
September
2009
|
Earnings
per Share – Amendments to Section 260-10-S99
|
||
ASC
820
|
September
2009
|
Investments
in Certain Entities that Calculate Net Asset Value per Share (or Its
Equivalent)
|
||
ASC
605
|
October
2009
|
Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a
consensus of the FASB Emerging Issues Task Force
|
||
ASC
470
|
October
2009
|
Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt
Issuance or Other Financing – a consensus of the FASB Emerging Issues Task
Force
|
||
ASC
860
|
December
2009
|
Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial
Assets
|
||
ASC
505
|
January
2010
|
Accounting
for Distributions to Shareholders with Components of Stock and Cash – a
consensus of the FASB Emerging Issues Task Force
|
||
ASC
810
|
January
2010
|
Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary – a Scope Clarification
|
||
ASC
718
|
January
2010
|
Compensation
– Stock Compensation (Topic 718): Escrowed Share Arrangements and the
Presumption of Compensation
|
||
ASC
820
|
January
2010
|
Fair
Value Measurements and Disclosures (Topic 820): Improving Disclosures
about Fair Value Measurements
|
||
ASC
855
|
February
2010
|
Subsequent
Events (Topic 855): Amendments to Certain Recognition and Disclosure
Requirements
|
||
ASC
810
|
February
2010
|
Consolidation
(Topic 810): Amendments for Certain Investment Funds
|
||
ASC
815
|
March
2010
|
Derivatives
and Hedging (Topic 815): Scope Exception Related to Embedded Credit
Derivatives
|
Management
does not anticipate that the new accounting pronouncements listed above will
have a material impact on our financial statements.
84
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
B – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive
Income
The
company’s comprehensive income is comprised of net income, unrealized gains and
losses on marketable securities classified foreign currency translation
adjustments, and unrealized gains and losses on derivative financial instruments
related to foreign currency hedging.
NOTE
C – RELATED PARTY TRANSACTIONS
Common Shares Issued to
Executive and Non-Executive Officers and Directors
As of
September 30, 2010, total 20,508,545 shares were issued to officers and
directors. Please see the Table below for details:
Common Shares Issued to
Executive and Non-Executive Officers and Directors
(Continued)
Name
|
Title
|
Total Shares
|
Total Amount
|
% of Common
Share
|
||||||||||
RUIXIA
YUAN
|
CHAIRMAN
|
8,508,545 | $ | 14,967 | 21.52 | % | ||||||||
LI
JUN WU
|
CEO
|
6,000,000 | $ | 6,000 | 15.18 | % | ||||||||
CUIXIAN
WU
|
DIRECTOR
|
4,000,000 | $ | 4,000 | 10.12 | % | ||||||||
HONG
HUI WEN
|
CFO
|
2,000,000 | $ | 2,000 | 5.06 | % | ||||||||
TOTAL
|
20,508,545 | $ | 26,967 | 51.87 | % |
Operating
Leases
The
Company entered into two leases for its corporate offices in under terms of
non-cancelable operating leases. The lease term is from September 29, 2009
through September 30, 2010 and requires a $ 179 monthly lease payment, and this
office is located at 70 West Madison ST, STE 1400, Chicago IL 60602, USA. Also,
CIS World, Ltd entered into a lease for its Hong Kong branch as well; and the
lease term is from April 1, 2010 through March 31, 2011 and requires a $385
monthly lease payment; and it is located Flat C, 2F, Eastern Street, Sai Ying
Pui, Hong Kong.
85
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
C – RELATED PARTY TRANSACTIONS (Continued)
Cost of Goods
Sold
On
December 10, 2008, CIS World, Ltd. signed a three years long-term distribution
agreement with Kang Zhi Xin Science and Technology (ShenZhen), Ltd (“KZX”), a
manufacturing company in China. KZX gives CIS World, Ltd the right of
import and sell its products in KZX’s trademark and brand name in Asia, Europe,
North and South America. KZX is owned 39% by Ms. Cuixian Wu, director
and shareholder of 10.12% issued common shares for CIS World,
Inc. The two entities, CIS World, Inc., and Kang Zhi Xin Science and
Technology (ShenZhen), Ltd, are under certain common
control relationship according to FASB ASC 850, “Related Party
Disclosures”.
The
products the Company will sell are manufactured in China by Kang Zhi Xin Science
and Technology (ShenZhen), Ltd, (“KZX”). It was established in 2008 specializing
in Continue Ink Supply System and Refillable Cartridges (“CISS”) in
manufacturing, and located at Fourth Industrial Parks of Rich Bridge, Fuyong
Neighbourhood Bridgehead Community, B3 East Third Layer, Bao An District,
ShenZhen City, Guangdong Province, PR China.
The
management of CIS World, Inc. believes that the purchase price for the parts
from KZX will be market price. CIS World, Inc. and KZX are two totally separated
entities, i.e., CIS World, Inc. is a USA corporation and will fully comply with
USA regulations and USA general accepted accounting principles; KZX is a Chinese
company and it will comply with Chinese legal systems. KZX, as a Chinese local
manufacturer, will record their manufacturing costs and inventories based on the
Chinese accounting regulations rulings. But, when CIS World, Inc. purchases the
parts from KZX, CIS World will record the actual costs paid to KZX as the costs
for inventory of CIS World, Inc. There is no any relationship for KZX’s
manufacturing historic costs with CIS World’s inventory value. Specifically,
CIS’s inventory value is equal to the purchase price or actual cost of the parts
purchased from KZX, and the purchase price of the parts will be fair market
price. CIS World, Inc. will adopt the first-in and first-out inventory system
according to generally accepted accounting principles in USA.
For the
period of January 1, 2010 to September 30, 2010, CIS World, Ltd purchased the
products and Continue Ink Supply System and Refillable cartridges from the
supplier Kang Zhi Xin Science and Technology (ShenZhen), Ltd, (“KZX”), and the
Company purchased Inks and cartridge related parts from a Hong Kong Trading
Company, Dongzhixin Technology Co., Limited.
For the
nine months ended of September 30, 2010, the Company incurred cost of good sold
of $ 654,873..
86
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
D – SHAREHOLDERS’ EQUITY
Common
Stock
Under the
Company’s Articles of Incorporation dated November 9, 2007, the Company is
authorized to issue 200,000,000 shares of capital stock with a par value of
$0.001.
On
November 9, 2007, the Company was incorporated in the State of
Nevada.
On
November 9, 2007, the Company issued 20,000,000 shares of common stock to the
four founders of the Company, Ruixia Ruan, Lijun Wu, Cuixian Wu and Honghui Wen
at $0.001 per share or $ 20,000 for initial capital (stock subscription
receivable).
On
January 31, 2008, total 4,460,000 shares were issued at price of $0.01 per share
to 17 shareholders for $ 44,600.
On March
31, 2008, additional 611,598 common shares were issued to 2 shareholders and
sold at price of $0.0137 per share. The proceeds of $ 8,379 were
received
On April
30, 2008, one of the Company founder and Chairman Ruixia Ruan purchased
additional 508,545 common shares at $ 0.0137 per share, and the amount of $
6,967 was received. Also, additional 13,757,718 common shares at $ 0.0137 per
share were issued to 40 shareholders for total proceeds of $
188,481.
On June
30, 2008, 198,000 common shares were issued to Williams Law Group at $ 0.01 per
share for the legal service value of $ 1,980.
As of
September30, 2010, there’s no more additional shares issued.
Therefore,
as of September 30, 2010, there was total share of 39,535,861 shares issued and
outstanding.
Stock Subscription
Receivable - Officers
At
November 9, 2007, the Company had receivables from its four founding
stockholders aggregating $20,000 for the purchase of their Company common stock.
The outstanding balance is due on demand and is unsecured. This receivable was
subsequently paid in full during April 2008.
87
CIS
WORLD, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
F– GOING CONCERN
The
Company is currently in the development stage and their activities consist
solely of corporate formation, raising capital, and attempting to sell products
to generate revenues.
There is
no guarantee that the Company will be able to raise enough capital or generate
revenues to sustain its operations and carry out its business
plan. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.
The
financial statements do not include any adjustments relating to the carrying
amounts of recorded assets or the carrying amounts and classification of
recorded liabilities that may be required should the Company be unable to
continue as a going concern.
As of
September 30, 2010, the cash and cash equivalent balance was $152,806, and there
is cumulative loss of $ 158,067 for the cumulative period from November 9, 2007
(Date of Inception) to September 30, 2010. The management believes
that the revenues will continue be generated and its cash flows will be
maintained to cover all its operational costs and the risk of going concern in
both short-term and long term is low.
88
Exhibit
B - Operating Expense Details
Nine
Month Ended
|
Nine
Month Ended
|
Nine
Month Ended
|
||||||||||
9/30/2010
|
9/30/2009
|
9/30/2008
|
||||||||||
Expense
|
||||||||||||
Advertising
Expense
|
- | - | 2,736 | |||||||||
Bank
Service Charges
|
1,111 | 660 | 835 | |||||||||
Business
License & Fees
|
- | 25 | - | |||||||||
Car/Truck
Expense
|
1,409 | 87 | 628 | |||||||||
Commission
|
1,736 | - | - | |||||||||
Directors
Fees
|
25,200 | - | 3,083 | |||||||||
Marketing
and Promotion Fee
|
- | - | 16,513 | |||||||||
Meals
and Entertainment
|
982 | 627 | 1,625 | |||||||||
Other
Expense
|
- | - | 19 | |||||||||
Office
Supplies
|
595 | 159 | 1,477 | |||||||||
Printing
|
- | - | 760 | |||||||||
Postage
and Shipping
|
- | - | 57 | |||||||||
Total
Professional Fees
|
18,132 | 17,584 | 13,980 | |||||||||
Total
Rent
|
5,076 | 12,015 | 7,265 | |||||||||
Telephone
and Fax
|
222 | 267 | - | |||||||||
Trade
Show & Exhibition
|
6,815 | - | 7,697 | |||||||||
Total
Travel
|
772 | 2,410 | 14,698 | |||||||||
Utilities
|
- | 116 | 361 | |||||||||
Total
Expense
|
62,051 | 33,951 | 71,735 |
89
PROSPECTUS
CIS
WORLD, INC.
Dated
_____________, 2011
Selling
shareholders are offering up to 9,513,658 shares of common stock. The
selling shareholders will offer their shares at $0.20 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices.
Our
common stock is not now listed on any national securities exchange, the NASDAQ
stock market or the OTC Bulletin Board.
Dealer Prospectus Delivery
Obligation
Until
_________ (90 days from the date of this prospectus) all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
90
Part
II-INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OFFICERS AND DIRECTORS
Our
Articles of Incorporation provide that no director or officer of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty by such person as a director or
officer, except for the payment of dividends in violation of Nevada law.
Our Bylaws provide, in pertinent part, that the Company shall indemnify
any person made a party to or involved in any civil, criminal or administrative
action, suit or proceeding by reason of the fact that such person is or was a
director or officer of the Company, or of any corporation which such person
served as such at the request of the Company, against expenses reasonably
incurred by, or imposed on, such person in connection with, or resulting from,
the exercise of such action, suit, proceeding or appeal thereon, except with
respect to matters as to which it is adjudged in such action, suit or proceeding
that such person was liable to the Company, or such other corporation, for
negligence or misconduct in the performance of such persons duties as a director
or officer of the Company. The determination of the rights of such
indemnification and the amount thereof may be made, at the option of the person
to be indemnified, by (1) order of the Court or administrative body or agency
having jurisdiction over the matter for which indemnification is being sought;
(2) resolution adopted by a majority of a quorum of our disinterested directors;
(3) if there is no such quorum, resolution adopted by a majority of the
committee of stockholders and disinterested directors of the Company; (4)
resolution adopted by a majority of the quorum of directors entitled to vote at
any meeting; or (5) Order of any Court having jurisdiction over the Company.
Such right of indemnification is not exclusive of any other right which
such director or officer may have, and without limiting the generality of such
statement, they are entitled to their respective rights of indemnification under
any bylaws, agreement, vote of stockholders, provision of law, or otherwise in
addition to their rights under our Bylaws.
With
regard to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of the Corporation in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will
be governed by the final adjudication of such case.
91
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all expenses, without consideration to
future contingencies, incurred or expected to be incurred by us in connection
with the issuance and distribution of the securities being offered by this
prospectus. Items marked with an asterisk (*) represent estimated expenses. We
have agreed to pay all the costs and expenses of this offering. Selling security
holders will pay no offering expenses.
ITEM
|
AMOUNT
|
|||
SEC
Registration Fee*
|
$
|
25
|
||
Legal
Fees and Expenses
|
50,000
|
|||
Accounting
Fees and Expenses*
|
50,000
|
|||
Total*
|
$
|
100,025
|
*
Estimated Figure
RECENT
SALES OF UNREGISTERED SECURITIES
On
November 9, 2007, the Company issued 20,000,000 shares of common stock to the
four founders of the Company, Ruixia Ruan, Lijun Wu, Cuixian Wu and Honghui Wen
at $0.001 per share or $ 20,000 for initial capital (stock subscription
receivable).
On
January 31, 2008, total 4,460,000 shares were issued at price of $0.01 per share
to 17 non U.S. shareholders for $44,600.
On March
31, 2008, additional 611,598 common shares were issued to 2 non U.S.
shareholders and sold at price of $0.0137 per share. The proceeds of
$ 8,379 were received.
On April
30, 2008, one of the Company founder and Chairman Ruixia Ruan purchased
additional 508,545 common shares at $ 0.0137 per share, and the amount of $
6,967 was received. Also, additional 13,757,718 common shares at $ 0.0137 per
share were issued to 40 non U.S. shareholders for total proceeds of $
188,481.
On June
30, 2008, 198,000 common shares were issued to Williams Law Group at $ 0.01 per
share for the legal service value of $ 1,980.
We relied
upon Section 4(2) of the Securities Act of 1933, as amended for the above
issuances to US citizens or residents.
We
believed that Section 4(2) of the Securities Act of 1933 was available
because:
|
¨
|
None
of these issuances involved underwriters, underwriting discounts or
commissions.
|
|
¨
|
Restrictive
legends were and will be placed on all certificates issued as described
above.
|
92
|
¨
|
The
distribution did not involve general solicitation or
advertising.
|
|
¨
|
The
distributions were made only to investors who were sophisticated enough to
evaluate the risks of the
investment.
|
We relied
upon Regulation S of the Securities Act of 1933, as amended for the above
issuances to non US citizens or residents.
We
believed that Regulation S was available because:
|
¨
|
None
of these issuances involved underwriters, underwriting discounts or
commissions;
|
|
¨
|
We
placed Regulation S required restrictive legends on all certificates
issued;
|
|
¨
|
No
offers or sales of stock under the Regulation S offering were made to
persons in the United States;
|
|
¨
|
No
direct selling efforts of the Regulation S offering were made in the
United States.
|
In
connection with the above transactions, although some of the investors may have
also been accredited, we provided the following to all investors:
|
¨
|
Access
to all our books and records.
|
|
¨
|
Access
to all material contracts and documents relating to our
operations.
|
|
¨
|
The
opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given
access.
|
Prospective
investors were invited to review at our offices at any reasonable hour, after
reasonable advance notice, any materials available to us concerning our
business. Prospective Investors were also invited to visit our
offices.
EXHIBITS
Item
3
|
1
|
Articles
of Incorporation of CIS World, Inc.
|
|
2
|
Bylaws
of CIS World, Inc.
|
|
3
|
Organizational
Documents of CIS WORLD (HK) LTD
|
Item
4
|
1
|
Form
of common stock Certificate of CIS World, Inc.(1)
|
Item
5
|
1
|
Legal
Opinion of Williams Law Group, P.A.
|
93
Item
10
|
1
|
Agreement
with Kangzhixin Technology (Shenzhen) Co.,
Ltd.
|
|
2
|
Agreement
with Kangzhixin Technology (Shenzhen) Co., Ltd. – Updated
*
|
Item
21
One
subsidiary: CIS World Technologies (Beijing) Co.,
Limited,
Item
23
|
1
|
Consent
of Enterprise CPAs, Ltd. *
|
|
2
|
Consent
of Williams Law Group, P.A. (included in Exhibit
5.1)
|
* filed
herewith
All other
Exhibits called for by Rule 601 of Regulation SB-2 or SK are not applicable to
this filing.
(1)
Information pertaining to our common stock is contained in our Articles of
Incorporation and Bylaws.
UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
i.
|
To
include any prospectus required bysection
10(a)(3) of the Securities Act of
1933;
|
ii.
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
toRule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
|
94
iii.
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
3.
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
4.
That, for the purpose of determining liability under the Securities Act of 1933
to any purchaser: Each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person of the
corporation in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such case.
95
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in Beijing China on February
4, 2011.
CIS
World, Inc.
Title
|
Name
|
Date
|
Signature
|
||||
Chairman
|
Rui Xia Yuan
|
February
4, 2011
|
/s/ Rui Xia Yuan
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the date
indicated.
SIGNATURE
|
NAME
|
TITLE
|
DATE
|
|||
/s/ Rui Xia Yuan
|
Rui Xia Yuan
|
Chairman, Director
|
February
4, 2011
|
|||
/s/ Honghui Wen
|
Honghui Wen
|
CFO, Director,
Principal
Accounting Officer |
February
4, 2011
|
|||
/s/ Lijun Wu
|
Lijun Wu
|
President, CEO, Director
|
February
4, 2011
|
|||
/s/ Cuixian Wu
|
Cuixian Wu
|
Secretary, Director
|
February
4, 2011
|
96