Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2010
or
| |TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number: 0-49819
CHINA STATIONERY AND OFFICE SUPPLY, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0931599
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
708 Third Avenue
New York, NY 10017
(address of principal executive offices) (Zip Code)
Issuer's telephone number: 212-508-4700
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 406 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
2
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files.) Yes [ ] No [ ]
Indicate by check mark disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 [ ] Small reporting company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [x] No [ ]
As of December 31, 2010 (the last business day of the most recently
completed second fiscal quarter) the aggregate market value of the
common stock held by non-affiliates was approximately $11,987.
The number of shares outstanding of the issuer's common stock, as of
March 28, 2011 was 11,987,427.
DOCUMENTS INCORPORATED BY REFERENCE: None
3
For the Fiscal Year Ended December 31, 2010
Item Page
------- -------
PART I
Item 1. Business 4
Item 1A. Risk Factors 9
Item 1B. Unresolved Staff Comments 9
Item 2. Description of Properties 9
Item 3. Legal Proceedings 9
Item 4. (Removed and Reserved) 9
PART II
Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of
Equity Securities 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 34
Item 9A. Controls and Procedures 29
Item 9B. Other Information 30
PART III
Item 10. Directors, Executive Officers and Corporate Governance 37
Item 11. Executive Compensation 39
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 40
Item 13. Certain Relationships and Related Transaction,
and Director Independence 41
Item 14. Principal Accountant Fees and Services 41
PART IV
Item 15. Exhibits, Financial Statement Schedules 41
Signatures 42
4
PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements regarding
registrant, its business and its financial prospects. These statements
represent management's present intentions and its present belief
regarding the registrant's future. Nevertheless, there are numerous
risks and uncertainties that could cause our actual results to differ
from the results suggested in this report.
Because these and other risks may cause the registrant's actual results
to differ from those anticipated by management, the reader should not
place undue reliance on any forward-looking statements that appear in
this report. Readers should also take note that the registrant will
not necessarily make any public announcement of changes affecting these
forward-looking statements, which should be considered accurate on this
date only.
ITEM 1. BUSINESS
In early November 2010, the board of directors of the registrant
changed its business plan to pursue global wealth strategy and asset
management for high net-worth individuals, families and institutional
clients. The registrant intends to offer services including
separately-managed accounts, sub-advisory relationships, structured
products, mutual funds, and other investment vehicles to unaffiliated
corporate and public employee pension funds, endowment funds, domestic
and foreign institutions, and governments and affiliates around the
world. The registrant will also offer in-depth portfolio strategy,
trading and brokerage services to institutional and individual
investors. Prior to the change in its business plan, the registrant's
primary business, through Ningbo Binbin Stationery Co., Ltd., its then
operating subsidiary based in China, was to develop, manufacture and
market office supplies including stationery, hole punchers, staplers,
pens and pencils, rubber stamps, felt markers and numerous other items,
which are sold through a worldwide network of distributors in China.
On January 1, 2011, Wei Chenghui, as manager of Ningbo Binbin
Stationery Co., Ltd., exercised the call option pursuant to the
exercise provisions of an Assignment and Assumption and Management
Agreement.
Pursuant to an Assignment and Assumption and Management Agreement
dated October 27, 2010, the registrant granted the manager an
irrevocable call option to acquire all of the registered capital of the
Ningbo Binbin. The manager also granted to the registrant an
irrevocable put option to cause the manager to purchase all of the
registered capital of Ningbo Binbin. Either the put option or the call
option could be exercised at any time when Ningbo Binbin does not
represent substantially all of the assets of the registrant. In
addition, the call option could be exercised by the manager at any time
on or after January 1, 2011.
5
Upon exercise of the call option, the manager delivered to the
registrant, duly endorsed for transfer to the registrant, one or more
certificates representing in aggregate three million seven hundred
ninety six thousand nine hundred thirty eight (3,796,938) shares of the
registrant's common stock and a written personal and unconditional
guarantee of the obligations of Ningbo Binbin. The registrant will
provide any reasonable assistance required by the manager to affect the
registration with the government of China of the transfer of the
registered capital of Ningbo Binbin.
Proposed Merger with Global Arena Holding Subsidiary Corp.
On January 19, 2011, China Stationery entered into the Agreement and
Plan of Merger with Global Arena. Upon the terms and subject to the
conditions of the Merger Agreement, at the effective date of the
Merger, Global Arena will merge with and into China Stationery, with
China Stationery continuing as the surviving corporation.
Global Arena, a Delaware corporation, is a holding company and
owns operates through its subsidiaries, Global Arena Investment
Management LLC, Global Arena Commodities Corp., Global Arena Trading
Advisors LLC, Lillybell Entertainment LLC and a minority owned
investment in Global Arena Capital Corp..
Global Arena Investment Management LLC
--------------------------------------
Global Arena completed the 95 % acquisition of Atlantis Asset
Management in April 2009, which was wholly owned by Michael Cohn who
owns the remaining 5 %. Atlantis Asset Management had been an
operating registered investment advisor since May 2005, Global Arena
then changed the name of the firm to Global Arena Investment Management
LLC. GAIM is a Registered Investment Advisor with the Securities
Exchange Commission, Central Registry Deposit Number 135835.
Michael Cohn has been a financial services professional for over 22
years. Since 2004, Mr. Cohn was the portfolio manager and chief
investment strategist at Atlantis Asset Management. His specialties are
equities, derivatives, commodities and fixed income strategies using
innovative risk management techniques to preserve wealth, and create
high income and growth oriented portfolios with lowered market risk.
From 1995 to 2003, he was the President and Managing Partner of Raymar
Capital Inc., a stock and option specialist firm on the American Stock
Exchange. Mr. Cohn started his career in 1985 at Bear Stearns & Co. in
New York City. His experience there included Treasury bond trading,
mortgage backed securities trading and underwriting, risk arbitrage,
and OTC trading. He has been a member of both the New York and
American Stock Exchanges. Mr. Cohn is a risk management consultant to
other asset managers and financial advisors on using derivatives to
manage risk and create income. Mr. Cohn has been quoted on CNBC and in
major financial print publications such as Forbes, Wealth Manager,
Financial Planning and others. Mr. Cohn has had articles published in
journals such as the Journal of Wealth Management.
On July 27, 2009, Global Arena, completed its second acquisition with
the acquisition of the assets of the MF Group, a securities brokerage
and asset management firm that had been in existence for 20 years.
6
GAIM currently manage approximately $110,000,000 in separately managed
accounts, the majority of which are held at held Fidelity Advisor.
GAIM is a global wealth strategy and asset management firm for high
net-worth individuals, families and institutional clients. GAIM offers
services including separately-managed accounts, mutual funds, and other
investment vehicles to unaffiliated corporate and public employee
pension funds, endowment funds, domestic and foreign institutions, and
governments and affiliates around the world. GAIM also offers in-depth
portfolio strategy, trading and risk management services to
institutional and individual investors.
GAIM believes the client is best served if given access to a diversity
of strategies, platforms and manager styles under one top-level
umbrella firm. Each manager is free to operate independently deriving
the benefits of economies of scale of the top-level operating
environment, yet each contributing to the whole by providing a
diversity of investment perspective and expertise.
GAIM has three related rules:
- Maintain independence and avoid conflicts of interest;
- Act in accord with the highest ethical standards; and
- The organization operates with 100% investment transparency and
performance disclosure.
Global Arena Investment Management LLC
Wealth Management for Portfolio Management for Institutional Investors
Taxable & Tax-Exempt Clients Institutional Investors & Consulting
- Asset Allocation - All Cap Core Portfolios - Private placements
- Equity, Fixed Income - Investment Policy Design - Executive Concentrated
- Risk Management - Multi-Strategy - Corporate Cash Management
Global Arena Commodities Corporation
------------------------------------
Global Arena Commodity Corporation completed its registration with the
National Futures Association in July 2009. Our NFA Registration is
0409315. GACC is owned 100% by Global Arena.
GACC is directed by its President John Piazza, who brings over 20 years
of financial trading experience.
Mr. Piazza is licensed with the NFA and has been a member of the
American Stock Exchange and the New York Mercantile Exchange. From 2006
to 2007, he worked with the Commodities Division of Clark Dodge &
Company.
From 2003-2006, he was an independent trader and broker on the trading
floor of the COMEX Division of the NYMEX, trading and managing a
portfolio of gold and silver futures and options in addition to
executing customer orders. From 1986 to 2003, Mr. Piazza joined Triple
J Trading, LLP, a successor to S&S Securities, as a manager of the
group, responsible for developing and implementing strategies to manage
risk.
7
Mr. Piazza was a independent option principal member of the AMEX,
acting as a market maker in listed equity and index options and trading
these securities as well as equities and derivative products in a
proprietary account. Mr. Piazza began his career in 1981 on the
trading floor of the American Stock Exchange with the firm of Dritz,
Goldring, and Wohlreich. As a specialist in corporate bonds, equities,
and equity and index options, Mr. Piazza was responsible for trading in
the firm account while serving as the primary market maker in these
securities. Mr. Piazza became a registered member of the National
Future Association and a licensed Member of the New York Mercantile
Exchange. Mr. Piazza attended Yale University and holds Series 3 and
Series 7 commodity and securities industry licenses.
GACC is focused on providing commodity brokerage facilities to
professional traders, Commodity Trading Advisors, Commodity Pool
Operators as well as offering managed futures accounts to institutional
and individual investors.
In July 2009, GACC completed its clearing agreement with MF Global as a
guaranteed introducing broker. MF Global provides GACC clients with
services in the core functions of order execution, operational
clearing, regulatory reporting and settlement.
Global Arena Trading Advisors LLC
---------------------------------
Global Arena Trading Advisors LLC is a registered commodities trading
advisory firm, NFA identification number 0416975, which was formed in
December 2009.
GATA is directed by its President John Piazza, who brings over 20 years
of financial trading experience.
Mr. Piazza is licensed with the NFA and has been a member of the
American Stock Exchange and the New York Mercantile Exchange. From 2006
to 2007, he worked with the Commodities Division of Clark Dodge &
Company.
From 2003-2006, he was an independent trader and broker on the trading
floor of the COMEX Division of the NYMEX, trading and managing a
portfolio of gold and silver futures and options in addition to
executing customer orders. From 1986 to 2003, Mr. Piazza joined Triple
J Trading, LLP, a successor to S&S Securities, as a manager of the
group, responsible for developing and implementing strategies to manage
risk.
Mr. Piazza was a independent option principal member of the AMEX,
acting as a market maker in listed equity and index options and trading
these securities as well as equities and derivative products in a
proprietary account. Mr. Piazza began his career in 1981 on the
trading floor of the American Stock Exchange with the firm of Dritz,
Goldring, and Wohlreich. As a specialist in corporate bonds, equities,
and equity and index options, Mr. Piazza was responsible for trading in
the firm account while serving as the primary market maker in these
securities. Mr. Piazza became a registered member of the National
Future Association and a licensed Member of the New York Mercantile
Exchange. Mr. Piazza attended Yale University and holds Series 3 and
Series 7 commodity and securities industry licenses.
8
GATA is owned 100% by Global Arena. GATA has is currently negotiating
a sub-manager agreement with a Commodity Trading Advisor, to manage the
commodity trading advisor. GATA will charge a 2% annual fee, and will
participate in 20% of any accretive profits, if any.
Lillybell Entertainment LLC
---------------------------
Lillybell Entertainment LLC was formed by Global Arena as an investment
vehicle to invest entertainment properties which include Theater,
Television, Film and Art. Global Arena owns 66% of Lillybell. Ms.
Kathryn Weisbeck is the Chief Executive Officer of LE and is the sole
owner of the remaining 33%.
Ms. Weisbeck is a member of the Screen Actors Guild, American
Federation of Television and Radio Artists, Actors Equity, and Film
Independent; host of the Independent Spirit Awards.
In 2003 Kathryn graduated With Honors from Loyola Marymount University
earning a Bachelor of Arts in Dance and a second degree, Bachelor of
Arts in Individualized Study: Musical Theatre. The program she created
is now offered as a BA in Musical Theatre by the school. During her
time at LMU, Kathryn participated in many student films, theatre
productions and dance concerts, was a projectionist for film classes,
was a member of Sursum Corda, a service organization, directed and
choreographed Jesus Christ Superstar, and toured the US with their
highly regarded Concert Choir.
Ms. Weisbeck has appeared on As the World Turns, ER, Canterbury's Law
and worked on films; 27 Dresses, (500) Days of Summer, The Accidental
Husband, Solitary Man as well as numerous independent films and
countless plays including West Side Story, Singin' in the Rain,
Anything Goes, Macbeth, and Oliver.
Lillybell will raise investment funds from qualified institutions,
family office investment managers, and accredited investors, through
general partnerships, and Limited Partnerships thereby benefiting in
the priniciple ownership of the properties, and participating in the
profits, if any.
Lillybell's first entertainment project will be the Lillybell Art Fund
LP, a limited partnership organized under Delaware partnership law.
The general partner is a Delaware limited liability company and was
organized in 2011 primarily to serve as general partner to the fund.
The general partner has the following members, Lillybell Entertainment
LLC, managed by Kathryn Weisbeck and John Matthews and Flamingo Drive
Enterprises, Inc. managed by Paul Fisher and Joanna C. Sikes.
The majority of the fund's assets will be used to purchase
original Dale Chihuly works of special, historic or significant value
from the following collections; Black Works, Putti Ikebana, Venetians,
Macchia, Persians, Chandeliers and selections from the de Young
exhibit.
9
Lillybell Entertainment will act as a general partner of the fund and
will be entitled to 60% of a 2% annual fee on the funds raised and 60%
of a 20% performance bonus if the value of the fund exceeds 120% of the
limited partners original Investment.
Global Arena Capital Corp.
--------------------------
Global Arena Capital Corp., is a full service registered broker/dealer
with the U.S. Securities Exchange Commission and the Financial Industry
Regulatory Authority, and is a member of the Municipal Securities
Rulemaking Board and Securities Investor Protection Corp., operating
under the Central Registry Deposit #16871.
Global Arena Holding owns 4.8% of Global Arena Capital. Global Arena
Capital currently manages approximately $220,000,000 and clears its
securities business, on a fully disclosed basis, thru RBC Correspondent
Services, a division of RBC Capital Markets, a member of the New York
Stock Exchange Euronext, FINRA and SIPC.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. DESCRIPTION OF PROPERTIES
The registrant's main office is located at 708 Third Avenue, 11th Floor,
New York, New York, 10017. These premises consist of 4,500 square feet
and are shared with Global Arena and its subsidiaries. The premises
are provided free of charge by Global Arena until after the proposed
merger. Global Arena pays approximately $24,200 per month in rent
under their sublease. Global Arena expects to renegotiate the sublease
following the merger. We believe these facilities are adequate for our
present level of operations.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. (REMOVED AND RESERVED)
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Information.
Our common stock is listed for quotation on the OTC Bulletin Board
under the trading symbol CSOF. The following table sets forth the bid
prices quoted for our common stock during each quarter in the past two
fiscal years.
Bid
-------------------
High Low
-------- --------
Jan. 1, 2009 - Mar. 31, 2009 $ .04 $ .02
Apr. 1, 2009 - June 30, 2009 $ .08 $ .02
July 1, 2009 - Sep. 30, 2009 $ .08 $ .04
Oct. 1, 2009 - Dec. 31, 2009 $ .05 $ .01
Jan. 1, 2010 - Mar. 31, 2010 $ .04 $ .03
Apr. 1, 2010 - June 30, 2010 $ .04 $ .02
July 1, 2010 - Sep. 30, 2010 $ .04 $ .02
Oct. 1, 2010 - Dec. 31, 2010 $ .04 $ .02
(b) Holders. Our shareholders list contains the names of 685
registered stockholders of record of the registrant's Common Stock.
(c) Dividend Policy. We have not declared or paid cash dividends or
made distributions in the past, and we do not anticipate that we will
pay cash dividends or make distributions in the foreseeable future. We
currently intend to retain and reinvest future earnings, if any, to
finance our operations.
d) Securities authorized for issuance under equity compensation plans.
No securities are authorized for issuance by the registrant under
equity compensation plans.
e) Performance graph. Not applicable.
f) Sale of unregistered securities.
The registrant did not sell any unregistered securities during the
fourth quarter of 2010.
Item 5(b) Use of Proceeds. Not applicable.
Item 5(c) Purchases of Equity Securities by the issuer and
affiliated purchasers.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Trends and Uncertainties
------------------------
In early November 2010, the board of directors of the registrant
changed its business plan to pursue global wealth strategy and asset
management for high net-worth individuals, families and institutional
clients. The registrant intends to offer services including
separately-managed accounts, sub-advisory relationships, structured
products, mutual funds, and other investment vehicles to unaffiliated
corporate and public employee pension funds, endowment funds, domestic
and foreign institutions, and governments and affiliates around the
world. The registrant will also offer in-depth portfolio strategy,
trading and brokerage services to institutional and individual
investors. Prior to the change in its business plan, China
Stationery's primary business, through Ningbo Binbin Stationery Co.,
Ltd., its then operating subsidiary based in China, was to develop,
manufacture and market office supplies including stationery, hole
punchers, staplers, pens and pencils, rubber stamps, felt markers and
numerous other items, which are sold through a worldwide network of
distributors in China.
Since November 2010, our main activities have been developing our
business strategies, creating strategic alliances within the global
wealth strategy and asset management industry, seeking equity financing
and preparing for the merger with Global Arena.
We are currently not aware of any other known material trends, demands,
commitments, events or uncertainties that will have, or are reasonable
likely to have, a material impact on our financial condition, operating
performance, revenues and/or income, or results in our liquidity
decreasing or increasing in any material way.
Discontinued Operations
-----------------------
On January 1, 2011, Wei Chenghui, as manager of Ningbo Binbin
Stationery Co., Ltd., exercised the call option pursuant to the
exercise provisions of an Assignment and Assumption and
Management Agreement.
Pursuant to an Assignment and Assumption and Management Agreement
dated October 27, 2010, the registrant granted the manager an
irrevocable call option to acquire all of the registered capital
of the Ningbo Binbin. The manager also granted to the registrant
an irrevocable put option to cause the manager to purchase all of
the registered capital of Ningbo Binbin. Either the put option
or the call option could be exercised at any time when Ningbo
Binbin does not represent substantially all of the assets of the
registrant. In addition, the call option could be exercised by
the manager at any time on or after January 1, 2011.
Upon exercise of the call option, the manager delivered to the
registrant, duly endorsed for transfer to the registrant, one or
more certificates representing in aggregate three million seven
hundred ninety six thousand nine hundred thirty eight (3,796,938)
shares of the registrant's common stock and a written personal
12
and unconditional guarantee of the obligations of Ningbo Binbin.
The registrant will provide any reasonable assistance required by
the manager to affect the registration with the government of
China of the transfer of the registered capital of Ningbo Binbin.
Results of Operations
---------------------
Due to the change of business focus and the sale of the subsidiary, a
discussion of the results of operations for the last two years is not
provided as the information is not relevant and does not provide an
understanding of our current financial condition.
Liquidity and Capital Resources
-------------------------------
We have not received any revenues relating to our new business focus.
Until we are able to complete the merger with Global Arena and raise
funds to pursue our business plan, our activities will be restricted.
We are subject to ongoing expenses associated with professional fees
for accounting, legal and a host of other expenses for annual reports
and proxy statements. These costs range up to $75,000 per year and,
although initially lower due to the sale of our subsidiary, will be
higher subsequent to the merger and as our business volume and activity
increases.
Plan of Operations
------------------
Over the next twelve months, we intend to:
Step Timeframe Estimated Cost
---- --------- --------------
1. Raise funds for working capital 1-2 months $10,000
2. Complete SEC and corporate filings
relating to merger and other
corporate actions 1-2 months $60,000
3. Complete merger with Global Arena 2-3 months $10,000
4. Integrate operations of Global Arena 6-9 months $100,000
5. Expand operations 9-12 months not yet
determined
The main uncertainties or obstacles involved before planned operations
can commence include
- raising sufficient funds
- completing the merger in a timely fashion and
- integrating and creating control and procedures.
Our current cash balance is estimated not to be sufficient to fund our
current operations. If we are unable to complete the merger and raise
sufficient funds or obtain alternate financing, we may never move
sufficiently forward with our business plan and become profitable.
13
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial
condition or results of operations.
Critical Accounting Policies and Estimates
We have made no material changes to our critical accounting policies in
connection with the preparation of financial statements for 2009.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements
Report of Independent Registered Public Accounting Firm Page 14
Consolidated Balance Sheets as of December 31, 2010 and 2009 Page 15
Consolidated Statements of Income for the Years Ended
December 31, 2010 and 2009 Page 16
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 2010 and 2009 Page 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2010 and 2009 Page 18
Notes to Consolidated Financial Statements Page 20
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of China Stationery Office
Supply, Inc and subsidiaries:
We have audited the accompanying balance sheets of China Stationery
Office Supply, Inc and subsidiaries as of December 31, 2010 and 2009,
and the related statements of income, stockholders' equity and
comprehensive income, and cash flows for each of the years ended.
China Stationery Office Supply, Inc and subsidiaries' management are
responsible for these financial statements. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the auditing standards of
the Public Company Accounting Oversight Board (United States). Those
auditing standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. The company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of China
Stationery Office Supply, Inc and subsidiaries as of December 31, 2010
and 2009, and the results of its operations and its cash flows for each
of the year in the two-year ended December 31, 2010 in conformity with
accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As more fully
described in Note 22 to the consolidated financial statements, the
Company has incurred significant operating losses and negative cash
flows from operations through December 31, 2010, and has an accumulated
deficit at December 31, 2010 of $3,629,433. These items, among other
matters, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 22. The consolidated financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or
the amount and classification of liabilities that may result from the
outcome of this uncertainty.
P.C.LIU, CPA, P.C.
Flushing, NY
March 28, 2011
15
CHINA STATIONERY OFFICE SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 AND 2009
ASSETS December 31, 2010 December 31, 2009
----------------- -----------------
Current Assets:
Cash and Cash equivalents $ 1,866,340 $ 428,155
Accounts Receivable, net 3,587,661 3,290,359
Inventory 3,423,217 4,096,368
Advance to Suppliers 2,049,989 2,066,610
Other Receivable 403,487 663,546
Prepaid Expenses 53,952 44,536
----------- -----------
Total Current Assets 11,384,646 10,589,574
----------- -----------
Plant and Equipment, net 7,642,241 7,397,815
Patent and Other Intangibles, net 1,291,671 1,282,779
Other Assets 423,532 653,957
----------- -----------
Total Assets $20,742,090 $19,924,124
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 4,519,380 $ 3,911,093
Notes Payable 1,977,746 307,440
Short-term Bank Loans 13,644,000 14,420,400
Advanced from Customers 1,040,420 1,288,052
----------- -----------
Total Current Liabilities 21,181,547 19,926,985
----------- -----------
Long-Term Liabilities - -
----------- -----------
Total Liabilities 21,181,547 19,926,985
----------- -----------
Noncontrolling interests in
Consolidated Subsidiary: (58,526) 5,180
Stockholders' Equity:
Common Stock, par value $.0001,
50,000,000 shares authorized;
11,987,427 shares issued and
outstanding as of
December 31, 2010 and 2009 11,987 11,987
Additional Paid in Capital 1,198,013 1,198,013
Retained Earnings (3,629,433) (3,213,843)
Statutory Reserve 590,380 590,380
Accumulated Other Comprehensive
Income 1,448,122 1,405,423
----------- -----------
Total Stockholders' Equity (380,931) (8,040)
----------- -----------
Total Liabilities and
Stockholders' Equity $20,742,090 $19,924,124
=========== ===========
The accompanying notes are an integral
part of these financial statements
16
CHINA STATIONERY AND OFFICE SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
2010 2009
------------ ------------
Net Sales $ 14,962,319 $ 11,916,453
Cost of Goods Sold 13,399,760 10,876,412
------------ ------------
Gross Profit 1,562,559 1,040,042
============ ============
Operating Expenses:
Sales Expenses 451,694 528,293
General and Administrative Expenses 862,068 1,808,464
------------ ------------
Total Operating Expenses 1,313,762 2,336,757
------------ ------------
Income from Operations before other
Income and (expenses) 248,797 (1,296,716)
------------ ------------
Other (Income)/ Expenses:
Interest Expense 940,574 1,036,363
Government Subsidy Income (2,470) (62,057)
Non-operation (Income)/ Expense (210,011) (41,794)
------------ ------------
Total Other Income and (Expense) 728,092 932,512
------------ ------------
Income (Loss) from Continuing Operations (479,296) (2,229,228)
Noncontrolling Interest 63,706 284,114
Provision For Income Taxes - -
------------ ------------
Net Loss (415,590) (1,945,113)
Other Comprehensive Income:
Unrealized Gain (loss) on Foreign
Currency Translation 42,699 (1,123)
------------ ------------
Comprehensive Income $ (372,891) $ (1,946,236)
============ ============
Earnings per Common Share-
Basic and Diluted (0.04) (0.19)
============ ============
Weighted Average Common Shares-
Basic and Diluted 11,987,427 11,987,427
============ ============
The accompanying notes are an integral
part of these financial statement
17
CHINA STATIONERY AND OFFICE SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
Preferred Common Stock Accumulated
Stock Par Value $.001 Additional Other Total
---------- -------------- Paid in Comprehensive Retained Statutory Comprehensive Stockholders'
Shares Amount Shares Amount Capital Income Earnings Reserve Income Equity
------ ------ ------ ------ ---------- ------------- --------- --------- ----------- ------------
Balance- December
31, 2008 - $ - 11,987,427 $11,987 $1,198,013 $1,406,546 $(1,268,730) $ 590,380 $ 1,938,196
Net Loss (1,945,113) (1,945,113) (1,945,113)
Allocation to
Statutory Reserve -
Foreign currency
adjustment (1,123) (1,123) (1,123)
---------
Comprehensive income (1,946,236)
---- ----- ---------- ------- ---------- ---------- ----------- --------- ----------
Balance- December
31, 2009 - $ - 11,987,427 11,987 1,198,013 1,405,423 (3,213,843) 590,380 (8,040)
---- ----- ---------- ------- ---------- ---------- ----------- --------- ----------
Net Loss (415,590) (415,590) (415,590)
Allocation to
Statutory Reserve -
Foreign currency
adjustment 42,699 42,699 42,699
---------
Comprehensive Income (372,891)
---- ----- ---------- ------- ---------- ---------- ----------- --------- ----------
Balance- December
31, 2010 - $ - 11,987,427 $11,987 $1,198,013 $1,448,122 $(3,629,433) $ 590,380 $ (380,931)
==== ===== ========== ======= ========== ========== ========== ========= ==========
The accompanying notes are an integral
part of these financial statements
18
CHINA STATIONERY AND OFFICE SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
Cash Flows From Operating Activities: 2010 2009
------------ ------------
Net Income (Loss) $ (415,590) $(1,945,113)
Adjustments to Reconcile Net Income
to Net Cash Provided (Used) By
Operating Activities:
Noncontrolling Interest 63,706 284,114
Depreciation and Amortization Expense 834,734 602,255
Loss on Disposal of fixed assets 13,834 -
Forgiveness of Indebtedness (244,168) -
Changes in assets and liabilities:
Accounts receivables, net (297,302) 848,722
Inventories 673,151 323,408
Advances to vendors 16,621 (91,817)
Other receivables, net 260,059 87,904
Prepaid expenses (9,416) 131,724
Accounts payable (659,138) 145,319
Advances from customers (247,632) 691,485
Accrued expenses, taxes and sundry
current liabilities 1,145,762 (551,669)
---------- -----------
Net Cash Provided (Used by
Operating Activities) $1,134,621 $ 526,333
---------- -----------
Cash Flows From Investing Activities:
Acquisition of property and equipment (633,041) (42,842)
---------- -----------
Net Cash Provided (Used) in
Investing Activities (633,041) (42,842)
---------- -----------
Proceeds from and (repayments) to
bank loans, net (776,400) (1,548,209)
Proceeds (repayment) of notes payable 1,670,306 (322,514)
---------- -----------
Net Cash Provided (Used) by
Financing Activities 893,906 (1,870,723)
---------- -----------
Effect of exchange rate changes on
cash and cash equivalents 42,699 (1,123)
---------- -----------
Increase in Cash and Cash Equivalents 1,438,185 (1,388,354)
---------- -----------
Cash and Cash Equivalents -
Beginning Balance 428,155 1,816,510
---------- -----------
Cash and Cash Equivalents - Ending Balance $1,866,340 $ 428,155
========== ===========
19
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Years for:
Interest Expense $ 899,220 $ 1,036,363
========== ===========
Income Taxes $ - $ -
========== ===========
The accompanying notes are an integral
part of these financial statements
20
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 1- Organization and Description of Business
China Stationery and Office Supple, Inc. (the "Company") was
incorporated in the state of Delaware in February 2002. The Company's
primary business, through its operating subsidiaries based in China, is
to develop, manufacture and market office supplies including
stationery, hole punchers, staplers, pens and pencils, rubber stamps,
felt markers, and numerous other items, which are sold through a
worldwide network of distributors in China.
The Company's business operations are carried on by its subsidiary,
Ningbo Binbin Stationery Co., Ltd. ("Binbin"). Binbin was organized on
January 29, 1998 under the laws of the People's Republic of China
("PRC"). On July 27, 2001, Binbin and its majority shareholder formed
Ningbo Binbin Style Commodity Co., Litd ("NBSC") under the laws of the
PRC. The primary business of NBSC is to manufacture and sell special
office supplies and promotion products in the PRC. NBSC is 90% owned
by Binbin.
On January 8, 2006, a Delaware corporation named "China Stationery and
Office Supply, Inc. (the "Intermediate Subsidiary") acquired 90% of the
registered capital of Binbin and the Intermediate Subsidiary were under
control. For that reason the transfer of 90% of the stock of Binbin to
the Intermediate Subsidiary did not meet the definition of a business
combination defined by ASC 805, "Business Combinations, as amended".
For transfers of assets under common control, the Company follows the
provisions of Appendix D of ASC 805. In accordance with Appendix D of
ASC 805, the receiving entity for transfers of net assets and exchanges
of shares between entities under common control should report results
of operations for the period in which the transfer occurs as though the
transfer of net assets or exchange of equity interest has occurred at
the beginning of the period.
On May 26, 2006, the Company completed a share exchange in which it
acquired 100% of the outstanding common stock of the Intermediate
Subsidiary. The transaction was treated as a reverse merger.
Accordingly, Intermediate Subsidiary is treated as the continuing
entity for accounting purposes and the historical financial information
prior to the merger is that of the Intermediate Subsidiaries.
Note 2- Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly and majority owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated in
consolidation.
21
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 2- Summary of Significant Accounting Policies (continued)
Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in the United States of America,
management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the dates of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting
year. Significant estimates, required by management, include the
recoverability of long-lived assets and the valuation of inventories.
Actual results could differ from those estimates.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or
less to be cash equivalents. The Company maintains cash and cash
equivalents with financial institutions in the PRC. The Company
performs periodic evaluation of the relative credit standing of
financial institutions that are considered in the Company's investment
strategy.
Bad debt reserves
The carrying amount of accounts receivable is reduced by a valuation
allowance that reflects the Company's best estimate of the amounts that
may not be collected. This estimate is based on reviews of all
balances in excess payment terms, typically 90-120 days; however, the
Company extends credit terms up to 12 months for certain customers.
Based on this review which includes customer credit worthiness and
history, general economic conditions and changes in customer payment
patterns, the Company estimates the portion, if any, of the balance
that will not be collected. Management reviews its valuation allowance
on a monthly basis.
Inventories
Inventories are stated at lower of cost, as determined on a weighted
average basis, or market value.
Property and Equipment
Property and equipment are stated at cost, net of accumulated
depreciation. Maintenance, repairs and betterments, including
replacement of minor items, are charged to expense; major additions to
physical properties are capitalized. Depreciation and amortization are
provided using the straight-line method for financial reporting
purposes, whereas accelerated methods are used for tax purposes.
22
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 2- Summary of Significant Accounting Policies (continued)
Long-lived assets
The Company accounts for long-lived assets in accordance with ASC 360
"Accounting for the impairment of Disposal of Long-Lived Assets", which
became effective January 1, 2002. Under ASC 360, the Company reviews
long-term assets for impairment whenever events or circumstances
indicate that the carrying amount of those assets may not be
recoverable. The Company has not incurred any losses in connection
with the adoption of this statement.
We review our long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of the assets to
future net cash flows expected to be generated by the assets. If the
assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount exceeds the
present value of estimated future cash flows. As of December 31, 2010,
we believe there is no impairment of our long-lived assets. There can
be no assurance, however, that market conditions will not change or
that there will be demand for our products, which could result in
impairment of long-lived assets in the future.
Intangible assets
Intangible assets consist of "rights to use land and build a plant."
According to the law of China, the government owns all the land in
China. Companies or individuals are authorized to possess and use the
land only through land use rights granted by the Chinese government.
Land use rights are being amortized using the straight-line method over
the lease term of 50 years. The method to amortize intangible assets
is a 50-year straight=line method. The Company also evaluates
intangible assets for impairment, at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying
value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets, other long-lived assets and,
goodwill is measured by comparing their net book value to the related
projected undiscounted cash flows form these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net
book value of the asset exceeds the related undiscounted cash flows,
the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss.
Revenue recognition
The Company recognizes revenue at the date of shipment to customers
when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the
Company exist and collectibility is reasonably assured.
23
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 2- Summary of Significant Accounting Policies (continued)
Reportable segments
Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which
management disaggregates a company. All of the Company's assets are
located in the PRC. The Company has two reportable segments based on
their product lines.
Accounting for income taxes
The Company accounts for income taxes under the provisions of ASC 740
"Accounting for Income Taxes", which requires that deferred tax assets
and liabilities be recognized for future tax consequences attributable
to differences between financial statements carrying amounts of
existing assets and liabilities and their respective tax basis. In
addition, ASC 740 requires recognition of future tax benefits, such as
carry forwards, to the extent that realization of such benefits is more
likely than not and that a valuation allowance be provided when it is
more likely than not that some portion of the deferred tax asset will
not be realized.
Foreign currency translation
The functional currency of China Stationery and Office Supply, Inc and
Subsidiaries is the Chinese Renminbi ("RMB"). For financial reporting
purposes, RMB has been translated into United States Dollars ("USD") as
the reporting currency. Assets and liabilities are translated at the
exchange rate in effect at the balance sheet date. Income statement
accounts are translated at the average rate of exchange prevailing for
the period. Capital accounts are translated at their historical
exchange rates when the capital translation occurred. Translation
adjustments arising from the use of different exchange rates from
period to period are included as a component of stockholders' equity as
"Accumulated other comprehensive income". Gains and losses resulting
from foreign currency transaction are included in accumulated other
comprehensive income.
Statement of cash flows
In accordance with Accounting Standards Codification ASC 230,
"Statement of Cash Flows," cash flows from the Company's operations are
calculated based upon the local currencies. As a result, amounts
related to assets and liabilities reported on the statement of cash
flows will not necessarily agree with changes in the corresponding
balances on the balance sheet.
24
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 2- Summary of Significant Accounting Policies (continued)
New accounting pronouncements
In January 2010, FASB issued ASU No. 2010-01- Accounting for
Distributions to Shareholders with Components of Stock and Cash. The
amendments in this Update clarify that the stock portion of a
distribution to shareholders that allows them to elect to receive cash
or stock with a potential limitation on the total amount of cash that
all shareholders can elect to receive in the aggregate is considered a
share issuance that is reflected in EPS prospectively and is not a
stock dividend for purposes of applying Topics 505 and 260 (Equity and
Earnings Per Share). The amendments in this update are effective for
interim and annual periods ending on or after December 15, 2009, and
should be applied on a retrospective basis. The adoption of this ASU
did not have a material impact on its consolidated financial
statements.
In January 2010, FASB issued ASU No. 2010-02 - Accounting and Reporting
for Decreases in Ownership of a Subsidiary - a Scope Clarification.
The amendments in this Update affect accounting and reporting by an
entity that experiences a decrease in ownership in a subsidiary that is
a business or nonprofit activity. The amendments also affect
accounting and reporting by an entity that exchanges a group of assets
that constitutes a business or nonprofit activity for an equity
interest in another entity. The amendments in this update are
effective beginning in the period that an entity adopts SFAS No. 160,
"Non-controlling Interests in Consolidated Financial Statements - An
Amendment of ARB No. 51." If an entity has previously adopted SFAS No.
160 as of the date the amendments in this update are included in the
Accounting Standards Codification, the amendments in this update are
effective beginning in the first interim or annual reporting period
ending on or after December 15, 2009. The amendments in this update
should be applied retrospectively to the first period that an entity
adopted SFAS No. 160. The adoption of this ASU did not have a material
impact on the Company's consolidated financial statements.
In January 2010, FASB issued ASU No. 2010-06 - Improving Disclosures
about Fair Value Measurements. This update provides amendments to
Subtopic 820-10 that requires new disclosure as follows: 1) Transfers
in and out of Levels 1 and 2. A reporting entity should disclose
separately the amounts of significant transfers. 2) Activity in Level
3 fair value measurements. In the reconciliation for fair value
measurements using significant unobservable inputs (Level 3), a
reporting entity should present separately information about purchases,
sales, issuances, and settlements (that is, on a gross basis rather
than as one net number). This update provides amendments to Subtopic
820-10 that clarifies existing disclosures as follows: 1) Level of
disaggregation. A reporting entity should provide fair value
measurement disclosures for each class of assets and liabilities. A
class is often a subset of assets or liabilities within a line item in
the statement of financial position. A reporting entity needs to use
judgment in determining the appropriate classes of assets and
liabilities.
25
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 2- Summary of Significant Accounting Policies (continued)
2) Disclosures about inputs and valuation techniques. A reporting
entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring
fair value measurements. Those disclosures are required for fair value
measurements that fall in either Level 2 or Level 3. The new
disclosures and clarifications of existing disclosures are effective
for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value
measurements. These disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those
fiscal years. The Company is currently evaluating the impact of this
ASU, however, the Company does not expect the adoption of this ASU to
have a material impact on its consolidated financial statements.
In February 2010, FASB issued ASU No. 2010-9 Subsequent Events (Topic
855) - "Amendments to Certain Recognition and Disclosure Requirements".
This update addresses certain implementation issues related to an
entity's requirement to perform and disclose subsequent-events
procedures, removes the requirement that public companies disclose the
date of their financial statements in both issued and revised financial
statements. According to the FASB, the revised statements include
those that have been changed to correct an error or conform to a
retrospective application of U.S. GAAP. The amendments were effective
upon issuance of the update, except for the use of the issued date for
conduit debt obligors. That amendment is effective for interim or
annual periods ending after June 15, 2010. The adoption of this ASU
did not have a material impact on the Company's consolidated financial
statements.
In April 2010, FASB issued ASU No. 2010-13-Stock Compensation. The
objective of this Update is to address the classification of an
employee share-based payment award with an exercise price denominated
in the currency of a market in which the underlying equity security
trades. It provides guidance on the classification of a share-based
payment award as either equity or a liability. A share-based payment
award that contains a condition that is not a market, performance, or
service condition is required to be classified as a liability. Under
Topic 718, awards of equity share options granted to an employee of an
entity's foreign operation that provide a fixed exercise price
denominated in (1) the foreign operation's functional currency or (2)
the currency in which the employee's pay is denominated should not be
considered to contain a condition that is not a market, performance, or
service condition.
The amendments in this Update affect entities that issue employee
share-based payment awards with an exercise price denominated in the
currency of a market in which a substantial portion of the entity's
equity securities trades that differs from the functional currency of
26
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 2- Summary of Significant Accounting Policies (continued)
the employer entity or payroll currency of the employee. The
amendments affect entities that have previously considered such awards
to be liabilities because of their exercise price.
The amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning on or after
December 15, 2010. The amendments in this Update should be applied by
recording a cumulative-effect adjustment to the opening balance of
retained earnings. The Company is currently evaluating the impact of
this ASU on its consolidated financial statements.
In July 2010, the FASB issued Accounting Standards Update 2010-20 which
amends "Receivables" (Topic 310). ASU 2010-20 is intended to provide
additional information to assist financial statement users in assessing
an entity's risk exposures and evaluating the adequacy of its allowance
for credit losses. The disclosures as of the end of a reporting period
are effective for interim and annual reporting periods ending on or
after December 15, 2010. The disclosures about activity that occurs
during a reporting period are effective for interim and annual
reporting periods beginning on or after December 15, 2010. The
amendments in ASU 2010-20 encourage, but do not require, comparative
disclosures for earlier reporting periods that ended before initial
adoption. However, an entity should provide comparative disclosures
for those reporting periods ending after initial adoption. While ASU
2010-20 will not have a material impact on our consolidated financial
statements, we expect that it will expand our disclosures related to
notes receivables.
Note 3- Accounts Receivable
Accounts receivable are uncollateralized, non-interest bearing customer
obligations typically due under terms requiring payment within 90-120
says from the invoice date. However, the Company does extend certain
customers credit terms up to 12 months. Accounts receivable are stated
at the amount billed to the customer. Payments of accounts receivable
are allocated to the specific invoices identified on the customer's
remittance advise or, if unspecified, are applied to the oldest unpaid
invoices. As of December 31, 2010 and 2009, the net account receivable
is $3,587,661 and $3,290,359, respectively.
27
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 4- Inventories
A summary of the components of inventories at December 31, 2010 and
2009 are as follows:
December 31, 2010 December 31, 2009
----------------- -----------------
Raw Materials $ 698,211 $ 558,815
Work in Process 1,735,890 2,106,764
Packaging Supplies 113,320 130,858
Finished Goods 875,795 1,299,931
----------------- -----------------
TOTAL $ 3,423,217 $ 4,096,368
================= =================
Note 5- Advances to Supplies
As a normal practice of doing business in China, the Company is
frequently required to make advance payments to suppliers for raw
materials. Such advance payments are interest free. The balances of
advances to suppliers were $2,049,989 and $2,066,610 as of December 31,
2010 and 2009 respectively.
Note 6- Other Receivable
Other receivable, $403,487 and $663,546 for the years of 2010 and 2009,
respectively, mainly consisted of the following items:
December 31, 2010 December 31, 2009
----------------- -----------------
Loan to employees $ 108,356 $ 336,381
Exported tax refund 114,147 40,682
Refundable security deposit 122,270 117,120
Other miscellaneous 58,714 169,363
----------------- -----------------
TOTAL $ 403,487 $ 663,546
================= =================
Note 7- Prepaid Expense
Prepaid expense consists of prepaid insurance and prepaid purchasing
production equipment in the years of 2010 and 2009 for the amount of
$53,952 and $44,536, respectively.
28
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 8- Property and Equipment
A summary of property and equipment at December 31, 2010 and 2009 are
as follows:
December 31, 2010 December 31, 2009
----------------- -----------------
Building $ 6,686,860 $ 6,457,495
Manufacturing Equipment 3,054,015 3,146,638
Office Furniture and Equipment 1,415,224 611,971
Vehicles 659,961 975,735
----------------- -----------------
Subtotal 11,816,060 11,191,839
Less: Accumulated Depreciation (4,173,819) (3,794,024)
----------------- -----------------
Total Property and Equipment $ 7,642,241 $ 7,397,815
================= =================
Depreciation expense for year ended December 31, 2010 and 2009 was
$526,620 and $533,108 respectively.
Note 9- Intangible Assets
The company's office and manufacturing site is located in Qiaotouhu
Street Scene, Ninghai Zhejiang China. The Company leases the land from
the local government of PRC with the term from November 2001 to
November 2051. The fair value amount of acquisition of the right to
use land was recorded as an intangible asset and is being amortized
over the lease term 50 years.
A summary of intangible assets at December 31, 2010 and 2009 are as
follows:
December 31, 2010 December 31, 2009
----------------- -----------------
Land Use Right $ 1,756,064 $ 1,716,357
Less: Accumulated Amortization (464,493) (433,578)
----------------- -----------------
Net Land Use Right $ 1,291,671 $ 1,282,779
================= =================
Amortization expense was $308,114 and $69,147 as of December 31, 2010
and 2009, respectively.
Note 10- Other Assets
Other assets are molds used in the production of various stationery and
office supplies. The cost of molds is amortized during their useful
life. A summary of additions and amortization of other assets for
years ended December 31, 2010 and 2009 are as follows:
29
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
December 31, 2010 December 31, 2009
----------------- -----------------
Beginning Balance $ 677,184 $ 776,376
Additions 4,416 176,436
Less: Amortization during the year (258,068) (298,855)
----------------- -----------------
Ending Balance $ 423,532 $ 653,957
================= =================
Note 11- Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses were comprised of the following
items as of December 31, 2010 and 2009.
December 31, 2010 December 31, 2009
----------------- -----------------
Accounts Payable $ 1,958,322 $ 2,861,628
Accrued Payroll and
Related Liabilities 427,986 397,818
Accrued VAT Payable 9,942 (41,375)
Miscellaneous Accrued Expense 2,123,131 693,022
----------------- -----------------
TOTAL $ 4,519,380 $ 3,911,093
================= =================
Note 12- Short-Term Bank Loans
The company borrowed funds from several financial institutions for its
working capital. These borrowings are short term in nature and are
secured by the Company's real estate and bear interest ranging from
5.35% to 6.31% in 2010 and 5.35% to 7.49% in 2009. As of December 31,
2010 and 2009 the short term loan was $13,644,000 and $14,420,400,
respectively.
Note 13- Advances From Customers
Advances from customers are non-interest bearing and unsecured. As of
December 31, 2010 and 2009 the balances were $1,040,420 and $1,288,052
respectively.
Note 14- Stockholders' Equity
Upon the completion of the reverse merger on May 26, 2006, in addition
to the outstanding 6,585,126 shares of common stock, Dickie Walker
issued 10,142,889 shares of common stock and 500,000 shares of Series A
Preferred Stock to the shareholders of China Stationery and Office
Supply, Inc. Each share of the Series A Preferred Stock was
convertible into 120 shares of common stock. All the outstanding
shares of the Series A Preferred Stock were subsequently converted into
common stock.
30
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 14- Stockholders' Equity (continued)
On June 26, 2006, the Board of Directors approved a 5-to-32 reverse
stock split of the Company's outstanding shares of common stock. The
reverse stock split became effective on July 18, 2006. All share and
per share information included in these consolidated financial
statements has been adjusted to reflect this reverse stock split.
Note 15- Segment Reporting
Under SFAS 131, the Company has two reportable segments: Ningbo Binbin
Stationery Co., Ltd ("Stationery") and Ningbo Binbin Style Commodity
Co., Ltd ("Style"). Following is a summary of segment information for
the year ended December 31, 2010 and 2009:
Year ended December 31, 2010
----------------------------
Stationery Style Total
------------ ---------- -----------
Revenue $ 14,844,486 $ 117,832 $14,962,319
Operating Income (Loss) $ 422,415 $ (173,618) $ 248,797
Total Assets $ 18,100,550 $2,641,540 $20,742,090
Capital Expenditure $ 633,041 $ 0 $ 633,041
Depreciation and Amortization $ 725,370 $ 131,579 $ 856,949
Interest Expense $ (940,626) $ 53 $ (940,574)
Year ended December 31, 2009
----------------------------
Stationery Style Total
----------- ----------- -----------
Revenue $11,795,337 $ 121,116 $11,916,453
Operating Income (Loss) (617,132) (679,584) (1,296,716)
Total Assets 17,291,233 2,632,891 19,924,124
Capital Expenditure 34,635 6,207 42,842
Depreciation and Amortization 442,401 159,854 602,255
Interest Expense $(1,036,363) $ - $(1,036,363)
Note 16- Statutory Common Welfare Fund
As stipulated by the Company Law of China, net income after taxation
can only be distributed as dividends after appropriation has been made
for the following:
(1) Making up cumulative prior years' losses, if any;
(2) Allocations to the "statutory surplus reserve" of at least 10% of
income after tax, as determined under China's accounting rules and
regulations, until the fund amounts to 50% of the Company's registered
capital;
31
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 16- Statutory Common Welfare Fund (continued)
(3) Allocation of 5-10% of income after tax, as determined under
China's accounting rules and regulations, to the Company's "statutory
common welfare fund", which is established for the purpose of providing
employee facilities and other collective benefits to the Company's
employees; and
(4) Allocations to the discretionary surplus reserve, if approved in
the shareholders' general meeting.
The Company incurred losses in both years ended December 31, 2010 and
2009. Therefore, Company was not required to allocate the "statutory
surplus reserve"
Note 17- Income Taxes
Deferred income taxes are computed using the asset and liability
method, such that deferred tax assets and liabilities are recognized
for the unexpected future tax consequences of temporary differences
between financial reporting amounts and the tax basis of existing
assets and liabilities based on currently enacted tax laws and tax
rates in effect in the China for the periods in which the differences
are expected to reverse.
Income tax expense is the tax payable for the period plus the change
during the period in deferred income taxes. A valuation allowance is
provided when it is more likely than not that some portion or all of
the deferred tax assets and liabilities, respectively, will be
realized. Therefore, there are no deferred tax assets or liabilities
for the years ended December 31, 2010 and 2009.
Since the Company's Chinese subsidiaries ("Binbin" and "NBSC") are
Sino-joint venture enterprises, under the Chinese tax regulation, they
are exempt from corporate income tax. Accordingly, the Company has not
accrued income tax for these subsidiaries for the years ended December
31, 2010 and 2009.
Note 18- Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing income
available to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted earnings per
share is computed similar to basic earnings per share except that the
denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive.
There are no common stock equivalents available in the computation of
earnings (loss) per share at December 31, 2010 and 2009.
32
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
Note 19- Current Vulnerability Due to Certain Concentrations
the Company's operations are carried out in China. Accordingly, the
Company's business, financial condition and results of operations may
be influenced by the political, economic and legal environments in the
Peoples Republic of China (PRC), and by the general state of the PRC
economy.
The Company's operations in the PRC are subject to specific
considerations and significant risks not typically associated with
companies in the North America and Western Europe. These include risks
associated with, among others, the political, economic and legal
environments and foreign currency exchange. The Company's results may
be adversely affected by changes in governmental policies with respect
to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation,
among other things.
Note 20- Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist of cash and cash
equivalents. As of December 31, 2010 and 2009, substantially all of
the Company's cash and cash equivalents were held by major banks
located in the PRC of which the Company's management believes are of
high credit quality. With respect to accounts receivable, the Company
extends credit based on an evaluation of the customer's financial
condition and customer payment practices to minimize collection risk on
account receivable.
The Company had one major supplier who accounted for 24.4% of total raw
material purchase during the year ended December 31, 2010. There was
no single vendor who accounted for more than 5% of the Company's total
raw material purchases during the year ended December 31, 2009. The
balance of this major supplier of account payable at the December 31,
2010 accounted for 19.87%.
The Company had three major customers who accounted for 14.1%, 8.4% and
5.6% of the total sales for the year ended December 31, 2010. Accounts
receivable from these customers at December 31, 2010 were 12.25%,
10.83% and 1.85%, respectively. The company had three major customers
who accounted for 9.3%, 6.7% and 5.0% of the total sales for the year
ended December 31, 2009. Accounts receivable from these customers at
December 31, 2009 were 1.71%, 7.2% and 0%, respectively.
The Company's sales are heavily dependent on exports products to USA
and Asia for both years ended December 31, 2010 and 2009.
Note 21- Contingencies
As of December 31, 2010, Ninbo Binbin Stationery Co., Ltd ("Binbin") is
contingently liable as a guarantor with respect to approximately
$1,364,400 of indebtedness of non-related entities. The term of the
guarantees is through March 23, 2011 and August 30, 2011. At any time
33
CHINA STATIONERY AND OFFICE SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
through that day, should any one of the entities default on its debt
payments, Binbin will be obligated to perform under that guarantee by
making the required payments. The maximum potential amount of future
payments that Binbin is required to make under the guarantee was
$1,364,400 and $1,317,600 as of December 31, 2010 and 2009
respectively.
Note 22- Going Concern
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company
as a going concern. The company incurred net losses of $415,590 and
$1,945,113 during the years ended December 31, 2010 and 2009,
respectively, and had an accumulated deficit of $3,629,433 as of
December 31, 2010.
Management plans to raise additional capital and borrowing short term
loan from the banks to meet the expectation of increased operations
costs to fund the operation expenses, and then reevaluate capital needs
upon a review of sales performance resulting from the upcoming season.
Our ability to continue as a going concern is dependent upon our
ability to generate profitable operations in the future and/or to
obtain the necessary financing to meet our obligations and to repay the
liabilities arising from normal business operations when they come due.
We plan to continue to provide for our capital requirements by issuing
additional equity securities and borrow funds from banks. No assurance
can be given that additional capital will be available when required or
on terms acceptable to us. We also cannot give assurance that we will
achieve significant revenues in the future. The outcome of these
matters cannot be predicted at this time and there are no assurances
that if achieved, we will have sufficient funds to execute our business
plan or generate positive operating results.
These matters, among others, raise substantial doubt about the ability
of the Company to continue as a going concern. These consolidated
financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should
we be unable to continue as a going concern.
Note 23- Subsequent Event
In October 23, 2010, the Company has sold 1,080,786 shares of common
stock to an investor, Eosphoros Asset Management Inc. (EAM), for the
price of $150,000. At the same day the EAM signed a Stock Option and
Proxy agreement with certain holders of common stock of the Company.
Pursuant to the agreement, beginning on February 28, 2011 and ending
April 30, 2011, EAM has the right but not the obligation to purchase
additional 1,752,771 shares of common stock.
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures.
The term "disclosure controls and procedures" (defined in SEC Rule 13a-
15(e)) refers to the controls and other procedures of a company that
are designed to ensure that information required to be disclosed by a
company in the reports that it files under the Securities Exchange Act
of 1934 (the "Exchange Act") is recorded, processed, summarized and
reported within required time periods. "Disclosure controls and
procedures" include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act
is accumulated and communicated to the company's management, including
its principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
The Company's management, with the participation of the Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the
period covered by this annual report (the "Evaluation Date"). Based on
that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer has concluded that, as of the Evaluation Date, such
controls and procedures were effective.
(b) Changes in internal controls.
The term "internal control over financial reporting" (defined in SEC
Rule 13a-15(f)) refers to the process of a company that is designed to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
The Company's management, with the participation of the Chief Executive
Officer and Chief Financial Officer has evaluated any changes in the
Company's internal control over financial reporting that occurred
during the fourth quarter of the year covered by this annual report,
and they have concluded that there was no change to the Company's
internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.
We have assessed the effectiveness of those internal controls as of
December 31, 2010, using the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO") Internal Control - Integrated
Framework as a basis for our assessment.
35
Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may
deteriorate. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
A material weakness in internal controls is a deficiency in internal
control, or combination of control deficiencies, that adversely affects
the Company's ability to initiate, authorize, record, process, or
report external financial data reliably in accordance with accounting
principles generally accepted in the United States of America such that
there is more than a remote likelihood that a material misstatement of
the Company's annual or interim financial statements that is more than
inconsequential will not be prevented or detected. In the course of
making our assessment of the effectiveness of internal controls over
financial reporting, we identified two material weaknesses in our
internal control over financial reporting. These material weaknesses
consisted of:
Inadequate staffing and supervision within the accounting operations of
our company. The relatively small number of employees who are
responsible for accounting functions prevents us from segregating
duties within our internal control system. The inadequate segregation
of duties is a weakness because it could lead to the untimely
identification and resolution of accounting and disclosure matters or
could lead to a failure to perform timely and effective reviews.
Lack of expertise in U.S accounting principles among the personnel in
our Chinese headquarters. Our books are maintained and our financial
statements are prepared by the personnel employed at our executive
offices in the City of Ninghai. Few of our employees have experience
or familiarity with U.S accounting principles. The lack of personnel
in our Ninghai office who are trained in U.S. accounting principles is
a weakness because it could lead to improper classification of items
and other failures to make the entries and adjustments necessary to
comply with U.S. GAAP.
Lack of independent control over policy implementation. Wei Chenghui
is the sole director of China Stationery, as well as its Chief
Executive Officer and Chief Financial Officer. As a result, Mr. Wei is
responsible for both the development of financial policies and for
their implementation. The absence of other directors to review the
implementation of the Board's policies and the performance by
management is a weakness because it could lead to a failure to note and
remedy improper financial accounting.
Management is currently reviewing its staffing and their training in
order to remedy the weaknesses identified in this assessment. However,
we have to weigh the cost of improvement against the benefit of
strengthened controls, particularly in light of our current financial
condition. However, because of the above conditions, management's
assessment is that the Company's internal controls over financial
reporting were not effective as of December 31, 2010.
36
This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to
attestation by the Company's registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management's report in this annual
report.
ITEM 9B. OTHER INFORMATION.
None.
37
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following individuals are the members of China Stationery's board
of directors and its executive officers.
Name Age Position with the Company Term(s) of Office
------------ ------ ------------------------- -----------------
John S. Matthews Chief Executive Officer October 27, 2010
Director to present
Josh Winkler Chief Financial Officer October 27, 2010
Director to present
Wei Chenghui(1) Director 2006 to present
(1)Mr. Chenghui shall resign as a director upon completion of the
Merger.
Directors hold office until the annual meeting of the Company's
stockholders and the election and qualification of their successors.
Officers hold office, subject to removal at any time by the Board,
until the meeting of directors immediately following the annual meeting
of stockholders and until their successors are appointed and qualified.
Departure of Directors or Certain Officers; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
Effective October 27, 2010, Wei Chenghui resigned all held corporate
offices in anticipation of a subsequent change in control of the
registrant.
John S. Matthews
----------------
Mr. Matthews has been the chief executive officer of Global Arena since
February 2008. From January 2006 to February 2008, Mr. Matthews was
the president of Clark Dodge, a FINRA registered broker/dealer.
From January 2003 to September 2005, Mr. Matthews was the chairman of
JSM Capital Holding Corp., held the independent contractor agreement
for two Office of Supervisory Jurisdictions with vFinance Investments,
Inc. and was responsible for all supervision of 35 registered
representatives.
Concurrently, during the period from January 2003 until October 2004,
Mr. Matthews served as the president of vFinance Investments and was
responsible for all retail sales of 165 registered representatives and
28 branch offices.
From 2001 through 2003, Mr. Matthews served as Chairman of Ehrenkranz,
King & Nussbaum, a NASD broker/dealer.
From 1996 to 2000, Mr. Matthews served as chairman and chief executive
officer of Weatherly Securities Corp., a full service NASD brokerage
firm. In May 2000, Weatherly Securities was sold to Weatherly
International PLC, a publicly-traded company listed on the London Stock
Exchange's Alternative Investment Market.
38
From 1992 to 1996, Mr. Matthews worked as a registered representative,
qualifying as a NASD Series 24 principal in 1992. Over the course of
his career, Mr. Matthews has gained extensive experience with the daily
operation and administration of a financial services firm.
Mr. Matthews graduated with a bachelor of arts from Long Island
University in 1986.
Josh Winkler
------------
Mr. Winkler has been the chairman of the board of Global Arena since
February 2008. Mr. Winkler has extensive background and experience in
accounting, operations and financing especially in the healthcare,
telecommunications, technology, entertainment, finance, among other
sectors. In the last several years, Mr. Winkler has been involved in
venture and growth capital financing business representing ultra high
net worth individuals. He brings with him an extensive managerial and
operation experience. From 2006 to 2008, after his retirement from IDT
and Net2Phone, Mr. Winkler worked at BullDog Entertainment, LLC in the
entertainment sector in ticketing and promotions, a company which was
later sold to Warner Music Group.
From 1995 to 2002, Mr. Winkler served as the president of the retail
division of IDT Corporation (NYSE: IDT), where he was an executive
officer and member of the board of directors. His executive duties put
him in control of the worldwide phone cards division. He also spun off
a group known as Net2Phone which was later sold to AT&T. Prior to
1995, Mr. Winkler was the president of a leading medical complex and
laboratory that provided family primary and urgent care for over ten
years until it was sold. Prior to 1985, Mr. Winkler practiced as a
certified public accountant for nearly ten years for national
accounting and audit firms including Oppenheimer, Apple, Dixon &
Company and other firms with strong taxation practices.
Wei Chenhui. From 2006 to October 27, 2010, Mr. Wei was chief
executive officer and chief financial officer of China Stationery. Mr.
Wei founded Nigbo Binbin in 1989 and has served as its president and
chief executive officer since then. Under Mr. Wei's leadership, Ningbo
Binbin has grown into a major participant in the Chinese office supply
industry. In 2003, China's Ministry of Commerce included Ningbo Binbin
in its list of "Top 100 Private Companies in Export Sales." Mr. Wei
attend the Zhejiang Industrial University, with a concentration in
business administration
Audit Committee; Compensation Committee; Nominating Committee
The board of directors has not yet appointed an audit committee or a
compensation committee or a nominating committee, due to the small size
of the board. The board of directors does not have an audit committee
financial expert, due to the small size of the board.
Code of Ethics
The registrant does not have a written code of ethics applicable to its
executive officers. The board of directors has not adopted a written
code of ethics because there are so few executive officers of the
registrant.
39
Section 16(a) Beneficial Ownership Reporting Compliance
None of the officers, directors or beneficial owners of more than 10%
of the registrant's common stock failed to file on a timely basis the
reports required by Section 16(a) of the Exchange Act during the year
ended December 31, 2010.
ITEM 11. EXECUTIVE COMPENSATION
The following table set forth certain information as to the
compensation paid to our executive officers.
Summary Compensation Table
Name and Cash Stock Option All Other
Principal Year Salary Awards Awards Compensation Total
Position ($) ($) ($) ($) ($)
------------- ---- ------ ------ ------ ------------ -----
John Matthews 2010 - - - - -
CEO 2009 n/a n/a n/a n/a n/a
Josh Winkler 2010 - - - - -
CFO 2009 n/a n/a n/a n/a n/a
Wei Chenghui 2010 - - - -
CEO, CFO 2009 16,807 - - - -
Equity Awards
Outstanding Equity Awards at December 31, 2010
Number of Number of
Securities Securities
Underlying Underlying
Unexercised Unexercised Option Option
Options/ Options/ Exercise Expiration
Name Exercisable Unexercisable Price Date
------------- ----------- ------------- -------- ----------
John Matthews - - - -
Josh Winkler - - - -
Wei Chenghui - - - -
Remuneration of Directors
None of the members of the board of directors receives remuneration for
service on the board.
40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following tabulates holdings of shares of the registrant by each
person or entity who, subject to the above, as of March 28, 2011, holds
of record or is known by management to own beneficially more than 5.0%
of the common shares and, in addition, by all directors and officers of
the registrant individually and as a group. Each named beneficial
owner has sole voting and investment power with respect to the shares
set forth opposite his name.
Percentage of
Number & Class Outstanding
Name and Address of Shares Common Shares
---------------- -------------- -------------
John Matthews
708 Third Avenue
New York City, NY 10017 0 0.00%
Josh Winkler
708 Third Avenue
New York City, NY 10017 0 0.00%
Wei Chengthui(1)
c/o Ningbo Binbin
Ziqtouhu Chenghuan Town
Nighai City Zheijang China 315611 499,635 4.17%
All Directors & Officers
as a group (3 persons) 499,635 4.17%
Other 5% Shareholders
Bin Wei
c/o Ningbo Binbin
Ziqtouhu Chenghuan Town
Nighai City Zheijang China 315611 599,548 5.00%
Jufen Hu
c/o Ningbo Binbin
Ziqtouhu Chenghuan Town
Nighai City Zheijang China 315611 2,697,981 22.51%
Cede & Co
P.O. Box 222
Bowling Green Station
New York, NY 10274 2,582,146 21.54%
(1) On January 1, 2011, Wei Chenghui, as manager of Ningbo Binbin
Stationery Co., Ltd., exercised the call option pursuant to the
exercise provisions of an Assignment and Assumption and Management
Agreement. Upon exercise of the call option, Mr. Wei Chenghui
delivered to the registrant, duly endorsed for transfer to the
registrant, one or more certificates representing in aggregate three
million seven hundred ninety six thousand nine hundred thirty eight
(3,796,938) shares of the registrant's common stock. The common shares
shall be cancelled by the registrant prior to the close of the merger.
41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Certain Relationships
None.
Director Independence
None of the members of the Board of Directors is independent, as
"independent" is defined in the rules of the NASDAQ Stock Market.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees. We paid aggregate fees and expenses of approximately
$50,000 and $30,000 respectively, from P.C. Liu, CPA, P.C. for the 2010
and 2009 fiscal years. Such fees included work completed for our annual
audits and for the review of our financial statements included in our
Form 10-Q.
Tax Fees. We did not incur any aggregate tax fees and expenses from
P.C. Liu, CPA, P.C. for the 2010 and 2009 fiscal years for professional
services rendered for tax compliance, tax advice, and tax planning.
All Other Fees. We did not incur any other fees from P.C. Lui, CPA,
P.C. during fiscal 2010 and 2009.
The board of directors, acting as the Audit Committee considered
whether, and determined that, the auditor's provision of non-audit
services was compatible with maintaining the auditor's independence.
All of the services described above for fiscal years 2010 and 2009 were
approved by the board of directors pursuant to its policies and
procedures.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) List of Financial statements included in Part II hereof
Balance Sheets, December 31, 2010 and 2009
Statements of Operations for the years ended December 31, 2010 and 2009
Statements of Stockholders' Equity for the years ended December 31,
2010 and 2009
Statements of Cash Flows for the years ended December 31, 2010 and 2009
Notes to the Financial Statements
(a)(2) List of Financial Statement schedules included in Part IV
hereof: None.
(a)(3) Exhibits
The following of exhibits are filed with this report:
(31) 302 certification
(32) 906 certification
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.
Date: March 28, 2011
CHINA STATIONERY & OFFICE SUPPLY, INC.
/s/ John Matthews
------------------------------
By: John Matthews, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
behalf of the Corporation and in the capacities and on the dates
indicated.
/s/John Matthews CEO/Director March 28, 2011
-------------------
John Matthews
/s/Joshua Winkler CFO/Controller March 28, 2011
------------------- Director
Joshua Winkler
/s/Wei Chenghui Director March 28, 2011
-------------------
Wei Chenghui
