Mobile Presence Technologies Inc. - FORM 10-Q/A

Attached files

file	filename
EX-32.1 - Mobile Presence Technologies Inc.	v201024_ex32-1.htm
EX-31.2 - Mobile Presence Technologies Inc.	v201024_ex31-2.htm
EX-31.1 - Mobile Presence Technologies Inc.	v201024_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 3

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission file number: 333-147666

CHINA SHANDONG INDUSTRIES, INC.

(Name of registrant as specified in its charter)

Delaware		20-8545693
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

No. 2888 Qinghe Road

Development Zone Cao County

Shandong Province, China 274400

(Address of principal executive offices)(Zip Code)

(86) 530-3431658

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o (Do not check if smaller reporting company)		Smaller reporting company x

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

Yes o No x

There were 12,865,013 shares of common stock outstanding as of November 5, 2010.

EXPLANATORY NOTE

This Quarterly Report on Form 10-Q/A is being filed as Amendment No. 3 to our Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 2010. The Form 10-Q was originally filed with the Securities and Exchange Commission on May 13, 2010, the Amendment No. 1 to the Form 10-Q was filed on June 28, 2010 and Amendment No. 2 to the Form 10-Q was filed on October 20, 2010.

On June 17, 2010, our management concluded that the unaudited consolidated financial statements for the fiscal quarter ended March 31, 2010 could no longer be relied upon because of errors in those financial statements. On June 23, 2010, the Company filed a Current Report on Form 8-K disclosing the need to restate its financials and the reasons for the restatement. The Company restated those financial statements to make the necessary accounting corrections in its Amendment No. 1 to the Form 10-Q.

This Amendment No. 3 to our Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 2010 is being filed to reflect that the restatement of the Company’s audited financial statements for the fiscal quarter ended March 31, 2010 resulted from ineffective disclosure controls and procedures which in turn led to ineffective internal control over financial reporting; see Item 4T. In addition, this Amendment No. 3 is being filed to incorporate certain changes to our financial statements and corresponding amendments to the Item entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Except as specifically referenced herein, this Amendment No. 3 to the Quarterly Report on Form 10-Q/A does not reflect any event occurring subsequent to June 28, 2010, the filing date of the Company’s Amendment No. 1 to the Quarterly Report on Form 10-Q/A.

TABLE OF CONTENTS

		Page No.
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009 (Audited)	3
	Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009 (unaudited)	4
	Consolidated Statements of Cash Flows for Three Months Ended March 31, 2010 and 2009 (unaudited)	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	30
Item 4	Controls and Procedures.	30
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	31
Item 1A.	Risk Factors.	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	31
Item 3.	Defaults Upon Senior Securities.	31
Item 4T.	(Removed and Reserved)	31
Item 5.	Other Information.	31
Item 6.	Exhibits.	32

FORWARD-LOOKING INFORMATION

This Amendment No. 3 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-Q/A is filed, and we do not intend to update any of the forward-looking statements after the date this Amendment No. 3 is filed to confirm these statements to actual results, unless required by law.

Item 1. Financial Statements.

China Shandong Industries, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
As of March 31, 2010 and December 31, 2009

	(Restated)			(Restated)
ASSETS	March 31, 2010			December 31, 2009
				(Audited)
CURRENT ASSETS
Cash and cash equivalents	$	3,455,275		$	2,185,839
Trade accounts receivable		17,788,731			16,833,798
Inventories		11,048,539			10,353,746
Prepaid expenses		642,492			375,493
Deposits		-			767,204
Other receivables		166,978			295,752
TOTAL CURRENT ASSETS		33,102,014			30,811,832

FIXED ASSETS
Property, plant, and equipment		10,836,686			10,656,454
Accumulated depreciation		(3,509,570	)		(3,309,354	)
NET FIXED ASSETS		7,327,116			7,347,100

OTHER ASSETS
Land occupancy rights, net		75,511			76,834
Construction in progress		8,510,258			6,940,632
TOTAL OTHER ASSETS		8,585,769			7,017,466

TOTAL ASSETS	$	49,014,899		$	45,176,398

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Short-term borrowings	$	7,910,581		$	8,054,831
Accounts payable		598,631			240,290
Other payables and accrued liabilities		445,388			731,329
Deposits received in advance		60,263			56,849
Taxes payable		747,163			643,476
Deferred tax liabilities		670,006			677,909
TOTAL CURRENT LIABILITIES		10,432,032			10,404,684

TOTAL LIABILITIES		10,432,032			10,404,684

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock ($.0001 par value, 5,000,000 authorized, none issued and outstanding as of March 31, 2010 and December 31, 2009)		-			-
Common stock ($.0001 par value, 100,000,000 authorized, 12,862,501 issued and outstanding as of March 31, 2010 and December 31, 2009)		1,286			1,286
Additional paid in capital		7,798,714			7,798,714
Statutory and discretionary surplus reserve		3,608,243			3,608,243
Accumulated other comprehensive income (loss)		269,557			(25,022	)
Retained earnings		26,905,067			23,388,493
TOTAL STOCKHOLDERS' EQUITY		38,582,867			34,771,714

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	49,014,899		$	45,176,398

See accompanying notes to these financial statements and auditors' report

China Shandong Industries, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income and Comprehensive Income
For the Three Months ended March 31, 2010 and 2009

	For the three months ended
	March 31, 2010			March 31, 2009
	(Restated)
Revenues
Sales	$	19,406,737		$	14,495,795
Cost of goods sold (exclusive of depreciation and amortization)		13,801,401			11,145,799

Operating expenses
Selling and marketing		237,577			160,238
Research and development expenses		251,136			150,165
General and administrative		263,304			108,060
Total Operating Expenses		752,017			418,463

Income from continuing operations		4,853,318			2,931,533

Other income (expenses)
Finance income (costs)		(247,095	)		(128,885	)
Other operating income(cost)		-			140,721
Non-operating income		93,318			(1,305	)
Total other income (expense)		(153,778	)		10,530

Income from operations before income taxes		4,699,541			2,942,063

Income taxes – current		(512,960	)		(706,635	)
Income taxes - deferred		(670,006	)		-

Net income	$	3,516,574		$	2,235,428

Other comprehensive income
Foreign currency translation adjustment		294,579			7,194

Comprehensive income	$	3,811,153		$	2,242,622

Basic and fully diluted net income per common share	$	0.28		$	0.18

Weighted average common shares outstanding		12,862,501			12,862,501

See accompanying notes to these financial statements and auditors' report.

China Shandong Industries, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
For the Three Months ended March 31, 2010 and 2009

	For the three months ended
	March 31, 2010			March 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:	(Restated)

Net income	$	3,516,574		$	2,235,428
Loss of disposal of fixed assets(loss of net value of fixed assets)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation		200,216			179,805
Amortization		1,323			1,323
Changes in operating assets and liabilities:
Trade accounts receivable		(952,910	)		(3,401,142	)
Prepaid expense		379,367			(95,830	)
Inventories		(694,269	)		1,704,333
Other receivables		128,844			(192,729	)
Accounts payable		358,243			493,496
Taxes payable		103,498			(995,609	)
Deferred tax liabilities		(7,903	)		-
Other payables and accrued liabilities		122,188			(221,633	)
Deposits received in advance		3,398			1,158
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		3,158,570			(291,400	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase for property, plant, and equipment		(180,232	)		-
Disposals of property, plant and equipment		-			14,264
Additions to construction in progress		(1,567,556	)		(791	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(1,747,788	)		13,473

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of short term borrowings		(146,479	)		-
Proceeds from short term borrowings		-			1,391,554
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(146,479	)		1,391,554

Foreign currency adjustment		5,134			127

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,269,436			1,113,753

CASH AND CASH EQUIVALENTS:
Beginning of period		2,185,839			1,751,997

End of period	$	3,455,275		$	2,865,750

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the quarter for:
Interest	$	247,096		$	128,834
Taxes	$	982,542		$	599,403

See accompanying notes to these financial statements and auditors' report.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

1.	ORGANIZATION AND BUSINESS BACKGROUND

China Shandong Industries Inc. (the “Company”) was incorporated on February 13, 2007 under the laws of the State of Delaware as “Mobile Presence Technologies, Inc”. On December 3, 2009, the Company changed its name to China Shandong Industries, Inc.

On October 22, 2009, the Company entered into a Stock Exchange and Reorganization Agreement (the “Agreement”), by and among the Company, Tianwei International Development Corporation, an Oregon Corporation (“TIDC”), CAOPU Enterprise Limited, a company organized under the laws of the British Virgin Islands (“Caopu”), London Financial Group Ltd., a company organized under the laws of the British Virgin Islands (“LFG”), Phoebus Vision Investment Developing Group, Ltd., a company organized under the laws of the British Virgin Islands (“Phoebus”), and Timothy Lightman (“TL”), pursuant to which the Company acquired all of the issued and outstanding capital stock of TIDC owned by each of CAOPU, LFG and Phoebus in exchange for an issuance by the Company of an aggregate of 11,576,250 shares of Common Stock of the Company, with a par value of $0.0001 per share (the “MBPI Common Stock”), to Caopu, LFG and Phoebus. The shares of MBPI Common Stock were issued pursuant to the exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder.

In addition, TL, the owner of 7,312,500 shares of MBPI Common Stock (“TL’s MBPI Shares”), representing approximately 93% of the 7,848,750 issued and outstanding shares of the Company’s Common Stock, delivered a stock certificate or stock certificates representing 6,562,500 of TL’s MBPI Shares to the Company for cancellation.

On November 5, 2009, pursuant to a separate Assignment and Assumption Agreement by and between the Company and TL, the Company assigned, in fee simple absolute, all of its assets of any kind whatsoever excepting only its rights under the Agreement, including, but not limited to those assets related to its proposed cellular telephone application to TL. TL assumed all of the indebtedness or other obligations of the Company in existence on the date hereof, excluding only its obligation to perform under the Agreement, including, but limited to any obligations for attorney fees, accountant fees, taxes and transfer agent fees and agreed to indemnify and hold the Company harmless against the same provided the Company gave prompt notice of any claim for indemnification.

The transaction was effectively completed on November 6, 2009, which has been accounted for as a reverse acquisition and recapitalization of the Company, through a wholly-owned subsidiary, TIDC, whereby TIDC is deemed to be the ultimate accounting acquirer (legal acquiree) and the Company to be the ultimate accounting acquiree (legal acquirer). The accompanying consolidated financial statements for the fiscal year ended December 31, 2008 are in substance those of TIDC, including the historical assets and liabilities, and the historical results and operations of TIDC since it is prior to the date of the reverse acquisition. The accompanying consolidated financial statements for the fiscal year ended December 31, 2009 are in substance those of TIDC, with the assets and liabilities, and revenues and expenses, of the Company being included effective from the date of stock exchange transaction. The Company is deemed to be a continuation of the business of TIDC, through its wholly-owned subsidiary, Shandong Caopu Arts & Crafts Co., Ltd. (“SCAC”), a PRC-based company incorporated on August 15, 2000 under the laws of the PRC. Accordingly, the accompanying consolidated financial statements for the fiscal year ended December 31, 2009 include the following:

(1)	the balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree at historical cost;

(2)	the financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of stock exchange transaction.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

1.	ORGANIZATION AND BUSINESS BACKGROUND (CONT’D)

On November 6, 2009, concurrent with the Stock Exchange with TIDC, the Company adopted the fiscal year end of SCAC, the wholly-owned subsidiary of TIDC, thereby changing the fiscal year end from September 30 to December 31. The consolidated audited financial statements for the new fiscal year will be reflected in the Company’s Form 10-K for the year ending December 31, 2009.

China Shandong Industries Inc., TIDC and SCAC are hereinafter referred to as (the “Company”).

The entities which were party to the reorganization were not related to each other.

The Company is located in the Cao Xian Development Zone, which is near the Beijing-Kowloon railway with the DeShang Highway to the East and Qinghe Road to the West. There are three production areas including sixteen production workshops and staff who work on willow products, craft and wooden furniture.

The Company undertakes joint production with local farmers by purchasing the processing products from them and then by proceeding to finish the products in order to generate sales. The Company has numerous products, such as grass willow products, wooden crafts, indoor/outdoor wooden furniture, office furniture, different kinds of frames and craftwork. The Company also has numerous national patterns for design and utility models.

The Company’s products are sold in various countries and regions, including the United States of America, Germany, the United Kingdom, the Netherlands, Italy, Sweden, Japan, Canada, Denmark, Hong Kong and Taiwan.

The Company’s business model is original equipment manufacturer (OEM) for North American and European manufacturers.

A majority of the Company’s sales were from exports. In order to adapt to the international market, the Company passed the ISO9001 international quality management system certification, ISO14001 environmental management system certification, OHSMS18001 Occupational Health and Safety Management System Certification, as well as the CE certification for access to the EU market.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America under the accrual basis of accounting.

Use of estimates

In preparing consolidated 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 consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of trade receivables, other receivables, inventories, income taxes and the estimation on useful lives of property, plant and equipment. Actual results could differ from these estimates.

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, and trade and other receivables. As of March 31, 2010 and 2009, substantially all of the Company’s cash and cash equivalents were held by financial institutions located in the PRC, which the Company’s management believes are of high credit quality. With respect to trade receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade and other receivables and maintains an allowance for doubtful accounts of trade and other receivables.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Cash and cash equivalents

The Company’s cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and that have insignificant risk of change in value because of changes in interest rates. The Company’s cash and cash equivalents, as of March 31, 2010 and 2009, were principally denominated in Renminbi (“RMB”) and were placed with banks in the PRC. They are not freely convertible into foreign currencies and the remittance of these funds out of the PRC is subject to exchange control restrictions imposed by the PRC government.

For purposes of the Consolidated Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. In accordance with SFAS No. 95, the consolidated Statements of Cash Flows are prepared based on the change in the RMB functional currency for each account and converted into U.S. dollars at the various exchange rates at the time.

Allowance for doubtful accounts

The Company establishes an allowance for doubtful accounts based on managements’ assessment of the trade receivables collectibles. Judgment is required in assessing the amount of the allowance. The Company considers the historical level of credit losses and applies percentages to different receivables categories. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a larger allowance may be required.

Based on the above assessment, during the reporting periods, management establishes the general provisioning policy to make an allowance equivalent to 5% of the gross amount of trade receivables. Additional specific provision is made against trade receivables to the extent which they are considered to be doubtful.

Bad debts are written off when identified. The Company does not accrue interest on trade receivables.

Historically, losses from uncollectible accounts have not significantly deviated from the general allowance estimated by management and no significant additional bad debts have been written off directly to net income. This general provisioning policy has not changed in the past since establishment and management considers that the aforementioned general provisioning policy is adequate, not excessive and does not expect to change this established policy in the near future.

Inventories

Inventories (finished goods, work in process, raw materials and packaging materials) are stated at the lower of cost or market. Cost is determined on a first in first out basis which includes an appropriate share of production overheads based on normal operating capacity and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. In assessing the ultimate realization of inventories, management makes judgments as to future demand requirements compared to current or committed inventory levels. The Company estimates the demand requirements based on market conditions, forecasts prepared by its customers, sales contracts and orders in hand.

In addition, the Company estimates net realizable value based on intended use, current market value and contract terms. The Company writes down the inventories for estimated obsolescence, slow moving or unmarketable inventories equal to the difference between the cost of inventories and the estimated market value based upon assumptions about future demand and market conditions.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Property, plant and equipment

Property, plant and equipment are comprised of buildings, machinery, equipment and furniture. Property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the respective fixed asset and other costs incurred to bring the fixed asset into its existing use. Depreciation is computed over the estimated useful lives of the respective fixed assets utilizing the straight-line basis method. Buildings are depreciated over a period of twenty years with a residual value of 10%. Machinery, equipment and furniture are depreciated over a period of ten years with a residual value of 10%. Maintenance or repairs are charged to expense as incurred. Upon sale or disposition, the applicable amounts of the fixed asset’s cost and related accumulated depreciation are removed from the accounts and the net amount less proceeds from the disposal is charged or credited to operations.

The Company recognizes an impairment loss on property, plant and equipment when evidence, such as the sum of expected future cash flows (undiscounted and without interest charges), indicates that future operations will not produce sufficient revenue to cover the related future costs, including depreciation, and when the carrying amount of the asset cannot be realized through sale. Measurement of the impairment loss is based on the fair value of the assets.

Land occupancy right, net

Land use right is recorded at cost less accumulated amortization. Amortization is provided over the term of the land use right agreement on a straight-line basis over the term of the agreement, which is 20 years.

Impairment of Long-lived assets

The Company evaluated the recoverability of its property, plant, equipment, and other assets in accordance with FASB Accounting Standards Codification 360 “Property, Plant and Equipment” (formerly SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”), which requires recognition of impairment of long-lived assets in the event the net book value of such assets exceed the estimated future undiscounted cash flows attributable to such assets or the business to which such intangible assets relate.

Earnings per share

The Company reports earnings (loss) per share in accordance with FASB Accounting Standards Codification 260 “Earnings per Share” (formerly SFAS 128, “Earnings per Share”). This statement requires dual presentation of basic and diluted earnings (loss) with a reconciliation of the numerator and denominator of the loss per share computations. Basic earnings per share amounts are based on the weighted average shares of common outstanding. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the periods presented. There were no adjustments required to net income for the period presented in the computation of diluted earnings per share. There were no common stock equivalents (CSE) necessary for the computation of diluted loss per share.

Construction in progress

Construction in progress is recorded using the cost method, which later transfers to fixed assets in achieving the expected usable condition. Interest costs on borrowings related to construction in progress are capitalized before achieving the expected usable condition.

Revenue recognition

Revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the customers, the selling price is fixed or determinable, and collection is reasonable assured. The Company generally records revenues when shipments clear the Chinese customs department. The Company offers varying payment terms for its customers and is generally responsible for paying the delivery cost of its products.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Cost of goods sold (exclusive of depreciation and amortization)

Cost of goods sold consists primarily of costs of raw materials and direct labor, and other costs directly attributable to the production of products. Write-down of inventories to lower of cost or market is also recorded in cost of goods sold.

The depreciation and amortization expenses, shipping and handling expenses, inspection costs, and the other costs of our distribution network are excluded from cost of goods sold.

Selling expenses

Selling expenses mainly consist of advertising, shipping and handling costs, exhibition expenses, inspection costs, and the other costs of our distribution network which are expensed as incurred during the selling activities.

General and administrative expenses

General and administrative expenses consist of depreciation and amortization expenses, office expenses, staff welfare, utilities, labor protection and salaries which are expensed as incurred at the administrative level.

Income taxes

The Company adopts the ASC Topic 740, “Income Taxes” regarding accounting for uncertainty in income taxes which prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. In addition, the guidance requires the determination of whether the benefits of tax positions will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions that are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial statements. The guidance provides for de-recognition, classification, penalties and interest, accounting in interim periods and disclosure.

For the years ended December 31, 2009 and 2008, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2009 and 2008, the Company did not have any significant unrecognized uncertain tax positions.

The Company conducts major business in the PRC and is subject to tax in that jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authority.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Also see Note 14.

Comprehensive income

The Company adopted FASB Accounting Standards Codification 220 “Comprehensive Income” (formerly SFAS No. 130, Reporting Comprehensive income”, which establishes standards for reporting and display of comprehensive income, and its components in the consolidated financial statements. Components of comprehensive income include net income and foreign currency translation adjustments. The Company has presented consolidated statements of income which includes other comprehensive income or loss.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Fair value of financial instruments

The carrying values of the Company’s financial instruments, including cash and cash equivalents, trade accounts and other receivables, inventories, prepaid expenses, accounts payable, other payables and accrued liabilities, deposits received in advance, dividends payable, taxes payable, short term borrowings and current portion of notes payable approximate their fair values due to the short-term maturity of such instruments.

It is managements’ opinion that the Company is not exposed to significant price, credit, foreign currency or interest rate risks arising from these financial instruments.

Advertising expense

Advertising is charged to expense as incurred. The Company does not incur any direct-response costs.

Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources, if applicable, are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Foreign currency translation

The functional currency of the Company is the Renminbi (“RMB”) and RMB is not freely convertible into foreign currencies. The Company maintains its consolidated financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the consolidated financial statements of the Company, which are prepared using the functional currency, have been translated into United States dollars. Current assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates while fixed assets and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity. The exchange rates in effect as of March 31, 2010 and 2009 were RMB1 for $0.1465 and $0.1466, respectively. The average exchange rates for the three months ended March 31, 2010 and 2009 were RMB1 for $0.1464 and $0.1439, respectively. There is no significant fluctuation in exchange rate for the conversion of RMB to US dollars after the balance sheet date.

Off-balance sheet arrangements

The Company does not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s consolidated financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the prior fiscal year just ended.

As a result of the Company’s implementation of the Codification during the prior fiscal year just ended, previous references to new accounting standards and literature are no longer applicable. In the current annual consolidated financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the consolidated financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the consolidated financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s consolidated financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s consolidated financial statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for consolidated financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s consolidated financial statements.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer records an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of buyout. The adoption of SFAS No. 160 did not have any other material impact on the Company’s financial statements.

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company implemented SFAS No. 167 in fiscal 2010, which does not have any material impact on our consolidated financial statements.

3.	RESTATEMENTS OF FINANCIAL STATEMENTS

On June 17, 2010, the Company’s management concluded that the Company’s audited financial statements for the year ended December 31, 2009 and the Company’s unaudited quarterly financial statements for the quarter ended March 31, 2010 should no longer be relied upon. Specifically, the Company’s revenues were understated by $9,885,472 for the year ended December 31, 2009 and overstated by $54,831 for the quarter ended March 31, 2010 with an overstatement of inventories by $7,173,838 as of December 31, 2009 and $7,150,617 as of March 31, 2010. In addition, the Company’s basic and fully diluted net income per common share for the year ended December 31, 2009 increased to $.98 per share from original $.78 per share. The impact of the corrections on the Company’s basic and fully diluted net income per common share for the three months ended March 31, 2010 was immaterial. The facts underlying the Company’s original conclusion is that all of such revenues are not recognized until the Company physically receives the clearance paper from Chinese customs department (“Customs”). However, there exists a gap between the receiving date and the approval date by the Customs, which is approximately 30 to 40 days. The Company believes the approval date by Chinese Customs generally represents the date that the title of the goods being passed onto to buyers and should be appropriate and persuasive evidence for revenue recognition. Accordingly, all the financial statements for the year ended December 31, 2009 and for the quarter ended March 31, 2010 are restated. The Company did not find any understatement in revenues for the comparative year ended December 31, 2008 and the comparative quarter ended March 31, 2009.

The following table sets forth all the accounts in the original amounts and restated amounts, respectively.

As of March 31, 2010

	(Original)			(Restated)

Trade accounts receivable, net	$	7,958,089		$	17,788,731
Inventories		18,199,156			11,048,539
Deferred tax liabilities		-			670,006
Accumulated other comprehensive income (loss)		(17,585	)		269,557
Retained earnings	$	25,182,191		$	26,905,067

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

3.	RESTATEMENTS OF FINANCIAL STATEMENTS (CONT’D)

For the three months ended March 31, 2010

	(Original)		(Restated)

Sales	$	19,461,568	$	19,406,737
Cost of goods sold (exclusive of depreciation and amortization)		13,824,621		13,801,401
Income taxes - current		1,190,869		512,960
Income taxes – deferred		-		670,006
Net income		3,540,282		3,516,574
Basic and fully diluted net income per common share	$	0.28	$	0.28

Statements of Retained Earnings	2010 (as restated)

Balance, January 1	$	21,354,768
Adjustment to correct the error of improper sales cut-off (net of tax)		2,033,725
Adjusted balance, January 1	$	23,388,493

4.	RESTRICTED CASH AND CASH EQUIVALENTS

According to the contract between the Company and the bank in which it has loans payable to, $0 and $246,106 at March 31, 2010 and 2009, respectively, is invested into certain designated accounts related to guarantees for notes payable.

5.	TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable is comprised of the following amounts at the respective dates:

	As of
		12/31/09		3/31/10
	Audited			Unaudited
	(Restated)			(Restated)

Gross trade accounts receivable from customers	$	17,204,380		$	18,159,416

Allowance for doubtful customer accounts		(370,582	)		(370,685	)

	$	16,833,798		$	17,788,731

Bad debt expense of $0 and $0 was recognized during the three months ended March 31, 2010 and 2009, respectively, in the accompanying consolidated income statements.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

6.	INVENTORIES

Inventories are comprised of the following amounts at the respective dates:

	As of
	12/31/09		3/31/10
	Audited		Unaudited
	(Restated)		(Restated)

Raw materials	$	1,462,682	$	1,586,793
Packaging materials		23,813		30,249
Work in process		2,191,570		2,564,759
Finished goods		6,675,681	6,866,738

		10,353,746		11,048,539
Provision for obsolete inventories		-0-		-0-

	$	10,353,746	$	11,048,539

7.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are comprised of the following amounts at the respective dates:

	As of
	12/31/09			3/31/10
	Audited (Restated)			Unaudited (Restated)
Cost:
Buildings	$	6,158,887		$	6,108,591
Machinery, equipment and furniture		4,497,567			4,728,045

		10,656,454			10,836,686
Accumulated depreciation		(3,309,354	)		(3,509,570	)

Net	$	7,347,100		$	7,327,116

During the reporting periods, depreciation expense is included in the following accounts on the accompanying consolidated income statements:

	Three months ended
	3/31/09		3/31/10

General and administrative expenses	$	179,805	$	200,216

	$	179,805	$	200,216

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

8.	LAND OCCUPANCY RIGHTS

	As of
	12/31/09			3/31/10
	Audited (Restated)			Unaudited (Restated)

Land occupancy rights		98,887			98,887

Less: Accumulated amortization		(22,053	)		(23,376	)

Land occupancy rights, net	$	76,834		$	75,511

During the reporting periods, amortization expense is included in the following accounts on the accompanying consolidated income statements:

	Three months ended
	3/31/09		3/31/10

General and administrative expenses	$	1,323	$	1,323

	$	1,323	$	1,323

9.	SHORT-TERM BORROWINGS

The Company’s outstanding principal balances on its short-term borrowings are payable as follows:

	As of
	12/31/09		3/31/10
	Audited		Unaudited

Bank of China, 5.832% to 6.372% interest rates, due no later than November 17, 2010		3,514,835		3,369,322
Commercial Bank (Heze branch), 7.965% interest rate, due no later than September 28, 2010		4,539,996		4,541,259

	$	8,054,831	$	7,910,581

As of March 31, 2010, a portion of short-term borrowings from Bank of China are secured by certain assets of the Company. Specifically, $1,523,519 in short-term borrowings is secured by the Company’s property with a net book value of $5,135,679, and $234,388 in short-term borrowings is secured by the Company’s equipment with a net book value of 1,805,999.

The effects of imputed interest on the aforementioned below market interest rates are immaterial to the consolidated financial statements taken as a whole.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

10.	OTHER PAYABLES AND ACCRUED LIABILITIES

	As of
	12/31/09		3/31/10
	Audited		Unaudited

Salary and welfare payable	$	105,246	$	198,752
Accrued expenses		21,818		14,188
Other payables		604,265		232,447

	$	731,329	$	445,388

Staff welfare payable represents accrued staff medical, industry injury claims; labor and unemployment insurances, all of which are third parties insurance and the insurance premiums are based on certain percentage of salaries. The obligations of the Company are limited to those premiums contributed by the Company.

11.	STATUTORY AND DISCRETIONARY SURPLUS RESERVE

In accordance with the relevant laws and regulations of the PRC and articles of association, the Company is required to appropriate 10% and a certain other percentage of the net profit as reported in the Company’s PRC statutory consolidated financial statements to the statutory reserve fund and the discretionary surplus reserve fund, respectively, after offsetting prior year’s losses.

When the balance of the statutory reserve fund reaches 50% of the registered capital, and further appropriation is optional. Upon approval from the board of directors or members, the statutory reserve can be used to offset accumulated losses or to increase registered capital.

12.	COST OF GOODS SOLD (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION)

The following table sets forth the breakdown of our cost of goods sold for the three months ended March 31, 2009 and 2010, respectively.

	Three months ended
	3/31/2009		3/31/2010

Direct Materials	$	8,750,299	$	10,564,836
Indirect Materials		1,666,381		2,299,238
Direct Labor		565,062		769,246
Inbound Freights		164,057		168,081
Cost of Goods Sold	$	11,145,799	$	13,801,401

The depreciation and amortization expenses, shipping and handling expenses, inspection costs are excluded from cost of goods sold, the amount of which for the three months ended March 31, 2009 and 2010, respectively, are set forth in the following table.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

12.	COST OF GOODS SOLD (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION) (CONT’D)

	Three months ended
	3/31/2009		3/31/2010

Depreciation expenses	$	179,805	$	200,216
Amortizations		1,323		1,323
Shipping and handling expenses		115,852		194,071
Inspection costs		18,632		21,027

These excluded expenses are included under Selling, General and Administrative expenses in the accompanying financial statements.

13.	SELLING AND MARKETING EXPENSES

Selling and marketing expenses were $160,238 and $237,577 for the three months ended March 31, 2009 and 2010, respectively, including $115,852 and $194,071 in shipping and handling expenses for the periods, respectively. Selling and marketing expenses mainly consist of advertising, shipping and handling costs, exhibition expenses, inspection costs, and the other costs of our distribution network which are expensed as incurred during the selling activities.

14.	INCOME TAXES

The Company is subject to the foreign investment enterprise income tax at the statutory rate of 15% on the profits as reported in the Company’s PRC statutory consolidated financial statements as adjusted by profit and loss items that are not taxable or deductible before 2008.

PRC’s legislative body, the National People’s Congress, adopted the unified EIT Law on March 16, 2007. This new tax law replaces the existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rate is set at 25% for both domestic enterprises and foreign-invested enterprises. Thus, the Company is subject to corporate income tax at the statutory rate of 25% commencing in 2008.

Income taxes in the accompanying consolidated statements of income for the reporting periods represent provision for EIT for the Company’s continuing operations in the PRC.

	Three months ended
	3/31/2009			3/31/2010 (Restate)

EIT rate in effect for the year		25	%		25	%
Profits before income tax	$	2,942,063		$	4,699,541
Income tax	$	706,635		$	1,182,966

The effective income taxes differ from the above PRC statutory EIT rates as follows:

	Three months ended
	3/31/2009			3/31/2010 (Restate)

Provision for income taxes at statutory EIT rate	$	735,516		$	1,174,884
Non-deductible and other various items for tax purposes		(28,881	)		8,082

Income taxes	$	706,635		$	1,182,966

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

14.	INCOME TAXES (CONT’D)

Income tax expense is summarized as follows:

	Three months ended
	3/31/2009		3/31/2010
			(restated)

Current	$	706,635	$	512,960
Deferred change		-		670,006

Income taxes expense	$	706,635	$	1,182,966

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets and liabilities are as follows:

Current portion:	Three months ended
	3/31/2009		3/31/2010
			(restated)

Sales cut-off	$	-	$	(670,006	)
Total deferred tax liabilities	$	-	$	(670,006	)
Net deferred tax liabilities	$	-	$	(670,006	)

15.	DEFINED CONTRIBUTION PLAN

The Company has a defined contribution plan for all of its qualified employees in the PRC. The employer and the employees are each required to make contributions to the plan at the rates specified in the plan. The obligation of the Company with respect to retirement is to make the required contributions under the plan. No forfeited contributions are available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to expense in the accompanying consolidated statements of income. The Company contributed $0 for both three-month periods ended March 31, 2009 and 2010, respectively. The contribution, if any, is included in general and administrative expenses in the accompanying consolidated income statements.

16.	CONTINGENCIES

The Company had no contingencies existing as of March 31, 2009 and 2010.

17.	RELATED PARTY TRANSACTIONS

The Company had no material transactions carried out with its related parties during the three months ended March 31, 2009 and 2010.

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

18.	INCOME PER SHARE

The following table sets forth the computation of basic earnings per share for the three months ended March 31, 2009 and 2010 indicated:

	Three months ended
	3/31/2009		3/31/2010 (Restate)
Numerator:
Net income	$	2,235,428	$	3,516,574

Denominator:
Weighted average number of shares outstanding
Basic		12,862,501		12,862,501

Earnings (loss) per share
Basic and fully diluted	$	0.18	$	0.28

The basic earnings per share were calculated using the net income and the weighted average number of shares outstanding during the reporting periods. All share and per share data have been adjusted to reflect the recapitalization of the Company in the Exchange, the forward stock split and the reverse stock split.

The Company had no dilutive instruments as of March 31, 2009 and 2010.

19.	CONCENTRATIONS AND RISKS

The Company's operations are carried out in the People’s Republic of China (“PRC”). Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company's results may be 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.

(a)	Major customers

For the three months ended March 31, 2009 and 2010, 100% of the Company’s assets were located in the PRC, and certain customers accounted for greater than 5% in revenues.

The following tables set forth our top three customers individually comprising 26% and 29% of net revenue for the three months ended March 31, 2009 and 2010, respectively.

For the three months ended March 31, 2009

Customers		Revenues					Accounts Receivable
Customer A		$	2,174,369	15	%		$	1,113,095
Customer B			869,748	6	%			502,101
Customer C			724,790	5	%			1,495,222

	Total:	$	3,768,907	26	%	Total:	$	3,110,419

CHINA SHANDONG INDUSTRIES, INC. AND SUBSIDIARIES

(FKA MOBILE PRESENCE TECHNOLOGIES, INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010

19.	CONCENTRATIONS AND RISKS (CONT’D)

For the three months ended March 31, 2010

Customers		Revenues					Accounts Receivable
Customer D		$	2,563,964	13	%		$	926,815
Customer E			1,806,429	9	%			688,297
Customer F			1,262,558	7	%			471,205

	Total:	$	5,632,951	29	%	Total:	$	2,086,316

(b) Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

20.	SUBSEQUENT EVENT

Subsequent to the three months ended March 31, 2010, the Company entered into an agreement to issue 300,000 warrants among other items and recorded a related expense of $334,702, equal to the estimated fair value of the warrants at the date of the grant to an unrelated shareholder of the Company. The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 5.15% risk-free interest, 0% dividend yield, 65% volatility, and a life of two years.

On July 30, 2010, Mr. Jinliang Li, the Chairman and Chief Executive Officer of the Company authorized the effectuation of a 1-for-2 reverse split (the “Reverse Split”) pursuant to the majority consent on July 1, 2010. The reverse split combines the Company’s outstanding Common Stock on the basis of 2 outstanding shares being changed to 1 outstanding share. Each shareholder’s percentage ownership in the Company (and relative voting power) will remain essentially unchanged as a result of the Reverse Split. All options, warrants, and any other similar instruments convertible into, or exchangeable or exercisable for, shares of common stock will be proportionally adjusted.

The Reverse Split took effective upon the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware on August 3, 2010.

The statement of equity and the earnings per share numbers in the financial statements have been restated per FASB 128 paragraph 134.

21.

SEGMENTS

The Company determined that it do not operate in any material, separately reportable operating segments as of March 31, 2009 and 2010.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Disclosure Regarding Forward-Looking Statements

The statements contained in this Report with respect to our financial condition, results of operations and business that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Forward-looking statements can be identified by the use of forward-looking terminology, such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the reader of the forward-looking statements that any such statements that are contained in this Report reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employee, and general business factors affecting our operations, markets, growth, services, products, licenses and other factors discussed in our other filings with the Securities and Exchange Commission, and that these statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing our company, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. Some of these risks are described in “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009.

These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward looking statements made in connection with this Report that are attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events. Further, the information about our intentions contained in this Report is a statement of our intention as of the date of this Report and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and our assumptions as of such date. We may change our intentions, at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.

Overview

Unless otherwise specified or required by context, references to “we,” “our” and “us” refer collectively to (i) China Shandong Industries, Inc., and our subsidiaries, Tianwei International Development Corporation, an Oregon corporation and Shandong Caopu Arts & Crafts Co., Ltd, a wholly foreign-owned enterprise organized under the laws of the PRC. Specific discussions or comments relating only to China Shandong Industries, Inc. will reference China Shandong Industries and those relating only to Shandong Caopu Arts & Crafts Co., Ltd will reference “Shandong.”

We are a designer and contract manufacturer of household furniture in the Peoples Republic of China (“PRC”). We produce a variety of indoor and outdoor residential furniture and wicker products that are sold and exported to more than 30 countries. Our products are sold through well known domestic and international retailers such as Trade Point A/S Direct Container, Zara-Home, Habitat UK Ltd., ABM Group Inc., and Fuji Boeki Co. Ltd. We believe that the product depth and extensive style selections we offer allows us to be a strong resource for global furniture, retail chains and retailers in the discounted price range.

Our operations are conducted through our subsidiary, Shandong, located in Shandong Province, PRC. Through Shandong, we manufacture over 20,000 different products. We focus on providing high quality products at competitive prices. For the fiscal year ended December 31, 2009, approximately 5% of our products were sold in the PRC and 95% of our products were sold to companies in countries and regions such as the United States, Germany, England, Italy, Sweden, Canada, Taiwan.

Our straw and wicker products as well as our wood handicraft products are high margin products as such products generally are manufactured by local persons in their homes, the raw material costs are low and the production of such products does not require advanced technology.

Our operating facilities consist of 19 plants located in our existing four industrial parks in Cao County, Shandong Province, PRC. The existing four industrial parks have a total area of 162,688.82 square meters, of which 71,708.40 square meters consists of buildings that house our production lines, warehouses, executive offices and related business items. We were granted an additional 98,435.32 square meters free land use right by the PRC Government in December 2006, which will be used to build the fifth industrial park in 2010. As of March 31, 2010, we have the land use right for a total of 261,124.14 square meters.

Based upon our perceived and historical growing demand for our wood furniture product and the changing demographics of the wood furniture industry, we believe we have a unique opportunity to substantially increase our revenues, net income and gross margins by not only expanding the manufacturing capacity of our existing wood furniture business but also producing different types of wood furniture products that we believe there is a large and increasing international demand for.

As a result, while we intend to continue manufacturing and sell our straw, wicker and handicraft products, we intend to devote substantial financial and other resources on our wood furniture products by not only producing new products but also increasing our current manufacturing capacity by renovating and upgrading our current production facilities.

The following chart shows the ownership interests in our operating subsidiaries.

(1) Of the shares owned by CAOPU Enterprise Limited (“CAOPU”), shares representing 51% of our issued and outstanding shares are held for the benefit of Mr. Jinliang Li and shares representing 35.4% of our issued and outstanding shares are held for the benefit of nine other minority shareholders (non of whom own more than 4.4% of our issued and outstanding shares individually). The shares held by CAOPU for the benefit of Mr. Li and the minority shareholders are held pursuant to the terms of Agreements between CAOPU and each such shareholder, a form of which is attached as an exhibit to this Form 10-K. Pursuant to the terms of such agreements, CAOPU shall continue to hold such shares for the benefit of such shareholders for a period of 15 months after we complete a public offering of our securities, unless such time period is extended. Although Mr. Li has no pecuniary interest in the shares held by CAOPU for the benefit of the nine minority shareholders, by reason of his sole ownership of CAOPU, Mr. Li has sole voting and dispositive power over such shares of our common stock.

(2) None of the remaining shareholders has more than 5% shares of our common stock.

Critical Accounting Policies

Unless otherwise noted, all translations from RMB to U.S. dollars were made at the middle rate published by the People’s Bank of China, or the middle rate, as of March 31, 2010, which was RMB6.8263 to $1.00. We make no representation that the RMB amounts referred to in this amendment to Quarterly Report on Form 10-Q/A could have been or could be converted into U.S. dollars at any particular rate or at all. On May 12, 2010, the middle rate was RMB 6.8271 to $1.00.

We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the amounts reported in our combined and consolidated financial statements and related notes. We periodically evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.

Revenue recognition

Accounts Receivable

Most of our sales were conducted on pre-payment or COD basis. However, during the normal course of business, we extend to some of our customers interest-free, unsecured credit for a term of 90 days depending on a customer’s credit history, as well as local market practices. We reviewed our accounts receivables quarterly and determined the amount of allowances, if any, necessary for doubtful accounts. Historically, we have not had any material bad debt write-offs and, however, we provide an arbitrary reserve amount for possible bad debts based upon 5% of the accounts receivable balances per year. Rather, we review our accounts receivable balances to determine whether specific reserves are required due to such issues as disputed balances with distributors, declines in distributors’ credit worthiness, or unpaid balances exceeding agreed-upon terms. Based upon the results of these reviews, we determine whether a specific provision should be made to provide a reserve for possible bad debt write-offs. We determined that no additional bad debt write offs were necessary or required as of March 31, 2010.

As of March 31, 2010 and December 31, 2009, we had outstanding gross accounts receivables of $18,159,416 and $17,204,380, respectively, and allowance for bad debts of $370,685 and $370,582, respectively. We believe that these outstanding amounts will be collected pursuant to the terms, conditions, and within the time frames agreed upon between our customers. During the reported periods, we did not experience any material problems relating to distributor payments and had no specific additional bad debt write-offs. In terms of our liquidity, we reflect the extended interest-free unsecured credit in our cash flows for the reported periods. Therefore, we anticipate no changes from past cash flow patterns.

Inventories

We state inventories, consisting of work in process, raw materials and packaging materials, at the lower of cost or market. Cost is determined on a first in first out basis which includes an appropriate share of production overheads based on normal operating capacity and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. Work in progress includes direct materials, direct production cost and an allocated portion of production overhead. Our accounting for inventory is described in Note 2 to our Notes to Consolidated Financial Statements for March 31, 2010 included elsewhere in this annual report. We evaluate inventory periodically for possible obsolescence of our raw materials to determine if a provision for obsolescence is necessary. Our estimates for determining the provision for obsolescence may be affected by technological changes and developments to our product offerings and changes in governmental regulations.

As of March 31, 2010 and December 31, 2009, we had an inventory balance of $11,048,539 and $10,353,746, respectively.

Recently Issued Accounting Standards

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of our consolidated financial statements or disclosures as a result of implementing the Codification during the prior fiscal year just ended.

As a result of our implementation of the Codification during the prior fiscal year just ended, previous references to new accounting standards and literature are no longer applicable. In the current annual financial statements, we will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by us. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact our consolidated financial statements. We evaluated for subsequent events through the issuance date of our consolidated financial statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact our consolidated financial statements.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. We implemented SFAS No. 160 at the start of fiscal 2009 and no longer record an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of buyout. The adoption of SFAS No. 160 did not have any other material impact on our consolidated financial statements.

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. We implemented SFAS No. 167 in fiscal 2010, which does not have any material impact on our consolidated financial statements.

RESULTS OF OPERATIONS

In 2010, we intend to continue to focus on the implementation of our strategic plan to sustain the growth we have experienced since becoming a U.S. public company in November 2009 through the reverse acquisition of Mobile Presence Technologies, Inc., a holding company for our China-based subsidiaries. In 2010, we expect to build a new production line for our high-end furniture products. Through our aggressive marketing campaign, we also expect to increase our brand awareness and customer loyalty.

The following tables set forth key components of our results of operations for the periods indicated, in dollars and as a percentage of revenue.

(All amounts in U.S. dollars, except for the percentages)

Statements of Operations	For the three months ended March 31, 2010						For the three months ended March 31, 2009
	USD			% of Revenue			USD		% of Revenue

Revenues	$	19,406,737			-	%	$	14,495,795		-	%

Cost of Sales (excluding depreciation)	$	13,801,401			71.1	%	$	11,145,799		76.9	%

Operating expenses	$	752,017			3.9	%	$	418,463		2.9	%

Income from operations	$	4,853,318			25.0	%	$	2,931,533		20.2	%

Other income (expense)	$	(153,778	)		0.8	%	$	10,530		0.1	%

Net income before income taxes	$	4,699,541			24.2	%	$	2,942,063		20.3	%

Net income	$	3,516,574			18.1	%	$	2,235,428		15.4	%

Comparison of Three Months Ended March 31, 2010 and 2009

Revenues

Our revenues consist of the sale price our products are sold at less returns and allowances. As we do not currently have our own sales force, we sell our products directly to non-related retailers and wholesalers (such as ABM Group) who then sell such products to the ultimate end users. To date, returns and allowances have been virtually non-existent and as such have had no material effect on our revenues.

Revenue for the three months ended March 31, 2010 was $19,406,737, an increase of $4,910,942, or 33.9%, from $14,495,795 for the comparable period in 2009. For the three months ended March 31, 2010, our main products, wood furniture, straw-wicker, and handicraft products, generated sales of approximately $10.9 million, $7.6 million, and $0.9 million, respectively, or approximately 56.2%, 39.2% and 4.6% of our total revenues for the three months ended March 31, 2010. Sales of our wood furniture, straw-wicker and handicraft products generated sales of approximately $8.0 million, $6.2 million and $0.3 million, respectively, for the three months ended March 31, 2009, or approximately 55.2%, 42.8% and 2.1%, respectively, of our total revenues for such period.

The increase in our revenues in three months ended March 31, 2010 compared to March 31, 2009 was primarily attributable to the increasing orders from our customers. We have received orders of approximately $21 million for the three months ended March 31, 2010, while receiving approximately $15 million for the comparable period in 2009. We also believe the increase in our revenues for the three months ended March 31, 2010 is a result of our increased selling price for our product, the average price of which was $183 per unit in the three months ended March 31, 2010 and $164 per unit for the comparable period in 2009.

Cost of Goods Sold (excluding depreciation and amortization)

Our cost of goods sold consists primarily of costs of direct and indirect raw materials, direct labor, and other costs directly attributable to the production of products, excluding depreciation and amortization expenses, shipping and handling expenses, inspection costs, and other costs of our distribution network, which are included in our Selling, General and Administrative expenses

Cost of goods sold for the three months ended March 31, 2010 was approximately $13,801,401, an increase of approximately $2,655,602, or approximately 23.8%, from approximately $11,145,799 for the comparable period in 2009. Such increase was due to more consumption of raw materials resulting from increased orders from our customers.

Selling and marketing expenses

Generally, our selling and marketing expenses mainly consist of advertising, shipping and handling costs, exhibition expenses, inspection costs, and the other costs of our distribution network which are expensed as incurred during the selling activities. The expenses incurred by us to market and show our products internationally at trade shows or similar industry exhibitions are examples for our selling and marketing expenses. Such expenses include the expenses to set up exhibition booths for our products, transportation costs to bring our products and representatives to the trade shows and exhibitions, and similar related costs and expenses. All the freight costs of shipping our products internationally to our retailers and wholesalers are borne by such retailers and wholesalers and are not included herein.

Our selling and marketing expenses for the three months ended March 31, 2010 was approximately $237,577, an increase of approximately $77,339 or 48.3% compared to approximately $160,238 for the comparable period in 2009. Such expenses include $194,071 and $115,852 in shipping and handling expenses for the three months ended March 31, 2010 and 2009, respectively. The increase resulted from the rise in transportation fee, port incidental charges and trade inspection fee that increased along with the sales revenue.

General and administrative expenses

Our general and administrative expenses are principally comprised of 3 items including salaries of our employees not involved in the actual manufacturing of our products, such as our executive officers and internal accounting and book keeping personnel; depreciation of our fixed assets such as our manufacturing facilities, offices and warehouses as well as certain expenses such as amortization of land use rights granted to us by PRC government agencies; and insurance payments paid by us to the PRC government to cover such items as disability, retirement and medical benefits for our employees.

Our general and administrative expenses for the three months ended March 31, 2010 was approximately $263,304, an increase of approximately $155,244 or 143.7% compared to approximately $108,060 for the comparable period in 2009. Such increase in expenses resulted from an increase in legal fees, audit fees and other professional fees attributable to becoming a publicly traded company in the United States.

Research and Development

Our research and development expenditures totaled $251,136 in the three months ended March 31, 2010, an increase of approximately $100,971, or 67.2% as compared to $150,165 in the same period of 2009. The increase was due to our growing investment in research and development of new products, including our proposed new furniture line. We expect our research and development expenditures would continue to increase as a result of further diversification of our product lines in the future.

Interest expense

Interest expense for the three months ended March 31, 2010 was $247,095, an increase of $118,210 or 91.7%, compared to $128,885 for the comparable period in 2009. The increase was due to the fact that, as of March 31, 2010, most of our short-term bank loans were granted by Commerical Bank Heze Branch, which charges a higher interest than other banks. In view of this situation, we are considering other banks which will provide lower interest rates based on our good credit record and strong income growth.

Income Tax Expense

Income tax expense for the three months ended March 31, 2010 was approximately $1,182,966, of which $512,960 was current and $670,006 was deferred. The deferred tax provision was due to a temporary difference between book income and taxable income attributable to goods in transit at the end of the period. An increase of approximately $476,331 or 67.4% for the three months ended March 31, 2010, compared to the same period of 2009, which was primarily attributable to the increase in taxable profits as a result of significant increase in sales revenues. The income taxes are based on a statutory 25% effective tax rate in both years. There was no deferred income tax for the three months ended March 31, 2009.

Net income

Net income for three months ended March 31, 2010 was approximately $3,516,574, an increase of $1,281,146, or 57.3% as compared to $2,235,428 for the comparable period in 2009. Net income as a percentage of our sales revenues increased to 18.1% in the three months ended March 31, 2010 from 15.4% in the comparable period in 2009. The increase in net income was primarily attributable to our increased revenue less the effects of a correlative increase in cost of goods sold in the quarter ended March 31, 2010 versus the quarter ended March 31, 2009. In addition, there was an increase in income taxes in the quarter ended March 31, 2010 versus the quarter ended March 31, 2009 caused by an increase in income from operations before income taxes during the quarter ended March 31, 2010. This increase in income taxes lessened the effect of the increase in net income for the quarter ended March 31, 2010 versus the quarter ended March 31, 2009 just as the increase in cost of goods sold and the increase in operating expenses during the quarter ended March 31, 2010 versus the quarter ended March 31, 2009 did.

Liquidity and Capital Resources

The following table sets forth a summary of our net cash flow information for the periods indicated:

(All amounts in U.S. dollars)

	For the three months
	Ended March 31,
	2010*			2009*
	(Consolidated, unaudited)			(Consolidated, unaudited)

Net cash provided by/(used in) operating activities	$	3,158,570		$	(291,400	)

Net cash (used in)/provided by investing activities	$	(1,747,788	)	$	13,473

Net cash (used in)/provided by financing activities	$	(146,479	)	$	1,391,554

Effect of Foreign currency translation	$	5,134		$	127

Net increase (decrease) in cash and equivalents	$	1,269,436		$	1,113,753

Cash and cash equivalents, beginning of period	$	2,185,839		$	1,751,997

Cash and cash equivalents, end of period	$	3,455,275		$	2,865,750

* The above financial data have been derived from our unaudited consolidated financial statements for the three months ended March 31, 2010 and 2009.

Operating Activities

Net cash provided by operating activities was approximately $3,158,570 for the three months ended March 31, 2010, compared to net cash outflow of approximately $291,400 used in operations for the comparable period in 2009. Positive cash flows during the three months ended March 31, 2010 were due primarily to net income of $3,516,574, the decrease in prepaid expense and other receivable by $379,367 and $128,844, respectively, plus the increase in accounts payable by $358,243, partially offset by the increase in accounts receivable and inventories by $952,910 and $694,269, respectively. Negative cash flows during the three months ended March 31, 2009 were due primarily to the increase in accounts receivables by $3,401,142, the decrease in taxes payable and accrued liabilities by $995,609 and $221,633, respectively, partially offset by the net income of $2,235,428 and the decrease in inventories by $1,704,333.

Investing Activities

Cash used in investing activities mainly consists of capital expenditures, expenditures for property, plant, and equipment, and additions to construction in progress.

Net cash used in investing activities was $1,747,788 for the three months ended March 31, 2010, compared to cash flows of $13,473 provided by investing activities during the same period in 2009. Negative cash flows during the first quarter of 2010 were primarily attributable to the spending in reconstruction, renewal and expansion of our old workshop buildings and facilities. We incurred $180,232 in expenditures for property, plant and equipment in the three months ended March 31, 2010 compared to an equipment disposal of $14,264, in the comparable period in 2009. We also had $1,567,556 incurred in construction in progress in the three months ended March 31, 2010 compared to $791 in such expenditures for the comparable period in 2009.

Financing Activities

Net cash used in financing activities was $146,479 for the three months ended March 31, 2010, due primarily to the repayments to the short-term borrowings. Comparably, we had cash flows of $1,391,554 provided by financial activities due to the proceeds from short term borrowings.

Based upon our present plans, we believe that cash on hand, cash flow from operations and funds available to us through our proposed financing activities will be sufficient to fund our capital needs for at least the next 12 months. We expect that our primary sources of funding for our operations for the next 12 months will result from cash flow from operations, in addition to our proposed financing activity. However, our ability to maintain sufficient liquidity depends partially on our ability to achieve anticipated levels of revenue, while continuing to control costs. If we did not have sufficient available cash, we would have to seek additional debt or equity financing through external sources, which may not be available on acceptable terms, or at all. Failure to maintain financing arrangements on acceptable terms would have a material adverse effect on our business, consolidated results of operations and financial condition.

Loan Facilities

We believe that we currently maintain a good business relationship with our banks. As of March 31, 2010, our outstanding bank loans that were classified as short term borrowings on the accompanying consolidated balance sheet were as follows:

(All Amounts in U.S. Dollars)

Name	Amount		Maturity Date
Bank of China, Cao County Branch (1)	$	219,677	11/17/2010
Bank of China, Cao County Branch (2)	$	234,321	4/16/2010
Bank of China, Cao County Branch (3)	$	512,580	10/21/2010
Bank of China, Cao County Branch (4)	$	439,351	9/21/2010
Bank of China, Cao County Branch (5)	$	351,484	4/22/2010
Bank of China, Cao County Branch (6)	$	102,536	2/2/2011
Laishang Bank (AKA Commercial Bank (Heze Branch) (7)	$	1,171,612	7/17/2010
Laishang Bank (AKA Commercial Bank (Heze Branch) (8)	$	439,351	9/28/2010
Laishang Bank (AKA Commercial Bank (Heze Branch) (9)	$	2,196,817	4/29/2010
Laishang Bank (AKA Commercial Bank (Heze Branch) (10)	$	732,257	8/31/2010
China Construction Bank, Cao County Branch (11)		585,917	7/8/2010
Total	$	7,910,581

(1) Short term loan (No. Year 2009 Cao Zhong Yin Si Dai Zi 011). The term of this loan agreement is from November 18, 2009 to November 17, 2010, with an interest rate of 6.372% per annum. The purpose of this loan is to purchase raw materials. The loan is the master contract of the Maximum Mortgage Contract (No. Year 2009 Di Xie Zi 001), Shandong is the guarantor for this loan.

(2) Short term loan (No. Year 2009 Cao Zhong Yin Si Dai Zi 010). The term of this loan agreement is from November 16, 2009 to April 16, 2010, with an interest rate of 5.832% per annum. The purpose of this loan is to purchase raw materials. The loan is the master contract of the Maximum Mortgage Contract (No. Year 2009 Di Xie Zi 001) and Maximum Mortgage Contract (No. Year 2009 Di Xie Zi 002), Shandong is the guarantor for this loan.

(3) Short term loan (No. Year 2009 Cao Zhong Yin Si Dai Zi 006). The term of this loan agreement is from October 22, 2009 to October 21, 2010, with an interest rate of 6.372% per annum. The purpose of this loan is to purchase raw materials. The loan is the master contract of the Maximum Mortgage Contract (No. Year 2009 Di Xie Zi 001), Shandong is the guarantor for this loan.

(4) Short term loan (No. Year 2009 Cao Zhong Yin Si Dai Zi 007). The term of this loan agreement is from October 22, 2009 to September 21, 2010, with an interest rate of 6.372% per annum. The purpose of this loan is to purchase raw materials. The loan is the master contract of the Maximum Mortgage Contract (No. Year 2009 Di Xie Zi 001), Shandong is the guarantor for this loan.

(5) Short term loan (No. Year 2009 Cao Zhong Yin Si Dai Zi 008). The term of this loan agreement is from October 22, 2009 to April 22, 2010, with an interest rate of 5.832% per annum. The purpose of this loan is to purchase raw materials. Shandong is the guarantor for this loan and takes join and several liabilities.

(6) Short term loan (No. Year 2010 Cao Zhong Yin Si Dai Zi 001). The term of this loan agreement is from February 4, 2010 to February 2, 2011, with an interest rate of 6.372% per annum. The purpose of this loan is to purchase raw materials. Shandong Enterprise Credit Guarantee Co., Ltd is the guarantor for this loan and takes join and several liabilities.

(7) Short term loan (No.2009071701210). The term of this loan agreement is from July 17, 2009 to July 17, 2010, with an interest rate of 9.558% per annum. The loan is to be used as our working fund, which should be repaid from our sales income. Heze JXY Food Limited is the guarantor for this loan and takes joint and several liabilities.

(8) Short term loan (No.2009120701210). The term of this loan agreement is from December 7, 2009 to September 28, 2010, with an interest rate of 9.558% per annum. The loan is to be used as our working fund, which should be repaid from our sales income. Heze JXY Food Limited and Shandong Cao Xian Changsheng Arts & Crafts Company Ltd are the guarantors for this loan and take joint and several liabilities.

(9) Short term loan (No.2010043001210). The term of this loan agreement is from April 30, 2010 to April 29, 2011, with an interest rate of 9.558% per annum. The loan is to be used as our working fund to purchase raw materials, which should be repaid from our sales income or others. Shandong Cao County Shengfeng Food Limited is the guarantor for this loan and takes joint and several liabilities.

(10) Short term loan (No.2009083101210). The term of this loan agreement is from August 31, 2009 to August 31, 2010, with an interest rate of 9.558% per annum. The loan is to be used as our working fund, which should be repaid from our sales income. Shandong Cao County Shengfeng Food Limited, Shandong Cao County Senyuan Lvse Food Limited, Shandong Cao County Kangli Yinpin Limited and Cao County Yangguang Arts & Crafts Limited are the guarantors for this loan and take joint and several liabilities.

(11) Short term loan (No. CXCKDDRZ 2010002). The term of this loan agreement is 120 days, from March 9, 2010 to July 8, 2010, with an interest rate of 5.346% per annum. The loan is to be used for purchasing, manufacturing, transporting and exporting related products. Shandong Cao County Zhuang Da Food Limited is the guarantor for this loan.

We anticipate rollovers of all current facilities coming due in the 2010 fiscal year and do not foresee a squeeze on the availability of credit to fund our operations and meet our growth objectives.

Capital Expenditures

We believe that substantially all of our capital expenditures going forward will be related to our furniture business as we diversify our product base, build component manufacturing facilities and renovate our existing manufacturing facilities.

We believe that our existing cash, cash equivalents, and cash flows from operations, and our proposed financing activities will be sufficient to meet our anticipated cash needs over the next 12 months. We will, however, require substantial additional cash resources to implement the balance of our growth strategy discussed elsewhere, including any acquisitions we may decide to pursue.

We intend to expand our operations as quickly as reasonably practicable to capitalize on our perceived demand for our wood furniture products. Our expansion plans will be implemented in phases based upon the availability of funds. Such expansion plans include establishing 2 new production lines to manufacture new products as well as increasing our existing production capacity by upgrading and renovating our existing facilities.

We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations and private financing.

We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts receivable and accounts payable. We consider investments in highly-liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents.

Off-Balance Sheet Arrangements

We have not entered into, nor do we expect to enter into, any off-balance sheet arrangements. We also have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. In addition, we have not entered into any derivative contracts that are indexed to our equity interests and classified as shareholders’ equity. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

Seasonality

Our operating results and cash flows historically have not been subject to seasonal variations. Although we do not currently anticipate any changes, this pattern may change, however, as a result of new market opportunities or new product introductions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable for a smaller reporting company.

Item 4T. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our chief executive officer and chief financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2010. Based on such evaluation, our chief executive officer and chief financial officer concluded at the time that our disclosure controls and procedures were effective as of March 31, 2010.

However, on June 17, 2010, our management concluded that our unaudited consolidated financial statements for the quarter ended March 31, 2010 (as well as our audited consolidated financial statements for the fiscal year ended December 31, 2009) could no longer be relied upon. On June 23, 2010, we filed a Current Report on Form 8-K disclosing the need to restate our financials and the reasons for the restatement. We restated those financial statements to make the necessary accounting corrections in our Amendment No. 1 to the Form 10-Q, which we filed on June 28, 2010.

As a result of the conclusion that we needed to restate our financial statements for the periods ended December 31, 2009 and March 31, 2010, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of such dates. Further, the conclusion that our disclosure controls and procedures were ineffective led our chief executive officer and chief financial officer to conclude that our internal controls over financial reporting were also ineffective.

We believe that we have, since the date that the error leading to the restatement was discovered, improved the effectiveness of our disclosure controls and procedures, and hence also our internal controls over financial reporting, by taking certain corrective steps that we believe considerably minimize the likelihood of a recurrence of such an error. As a result, our chief executive officer and chief financial officer concluded, in connection with their evaluation of the Company’s disclosure controls and procedures as of June 30, 2010, that our disclosure controls and procedures were effective as of such date and therefore made statements to such effect in the Quarterly Report on Form 10-Q for the quarterly period then ended. This Amendment No. 2 to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2010 does not amend that conclusion.

Inherent Limitations on Disclosure Controls and Procedures

The effectiveness of our disclosure controls and procedures is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

Changes in Internal Control over Financial Reporting

Other than the corrective steps referred to above, we have made no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, 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 or procedures may deteriorate. Accordingly, our internal controls and procedures are designed to provide reasonable assurance of achieving their objectives.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable to smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

(a) None.

(b) None.

Item 6. Exhibits.

Exhibit Number				Exhibit Description

3.1				Certificate of Incorporation. (1)

3.1(a)				Certificate of Amendment of Certificate of Incorporation. (2)

3.2				Bylaws (1)

10.1				Stock Exchange and Reorganization Agreement dated October 22, 2009. (3)

10.2				Assignment and Assumption Agreement dated November 5, 2009, by and between Mobile Presence Technologies, Inc. and Timothy Lightman. (3)

10. 3				Form of Share Holding Agreement, dated September 14, 2009, between us and each of nine other shareholders. (4)

10.4				Maximum Amount Guarantee Agreement dated May 15, 2008, by and between Shandong Caopu Arts & Crafts Co., Ltd and Bank of Chin, Cao Country Branch.(3)

10.5				Maximum Amount Guarantee Contract (No. Year 2009 Di Xie Zi 001), dated August 25, 2009, by and between Shandong Caopu Arts & Crafts Co., Ltd. and Bank of Chin, Cao Country Branch. (5)

10.6				Maximum Amount Guarantee Contract (No. Year 2009 Di Xie Zi 002), dated November 11, 2009, by and between Shandong Caopu Arts & Crafts Co., Ltd. and Bank of Chin, Cao Country Branch. (5)

10.7				Employment Agreements, by and between Shandong Caopu Arts & Crafts Co., Ltd and each of Jinliang Li, Jiawei Li, Zhiyu Wang and Zhiqiang Zhong. (3)

21.1				List of Subsidiaries. (3)

31.1				Certification pursuant to Section 302 of the Sarbanes-Oxley Act

31.2				Certification pursuant to Section 302 of the Sarbanes-Oxley Act

32.1				Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Incorporated by reference to registration statement on Form SB-2 filed with the SEC on November 28, 2007.

(2) Incorporated by reference to our Current Report on Form 8-K filed with the SEC on January 6, 2010.

(3) Incorporated by reference to our Current Report on Form 8-K filed with the SEC on November 12, 2009.

(4) Incorporated by reference to our original Annual Report on Form 10-K filed with the SEC on April 15, 2010.

(5) Incorporated by reference to our Amendment No. 1 to our Annual Report on Form 10-K/A filed with the SEC on June 28, 2010.

SIGNATURES

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

	CHINA SHANDONG INDUSTRIES, INC.

November 5, 2010	By:	/s/ Jinliang Li
		Jinliang Li, Chief Executive Officer
		(Principal Executive Officer)

November 5, 2010	By :	/s/ Yuhong Lei
		Yuhong Lei, CFO
		(Principal Accounting and Financial Officer)

Mobile Presence Technologies Inc. - FORM 10-Q/A - November 5, 2010

Attached files

Mobile Presence Technologies Inc. Reports