UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 2010
China Stationery and Office Supply, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 0-49819 33-0931599
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization Number) Identification No.)
708 Third Avenue
New York City, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (212) 508-4700
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under
any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note
This amendment 2 to Form 8-K is being filed solely to include the
auditor's signature on the audit opinion which was inadvertently left
off during the edgarizing process.
2
Item 9.01 Financial Statements and Exhibits.
Financial Statements
(a) Financial statements of business acquired
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND FOR THE PERIOD
FEBRUARY 24, 2009 (DATE OF INCEPTION) TO DECEMBER 31, 2009
3
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONTENTS
-------------------------------------
Page
----
Report of Independent Registered Public Accounting Firm 4
Consolidated Financial Statements
Consolidated Balance Sheets 5
Consolidated Statements of Operations 6
Consolidated Statements of Changes in Stockholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 10-26
4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Global Arena Holding Subsidiary Corp.
We have audited the accompanying consolidated balance sheets of Global
Arena Holding Subsidiary Corp. and Subsidiaries (the "Company") as of
December 31, 2010 and 2009, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the
year ended December 31, 2010 and for the period February 24, 2009 (date
of inception) to December 31, 2009. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Global Arena Holding Subsidiary Corp. and Subsidiaries as of December
31, 2010 and 2009 and the results of its operations and cash flows for
the year ended December 31, 2010 and for the period February 24, 2009
(date of inception) to December 31, 2009 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company incurred a loss from
operations of approximately $882,000 for the year ended December 31,
2010 and approximately $631,000 for the period February 24, 2009 (date
of inception) to December 31, 2009, respectively. The cash used in
operations was approximately $811,000 and $595,000 for the year ended
December 31, 2010 and for the period February 24, 2009 (date of
inception) to December 31, 2009, respectively. These conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 3. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/Marcum LLP
New York, New York
April 4, 2011
5
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 AND 2009
2010 2009
---- ----
Assets
Cash $ 22,401 $ 2,696
Cash - restricted 325,872 -
Due from clearing broker 5,818 185
Investment in GACC 480,000 430,000
Other receivable - related party 62,611 312,718
Advances to registered representatives
and employees 23,500 23,628
Fixed assets, net of accumulated
depreciation 1,074 1,659
Prepaid expenses and other current assets 2,123 1,135
Intangible asset, customer list, net 140,145 194,396
---------- ----------
Total Assets $1,063,544 $ 966,417
========== ==========
Liabilities and Stockholders' Equity
Liabilities
Accounts payable and accrued expenses $ 61,211 $ 30,622
Commissions payable - 7,648
Payable to affiliates - 3,700
Derivative liability 343,000 -
---------- ----------
Total Liabilities $ 404,211 $ 41,970
---------- ----------
Commitments and Contingencies
Stockholders' Equity
Common stock, par value
$0.0001 per share; 15,000,000
shares authorized; 12,000,000 and
9,938,000 shares issued and
outstanding, respectively 1,200 994
Additional paid-in capital 2,170,800 1,554,006
Accumulated deficit (1,400,560) (596,960)
---------- ----------
Stockholders' equity attributable to
Global Arena Holding Subsidiary Corp. 771,440 958,040
Non-controlling interest (112,107) (33,593)
---------- ----------
Total Stockholders' Equity 659,333 924,447
---------- ----------
Total Liabilities and Stockholders'
Equity $1,063,544 $ 966,417
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
6
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION) TO
DECEMBER 31, 2009
2010 2009
---- ----
Revenues
Investment advisory fees $ 836,146 $ 476,128
Commissions and other 16,814 472
---------- ----------
Total Revenues $ 852,960 $ 476,600
Operating Expenses
Commissions 641,239 403,295
Salaries and benefits 567,075 289,230
Occupancy 141,610 96,896
Business development 155,902 105,345
Professional fees 127,029 157,416
Clearing and operations 36,806 21,223
Communication and data 11,940 9,200
Regulatory fees 13,838 6,627
Office and other expense 39,635 17,921
---------- ----------
Total Operating Expenses 1,735,074 1,107,153
---------- ----------
Net Loss (882,114) (630,553)
Net loss attributable to
non-controlling interest (78,514) (33,593)
Net loss attributable to
stockholders of Global Arena
Holding Subsidiary Corp. $ (803,600) $ (596,960)
========== ==========
The accompanying notes are an integral
part of these consolidated financial statements.
7
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION) TO DECEMBER 31, 2009
Common Stock Additional Accumulated Non-controlling
Shares Amount Paid-in Capital Deficit Interest Total
------ ------ --------------- ----------- -------------- -----
Balance - February 24,
2009 (Date of Inception) -- $ -- $ -- $ -- $ -- $ --
Issuance of shares to
Founders 8,072,000 807 (807) -- -- --
Issuance of common
stock and warrants
for cash 1,866,000 187 1,554,813 -- -- 1,555,000
Net loss -- -- -- (596,960) (33,593) (630,553)
---------- ------ ---------- ----------- --------- ----------
Balance -
December 31, 2009 9,938,000 994 1,554,006 (596,960) (33,593) 924,447
Repurchase and
cancellation of
common stock from
from investors (306,000) (31) (254,969) -- -- (255,000)
Issuance of common
stock and warrants
for cash 618,000 62 514,938 -- -- 515,000
Issuance of common
stock and warrants
for cash 1,750,000 175 699,825 -- -- 700,000
Reclassification of
warrants to derivative
liability -- -- (343,000) -- -- (343,000)
Net loss -- -- -- (803,600) (78,514) (882,114)
---------- ------ ---------- ----------- -------- ----------
Balance -
December 31, 2010 12,000,000 $1,200 $2,170,800 $(1,400,560) $(112,107) $ 659,333
========== ====== ========== =========== ========= ==========
The accompanying notes are an integral
part of these consolidated financial statements.
8
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION) TO
DECEMBER 31, 2009
2010 2009
---- ----
Cash Flows from Operating Activities
Net loss $ (882,114) $ (630,553)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation and amortization 54,836 22,702
Changes in operating assets and
liabilities:
Due from clearing broker (5,633) (185)
Advances to registered representatives
and employees 128 (23,628)
Prepaid expenses (988) (1,135)
Accounts payable and accrued expenses 30,589 30,622
Commissions payable (7,648) 7,648
---------- ----------
Total Adjustments 71,284 36,024
---------- ----------
Net Cash Used in Operating Activities (810,830) (594,529)
---------- ----------
Cash Flows from Investing Activities
Investment in affiliate (50,000) (430,000)
Escrow deposit - restricted cash (325,872) --
Purchase of customer list -- (217,000)
Purchase of property and equipment -- (1,757)
---------- ----------
Net Cash Used in Investing Activities (375,872) (648,757)
---------- ----------
Cash Flows from Financing Activities
Proceeds from the issuance
of common stock 1,215,000 1,555,000
Repurchase of common stock from
Investors (255,000) --
Advances from (to) affiliate 250,107 (312,718)
Advances (to) from GACC (3,700) 3,700
---------- ----------
Net Cash Provided by Financing
Activities $1,206,407 $1,245,982
---------- ----------
Net Increase in Cash and Cash
Equivalents $ 19,705 $ 2,696
Cash - Beginning 2,696 --
---------- ----------
Cash - Ending $ 22,401 $ 2,696
========== ==========
9
Supplemental Disclosures of Cash Flow
Information
Interest paid $ 3 $ 17
Income taxes paid $ 0 $ 0
The accompanying notes are an integral
part of these consolidated financial statements.
10
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 1 - Nature of Business
Global Arena Holding Subsidiary Corp. (the "Company"), was formed in
February 2009, in the state of Delaware. The Company is a financial
services firm that services the financial community through its
subsidiaries as follows:
Global Arena Investment Management LLC ("GAIM") provides investment
advisory services to its clients. GAIM is registered with the
Securities and Exchange Commission (the "SEC") as an investment advisor
and clears all of its business through Fidelity Advisors ("Fidelity"),
its correspondent broker. Global Arena Commodities Corp. ("GACOM")
provides commodities brokerage services in return for commissions.
Global Arena Trading Advisors, LLC ("GATA") provides futures advisory
services in return for fees. GATA is registered with the National
Futures Association (NFA) as a commodities trading advisor. Lillybell
Entertainment, LLC ("Lillybell") provides finance services to the
entertainment industry.
Note 2 - Reverse Merger Transaction
On January 19, 2011, China Stationery and Office Supply, Inc.
("China Stationery") entered into an Agreement and Plan of Merger with
the Company. Upon the terms and subject to the conditions of the
Merger Agreement, at the effective date of the Merger, the Company will
merge with and into China Stationery, with China Stationery continuing
as the surviving corporation.
At the effective date of the Merger, each share of the Company's common
stock, will be cancelled and converted automatically into the right to
receive 1.5 common shares of China Stationery for an aggregate of
18,000,000 common shares of China Stationery and will be recorded as a
recapitalization of China Stationery.
The Merger is being effected pursuant to an Agreement and Plan of
Reorganization and the related Agreement and Plan of Merger dated as of
January 19, 2011, among China Stationery and Global Arena. The
approval of China Stationery's board of directors and the affirmative
vote of the holders of a majority of the outstanding common stock
entitled to vote are required to approve and adopt the Merger
Agreement. China Stationery's sole director approved the Merger
Agreement and the transactions contemplated by the Merger Agreement,
including the Merger, at a meeting of the board of directors on January
19, 2011. The Merger Agreement was executed and delivered by the
parties on January 19, 2011.
11
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 2 - Reverse Merger Transaction (Continued)
On January 19, 2011, immediately following the execution and delivery
of the Merger Agreement, and as a condition and inducement to the
willingness of the Company to enter into the Merger Agreement, certain
shareholders, who held, as of the date of the Merger Agreement, a
majority of the issued and outstanding common shares entitled to vote
on the adoption of the Merger Agreement, executed and delivered to the
Company a written consent approving the transactions contemplated
thereby, including the Merger. As a result of the certain
shareholder's written consent, no further action by any other China
Stationery stockholder is required in connection with the adoption of
the Merger Agreement.
The Company and China Stationery are obligated to complete the Merger
under the terms of the Merger Agreement subject to the conditions set
forth therein, all of which we expect to be satisfied by April 4, 2011;
however, there is no assurance that the Merger will close at that time,
or at all.
Note 3 - Liquidity, Capital Resources and Going Concern
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets
and the satisfaction of the liabilities in the normal course of
business. The Company has incurred losses of approximately $882,000 and
$631,000 during the year ended December 31, 2010 and for the period
February 24, 2009 (date of inception) to December 31, 2009,
respectively. These conditions raise substantial doubt about its
ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments related to the
recoverability or classification of asset-carrying amounts or the
amounts and classification of liabilities that may result should the
Company be unable to continue as a going concern.
For the year ended December 31, 2010 and for the period February 24,
2009 (date of inception) to December 31, 2009, the Company sold common
stock and warrants for net proceeds of $1,215,000 and $1,555,000,
respectively.
Management believes that it will be successful in obtaining additional
financing, from which the proceeds will be primarily used to execute
its operating plan. The Company plans to use its available cash to
continue the development and execution of its business plan and expand
its client base and services.
12
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 3 - Liquidity and Capital Resources (Continued)
However, the Company can give no assurance that such financing will be
available on terms advantageous to the Company, or at all. Should the
Company not be successful in obtaining the necessary financing to fund
its operations, the Company would need to curtail certain or all of its
operational activities. The accompanying consolidated financial
statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.
Note 4 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Principles of Consolidation
The consolidated financial statements of the Company include accounts
of the Company and its wholly-owned subsidiary and majority owned
subsidiaries. Intercompany transactions and balances are eliminated in
consolidation.
Revenue Recognition
The Company earns revenues through various services it provides to its
clients. Advisory fees are on a contractual basis with the fee
stipulated in the contract and are recognized based on the terms of the
contract during the period service is provided.
Customer security transactions and the related commission income and
expense are recorded as of the trade date. The Company generally acts
as an agent in executing customer orders to buy or sell listed and
over-the-counter securities in which it does not make a market, and
charges commissions based on the services the Company provides to its
customers.
13
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 4 - Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with
an original maturity of three months or less when purchased to be cash
equivalents. As of December 31, 2010, in contemplation of the private
placement offerings (see Note 11) the Company had a cash escrow balance
of approximately $326,000. Accordingly, this amount has been included
as restricted cash.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is calculated
using the straight-line method based on the estimated useful lives of
the related assets, which are approximately five years. Maintenance and
repairs are charged to expense as incurred; costs of major additions
and betterments that extend the useful life of the asset are
capitalized. When assets are retired, or otherwise disposed of, the
costs and related accumulated depreciation or amortization are removed
from the accounts and any gain or loss on disposal is recognized.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including intangible assets
other than goodwill, for impairment whenever changes in circumstances
indicate that the carrying value of the asset may not be recoverable.
In connection with this review, the Company also reevaluates the
periods of depreciation and amortization for these assets. The Company
assesses recoverability by determining whether the net book value of
the related asset will be recovered through the projected undiscounted
future cash flows of the asset. If the Company determined that the
carrying value of the asset may not be recoverable, it measures any
impairment based on the projected future discounted cash flows as
compared to the asset's carrying value. For the year ended December
31, 2010 and for the period February 24, 2009 (date of inception) to
December 31, 2009, the Company has not recorded any impairment charges
on its long-lived assets.
Derivative Financial Instruments
In connection with the issuance of certain warrants that include price
protection reset provisions. The Company determined that the exercise
price reset provision feature is an embedded derivative instrument
pursuant to ASC 815 "Derivatives and Hedging."
14
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 4 - Summary of Significant Accounting Policies (Continued)
Derivative Financial Instruments (Continued)
The accounting treatment of derivative financial instruments requires
that the Company record the related warrants at their fair values as of
the inception date of the financial instrument and at fair value as of
each subsequent balance sheet date. Any change in fair value was
recorded as non-operating, non-cash income or expense for each
reporting period at each balance sheet date. The Company reassesses
the classification at each balance sheet date. If the classification
changes as a result of events during the period, the contract is
reclassified as of the date of the event that caused the
reclassification.
Advances to Employees
The Company may advance funds or pay expenses on behalf of its
employees or other persons. The Company generally establishes an
allowance for uncollectible amounts to reflect the amount of loss that
can be reasonably estimated by management and is included as part of
operating expenses in the accompanying statement of operations. The
determination of the amount of uncollectible accounts is based on the
amount of credit extended and the length of time each receivable has
been outstanding, as it relates to each individual employee or person.
As of December 31, 2010 and December 31, 2009, the Company has not
established a reserve for any potential non-collection.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs, which
are included in business development expenses, were deemed to be de
minimus for the year ended December 31, 2010 and for the period
February 24, 2009 (date of inception) to December 31, 2009.
Income Taxes
The Company accounts for income taxes under the provisions of
Accounting Standards Codification ("ASC") 740 - Income Taxes. ASC 740
requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the consolidated
financial statements and tax basis of assets and liabilities and for
the expected future tax benefit to be derived from tax loss and tax
credit carry forwards. ASC 740 additionally requires the establishment
of a valuation allowance to reflect the likelihood of realization of
deferred tax assets.
15
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 4 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In February 2010, the Financial Accounting Standards Board ("FASB")
Accounting Standards Update 2010-10 (ASU 2010-10), "Consolidation
(Topic 810): Amendments for Certain Investment Funds." The amendments
in this Update are effective as of the beginning of a reporting
entity's first annual period that begins after November 15, 2009 and
for interim periods within that first reporting period. Early
application is not permitted. The adoption of provisions of ASU 2010-
10 did not have a material effect on the Company's financial position,
results of operations or cash flows.
ASU No. 2010-11 was issued in March 2010, and clarifies that the
transfer of credit risk that is only in the form of subordination of
one financial instrument to another is an embedded derivative feature
that should not be subject to potential bifurcation and separate
accounting. This ASU will be effective for the first fiscal quarter
beginning after June 15, 2010, with early adoption permitted. The
adoption of this ASU did not have a material effect on the financial
position, results of operations or cash flows of the Company.
In April 2010, the FASB issued Accounting Standard Update No. 2010-12.
"Income Taxes" (Topic 740). In April 2010, the FASB issued Accounting
Standards Update 2010-12 (ASU 2010-12), Income Taxes (Topic 740):
Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts.
After consultation with the FASB, the SEC stated that it "would not
object to a registrant incorporating the effects of the Health Care and
Education Reconciliation Act of 2010 when accounting for the Patient
Protection and Affordable Care Act". The Company does not expect the
provisions of ASU 2010-12 to have a material effect on the financial
position, results of operations or cash flows of the Company.
ASU No. 2010-13 was issued in April 2010 and will clarify the
classification of an employee share based payment award with an
exercise price denominated in the currency of a market in which the
underlying security trades. This ASU will be effective for the first
fiscal quarter beginning after December 15, 2010, with early adoption
permitted. The Company does not expect the provisions of ASU 2010-13
to have a material effect on the financial position, results of
operations or cash flows of the Company.
In April 2010, the FASB issued Accounting Standards Update 2010-17 (ASU
2010-17), Revenue Recognition-Milestone Method (Topic 605): Milestone
Method of Revenue Recognition. The amendments in this Update are
effective on a prospective basis for milestones achieved in fiscal
years, and interim periods within those years, beginning on or after
June 15, 2010. Early adoption is permitted. If a vendor elects early
16
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 4 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
adoption and the period of adoption is not the beginning of the
entity's fiscal year, the entity should apply the amendments
retrospectively from the beginning of the year of adoption. The Company
does not expect the provisions of ASU 2010-17 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
In April 2010, the FASB issued Accounting Standards Update (ASU) No.
2010-18 "Receivables (Topic 310) - Effect of a Loan Modification When
the Loan is Part of a Pool that is Accounted for as a Single Asset - a
consensus of the FASB Emerging Issues Task Force." ASU 2010-18
provides guidance on account for acquired loans that have evidence of
credit deterioration upon acquisition. It allows acquired assets with
common risk characteristics to be accounted for in the aggregate as a
pool. ASU 2010-18 is effective for modifications of loans accounted
for within pools under Subtopic 310-30 in the first interim or annual
reporting period ending on or after July 15, 2010. The adoption of ASU
2010-18 did not have an impact on its financial condition, results of
operations, or disclosures.
In May 2010, the FASB issued Accounting Standards Update 2010-19 (ASU
2010-19), Foreign Currency (Topic 830): Foreign Currency Issues:
Multiple Foreign Currency Exchange Rates. The amendments in this Update
are effective as of the announcement date of March 18, 2010. The
Company does not expect the provisions of ASU 2010-19 to have a
material effect on the financial position, results of operations or
cash flows of the Company.
Other recent accounting pronouncements issued by the FASB and the SEC
did not have, or are not believed by management to have, a material
impact on the Company's present or future consolidated financial
statements.
Note 5 - Non-Controlling Interest
The Company has operating assets through two operating subsidiaries.
The Company has a 67% equity interest in Lillybell and a 95% equity
interest in GAIM. As of December 31, 2010 and 2009 the third party non-
controlling interest was ($112,107) and ($33,593), respectively.
17
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 6 - Fair Value
ASC 820 "Fair Value Measurements and Disclosures" defines fair value,
establishes a framework for measuring fair value and requires enhanced
disclosures about fair value measurements. As defined in ASC 820, fair
value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. The Standard clarifies that the
exchange price is the price in an orderly transaction between market
participants to sell an asset or transfer a liability at the
measurement date and emphasizes that fair value is a market-based
measurement and not an entity-specific measurement.
ASC 820 establishes the following hierarchy used in fair value
measurements and expands the required disclosures of assets and
liabilities measured at fair value:
Level 1 - Inputs use quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access.
Level 2 - Inputs use other inputs that are observable, either directly
or indirectly. These inputs include quoted prices for similar assets
and liabilities in active markets as well as other inputs such as
interest rates and yield curves that are observable at commonly quoted
intervals.
Level 3 - Inputs are unobservable inputs, including inputs that are
available in situations where there is little, if any, market activity
for the related asset or liability.
In instances where inputs used to measure fair value fall into
different levels in the above fair value hierarchy, fair value
measurements in their entirety are categorized based on the lowest
level input that is significant to the valuation. The Company's
assessment of the significance of particular inputs to these fair
measurements requires judgment and considers factors specific to each
asset or liability.
Liabilities measured at fair value as of December 31, 2010 are as
follows:
Balance
December 31,
Level 1 Level 2 Level 3 2010
--------- --------- --------- ---------
Warrants $ - $ - $ 343,000 $ 343,000
18
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 6 - Fair Value (Continued)
Financial assets are considered Level 3 when their fair values are
determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or
input is unobservable. Our Level 3 liability consisted of warrants
with dilutive price reset provisions issued to investors (See Note 11).
The following table provides a summary of the changes in fair value,
including net transfers in and/or out, of all financial assets measured
at fair value on a recurring basis using significant unobservable
inputs during the year ended December 31, 2010:
Warrant
--------
Balance - January 1, 2010 $ -
--------
Total unrealized losses included in:
Income and expenses -
Stockholders' equity 343,000
Transfers in and out of Level 3 -
--------
Balance - December 31, 2010 $343,000
==========
Note 7 - Investment in Global Arena Capital Corp.
As of December 31, 2010 and December 31, 2009, the investment in
Global Arena Capital Corp. ("GACC") was $480,000 and $430,000,
respectively. GACC is a broker dealer registered with the SEC. As of
December 31, 2010 and 2009 the Company owned a 4.8% and a 4.3% interest
in GACC, respectively. The investment made in GACC is accounted for
under the cost method of accounting because the Company does not hold a
significant interest in this entity.
Note 8 - Due from Clearing Organizations
As of December 31, 2010 and December 31, 2009, amounts due from the
clearing organizations consisted primarily of cash deposits. For the
year ended December 31, 2010 and the period February 24, 2009 (date of
inception) to December 31, 2009, the Company incurred charges of
$13,011 and $333, respectively, for execution and clearing services
rendered by the clearing brokers.
19
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 9 - Customer List
On July 27, 2009, the Company entered into an agreement to acquire a
customer list from an unaffiliated entity, under which the Company paid
$217,000 for the acquisition. The Company has capitalized such $217,000
and determined the estimated useful life of the customer list to be
approximately four years. Amortization expense for the year ended
December 31, 2010 and the period February 24, 2009 (date of inception)
to December 31, 2009 was approximately $54,000 and $23,000,
respectively.
Note 10 - Income Taxes
As of December 31, 2010 and 2009, the Company had approximately
$1,440,000 and $609,000, respectively, of federal net operating loss
carryforwards available to offset future taxable income. These net
operating losses which, if not utilized, begin expiring in 2029. In
accordance with Section 382 of the Internal Revenue Code, deductibility
of the Company's net operating loss carryforward may be subject to an
annual limitation in the event of a change of control. The Company
performed a preliminary evaluation as to whether a change of control
has taken place and concluded that no change of control has occurred to
date.
Deferred income taxes reflect the net tax effects of operating loss and
or tax credit carryforwards and temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Due to the
Company's historical lack of taxable profits, management has not
provided for any deferred tax asset. In assessing the realization of
deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future
deductible amounts become deductible. ASC 740 - "Income Taxes" requires
that a valuation allowance be established when it is "more likely than
not" that all, or a portion of, deferred tax assets will not be
realized. A review of all available positive and negative evidence
needs to be considered, including a company's performance, the market
environment in which the company operates the length of carryback and
carryforward periods, and expectations of future profits, etc. The
Company believes that significant uncertainty exists with respect to
future realization of the deferred tax assets and has therefore
established a full valuation allowance for the full amount as of
December 31, 2010 and December 31, 2009. For the year ended December
20
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
31, 2010 and for the period February 24, 2009 (date of inception) to
December 31, 2009, the deferred tax asset valuation allowance increased
by approximately $348,000 and $247,000, respectively.
As of December 31, 2010 and 2009 the deferred tax asset consisted of
the following:
December 31,
2010 2009
---- ----
Deferred Tax Asset
Net operating loss 576,000 244,000
Amortization of customer list 19,000 3,000
-------- --------
Total deferred tax asset 595,000 247,000
Valuation allowance (595,000) (247,000)
-------- --------
Net deferred tax asset - -
======== ========
The Company evaluated the provisions of ASC 740 related to the
accounting for uncertainty in income taxes recognized in an
enterprise's financial statements. ASC 740 prescribes a recognition
threshold and a measurement attribute for the financial statement
recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination
by taxing authorities. Differences between tax positions taken or
expected to be taken in a tax return and the benefit recognized and
measured pursuant to the interpretation are referred to as
"unrecognized benefits." A liability is recognized (or amount of net
operating loss carry forward or amount of tax refundable is reduced)
for an unrecognized tax benefit because it represents an enterprise's
potential future obligation to the taxing authority for a tax position
that was not recognized as a result of applying the provisions of ASC
740.
Interest costs related to unrecognized tax benefits are required to be
calculated (if applicable) and would be classified as "Interest
expense, net" in the statements of operation. Penalties would be
recognized as a component of "General and administrative expenses."
No Interest or penalties were recorded during the years ended December
31, 2010 and December 31, 2009 respectively. As of December 31, 2010
and December 31, 2009 no liability for unrecognized tax benefits was
required to be reported. The Company does not expect any significant
changes in its unrecognized tax benefits in the next year.
21
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
The Company files tax returns in U.S. Federal and various state
jurisdictions and are subject to audit by tax authorities beginning
with the year ended December 31, 2007.
The income tax provision (benefit) consists of the following:
For the Period
For the year February 24, 2009
ended (Date of Inception) to
December 31, 2010 December 31, 2009
----------------- -----------------
Federal
Current - -
Deferred (296,000) (210,000)
State and Local
Current - -
Deferred (52,000) (37,000)
Change in valuation allowance 348,000 247,000
------- -------
Income tax provision (benefit) - -
======= =======
The reconciliation between the statutory federal income tax rate (34%)
and the Company's effective rate for the year ended December 31, 2010
and for the period February 24, 2009 (date of inception) to December
31, 2009 is as follows:
For the Period
For the year February 24, 2009
ended (Date of Inception) to
December 31, 2010 December 31, 2009
----------------- -----------------
Federal statutory rate (34)% (34)%
State tax rate, net of federal benefit (6)% (6)%
Other permanent differences 1 % 1 %
Valuation Allowance 39 % 39 %
------- -------
Effective Rate --% --%
======= =======
Note 11 - Stockholders' Equity
On February 24, 2009 (date of inception) the Board of Directors of the
Company authorized the issuance of 8,072,000 shares of common stock to
the founders of the Company. No charge has been recorded with the
issuance of these shares.
22
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 11 - Stockholders' Equity (Continued)
During the period February 24, 2009 (date of inception) to December 31,
2009, the Company entered into a private placement offering for
$2,000,000 (40 units). Each unit consists of 60,000 shares of common
stock and warrants to purchase 30,000 shares of common stock. The
warrants are exercisable in whole or in part during the three-year
period following issuance at an exercise price of $1.00 per share. The
shares of common stock into which the warrants are exercisable will
have the same registration rights as all other shares of common stock
sold in this offering. Under the terms of the agreement the Company may
sell up to an additional 20 units to cover investor over-subscriptions,
if any.
The purchase price for each unit is $50,000, although subscriptions for
lesser amounts may be accepted at the discretion of the Company's
management. For the period February 24, 2009 (date of inception) to
December 31, 2009, the Company sold approximately 31.1 units consisting
of 1,866,000 shares of common stock with 933,000 warrants for net
proceeds of $1,555,000.
For the year ended December 31, 2010, under the private placement
described above, the Company sold 5.2 net units consisting of 618,000
shares of common stock with 309,000 warrants for net proceeds of
$515,000.
The Company also entered into a separate subscription
agreement during the year ended December 31, 2010 to sell 1,750,000
shares of common stock and warrants to purchase 1,487,500 shares of
common stock for net proceeds of $700,000; 743,750 warrants are
exercisable in whole or in part during the three-year period following
issuance at an exercise price of $0.46 per share and the remaining
743,750 warrants are exercisable at $0.52 per share.
The warrants had a dilutive provision whereby in the event the Company
sells shares of common stock for consideration less than the stated
exercise price then the warrant price will be adjusted accordingly to
the terms of the agreement. The Company determined that the reset
provision is a derivative liability and under ASC 815 the Company was
required to reclassify the warrant as a derivative liability and mark
to market through earnings at the end of each reporting period (See
Note 6).
The Company calculated the fair value of the warrants of $343,000 using
the Binomial Lattice Model.
23
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 11 - Stockholders' Equity (Continued)
The Company used the following assumptions:
Risk-Free Interest Rate: 0.73% to 1.03%
Expected Term: 3 years
Expected Volatility: 100%
Expected Dividends: 0%
During the year ended December 31, 2010, the Company repurchased from
investors 306,000 shares of the Company's common stock and 153,000
warrants for net proceeds of $255,000. Accordingly, the Company
cancelled the 306,000 shares of common stock and 153,000 warrants
associated with these shares.
Note 12 - Warrants
The following tables summarize information about warrants outstanding
as of December 31, 2010 and December 31, 2009:
Weighted
Average Weighted
Exercise Average Intrinsic
Shares Price Exercisable Value
--------- ----- --------- ----------
Outstanding at
February 24, 2009 - - - $ -
(Date of Inception)
Granted 933,000 $1.00 933,000 -
Exercised - - - -
Expired - - - -
--------- ----- --------- --------
Outstanding at
December 31, 2009 933,000 $1.00 933,000 $ -
Granted 1,796,500 $0.64 1,796,500 -
Exercised - - - -
Expired - - - -
Cancelled (153,000) (1.00) (153,000) -
--------- ----- --------- --------
Outstanding at
December 31, 2010 2,576,500 $0.80 2,576,500 $ -
--------- ----- --------- --------
24
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 12 - Warrants (Continued)
Average
Number Contractual Exercise Warrants
Exercise Price Outstanding Life Price Exercisable
----------- ---- ----- -----------
$0.46 743,750 2.88 $0.46 743,750
$0.52 743,750 2.88 $0.52 743,750
$1.00 1,089,000 1.61 $1.00 1,089,000
--------- ---------
Total 2,576,500 2,576,500
========== =========
Note 13 - Related Parties
The Company has an expense sharing agreement with GACC whereby GACC
pays certain general and administrative expenses on behalf of the
Company and its operating subsidiaries. During the year ended December
31, 2010 and the period February 24, 2009 (date of inception) to
December 31, 2009, the Company reimbursed GACC approximately $443,000
and $243,000, respectively.
The Company has a month-to-month agreement with Broadsword, an
affiliated company, whereby Broadsword provides office space to the
Company. During the year ended December 31, 2010 and the period
February 24, 2009 (Date of Inception) to December 31, 2009, the Company
was charged approximately $126,000 and $83,000, respectively, for
office space.
Note 14 - Commitments and Contingencies
Litigation
The Company may be involved in legal proceedings in the ordinary course
of business. Such matters are subject to many uncertainties, and
outcomes are not predictable with assurance. The Company currently is
not involved in any legal proceedings.
Operating Lease
The Company has a month to month lease for office space. Rent expense
for the year ended December 31, 2010 and the period February 24, 2009
(date of inception) to December 31, 2009, was approximately $126,000
and $83,000, respectively.
25
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 14 - Commitments and Contingencies (Continued)
Indemnification
The Company is engaged in providing a broad range of investment
services to a diverse group of retail and institutional clientele.
Counterparties to the Company's business activities include broker-
dealers and clearing organizations, banks and other financial
institutions. The Company uses clearing brokers to process transactions
and maintain customer accounts on a fee basis, and the Company permits
the clearing firms to extend credit to its clientele secured by cash
and securities in the client's account. The Company's exposure to
credit risk associated with the non-performance by its customers and
counterparties in fulfilling their contractual obligations can be
directly impacted by volatile or illiquid trading markets, which may
impair the ability of customers and counterparties to satisfy their
obligations to the Company. The Company has agreed to indemnify the
clearing brokers on a limited basis for losses it incurs while
extending credit to the Company's clients.
It is the Company's policy to review, as necessary, the credit standing
of its customers and each counterparty. Amounts due from customers that
are considered uncollectible by the clearing broker are charged back to
the Company by the clearing broker when such amounts become
determinable. Upon notification of a charge back, such amounts, in
total or in part, are then either (i) collected from the customers,
(ii) charged to the broker initiating the transaction, and/or (iii)
charged as an expense in the accompanying statement of operations,
based on the particular facts and circumstances.
The maximum potential amount for future payments that the Company could
be required to pay under this indemnification cannot be estimated.
However, the Company believes that it is unlikely it will have to make
any material payments under these arrangements and has not recorded any
contingent liability in the consolidated financial statements for this
indemnification.
Credit risk
The Company maintains checking accounts in a financial institution.
Accounts at its bank are insured by the Federal Deposit Insurance
Corporation ("FDIC"). At times, cash and cash equivalents may be
uninsured or in deposit accounts that exceed the FDIC insurance limit.
26
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2010 AND
FOR THE PERIOD FEBRUARY 24, 2009 (DATE OF INCEPTION)
TO DECEMBER 31, 2009
Note 15 - Revenue Concentrations
The Company considers significant revenue concentrations to be clients
or brokers who account for 10% or more of the total revenues generated
by the Company during the period. The Company had 3 brokers who
accounted for 81% of total revenues, which included revenues from a
single customer that accounted for 14% of total revenues, during the
fiscal year ended December 31, 2010. During the period February 24,
2010 (date of inception) to December 31, 2009, the Company had 2
brokers who accounted for 78% of total revenues, which included
revenues from one customer that accounted for 19% of total revenues and
from another customer accounting for 11% of total revenues.
Note 16 - Subsequent Events
Management has evaluated subsequent events to determine if events or
transactions occurring through April 4, 2011, the date the financial
statements are available to be issued, require potential adjustment to
or disclosure in the consolidated financial statements.
27
CHINA STATIONERY AND OFFICE SUPPLY, INC. AND SUBSIDIARIES
GLOBAL ARENA HOLDING SUBSIDIARY CORP.
INTRODUCTION TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
statements give effect to the proposed merger between China Stationery
and Office Supply, Inc. and Global Arena Holding Subsidiary Corp.,
entered into under the Agreement and Plan of Reorganization on January
19, 2011. Shareholders of Global Arena shall receive 1.5 common shares
of the registrant for every common share of Global Arena for an
aggregate of eighteen million (18,000,000) common shares.
Additionally, the name of China Stationery shall be changed to Global
Arena Holding Corp. Prior to the closing of the merger, China
Stationery shall effectuate a 1 for 20 reverse stock split of its
common shares. As a result, after the reverse stock split, China
Stationery shall have a total of 409,524 common shares issued and
outstanding.
The unaudited pro forma combined balance sheet combines the balance
sheets of China Stationery and Global Arena as if the recapitalization
has occurred on December 31, 2010. The pro forma combined statement of
operations for the year ended December 31, 2010 combines the historical
statements of operations of China Stationery and Global Arena for the
year ended December 31, 2010 and gives pro forma effect to the
recapitalization as if it were completed on January 1, 2010. References
are made to the notes to the pro forma statements and a detailed
explanation of these combinations.
The pro forma balance sheet and statements of operations should be read
in conjunction with the separate historical consolidated financial
statements of China Stationery for the year ended December 31, 2010 and
the historical financial statements of Global Arena for the year ended
December 31, 2010.
These pro forma condensed combined financial statements may not be
indicative of what would have occurred if the reverse acquisition had
actually occurred on the indicated dates and they should not be relied
upon as an indication of future results of operations.
28
China Stationery and Office Supply, Inc. and Subsidiaries
and Global Arena Holding Subsidiary Corp.
Pro Forma Condensed Combined Balance Sheets
As of December 31, 2010
Global Arena
China Stationery Holding Pro Forma Adjustments
Note Office Supply, Inc. Subsidiary ---------------------
Ref. and Subsidiaries(a) Corp.(b) Debit Credit Combined(a)(b)
---- ------------------- ----------- ----- ------ --------
ASSETS
Cash and cash equivalents c $ 1,866,340 $ 348,273 $ - $ 1,866,340 $ 348,273
Accounts Receivable, net c 3,587,661 - - 3,587,661 -
Inventory c 3,423,217 - - 3,423,217 -
Advance to Suppliers c 2,049,989 - - 2,049,989 -
Due from clearing broker - 5,818 - - 5,818
Investment in affiliates - 480,000 - - 480,000
Receivables from Affiliates - 62,611 - - 62,611
Advances to registered
representatives - 23,500 - - 23,500
Fixed assets, net of
accumulated depreciation c 7,642,241 1,074 - 7,642,241 1,074
Other Receivable c 403,487 - - 403,487 -
Prepaid expenses c 53,952 2,123 - 53,952 2,123
Patent and Other
Intangibles, net c 1,291,671 - - 1,291,671 -
Other Assets c 423,532 - - 423,532 -
Customer lists, net - 140,145 - - 140,145
----------- ----------- ----------- ----------- ----------
TOTAL ASSETS $20,742,090 $ 1,063,544 $ - $20,742,090 $1,063,544
=========== =========== =========== =========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
LIABILITIES
Accounts payable and accrued
expenses c $ 4,519,380 $ 61,211 $ 4,519,380 $ - $ 61,211
Notes Payable c 1,977,746 - 1,977,746 - -
Short-term Bank Loans c 13,644,000 - 13,644,000 - -
Advanced from Customers c 1,040,420 - 1,040,420 - -
Commissions payable - - - - -
Payable to affiliates - - - - -
Derivative liability - 343,000 - - 343,000
----------- ----------- ----------- ----------- ----------
TOTAL LIABILITIES 21,181,546 404,211 21,181,546 - 404,211
----------- ----------- ----------- ----------- ----------
Non-controlling interests in
Consolidated Subsidiary: (58,526) (112,107) - 58,526 (112,107)
STOCKHOLDERS' (DEFICIENCY) EQUITY:
Common stock, par value
$0.0001 per share; c, d 11,987 1,200 11,987 600 1,800
Additional paid-in capital c 1,198,013 2,170,800 1,198,013 - 2,170,200
Accumulated Deficit c (3,629,433) (1,400,560) - 3,629,432 (1,400,560)
Statutory Reserve c 590,380 - 590,380 - -
Accumulated Other
Comprehensive Income c 1,448,122 - 1,448,122 - -
----------- ----------- ----------- ----------- ----------
TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY (380,931) 771,440 3,248,502 3,630,032 771,400
----------- ----------- ----------- ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIENCY) EQUITY $20,742,090 $ 1,063,544 $24,430,048 $(3,688,558)$1,063,544
=========== =========== =========== =========== ==========
29
China Stationery and Office Supply, Inc. and Subsidiaries
and Global Arena Holding Subsidiary Corp.
Pro Forma Combined Statements of Operations
For The Year Ended December 31, 2010
Global Arena
China Stationery Holding Pro Forma Adjustments
Note Office Supply, Inc. Subsidiary ---------------------
Ref. and Subsidiaries(a) Corp.(b) Debit Credit Combined(a)(b)
---- ------------------- ----------- ----- ------ --------
REVENUES
Net Sales c $14,962,319 $ - $14,962,319 $ - $ -
Investment advisory fees - 836,146 - - 836,146
Commissions and other - 16,814 - - 16,814
Government Subsidy Income c 2,470 - 2,470 - -
Non-operation Income c 210,011 - 210,011 - -
----------- ----------- ----------- ----------- ----------
TOTAL REVENUES 15,174,800 852,960 15,174,800 - 852,960
OPERATING EXPENSES
Cost of Goods Sold c $13,399,760 $ - $ - $13,399,760 $ -
Sales Expenses c 451,694 - - 451,694 -
Commissions - 641,239 - - $ 641,239
Salaries and benefits - 567,075 - - $ 567,075
Occupancy - 141,610 - - $ 141,610
Business development - 155,902 - - $ 155,902
Professional fees - 127,029 - - $ 127,029
Clearing and operations - 36,806 - - $ 36,806
Communication and data - 11,940 - - $ 11,940
Regulatory fees - 13,838 - - $ 13,838
Office and other expense - 39,635 - - $ 39,635
General and Administrative
Expenses c 862,068 - - 862,068 $ -
Interest Expense c 940,574 - - 940,574 $ -
----------- ----------- ----------- ----------- ----------
TOTAL OPERATING EXPENSES 15,654,096 1,735,074 - 15,654,096 1,735,074
LOSS BEFORE INCOME TAXES (479,296) (882,114) 15,174,800 (15,654,096) (882,114)
Loss from Continuing Operations (479,296) (882,114) 15,174,800 (15,654,096 (882,114)
----------- ----------- ----------- ----------- ----------
Non-controlling Interest c 63,706 - 63,706 - $ -
NET LOSS (415,590) (882,114) 15,238,506 (15,654,096) (882,114)
----------- ----------- ----------- ----------- ----------
Other Comprehensive (Loss) Income:
Unrealized Gain (loss) on Foreign
Currency Translation c 42,699 - 42,699 - $ -
----------- ----------- ----------- ----------- ----------
Comprehensive Loss $ (372,891) $ (882,114) - $ (372,891)$ (882,114)
=========== =========== =========== =========== ==========
Weighted Average Common Shares-
Basic and Diluted 11,987,427 15,632,458
=========== ==========
Earnings per Common Share-
Basic and Diluted $ (0.04) $ (0.05)
=========== ==========
30
China Stationery and Office Supply, Inc. and Subsidiaries
and Global Arena Holding Subsidiary Corp.
Notes to Condensed Combined Pro Forma Financial Statements
(a) Derived from the audited balance sheets and income statements of
China Stationery and subsidiaries for the years ended December 31, 2010
and December 31, 2009
(b) Derived from the audited balance sheets and income statements of
Global Arena for the year ended December 31, 2010 and the period
February 24, 2009 (Inception) through December 31, 2009.
(c) Reflects elimination of prior operations of China Stationery and
subsidiaries pursuant to the proposed merger, the sale of the
subsidiary of China Stationery and as a result of the change in its
business plan. The business of China Stationery was distributed to the
previous owners.
(d) Reflects the issuance of 18,000,000 shares of China Stationery in
connection with the reverse merger.
31
(b) Exhibits
(10-1) Agreement and Plan of Reorganization by and between the
registrant and Global Arena Holding Subsidiary Corp. dated January 19,
2011 incorporated by reference to Form 8-K dated January 19, 2011 filed
January 24, 2011
(10-2) Assignment and Assumption and Management Agreement dated
October 27, 2010 incorporated by reference to Form 8-K dated January
19, 2011 filed January 24, 2011
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 hereunto duly authorized.
China Stationery & Office Supply, Inc.
/s/John S. Matthews
-----------------------
John S. Matthews
Chief Executive Officer
Date: April 4, 201
