U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended December 31, 2009
Commission
File Number 333-139910
EATWARE,
INC.
(Name of
small business issuer in its charter)
|
Nevada
|
1712
|
20-2234410
|
|
(State
or other jurisdiction
of
incorporation or organization)
|
(Primary
SIC Code)
|
(IRS
Employer Identification No.)
|
23/F,
Westin Center, 26 Hung To Road
Kwun
Tong, Kowloon, Hong Kong
(Address
of principal executive offices)
+852
2295-1818
(
Registrant’s telephone number,
including area code
)
Check
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
þ
No
o
|
Large
Accelerated Filer
o
|
Accelerated
Filer
o
|
Non-Accelerated
Filer
o
|
Smaller
Reporting Company
þ
|
Check
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
There
were 1,990,759,517 shares of Common Stock outstanding as of January 26, 2010.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
Page
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2009 and March 31,
2009
|
|
F-2
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations And Comprehensive Loss for the Three
and Nine Months ended December 31, 2009 and 2008
|
|
F-3
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months ended December
31, 2009 and 2008
|
|
F-4
|
|
|
|
|
|
Condensed
Consolidated Statement of Stockholders’ Deficit for the Nine Months ended
December 31, 2009
|
|
F-5
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
F-6 to F-18
|
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF DECEMBER 31, 2009 AND MARCH 31, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
|
|
|
December 31, 2009
|
|
|
March 31, 2009
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
18,631
|
|
|
$
|
5,092
|
|
|
Accounts
receivable, trade
|
|
|
210,366
|
|
|
|
142,515
|
|
|
Inventories
|
|
|
9,344
|
|
|
|
3,243
|
|
|
Prepayment
and other receivables
|
|
|
51,572
|
|
|
|
56,944
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
289,913
|
|
|
|
207,794
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
-
|
|
|
|
-
|
|
|
Plant
and equipment, net
|
|
|
2,545
|
|
|
|
3,726
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
292,458
|
|
|
$
|
211,520
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
$
|
167,350
|
|
|
$
|
167,553
|
|
|
Accounts
payable, trade
|
|
|
197,564
|
|
|
|
218,163
|
|
|
Notes
payable, unsecured
|
|
|
923,226
|
|
|
|
374,169
|
|
|
Amount
due to a former director
|
|
|
1,146,427
|
|
|
|
1,202,847
|
|
|
Other
payables and accrued liabilities
|
|
|
230,457
|
|
|
|
156,138
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,665,024
|
|
|
|
2,118,870
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
2,665,024
|
|
|
|
2,118,870
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficit:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares authorized; no shares issued
and outstanding as of December 31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $0.001 par value; 2,500,000,000 and 2,000,000,000 shares
authorized; 1,990,759,517 shares issued and outstanding as of December 31,
2009 and March 31, 2009
|
|
|
1,990,759
|
|
|
|
1,990,759
|
|
|
Additional
paid-in capital
|
|
|
550,215
|
|
|
|
550,215
|
|
|
Accumulated
other comprehensive income
|
|
|
2,409
|
|
|
|
579
|
|
|
Accumulated
deficit
|
|
|
(4,915,949
|
)
|
|
|
(4,448,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(2,372,566
|
)
|
|
|
(1,907,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
292,458
|
|
|
$
|
211,520
|
|
See
accompanying notes to condensed consolidated financial
statements.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS
AND COMPREHENSIVE LOSS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
|
|
|
Three months ended December 31,
|
|
|
Nine months ended December 31
,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES,
NET
|
|
$
|
190,345
|
|
|
$
|
463,426
|
|
|
$
|
558,111
|
|
|
$
|
2,080,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUES
|
|
|
(158,352
|
)
|
|
|
(357,076
|
)
|
|
|
(470,274
|
)
|
|
|
(1,621,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
31,993
|
|
|
|
106,350
|
|
|
|
87,837
|
|
|
|
459,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
(1,971
|
)
|
|
|
(6,117
|
)
|
|
|
(3,100
|
)
|
|
|
(103,364
|
)
|
|
Research
and development
|
|
|
-
|
|
|
|
(24,628
|
)
|
|
|
(35,071
|
)
|
|
|
(123,004
|
)
|
|
General
and administrative
|
|
|
(100,468
|
)
|
|
|
(255,235
|
)
|
|
|
(469,558
|
)
|
|
|
(963,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
(102,439
|
)
|
|
|
(285,980
|
)
|
|
|
(507,729
|
)
|
|
|
(1,189,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(70,446
|
)
|
|
|
(179,630
|
)
|
|
|
(419,892
|
)
|
|
|
(730,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1
|
|
|
|
20
|
|
|
|
2
|
|
|
|
63
|
|
|
Interest
expense
|
|
|
(15,994
|
)
|
|
|
(2,575
|
)
|
|
|
(47,156
|
)
|
|
|
(6,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
|
|
(86,439
|
)
|
|
|
(182,185
|
)
|
|
|
(467,046
|
)
|
|
|
(736,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(86,439
|
)
|
|
$
|
(182,185
|
)
|
|
$
|
(467,046
|
)
|
|
$
|
(736,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Foreign currency translation gain (loss)
|
|
|
1,806
|
|
|
|
(5,454
|
)
|
|
|
1,830
|
|
|
|
(8,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS
|
|
$
|
(84,633
|
)
|
|
$
|
(187,639
|
)
|
|
$
|
(465,216
|
)
|
|
$
|
(745,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share – Basic and diluted
|
|
$
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – Basic and diluted
|
|
|
1,990,759,517
|
|
|
|
1,990,759,517
|
|
|
|
1,990,759,517
|
|
|
|
1,990,759,517
|
|
See
accompanying notes to condensed consolidated financial
statements.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
|
Nine months ended December 31
,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(467,046
|
)
|
|
$
|
(736,884
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,179
|
|
|
|
1,316
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, trade
|
|
|
(67,969
|
)
|
|
|
10,258
|
|
|
Accounts
receivable, related parties
|
|
|
-
|
|
|
|
52,734
|
|
|
Inventories
|
|
|
(6,106
|
)
|
|
|
(3,500
|
)
|
|
Prepayment
and other receivables
|
|
|
5,341
|
|
|
|
(63,793
|
)
|
|
Accounts
payable, trade
|
|
|
(20,479
|
)
|
|
|
289,169
|
|
|
Accounts
payable, related parties
|
|
|
-
|
|
|
|
(421,324
|
)
|
|
Other
payables and accrued liabilities
|
|
|
113,741
|
|
|
|
(64,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(441,339
|
)
|
|
|
(936,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
-
|
|
|
|
(1,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
(1,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net
change in bank overdraft
|
|
|
(103
|
)
|
|
|
166,902
|
|
|
Proceeds
from short-term borrowings
|
|
|
-
|
|
|
|
30,784
|
|
|
Advance
from a related party
|
|
|
-
|
|
|
|
1,480,972
|
|
|
Proceeds
from notes payable
|
|
|
510,253
|
|
|
|
-
|
|
|
Repayment
to a former director
|
|
|
(55,407
|
)
|
|
|
(770,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
454,743
|
|
|
|
907,878
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
135
|
|
|
|
(8,537
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
13,539
|
|
|
|
(38,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
5,092
|
|
|
|
53,863
|
|
|
|
|
|
|
|
|
|
|
|
|
END
OF PERIOD
|
|
$
|
18,631
|
|
|
$
|
15,138
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Cash
paid for interest
|
|
$
|
(7,863
|
)
|
|
$
|
(6,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Waiver
of the amount payable to a stockholder
|
|
$
|
-
|
|
|
$
|
550,215
|
|
See
accompanying notes to condensed consolidated financial
statements.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR
THE NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
comprehensive
|
|
|
Accumulated
|
|
|
stockholders’
|
|
|
|
|
No. of shares
|
|
|
Amount
|
|
|
No. of shares
|
|
|
Amount
|
|
|
paid-in capital
|
|
|
income
|
|
|
deficit
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of April 1, 2009
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,990,759,517
|
|
|
$
|
1,990,759
|
|
|
$
|
550,215
|
|
|
$
|
579
|
|
|
$
|
(4,448,903
|
)
|
|
$
|
(1,907,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(467,046
|
)
|
|
|
(467,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,830
|
|
|
|
-
|
|
|
|
1,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2009
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,990,759,517
|
|
|
$
|
1,990,759
|
|
|
$
|
550,215
|
|
|
$
|
2,409
|
|
|
$
|
(4,915,949
|
)
|
|
$
|
(2,372,566
|
)
|
See
accompanying notes to condensed consolidated financial
statements
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
NOTE
- 1
|
BASIS
OF PRESENTATION
|
The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States of America (“GAAP”), and the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures
normally included in audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information not
misleading.
In the
opinion of management, the consolidated balance sheet as of March 31, 2009 which
has been derived from audited financial statements and these unaudited condensed
consolidated financial statements reflect all normal and recurring adjustments
considered necessary to state fairly the results for the periods presented. The
results for the nine months ended December 31, 2009 are not necessarily
indicative of the results to be expected for the entire fiscal year ending March
31, 2010 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the Management’s Discussion and the audited
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended March 31, 2009.
|
NOTE
- 2
|
ORGANIZATION
AND BUSINESS BACKGROUND
|
Eatware,
Inc. (the “Company” or “CHSH”) was incorporated in the State of Nevada on
January 24, 2005 as Indigo Technologies, Inc. On June 6, 2007, CHSH changed its
name to “China Shoe Holdings, Inc.” On July 20, 2009, the Company further
changed its current name to “Eatware, Inc.” The principal activity of CHSH,
through its subsidiaries, is mainly engaged in the development and manufacturing
of proprietary additives and trading of bio-degradable food containers and
packaging products in Hong Kong and the People's Republic of China
("PRC").
On March
31, 2009, the Company entered into a Share Exchange Agreement (the “Exchange
Agreement”) by and among (1) Extra Ease Limited (“Extra Ease”) and (2) Eatware
Intellectual Properties Limited (“EWIP”), and (3) the shareholders of Extra Ease
and EWIP. Pursuant to the Exchange Agreement, the Company agreed to issue a
total of 1,871,313,946 shares of its common stock, of which (i) 121,313,946
shares were issued to the shareholder of Extra Ease in exchange for 10,000
shares of Extra Ease, representing 100% of the issued and outstanding common
stock of Extra Ease, and (ii) 1,750,000,000 shares were issued to the
shareholder of EWIP in exchange for 50,000 shares of EWIP, representing 100% of
the issued and outstanding common stock of EWIP. Immediately following
completion of the share exchange transaction, Extra Ease and EWIP became the
wholly-owned subsidiaries of the Company.
This
stock exchange transaction has been accounted for as a reverse acquisition and
recapitalization of CHSH whereby Extra Ease and EWIP are deemed to be the
accounting acquirers (legal acquirees) and CHSH to be the accounting acquiree
(legal acquirer). The accompanying condensed consolidated financial statements
are in substance those of Extra Ease and EWIP, with the assets and liabilities,
and revenues and expenses, of the Company being included effective from the date
of stock exchange transaction.
On July
22, 2009, the Company increased its authorized capital stock to 2,510,000,000
shares, consisting of 10,000,000 shares of preferred stock, par value $.001 per
share, and 2,500,000,000 shares of common stock, par value $.001 per
share.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
As of
December 31, 2009, details of the Company’s subsidiaries are described
below:
|
Name of subsidiaries
|
|
Place and date of
incorporation
|
|
Particulars of
issued/ registered
share capital
|
|
Principal activities
|
|
Extra
Ease Limited (“Extra Ease”)
|
|
British Virgin Islands,
January 2, 2008
|
|
10,000
issued shares of US$1 each
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
Eatware
Global Corp. (“EGC”)
|
|
British Virgin Islands,
March 31, 2006
|
|
1
issued share of US$1 each
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
Eatware
Intellectual Properties Limited (“EWIP”)
|
|
British Virgin Islands,
December 15, 2006
|
|
100
issued shares of US$1 each
|
|
Development
of technical know-how and patents
|
|
|
|
|
|
|
|
|
|
Eatware
Far East Limited (“EFEL”)
|
|
Hong Kong,
January 26, 2007
|
|
1
issued share of HK$1 each
|
|
Trading
of foodwares and containers
|
|
|
|
|
|
|
|
|
|
Eatware
International Limited (“EIL”)
|
|
British Virgin Islands,
December 15, 2006
|
|
1
issued share of US$1 each
|
|
Trading
of foodwares and packaging products
|
|
|
|
|
|
|
|
|
|
Rongbao
(Nantong) Environmental Co., Ltd (“RBNT”)
|
|
The People’s Republic
of China,
June 22, 2005
|
|
US$100,000
|
|
Manufacture
and development of proprietary additives
|
|
|
|
|
|
|
|
|
|
Eatware
Assets Management Limited (“EAML”)
|
|
Hong Kong,
September 1, 2008
|
|
1
issued share of HK$1 each
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
Eatware
Hong Kong Limited (“EWHK”)
|
|
Hong Kong,
September 15, 2009
|
|
1
issued share of HK$1 each
|
|
Trading
of foodwares and
containers
|
The
Company and its subsidiaries are hereinafter referred to as (the
"Company").
|
NOTE
-
3
|
GOING
CONCERN UNCERTAINTY
|
The
accompanying condensed consolidated financial statements have been prepared
using the going concern basis of accounting, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of
business.
For the
nine months ended December 31, 2009, the Company has incurred a net loss of
$467,046 and experienced negative cash flows from operations of $441,339 with an
accumulated deficit of $4,915,949 as of that date. The continuation of the
Company as a going concern through December 31, 2010 is dependent upon the
continued financial support from its stockholders and overdraft facility. The
Company is currently pursuing the additional financing for its operations.
However, there is no assurance that the Company will be successful in securing
sufficient funds to sustain the operations.
These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. These consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets and liabilities that may result in the Company not
being able to continue as a going concern.
|
NOTE
-
4
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
In
preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheets and revenues and expenses during the periods
reported. Actual results may differ from these estimates.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
condensed consolidated financial statements include the financial statements of
CHSH and its subsidiaries. All significant inter-company balances and
transactions within the Company have been eliminated upon
consolidation.
|
l
|
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customers’ current
credit worthiness and the economic environment. As of December 31, 2009, the
Company recorded no allowance for doubtful accounts.
Inventories
are stated at the lower of cost or market (net realizable value), cost being
determined on a weighted average method. Costs mainly represent the cost of raw
material of proprietary additives. The Company quarterly reviews historical
sales activity to determine excess, slow moving items and potentially obsolete
items and also evaluates the impact of any anticipated changes in future demand.
The Company provides inventory allowances based on excess and obsolete
inventories determined principally by customer demand. As of December 31, 2009,
no allowance for obsolete inventories was required.
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational:
|
|
|
Depreciable life
|
|
Leasehold
improvement
|
|
Term of the lease (2 years)
|
|
Furniture,
fixtures and office equipment
|
|
4 to 5 years
|
Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.
Depreciation
expense for the three months ended December 31, 2009 and 2008 were $393 and
$474, respectively.
Depreciation
expense for the nine months ended December 31, 2009 and 2008 were $1,179 and
$1,316, respectively.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
l
|
Valuation
of long-lived assets
|
Long-lived
assets primarily include plant and equipment and intangible assets. In
accordance with the provisions of Accounting Standards Codification ("ASC") ASC
Subtopic 360-10-5, “
Impairment
or Disposal of Long-Lived Assets”
, the Company periodically reviews
long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If an impairment is indicated, the asset is written down to
its estimated fair value based on a discounted cash flow analysis. Determining
the fair value of long-lived assets includes significant judgment by management,
and different judgments could yield different results. There has been no
impairment as of December 31, 2009.
In
accordance with the ASC Topic 605,
"Revenue Recognition"
, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and
collectibility is reasonably assured.
Revenue
is recognized when products are delivered to customers. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
In instances where products are configured to customer requirements, revenue is
recorded upon the successful completion of the Company’s final test procedures
and the customer’s acceptance.
The
Company is subject to value-added tax ("VAT") under the PRC tax law which is
levied on the majority of the products at the rate of 17% on the invoiced value
of sales. Output VAT is borne by customers in addition to the invoiced value of
sales and input VAT is borne by the subsidiaries in addition to the invoiced
value of purchases to the extent not refunded for export sales.
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
The
Company adopts the ASC Topic 740,
“Income Taxes”
regarding
accounting for uncertainty in income taxes 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
nine months ended December 31, 2009 and 2008, the Company did not have any
interest and penalties associated with tax positions. As of December 31, 2009,
the Company did not have any significant unrecognized uncertain tax
positions.
The
Company conducts major businesses in the PRC and Hong Kong and is subject to
taxes in these jurisdictions. As a result of its business activities, the
Company files tax returns that are subject to examination by the local and
foreign tax authorities.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
Company calculates net loss per share in accordance with ASC Topic 260,
“Earnings per Share.”
Basic
loss per share is computed by dividing the net loss by the weighted-average
number of common shares outstanding during the period. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.
ASC Topic
220,
“Reporting Comprehensive
Income”
establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources.
Accumulated comprehensive income, as presented in the accompanying consolidated
statement of stockholders’ deficit consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not
included in the computation of income tax expense or benefit.
|
l
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.
The
reporting currency of the Company is the United States Dollars ("US$"). The
Company’s subsidiaries operating in Hong Kong maintain their books and record in
its local currency, Hong Kong Dollars ("HK$") while one subsidiary operating in
the PRC maintains its books and records in its local currency, Renminbi Yuan
("RMB"), which are functional currencies as being the primary currency of the
economic environment in which these entities operate.
In
general, assets and liabilities are translated into US$, in accordance ASC
Topic 830-30, “
Translation of
Financial Statement
”
, using the exchange rate on
the balance sheet date. Revenues and expenses are translated at average rates
prevailing during the period. The gains and losses resulting from translation of
financial statements of foreign subsidiaries are recorded as a separate
component of accumulated other comprehensive income within the statement of
stockholders’ deficit.
Translation
of amounts from HK$ and RMB into US$1 has been made at the following exchange
rates for the respective period:
|
|
|
Nine months ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Period-end
RMB:US$1 exchange rate
|
|
|
6.8372
|
|
|
|
6.8555
|
|
|
Average
monthly rates RMB:US$1 exchange rate
|
|
|
6.8390
|
|
|
|
6.8927
|
|
|
Period
end HK$:US$1 exchange rate
|
|
|
7.7551
|
|
|
|
7.7507
|
|
|
Average
monthly rates HK$:US$1 exchange rate
|
|
|
7.7513
|
|
|
|
7.7847
|
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
ASC Topic
280,
“Segment
Reporting”
establishes standards for reporting information about
operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business
segments and major customers in the financial statements. During the nine months
ended December 31, 2009 and 2008, the Company operates two reportable segments
in Hong Kong and the PRC.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
ASC Topic
820, “
Fair Value Measurements
and Disclosures
” ("ASC 820") establishes a new framework for measuring
fair value and expands related disclosures. Broadly, ASC 820 framework requires
fair value to be determined based on the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants. ASC 820 establishes a three-level valuation
hierarchy based upon observable and non-observable inputs. These tiers include:
Level 1, defined as observable inputs such as quoted prices in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are
either directly or indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity
to develop its own assumptions.
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
|
l
|
Fair
value of financial
instruments
|
The
carrying value of the Company’s financial instruments include cash and cash
equivalents, accounts receivable, prepayment and other receivables, accounts
payable, amount due to a former director, other payables and accrued
liabilities. Fair values were assumed to approximate carrying values for these
financial instruments because they are short term in nature and their carrying
amounts approximate fair values. The carrying value of the Company’s bank
overdraft and notes payable approximated the fair value based on the current
market conditions for similar debt instruments.
|
l
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does 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.
In August
2009, the FASB issued an update of ASC Topic 820, “
Measuring Liabilities at Fair
Value
”. The new guidance provides clarification that in circumstances in
which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using prescribed
techniques. The Company adopted the new guidance in the third quarter of this
fiscal year and it did not materially affect the Company’s financial position
and results of operations.
In
October 2009, the FASB issued ASU No. 2009-13, “
Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging
Issues Task Force)
” which amends ASC 605-25, “
Revenue Recognition:
Multiple-Element Arrangements
.” ASU No. 2009-13 addresses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how to allocate consideration to each unit of
accounting in the arrangement. This ASU replaces all references to fair value as
the measurement criteria with the term selling price and establishes a hierarchy
for determining the selling price of a deliverable. ASU No. 2009-13 also
eliminates the use of the residual value method for determining the allocation
of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded
disclosures. This ASU will become effective for us for revenue arrangements
entered into or materially modified on or after April 1, 2011. Earlier
application is permitted with required transition disclosures based on the
period of adoption. The Company is currently evaluating the application date and
the impact of this standard on its condensed consolidated financial
statements.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
NOTE
-
5
|
ACCOUNTS
RECEIVABLE
|
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. As of December 31, 2009 and March 31, 2008, no allowance for doubtful
accounts was required.
In July
2009, the Company renewed its overdraft facility with Dah Sing Bank with the
additional corporate guarantee from a related company. Under this facility, the
Company may borrow up to $167,733 (equivalent to HK$1,300,000) at a rate of 0.5%
per annum over Hong Kong prime rate, payable monthly. Weighted average interest
rate approximates 5.75% per annum for the nine months ended December 31, 2009.
This facility is personally guaranteed by Mr. So, Jonathan W.L., the former
director of the Company and also guaranteed by a related company which is
controlled by Mr. So, Jonathan W.L., the former director of the Company. The
overdraft facility will be extended or renewed at the option of the
bank.
|
NOTE
-
7
|
NOTES
PAYABLE, UNSECURED
|
As of
December 31, 2009, the aggregate notes payable totaling $923,226 included the
following:
|
(i)
|
$853,235
note payable due to an unrelated party, Swiftasset Holdings Limited, which
carries interest rate of 7% per annum, unsecured and no fixed term of
repayment; and
|
|
(ii)
|
$31,307
note payable due to an unrelated party, Mr. Liu Kwok Keung, which carries
interest rate of 7% per annum, unsecured and no fixed term of repayment;
and
|
|
(iii)
|
$38,684
note payable due to an unrelated party, Profit Way Industrial Limited,
which is unsecured, interest-free and no fixed term of repayment. The
amount of the imputed interest is
insignificant.
|
|
NOTE
-
8
|
AMOUNT
DUE TO A FORMER DIRECTOR
|
As of
December 31, 2009, $1,146,427 due to a former director, Mr. So, Jonathan W.L.
represented temporary advances to the Company which was unsecured, interest-free
and had no fixed repayment term.
For the
nine months ended December 31, 2009 and 2008, the local (“United States of
America”) and foreign components of loss before income taxes were comprised of
the following:
|
|
|
Nine months ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Tax
jurisdictions from:
|
|
|
|
|
|
|
|
-
Local
|
|
$
|
(222,886
|
)
|
|
$
|
89,874
|
|
|
-
Foreign
|
|
|
(244,160
|
)
|
|
|
(826,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
$
|
(467,046
|
)
|
|
$
|
(736,884
|
)
|
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
effective tax rate in the years presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company and its subsidiaries that operate in various countries:
United States of America, British Virgin Islands (“BVI”), Hong Kong and the PRC
that are subject to tax in the jurisdictions in which they operate, as
follows:
United
States of America
CHSH is
registered in the State of Nevada and is subject to United States of America tax
law. As of December 31, 2009, the operation in the United States of America did
not incur net operating losses available for federal tax purposes, which are
available to offset future taxable income.
British
Virgin Islands
Under the
current laws of the BVI, Extra Ease, EGC, EWIP and EIL are not subject to tax on
income.
Hong
Kong
EFEL,
EAML and EWHK are subject to Hong Kong Profits Tax at the statutory rate of
16.5% and 16.5% on the assessable income for the nine months ended December 31,
2009 and 2008, respectively. For the nine months ended December 31, 2009 and
2008, its operating subsidiaries in Hong Kong incurred an operating loss for
income tax purposes and were exempted from Hong Kong Profits Tax.
The
PRC
The
Company’s subsidiary, RBNT operating in the PRC is subject to the Corporate
Income Tax governed by the Income Tax Law of the PRC (the “PRC Income Tax”), at
a unified statutory rate of 25%. Under the PRC Income Tax, RBNT is qualified as
a foreign investment enterprise and is exempted from income tax for the first
two profit making years with a 50% exemption of income tax (that is 30%) for the
next three years. For the nine months ended December 31, 2009 and 2008, RBNT was
exempted from the PRC Income Tax due to the cumulative operating
losses.
The
following table sets forth the significant components of the aggregate net
deferred tax assets and liabilities of the Company as of December 31, 2009 and
March 31, 2009:
|
|
|
December 31, 2009
|
|
|
March 31, 2009
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
(178
|
)
|
|
$
|
(294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
|
366,081
|
|
|
|
329,222
|
|
|
Total
net deferred tax assets
|
|
|
365,903
|
|
|
|
328,928
|
|
|
Less:
valuation allowance
|
|
|
(365,903
|
)
|
|
|
(328,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
As of
December 31, 2009 and March 31, 2009, the Company had approximately $2,198,864
and $1,978,796 of the cumulative tax losses which can be carried forward
indefinitely to offset future taxable income.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Management
believes that it is more likely than not that the deferred tax assets from net
operating loss carryforwards will not be fully realizable in the future.
Accordingly, the Company provided for a full valuation allowance against its
deferred tax assets of $365,903 and $328,928 as of December 31, 2009 and March
31, 2009, respectively. During the quarter, the valuation allowance increased by
$36,975, primarily relating to net operating loss carryforwards from the foreign
tax regimes.
|
NOTE
-
10
|
RELATED
PARTY TRANSACTIONS
|
|
|
|
|
Nine months ended December 31,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Rental
charge reimbursed by a related company
|
(a)
|
|
$
|
81,110
|
|
|
$
|
121,930
|
|
|
Consultancy
fees paid to a related company
|
(b)
|
|
$
|
-
|
|
|
$
|
50,587
|
|
|
(a)
|
For
the nine months ended December 31, 2009 and 2008, the Company leased out
some portion of the office premises to and partially reimbursed rental
charge by a related company, which is controlled by the former director of
the Company, at the market price in accordance with the lease agreement in
a normal course of business.
|
|
(b)
|
For
the nine months ended December 31, 2008, the Company paid consultancy
service to a related company which is controlled by the former director of
the Company, at its fair value in a normal course of
business.
|
|
NOTE
-
11
|
SEGMENT
INFORMATION
|
|
(a)
|
Business
segment reporting
|
The
Company’s business units have been aggregated into two reportable segments, as
defined by ASC Topic 280:
|
l
|
Additive
Business – sales and manufacture of proprietary additives in the
PRC
|
|
l
|
Foodware
Business – trading of food containers and packaging products in Hong Kong
and overseas
|
The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies (see Note 4). The Company had no
inter-segment sales for the nine months ended December 31, 2009 and 2008. The
Company’s reportable segments are strategic business units that offer different
products and services. They are managed separately based on the different
technology and marketing strategies of each business unit for making internal
operating decisions.
Summarized
financial information concerning the Company’s reportable segments is shown in
the following table for the three months ended December 31, 2009 and
2008:
|
|
|
Three months ended December 31, 2009
|
|
|
|
|
Additive
Business
|
|
|
Foodware
Business
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
5
|
|
|
$
|
190,340
|
|
|
$
|
190,345
|
|
|
Cost
of revenues
|
|
|
(5
|
)
|
|
|
(158,347
|
)
|
|
|
(158,352
|
)
|
|
Gross
profit
|
|
|
-
|
|
|
|
31,993
|
|
|
|
31,993
|
|
|
Depreciation
|
|
|
40
|
|
|
|
353
|
|
|
|
393
|
|
|
Net
loss
|
|
$
|
(644
|
)
|
|
$
|
(85,795
|
)
|
|
$
|
(86,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure
for long-lived assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
|
Three months ended December 31, 2008
|
|
|
|
|
Additive
Business
|
|
|
Foodware
Business
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
27,490
|
|
|
$
|
435,936
|
|
|
$
|
463,426
|
|
|
Cost
of revenues
|
|
|
(24,355
|
)
|
|
|
(332,721
|
)
|
|
|
(357,076
|
)
|
|
Gross
profit
|
|
|
3,135
|
|
|
|
103,215
|
|
|
|
106,350
|
|
|
Depreciation
|
|
|
40
|
|
|
|
434
|
|
|
|
474
|
|
|
Net
loss
|
|
$
|
(1,342
|
)
|
|
$
|
(180,843
|
)
|
|
$
|
(182,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure
for long-lived assets
|
|
$
|
-
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Summarized
financial information concerning the Company’s reportable segments is shown in
the following table for the nine months ended December 31, 2009 and
2008:
|
|
|
Nine months ended December 31, 2009
|
|
|
|
|
Additive
Business
|
|
|
Foodware
Business
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
22,206
|
|
|
$
|
535,905
|
|
|
$
|
558,111
|
|
|
Cost
of revenues
|
|
|
(19,192
|
)
|
|
|
(451,082
|
)
|
|
|
(470,274
|
)
|
|
Gross
profit
|
|
|
3,014
|
|
|
|
84,823
|
|
|
|
87,837
|
|
|
Depreciation
|
|
|
121
|
|
|
|
1,058
|
|
|
|
1,179
|
|
|
Net
loss
|
|
$
|
(6,422
|
)
|
|
$
|
(460,624
|
)
|
|
$
|
(467,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure
for long-lived assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
Nine months ended December 31, 2008
|
|
|
|
|
Additive
Business
|
|
|
Foodware
Business
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
130,972
|
|
|
$
|
1,949,632
|
|
|
$
|
2,080,604
|
|
|
Cost
of revenues
|
|
|
(123,493
|
)
|
|
|
(1,497,588
|
)
|
|
|
(1,621,081
|
)
|
|
Gross
profit
|
|
|
7,479
|
|
|
|
452,044
|
|
|
|
459,523
|
|
|
Depreciation
|
|
|
120
|
|
|
|
1,196
|
|
|
|
1,316
|
|
|
Net
loss
|
|
$
|
(5,938
|
)
|
|
$
|
(730,946
|
)
|
|
$
|
(736,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure
for long-lived assets
|
|
$
|
-
|
|
|
$
|
1,268
|
|
|
$
|
1,268
|
|
|
(b)
|
Geographic
segment reporting
|
In
respect of geographical segment reporting, sales are based on the country in
which the customer is located, as follows:
|
|
|
Nine months ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
By
regions:
|
|
|
|
|
|
|
|
North
America
|
|
$
|
403,033
|
|
|
$
|
1,521,072
|
|
|
Asia
|
|
|
88,015
|
|
|
|
371,443
|
|
|
Europe
|
|
|
28,771
|
|
|
|
124,727
|
|
|
Others
|
|
|
38,292
|
|
|
|
63,362
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues, net
|
|
$
|
558,111
|
|
|
$
|
2,080,604
|
|
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
NOTE
- 12
|
CONCENTRATIONS
OF RISK
|
The
Company is exposed to the following concentrations of risk:
The
following is a table summarizing the revenue from customers that individually
represent more than 10% of the Company’s revenue for the three months ended
December 31, 2009 and 2008 and their outstanding balances at period-end
date:
|
|
|
|
Three months ended December 31, 2009
|
|
|
|
December 31, 2009
|
|
|
|
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
|
Accounts receivable,
trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
$
|
64,628
|
|
|
|
34
|
%
|
|
|
$
|
49,302
|
|
|
Customer
B
|
|
|
|
75,350
|
|
|
|
40
|
%
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
139,978
|
|
|
|
74
|
%
|
Total:
|
|
$
|
49,302
|
|
For the
three months ended December 31, 2008, one customer represented more than 10% of
the Company’s revenue. This customer accounts for 24% of the Company’s revenue
amounting to $109,789, with $0 of accounts receivable.
The
following is a table summarizing the revenue from customers that individually
represent more than 10% of the Company’s revenue for the nine months ended
December 31, 2009 and 2008 and their outstanding balances at period-end
date:
|
|
|
|
Nine months ended December 31, 2009
|
|
|
|
December 31, 2009
|
|
|
|
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
|
Accounts receivable,
trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
$
|
205,776
|
|
|
|
37
|
%
|
|
|
$
|
49,302
|
|
|
Customer
B
|
|
|
|
142,550
|
|
|
|
26
|
%
|
|
|
|
-
|
|
|
Customer
C
|
|
|
|
61,213
|
|
|
|
11
|
%
|
|
|
|
12,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
409,539
|
|
|
|
74
|
%
|
Total:
|
|
$
|
61,479
|
|
For the
nine months ended December 31, 2008, one customer represented more than 10% of
the Company’s revenue. This customer accounts for 51% of the Company’s revenue
amounting to $1,051,884, with $0 of accounts receivable.
The
following is a table summarizing the purchase from vendors that individually
represent more than 10% of the Company’s purchase for the three months ended
December 31, 2009 and 2008 and their outstanding balances at period-end
date:
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
|
|
Three months ended December 31, 2009
|
|
|
|
December 31, 2009
|
|
|
|
|
|
Purchases
|
|
|
Percentage
of purchases
|
|
|
|
Accounts payable,
trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
|
$
|
84,516
|
|
|
|
53
|
%
|
|
|
$
|
97,036
|
|
|
Vendor
B
|
|
|
|
71,240
|
|
|
|
44
|
%
|
|
|
|
58,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
155,756
|
|
|
|
97
|
%
|
Total:
|
|
$
|
155,121
|
|
|
|
|
|
Three months ended December 31, 2008
|
|
|
|
December 31, 2008
|
|
|
|
|
|
Purchases
|
|
|
Percentage
of purchases
|
|
|
|
Accounts payable,
trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
|
$
|
214,202
|
|
|
|
61
|
%
|
|
|
$
|
268,299
|
|
|
Vendor
B
|
|
|
|
112,498
|
|
|
|
31
|
%
|
|
|
|
129,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
326,700
|
|
|
|
92
|
%
|
Total:
|
|
$
|
397,920
|
|
The
following is a table summarizing the purchase from vendors that individually
represent more than 10% of the Company’s purchase for the nine months ended
December 31, 2009 and 2008 and their outstanding balances at period-end
date:
|
|
|
|
Nine months ended December 31, 2009
|
|
|
|
December 31, 2009
|
|
|
|
|
|
Purchases
|
|
|
Percentage
of purchases
|
|
|
|
Accounts payable,
trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
|
$
|
272,767
|
|
|
|
58
|
%
|
|
|
$
|
97,036
|
|
|
Vendor
B
|
|
|
|
168,571
|
|
|
|
36
|
%
|
|
|
|
58,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
441,338
|
|
|
|
94
|
%
|
Total:
|
|
$
|
155,121
|
|
|
|
|
|
Nine months ended December 31, 2008
|
|
|
|
December 31, 2008
|
|
|
|
|
|
Purchases
|
|
|
Percentage
of purchases
|
|
|
|
Accounts payable,
trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
|
$
|
988,372
|
|
|
|
61
|
%
|
|
|
$
|
268,299
|
|
|
Vendor
B
|
|
|
|
503,195
|
|
|
|
31
|
%
|
|
|
|
129,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
1,491,567
|
|
|
|
92
|
%
|
Total:
|
|
$
|
397,920
|
|
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.
EATWARE,
INC.
(Formerly
China Shoe Holdings, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
Company cannot guarantee that the current exchange rate will remain steady;
therefore there is a possibility that the Company could post the same amount of
net income for two comparable periods and because of the fluctuating exchange
rate actually post higher or lower profit depending on exchange rate of HK$
converted to US$ on that date. The exchange rate could fluctuate depending on
changes in political and economic environments without notice.
As the
Company has no significant interest-bearing assets, the Company’s income and
operating cash flows are substantially independent of changes in market interest
rates.
The
Company’s interest-rate risk arises from bank overdraft. Bank overdraft at
variable rates exposes the Company to cash flow interest rate risk. The Company
manages interest rate risk by varying the issuance and maturity dates variable
rate debt, limiting the amount of variable rate debt, and continually monitoring
the effects of market changes in interest rates. As of December 31, 2009,
borrowings under overdraft facility were at variable rates. The interest rates
of bank facility are disclosed in Note 6.
|
NOTE
- 13
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company currently does not have any formal lease agreements. For the first six
months ended December 31, 2009, the Company recorded and paid rent expense at
the current market fair value on a monthly basis under the lease agreement
signed by a related party, which was controlled by the former director of the
Company. Starting from October 2009, the Company entered into a new oral
agreement to sublease the same office space on a monthly basis with the new
lessee.
Costs
incurred under these operating leases are recorded as rental expense and totaled
approximately $15,971 and $28,696 for the nine months ended December 31, 2009
and 2008, respectively.
|
NOTE
- 14
|
SUBSEQUENT
EVENTS
|
The
Company evaluated subsequent events through February 11, 2010, the date the
financial statements were issued, and there were no subsequent events which
impacted the Company’s financial position or results of operations as of
December 31, 2009 or which required disclosure.
|
ITEM 2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
The
following discussion should be read in conjunction with the Financial Statements
and Notes thereto. This document contains certain forward-looking statements
including, among others, anticipated trends in our financial condition and
results of operations and our business strategy. (See Part I, Item 1A, "Risk
Factors "). These forward-looking statements are based largely on our current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from these forward-looking statements. Important
factors to consider in evaluating such forward-looking statements include (i)
changes in external factors or in our internal budgeting process which might
impact trends in our results of operations; (ii) unanticipated working capital
or other cash requirements; (iii) changes in our business strategy or an
inability to execute our strategy due to unanticipated changes in the industries
in which we operate; and (iv) various competitive market factors that may
prevent us from competing successfully in the marketplace. The Company assumes
no obligation and does not intend to update any forward-looking statements,
except as required by law.
USE
OF TERMS
Except as
otherwise indicated by the context, references in this Form 10-Q to “CHSH,”
“we,” “us,” “our,” “our Company,” or “the Company” are to Eatware, Inc., a
Nevada corporation, and its consolidated subsidiaries. Unless the context
otherwise requires, all references to (i)“Extra Ease” are to Extra Ease Limited,
a limited liability company incorporated in the British Virgin Islands;
(ii)“EGC” are to Eatware Global Corp., a limited liability company incorporated
in the British Virgin Islands; (iii)“EWIP” are to Eatware Intellectual
Properties Limited, a limited liability company incorporated in the British
Virgin Islands; (iv)“EFEL” are to Eatware Far East Limited, a limited liability
company incorporated in the British Virgin Islands; (v)“EIL” are to
Eatware International Limited, a limited liability company incorporated in the
British Virgin Islands; (vi)“RBNT” are to Rongbao (Nantong) Environmental
Co., Ltd., a limited liability company incorporated in the People's Republic of
China; (vii)“EAML” are to Eatware Assets Management Limited, a limited liability
company incorporated in Hong Kong (viii) ) “EWHK” are to Eatware Hong Kong
Limited, a limited liability company incorporated in Hong Kong (ix) “BVI”
are to British Virgin Islands; (x) “PRC” and “China” are to the People's
Republic of China; (xi) “U.S. dollar,” “$” and “US$” are to United States
dollars; (xii) “RMB” are to Yuan of China; (xiii) “Securities Act” are to the
Securities Act of 1933, as amended; and “Exchange Act” are to the Securities
Exchange Act of 1934, as amended.
OVERVIEW
We
conduct our operations through our wholly owned subsidiaries, EWIP and Extra
Ease and its subsidiaries – EGC, EAML, EFEL, EIL, and RBNT. (collectively
referred to as “EGC”). On September 15, 2009, a new subsidiary of Extra Ease
was formed. The name of this subsidiary is EWHK and the company name took
effect from October 5, 2009. EWHK entered into a licensing agreement with EWIP
to be a licensor of the Group’s technologies to external parties. Extra Ease,
EGC and EWIP are collectively referred to as “Eatware” or the “Group”. We
primarily engage in the marketing and trading of environmentally safe food
packaging products and additives. Our objective is to establish ourselves as a
leading brand of high quality bio-based food packaging products. We are also
looking into opportunities of licensing our technology, intellectual properties
and trademarks to licensed factories for producing Eatware products and collect
royalty for additional income source.
Prior to
Eatware products launching to the market, we have performed extensive research
on pulp technology. Throughout the process, EWIP has involved experts both from
the industry and the universities. Management believes that Eatware’s
technological application in this area is far advanced of its competitors. Our
research and development strategy is to create innovative, value-added products
and market opportunities and thus enhance Eatware’s market
position.
Our
patented technology, combined with the unique additive serve as a high barrier
to entry for the Company’s competitors.
The
Company relies on a combination of trade secrets, confidentiality agreements,
patent, trademark, copyright, licenses, unfair competition and other
intellectual property laws to protect its intellectual property and other
proprietary rights.
The
Company’s products are 100% organic, chemical-free biodegradable foodservice
packaging product in the industry. Features of the products include being oil,
water, heat resistant, microwave and oven safe. EWIP also invented what
management believes to be the world’s first 100% organic additive - Eatplus
®
,
comprised of a modified starch. While other food packaging competitive products
can take over 200 years to decompose and have contributed to massive landfills
across the globe, Eatware products are designed to decompose in the soil within
180 days and can disperse in water within two weeks. Eatplus
®
enhances
the products making them sturdy, yet 100% biodegradable.
In
contrast, traditional foodservice disposables, wraps, and paperboard are
currently manufactured from a variety of materials, including paper and plastic.
Management believes that none of these materials fully addresses three of the
principal challenges facing the foodservice industry; namely performance, price,
and environmental impact. Management believes that Eatware products address the
combination of these challenges better than traditional alternatives and
therefore will be able to achieve a significant share of the foodservice
disposable packaging market.
The
Company’s products can be categorized into five types: (1) plates; (2) bowls;
(3) trays; (4) lunch boxes; and (5) mini containers. To date, The Company’s
technology has been used to produce limited commercial quantities of plates,
bowls, and hinged-lid containers intended for use by all segments of the
foodservice disposable packaging market, including quick-service restaurants,
food and facilities management companies, Governments, universities/colleges,
and retail operations. These products were developed using detailed
environmental assessments and carefully selected raw materials and processes to
minimize the harmful impact on the environment without sacrificing competitive
price or performance.
RESULTS
OF OPERATIONS
The
following table summarizes the results of our operations during the three months
ended December 31, 2009 and 2008, and provides information regarding the dollar
and percentage increase or (decrease) from the three months ended December
31, 2009 to the three months ended December 31, 2008.
All
amounts, other than percentages, are in U.S dollars
|
|
|
Three months ended December 31,
|
|
|
|
|
|
|
|
|
Item
|
|
2009
|
|
|
2008
|
|
|
Increase
(Decrease)
|
|
|
% Increase
(% Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
190,345
|
|
|
|
463,426
|
|
$
|
(273,081
|
)
|
|
|
(58.9
|
)%
|
|
Cost
of revenues
|
|
|
158,352
|
|
|
|
357,076
|
|
|
|
(
198,724
|
)
|
|
|
(55.7
|
)%
|
|
Gross
profit
|
|
|
31,993
|
|
|
|
106,350
|
|
|
|
(74,357
|
)
|
|
|
(69.9
|
)%
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
1,971
|
|
|
|
6,117
|
|
|
|
(4,146
|
)
|
|
|
(67.8
|
)%
|
|
Research
and development
|
|
|
0
|
|
|
|
24,628
|
|
|
|
(24,628
|
)
|
|
|
(100.0
|
)%
|
|
General
and administrative
|
|
|
100,468
|
|
|
|
255,235
|
|
|
|
(154,767
|
)
|
|
|
(60.6
|
)%
|
|
Loss
from operations
|
|
|
(70,446
|
)
|
|
|
(179,630
|
)
|
|
|
109,184
|
|
|
|
60.8
|
%
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1
|
|
|
|
20
|
|
|
|
(19
|
)
|
|
|
(95.0
|
)%
|
|
Interest
expense
|
|
|
(15,994
|
)
|
|
|
(2,575
|
)
|
|
|
13,419
|
|
|
|
521.1
|
%
|
|
Loss
before income taxes
|
|
|
(86,439
|
)
|
|
|
(182,185
|
)
|
|
|
95,746
|
|
|
|
52.6
|
%
|
|
Income
tax expense
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
%
|
|
Net
loss
|
|
$
|
(
86,439
|
)
|
|
$
|
(
182,185
|
)
|
|
|
95,746
|
|
|
|
52.6
|
%
|
Three
Months Ended December 31, 2009 Compared to Three Months Ended December 31,
2008
Revenue
Revenue
was $0.19 million for the three months ended December 31, 2009 as compared to
$0.46 million for the three months ended December 31, 2008,
representing a decreased by 58.9%. The dramatic decrease in revenue was mainly
attributable to the discontinuance of a distributor agreement with a major
customer due to unfavorable business term.
Cost
of Revenue and Gross Profit
Cost of
revenue and gross profit were respectively $0.16 million and $0.03 million for
the three months ended December 31, 2009 as compared to $0.36 million and $0.11
million for the three months ended December 31, 2008, representing a decrease by
55.7% and 69.9% respectively. The decrease in gross profit was mainly due to the
discontinuance of a distributor agreement with a major customer as
discussed above when comparing with the corresponding period of
2008.
Research
and Development Expenses
For the
three months ended December 31, 2009, research and development expenses
decreased by $0.02 million, or 100% over the prior period. The
decrease was due primarily to a lesser expense in machine testing, research and
development.
Sales
and Marketing Expenses
Sales and
marketing expenses decreased by $0.04 million, or 67.8% for the three months
ended December 31, 2009 compared to the prior period. The decrease in
sales and marketing expenses was mainly attributable to a reduction of
exhibition costs. During the three months ended December 31, 2009, we
have adjusted our marketing strategy to co-hosting exhibitions with our
distributors instead of attending on our own. This new strategy
reduces our sales and marketing expenses when compared to the same period of
year 2008.
General
and Administrative Expenses
General
and administrative expenses decreased by $0.15 million, or 60.6% for the three
months ended December 31, 2009 compared to the three months ended December 31,
2008. The decrease in general and administrative expenses can be attributed to a
reduction in salary expenses and our strengthened cost control, which resulted
in reduction of general and administrative expenses such as travel expenses,
entertainment expenses etc.
Income
Tax Expense
Eatware,
Inc. is subject to United States federal income tax rate. No provision for
income taxes in the United States has been made as the Company had no United
States taxable income during the three months ended December 31,
2009.
Our
subsidiaries, Extra Ease, EGC, EWIP, and EIL were incorporated in the BVI
and, under the current laws of the BVI these subsidiaries are not subject to
income taxes.
EFEL,
EAML and EWHK, subsidiaries of the Company which operate in Hong Kong,
are subject to Hong Kong Profits Tax. However, EFEL and EAML had
no Hong Kong taxable income during the three months ended December 31,
2009.
RBNT, a
subsidiary of the Company, which operates in the PRC, is subject to the PRC
Corporate Income Tax. However, RBNT had no PRC taxable income during the three
months ended December 31, 2009.
Net
Loss
Net loss
was $0.09 million for the three months ended December 31, 2009 as compared to a
net loss of $0.18 million for the three months ended December 31, 2008. The
decrease in net loss was mainly attributable to reduction of our sales and
marketing expenses and general and administrative expenses.
The
following table summarizes the results of our operations during the nine months
ended December 31, 2009 and 2008, and provides information regarding the dollar
and percentage increase or (decrease) from the nine months ended December 31,
2009 to the nine months ended December 31, 2008.
All
amounts, other than percentages, are in U.S dollars
|
|
|
Nine months ended December 31,
|
|
|
|
|
|
|
|
|
Item
|
|
2009
|
|
|
2008
|
|
|
Increase
(Decrease)
|
|
|
% Increase
(% Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
558,111
|
|
|
|
2,080,604
|
|
|
$
|
(1,522,493
|
)
|
|
|
(73.2
|
)%
|
|
Cost
of revenues
|
|
|
470,274
|
|
|
|
1,621,081
|
|
|
|
(
1,150,807
|
)
|
|
|
(71.0
|
)%
|
|
Gross
profit
|
|
|
87,837
|
|
|
|
459,523
|
|
|
|
(371,686
|
)
|
|
|
(80.9
|
)%
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
3,100
|
|
|
|
103,364
|
|
|
|
(100,264
|
)
|
|
|
(97.0
|
)%
|
|
Research
and development
|
|
|
35,071
|
|
|
|
123,004
|
|
|
|
(87,933
|
)
|
|
|
(71.5
|
)%
|
|
General
and administrative
|
|
|
469,558
|
|
|
|
963,503
|
|
|
|
(493,945
|
)
|
|
|
(51.3
|
)%
|
|
Loss
from operations
|
|
|
(419,892
|
)
|
|
|
(730,348
|
)
|
|
|
310,456
|
|
|
|
42.5
|
%
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
2
|
|
|
|
63
|
|
|
|
(61
|
)
|
|
|
(96.8
|
)%
|
|
Interest
expense
|
|
|
(47,156
|
)
|
|
|
(6,599
|
)
|
|
|
40,557
|
|
|
|
614.6
|
%
|
|
Loss
before income taxes
|
|
|
(467,046
|
)
|
|
|
(736,884
|
)
|
|
|
269,838
|
|
|
|
36.6
|
%
|
|
Income
tax expense
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
%
|
|
Net
loss
|
|
$
|
(
467,046
|
)
|
|
$
|
(
736,884
|
)
|
|
|
269,838
|
|
|
|
36.6
|
%
|
Nine
Months Ended December 31, 2009 Compared to Nine Months Ended December 31,
2008
Revenue
Revenue
was $0.56 million for the nine months ended December 31, 2009 as compared to
$2.08 million for the nine months ended December 31, 2008, representing a
decreased by 73.2%. The dramatic decrease in revenue was mainly attributable to
the discontinuance of a distributor agreement with a major customer due to
unfavorable business term.
Cost
of Revenue and Gross Profit
Cost of
revenue and gross profit were respectively $0.47 million and $0.09 million for
the nine months ended December 31, 2009 as compared to $1.62 million and $0.46
million for the nine months ended December 31, 2008, representing a decrease by
71.0% and 80.9% respectively. The decrease in gross profit was mainly due to the
discontinuance of a distributor agreement with a major customer as discussed
above when comparing with the corresponding period of 2008.
Research
and Development Expenses
For the
nine months ended December 31, 2009, research and development expenses decreased
by $0.09 million, or 71.5% over the prior period. The decrease was
due primarily to a lesser expense in machine testing, research and
development.
Sales
and Marketing Expenses
Sales and
marketing expenses decreased by $0.10 million, or 97.0% for the nine months
ended December 31, 2009 compared to the prior period. The decrease in
sales and marketing expenses was mainly attributable to a reduction of
exhibition costs. During the nine months ended December 31, 2009, we
have adjusted our marketing strategy to co-hosting exhibitions with our
distributors instead of attending on our own. This new strategy
reduces our sales and marketing expenses when compared to the same period of
year 2008.
General
and Administrative Expenses
General
and administrative expenses decreased by $0.49 million, or 51.3% for the nine
months ended December 31, 2009 compared to the nine months ended December 31,
2008. The decrease in general and administrative expenses can be attributed to a
reduction in salary expenses and our strengthened cost control, which resulted
in reduction of general and administrative expenses such as travel expenses,
entertainment expenses etc.
Income
Tax Expense
Eatware,
Inc. is subject to United States federal income tax rate. No provision for
income taxes in the United States has been made as the Company had no United
States taxable income during the nine months ended December 31,
2009.
Our
subsidiaries, Extra Ease, EGC, EWIP, and EIL were incorporated in the BVI and,
under the current laws of the BVI these subsidiaries are not subject to
income taxes.
EFEL,
EAML and EWHK, subsidiaries of the Company which operate in Hong Kong,
are subject to Hong Kong Profits Tax. However, EFEL and EAML had
no Hong Kong taxable income during the nine months ended December 31,
2009.
RBNT, a
subsidiary of the Company, which operates in the PRC, is subject to the PRC
Corporate Income Tax. However, RBNT had no PRC taxable income during the nine
months ended December 31, 2009.
Net
Loss
Net loss
was $0.47 million for the nine months ended December 31, 2009 as compared to a
net loss of $0.74 million for the nine months ended December 31, 2008. The
decrease in net loss was mainly attributable to reduction of our sales and
marketing expenses and general and administrative expenses.
Liquidity
and Capital Resources
Cash
Flows
|
All amounts in U.S. dollars
|
|
Nine
Months Ended
December
31
,
|
|
|
|
|
200
9
|
|
|
200
8
|
|
|
Net
cash used in operating activities
|
|
$
|
(441,339
|
)
|
|
$
|
(936,798
|
)
|
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
(1,268
|
)
|
|
Net
cash provided by financing activities
|
|
|
454,743
|
|
|
|
907,878
|
|
|
Foreign
currency translation adjustments
|
|
|
135
|
|
|
|
(8,537
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
$
|
13,539
|
|
|
$
|
(38,725
|
)
|
Operating
Activities:
Net cash
used in operating activities was $0.44 million for the nine months ended
December 31, 2009, as compared with net cash used in operating activities of
$0.94 million for the corresponding period in 2008. The change of net cash used
in operating activities was mainly due to the decrease of accounts payable,
related parties of approximately $0.42 million.
Investing
Activities:
Net cash
used in investing activities for the nine months ended December 31, 2009 was
$0. The net cash used in investing activities for the same period in
2008 was $1,268.
Financing
Activities:
Net cash
provided by financing activities in the nine months ended December 31, 2009
totaled $0.45 million due mainly to proceeds from notes payable of $0.51
million offset by repayment to a former director of $0.06 million. Net
cash provided by financing activities in the nine months ended December 31,
2008 was $0.91 million due mainly to advance from a related party of $1.48
million offset by repayment to a former director of $0.77
million.
Short
Term Bank Borrowings:
The
Company has an overdraft financing facility with Dah Sing Bank. The
facility has an overdraft limit of $0.17 million. The interest rate of this
facility is Dah Sing Bank’s prime rate plus 0.5% per annum. Currently
Dah Sing Bank’s prime rate is at 5.25% per annum, making the effective interest
rate of this facility 5.75% per annum.
Going
Concern
The
financial statements have been prepared assuming that the Group will continue as
a going concern, which contemplates the realization of assets and the discharge
of liabilities in the normal course of business for the foreseeable future. Due
to the Company's continuous loss and deteriorating current ratio substantial
doubt to continue as a going concern is raised, this will be dependent upon the
Company’s ability to meet its financing requirements and the success of its
future operations.
For the
nine months ended December 31, 2009, the Group had incurred a net loss of $0.47
million and the Company has incurred losses over the past several quarters.
Management has in the past taken certain actions and implemented changes
designed to improve the Group’s financial results and operating cash
flows. The actions involve certain cost-saving initiatives, such as
reduction of Company’s salary expense, reduction of travel and entertainment
expenses. Other actions involved focusing on the most profitable part
of the Company products line, reviewing pricing structure and adding customized
products developments’ solutions. Nevertheless, despite all these
actions as of the date of this report the Group has continued to experience
losses with no signs of short-term turnaround. These factors raise
substantial doubt about the Group ability to continue as a going concern and
realization of a major portion of the assets in the accompanying consolidated
balance sheet is dependent upon the continued operations of the Group, which in
turn is dependent upon the Group’s ability to meet its financing requirements
and the success of its future operations.
On a
long-term basis, our liquidity will be dependent on establishing profitable
operations, collection of accounts receivable, additional infusions of capital
and additional financing. If necessary, we may raise capital through an equity
or debt offering. The funds raised from those offerings will be used to develop
and execute our business plan. However, there can be no assurance that we will
be able to obtain additional equity or debt financing in the future, if at all.
If we are unable to raise additional capital, our growth potential will be
adversely affected.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
ITEM
4T. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934 (the
“Exchange Act”), as amended, is accumulated and communicated to the issuer's
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation
with the participation of the Company’s management, including the Company’s
Chief Executive Officer and the Company’s Principal Financial Officer, of the
effectiveness of the Company’s disclosure controls and procedures (as defined
under Rule 13a-15(e) under the Exchange Act) as of December 31,
2009. Based upon that evaluation, the Company’s Chief
Executive Officer and Principal Financial Officer concluded that the Company’s
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in the reports that the Company files or
submits under the Exchange Act, 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 the Company’s management,
including the Company’s Chief Executive Officer and Principal Financial Officer,
to allow timely decisions regarding required disclosure.
Changes
in internal controls
Our
management, with the participation our Chief Executive Officer and Principal
Financial Officer, performed an evaluation as to whether any change in our
internal controls over financial reporting occurred during the quarter
ended December 31, 2009. Based on that evaluation, our Chief Executive
Officer and Principal Financial Officer concluded that no change occurred in the
Company's internal controls over financial reporting during the quarter ended
December 31, 2009 that has materially affected, or is reasonably likely to
materially affect, the Company's internal controls over financial
reporting
PART II OTHER INFORMATION
ITEM
1 LEGAL PROCEEDINGS
From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results.
ITEM
1A RISKS FACTORS
There
have been no material changes from the Risk Factors described in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2009.
ITEM
2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
No
ne.
ITEM
3 DEFAULTS UPON SENIOR SECURITIES
No
ne.
ITEM
4 SUBMISSION OF MATTER TO A VOTE OF SECURITIES HOLDERS
No
ne.
ITEM
5 OTHER INFORMATION
None.
ITEM
6 EXHIBITS
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certification
by Principal Executive Officer pursuant to Sarbanes Oxley Section
302(1)
|
|
31.2
|
|
Certification
by Principal Financial Officer pursuant to Sarbanes Oxley Section
302(1)
|
|
|
|
|
|
32.1
|
|
Certification
by Principal Executive Officer a pursuant to 18 U.S.C. Section
1350(1)
|
|
32.2
|
|
Certification
by Principal Financial Officer a pursuant to 18 U.S.C. Section
1350(1)
|
(1) Filed
herewith.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 11th day of February, 2010.
|
|
|
EATWARE,
INC.
|
|
|
|
|
|
|
By:
|
/s/ Wu, Man-Shing
|
|
|
|
Wu,
Man-Shing
|
|
|
|
Chief
Executive Officer
|
|
|
|
Principal
Executive Officer
|
|
|
|
|
|
|
By:
|
/s/ Wu, Man-Shing
|
|
|
|
Wu,
Man-Shing
|
|
|
|
Interim
Chief Financial Officer
|
|
|
|
Principal
Accounting and Financial
Officer
|
China Shoe (CE) (USOTC:CHSH)
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